SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-16712
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BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3451878
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd., Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
-------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
- ----- ----
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
------------- -------------
Cash and cash equivalents $ 228,038 $ 229,105
Escrow deposits 133,924 153,190
Prepaid expenses 72,539 28,541
Deferred expenses, net of accumulated
amortization of $98,235 in 1996 and
$82,305 in 1995 61,065 76,995
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495,566 487,831
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Investment in real estate:
Land 940,021 940,021
Buildings and improvements 16,578,369 16,578,369
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17,518,390 17,518,390
Less accumulated depreciation 8,362,865 7,970,988
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Investment in real estate, net of
accumulated depreciation 9,155,525 9,547,402
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$ 9,651,091 $ 10,035,233
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LIABILITIES AND PARTNERS' DEFICIT
Loan payable - affiliate $ 1,041,033 $ 1,010,262
Accounts payable 44,949 50,888
Due to affiliates 106,992 96,437
Accrued liabilities, principally
real estate taxes 262,690 274,351
Security deposits 33,488 39,478
Mortgage notes payable 9,483,014 9,525,894
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Total liabilities 10,972,166 10,997,310
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Affiliate's participation in joint venture 17,796 22,373
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Unitholders' deficit (996,146 Units
issued and outstanding) (1,224,746) (873,609)
General Partner's deficit (114,125) (110,841)
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Total partners' deficit (1,338,871) (984,450)
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<PAGE>
$ 9,651,091 $ 10,035,233
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Rental and service $ 1,417,209 $ 1,379,576
Interest on short-term investments 5,378 11,073
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Total income 1,422,587 1,390,649
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Expenses:
Interest on mortgage note payable 415,507 419,084
Interest on short-term loan
payable - affiliate 30,771 34,664
Depreciation 391,877 391,877
Amortization of deferred expenses 15,930 15,930
Property operating 492,153 461,704
Real estate taxes 119,684 127,687
Property management fees 69,609 67,582
Incentive partnership management fee 11,206 11,206
Administrative 79,833 96,318
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Total expenses 1,626,570 1,626,052
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Loss before affiliate's participation
in joint venture (203,983) (235,403)
Affiliate's participation in loss
from joint venture 230 271
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Net loss $ (203,753) $ (235,132)
============= =============
Net loss allocated to General Partner $ (2,038) $ (2,351)
============= =============
Net loss allocated to Unitholders $ (201,715) $ (232,781)
============= =============
Net loss per Unit (996,146 issued
and outstanding) $ (0.20) $ (0.23)
============= =============
Distributions to General Partner $ 1,246 $ 1,246
============= =============
Distributions to Unitholders $ 149,422 $ 149,422
============= =============
Distributions per Unit $ 0.15 $ 0.15
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Rental and service $ 715,441 $ 705,096
Interest on short-term investments 2,844 5,775
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Total income 718,285 710,871
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Expenses:
Interest on mortgage note payable 207,520 209,328
Interest on short-term
loan payable - affiliate 15,367 17,667
Depreciation 195,938 195,938
Amortization of deferred expenses 7,965 7,965
Property operating 244,711 275,558
Real estate taxes 51,097 63,793
Property management fees 34,698 33,917
Incentive partnership management fee 5,603 5,603
Administrative 42,003 57,458
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Total expenses 804,902 867,227
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Loss before affiliate's participation
in joint venture (86,617) (156,356)
Affiliate's participation in loss
from joint venture 67 216
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Net loss $ (86,550) $ (156,140)
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Net loss allocated to General Partner $ (866) $ (1,561)
============= =============
Net loss allocated to Unitholders $ (85,684) $ (154,579)
============= =============
Net loss per Unit (996,146 issued
and outstanding) $ (0.08) $ (0.15)
============= =============
Distribution to General Partner $ 623 $ 623
============= =============
Distribution to Unitholders $ 74,711 $ 74,711
============= =============
Distribution per Unit $ 0.075 $ 0.075
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net loss $ (203,753) $ (235,132)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Affiliate's participation in loss
from joint venture (230) (271)
Depreciation of property 391,877 391,877
Amortization of deferred expenses 15,930 15,930
Accrued interest expense due at
maturity - affiliate 30,771 34,664
Net change in:
Escrow deposits 19,266 (72,676)
Prepaid expenses (43,998)
Accounts payable (5,939) 8,021
Due to affiliates 10,555 (26,550)
Accrued liabilities (11,661) (9,488)
Security deposits (5,990) 3,824
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Net cash provided by operating
activities 196,828 110,199
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Financing activities:
Distributions to Unitholders (149,422) (149,422)
Distributions to General Partner (1,246) (1,246)
Distributions to joint venture partner -
affiliate (4,347)
Principal payments on mortgage notes
payable (42,880) (39,304)
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Net cash used in financing activities (197,895) (189,972)
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Net change in cash and cash equivalents (1,067) (79,773)
Cash and cash equivalents at beginning
of period 229,105 639,493
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Cash and cash equivalents at end of period $ 228,038 $ 559,720
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1996, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the six months ended June 30, 1996 and 1995, the Partnership incurred
and paid interest expense on the mortgage note payable of $415,507 and
$419,084, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 are:
Paid
-----------------------
Six Months Quarter Payable
------------ --------- ----------
Incentive partnership management
fees $11,206 $5,603 $88,557
Reimbursement of expenses to
the General Partner, at cost 22,476 14,641 18,435
In conjunction with the May 1993 financing of Autumn Woods Apartments, the
monthly debt service payments due on the first mortgage loan were required to
be funded by advances from the General Partner through December 16, 1994, at
which time the General Partner loan became due. The General Partner loan was
repaid in full in August 1996 from proceeds received in connection with the
sale of Autumn Woods Apartments as described below. As of June 30, 1996, this
loan had a balance of $1,041,033. During the six months ended June 30, 1996 and
1995, the Partnership incurred interest expense on this loan of $30,771 and
$34,664, respectively, which has been added to the principal balance of the
loan. Interest expense was computed at the American Express Company cost of
funds rate plus a spread to cover administrative costs. As of June 30, 1996,
this rate was 5.911%.
4. Subsequent Events:
(a) In July 1996, the Partnership made a distribution of $74,711 ($.075 per
Unit) to the Unitholders for the second quarter of 1996.
<PAGE>
(b) The Autumn Woods Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of 99.7291% and 0.2709%,
respectively. In August 1996, the joint venture sold the property in an all
cash sale for $17,400,000. From the proceeds of the sale, the joint venture
paid $9,483,014 to the third party mortgage holder in full satisfaction of the
first mortgage loan, and paid $409,810 in selling costs and $190,030 of
prepayment penalties. The basis of the property was $9,087,885, which is net of
accumulated depreciation of $8,430,505. For financial statement purposes, the
Partnership will recognize a gain during the third quarter 1996 of
approximately $7,902,000 from the sale of this property, of which $21,000 is
the minority joint venture partner's share.
(c) As mentioned above, the Partnership had an interest in the Autumn Woods
Apartments which was sold in August 1996. This joint venture interest was the
Partnership's sole asset. The Partnership expects to distribute a majority of
the proceeds to Limited Partners in October 1996 and will retain a portion of
the cash to satisfy estimated obligations of the Partnership as well as
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of the liabilities or contingencies which may arise. Such contingencies
may include legal and other fees stemming from litigation involving the
Partnership. In the absence of any such contingency arising, the General
Partner anticipates terminating the Partnership by December 31, 1996 and
distributing the remaining reserves. In the event any contingency arises, the
Partnership's termination will be delayed and reserves will be held by the
Partnership for a longer period of time.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Current Income Fund-87 A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1986 to invest in and operate
income-producing real property. The Partnership raised $14,942,190 from sales
of Limited Partnership Depositary Units and utilized these proceeds to acquire
Autumn Woods Apartments. The Partnership sold the Autumn Woods Apartments in
August 1996.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
An increase in rental income due to increased occupancy at the property in 1996
was the primary reason for the decrease in the net loss for the six months
ended June 30, 1996 as compared to the same period in 1995. Lower structural
repairs during the quarter ended June 30, 1996 was the primary reason for the
decrease in the net loss for the quarter ended June 30, 1996 as compared to the
same period in 1995. Further discussion of the Partnership's operations is
summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the six months and quarters ended June 30, 1996 and 1995.
Primarily due to increased occupancy at the property, rental income increased
for 1996 when compared to 1995.
Primarily due to lower average cash balances, resulting from distributions of
excess cash flow generated by the Partnership during 1995, interest income on
short-term investments decreased during 1996 when compared to 1995.
Lower structural repairs at the Autumn Woods Apartments was the primary reason
for the decrease in property operating expense for the quarter ended June 30,
1996 as compared to the same period in 1995.
Lower tax rates at the property resulted in a decrease in real estate tax
expense during 1996 when compared to 1995.
Primarily as a result of decreased accounting fees and travel expenses,
administrative expenses decreased during 1996 when compared to 1995.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $1,000 as of
June 30, 1996 when compared to December 31, 1995. The Partnership's operating
activities generated approximately $197,000 of cash flow primarily from the
operations of the Autumn Woods Apartments, which was partially offset by the
payment of administrative expenses and incentive partnership management fees.
Cash flow used in financing activities totaled approximately $198,000 and
included the payment of distributions to Unitholders, the General Partner and
the joint venture partner, as well as the payment of principal on the mortgage
note payable.
During 1996 and 1995, Autumn Woods Apartments generated positive cash flow,
which the Partnership defines as an amount equal to the property's revenue
receipts less property related expenditures, which includes debt service
payments. As of June 30, 1996, the occupancy rate of the property was 93%.
During August 1996, the Autumn Woods Apartments, which was owned by a joint
venture consisting of the Partnership and an affiliate, was sold in an all cash
sale for $17,400,000. From the proceeds of the sale, the joint venture paid
$9,483,014 to the third party mortgage holder in full satisfaction of the first
mortgage loan and paid $409,810 in selling costs and prepayment penalties of
$190,030. The net proceeds of the sale were $7,317,146, of which $7,297,324 was
the Partnership's share. Pursuant to the terms of the sale, $250,000 of the
proceeds will be retained by the joint venture until October 1996. As discussed
below, after the loan from the General Partner is repaid, the Partnership
expects to distribute available Net Cash Proceeds from the sale to Unitholders.
See Note 4 of Notes to Financial Statements for additional information.
In conjunction with the May 1993 financing of Autumn Woods Apartments, the
monthly debt service payments due on the first mortgage loan were required by
the Prospectus to be funded by advances from the General Partner on a zero
coupon basis until December 1994, at which time the General Partner loan
matured. The General Partner loan of $1,046,516 was repaid in full from
property sale proceeds in August 1996.
In July 1996, the Partnership paid $74,711 ($.075 per Unit) of Net Cash
Receipts to the Unitholders representing the distribution for the second
quarter of 1996. The level of this distribution remained unchanged from the
amount distributed to Unitholders during the first quarter of 1996. Including
the July 1996 distribution, the Partnership has distributed $6.69 per $15.00
Unit all of which represents Cash Flow from operations.
The Partnership had an interest in the Autumn Woods Apartments, which was sold
in August 1996. The joint venture interest was the Partnership's sole asset.
The Partnership expects to distribute a majority of the proceeds to Limited
Partners in October 1996 and will retain a portion of the cash to satisfy
estimated obligations of the Partnership as well as establish a reserve for
contingencies. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of the liabilities
or contingencies which may arise. Such contingencies may include legal and
<PAGE>
other fees stemming from litigation involving the Partnership. In the absence
of any such contingency arising, the General Partner anticipates terminating
the Partnership by December 31, 1996 and distributing the remaining reserves.
In the event any contingency arises, the Partnership's termination will be
delayed and reserves will be held by the Partnership for a longer period of
time. Based on expected distributions to Unitholders from proceeds received
from the sale of the property and the Partnership's cash reserves, Unitholders
will not recover all of their original investment.
Since the Preferred Distribution levels to Unitholders specified in the
Partnership Agreement have not been attained in any year, the General Partner
will not be paid the 25% share of its Net Cash Receipts which was subordinated
to the Unitholders' Preferred Distributions in accordance with the Partnership
Agreement.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
- --------------------------
Autumn Woods Apartments
- -----------------------
As previously reported, on July 5, 1996, the joint venture (the "Joint
Venture") consisting of the Partnership and affiliate which owned the Autumn
Woods Apartments, Indianapolis, Indiana, contracted to sell the property for a
sale price of $17,400,000 to an unaffiliated party, TGM Realty Corp. #5, a
Delaware corporation. TGM Realty Corp. #5 assigned its rights under the
contract to an affiliate, TGM Autumn Woods Inc., a Delaware corporation, and
the sale closed on August 1, 1996. From the proceeds of the sale, the Joint
Venture paid the outstanding balance of the first mortgage loan of $9,483,014,
$190,030 of prepayment penalties, $259,125 to a unaffiliated party as a
brokerage commission, $130,500 to an affiliate of the third party providing
property management services for the property as a fee for services rendered in
connection with the sale of the property and other closing costs of $20,185.
The purchaser received proration credits of $125,000 for corrective work
resulting from the purchaser's due diligence review and $302,500 for repairs
due to fire damage at the property which is expected to be recovered, less the
deductible, from the Joint Venture's insurance carrier. The Joint Venture
received approximately $6,889,646 of remaining proceeds. Of such amount,
$250,000 will be retained by the Joint Venture and will not be available for
use or distribution by the Joint Venture until 90 days after the closing. The
Partnership's share of the total remaining proceeds is approximately
$6,871,000.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 2
to the Registrant's Registration Statement on Form S-11 dated December 17, 1986
(Registration No. 33-7858) and Form of Confirmation regarding Depositary Units
in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form
10-Q for the quarter ended June 30, 1992 (Commission File No. 0-16712) are
incorporated herein by reference.
(10) Agreement of Sale and letter dated July 12, 1996 relating to the sale of
Autumn Woods Apartments previously filed as Exhibits (2)(a) and (b) to the
Registrant's Current Report on Form 8-K dated July 5, 1996, is incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1996 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated July 5, 1996 was
filed reporting the contract to sell the Autumn Woods Apartments in
Indianapolis, Indiana.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor CIF
Partners, the General Partner
By: /s/ Brian Parker
-----------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor CIF Partners, the General
Partner
Date: August 14, 1996
----------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 228
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 435
<PP&E> 17518
<DEPRECIATION> 8363
<TOTAL-ASSETS> 9651
<CURRENT-LIABILITIES> 1489
<BONDS> 9483
0
0
<COMMON> 0
<OTHER-SE> (1339)
<TOTAL-LIABILITY-AND-EQUITY> 9651
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<TOTAL-REVENUES> 1423
<CGS> 0
<TOTAL-COSTS> 693
<OTHER-EXPENSES> 488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 446
<INCOME-PRETAX> (204)
<INCOME-TAX> 0
<INCOME-CONTINUING> (204)
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<CHANGES> 0
<NET-INCOME> (204)
<EPS-PRIMARY> (0.20)
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</TABLE>
