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
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
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
- ---------------------------------------- -------------------
(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
September 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 1,413,435 $ 1,166,719
Accounts and accrued interest receivable 6,101 287,012
-------------- --------------
$ 1,419,536 $ 1,453,731
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,410 $ 2,474
Due to affiliates 16,366 37,570
-------------- --------------
Total liabilities 17,776 40,044
-------------- --------------
Commitments and contingencies
Unitholders' capital (996,146 Units
issued and outstanding) 1,479,687 1,479,687
General Partner's deficit (77,927) (66,000)
-------------- --------------
Total partners' capital 1,401,760 1,413,687
-------------- --------------
$ 1,419,536 $ 1,453,731
============== ==============
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 nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Rental and service $ 1,631,532
Interest on short-term investments $ 51,963 54,407
-------------- --------------
Total income 51,963 1,685,939
-------------- --------------
Expenses:
Interest on mortgage note payable 484,575
Interest on short-term loan
payable - affiliate 36,262
Depreciation 459,517
Amortization 18,585
Property operating 798,826
Real estate taxes 145,038
Property management fees 81,700
Incentive partnership management fees 16,809
Administrative 63,890 112,782
-------------- --------------
Total expenses 63,890 2,154,094
-------------- --------------
Loss before gain on sale of property and
affiliate's participation in joint venture (11,927) (468,155)
Gain on sale of property 7,902,305
Affiliate's participation in income
from joint venture (28,457)
-------------- --------------
(Loss) income before extraordinary item (11,927) 7,405,693
Extraordinary item:
Debt extinguishment expense (248,440)
-------------- --------------
Net (loss) income $ (11,927) $ 7,157,253
============== ==============
(Loss) income before extraordinary item
allocated to General Partner $ (11,927) $ 45,464
============== ==============
Income before extraordinary item allocated to
Unitholders None $ 7,360,229
============== ==============
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- -------------
Income before extraordinary item per Unit
(996,146 issued and outstanding) None $ 7.39
============== ==============
Extraordinary item allocated to General
Parter None $ (2,484)
============== ==============
Extraordinary item allocated to Unitholders None $ (245,956)
============== ==============
Extraordinary item per Unit (996,146 issued
and outstanding) None $ (0.25)
============== ==============
Net (loss) income allocated to General
Partner $ (11,927) $ 42,980
============== ==============
Net income allocated to Unitholders None $ 7,114,273
============== ==============
Net income per Unit (996,146 issued
and outstanding) None $ 7.14
============== ==============
Distributions to General Partner None $ 1,869
============== ==============
Distributions to Unitholders None $ 224,133
============== ==============
Distributions per Unit (996,146 issued None $ 0.225
and outstanding ============== ==============
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 September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Rental and service $ 214,323
Interest on short-term investments $ 18,698 49,029
-------------- --------------
Total income 18,698 263,352
-------------- --------------
Expenses:
Interest on mortgage note payable 69,068
Interest on short-term
loan payable - affiliate 5,491
Depreciation 67,640
Amortization 2,655
Property operating 306,673
Real estate taxes 25,354
Property management fees 12,091
Incentive partnership management fee 5,603
Administrative 7,958 32,949
-------------- --------------
Total expenses 7,958 527,524
-------------- --------------
Income (loss) before gain sale of property
and affiliate's participation in joint
venture 10,740 (264,172)
Gain on sale of property 7,902,305
Affiliate's participation in income
from joint venture (28,687)
-------------- --------------
Income before extraordinary item 10,740 7,609,446
Extraordinary item:
Debt extinguishment expense None (248,440)
-------------- --------------
Net income $ 10,740 $ 7,361,006
============== ==============
Income before extraordinary item allocated to
General Partner $ 2,740 $ 47,502
============== ==============
Income before extraordinary item allocated to
Unitholders $ 8,000 $ 7,561,944
============== ==============
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Income before extraordinary item per Unit
(996,146 issued and outstanding) $ 0.01 $ 7.59
============== ==============
Extraordinary item allocated to General
Partner None $ (2,484)
============== ==============
Extraordinary item allocated to Unitholders None $ (245,956)
============== ==============
Extraordinary item per Unit (996,146 issued
and outstanding) None $ (0.25)
============== ==============
Net income allocated to General
Partner $ 2,740 $ 45,018
============== ==============
Net income allocated to Unitholders $ 8,000 $ 7,315,988
============== ==============
Net income per Unit (996,146 issued
and outstanding) $ 0.01 $ 7.34
============== ==============
Distribution to General Partner None $ 623
============== ==============
Distribution to Unitholders None $ 74,711
============== ==============
Distribution per Unit None $ 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 nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Operating activities:
Net (loss) income $ (11,927) $ 7,157,253
Adjustments to reconcile net (loss) income
to net cash provided by or (used in)
operating activities:
Extraordinary item:
Debt extinguishment expense 58,410
Gain on sale of property (7,902,305)
Affiliate's participation in income
from joint venture 28,457
Depreciation of property 459,517
Amortization of deferred expenses 18,585
Accrued interest expense due at
maturity - affiliate 36,262
Net change in:
Accounts and accrued interest
receivable 280,911 (335,537)
Escrow deposits 153,190
Prepaid expense 28,541
Accounts payable (1,064) (48,630)
Due to affiliates (21,204) 18,741
Accrued liabilities (274,351)
Security deposits (39,478)
-------------- --------------
Net cash provided by or used in
operating activities 246,716 (641,345)
-------------- --------------
Investing activities:
Proceeds from sale of property 17,400,000
Payment of selling costs (409,810)
--------------
Net cash provided by investing activities 16,990,190
--------------
Financing activities:
Distributions to Unitholders (224,133)
Distributions to General Partner (1,869)
Distributions to joint venture partner -
affiliate (50,830)
Repayment of loan payable - affiliate (1,046,524)
Repayment of mortgage note payable (9,483,014)
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Principal payments on mortgage note
payable (42,880)
--------------
Net cash used in financing activities (10,849,250)
--------------
Net change in cash and cash equivalents 246,716 5,499,595
Cash and cash equivalents at beginning
of period 1,166,719 229,105
-------------- --------------
Cash and cash equivalents at end of period $ 1,413,435 $ 5,728,700
============== ==============
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 Policies:
(a) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1997, and all such adjustments are of a normal
and recurring nature.
(b) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General Partner
and Unitholders to appropriately reflect their respective remaining economic
interests as provided for in the Partnership Agreement, the (loss) income
allocations between the partners have been adjusted for financial statement
purposes in 1997 and 1996.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the disposition of all its interests in real estate. The Partnership sold the
Autumn Woods Apartments in August 1996. A portion of the proceeds from the sale
were distributed to Unitholders in October 1996. The Partnership retained a
portion of the cash to satisfy 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 liabilities and contingencies which continue to exist and which may
also arise. Such contingencies currently consist primarily of legal and other
fees and costs stemming from litigation involving the Partnership including the
lawsuit discussed in Note 5 of Notes to Financial Statements. Due to this
litigation, the Partnership will not be dissolved and reserves will be held by
the Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
3. Interest Expense:
During the nine months ended September 30, 1996, the Partnership incurred and
paid interest expense on the mortgage note payable of $484,575.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1997 are:
<PAGE>
Paid
----------------------
Nine Months Quarter Payable
------------ --------- ----------
Reimbursement of expenses to
the General Partner, at cost $ 38,763 $ 6,908 $ 16,366
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, and was extended. The General
Partner loan and accrued interest were repaid in full in August 1996 from
proceeds received in connection with the sale of Autumn Woods Apartments.
During the nine months ended September 30, 1996, the Partnership incurred
interest expense on this loan of $36,262. Interest expense was computed at the
American Express Company cost of funds rate plus a spread to cover
administrative costs. As of September 30, 1996, this rate was 5.931%.
5. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to, the offering of the Units of the Partnership. The defendants continue to
vigorously contest this action. A plaintiff class has not yet been certified,
and no determination of the merits have been made. It is not determinable at
this time whether or not an unfavorable decision in this action would have a
material adverse impact on the financial position, operations and liquidity of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
<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
a joint venture interest in Autumn Woods Apartments. Autumn Woods Apartments
was sold 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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
The Partnership recognized a large gain related to the sale of Autumn Woods
Apartments in August 1996, which was the primary reason the Partnership
generated significant net income during the nine months ended September 30,
1996 as compared to a net loss during the same period in 1997. The gain on sale
also resulted in higher net income for the quarter ended September 30, 1996 as
compared to the same period in 1997. Further discussion of the Partnership's
operations is summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to the nine months and quarters ended September 30, 1997 and 1996.
As a result of the sale of Autumn Woods Apartments in August 1996, rental and
service income, interest expense on mortgage note payable, depreciation
expense, amortization expense, property operating expense, real estate tax
expense and property management fees ceased.
As a result of higher average cash balances during the third quarter of 1996
due to the investment of proceeds received by the Partnership from the sale of
the Autumn Woods Apartments in August 1996 prior to distribution to Unitholders
in October 1996, interest income on short-term investments decreased during the
quarter ended September 30, 1997 as compared to the same period in 1996. The
Partnership has retained a portion of the sale proceeds as discussed below. The
investment of these proceeds during 1997 offset the above decrease in interest
income during the quarter ended September 30, 1997. As a result, interest
income on short-term investments remained relatively unchanged during the nine
months ended September 30, 1997 as compared to the same period in 1996.
<PAGE>
The General Partner loan was repaid in August 1996 from a portion of the
proceeds received from the sale of Autumn Woods Apartments. As a result,
interest expense on short-term loan payable - affiliate ceased.
Incentive partnership management fees earned by the General Partner, which were
based on Net Cash Receipts, ceased as a result of the sale of Autumn Woods
Apartments during 1996.
Primarily as a result of decreased accounting and portfolio management fees,
administrative expenses decreased during 1997 when compared to 1996.
The Autumn Woods Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In August 1996, the joint venture sold the
property and the Partnership recognized a gain on sale of $7,902,305.
As a result of the sale of Autumn Woods Apartments in 1996, affiliate's
participation in income of joint venture ceased.
In connection with the sale of Autumn Woods Apartments, the Partnership wrote
off the remaining unamortized deferred expense in the amount of $58,410. In
addition, the Partnership incurred a prepayment penalty of $190,030 in
connection with the repayment of the underlying mortgage note payable. For
financial statement purposes, these two amounts were recognized as
extraordinary items and classified as debt extinguishment expense.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $247,000 as of
September 30, 1997, when compared to December 31, 1996, primarily due to the
collection of insurance proceeds as discussed below. Operating activities
generated cash of approximately $247,000 which consisted of the collection of
an account receivable related to property insurance proceeds and interest
income on short-term investments which were partially offset by the payment of
administrative expenses.
Since inception, Unitholders have received distributions of Net Cash Receipts
of $6.73 and Net Cash Proceeds of $4.51 totaling $11.24 per $15.00 Unit as well
as certain tax benefits. Unitholders will not recover all of their original
investment. Since inception, the General Partner has received distributions of
Net Cash Receipts totaling $55,044. Additionally since inception, the General
Partner has received $420,158 of Incentive Partnership Management fees. The
General Partner has not and will not receive any distributions of Net Cash
Proceeds.
The Partnership Agreement provides for the dissolution of the Partnership upon
the disposition of all its interests in real estate. The Partnership sold the
Autumn Woods Apartments in August 1996. The Partnership has retained a portion
of the cash from the sale of the Autumn Woods Apartments to satisfy 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 liabilities and contingencies which
continue to exist and which may also arise. Such contingencies currently
<PAGE>
consist primarily of legal and other fees and costs stemming from litigation
involving the Partnership including the lawsuit discussed in Note 5 of Notes to
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(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 September 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 nine month period ended
September 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1997.
<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/Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Managing Director, and Chief Financial
Officer (Principal Accounting Officer) of
Balcor CIF Partners, the General Partner
Date: November 13, 1997
---------------------
<PAGE>
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1414
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1420
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1420
<CURRENT-LIABILITIES> 18
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1402
<TOTAL-LIABILITY-AND-EQUITY> 1420
<SALES> 0
<TOTAL-REVENUES> 52
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 64
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (12)
<EPS-PRIMARY> 0
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</TABLE>
