Item 1. Business - ----------------
Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the "Registrant") is a limited partnership formed in 1984 under the laws of the State of Illinois. The Registrant raised $52,811,000 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of income-producing real property, and all financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire four real property investments and a minority joint venture interest in one additional property. The property in which the Registrant held a minority joint venture interest was sold in December 1994 and the Registrant sold 101 Marietta Tower in February 1996. The Registrant owns the remaining properties described under "Properties" (Item 2). The Partnership Agreement generally provides that the proceeds of any sale or refinancing of the Registrant's properties will not be reinvested in new acquisitions.
Overall, the investment real estate market saw gradual improvement over the last year. This improvement has taken place in an environment of generally low interest rates and little or no new supply, parameters which may not exist in the next few years. Demand for real estate space, while projected to improve in line with the overall economy, is also vulnerable to external forces. The major challenges facing the real estate industry today include increased international competition, corporate restructurings, new computer and communications technologies, an aging population and potential revisions of the tax code. In addition, the increased flow of capital to real estate through new vehicles such as commercial mortgage-backed securities and REITs could spur new construction at unsupportable levels, as well as impact existing property values.
Operationally, existing apartment properties continued to register occupancy percentages in the 90s, with average rents rising at an annual rate of between 3 and 4 percent. Apartments are still considered one of the top real estate asset classes in terms of performance. However, some markets are experiencing new construction of rental units which, if unrestrained, could impact the performance of existing properties. Most of the new construction is aimed at the two segments of the rental market which are growing the fastest: low-income households and upper-income households who prefer to rent rather than own. Of all the major asset classes, apartments typically display the least volatility in terms of property values.
The General Partner had previously advised Limited Partners that its strategy was to sell the Registrant's remaining properties over the next two to three year period. The General Partner also stated that the timing of the liquidation could be lengthened or shortened due to changes in market conditions, economic factors, interest rates and unforeseen events. The General Partner now believes that the market for multifamily housing properties has become increasingly favorable to sellers of these properties. If current market conditions for sales remain favorable, the liquidation of the Registrant's properties may be accelerated.
The Registrant received notice of unsolicited offers for the purchase of limited partnership interests ("tender offers") in August and November 1995. The tender offers were made by Equity Resource Fund-XVII ("Equity Resources"). Equity Resources stated that their primary motive in making the offers was to make a profit from the purchase of the interests. Equity Resources acquired 2.38% of the total interests outstanding in the Registrant pursuant to the tender offers. The Registrant incurred administrative costs in responding to the tender offers and may incur additional costs if additional tender offers are made in the future. The General Partner cannot predict with any certainty what the impact of these tender offers or any future tender offers will have on the operations of the Registrant.
The Registrant sold 101 Marietta Tower in February 1996. See Other Information below, Item 7. Liquidity and Capital Resources and Note 10 of Notes to Financial Statements for additional information.
The Registrant, by virtue of its ownership of real estate, is subject to federal and state laws and regulations covering various environmental issues. Management of the Registrant utilizes the services of environmental consultants to assess a wide range of environmental issues and to conduct tests for environmental contamination as appropriate. The General Partner is not aware of any potential liability due to environmental issues or conditions that would be material to the Registrant.
The officers and employees of Balcor Equity Partners-XVIII, the General Partner of the Registrant, and its affiliates perform services for the Registrant. The Registrant currently has no employees engaged in its operations.
Other Information - -----------------
101 Marietta Tower - -------------------
In 1984, the Registrant acquired the 101 Marietta Tower office complex and a leasehold interest in 200 parking spaces in the parking garage across the street (together, the "Property") utilizing $20,595,745 of offering proceeds. The Property was purchased subject to a first mortgage loan in the amount of $20,000,000.
On December 19, 1995, the Registrant contracted to sell the Property for a sale price of $29,500,000 to an unaffiliated party, Lennar Partners, Inc., a Florida corporation ("Lennar"). The sale price was subsequently reduced to $26,000,000. Lennar assigned its rights as purchaser under the contract and on February 12, 1996, the Property was acquired by Leisure Colony Management Corp., a Florida corporation which is an affiliate of Lennar (the "Purchaser"). The Purchaser acquired the Property subject to the first mortgage loan which had an outstanding principal balance of approximately $17,350,000 at closing.
From the proceeds of the sale, the Registrant paid a brokerage commission of $260,000 to an affiliate of the company which provides property management services at the Property (the "Broker"). An affiliate of the Broker is also a principal of the Purchaser. The Registrant also paid closing and other sale costs of approximately $206,000 and received the remaining sale proceeds of $8,184,000. In addition, the contract provided that in the event the purchaser receives certain payments in the future from the principal tenant of the Property relating to reimbursements for certain operating expenses, the Registrant was entitled to receive 25% of these payments. This percentage has been increased to 75% by the parties. The General Partner was reimbursed by the Registrant for its actual expenses incurred in connection with the sale.
Item 2.
Item 2. Properties - ------------------
The Registrant owns the three properties described below:
Location Description of Property - -------- -----------------------
San Antonio, Texas Canyon Point Apartments: a 214-unit apartment complex located on approximately 9 acres.
Greenville, South Carolina Mallard Cove Apartments (formerly Hidden Lakes): a 211-unit apartment complex located on approximately 15 acres.
Grand Blanc, Michigan Knollwood Village Apartments: a 648-unit apartment complex located on approximately 55 acres.
Each of the above properties is held subject to various mortgages and other forms of financing.
In the opinion of the General Partner, the Registrant has provided adequate insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property investments.
Item 3.
Item 3. Legal Proceedings - -------------------------
Proposed class action - ---------------------
On February 29, 1996, a proposed class action complaint was filed, Raymond Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of the State of New York, County of New York). The Registrant, additional limited partnerships which were sponsored by The Balcor Company, three limited partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together with the Registrant and the affiliated partnerships, the "Defendant Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are defendants. The complaint alleges, among other things, common law fraud and deceit, negligent misrepresentation and breach of fiduciary duty relating to the disclosure of information in the offering of limited partnership interests in the Defendant Partnerships. The complaint seeks judgment for compensatory damages equal to the amount invested in the Defendant Partnerships by the proposed class plus interest accrued thereon; general damages for injuries arising from the defendants' actions; recovery from the defendants of all profits received by them as a result of their actions relating to the Defendant Partnerships; exemplary damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been certified as of this date. Management of each of the defendants believes they have meritorious defenses to contest the claims. It is not determinable at this time whether or not an unfavorable decision in this action would have a material adverse impact on the Registrant.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders - -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant during 1995.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder - ------------------------------------------------------------------------- Matters - -------
There has not been an established public market for Limited Partnership Interests and it is not anticipated that one will develop; therefore, the market value of the Limited Partnership Interests cannot reasonably be determined. For information regarding previous distributions, see Financial Statements, Statements of Partners' Capital and Item 7. Liquidity and Capital Resources, below.
As of December 31, 1995, the number of record holders of Limited Partnership Interests of the Registrant was 5,179.
Item 6.
Item 6. Selected Financial Data - -------------------------------
Year ended December 31, ----------------------------------------------------------- 1995 1994 1993 1992 1991 ------------ ---------- ---------- ---------- -----------
Total income $16,743,567 $16,740,793 $15,328,981 $13,535,576 $13,015,657 Provision for in- vestment property writedown 1,016,987 None None None None Net income (loss) 1,240,270 885,014 (8,829) (1,754,481) (1,776,892) Net income (loss) per Limited Partner- ship Interest 23.25 16.59 (.16) (32.89) (33.31) Total assets 58,114,553 58,914,891 58,492,849 58,875,919 61,394,682 Mortgage notes payable 39,475,209 40,078,625 39,289,424 39,415,967 39,861,120 Distributions per Limited Partner- ship Interest(A) 20.00 20.00 None None None
(A) No distributions of original capital were made in any of the last five years.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations - -------------
Operations - ----------
Summary of Operations - ---------------------
Improved operations at 101 Marietta Tower office complex and Knollwood Village Apartments resulted in an increase in net income for Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the "Partnership") for 1995 as compared to 1994. This increase was offset by a provision recognized in connection with the sale of the 101 Marietta Tower office complex. In 1994, the Partnership recognized its share of the gain on the sale of Belmere Apartments, in which it held a minority joint venture interest, which partially offset this increase, and also resulted in net income for 1994 as compared to a slight net loss during 1993. Further discussion of the Partnership's operations is summarized below.
1995 Compared to 1994 - ---------------------
Due to higher average cash balances and interest rates, interest income on short-term investments increased during 1995 as compared to 1994.
Belmere Apartments, in which the Partnership held a minority joint venture interest, was sold during 1994. As a result of the gain recognized in connection with the sale, the Partnership recognized income from participation in joint venture with an affiliate in 1994.
A lower property assessment at the 101 Marietta Tower office complex retroactive to the 1993 tax year, reduced real estate tax expense and resulted in a refund of 1993 real estate taxes which was received and recognized as other income in 1995.
The refinancing of the Knollwood Village Apartments mortgage note payable in 1994 required the payment of deferred expenses which are being amortized over the term of the mortgage note payable. As a result, amortization expense increased for 1995 as compared to 1994.
Due to lower tenant-related repairs and maintenance expenses and leasing costs at the 101 Marietta Tower office complex in 1995 and the exterior painting of the Canyon Point and Knollwood Village apartment complexes completed in 1994, property operating expense decreased in 1995 as compared to 1994.
The lower property assessment at the 101 Marietta Tower office complex and a lower tax rate at the Knollwood Village Apartments resulted in a decrease in real estate taxes during 1995 as compared to 1994.
A recalculation of the recoverable expenses as required by the terms of the General Service Administration ("GSA") lease at the 101 Marietta Tower office complex was made in late 1993. Additional income related to this recalculation was received in 1994, resulting in additional management fees. This caused a decrease in property management fees during 1995 as compared to 1994.
Due to lower portfolio management fees, administrative expenses decreased during 1995 as compared to 1994.
The 101 Marietta Tower office complex was sold in February 1996. At December 31, 1995, for financial statement purposes, the property was written down to an amount equal to the February 1996 net sales proceeds received and the Partnership recognized a provision for investment property writedown of $1,016,987. See Note 10 of Notes to Financial Statements for additional information.
1994 Compared to 1993 - ---------------------
Higher rental and/or occupancy rates at all of the Partnership's properties resulted in an increase in rental income and property management fees for 1994 as compared to 1993.
As required by the terms of the General Service Administration ("GSA") lease at the 101 Marietta Tower office complex, a recalculation of the recoverable operating and real estate tax expenses was made in late 1993. This recalculation and subsequent collection of 1993 and 1994 reimbursements resulted in an increase in service income and property management fees during 1994 when compared to 1993.
Due to higher cash balances and interest rates, interest income on short-term investments increased during 1994 as compared to 1993.
As a result of the gain recognized in connection with the sale of Belmere Apartments, the Partnership recognized income from participation in joint venture with an affiliate in 1994 compared to a loss in 1993.
As a result of a prepayment penalty on the previous first mortgage loan, which was recorded as interest expense, and a higher mortgage loan balance associated with the Knollwood Village Apartments refinancing in June 1994, interest expense on mortgage notes payable increased for 1994 as compared to 1993. This increase was partially offset by the 1993 refinancing of the Canyon Point Apartments' mortgage note at a lower interest rate.
The loan refinancings in 1993 related to Mallard Cove and Canyon Point apartment complexes and in 1994 related to Knollwood Village Apartments required the payment of certain expenses which are deferred and amortized over the terms of the mortgage notes payable. As a result, amortization expense increased for 1994 as compared to 1993.
As a result of higher insurance and janitorial expenses at the 101 Marietta Tower office complex and higher insurance expense at the Canyon Point, Mallard Cove and Knollwood Village apartment complexes, property operating expense increased for 1994 as compared to 1993.
A lower property assessment at the 101 Marietta Tower office complex and a decrease in tax rates at the Knollwood Village Apartments caused real estate tax expense to decrease for 1994 as compared to 1993.
Due to higher portfolio management and accounting fees which were partially offset by decreases in other professional and consulting fees, administrative expenses increased slightly for 1994 as compared to 1993.
Liquidity and Capital Resources - -------------------------------
The cash position of the Partnership increased as of December 31, 1995 as compared to December 31, 1994 primarily due to improved operations at the Partnership's properties. The Partnership's cash provided by operating activities included the cash flow from operations of the Partnership's properties and interest income received on short-term investments, which was partially offset by administrative costs. The cash provided by investing activities consisted of the final distribution received from the joint venture which owned Belmere Apartments and represents the Partnership's share of sales proceeds and fourth quarter 1994 property operations. The net cash used in financing activities consisted of capital improvement escrow activity, principal payments on mortgage notes payable and distributions to Limited Partners.
The Partnership classifies the cash flow performance of its properties as either positive, a marginal deficit or a significant deficit, each after consideration of debt service payments. The Partnership defines cash flow generated from its properties as an amount equal to the property's revenue receipts less property related expenditures, which include debt service payments. All four of the Partnership's properties have underlying debt. During 1995 and 1994, all four of the Partnership's properties generated positive cash flow. Belmere Apartments, in which the Partnership held a minority joint venture interest, was sold in December 1994 and was generating a marginal cash flow deficit during 1994 prior to its sale. As of December 31, 1995, the occupancy rates of the Partnership's residential properties ranged from 95% to 98%, while the occupancy rate at the 101 Marietta Tower office complex was 99%.
While the cash flow of certain of the Partnership's properties has improved, the General Partner continues to pursue actions aimed at improving property operating performance and to seek rent increases where market conditions allow.
The General Partner had previously advised Limited Partners that its strategy was to sell the Partnership's remaining properties over the next two to three year period. The General Partner also stated that the timing of the liquidation could be lengthened or shortened due to changes in market conditions, economic factors, interest rates and unforeseen events. The General Partner now believes that the market for multifamily housing properties has become increasingly favorable to sellers of these properties. If current market conditions for sales remain favorable, the liquidation of the Partnership's properties may be accelerated.
The 101 Marietta Tower office complex, which represented 50% of the Partnership's original portfolio, was sold in February 1996 for $26,000,000. The purchaser of the 101 Marietta Tower office complex acquired the property subject to the existing $17,353,151 first mortgage loan. There will be a special distribution consisting of the proceeds from the 101 Marietta Tower office complex sale plus any excess cash reserves above an amount necessary to protect against unforeseen events in the second quarter of 1996.
In January 1991, quarterly distributions to Limited Partners were suspended due to the March 1991 maturity of the Canyon Point mortgage note payable and the pending December 1992 expiration of the GSA lease at 101 Marietta Tower office complex. With the resolution of these issues, along with the refinancing of the Mallard Cove mortgage note payable, the Partnership resumed quarterly distribution to Limited Partners in January 1994. The Partnership made four distributions of Net Cash Receipts totaling $20.00 per Interest in 1995 and 1994, respectively. See Statement of Partners' Capital for additional information.
In January 1996, the Partnership paid $264,055 ($5.00 per Interest) representing the quarterly distribution to Limited Partners for the fourth quarter of 1995. The level of this distribution is consistent with that of the prior quarter. Assuming property operations meet current projections, the Partnership anticipates making regular quarterly distributions from the Partnership's continuing property operations and from any cash reserves above an amount necessary to protect against unforeseen events. Including the January 1996 distribution, Limited Partners have received distributions of Net Cash Receipts totaling $120.50 and Net Cash Proceeds totaling $14.50 per $1,000 Interest, as well as certain tax benefits. In light of results to date and current market conditions, there can be no assurance that investors will recover all of their original investment.
In December 1994, the joint venture in which the Partnership owned a 25.6% interest sold the Belmere Apartments for a sale price of $8,500,000. From the sale proceeds, the joint venture repaid the first mortgage loan and other costs and received approximately $1,755,000. In February 1995, the Partnership received a distribution of $482,229 which represents its share of sales proceeds and fourth quarter property operations. This amount was included in accounts receivable in the financial statements at December 31, 1994.
In February 1996, the Partnership sold 101 Marietta Tower office complex for a sales price of $26,000,000. The purchaser acquired the property subject to the existing $17,353,151 first mortgage loan and the Partnership received the remaining proceeds of $8,181,086. See Note 10 of Notes to Financial Statements and Item 1. Business - Other Information for additional information.
Each of the Partnership's properties is owned through the use of third-party mortgage loan financing and, therefore, the Partnership is subject to the financial obligations required by such loans. As a result of the General Partner's efforts to modify and refinance these loans, the Partnership has no third party financing which matures prior to 1998.
In 1995, the Financial Accounting Standards Board issued Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which established accounting standards for impairment of long-lived assets and long-lived assets to be disposed of. This statement has been adopted by the Partnership as of January 1, 1995, and did not have a material impact on the financial position or results of operations of the Partnership.
Inflation has several types of potentially conflicting impacts on real estate investments. Short-term inflation can increase real estate operating costs which may or may not be recovered through increased rents and/or sales prices, depending on general or local economic conditions. In the long-term, inflation can be expected to increase operating costs and replacement costs and may lead to increased rental revenues and real estate values.
Item 8.
Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------
See Financial Statements and Schedule in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K is not applicable.
The net effect of the differences between the financial statements and the tax returns is summarized as follows:
December 31, 1995 December 31, 1994 ----------------------- ------------------------- Financial Tax Financial Tax Statements Returns Statements Returns ---------- --------- ---------- ---------
Total assets $58,114,553 $54,224,324 $58,914,891 $54,244,538 Partners' capital (deficit): General Partner (221,590) (219,628) (233,993) (237,302) Limited Partners 16,881,697 13,719,433 16,710,050 13,025,947 Net income (loss): General Partner 12,403 17,674 8,850 24,359 Limited Partners 1,227,867 1,749,706 876,164 760,804 Per Limited Part- nership Interest 23.25 33.13 16.59 14.41
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and - ----------------------------------------------------------------------- Financial Disclosure - --------------------
On September 14, 1995 the Registrant approved the engagement of Coopers & Lybrand L.L.P. as its independent auditors for the fiscal year ending December 31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed as auditors of the Registrant effective September 14, 1995. The General Partner of the Registrant approved the change in auditors.
The reports of Ernst & Young LLP on the Registrant's financial statements for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Registrant's financial statements for each of the two fiscal years ended December 31, 1994, and in the subsequent interim period, there were not disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Ernst & Young LLP would have caused Ernst & Young LLP to make reference to the matter in their report.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-XVIII, its General Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers and significant employees of the General Partner of the Registrant are as follows:
TITLE OFFICERS ----- --------
Chairman, President and Chief Thomas E. Meador Executive Officer Senior Vice President Alexander J. Darragh Senior Vice President Josette V. Goldberg Senior Vice President Alan G. Lieberman Senior Vice President, Chief Brian D. Parker Financial Officer, Treasurer and Assistant Secretary Senior Vice President John K. Powell, Jr.
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman, President and Chief Executive Officer and has responsibility for all ongoing day-to-day activities at Balcor. He is a Director of The Balcor Company. He is also Senior Vice President of American Express Company and is responsible for its real estate operations worldwide. Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in the commercial real estate division where he was involved in various lending activities. Mr. Meador received his M.B.A. degree from the Indiana University Graduate School of Business.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and is responsible for due diligence analysis and real estate advisory services for Balcor and American Express Company. He also has supervisory responsibility for Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban Geography from Queen's University and in Urban Planning from Northwestern University.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary responsibility for all human resources matters. In addition, she has supervisory responsibility for Balcor's MIS functions. Ms. Goldberg has been designated as a Senior Human Resources Professional (SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for Balcor's property sales and capital markets functions. Mr. Lieberman is a Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief Financial Officer and Chief Accounting Officer, is responsible for Balcor's financial, legal and treasury functions. He is a Director of The Balcor Company. Mr. Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy from DePaul University.
John K. Powell Jr. (June 1950) joined Balcor in September 1985 and is responsible for portfolio and asset management matters relating to Balcor's partnerships. Mr. Powell also has supervisory responsibility for Balcor's risk management and investor services functions. He received a Master of Planning degree from the University of Virginia. Mr. Powell has been designated a Certified Real Estate Financier by the National Society for Real Estate Finance and is a full member of the Urban Land Institute.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any material legal proceedings nor were any such proceedings terminated during the fourth quarter of 1995.
Item 11.
Item 11. Executive Compensation - -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the executive officers and directors of Balcor Equity Partners-XVIII, the General Partner. Certain of these officers receive compensation from The Balcor Company (but not from the Registrant) for services performed for various affiliated entities, which may include services performed for the Registrant. However, the General Partner believes that any such compensation attributable to services performed for the Registrant is immaterial to the Registrant. See Note 8 of Notes to Financial Statements for the information relating to transactions with affiliates.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially more than 5% of the outstanding Limited Partnership Interests of the Registrant.
(b) Balcor Equity Partners-XVIII and its officers and partners own as a group the following Limited Partnership Interests of the Registrant:
Amount Beneficially Title of Class Owned Percent of Class -------------- ------------- ---------------- Limited Partnership Interests 100 Interests Less than 1%
Relatives and affiliates of the officers and partners of the General Partner do not own any additional Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may result in a change of control of the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------
(a & b) See Note 8 of Notes to Financial Statements for additional information relating to transactions with affiliates.
See Note 3 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K - -------------------------------------------------------------------------
(a) (1 & 2) See Index to Financial Statements and Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership set forth as Exhibit 3 to Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated September 17, 1984 (Registration No. 2-89380) is hereby incorporated herein by reference.
(4) Form of Subscription Agreement, previously filed as Exhibit 4.1 to Amendment No. 1 to Registrant's Registration Statement on Form S-11 dated May 15, 1984 (Registration No. 2-89380), and Form of Confirmation regarding Interests 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. 0-13357) are incorporated herein by reference.
(10) Material Contracts
(a) Agreement of Sale and attachment thereto relating to the sale of the 101 Marietta Tower office building previously filed as Exhibit (2) to the Registrant's Report on Form 8-K dated December 19, 1995 (Commission File No. 0-13357) is incorporated herein by reference.
(b) Reinstatement of, and First Amendment To, Agreement of Sale relating to the sale of the 101 Marietta Tower office building is attached hereto.
(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the change in the Registrant's certifying accountant previously filed as Exhibit 16 to the Registrant's Report on Form 8-K/A dated October 27, 1995 (Commission File No. 0-13357) is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1995 is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report of Form 8-K/A dated October 27, 1995, amending the Current Report on Form 8-K dated September 19, 1995 reporting a change in the Registrant's certifying public accountant, was filed (Commission File No. 0-13357).
(ii) A Current Report on Form 8-K dated December 19, 1995 (Commission File No. 0-13357) was filed relating to the contract for the sale of the 101 Marietta Tower office building.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of l934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Brian D. Parker ----------------------------------- Brian D. Parker Senior Vice President, and Chief Financial Officer (Principal Accounting and Financial Officer) of Balcor Equity Partners-XVIII, the General Partner
Date: March 28, 1996 -----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - ---------------------- ----------------------------- -------------
President and Chief Executive Officer (Principal Executive Officer) of Balcor Equity Partners-XVIII, the General /s/Thomas E. Meador Partner March 28, 1996 - ---------------------- ------------- Thomas E. Meador
Senior Vice President, and Chief Financial Officer (Principal Accounting Officer and Financial Officer) of Balcor Equity Partners-XVIII, the /s/Brian D. Parker General Partner March 28, 1996 - ---------------------- ------------- Brian D. Parker
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1995 and 1994
Statements of Partners' Capital, for the years ended December 31, 1995, 1994 and 1993
Statements of Income and Expenses, for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1995
Financial Statement Schedules, other than that listed, are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Balcor Equity Properties-XVIII A Real Estate Limited Partnership:
We have audited the accompanying balance sheet and financial statement schedule of Balcor Equity Properties-XVIII A Real Estate Limited Partnership (An Illinois Limited Partnership) as of December 31, 1995 and the related statements of partners' capital, income and expenses and cash flows for the year then ended. These financial statements and financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Balcor Equity Properties-XVIII A Real Estate Limited Partnership (An Illinois Limited Partnership) at December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois March 23, 1996
REPORT OF INDEPENDENT AUDITORS
To the Partners of Balcor Equity Properties-XVIII: A Real Estate Limited Partnership:
We have audited the accompanying balance sheet of Balcor Equity Properties-XVIII A Real Estate Limited Partnership (An Illinois Limited Partnership) as of December 31, 1994 and the related statements of partners' capital, income and expenses and cash flows for each of the two years in the period ended December 31, 1994. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Balcor Equity Properties - XIV, an affiliate, which is the majority joint venturer of the partnership which owned the Belmere Apartments. The Partnership's share of the operating income (loss) of this joint venture included in the accompanying 1994 and 1993 statements of income and expenses was approximately $755,000 (principally due to the gain on sale of the property owned) and ($77,000), respectively. The financial statements of Balcor Equity Properties - XIV were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the aforementioned investment in joint venture, is based solely on the report of the other auditors
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Balcor Equity Properties-XVIII A Real Estate Limited Partnership at December 31, 1994 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois March 1, 1995
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALANCE SHEETS December 31, 1995 and 1994
ASSETS
1995 1994 -------------- -------------- Cash and cash equivalents $ 10,008,666 $ 6,190,971 Escrow deposits 1,694,388 2,082,249 Accounts and accrued interest receivable 809,538 1,101,624 Prepaid expenses 178,688 58,398 Deferred expenses, net of accumulated amortization of $233,092 in 1995 and $148,659 in 1994 476,297 560,730 -------------- -------------- 13,167,577 9,993,972 -------------- -------------- Investment in real estate: Land 10,331,853 10,514,910 Buildings and improvements 69,865,669 70,699,599 -------------- -------------- 80,197,522 81,214,509 Less accumulated depreciation 35,250,546 32,293,590 -------------- -------------- Investment in real estate, net of accumulated depreciation 44,946,976 48,920,919 -------------- -------------- $ 58,114,553 $ 58,914,891 ============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 204,221 $ 225,336 Due to affiliates 33,430 67,045 Accrued liabilities, principaly interest and real estate taxes 1,539,679 1,853,632 Security deposits 201,907 214,196 Mortgage notes payable 39,475,209 40,078,625 -------------- -------------- Total liabilities 41,454,446 42,438,834 -------------- -------------- Limited Partners' capital (52,811 Interests issued and outstanding) 16,881,697 16,710,050 General Partner's deficit (221,590) (233,993) -------------- -------------- Total partners' capital 16,660,107 16,476,057 -------------- -------------- $ 58,114,553 $ 58,914,891 ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL for the years ended December 31, 1995, 1994 and 1993
Partners' Capital (Deficit) Accounts -------------- ----------------------------- General Limited Total Partner Partners -------------- -------------- -------------- Balance at December 31, 1992 $ 16,656,092 $ (242,754) $ 16,898,846
Net loss for the year ended December 31, 1993 (8,829) (89) (8,740) -------------- -------------- -------------- Balance at December 31, 1993 16,647,263 (242,843) 16,890,106
Cash distributions to Limited Partners (A) (1,056,220) (1,056,220)
Net income for the year ended December 31, 1994 885,014 8,850 876,164 -------------- -------------- -------------- Balance at December 31, 1994 16,476,057 (233,993) 16,710,050
Cash distributions to Limited Partners (A) (1,056,220) (1,056,220)
Net income for the year ended December 31, 1995 1,240,270 12,403 1,227,867 -------------- -------------- -------------- Balance at December 31, 1995 $ 16,660,107 $ (221,590) $ 16,881,697 ============== ============== ==============
(A) Summary of cash distributions per Interest:
1995 1994 1993 -------------- -------------- --------------
First Quarter $ 5.00 $ 5.00 None Second Quarter 5.00 5.00 None Third Quarter 5.00 5.00 None Fourth Quarter 5.00 5.00 None
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993 -------------- -------------- -------------- Income: Rental $ 12,939,827 $ 12,672,200 $ 12,334,913 Service 3,103,906 3,090,448 2,894,136 Interest on short-term investments 472,679 223,412 99,932 Participation in income of joint venture with an affiliate 754,733 Other income 227,155 -------------- -------------- -------------- Total income 16,743,567 16,740,793 15,328,981 -------------- -------------- -------------- Expenses: Interest on mortgage notes payable 3,647,305 3,785,223 3,586,643 Depreciation 2,956,956 2,935,846 3,040,277 Amortization of deferred expenses 84,433 67,939 28,958 Property operating 5,438,275 6,270,831 5,837,673 Real estate taxes 1,157,793 1,400,303 1,597,631 Property management fees 800,165 930,617 730,637 Administrative 401,383 465,020 439,444 Participation in loss of joint venture with an affiliate 76,547 Provision for investment property writedown 1,016,987 -------------- -------------- -------------- Total expenses 15,503,297 15,855,779 15,337,810 -------------- -------------- -------------- Net income (loss) $ 1,240,270 $ 885,014 $ (8,829) ============== ============== ============== Net income (loss) allocated to General Partner $ 12,403 $ 8,850 $ (89) ============== ============== ============== Net income (loss) allocated to Limited Partners $ 1,227,867 $ 876,164 $ (8,740) ============== ============== ============== Net income (loss) per Limited Partnership Interest (52,811 issued and outstanding) $ 23.25 $ 16.59 $ (0.16) ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993 -------------- -------------- -------------- Operating activities: Net income (loss) $ 1,240,270 $ 885,014 $ (8,829) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for investment property writedown 1,016,987 Participation in (income) loss of joint venture with with an affiliate (754,733) 76,547 Depreciation 2,956,956 2,935,846 3,040,277 Amortization of deferred expenses 84,433 67,939 28,958 Collection (accrual) of recoverable expenses 1,509,618 (1,509,618) Net change in: Escrow deposits (87,700) (141,768) (908,628) Accounts and accrued interest receivable (190,143) (103,281) 100,938 Prepaid expenses (120,290) 96,810 230,298 Accounts payable (21,115) 65,145 (199,282) Due to affiliates (33,615) (9,012) 4,187 Accrued liabilities (313,953) 35,732 (104,708) Security deposits (12,289) 6,314 675 -------------- -------------- -------------- Net cash provided by operating activities 4,519,541 4,593,624 750,815 -------------- -------------- -------------- Investing activities: Capital contributions to joint venture with an affiliate (21,628) (25,117) Distribution from joint venture with an affiliate 482,229 Improvements to properties (333,283) (127,696) -------------- -------------- -------------- Net cash provided by (used in) investing activities 482,229 (354,911) (152,813) -------------- -------------- --------------
Financing activities: Distributions to Limited Partners (1,056,220) (1,056,220) Repayment of mortgage notes payable (11,700,000) (9,001,276) Proceeds from refinancing of mortgage note payable 13,000,000 9,300,000 Payment of deferred expenses (329,872) (269,517) Release of capital improvement escrow 668,946 172,331 Funding of capital improvement escrow (193,385) (903,512) Principal payments on mortgage notes payable (603,416) (510,799) (425,267) -------------- -------------- -------------- Net cash used in financing activities (1,184,075) (1,328,072) (396,060) -------------- -------------- -------------- Net change in cash and cash equivalents 3,817,695 2,910,641 201,942 Cash and cash equivalents at beginning of year 6,190,971 3,280,330 3,078,388 -------------- -------------- -------------- Cash and cash equivalents at end of year $ 10,008,666 $ 6,190,971 $ 3,280,330 ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the "Partnership") is engaged principally in the operation of residential and commercial real estate located in various markets within the United States.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally accepted accounting principles requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using the straight-line method. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years ----- Buildings and improvements 18-30 Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
(c) Effective January 1, 1995 the Partnership adopted Statement of Financial Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the Partnership records its investments in real estate at the lower of cost or fair value, and periodically assesses, but not less than on an annual basis, possible impairment to the value of its properties. The General Partner estimates the fair value of its properties by dividing the property's expected net operating income by a risk adjusted rate of return which considers economic and demographic conditions in the market. In the event the General Partner determines an impairment in value has occurred, and the carrying amount of the real estate asset will not be recovered, a provision is recorded to reduce the carrying basis of the property to its estimated fair value. The General Partner considers the method referred to above to result in a reasonable measurement of a property's fair value, unless other factors affecting the property's value indicate otherwise.
(d) Deferred expenses consist of refinancing fees which are amortized over the terms of the respective agreements.
(e) The Financial Accounting Standard Board's Statement No. 107, "Disclosures About Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value. Since quoted market prices are not available for the Partnership's financial instruments, fair values have been based on estimates using present value techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in immediate settlement of the instrument. Statement No. 107 does not apply to all balance sheet items and excludes certain financial instruments and all non-financial instruments such as real estate and investment in joint ventures from its disclosure requirements.
(f) Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Cash equivalents primarily are held or invested with one issuer of commercial paper.
(g) Revenue is recognized on an accrual basis in accordance with generally accepted accounting principles. Income from operating leases with significant abatements and/or scheduled rent increases is recognized on a straight line basis over the respective lease term. Service income includes reimbursements from operating costs such as real estate taxes, maintenance and insurance and is recognized as revenue in the period the applicable costs are incurred.
(h) The Partnership is not liable for Federal income taxes and each partner recognizes his proportionate share of the Partnership loss or income in his tax return; therefore, no provision for income taxes is made in the financial statements of the Partnership.
(j) A reclassification has been made to the previously reported 1994 and 1993 financial statements to conform with the classification used in 1995. This reclassification has not changed the 1994 and 1993 results.
3. Partnership Agreement:
The Partnership was organized in January 1984. The Partnership Agreement provides for Balcor Equity Partners-XVIII to be the General Partner and for the admission of Limited Partners through the sale of up to 100,000 Limited Partnership Interests at $1,000 per Interest, 52,811 of which were sold on or prior to July 31, 1985, the termination date of the offering.
All profits and losses of the Partnership are allocated 99% to the capital accounts of the Limited Partners and 1% to the capital account of the General Partner.
When and as cash distributions are made, 100% of the Net Cash Receipts will be distributed to holders of Interests. The General Partner will not receive any portion of Net Cash Receipts; however, there will be accrued for the benefit of the General Partner an amount equal to 1% of Net Cash Receipts distributed to holders of Interests, which will be paid only out of Net Cash Proceeds as a part of the General Partner's distributive share on sale or refinancing of properties.
When the Partnership sells or refinances its properties, the Net Cash Proceeds resulting therefrom which are available for distribution will be distributed only to holders of Limited Partnership Interests until such time as they have received an amount equal to their Original Capital plus a 6% per annum non-compounded return. The remaining Net Cash Proceeds available for distribution will be distributed 85% to holders of Limited Partnership Interests and 15% to the General Partner, provided that the General Partner's distributive share shall be further subordinated to the prior receipt by Limited Partners of a Preferential Cumulative Distribution of their Original Capital in the amount of 100% for Interests purchased prior to January 1, 1985 and 80% for Interests purchased thereafter.
4. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1995 and 1994 consisted of the following:
Carrying Carrying Current Final Property Amount of Amount of Inter- Matur- Periodic Estimated Pledged as Notes at Notes at est ity Payment Balloon Collateral 12/31/95 12/31/94 Rate Date Terms Payment - -------------- ---------- ---------- ------ ------ ------- ---------- Apartment Complexes: Canyon Point $ 5,149,774$ 5,193,774 8.59% 1998 $ 40,703 $ 5,022,000 Mallard Cove 3,976,029 4,007,623 9.01 2000 32,616 3,797,000 Knollwood Village (A) 12,878,068 12,961,273 9.55 2004 109,786 11,737,000
Office Building: 101 Marietta Tower (B) 17,471,338 17,915,955 10.00 2001 554,971 13,899,000 ----------- ----------- $39,475,209 $40,078,625 =========== ===========
(A) In June 1994, this loan was refinanced. The interest rate increased from 9.00% to 9.55%, the maturity date was extended from December 1994 to July 2004 and the monthly payments increased from $87,750 to $109,786. A portion of the proceeds from the new $13,000,000 first mortgage loan were used to repay the existing first mortgage loan of $11,700,000.
(B) In February 1996, the property collateralizing this loan was sold subject to the loan. See Note 10 for additional information.
During 1995, 1994 and 1993 the Partnership incurred interest expense on mortgage notes payable of $3,647,305, $3,785,223 and $3,586,643 and paid interest expense of $3,804,468, $3,968,746 and $3,949,717, respectively.
The Partnership's loans described above require current monthly payments of principal and interest, except for the 101 Marietta Tower loan which requires quarterly payments of principal and interest.
Real estate with an aggregate carrying value of $80,197,522 at December 31, 1995 was pledged as collateral for repayment of the mortgage notes.
Maturities of the above mortgage notes payable during each of the next five years are approximately as follows:
1996 $ 174,000 1997 191,000 1998 5,202,000 1999 167,000 2000 3,939,000
The maturities listed above do not include the 101 Marietta Tower loan. In February, 1996 the property collateralizing this loan was sold subject to the loan.
5. Management Agreements:
As of December 31, 1995, all of the properties owned by the Partnership are under management agreements with a third-party management company. These management agreements provide for annual fees of 5% of gross operating receipts for the residential properties and 3% to 6% of gross operating receipts for 101 Marietta Tower.
6. Investment in Joint Venture with an Affiliate:
The Partnership owned a 25.6% joint venture interest in Belmere Apartments and accounted for it under the equity method. In December 1994, the joint venture sold the property for a sales price of $8,500,000. From the sales proceeds, the joint venture repaid the first mortgage loan and other selling costs and received approximately $1,755,000. In February 1995, the Partnership received a distribution of $482,229 which represented its share of sales proceeds and fourth quarter 1994 property operations. This amount was included in accounts receivable in the financial statements at December 31,1994. The Partnership's share of the gain on the sale is $949,032 and is included in "Participation in income of joint venture with an affiliate" in 1994 and is partially offset by the Partnership's share of operating losses through the sale date. During 1994 and 1993, the Partnership made capital contributions of $21,628 and $25,117, respectively to the joint venture.
7. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code, rules and regulations promulgated thereunder and existing interpretations thereof. The accompanying financial statements, which are prepared in accordance with generally accepted accounting principles, will differ from the tax returns due to the different treatment of various items as specified in the Internal Revenue Code. The net effect of these accounting differences is that the net income for 1995 in the financial statements is $489,877 more than the tax income of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended 12/31/95 12/31/94 12/31/93 -------------- -------------- -------------- Paid Payable Paid Payable Paid Payable ------ ------- ------ ------- ------ -------
Property management fees None None $842,028 None $732,228 $58,502 Reimbursement of expenses to the General Partner, at cost: Accounting $46,607 $4,326 61,056 22,549 46,147 3,819 Data processing 12,337 525 30,712 5,868 20,772 4,578 Investor communica- tions 6,127 None 18,801 5,524 18,181 1,505 Legal 24,805 3,699 12,405 6,419 12,347 1,022 Portfolio management 90,767 14,122 93,124 9,612 66,900 5,626 Other 10,317 1,502 12,405 17,073 12,142 1,005 Property sales 10,741 9,256 None None None None
The Partnership participates in an insurance deductible program with other affiliated partnerships in which the program pays claims up to the amount of the deductible under the master insurance policies for its properties. The program is administered by an affiliate of the General Partner who receives no fee for administering the program however; the General Partner is reimbursed for program expenses. The Partnership paid premiums to the deductible insurance program of $97,729, $118,333 and $80,847 for 1995, 1994 and 1993, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all of the Partnership's properties until the affiliate was sold to a third party in November 1994.
9. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments at December 31, 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest receivable and accounts payable approximates fair value.
Based on borrowing rates available to the Partnership at the end of 1995 for mortgage loans with similar terms and maturities, the fair value of the mortgage notes payable approximates the carrying value.
10. Subsequent Events:
(a) In January 1996, the Partnership paid a distribution of $264,055 ($5.00 per Interest) to Limited Partners relating to the fourth quarter of 1995.
(b) In February 1996, the Partnership sold 101 Marietta Tower office complex in an all cash sale for $26,000,000. The purchaser of the 101 Marietta Tower office complex acquired the property subject to the existing $17,353,151 first mortgage loan and the Partnership paid $465,743 consisting of a brokerage commission and other closing costs. The basis of the property was $26,551,244 at December 31, 1995. As a result of the sale the property was written down to an amount equal to the February 1996 net sales proceeds received and the Partnership recognized a $1,016,987 provision for investment property writedown in 1995.
The Partnership received rental income at 101 Marietta Tower office complex from the leasing of office space under operating leases. During 1996, prior to the sale, the Partnership received $593,900 of rental income related to operating leases.
Approximately 83% of the space at 101 Marietta Tower office complex was leased to General Service Administration ("GSA") and 50%, 47% and 48% of the Partnership's total rental and service income recognized during 1995, 1994 and 1993, respectively, related to GSA.
(c) On February 29, 1996, a proposed class action complaint was filed, Raymond Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of the State of New York, County of New York). The Partnership, additional limited partnerships which were sponsored by The Balcor Company, three limited partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together with the Partnership and the affiliated partnerships, the "Defendant Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are defendants. The complaint alleges, among other things, common law fraud and deceit, negligent misrepresentation and breach of fiduciary duty relating to the disclosure of information in the offering of limited partnership interests in the Defendant Partnerships. The complaint seeks judgment for compensatory damages equal to the amount invested in the Defendant Partnerships by the proposed class plus interest accrued thereon; general damages for injuries arising from the defendants' actions; recovery from the defendants of all profits received by them as a result of their actions relating to the Defendant Partnerships; exemplary damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been certified as of this date. Management of each of the defendants believes they have meritorious defenses to contest the claims. It is not determinable at this time whether or not an unfavorable decision in this action would have a material adverse impact on the Partnership.
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR EQUITY PROPERTIES-XVIII A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) See description of Mortgage Notes Payable in Note 4 of Notes to Financial Statements.
(b) This property was sold in February 1996.
(c) Consists of legal fees, appraisal fees, title costs and other related professional fees.
(d) Guaranteed income earned on properties under the terms of certain management and guarantee agreements was recorded by the Partnership as a reduction of the basis of the property to which the guaranteed income related.
(e) Represents a reduction of basis due to a permanent impairment of the asset value (See Note 10)
(f) The aggregate cost of land for Federal income tax purposes is $10,537,326 and the aggregate cost of buildings and improvements for Federal income tax purposes is $71,381,388. The total of these is $81,918,714.
(g)Reconciliation of Real Estate --------------------------------
1995 1994 1993 ---------- ---------- ---------- Balance at beginning of year $81,214,509 $80,881,226 $80,753,530 Additions during the year: Improvements 333,283 127,696 Reductions during the year: Impairments 1,016,987 ----------- ----------- ----------- Balance at end of year $80,197,522 $81,214,509 $80,881,226 ============ =========== ===========
Reconciliation of Accumulated Depreciation -------------------------------------------
1995 1994 1993 ----------- ----------- ----------- Balance at beginning of year $32,293,590 $29,357,744 $26,317,467 Depreciation expense for the year 2,956,956 2,935,846 3,040,277 ------------ ----------- ----------- Balance at end of year $35,250,546 $32,293,590 $29,357,744 ============ =========== ===========
(h) Depreciation expense is computed based upon the following estimated useful lives:
Years ----- Buildings and improvements 18-30 Furniture and fixtures 5
(i) This apartment complex was completed in three phases from 1970 through 1973.