Item 1. Business - ----------------
Balcor Realty Investors-84 (the "Registrant") is a limited partnership formed in 1982 under the laws of the State of Illinois. The Registrant raised $140,000,000 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of real property, and all information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire twenty-three real property investments and a minority joint venture interest in one additional property. The Registrant has since disposed of ten of these properties, including the Pinebrook Apartments which was sold in February 1995 and the property in which the Registrant had a minority joint venture interest. As of December 31, 1994, the Registrant owned the fifteen properties described under "Properties" (Item 2). The Partnership Agreement provides that the proceeds of any sale or refinancing of the Registrant's properties will not be reinvested in new acquisitions.
During 1994, institutionally owned and managed multi-family residential properties in many markets continued to experience favorable operating conditions combined with relatively low levels of new construction. These favorable operating conditions were supported by the strong pattern of national economic growth which contributed to job growth and rising income levels in most local economies. However, some rental markets continue to remain extremely competitive; therefore, the General Partner's goals are to maintain high occupancy levels, while increasing rents where possible, and to monitor and control operating expenses and capital improvement requirements at the properties. As discussed in Item 7. Liquidity and Capital Resources, of the Registrant's fifteen remaining properties, during 1994, nine generated positive cash flow while six generated marginal cash flow deficits.
Historically, real estate investments have experienced the same cyclical characteristics affecting most other types of long-term investments. While real estate values have generally risen over time, the cyclical character of real estate investments, together with local, regional and national market conditions, has resulted in periodic devaluations of real estate in particular markets, as has been experienced in the last few years. As a result of these factors, it has become necessary for the Registrant to retain ownership of many of its properties for longer than the holding period for the assets originally described in the prospectus. The General Partner examines the operations of each property and each local market in conjunction with the Registrant's long term dissolution strategy when determining the optimal time to sell each of the Registrant's properties.
During 1994, the Registrant completed refinancings or modifications of three mortgage notes payable. See Item 7. Liquidity and Capital Resources for additional information.
The Registrant sold two properties during 1994. See Item 7. Liquidity and Capital Resources 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 Partners-XV, 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 - -----------------
Pinebrook Apartments - --------------------
In 1984, Pinebrook Apartments was acquired by Pinebrook Investors, a joint venture consisting of the Registrant and an affiliate. The Registrant and the affiliate hold participating percentages in the joint venture of 51.57% and 48.43%, respectively. Pinebrook Investors utilized $2,959,230 towards the purchase of the property, including $1,400,000 from the Registrant. The remainder of the purchase price was payable in the form of a $5,185,000 purchase money note (the "Note") collateralized by a wrap-around mortgage on the property. The Note wrapped around four subordinate mortgage loans held by unaffiliated parties and was collateralized by the property. In 1992, Pinebrook Limited Partnership, another joint venture consisting of the Registrant and the affiliate, purchased one of the subordinate loans at a discount for $220,000, of which $113,454 was the Registrant's share.
In November 1992, Pinebrook Investors suspended debt service payments on the Note, and subsequently, in December 1992, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In May 1994, the Pinebrook Investor's plan of reorganization became effective. Pursuant to the plan of reorganization, Pinebrook Investors was required to sell the property within two years.
On February 2, 1995, Pinebrook Investors sold the property to TGM Pinebrook Inc., a Delaware corporation, for a sale price of $6,140,000. From the proceeds of the sale, Pinebrook Investors paid approximately $5,058,226 to the third party mortgage holders in full satisfaction of the outstanding amount of the loans. Additionally, Pinebrook Investors paid approximately $716,729 to Pinebrook Limited Partnership in full satisfaction of the outstanding amount of its loan, of which the Registrant's share is $369,617. Pinebrook Investors paid $184,200 as a brokerage commission to an unaffiliated party and approximately $25,975 representing closing and other costs. Pinebrook Investors received the remaining $13,316, of which the Registrant's share is $6,867. Neither the General Partner nor its affiliates will receive a commission in connection with the sale of the property.
Item 2.
Item 2. Properties - ------------------
As of December 31, 1994, the Registrant owned the 15 properties described below:
Location Description of Property - -------- -----------------------
Jacksonville, Florida Antlers Apartments: a 400-unit apartment complex located on approximately 43 acres.
Chandler, Arizona Briarwood Place Apartments: a 268-unit apartment complex located on approximately 15 acres.
Phoenix, Arizona Canyon Sands Village Apartments: a 412-unit apartment complex located on approximately 20 acres.
Harris County, Texas Chesapeake Apartments: a 320-unit apartment complex located on approximately 11 acres.
Fort Worth, Texas Chestnut Ridge Apartments (Phase II): a 160-unit apartment complex located on approximately 6 acres.
Colorado Springs, Colorado Chimney Ridge Apartments: a 280-unit apartment complex located on approximately 9 acres.
Dade County, Florida Courtyards of Kendall Apartments: a 300-unit apartment complex located on approximately 20 acres.
Tulsa, Oklahoma Creekwood Apartments (Phase I): a 276-unit apartment complex located on approximately 13 acres.
Charleston County, South Carolina Drayton Quarter Apartments: a 206-unit apartment complex located on approximately 17 acres.
Lexington, Kentucky * Pinebrook Apartments: a 208-unit apartment complex located on approximately 11 acres.
Oklahoma City, Oklahoma Quail Lakes Apartments: a 384-unit apartment complex located on approximately 19 acres.
Dallas, Texas Ridgetree Apartments (Phase I): a 444-unit apartment complex located on approximately 11 acres.
Las Vegas, Nevada Somerset Pointe Apartments: a 452-unit apartment complex located on approximately 26 acres.
Overland Park, Kansas Sunnyoak Village Apartments: a 548-unit apartment complex located on approximately 33 acres.
Irving, Texas Woodland Hills Apartments: a 250-unit apartment complex located on approximately 10 acres.
* This property was owned by the Registrant through a joint venture with an affiliate and was sold during 1995. See Item 1. Business and Note 12 of Notes to Financial Statements for additional information.
Each of the above properties is held subject to various forms of financing.
In the opinion of the General Partner, the Registrant has provided for 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 - -------------------------
The Registrant is not subject to any material pending legal proceedings, nor were any such proceedings terminated during the fourth quarter of 1994.
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 1994.
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 distributions, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 13,453.
Item 6.
Item 6. Selected Financial Data - -------------------------------
Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ----------
Total income $30,392,509 $30,159,179 $30,525,777 $31,274,909 $32,505,457 Loss before gains on sale of assets and extraordinary items (2,814,657) (3,588,955) (5,092,181) (6,901,927) (7,890,602) Net income (loss) 5,572,852 2,809,966 (5,092,181) (3,093,431) (7,890,602) Net income (loss) per Limited Partnership Interest 39.41 19.87 (36.01) (21.88) (55.80) Total assets 98,385,353 117,468,061 128,763,485 132,982,864 169,019,865 Mortgage notes payable 114,779,433 136,404,898 149,910,843 150,663,629 182,960,724
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and - ----------------------------------------------------------------------- Results of Operations - ---------------------
Summary of Operations - ---------------------
The Ridgepoint Hill and Ridgepoint View apartment complexes were sold in 1994 and certain of the related loans were repaid at a discount. During 1993, the Ridgetree Phase I first mortgage loan was purchased at a discount and title to the Highland Glen apartment complex was relinquished through foreclosure. As a result of these transactions and the timing of their related gains, Balcor Realty Investors-84 (the "Partnership") generated increased net income during 1994 as compared to 1993 and generated net income during 1993 as compared to a net loss during 1992. Further discussion of the Partnership's operations is summarized below.
Operations - ----------
1994 Compared to 1993 - ---------------------
In August 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View apartment complexes and repaid the first mortgage loans to a third party. In addition, sales proceeds were used to repay the second mortgage loans and unsecured third mortgage loan from an affiliate of the General Partner at a
discount. As a result, the Partnership recognized gains on the sales of the properties and extraordinary gains on forgiveness of debt during 1994. During May 1993, title to the Highland Glen apartment complex was relinquished to the mortgage holder through foreclosure. As a result, the Partnership recognized an extraordinary gain on foreclosure. The 1994 property sales and the 1993 foreclosure resulted in decreases in rental and service income, interest expense on mortgage notes payable, depreciation, property operating expenses, maintenance and repair expense, real estate taxes and property management fees during 1994 as compared to 1993. These decreases were partially or, in certain cases, fully offset by the events described below.
Twelve of the Partnership's remaining properties experienced improved occupancy and/or higher rental rates in 1994, resulting in increased rental and service income and property management fees during 1994 as compared to 1993, which fully offset the decreases from the property sales and foreclosure.
Due to higher average cash balances and higher market interest rates on short- term interest bearing instruments, interest income on short-term investments increased during 1994 as compared to 1993.
In accordance with the loan agreements, the interest rates on the Briarwood, Canyon Sands, Somerset Pointe and Sunnyoak Village mortgage notes decreased in 1993 based on lower market rates and resulted in a decrease in interest expense on these loans. In addition, during 1994 and 1993, the Chestnut Ridge Phase II mortgage note and the Ridgetree Phase I and Woodland Hills mortgage notes were refinanced at lower interest rates and reduced total principal balances. These decreases in interest expense, as well as the decreases discussed above, were partially offset during 1994 by interest expense recognized on the Chesapeake mortgage note, which was obtained during June 1993, and on the Quail Lakes loan, which had principal-only payments until June 1993 at which time the payments increased to principal and interest. In addition, the Partnership recognized extraordinary gains on forgiveness of debt during 1993 in connection with the refinancings of the Ridgetree Phase I and Chimney Ridge mortgage loans.
Due to increases in the short-term loan balance payable to an affiliate and interest rates during 1994, interest expense on short-term loans increased during 1994 as compared to 1993.
Higher costs for insurance premiums, payroll expenses and contract services at many of the Partnership's properties resulted in increased property operating expense during 1994 as compared to 1993. This increase fully offset the decrease from the property sales and foreclosure.
Due to higher repair and maintenance expenditures, which included roof and pavement repairs, landscaping and replacement of floor coverings at many of the Partnership's properties, maintenance and repair expense increased during 1994 as compared to 1993, which fully offset the decrease from the property sales and foreclosure.
Due primarily to a higher tax assessment for the Ridgetree Phase I apartment complex, real estate taxes increased during 1994 as compared to 1993, which fully offset the decrease from the property sales and foreclosure.
Primarily as a result of increased legal fees relating to the Pinebrook bankruptcy settlement and increased portfolio management and data processing expenses, administrative expenses increased during 1994 as compared to 1993. This increase was partially offset by a decrease in accounting fees during 1994 as compared to 1993.
The Pinebrook apartment complex was owned by a joint venture consisting of the Partnership and an affiliate. The joint venture recognized other income during 1993 in connection with the purchase of a note investment related to the property. During 1994, default interest expense was recognized on the fourth mortgage loan in connection with the bankruptcy plan of reorganization. These transactions, as well as higher property operating and repairs and maintenance
expenditures at the property which had been deferred due to the bankruptcy, resulted in an increase in affiliate's participation in loss from joint venture during 1994 as compared to 1993.
1993 Compared to 1992 - ---------------------
After the Partnership suspended debt service payments on the Highland Glen apartment complex and the lender filed foreclosure proceedings, a receiver was appointed and took possession of the property in September 1992. This caused decreases in rental and service income, interest expense on mortgage notes payable, depreciation expense, property operating expenses, maintenance and repair expenses, real estate taxes and property management fees during 1993 as compared to 1992. These decreases were partially or, in certain cases, fully offset by the events described below. During May 1993, title to the Highland Glen apartment complex was relinquished to the mortgage holder through foreclosure. As a result, the Partnership recognized an extraordinary gain on foreclosure during 1993.
Fourteen of the Partnership's remaining properties experienced improved occupancy levels and/or higher rental rates in 1993, partially offsetting the previously discussed decreases in rental and service income and property management fees during 1993 as compared to 1992.
The Partnership reached a settlement with the seller of the Ridgetree Phase I apartment complex in June 1992. Prorations due from the seller pursuant to the terms of the original management and guarantee agreement on this property were previously written off due to uncertain collectibility. Pursuant to the settlement agreement, the parties have released all claims and causes of action against one another, and the Partnership received cash of $208,000 and was relieved of certain other liabilities by the seller. Other income of $259,174 was recognized in connection with this transaction and resulted in a decrease in other income during 1993 as compared to 1992.
The interest rate on the previous Creekwood Phase I mortgage note adjusted monthly based on a market rate while the interest rates on the Briarwood, Canyon Sands, Somerset Pointe and Sunnyoak Village mortgage notes were adjusted in 1993 based on market rates. Lower interest rates during 1993 resulted in a decrease in interest expense on these loans. In April 1993, the Ridgetree Phase I mortgage note was refinanced and the original loan was repaid at a discount. As a result of a lower principal balance and interest rate on the new loan, interest expense decreased for this property. In May 1993, the Woodland Hills first mortgage note was refinanced and the second mortgage was partially repaid. As a result of the reduced total principal balances and a lower interest rate on the new first mortgage loan, interest expense decreased for this property. These items contributed to the decrease in interest expense on mortgage notes payable during 1993 as compared to 1992. The decreases in interest expense discussed above were partially offset during 1993 by interest expense recognized on the Chesapeake mortgage note, which was obtained during June 1993, and on the Quail Lakes apartment complex loan, which had principal- only payments until June 1993.
As a result of the full amortization of the deferred expenses related to prior mortgages on the Highland Glen apartment complex, which was foreclosed in 1993, and the Woodland Hills, Chesapeake and Chimney Ridge apartment complexes, which were refinanced in 1993, amortization of deferred expenses increased during 1993 as compared to 1992.
Slightly higher property operating expenses at most of the remaining properties resulted in an increase in property operating expenses during 1993 as compared to 1992.
During 1993, the Partnership recognized extraordinary gains on forgiveness of debt in connection with the refinancings of the Ridgetree Phase I and Chimney Ridge mortgage loans.
Liquidity and Capital Resources - -------------------------------
The cash position of the Partnership increased as of December 31, 1994 as compared to December 31, 1993. The Partnership received cash from its operating activities which consisted primarily of cash flow generated from property operations which were partially offset by the payment of administrative expenses and short-term interest expense. The Partnership also received cash from its investing activities relating to the sale of the Ridgepoint Hill and Ridgepoint View apartment complexes, all of which was used in its financing activities to repay the related mortgage notes. The Partnership also used cash to fund its other financing activities which consisted primarily of a net repayment to the General Partner and the refinancing of the Chestnut Ridge Phase II and Creekwood Phase I mortgage notes, as well as principal payments on mortgage notes payable.
The Partnership has loans from the General Partner and owes approximately $12,153,000 to the General Partner at December 31, 1994 in connection with the funding of operating deficits and borrowings needed for loan refinancings. These loans are expected to be repaid from available cash flow from future property operations, and from proceeds received from the disposition or refinancing of the Partnership's real estate investments, prior to any distributions to Limited Partners.
Although an affiliate of the General Partner has, in certain circumstances, provided mortgage loans for certain properties to the Partnership, there can be no assurance that loans of this type will be available from either an affiliate or the General Partner in the future. The General Partner may also continue to provide additional short-term loans to the Partnership or to fund working capital needs or property operating deficits, although there is no assurance that such loans will be available. Should such short-term loans not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available either through the General Partner or third parties, the Partnership may be required to dispose of some of its properties to satisfy these obligations.
In instances where the General Partner concludes that the Partnership's investment objectives cannot be met by continuing to own a particular property and fund operating deficits, the Partnership has suspended and may in the future suspend debt service payments or sell the property at a price less than its original cost. Suspension of debt service payments may lead to a renegotiation of terms with lenders which would permit the Partnership to continue to own properties or may lead to foreclosure or other action by lenders which would result in the relinquishment of title to properties in satisfaction of the outstanding mortgage loan balances. In the case of each property, the General Partner will pursue modification of underlying debt, consider suspending debt service payments and/or deferring non-critical repair and maintenance costs and analyze present and projected market conditions and projections for operations prior to determining the disposition of a property.
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 unless otherwise indicated. A deficit is considered to be significant if it exceeds $250,000 annually or 20% of the property's rental and service income. 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. For 1994, nine of the fifteen remaining properties owned by the Partnership generated positive cash flow and six generated marginal cash flow deficits. For 1993, of these fifteen properties, ten generated positive cash flow and five generated marginal cash flow deficits.
The Canyon Sands apartment complex, which had generated marginal deficits
during 1993, generated positive cash flow during 1994 due to higher rental income and slightly lower debt service payments. The following two properties that had generated positive cash flow during 1993 generated marginal cash flow deficits during 1994. The Pinebrook apartment complex experienced higher insurance premiums and increased repairs and maintenance expense which had been deferred during the bankruptcy proceedings while the Drayton Quarter apartment complex experienced slightly higher real estate taxes and slightly lower rental income during 1994.
While the cash flow of certain of the Partnership's properties has improved, the General Partner continues to pursue a number of actions aimed at improving the cash flow of the Partnership's properties including refinancing of mortgage loans, improving property operating performance, and seeking rent increases where market conditions allow. As of December 31, 1994, the occupancy rates of all of the Partnership's properties ranged from 92% to 97% except for Ridgetree Apartments Phase I which had an occupancy rate of 89%. Despite improvements during 1993 and 1994 in the local economies and rental markets where certain of the Partnership's properties are located, the General Partner believes that continued ownership of many of the properties is in the best interests of the Partnership in order to maximize potential returns to Limited Partners. As a result, the Partnership will continue to own these properties for longer than the holding period for the assets originally described in the prospectus.
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. See Note 3 of Notes to Financial Statements for information concerning outstanding balances, maturity dates, interest rates, and other terms related to each of these mortgage loans. During 1995 and 1996, the Partnership has only one loan maturing, a mortgage loan of approximately $4,765,000 collateralized by the Drayton Quarter apartment complex. The General Partner has decided to sell the property and negotiations are currently in progress to accomplish this prior to the maturity of the loan.
The Pinebrook apartment complex was owned by Pinebrook Investors, a joint venture consisting of the Partnership and an affiliate, and was financed with a $5,185,000 wrap-around mortgage payable, which matured in July 1993. In December 1992, Pinebrook Investors filed for protection under the U.S. Bankruptcy Code and in 1994, a plan of reorganization was approved by the Bankruptcy Court. Pursuant to the plan, Pinebrook Investors was required to sell the property within two years. Consequently, in February 1995, Pinebrook Investors sold the property in an all cash sale for $6,140,000. From the proceeds, Pinebrook Investors paid $5,058,226 to the third party mortgage holders in full satisfaction of the first, second and fourth mortgage loans. Additionally, Pinebrook Investors paid approximately $716,729 in full satisfaction of the third mortgage note payable to Pinebrook Limited Partnership, a separate joint venture consisting of the Partnership and the affiliate. See Notes 3, 10 and 12 of Notes to Financial Statements for additional information.
During 1994, the Chestnut Ridge Phase II mortgage loans, the Creekwood Phase I first mortgage loan, and the Quail Lakes first mortgage loan were refinanced or modified. See Note 3 of Notes to Financial Statements for additional information.
During 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View apartment complexes in an all cash sale for $18,659,285. From the proceeds, the Partnership paid $12,658,037 in full satisfaction of the first mortgage loans and $5,381,539 to an affiliate of the General Partner in full satisfaction of the second mortgage loans and an unsecured third mortgage loan which represented a discount of $2,791,215. The Partnership did not receive any proceeds from the sale of the properties. See Notes 8 and 11 of Notes to Financial Statements for additional information.
Woodland Hills Apartments is located near the Dallas/Ft. Worth Airport. A proposed expansion plan provides for the construction of two additional runways on airport property. A plan proposed by the Dallas/Fort Worth International
Airport Board provides for varying levels of compensation to single family homeowners; however, no similar compensation is planned for the majority of apartment complex owners, including the property. In July 1993, the Partnership and other affected multi-family property owners filed a lawsuit seeking to obtain compensation. As a result of the court's decisions, the Partnership is not entitled to receive any compensation due to the airport expansion. The plaintiffs have decided not to appeal the decision due to the costs of continuing the litigation, but intend to continue to monitor the situation. Woodland Hills Apartments, however, may be entitled to be reimbursed for the costs of sound proofing under the Final Environmental Impact Statement approved by the Federal Aviation Administration. However, a final determination will not be made until the runways are completed and actual noise studies are analyzed. The General Partner does not anticipate that the proposed expansion plan will have a significant impact to the value of the property.
The Briarwood apartment complex is located in the path of a planned expansion of Price Road, which is adjacent to the property. Discussions for this expansion have been ongoing, and the General Partner has been attending the public hearings due to its opposition to this expansion. If the current plans are approved, approximately 68 of the complex's 268 units would be condemned, which would have a significant impact on the property's value. Currently it is unclear whether the future approvals and funding for the project will be obtained and, if obtained, what compensation the Partnership would receive for the units or when the work would begin.
Although investors have received certain tax benefits, the Partnership has not commenced distributions. Future distributions to investors will depend on improved cash flow from the Partnership's remaining properties and proceeds from future property sales, as to both of which there can be no assurances. In light of results to date and current market conditions, the General Partner does not anticipate that investors will recover a substantial portion of their original investment.
The General Partner has recently completed the outsourcing of the financial reporting and accounting services, transfer agent and investor records services, and computer operations and systems development functions that provided services to the Partnership. All of these functions are now being provided by independent third parties. Additionally, Allegiance Realty Group, Inc., which has provided property management services to all of the Partnership's properties, was sold to a third party. Each of these transactions occurred after extensive due diligence and competitive bidding processes. The General Partner does not believe that the cost of providing these services to the Partnership, in the aggregate, will be materially different to the Partnership during 1995 when compared to 1994.
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 depending on general or local economic conditions. In the long-term, inflation will 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 Index to Financial Statements and Financial Statement 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, 1994 December 31, 1993 ------------------------- -------------------------
Financial Tax Financial Tax Statements Returns Statements Returns ---------- --------- ---------- ---------
Total assets $98,385,353 $67,625,335 $117,468,061 $86,235,405 Partners' capital accounts (deficit): General Partner (1,545,395)(11,230,881) (1,601,123) (18,854,592) Limited Partners (29,002,420)(49,329,122) (34,519,544) (50,849,212) Net income (loss): General Partner 55,728 7,623,711 28,100 (3,584,849) Limited Partners 5,517,124 1,520,090 2,781,866 6,627,854 Per Limited Part- nership Interest 39.41 10.86 19.87 47.34
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and - ----------------------------------------------------------------------- Financial Disclosure - --------------------
There have been no changes in or disagreements with accountants on any matter of accounting principles, practices or financial statement disclosure.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Partners-XV, its General Partner, has a Board of Directors.
(b, c & e) The names, ages and business experience 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 Executive Vice President, Allan Wood Chief Financial Officer and Chief Accounting Officer Senior Vice President Alexander J. Darragh First Vice President Daniel A. Duhig First Vice President Josette V. Goldberg First Vice President Alan G. Lieberman First Vice President Brian D. Parker and Assistant Secretary First Vice President John K. Powell, Jr. First Vice President Reid A. Reynolds First Vice President Thomas G. Selby
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. 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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief Financial Officer and Chief Accounting Officer, is responsible for the financial and administrative functions. He is also a Director of The Balcor Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor, he was employed by Price Waterhouse where he was involved in auditing public and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has primary responsibility for the Portfolio Advisory Group. He is responsible for due diligence analysis and real estate advisory services in support of asset management, institutional advisory and capital markets functions. Mr. Darragh has supervisory responsibility of Balcor's Investor Services, Investment Administration, Fund Management and Land Management departments. Mr. Darragh received masters' degrees in Urban Geography from Queens's University and in Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is responsible for the Asset Management Department relating to real estate investments made by Balcor and its affiliated partnerships, including negotiations for modifications or refinancings of real estate mortgage investments and the disposition of real estate investments.
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 administrative and MIS departments. 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 the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for Balcor's corporate and property accounting, treasury and budget activities. 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 the administration of the investment portfolios of Balcor's partnerships and for Balcor's risk management functions. Mr. Powell received a Master of Planning degree from the University of Virginia. He 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.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with the asset management of residential properties for Balcor. Mr. Reynolds is a licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has responsibility for various Asset Management functions, including oversight of the residential portfolio. From January 1986 through September 1994, Mr. Selby was Regional Vice President and then Senior Vice President of Allegiance Realty Group, Inc., an affiliate of Balcor providing property management services. Mr. Selby was responsible for supervising the management of residential properties in the western United States.
(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 1994.
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 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 7 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 Partners-XV 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 116 Interests Less than 1%
Relatives and affiliates of the officers and partners of the General Partner own an additional 80 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 2 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
See Note 7 of Notes to Financial Statements for information relating to transactions with affiliates.
(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 Schedules, and Reports on Form 8-K - -------------------------------------------------------------------------
(a) (1 & 2) See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and Restated Certificate of Limited Partnership, previously filed as Exhibits 3 and 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated December 16, 1983 (Registration No. 2-86317) are incorporated herein by reference.
(4) 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. 0-13349) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(99) Agreement of Sale relating to the sale of Pinebrook Apartments, Lexington, Kentucky is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: 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 REALTY INVESTORS-84
By: /s/Allan Wood ---------------------- Allan Wood Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XV, the General Partner
Date: March 27, 1995 ------------------
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 Partners-XV, /s/Thomas E. Meador the General Partner March 27, 1995 - ---------------------- -------------- Thomas E. Meador
Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XV, /s/Allan Wood the General Partner March 27, 1995 - ---------------------- -------------- Allan Wood
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Deficit, for the years ended December 31, 1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
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 Realty Investors-84:
We have audited the financial statements and the financial statement schedule of Balcor Realty Investors-84 (An Illinois Limited Partnership) as listed in the index of this Form 10-K. 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 audits.
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, the financial statements referred to above present fairly, in all material respects, the financial position of Balcor Realty Investors-84 at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, 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 10, 1995
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 ------------- ------------- Cash and cash equivalents $ 1,311,019 $ 736,429 Certificate of deposit - restricted 700,000 700,000 Net investment in note receivable 914,040 Escrow deposits 2,501,015 3,052,027 Accounts and accrued interest receivable 914,727 1,615,965 Deferred expenses, net of accumulated amortization of $1,061,641 in 1994 and $1,128,672 in 1993 1,353,111 1,570,886 ------------- ------------- 6,779,872 8,589,347 ------------- ------------- Investment in real estate: Land 18,397,507 22,657,624 Buildings and improvements 130,982,523 145,783,613 ------------- ------------- 149,380,030 168,441,237 Less accumulated depreciation 57,774,549 59,562,523 ------------- ------------- Investment in real estate, net of accumulated depreciation 91,605,481 108,878,714 ------------- ------------- $ 98,385,353 $117,468,061 ============= =============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 12,153,202 $ 11,166,206 Accounts payable 328,647 1,040,208 Due to affiliates 197,822 207,444 Accrued liabilities, principally interest and real estate taxes 1,201,714 4,229,868 Security deposits 582,347 599,835 Mortgage notes payable 112,812,222 126,356,211 Mortgage notes payable - affiliate 1,967,211 10,048,687 ------------- ------------- Total liabilities 129,243,165 153,648,459
Affiliate's participation in joint venture (309,997) (59,731)
Partners' deficit (140,000 Limited Partnership Interests issued and outstanding) (30,547,815) (36,120,667) ------------- ------------- $ 98,385,353 $117,468,061 ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT for the years ended December 31, 1994, 1993 and 1992
Partners' Deficit Accounts -------------------------------------------- General Limited Total Partner Partners(A) -------------- ------------- -------------
Balance at December 31, 1991 $ (33,838,452) $ (1,578,301) $(32,260,151)
Net loss for the year ended December 31, 1992 (5,092,181) (50,922) (5,041,259) -------------- ------------- ------------- Balance at December 31, 1992 (38,930,633) (1,629,223) (37,301,410)
Net income for the year ended December 31, 1993 2,809,966 28,100 2,781,866 -------------- ------------- ------------- Balance at December 31, 1993 (36,120,667) (1,601,123) (34,519,544)
Net income for the year ended December 31, 1994 5,572,852 55,728 5,517,124 -------------- ------------- ------------- Balance at December 31, 1994 $ (30,547,815) $ (1,545,395) $(29,002,420) ============== ============= =============
(A) Includes a $110,000 investment by the General Partner, which is treated on the same basis as the other Limited Partnership Interests.
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Income: Rental and service $ 30,283,700 $ 29,915,125 $ 30,010,121 Interest on short-term investments 108,809 76,829 81,558 Other income 167,225 434,098 ------------- ------------- ------------- Total income 30,392,509 30,159,179 30,525,777 ------------- ------------- -------------
Expenses: Interest on mortgage notes payable 10,764,902 12,047,956 13,816,050 Interest on short-term loans 635,617 484,932 494,403 Depreciation 4,461,058 4,617,794 4,884,047 Amortization of deferred expenses 455,911 471,567 229,473 Property operating 8,770,470 8,085,076 7,892,370 Maintenance and repairs 3,264,328 3,207,875 3,353,405 Real estate taxes 2,535,394 2,492,324 2,502,189 Property management fees 1,502,309 1,481,954 1,493,809 Administrative 1,049,594 923,660 1,021,753 ------------- ------------- ------------- Total expenses 33,439,583 33,813,138 35,687,499 ------------- ------------- -------------
Loss before gains on sales of properties, affiliate's participation in loss from joint venture and extraordinary items (3,047,074) (3,653,959) (5,161,722)
Gains on sales of properties 5,596,294 Affiliate's participation in loss from joint venture 232,417 65,004 69,541 ------------- ------------- ------------- Income (loss) before extraordinary items 2,781,637 (3,588,955) (5,092,181) ------------- ------------- ------------- Extraordinary items: Gains on forgiveness of debt 2,791,215 2,058,078 Gain on foreclosure of property 4,340,843 ------------- ------------- Total extraordinary items 2,791,215 6,398,921 ------------- ------------- ------------- Net income (loss) $ 5,572,852 $ 2,809,966 $ (5,092,181) ============= ============= ============= Income (loss) before extraordinary items allocated to General Partner $ 27,816 $ (35,890) $ (50,922) ============= ============= ============= Income (loss) before extraordinary items
allocated to Limited Partners $ 2,753,821 $ (3,553,065) $ (5,041,259) ============= ============= ============= Income (loss) before extraordinary items per Limited Partnership Interest (140,000 issued and outstanding) $ 19.67 $ (25.38) $ (36.01) ============= ============= =============
Extraordinary items allocated to General Partner $ 27,912 $ 63,989 None ============= ============= ============= Extraordinary items allocated to Limited Partners $ 2,763,303 $ 6,334,932 None ============= ============= ============= Extraordinary items per Limited Partnership Interest (140,000 issued and outstanding) $ 19.74 $ 45.25 None ============= ============= ============= Net income (loss) allocated to General Partner $ 55,728 $ 28,100 $ (50,922) ============= ============= ============= Net income (loss) allocated to Limited Partners $ 5,517,124 $ 2,781,866 $ (5,041,259) ============= ============= ============= Net income (loss) per Limited Partnership Interest (140,000 issued and outstanding) $ 39.41 $ 19.87 $ (36.01) ============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992 (Continued)
1994 1993 1992 ------------- ------------- ------------- Operating activities: Net income (loss) $ 5,572,852 $ 2,809,966 $ (5,092,181) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary items: Gains on forgiveness of debt (2,791,215) (2,058,078) Gain on foreclosure of property (4,340,843) Gains on sales of properties (5,596,294) Affiliate's participation in loss from joint venture (232,417) (65,004) (69,541) Depreciation of properties 4,461,058 4,617,794 4,884,047 Amortization of deferred expenses 455,911 471,567 229,473 Amortization of discount on note receivable (112,816) (117,185) Deferred interest on note receivable (131,475) (424,168) (39,871) Deferred interest expense 806,802 Net change in: Escrow deposits 295,653 (1,083,694) (426,432) Accounts and accrued interest receivable 701,238 (926,249) (243,519) Accounts payable (711,561) 72,914 355,743 Due to affiliates (9,622) (10,263) 4,383 Accrued liabilities (241,377) 1,365,981 607,755 Security deposits (17,488) (13,309) 2,631 ------------- ------------- ------------- Net cash provided by operating activities 1,755,263 303,798 902,105 ------------- ------------- ------------- Investing activities: Proceeds from redemption of restricted investments 100,000 610,000 Purchase of investment in note (220,000) Additions to properties (48,774) (33,750) Proceeds from sales of properties 18,659,285 Payment of selling costs (250,816) ------------- ------------- ------------- Net cash provided by investing activities 18,408,469 51,226 356,250 ------------- ------------- ------------- Financing activities: Capital contributions by joint venture partner - affiliate 4,953 133,342 Distributions to joint venture partner -
affiliate (22,802) (23,780) (7,537) Proceeds from loan payable - affiliate 764,128 5,918,837 1,478,387 Repayment of loan payable - affiliate (1,218,432) (7,164,610) (302,178) Proceeds from issuance of mortgage notes payable 8,828,700 27,532,897 2,863,800 Repayment of mortgage notes payable (20,626,168) (21,205,963) Repayment of mortgage notes payable - affiliate (5,668,638) (1,912,948) (2,863,800) Principal payments on mortgage notes payable (1,574,407) (1,579,971) (2,093,148) Principal payments on mortgage notes payable - affiliate (133,699) (7,675) (43,837) Payment of deferred expenses (198,136) (967,631) (203,029) Payment of financing escrows (113,250) (896,083) (111,245) Release of financing escrows 368,609 32,228 ------------- ------------- ------------- Net cash used in financing activities (19,589,142) (274,699) (1,149,245) ------------- ------------- -------------
Net change in cash and cash equivalents 574,590 80,325 109,110 Cash and cash equivalents at beginning of year 736,429 656,104 546,994 ------------- ------------- ------------- Cash and cash equivalents at end of year $ 1,311,019 $ 736,429 $ 656,104 ============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using straight-line and accelerated methods. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years -----
Buildings and improvements 20 to 30 Furniture and fixtures 5 to 7
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
Interest incurred while properties were under construction was capitalized.
The Partnership records its investments in real estate at cost, and periodically assesses possible impairment to the value of its properties. In the event that the General Partner determines that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
(b) Deferred expenses consist of financing fees which are amortized over the terms of the respective agreements.
(c) Cash equivalents include all unrestricted highly liquid investments with an original maturity of three months or less.
(d) The Partnership is not liable for Federal income taxes and each partner recognizes his proportionate share of the Partnership income or loss in his tax return; therefore, no provision for income taxes is made in the financial statements of the Partnership.
(e) Reclassifications have been made to the previously reported 1993 and 1992 statements in order to provide comparability with the 1994 statements. These reclassifications have not changed the 1993 or 1992 results.
2. Partnership Agreement:
The Partnership was organized in September 1982. The Partnership Agreement provides for Balcor Partners-XV to be the General Partner and for the admission of Limited Partners through the sale of up to 150,000 Limited Partnership Interests at $1,000 per Interest, 140,000 of which were sold on or prior to June 27, 1984, the termination date of the offering.
The Partnership Agreement provides that the General Partner generally will be allocated 1% of the profits and losses. One hundred percent of "Net Cash Receipts" available for distribution shall be distributed to the holders of Interests in proportion to their participating percentages as of the record date for such distributions. In addition, there shall be accrued for the benefit of the General Partner as its distributive share from operations an amount equivalent to approximately 1% of the total Net Cash Receipts being distributed, which will be paid only out of Net Cash Proceeds.
Under certain circumstances, the General Partner may also participate in the Net Cash Proceeds of the sale or refinancing of Partnership properties. When and as 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 Interests until such time as holders of Interests have received an amount equal to their Original Capital plus certain
levels of return as specified by the Partnership Agreement. Only after such returns are made to the Limited Partners will the General Partner receive 15% of further distributed Net Cash Proceeds, which will include the accrued distributive share of Net Cash Receipts, subject to increase by an amount equal to certain acquisition fees the General Partner would otherwise have been entitled to pursuant to the Partnership Agreement.
3. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1994 and 1993 consisted of the following:
Carrying Carrying Current Final Property Amount of Amount of Inter- Matur- Current Estimated Pledged as Notes at Notes at est ity Monthly Balloon Collateral 12/31/94 12/31/93 Rate Date Payment Payment - --------------- ---------- ---------- ------ ------ -------- ----------
Mortgage Notes Payable - Nonaffiliates:
Apartment Complexes: Antlers (A) $10,309,549 $10,446,268 8.25% 1998 $82,787 $9,731,000 Briarwood Place 6,137,179 6,261,495 6.498% 1998 43,961 5,606,000 Canyon Sands Village 9,265,525 9,447,725 6.498% 1998 66,130 8,460,000 Chesapeake (B) 5,140,624 5,170,785 7.875% 2028 36,357 None Chimney Ridge (C) 7,321,840 7,389,254 7.625% 2003 52,377 6,452,000 Chestnut Ridge (Phase II) (D) 3,112,914 2,843,547 9.02% 2001 25,219 2,934,000 Courtyards of Kendall (E) 9,137,019 9,461,431 9.50% 1997 83,906 9,014,000 Creekwood (F) 5,677,152 5,335,504 8.88% 1999 45,372 5,465,000 Drayton Quarter 4,796,013 4,833,492 11.00% 1995 47,276 4,765,000 Pinebrook (G) 5,068,603 5,185,000 Quail Lakes (H) 6,801,164 6,847,000 8.25% 2001 51,295 6,350,000 Ridgepoint Hill (I) 6,186,000 Ridgepoint View (I) 6,352,000 Ridgetree (Phase I) (J) 9,569,351 9,626,164 10.05% 2000 85,139 9,157,000 Somerset Pointe 11,473,744 11,690,016 6.498% 1998 80,531 10,501,000 Sunnyoak Village 14,008,532 14,247,685 7.33% 2015 106,091 None Woodland Hills (K) 4,993,013 5,032,845 8.54% 1998 39,009 4,828,000 ----------- -----------
Subtotal 112,812,222 126,356,211 ----------- -----------
Mortgage Notes Payable - Affiliates:
Apartment Complexes: Chestnut Ridge (L) 1,515,739 2,829,241 10.50% 2002 (L) 1,516,000 Ridgepoint Hill (I) 3,288,870 Ridgepoint View (I) 3,345,405 Woodland Hills (M) 451,472 585,171 10.50% 1999 (M) 451,000 ----------- -----------
Subtotal 1,967,211 10,048,687 ----------- ----------- Total $114,779,433$136,404,898 ============ ===========
(A) In July 1993, this loan was modified. The loan balance was increased by $232,334 to $10,500,000, the interest rate decreased from 9% to 8.25%, the maturity date was extended from January 1994 to August 1998 and the monthly payments decreased from $87,745 to $82,787.
(B) In June 1993, the Partnership obtained this first mortgage loan. It replaced the bonds collateralized by the property, which the Partnership had purchased in 1991.
(C) In October 1993, this loan was refinanced. The interest rate decreased from 10.00% to 7.625%, the maturity date was extended from July 2002 to November 2003 and the monthly payments decreased from $53,285 to $52,377. Proceeds from the new $7,400,000 first mortgage loan were used to repay the existing first mortgage loan of $6,023,757, which represented a discount to the Partnership of $180,599.
(D) In March 1994, this loan was refinanced. The interest rate decreased from 9.75% to 9.02%, the maturity date was changed from January 2002 to April 2001 and the monthly payments increased from $24,073 to $25,219. Proceeds from the new $3,128,700 first mortgage loan were used to repay the existing $2,841,601 first mortgage loan as well as $287,099 of the Balcor Real Estate Holdings, Inc. ("BREHI") loan.
(E) The Partnership is obligated to pay the lender (upon the earlier of maturity or the sale or refinancing of the property) additional interest equal to the lesser of: (i) 25% of the amount by which the agreed upon value of the property at maturity or upon sale or refinancing exceeds $10,100,000, or (ii) interest which would have accrued on the loan from June 1, 1992 through the earlier of maturity or the sale or refinancing of the property at a rate of 15% per annum.
(F) In May 1994, this loan was refinanced. The interest rate changed from a floating rate to a fixed rate of 8.88%, the maturity date was extended from September 1994 to June 1999, and the monthly payments decreased from $49,953 to $45,372. Proceeds from the new $5,700,000 first mortgage loan were used to repay the existing first mortgage loan of $5,246,568.
(G) In December 1992, Pinebrook Investors, the joint venture which owns the property filed for protection under the U.S. Bankruptcy Code. In 1994, a plan of reorganization was approved by the Bankruptcy Court. Under the plan, the wrap-around features of the various mortgage notes were eliminated and the notes became first, second, third and fourth mortgage notes upon which the joint venture made monthly payments totaling $40,761, a portion of which might have been deferred based on availability of cash flow, at interest rates ranging from 8.875% to 10%. Under the plan of reorganization, the new first, second and fourth mortgage loan balances were $2,294,722, $1,712,135 and $1,006,029, respectively. The third mortgage note payable was eliminated, along with its monthly payments, through consolidation of the financial statements. In February 1995, Pinebrook Investors sold the property. The mortgage maturity amount is included in the 1995 maturity schedule amount below. See Notes 10 and 12 of Notes to Financial Statements for additional information.
(H) In March 1994, this loan was modified. Effective February 1994, the interest rate increased from 6.745% to 8.25%, the maturity date was extended from March 1995 to March 2001 and the monthly payments increased from $44,612 to $51,295.
(I) In August 1994, the Partnership sold this property. See Note 8 of Notes to Financial Statements for additional information.
(J) In April 1993, this loan was refinanced. The interest rate decreased from 11.00% to 10.05%, the maturity date was extended from September 1996 to May 2000 and the monthly payments decreased from $102,889 to $85,139. Proceeds from the $9,467,780 first mortgage loan and the $193,220 second mortgage loan, along with a principal payment of $760,190, were used to repay the existing $12,298,669 first mortgage loan which represents a discount of $1,877,479.
(K) In May 1993, this loan was refinanced. The interest rate decreased from 10.00% to 8.54%, the maturity date was extended from September 1993 to June 1998 and the monthly payments decreased from $44,405 to $39,009. Proceeds from the new $5,054,563 first mortgage loan were used to repay the existing first
mortgage loan of $4,941,615 as well as $112,948 of the BREHI loan.
(L) This note represents a subordinate non-recourse loan of $1,315,739 payable to BREHI and a preferred limited partnership interest of $200,000 in the subsidiary partnership which holds title to the property. During 1994, $287,099 of the proceeds from the new first mortgage loan were used to repay a portion of the $414,897 deferred interest on the previous junior loans from affiliates. In addition, as a requirement of the first mortgage loan, of the remaining balances of the junior loans and deferred interest, $1,441,300 was retired and replaced with a General Partner loan and the remainder was retired and replaced with the current notes and preferred limited partnership interest. The contract rate on the BREHI loan remains unchanged at 10.5%, which is the rate of return earned on the preferred limited partnership interest as well. The interest pay rate on the BREHI loan is the lower of the contract rate or the net cash flow from the property. Any deferred interest on the BREHI loan will be payable at maturity. The Limited Partners' position is unaffected by this conversion of a portion of the junior loans to an equity position as Limited Partners' equity is subordinate to the preferred interest just as it was subordinate to the junior loans prior to the recharacterization.
(M) This note represents a second mortgage loan payable to BREHI. During 1993, the balance of the BREHI loan of $2,498,119, including accrued interest, was reduced to $585,171 as a requirement of the first mortgage loan. The partial repayment was conditioned upon BREHI agreeing to subordinate repayment of the remaining portion of the BREHI loan to a payment to the Partnership from sale or refinancing proceeds from this property of $1,800,000. The interest pay rate is the lower of the contract rate or the net cash flow from the property, after payment of interest on the first mortgage loan, limited to a maximum annual deficit of $62,500. Deferred interest on the second mortgage loan is accumulated and bears interest at the contract rate.
The Partnership's mortgage loans to non-affiliates described above require current monthly payments of principal and interest. During the years ended December 31, 1994, 1993 and 1992, the Partnership incurred interest expense on mortgage notes payable to non-affiliates of $10,132,223, $10,882,258 and $12,561,221, respectively. The Partnership paid interest expense of $10,140,419 in 1994, $10,655,057 in 1993 and $11,830,225 in 1992. See Note 8 of Notes to Financial Statements for interest paid and incurred on loans payable to affiliates.
Maturities of the mortgage notes payable - nonaffiliates and mortgage note payable - affiliates in each of the next five years are approximately as follows:
1995 $12,031,000 1996 1,564,000 1997 10,339,000 1998 40,443,000 1999 6,644,000
4. Management Agreements:
As of December 31, 1994, 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.
5. Affiliate's Participation in Joint Venture:
The Pinebrook apartment complex was purchased by Pinebrook Investors, a joint venture between the Partnership and an affiliate. All assets, liabilities, income and expenses of the joint venture are included in the financial statements of the Partnership with the appropriate deduction from income or loss for the affiliate's participation in the joint venture. Profits and losses are allocated 51.57% to the Partnership and 48.43% to the affiliate.
6. 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 basis method of accounting 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 1994 in the financial statements is $3,570,949 less than the tax income of the Partnership for the same period.
7. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended 12/31/94 12/31/93 12/31/92 ------------------ ------------------ ------------------ Paid Payable Paid Payable Paid Payable -------- ------- -------- ------- -------- -------
Property manage- ment fees $1,401,854 None $1,477,069 $135,884 $1,483,559 $130,999 Reimbursement of expenses to General Partner at cost: Accounting 119,390 $39,870 64,346 5,325 24,802 1,840 Data processing 102,770 20,814 57,699 10,401 63,566 5,255 Investor communications 12,677 4,234 10,210 845 10,201 757 Legal 35,233 11,767 27,006 2,235 40,765 3,025 Other 43,319 14,467 32,012 2,649 35,905 2,664 Portfolio mgmt. 127,397 38,107 118,754 9,356 78,260 5,377
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.
During 1994, $1,441,300 of an unsecured affiliate loan relating to the Chestnut Ridge Phase II Apartments was retired and replaced with a General Partner loan as a result of the March 1994 refinancing of that property. In addition, the Partnership borrowed an additional $764,128 to meet working capital requirements. The Partnership repaid $1,218,432 of these loans from the General Partner during 1994. As of December 31, 1994, the Partnership had outstanding short-term loans totaling $12,153,202 from the General Partner with accrued interest payable on these loans totaling $68,563. During 1994, 1993 and 1992, the Partnership incurred interest expense of $635,617, $484,932 and $494,403 and paid interest expense of $607,803, $511,973 and $480,680 on these loans, respectively. Interest expense is computed at the American Express Company cost of funds rate plus a spread to cover administrative costs. As of December 31, 1994, this rate was 6.56%.
In March 1994, the Partnership refinanced the Chestnut Ridge Phase II mortgage loans payable, including a second mortgage loan previously outstanding to BREHI, an affiliate of the General Partner, and the unsecured loan described above. See Note 3 of Notes to Financial Statements for additional information.
In August 1994, the Partnership repaid the Ridgepoint Hill and Ridgepoint View BREHI loans at a discount in connection with the sale of these properties. See Note 8 of Notes to Financial Statements for additional information.
As of December 31, 1994, the Partnership had junior loans outstanding from BREHI relating to the Chestnut Ridge Phase II and Woodland Hills apartment complexes in the aggregate amount of $1,967,211 with accrued interest payable on these loans totaling $29,623. See Note 3 of Notes to Financial Statements
for additional information. During 1994, 1993 and 1992, the Partnership incurred interest expense of $632,679, $1,165,698 and $1,254,829 and paid interest expense of $913,199, $770,479 and $974,726 on these affiliated mortgage loans, respectively.
The General Partner may continue to provide additional short-term loans to the Partnership to fund future working capital needs or operating deficits, although there is no assurance that such loans will be available. Should such short-term loans not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available either through the General Partner or third parties, the Partnership may be required to dispose of some of its properties to satisfy these obligations.
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. The Partnership's premiums to the deductible insurance program were $310,984, $208,938 and $207,395 for 1994, 1993 and 1992, respectively. The Partnership had receivables from the insurance deductible program totaling $159,351 at December 31, 1994.
8. Property Sales:
In August 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View apartment complexes in an all cash sale for $18,659,285. From the proceeds of the sale, the Partnership paid $12,658,037, which included accrued interest, in full satisfaction of the first mortgage loans, as well as brokerage commissions and other closing costs. The bases of these properties were $12,812,175, net of accumulated depreciation of $6,249,032. For financial statement purposes, the Partnership recognized a gain of $5,596,294 from the sale of these properties. The remaining $5,381,539 of sales proceeds were paid to an affiliate of the General Partner in full satisfaction of the second mortgage loans and an unsecured third mortgage loan. This represents a discount of $2,791,215 from the outstanding balance of the affiliate loans and accrued interest. The Partnership did not receive any proceeds from the sale of the properties.
9. Restricted Investments:
As of December 31, 1992, the Partnership had pledged cash of $800,000 as additional collateral related to the Woodland Hills and Canyon Sands mortgage loans. In connection with the May 1993 Woodland Hills refinancing, cash collateral of $100,000 was released. As of December 31, 1994, $700,000 remained pledged related to the Canyon Sands mortgage loan. This amount was invested in short-term instruments pursuant to the terms of the agreement with the lending institution. Interest earned on the collateral accumulates to the benefit of the Partnership.
In addition, an affiliate of the General Partner had been providing a guarantee against a letter of credit in the amount of $250,000 posted as additional collateral for the funding of capital improvements on the Courtyards of Kendall apartment complex. During 1994, the letter of credit was cashed and applied to the principal balance of the underlying mortgage loan.
10. Net Investment in Note Receivable:
The Pinebrook apartment complex was owned by Pinebrook Investors, a joint venture consisting of the Partnership and an affiliate, and was financed with a $5,185,000 wrap-around mortgage note payable to Lexington Associates, the seller of the property ("Lexington"), which wrapped two underlying mortgage notes payable to Pinebrook Limited Partnership, a separate joint venture consisting of the Partnership and the affiliate. These notes in turn wrapped a
mortgage note payable to Tates Creek Place ("Tates Creek"). As of December 31, 1993, the Partnership's net investment in the notes was $914,040, consisting of the wrap-around notes receivable from Lexington of $4,885,918, offset by the mortgage note payable to Tates Creek of $3,971,878. In December 1992, Pinebrook Investors filed for protection under the U.S. Bankruptcy Code and a plan of reorganization was approved by the Bankruptcy Court and made effective in May 1994. Under the plan of reorganization, the wrap-around features of the various mortgage notes were eliminated and the mortgage notes payable by Pinebrook Investors to third parties became first, second and fourth mortgage notes. The net investment of $914,040 described above was recharacterized as a third mortgage note payable by Pinebrook Investors to Pinebrook Limited Partnership. The operations of these joint ventures have been consolidated within the Partnership's financial statements, and the related intercompany mortgage notes transactions have been eliminated. In February 1995, the Partnership sold the Pinebrook apartment complex. See Notes 3 and 12 of Notes to Financial Statements for additional information.
11. Extraordinary Items:
(a) During 1994, the Ridgepoint Hill and Ridgepoint View apartment complexes were sold. In connection with the sale, the Partnership repaid the second mortgage loans and an unsecured third mortgage loan due to an affiliate of the General Partner at a discount. This transaction resulted in an extraordinary gain on forgiveness of debt of $2,791,215 during 1994 for financial statement purposes. See Note 8 of Notes to Financial Statements for additional information.
(b) During 1993, the Ridgetree Phase I and the Chimney Ridge mortgage notes were refinanced. The mortgage notes which had outstanding balances totaling $18,322,426, including accrued interest, were repaid for $16,264,348. These transactions resulted in extraordinary gains on forgiveness of debt totaling $2,058,078 during 1993 for financial statement purposes.
(c) During 1993, title to the Highland Glen Apartments was relinquished through foreclosure. The Partnership wrote-off the property basis of $10,613,575, net of accumulated depreciation of $4,252,309, a mortgage loan balance of $14,918,362 and accrued real estate taxes of $36,056. The Partnership recognized an extraordinary gain on foreclosure of property of $4,340,843 during 1993 for financial statement purposes.
12. Contingency:
The Briarwood apartment complex is located in the path of a planned expansion of Price Road, which is adjacent to the property. Discussions for this expansion have been ongoing, and the General Partner has been attending the public hearings due to its opposition to this expansion. If the current plans are approved, approximately 68 of the complex's 268 units would be condemned, which would have a significant impact on the property's value. Currently it is unclear whether the future approvals and funding for the project will be obtained and, if obtained, what compensation the Partnership would receive for the units or when the work would begin.
13. Subsequent Event:
In February 1995, the Partnership sold the Pinebrook Apartments in an all cash sale for $6,140,000. From the proceeds of the sale, the Partnership paid $5,058,226 to the third party mortgage holders in full satisfaction of the first, second and fourth mortgage loans, as well as a brokerage commission and other closing costs. The basis of the property was $4,114,855, net of accumulated depreciation of $3,364,699. The Partnership will recognize a gain of $1,814,970 in its 1995 financial statements.
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
BALCOR REALTY INVESTORS-84 (An Illinois Limited Partnership)
NOTES TO SCHEDULE III (a) See description of mortgage notes payable in Note 3 of Notes to Financial Statements.
(b) Consists of legal fees, appraisal fees, title costs, other related professional fees and capitalized construction period interest.
(c) 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.
(d) A reduction of basis was made to write down the property to its December 31, 1988 mortgage liability balance.
(e) The aggregate cost of land for Federal income tax purposes is $19,534,465 and the aggregate cost of buildings and improvements for Federal income tax purposes is $124,960,899. The total of these is $144,495,364.
(f) Reconciliation of Real Estate ----------------------------- 1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $168,441,237 $183,258,347 $183,224,597
Additions during year: Improvements 48,774 33,750
Deductions during year Foreclosure of investment properties None (14,865,884) None Cost of real estate sold (19,061,207) None None ------------ ------------ ------------ Balance at close of year $149,380,030 $168,441,237 $183,258,347 ============ ============ ============
Reconciliation of Accumulated Depreciation ------------------------------------------ 1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $ 59,562,523 $ 59,197,038 $ 54,312,991
Depreciation expense for the year 4,461,058 4,617,794 4,884,047 Accumulated depreciation of foreclosed investment properties None (4,252,309) None Accumulated depreciation of real estate sold (6,249,032) None None ------------ ------------ ------------ Balance at close of year $ 57,774,549 $ 59,562,523 $ 59,197,038 ============ ============ ============
(g) Depreciation expense is computed based upon the following estimated useful lives: Years -----
Buildings and improvements 20 to 30 Furniture and fixtures 5 to 7