SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11805
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BALCOR REALTY INVESTORS-83
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(Exact name of registrant as specified in its charter)
Illinois 36-3189175
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
--------------- --------------
Cash and cash equivalents $ 7,328,539 $ 5,950,452
Restricted investment 700,000
Escrow deposits 1,293,239 1,560,542
Accounts and accrued interest receivable 168,520 97,846
Prepaid expenses 230,592 36,266
Deferred expenses, net of accumulated
amortization of $733,974 in 1995 and
$631,300 in 1994 756,633 597,642
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9,777,523 8,942,748
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Investment in real estate, at cost:
Land 8,885,606 10,560,405
Buildings and improvements 54,739,601 66,665,695
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63,625,207 77,226,100
Less accumulated depreciation 26,107,603 30,862,686
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Investment in real estate, net of
accumulated depreciation 37,517,604 46,363,414
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$ 47,295,127 $ 55,306,162
=============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 196,537 $ 214,310
Due to affiliates 9,039 74,058
Accrued liabilities, principally interest
and real estate taxes 507,763 1,241,718
Security deposits 250,473 288,826
Mortgage note payable - affiliate 734,154 772,896
Mortgage notes payable 45,996,308 55,475,305
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Total liabilities 47,694,274 58,067,113
Partners' deficit (75,005 Limited Partnership
Interests issued and outstanding) (399,147) (2,760,951)
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$ 47,295,127 $ 55,306,162
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 7,940,287 $ 7,880,202
Interest on short-term investments 220,603 148,361
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Total income 8,160,890 8,028,563
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Expenses:
Interest on mortgage notes payable 2,239,699 2,377,836
Depreciation 975,972 993,910
Amortization of deferred expenses 85,738 93,462
Property operating 3,060,716 3,125,416
Real estate taxes 712,056 735,404
Property management fees 398,323 392,932
Administrative 304,601 309,365
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Total expenses 7,777,105 8,028,325
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Income before gain on sale of property
and extraordinary items 383,785 238
Gain on sale of property 2,711,565
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Income before extraordinary items 3,095,350 238
Extraordinary items:
Gain on forgiveness of debt 40,653 1,400,400
Debt extinguishment expenses (99,153)
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Total extraordinary items (58,500) 1,400,400
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Net income $ 3,036,850 $ 1,400,638
=============== ==============
Income before extraordinary items
allocated to General Partner $ 46,305 $ 12
=============== ==============
Income before extraordinary items
allocated to Limited Partners $ 3,049,045 $ 226
=============== ==============
Income before extraordinary items
per Limited Partnership Interest
(75,005 issued and outstanding) $ 40.65 None
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Continued)
(Unaudited)
1995 1994
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Extraordinary items allocated
to General Partner $ (2,925) $ 70,020
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Extraordinary items allocated
to Limited Partners $ (55,575) $ 1,330,380
=============== ==============
Extraordinary items per Limited
Partnership Interest (75,005
issued and outstanding) $ (0.74) $ 17.74
=============== ==============
Net income allocated to
General Partner $ 43,380 $ 70,032
=============== ==============
Net income allocated to
Limited Partners $ 2,993,470 $ 1,330,606
=============== ==============
Net income per Limited Partnership
Interest (75,005 issued and
outstanding) $ 39.91 $ 17.74
=============== ==============
Distributions to Limited Partners $ 675,046 $ 675,046
=============== ==============
Distributions per Limited
Partnership Interest $ 9.00 $ 9.00
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 3,921,590 $ 3,947,244
Interest on short-term investments 106,456 71,785
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Total income 4,028,046 4,019,029
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Expenses:
Interest on mortgage notes payable 1,098,152 1,142,722
Depreciation 478,737 496,955
Amortization of deferred expenses 43,742 47,554
Property operating 1,571,839 1,582,760
Real estate taxes 345,687 365,621
Property management fees 197,343 196,950
Administrative 173,539 143,482
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Total expenses 3,909,039 3,976,044
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Income before gain on sale of property
and extraordinary item 119,007 42,985
Gain on sale of property 2,711,565
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Income before extraordinary item 2,830,572 42,985
Extraordinary item:
Debt extinguishment expenses (99,153)
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Net income $ 2,731,419 $ 42,985
=============== ==============
Income before extraordinary item
allocated to General Partner $ 33,066 $ 2,149
=============== ==============
Income before extraordinary item
allocated to Limited Partners $ 2,797,506 $ 40,836
=============== ==============
Income before extraordinary item
per Limited Partnership Interest
(75,005 issued and outstanding) $ 37.29 $ 0.54
=============== ==============
Extraordinary item allocated
to General Partner $ (4,958) None
=============== ==============
Extraordinary item allocated
to Limited Partners $ (94,195) None
=============== ==============
Extraordinary item per Limited
Partnership Interest (75,005
issued and outstanding) $ (1.25) None
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Continued)
(Unaudited)
1995 1994
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Net income allocated to
General Partner $ 28,108 $ 2,149
=============== ==============
Net income allocated to
Limited Partners $ 2,703,311 $ 40,836
=============== ==============
Net income per Limited Partnership
Interest (75,005 issued and
outstanding $ 36.04 $ 0.54
=============== ==============
Distribution to Limited Partners $ 337,523 $ 337,523
=============== ==============
Distribution per Limited
Partnership Interest $ 4.50 $ 4.50
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 3,036,850 $ 1,400,638
Adjustments to reconcile net income
to net cash provided by operating
activites:
Gain on forgiveness of debt (40,653) (1,400,400)
Debt extinguishment expenses 56,000
Gain on sale of property (2,711,565)
Depreciation of properties 975,972 993,910
Amortization of deferred expenses 85,738 93,462
Net change in:
Escrow deposits 267,303 461,320
Accounts and accrued interest
receivable (70,674) (78,227)
Prepaid expenses (194,326) 110,253
Accounts payable (17,773) (111,819)
Due to affiliates (65,019) 71,893
Accrued liabilities (733,955) (652,715)
Security deposits (38,353) (4,526)
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Net cash provided by operating activities 549,545 883,789
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Investing activities:
Redemption of restricted investment 700,000
Proceeds from sale of real estate 954,428
Payment of selling costs (168,597)
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Net cash provided by investing activities 1,485,831
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Financing activities:
Distributions to Limited Partners (675,046) (675,046)
Repayment of mortgage note
payable - affiliate (38,742) (12,101)
Proceeds from issuance of mortgage
notes payable 11,980,000
Repayment of mortgage notes payable (11,254,363)
Principal payments on mortgage notes payable (368,409) (1,287,663)
Payment of deferred expenses (300,729) (114,226)
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Net cash used in financing activities (657,289) (2,089,036)
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Net change in cash and cash equivalents 1,378,087 (1,205,247)
Cash and cash equivalents at beginning
of period 5,950,452 8,151,524
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Cash and cash equivalents at end of period $ 7,328,539 $ 6,946,277
=============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1995, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the six months ended June 30, 1995 and 1994, the Partnership incurred
and paid interest expense on mortgage notes payable to non-affiliates of
$2,242,443 and $2,326,482.
3. Transactions with affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $175,377 $175,377 $9,039
As of June 30, 1995, the Partnership has a $734,154 mortgage note payable
outstanding to Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of the
General Partner. This loan relates to the Walnut Ridge - Phase II Apartments.
During the six months ended June 30, 1995 and 1994, the Partnership incurred
interest expense on the BREHI loan of $40,409 and $51,354, and paid interest
expense of $34,277 and $109,507, respectively. Interest expense of $13,120 was
payable as of June 30, 1995 and is included in accrued liabilities on the
balance sheet.
4. Property Sale:
In June 1995, the North Cove Apartments was sold for $10,750,000. In
connection with the sale, the purchaser assumed the $9,795,572 third party
first mortgage loan. The basis of the property was $7,869,838, which is net of
accumulated depreciation of $5,731,055. For financial statement purposes, the
Partnership recognized a gain of $2,711,565 from the sale of the property.
5. Loan Refinancings:
a) In January 1995, the Eagle Crest - Phase I Apartments first mortgage loan
was refinanced. The interest rate increased from 9.025% to 9.621%, the maturity
date was extended from November 1994 to February 2002 and the monthly payments
increased from $52,187 to $61,008. A portion of the proceeds from the new
$7,180,000 first mortgage loan were used to repay the existing first mortgage
loan of $6,939,000.
b) In June 1995, the Deer Oaks Apartments first mortgage loan was refinanced.
The interest rate decreased from 10.0% to 7.35%, the maturity date was extended
from October 1995 to July 2002 and the monthly payments decreased from $39,491
to $33,071. A portion of the proceeds from the new $4,800,000 first mortgage
loan were used to repay the existing first mortgage loan of $4,315,363.
6. Subsequent Event:
In July 1995, the Partnership made a distribution of $337,523 ($4.50 per
Interest) to the holders of Limited Partnership Interests for the second
quarter of 1995.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors-83 (the "Partnership") is a limited partnership formed
in 1981 to invest in and operate income-producing real property. The
Partnership raised $75,005,000 from sales of Limited Partnership Interests and
utilized these proceeds to acquire eleven real property investments and a
minority joint venture interest in one additional real property. To date, four
properties and the property in which the Partnership held a minority joint
venture interest have been sold or relinquished through foreclosure to the
lenders. The Partnership continues to operate its seven remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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During June 1995, the North Cove Apartments was sold. The gain recognized on
the sale is the primary reason the Partnership generated higher net income for
the six months and quarter ended June 30, 1995 when compared to the same
periods in 1994. In addition, in connection with the February 1994 refinancing
of the North Cove Apartments mortgage loan, the lender forgave deferred
interest and a portion of the principal due on the loan resulting in the
recognition of an extraordinary gain on forgiveness of debt during the six
months ended June 30, 1994. Further discussion of the Partnership's operations
is summarized below.
1995 Compared to 1994
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Higher rental and/or occupancy rates at several of the Partnership's properties
during the six months and quarter ended June 30, 1995 were offset by the June
1995 sale of the North Cove Apartments. The net effect of these transactions
was that rental and service income and, correspondingly, property management
fees remained relatively unchanged compared to the same periods in 1994. In
addition, the Partnership recognized a gain in connection with this property
sale.
Due to higher interest rates, interest income on short-term investments
increased for the six months and quarter ended June 30, 1995 as compared to the
same periods in 1994.
As a result of legal fees incurred in connection with Deer Oaks Apartments'
litigation, administrative expenses increased during the quarter ended June
30, 1995 as compared to the same period in 1994.
During 1995, the Partnership recognized an extraordinary gain on forgiveness of
debt of $40,653 in connection with the settlement reached with the seller of
the Springs Pointe and Desert Sands apartment complexes. In February 1994, the
first mortgage loan collateralized by North Cove Apartments was refinanced, and
the lender forgave deferred interest and a portion of the principal. In
connection with this transaction, the Partnership recognized an extraordinary
gain on forgiveness of debt.
In June 1995, the first mortgage loan collateralized by Deer Oaks Apartments
was refinanced, and a prepayment penalty of $43,153 was incurred. Also in June
1995, the North Cove Apartments was sold and the remaining deferred expenses
of $56,000 were recognized. For financial statement purposes, these two
amounts have been classified as debt extinguishment expenses.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased at June 30, 1995 as compared to
December 31, 1994. The Partnership's operating activities during the first six
months of 1995 consisted primarily of cash flow generated from the operation of
the properties and interest income on short-term investments, which were
partially offset by the payment of administrative expenses. Investing
activities consisted of the release of cash collateral related to Desert Sands
Apartments and proceeds from the sale of the North Cove Apartments. Financing
activities consisted of distributions to Limited Partners, principal payments
on mortgage notes payable, and activity associated with the refinancings of the
Eagle Crest - Phase I and Deer Oaks Apartments mortgage loans.
The Partnership defines cash flow generated from its properties as being equal
to the property's revenue receipts less property related expenditures, which
include debt service payments. During the six months ended June 30, 1995 and
1994, all of the Partnership's seven remaining properties generated positive
cash flow. The North Cove Apartments generated a cash flow deficit prior to
its sale.
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 June 30, 1995, the occupancy rates of the
Partnership's properties ranged from 91% to 99%. Despite improvements 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. The General Partner examines
the operations of each property and each local market individually when
determining the optimal time to sell each of the Partnership's properties.
Although an affiliate of the General Partner has, in certain circumstances,
provided loans for certain properties of the Partnership, there can be no
assurance that loans of these types will be available from either an affiliate
or the General Partner in the future.
During January and June 1995, the Eagle Crest - Phase I and Deer Oaks apartment
complexes' first mortgage loans were refinanced. See Note 5 of Notes to
Financial Statements 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 obtain loan modifications as well as refinancings of many
existing loans, the Partnership has no third party financing which matures
prior to 1998.
A restricted deposit in the amount of $700,000 was pledged as additional
collateral related to the mortgage loan on the Desert Sands Apartments. The
amount pledged as collateral was invested in short-term instruments pursuant to
the terms of the pledge agreement with the lending institution and interest
earned on this amount accumulated to the benefit of the Partnership. In March
1995, this restricted deposit was released and the accumulated interest was
paid to the Partnership.
During June 1995, the Partnership sold the North Cove Apartments for a sale
price of $10,750,000, subject to the underlying mortgage loan, and received net
proceeds of $785,831. See Note 4 of Notes to Financial Statements and Item 5.
Other Information for additional information.
During July 1995, the Partnership made a distribution of $337,523 ($4.50 per
Interest) to the holders of Limited Partnership Interests for the second
quarter of 1995. The level of this distribution was consistent with the amount
distributed for the first quarter of 1995. To date, investors have received
distributions of Net Cash Receipts of $66.50 and Net Cash Proceeds of $100,
totaling $166.50 per $1,000. Interest, as well as certain tax benefits. The
General Partner expects to continue quarterly distributions to Limited Partners
based on the current performance of the Partnership's properties. However, the
level of future distributions will depend on cash flow from the Partnership's
remaining properties, the successful refinancing of certain mortgage loans and
proceeds from future property sales, as to all of which there can be no
assurances.
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. The timing of the long-term effects of inflation on
real estate may be dictated by general or local economic conditions.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
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North Cove Apartments
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As previously described, in April 1995, the Partnership contracted to sell
North Cove Apartments for a sale price of $10,750,000 to Pacific American
Advisors Company, a Nevada corporation. The sale closed June 12, 1995. The
purchaser took title to the property subject to the existing first mortgage
loan which had a principal balance of $9,795,572 at closing. The Partnership
paid $100,000 to an unaffiliated entity as a brokerage commission and received
$785,831 of sale proceeds.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Amended and Restated Certificate of Limited Partnership set forth as
Exhibit 4.1 to Amendment No. 1 to Registrant's Registration Statement on
Form S-11 dated December 10, 1982 (Registration No. 2-79043) 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. 0-11805) are incorporated herein by reference.
(10) Agreement of Sale relating to the sale of North Cove Apartments
previously filed as Exhibit (2) to Registrant's Current Report on Form 8-K
dated April 24, 1995 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated April 24, 1995 was
filed reporting the contract to sell the North Cove Apartments in Houston,
Texas.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS-83
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XIII, the General Partner
By: /s/Brian D. Parker
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Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners-XIII, the
General Partner
Date: August 14, 1995
--------------------------