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 September 30, 2000
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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 0-15649
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BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3327914
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2333 Waukegan Road, Suite 100
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 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 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 2000 and December 31, 1999
(Unaudited)
ASSETS
2000 1999
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Cash and cash equivalents $1,801,393 $1,848,420
Accounts and accrued interest receivable 9,735 8,970
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$1,811,128 $1,857,390
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 74,493 $ 75,196
Due to affiliates 7,194 30,767
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Total liabilities 81,687 105,963
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Commitments and contingencies
Limited Partners' capital (59,791
Interests issued and outstanding) 2,046,402 2,068,388
General Partner's deficit (316,961) (316,961)
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Total partners' capital 1,729,441 1,751,427
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$1,811,128 $1,857,390
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The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
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Income:
Interest on short-term investments $ 82,400 $ 56,770
Other income 33,106
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Total income 82,400 89,876
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Expenses:
Administrative 104,386 110,230
Other expense 19,800
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Total expenses 104,386 130,030
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Net loss $ (21,986) $ (40,154)
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Net loss allocated to General Partner None None
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Net loss allocated to Limited Partners $ (21,986) $ (40,154)
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Net loss per Limited Partnership Interest
(59,791 issued and oustanding) -
Basic and Diluted $ (0.37) $ (0.67)
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The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 2000 and 1999
(Unaudited)
2000 1999
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Income:
Interest on short-term investments $ 29,404 $ 18,563
Other income 33,106
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Total income 29,404 51,669
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Expenses:
Administrative 28,376 33,613
Other expense 19,800
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Total expenses 28,376 53,413
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Net income (loss) $ 1,028 $ (1,744)
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Net income (loss) allocated to
General Partner None None
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Net income (loss) allocated to
Limited Partners $ 1,028 $ (1,744)
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Net income (loss) per Limited Partnership
Interest (59,791 issued and oustanding)
- Basic and Diluted $ 0.02 $ (0.03)
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The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
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Operating activities:
Net loss $ (21,986) $ (40,154)
Adjustments to reconcile net loss to net
cash used in operating activities:
Net change in:
Accounts and accrued interest
receivable (765) 322
Escrow deposit 19,800
Accounts payable (703) 4,770
Due to affiliates (23,573) 3,103
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Net cash used in operating activities (47,027) (12,159)
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Investing activity:
Release of escrow deposit 255,106
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Cash provided by investing activity 255,106
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Net change in cash and cash equivalents (47,027) 242,947
Cash and cash equivalents at beginning
of year 1,848,420 1,605,485
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Cash and cash equivalents at end of period $1,801,393 $1,848,432
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The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(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 nine months and quarter
ended September 30, 2000, and all such adjustments are of a normal and
recurring nature.
2. Partnership Termination:
As previously reported, class action litigation involving the Partnership was
originally filed in February 1996. This litigation has existed over the past
four and 1/2 years in three separate but related cases and continues to exist
today. Since inception of this litigation, the general partner has stated that
the Partnership would not be dissolved until the conclusion of this litigation
and that the general partner has a contingent right to seek recovery from the
Partnership of the legal fees it expends in defending against this litigation.
The general partner believed that this litigation would have been completed and
resolved before now. Despite the fact that the general partner has prevailed
twice on motions to dismiss the litigation for failure to state a cause of
action, the plaintiffs have continued to re-file the litigation and assert
claims and, in so doing, have protracted the litigation. There is presently
pending the general partner's and remaining defendants' third motion to dismiss
the litigation for failure to state a cause of action, on which the court heard
argument in April 2000. Defendants believe this motion to be meritorious. Given
the actions of plaintiffs' counsel to date, at this point in time the general
partner does not believe that the litigation will be concluded in the near
future. As a result, the general partner has decided that it will dissolve the
Partnership in December 2000 and distribute all remaining cash reserves to the
limited partners.
The Partnership has accrued on its financial statements the legal fees expended
to date by the general partner in defending against this litigation. The
general partner would be entitled to place such amounts, along with an amount
representing anticipated future legal fees, in a trust account to be held until
the conclusion of this litigation. Because the general partner believes such an
action would not be in the best interests of the limited partners, it has
decided not to do so and will distribute to limited partners such amounts
accrued for legal fees. The general partner does not in any way waive its claim
for indemnification under the partnership agreement; however, the general
partner will not seek to recover from the limited partners any amounts
distributed to them in attempting to satisfy the general partner's
indemnification rights.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
nine months and quarter ended September 30, 2000 are:
Paid
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Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 46,087 $ 7,677 $ 7,194
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 86-Series I A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1984 to invest in and operate
income-producing real property. The Partnership raised $59,791,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
eight real property investments and a minority joint venture interest in one
additional real property. The Partnership sold its final real estate investment
in January 1997.
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 1999 for a more complete understanding of
the Partnership's financial position.
Operations
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2000 Compared to 1999
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The operations of the Partnership in 2000 and 1999 consisted primarily of
administrative expenses which, generally, were partially offset by interest
income earned on short-term investments. During the quarter ended September 30,
2000, however, interest income was higher than administrative expenses which
resulted in the Partnership generating net income as compared to a loss during
the quarter ended September 30, 1999.
Primarily as a result of higher interest rates, interest income on short-term
investments increased during the nine months and quarter ended September 30,
2000 as compared to the same periods in 1999.
In connection with the sale of the Pines of Cloverlane Apartments in 1996, the
Partnership established an escrow account to provide for certain costs the
purchaser might incur at the property related to Pittsfield Township, Michigan
inspections and subsequent improvements at the property. During the third
qurter of 1999, the Partnership recognized other income of $33,106 and other
expense of $19,800 in connection with the release of amounts in the escrow
account.
Primarily as a result of lower accounting and accrued legal fees,
administrative expenses decreased during the nine months and quarter ended
September 30, 2000 as compared to the same periods in 1999. This decrease was
partially offset by an increase in printing costs.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $47,000 as of
September 30, 2000 as compared to December 31, 1999 primarily due to cash used
in operating activities for the payment of administrative expenses, which was
partially offset by interest income earned on short-term investments.
As previously reported, class action litigation involving the Partnership was
originally filed in February 1996. This litigation has existed over the past
four and 1/2 years in three separate but related cases and continues to exist
today. Since inception of this litigation, the general partner has stated that
the Partnership would not be dissolved until the conclusion of this litigation
and that the general partner has a contingent right to seek recovery from the
Partnership of the legal fees it expends in defending against this litigation.
The general partner believed that this litigation would have been completed and
resolved before now. Despite the fact that the general partner has prevailed
twice on motions to dismiss the litigation for failure to state a cause of
action, the plaintiffs have continued to re-file the litigation and assert
claims and, in so doing, have protracted the litigation. There is presently
pending the general partner's and remaining defendants' third motion to dismiss
the litigation for failure to state a cause of action, on which the court heard
argument in April 2000. Defendants believe this motion to be meritorious. Given
the actions of plaintiffs' counsel to date, at this point in time the general
partner does not believe that the litigation will be concluded in the near
future. As a result, the general partner has decided that it will dissolve the
Partnership in December 2000 and distribute all remaining cash reserves to the
limited partners.
The Partnership has accrued on its financial statements the legal fees expended
to date by the general partner in defending against this litigation. The
general partner would be entitled to place such amounts, along with an amount
representing anticipated future legal fees, in a trust account to be held until
the conclusion of this litigation. Because the general partner believes such an
action would not be in the best interests of the limited partners, it has
decided not to do so and will distribute to limited partners such amounts
accrued for legal fees. The general partner does not in any way waive its claim
for indemnification under the partnership agreement; however, the general
partner will not seek to recover from the limited partners any amounts
distributed to them in attempting to satisfy the general partner's
indemnification rights.
Limited Partners have received distributions of Net Cash Receipts of $12.50 and
Net Cash Proceeds of $290.74, totaling $303.24 per $1,000 Interest, as well as
certain tax benefits. No additional distributions are anticipated to be made
prior to the termination of the Partnership. However, after paying final
partnership expenses, any remaining cash reserves will be distributed. Limited
Partners will not recover a substantial portion of their original investment.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
of the Registrant's Registration Statement on Form S-11 dated December 16, 1985
(Registration No. 33-361), and Form of Confirmation regarding Interests in the
Partnership 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. 0-15649) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 2000 is attached hereto.
(b) Reports on Form 8-K: No reports were filed in Form 8-K during the quarter
ended September 30, 2000.
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 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By:/s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor Partners -
XIX, the General Partner
By:/s/Jayne A. Kosik
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Jayne A. Kosik
Senior Managing Director and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners - XIX, the General
Partner
Date: November 13,2000
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