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, 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
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 7,466,145 $ 5,950,452
Restricted investment 700,000
Escrow deposits 1,447,159 1,560,542
Accounts and accrued interest
receiveable 262,097 97,846
Prepaid expenses 292,401 36,266
Deferred expenses, net of accumulated
amortization of $776,213 in 1995
and $631,300 in 1994 699,950 597,642
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10,167,752 8,942,748
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Investment in real estate, at cost:
Land 8,885,606 10,560,405
Buildings and improvements 54,739,601 66,665,695
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63,625,207 77,226,100
Less accumulated depreciation 26,516,540 30,862,686
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Investment in real estate, net of
accumulated depreciation 37,108,667 46,363,414
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$ 47,276,419 $ 55,306,162
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LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 179,665 $ 214,310
Due to affiliates 24,933 74,058
Accrued liabilities, principally
interest and real estate taxes 741,207 1,241,718
Security deposits 260,168 288,826
Mortgage note payable - affiliate 734,154 772,896
Mortgage notes payable 45,836,130 55,475,305
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Total liabilities 47,776,257 58,067,113
Partners' deficit (75,005 Limited
Partnership Interests issued
and outstanding) (499,838) (2,760,951)
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$ 47,276,419 $ 55,306,162
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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 nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 11,514,239 $ 11,833,521
Interest on short-term investments 319,197 227,314
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Total income 11,833,436 12,060,835
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Expenses:
Interest on mortgage notes payable 3,124,280 3,525,898
Depreciation 1,384,909 1,490,860
Amortization of deferred expenses 127,977 147,224
Property operating 4,541,145 5,108,939
Real estate taxes 999,698 1,101,100
Property management fees 576,784 591,010
Administrative 458,026 451,694
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Total expenses 11,212,819 12,416,725
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Income (loss) before gain on sale of
property and extraordinary items 620,617 (355,890)
Gain on sale of property 2,711,565 0
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Income (loss) before extraordinary items 3,332,182 (355,890)
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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 $ 3,273,682 $ 1,044,510
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Income (loss) before extraordinary
items allocated to General Partner $ 58,147 $ (17,795)
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Income (loss) before extraordinary
items allocated to Limited Partners $ 3,274,035 $ (338,095)
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Income (loss) before extraordinary
items per Limited Partnership Interest
(75,005 issued and outstanding) $ 43.65 $ (4.51)
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Extraordinary items allocated to
General Partner $ (2,925) $ 70,020
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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 nine months ended September 30, 1995 and 1994
(Unaudited)
(Continued)
Extraordinary items allocated to
Limited Partners $ (55,575) $ 1,330,380
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Extraordinary items per Limited
Partnership Interest (75,005 issued
and outstanding) $ (0.74) $ 17.74
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Net income allocated to General Partner $ 55,222 $ 52,225
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Net income allocated to Limited Partners $ 3,218,460 $ 992,285
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Net income per Limited Partnership
Interest (75,005 issued and
outstnading) $ 42.91 $ 13.23
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Distributions to Limited Partners $ 1,012,569 $ 1,012,569
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Distributions per Limited Partnership
Interest $ 13.50 $ 13.50
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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 September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 3,573,952 $ 3,953,319
Interest on short-term investments 98,594 78,953
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Total income 3,672,546 4,032,272
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Expenses:
Interest on mortgage notes payable 884,581 1,148,062
Depreciation 408,937 496,950
Amortization of deferred expenses 42,239 53,762
Property operating 1,480,429 1,983,497
Real estate taxes 287,642 365,722
Property management fees 178,461 198,078
Administrative 153,425 142,329
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Total expenses 3,435,714 4,388,400
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Net income (loss) $ 236,832 $ (356,128)
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Net income (loss) allocated to
General Partner $ 11,842 $ (17,807)
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Net income (loss) allocated to
Limited Partners $ 224,990 $ (338,321)
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Net income (loss) per Limited
Partnership Interest (75,005
issued and outstanding) $ 3.00 $ (4.51)
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Distribution to Limited Partners $ 337,523 $ 337,523
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Distribution per Limited Partnership
Interest $ 4.50 $ 4.50
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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 nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 3,273,682 $ 1,044,510
Adjustments to reconcile net income
to net cash provided by operating
activities:
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 1,384,909 1,490,860
Amortization of deferred expenses 127,977 147,224
Net change in:
Escrow deposits 113,383 (10,996)
Accounts and accrued interest
receivable (164,251) (32,318)
Prepaid expenses (256,135) 73,987
Accounts payable (34,645) (46,768)
Due to affiliates (49,125) 42,450
Accrued liabilities (500,511) (327,398)
Security deposits (28,658) (6,187)
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Net cash provided by operating
activities 1,170,408 974,964
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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 (1,012,569) (1,012,569)
Proceeds from issuance of mortgage
notes payable 11,980,000 3,000,000
Repayment of mortgage notes payable (11,254,363) (3,123,000)
Repayment of mortgage note payable -
affiliate (38,742) (54,480)
Principal payments on mortgage notes
payable (528,587) (1,445,395)
Payment of deferred expenses (286,285) (209,424)
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Net cash used in financing activities (1,140,546) (2,844,868)
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Net change in cash and cash equivalents 1,515,693 (1,869,904)
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 $ 7,466,145 $ 6,281,620
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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:
Several reclassifications have been made to the previously reported 1994
statements to conform with the classifications used in 1995. These
reclassifications have not changed the 1994 results. 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,
1995, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred and paid interest expense on mortgage notes payable to non-affiliates
of $3,067,269 and $3,451,967.
3. Transactions with affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1995 are:
Paid
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Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $185,142 $9,765 $24,933
As of September 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 nine months ended September 30, 1995, principal payments of $38,742
were made on the BREHI loan. Also, during the nine months ended September 30,
1995 and 1994, the Partnership incurred interest expense on the BREHI loan of
$57,011 and $73,931, and paid interest expense of $58,797 and $135,202,
respectively. Interest expense of $5,202 was payable as of September 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 October 1995, the Partnership made a distribution of $5,362,858 ($71.50 per
Interest) to the holders of Limited Partnership Interests for the third quarter
of 1995. This distribution includes a regular quarterly distribution of $4.50
per Interest from Net Cash Receipts and a special Net Cash Proceeds
distribution of $67.00 per Interest from Net Cash Proceeds reserves.
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
this sale, along with improved property operations, are the primary reasons the
Partnership generated higher net income for the nine months ended September 30,
1995 when compared to the same period 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.
Further discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
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Unless otherwise noted, discussions of fluctuations between 1994 and 1995 refer
to both the quarter and nine months ended September 30, 1995 and 1994.
The sale of North Cove Apartments in June 1995 resulted in decreases in rental
and service income, interest expense on mortgage notes payable, depreciation,
property operating expenses, real estate taxes and property management fees
during 1995 as compared to 1994. Certain of these decreases were also affected
by the events described below. In connection with the sale, the Partnership
recognized a gain during 1995.
Higher rental and/or occupancy rates at all of the Partnership's properties
during the nine months and quarter ended September 30, 1995 were offset by the
June 1995 sale of the North Cove Apartments. As a result, rental and service
income and, correspondingly, property management fees decreased, compared to
the same periods in 1994.
Due to higher interest rates and average cash balances, interest income on
short-term investments increased during 1995 as compared to 1994.
During 1995, the Partnership recognized an extraordinary gain on forgiveness of
debt 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 were recognized. These two amounts have been classified as debt
extinguishment expenses.
Liquidity and Capital Resources
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The cash position of the Partnership increased at September 30, 1995 as
compared to December 31, 1994. The increase was due to the release of cash
collateral related to Desert Sands Apartments, proceeds from the sale of the
North Cove Apartments and activity associated with the refinancings of the
Eagle Crest - Phase I and Deer Oaks Apartments mortgage loans. This increase
was partially offset by distributions to Limited Partners from property
operations as well as cash reserves. In October, the Partnership made a
special distribution to the Limited Partners of $5,025,335 from Net Cash
Proceeds reserves.
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. During the nine months ended September 30,
1995 and 1994, all of the Partnership's seven remaining properties generated
positive cash flow. The North Cove Apartments, which was sold in June 1995,
generated a cash flow deficit during 1994 and 1995 prior to its sale.
While certain of the Partnership's properties have improved, the General
Partner continues to pursue a number of actions aimed at improving the cash
flow of the Partnership's properties including the refinancing of mortgage
loans, improving operating performance, and seeking rent increases where market
conditions allow. As of September 30, 1995, the occupancy rates of the
Partnership's properties ranged from 94% to 97%. 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 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.
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 for
additional information.
During October 1995, the Partnership made a distribution of $5,362,858 ($71.50
per Interest) to the holders of Limited Partnership Interests for the third
quarter of 1995. This distribution includes a regular quarterly distribution
of $4.50 per Interest from Net Cash Receipts and a special Net Cash Proceeds
distribution of $67.00 per Interest from Net Cash Proceeds reserves. The level
of the regular quarterly distribution was consistent with the amount
distributed for the second quarter of 1995. Including the October 1995
distribution, investors have received distributions of Net Cash Receipts of $71
and Net Cash Proceeds of $167, totaling $238 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, 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 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 nine month period ending
September 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1995.
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: November 13, 1995
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