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 March 31, 1996
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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 (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-83
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
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Cash and cash equivalents $ 3,229,829 $ 2,734,729
Escrow deposits 1,137,050 1,694,777
Accounts and accrued interest receivable 187,470 64,523
Prepaid expenses 76,115 184,700
Deferred expenses, net of accumulated
amortization of $747,119 in 1996
and $702,304 in 1995 603,963 648,778
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5,234,427 5,327,507
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Investment in real estate:
Land 8,885,606 8,885,606
Buildings and improvements 54,739,601 54,739,601
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63,625,207 63,625,207
Less accumulated depreciation 27,338,470 26,928,743
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Investment in real estate, net of
accumulated depreciation 36,286,737 36,696,464
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$ 41,521,164 $ 42,023,971
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LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 107,019 $ 141,244
Due to affiliates 38,434 24,811
Accrued liabilities, principally real
estate taxes 311,565 938,309
Security deposits 267,710 260,819
Mortgage note payable - affiliate 734,154 734,154
Mortgage notes payable 45,507,033 45,673,057
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Total liabilities 46,965,915 47,772,394
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Limited Partners' deficit (75,005
Interests issued and outstanding) (1,997,854) (2,269,466)
General Partner's deficit (3,446,897) (3,478,957)
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Total partners' deficit (5,444,751) (5,748,423)
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$ 41,521,164 $ 42,023,971
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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 March 31, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Rental and service $ 3,596,362 $ 4,018,697
Interest on short-term investments 44,196 114,147
Settlement income 208,250
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Total income 3,848,808 4,132,844
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Expenses:
Interest on mortgage notes payable 912,113 1,141,547
Depreciation 409,727 497,235
Amortization of deferred expenses 44,815 41,996
Property operating 1,257,280 1,488,877
Real estate taxes 292,124 366,369
Property management fees 177,777 200,980
Administrative 113,777 131,062
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Total expenses 3,207,613 3,868,066
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Income before extraordinary item 641,195 264,778
Extraordinary item:
Gain on forgiveness of debt 40,653
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Net income $ 641,195 $ 305,431
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Income before extraordinary item allocated
to General Partner $ 32,060 $ 13,239
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Income before extraordinary item allocated
to Limited Partners $ 609,135 $ 251,539
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Income before extraordinary item per
Limited Partnership Interest (75,005
issued and outstanding) $ 8.12 $ 3.36
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Extraordinary item allocated to General
Partner None $ 2,033
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Extraordinary item allocated to Limited
Partners None $ 38,620
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Extraordinary item per Limited Partnership
Interest (75,005 issued and outstanding) None $ 0.51
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Net income allocated to General Partner $ 32,060 $ 15,272
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Net income allocated to Limited Partners $ 609,135 $ 290,159
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Net income per Limited Partnership Interest
(75,005 issued and outstanding) $ 8.12 $ 3.87
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Distribution to Limited Partners $ 337,523 $ 337,523
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Distribution per Limited Partnership
Interest (75,005 issued and outstanding) $ 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 quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net income $ 641,195 $ 305,431
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on forgiveness of debt (40,653)
Depreciation of properties 409,727 497,235
Amortization of deferred expenses 44,815 41,996
Net change in:
Escrow deposits 557,727 577,333
Accounts receivable (122,947) (54,208)
Prepaid expenses 108,585
Accounts payable (34,225) (31,235)
Due to affiliates 13,623 44,339
Accrued liabilities (626,744) (849,758)
Security deposits 6,891 3,600
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Net cash provided by operating activities 998,647 494,080
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Investing activity:
Redemption of restricted investment 700,000
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Cash provided by investing activity 700,000
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Financing activities:
Distribution to Limited Partners (337,523) (337,523)
Proceeds from issuance of mortgage
note payable 7,180,000
Repayment of mortgage note payable (6,939,000)
Principal payments on mortgage notes
payable (166,024) (200,449)
Payment of deferred expenses (138,236)
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Net cash used in financing activities (503,547) (435,208)
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Net change in cash and cash equivalents 495,100 758,872
Cash and cash equivalents at beginning
of period 2,734,729 5,950,452
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Cash and cash equivalents at end of period $ 3,229,829 $ 6,709,324
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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:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1996 and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarters ended March 31, 1996 and 1995, the Partnership incurred and
paid interest expense on mortgage notes payable to non-affiliates of $892,627
and $1,120,519, respectively.
3. Transactions with affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $22,576 $38,434
As of March 31, 1996, the Partnership has a $734,154 mortgage note payable
outstanding to The Balcor Company ("TBC"), an affiliate of the General Partner.
This loan relates to the Walnut Ridge - Phase II Apartments. During the
quarters ended March 31, 1996 and 1995, the Partnership incurred interest
expense on the TBC loan of $19,486 and $21,028, and paid interest expense of
$12,848 and $14,040, respectively. Interest expense of $6,638 was payable as of
March 31, 1996 and is included in accrued liabilities on the balance sheet.
4. Subsequent Event:
In April 1996, the Partnership made a distribution of $1,350,090 ($18.00 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1996. This distribution includes a regular quarterly distribution of $6.00
per Interest from Net Cash Receipts and a special distribution of $12.00 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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership received settlement income in February 1996 related to
litigation with the seller of Deer Oaks Apartments and operations at several of
the Partnership's properties improved in 1996. In addition, the North Cove
Apartments, which recognized a loss for financial statement purposes during the
quarter ended March 31, 1995, was sold in June 1995. These are the primary
reasons the Partnership generated higher net income for the quarter ended March
31, 1996 when compared to the same period in 1995. Further discussion of the
Partnership's operations is summarized below.
1996 Compared to 1995
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Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
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 1996 as compared to 1995. Decreases in certain of these items were also
affected by the events described below.
Higher occupancy rates at certain of the Partnership's properties during 1996
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 1995.
Due to lower interest rates and lower average cash balances as a result of a
special distribution to Limited Partners in October 1995, interest income on
short-term investments decreased during 1996 as compared to 1995.
The Partnership reached a settlement with the seller of the Deer Oaks
Apartments in February 1996 and received $208,250 of settlement income relating
primarily to amounts due from the seller under the management and guarantee
agreement.
Lower accounting fees resulted in a decrease in administrative expense during
1996 as compared to 1995.
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.
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $495,000 as of
March 31, 1996 when compared to December 31, 1995. Cash flow of approximately
$999,000 was provided by operating activities during 1996 consisting primarily
of cash flow from the operations of the Partnership's properties, interest
income on short-term investments and settlement income received from the seller
of the Deer Oaks Apartments, which were partially offset by the payment of
administrative expenses. Cash used in financing activities of approximately
$504,000 consisted of distributions to the Limited Partners and principal
payments on mortgage notes payable.
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. During 1996 and 1995, all of the Partnership's seven remaining
properties generated positive cash flow. The North Cove Apartments, which was
sold in June 1995, generated a marginal cash flow deficit during 1995 prior to
its sale. As of March 31, 1996, the occupancy rates of the Partnership's
properties ranged from 92% to 100%.
While the cash flow of 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 improving operating
performance and seeking rent increases where market conditions allow.
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. Currently,
the Partnership is preparing to market two properties for sale, is actively
marketing an additional three properties and has entered into contracts to sell
the Desert Sands Village and Eagle Crest - Phase I apartment complexes for sale
prices of $14,579,423 and $9,270,000, respectively. If current market
conditions remain favorable and the General Partner can obtain appropriate sale
prices, the Partnership's liquidation strategy may be accelerated.
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 1997, approximately $734,000 of
loan financing on the Walnut Ridge - Phase II Apartments from an affiliate of
the General Partner matures.
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. The Partnership has no third
party financing which matures prior to 1998.
In April 1996, the Partnership paid $1,350,090 ($18.00 per Interest) to Limited
Partners representing the quarterly distribution for the first quarter of 1996.
This distribution includes a regular quarterly distribution of $6.00 per
Interest from Net Cash Receipts and a special distribution of $12.00 per
Interest from Net Cash Proceeds reserves. The level of the regular quarterly
distribution increased from the amount distributed for the fourth quarter of
1995 as a result of improved cash flow from the Partnership's properties. To
date, investors have received distributions of Net Cash Receipts of $81.50 and
Net Cash Proceeds of $179.00, totaling $260.50 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, and proceeds
from future property sales, as to all 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 all of their original
investment.
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 can be expected to
increase operating costs and replacement costs and may lead to increased rental
revenues and real estate values.
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) Material Contracts:
(i) Agreement of Sale relating to the sale of North Cove Apartments previously
filed as Exhibit (2) to the Registrant's Current Report on Form 8-K dated April
24, 1995 is incorporated herein by reference.
(ii) Agreement of Sale and attachment thereto relating to the sale of Desert
Sands Village Apartments previously filed as Exhibit (2)(a) to the Registrant's
Current Report on Form 8-K dated April 23, 1996, is incorporated herein by
reference.
(iii) Agreement of Sale and attachment thereto relating to the sale of Eagle
Crest - Phase I Apartments previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated April 23, 1996, is incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated April 23, 1996 was
filed reporting the contracts to sell the Desert Sands Village Apartments in
Phoenix, Arizona and the Eagle Crest - Phase I Apartments in Irving, 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: May 15, 1996
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