Item 1. Business
Balcor/Colonial Storage Income Fund - 85 (the "Registrant") is a limited partnership formed in September 1983 under the laws of the State of Illinois, which raised $69,229,500 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of income-producing mini-warehouse facilities, and all financial information included in this report relates to that industry segment.
The principal purpose of the Registrant is to acquire, own, maintain, operate, lease, and hold for capital appreciation and current income, existing mini-warehouse facilities offering storage space for business and personal use. The Registrant utilized the net offering proceeds to acquire from affiliates of a General Partner sixty-nine mini-warehouse facilities in 1985. Additionally, the Registrant acquired from non-affiliated entities four mini-warehouse facilities in 1986. The Registrant sold one mini-warehouse facility each in 1989 and 1990 and two facilities in 1993.
The Partnership Agreement provides that the proceeds of any sale, financing, or refinancing will not be reinvested in new acquisitions, except that net proceeds may be used to purchase or finance improvements or additions to the Registrant's properties.
The real estate industry continues to experience cyclical downturns in many cities and regions of the country. 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 devaluation of real estate in particular markets. In light of the competitiveness in the rental markets, the General Partners' goals have been to maintain high occupancy levels while increasing rents where possible and to monitor and control operating expenses and capital improvements.
During 1994 Registrant received repayment of one loan receivable. See Item 7. Liquidity and Capital Resources for further 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 Partners are not aware of any potential liability due to environmental issues or conditions that would be material to the Registrant.
The officers, directors, and employees of Balcor Storage Partners-85 and Colonial Storage 85, Inc., the General Partners of the Registrant, and their affiliates perform certain services for the Registrant. The Registrant currently has 34 full-time and 78 part-time employees engaged in its operations.
Item 2.
Item 2. Properties
As of December 31, 1994, the Registrant owns the properties described below.
Net Rentable Land Area No. of Area (Square Rentable Location (Acres) Feet) Spaces
3233 East Highway 80 Odessa, Texas 1.3 22,450 156
2306 North Collins Boulevard Arlington, Texas 1.7 26,098 248
3107 South Lake Drive Texarkana, Texas 1.1 19,230 155
6715 Wolflin Road Amarillo, Texas 1.6 21,080 218
7800 North Broadway Oklahoma City, Oklahoma 2.4 35,880 264
1604 Camp Lane Albany, Georgia 1.9 32,942 301
1005 West Cotton Longview, Texas 2.2 24,002 210
6046 Financial Drive Norcross, Georgia 2.2 34,708 285
1320 Norwood Drive Bedford, Texas 1.8 29,220 254
5311 Apex Highway Durham, North Carolina 3.0 23,000 252
218 Eisenhower Drive Savannah, Georgia 1.5 21,716 206
132 Slaton Highway Lubbock, Texas 1.9 16,840 114
2960 South Cobb Drive Smyrna, Georgia 1.8 28,892 255
3513 Highway 45 North Meridian, Mississippi 2.0 24,980 191
3194 South Campbell Avenue Springfield, Missouri 1.7 25,360 242
1440 North Hairston Road Stone Mountain, Georgia 2.3 30,117 270
3472 Hillsboro Road Durham, North Carolina 1.9 31,600 315
4615 West Beryl Road Raleigh, North Carolina 1.7 28,750 295
2826 South Clack Street Abilene, Texas 2.4 32,038 273
1301 South Stemmons Lewisville, Texas 1.2 21,900 162
2316 Highway 19 North Meridian, Mississippi 2.3 27,880 216
3016 South Cooper Arlington, Texas 1.5 24,912 193
2215 West Southwest Loop 223 Tyler, Texas 2.5 28,301 241
2000 Country Club Drive Carrollton, Texas 2.0 35,379 237
2331 South Collins Boulevard Arlington, Texas 2.0 31,396 273
2990 Pio Nono Avenue Macon, Georgia 1.7 26,998 220
5513 East Lancaster Fort Worth, Texas 1.3 22,104 210
5121 North Street Nacogdoches, Texas 2.0 17,483 146
4917 California Parkway, S.E. Fort Worth, Texas 1.7 27,132 247
1881 Gordon Highway Augusta, Georgia 1.6 22,464 230
3208 East Park Row Arlington, Texas 2.1 35,505 341
5502 Chapel Hill Boulevard Chapel Hill, North Carolina 1.7 26,800 260
3654 West Pioneer Parkway Arlington, Texas 2.3 34,176 245
1311 Northwest Loop 281 Longview, Texas 2.0 24,940 200
3125 Cherry Street North Winston-Salem, North Carolina 1.3 21,500 259
1010 Holiday Hill Drive North Midland, Texas 2.6 42,578 357
95 Green Street Warner Robins, Georgia 1.2 19,940 192
2115 Silas Creek Parkway Winston-Salem, North Carolina 1.7 25,350 299
3120 Knickerbocker Road San Angelo, Texas 1.8 19,425 146
2302 Parkview Drive San Angelo, Texas 1.1 19,575 180
8457 Roswell Road Dunwoody, Georgia 3.9 60,240 447
5717 Will Ruth Avenue El Paso, Texas 2.0 33,056 260
1513 Denman Street Lufkin, Texas 1.5 14,362 120
9303 Abercorn Extension Savannah, Georgia 3.0 34,080 278
1850 North Clack Street Abilene, Texas 1.2 17,280 99
7012 Glenwood Raleigh, North Carolina 1.5 25,200 196
3730 West Wendover Avenue Greensboro, North Carolina 1.7 30,600 289
2305 East Lohman Avenue Las Cruces, New Mexico 1.3 17,380 177
4000 I-40 East Amarillo, Texas 1.6 21,860 218
4701 Osborne Drive El Paso, Texas 1.3 18,900 183
3229 Highway 80 Mesquite, Texas 2.1 31,120 206
1510 West 7th Street Clovis, New Mexico 1.0 13,640 124
914 N.E. 8th Street Grand Prairie, Texas 1.8 27,940 206
7469 Tara Boulevard Jonesboro, Georgia 1.8 29,082 221
871 North Forest Amarillo, Texas 2.5 23,379 200
5808 Highway 271 South Fort Smith, Arkansas 1.1 14,680 123
5604 Tinker Diagonal Midwest City, Oklahoma 1.6 27,901 278
3751 Longmire Way Doraville, Georgia 2.1 29,780 300
818 South Clack Street Abilene, Texas 1.5 16,340 165
8400 Canyon Drive Amarillo, Texas 2.2 17,570 157
3121 Washington Road Augusta, Georgia 1.4 28,138 255
4011 Midland Boulevard Fort Smith, Arkansas 1.9 26,580 174
4141 Snapfinger Woods Drive Decatur, Georgia 2.7 36,580 336
1808 Hampton Road Texarkana, Texas 2.8 28,621 247
4155 Milgen Road Columbus, Georgia 1.5 24,624 215
426 South College Drive Wilmington, North Carolina 2.3 28,131 290
1412 Poinsett Highway Greenville, South Carolina 1.6 19,300 200
2815 White Horse Road Greenville, South Carolina 2.6 31,500 309
1515 Mt. Zion Road Morrow, Georgia 5.0 64,539 666
In the opinion of the General Partners, the Registrant has provided for adequate insurance coverage for its real estate investment properties.
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 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. For information regarding previous distributions, see the Statements of Partners' Capital, page, and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 7,749.
Item 6.
Item 6. Selected Financial Data
Year Ended December 31 1994 1993 1992 1991 1990 Rental income $ 10,067,226 9,298,505 8,600,074 8,117,059 7,714,249 Interest income $ 293,869 213,018 194,020 266,973 301,746 Net income $ 4,816,067 4,089,522 3,443,706 3,224,478 3,258,345
Net income per Limited Partnership Interest $ 17.22 14.62 12.31 11.53 11.65
Taxable income $ 4,893,600 3,930,321 3,208,375 2,969,489 3,145,786
Taxable income per Limited Partnership Interest $ 17.50 14.05 11.47 10.62 11.25
Cash and cash equivalents $ 4,014,486 2,834,883 2,427,287 2,328,126 2,900,221
Total mini- warehouse properties, net of accumulated depreciation $ 44,809,932 46,050,709 48,492,489 49,807,181 50,519,817
Total assets $ 50,764,405 51,105,762 52,366,414 53,577,746 54,862,156
Distributions to Limited Partners $ 5,170,064 5,305,745 4,715,919 4,641,178 4,474,994
Distributions per Limited Partnership Interest $ 18.67 19.16 17.03 16.76 16.16
Properties owned on December 31 69 69 71 71 71
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Summary of Operations
Increased rental revenues resulting from substantially improved market conditions in cities where many of Balcor/Colonial Storage Income Fund- 85's (the "Partnership") properties are located was the primary reason for the increases in net income generated by the Partnership during 1994, 1993 and 1992. No material events occurred during these periods which significantly impacted the net income of the Partnership. Further discussion of the Partnership's operations is summarized below.
Operations
1994 Compared to 1993
Due to increases in rental rates at certain of the Partnership's mini- warehouse facilities, particularly in the Georgia and mid-Atlantic regions of the United States, rental income and, correspondingly, property management fees increased from 1993 to 1994.
Interest income from mortgage notes receivable increased from 1993 to 1994 due to interest payments on the first mortgage notes which were received by the Partnership in connection with the sale of two mini-warehouse properties in July 1993. This increase was partially offset by the retirement of one note in April 1994.
Interest income on short-term investments increased from 1993 to 1994 due to an increase in average balances available for investment as well as an increase in rates.
Increased accounting and asset management costs as well as supplies expenses resulted in an increase in general and administrative expenses during 1994 as compared to 1993.
1993 Compared to 1992
Due to an increase in occupancy levels and rental rate increases at certain of the Partnership's mini-warehouse facilities, particularly in the Central and Eastern regions of the United States, rental income and, correspondingly, property management fees increased from 1992 to 1993.
Interest income from mortgage notes receivable increased from 1992 to 1993 primarily due to interest payments on the first mortgage notes which were received by the Partnership in July 1993 in connection with the sale of the two mini-warehouse properties.
Increased legal fees resulting from the property sales and higher payroll costs resulted in an increase in general and administrative expense during 1993 as compared to 1992.
The loss on sale of mini-warehouse facilities resulted from the sale of two mini-warehouse facilities located in Albuquerque, New Mexico (See note 2 of Notes to Financial Statements for additional information).
Liquidity and Capital Resources
The cash position of the Partnership increased from December 31, 1993, to December 31, 1994 as cash from operations and from mortgage notes receivable exceeded distributions to Limited Partners and capital expenditures. The Partnership's cash flow provided by operating activities in 1994 was generated primarily by the operations of the mini-warehouse properties and interest income earned on the Partnership's short-term investments and mortgage notes receivable, which was partially offset by administrative expenses. This cash flow was used in investing activities to make capital improvements to the properties, which included painting, roofing and paving expenditures, and in financing activities to provide distributions to the Limited Partners.
On March 3, 1994 a $215,000 note related to the sale of one mini-warehouse facility in 1993 was paid in full.
Pursuant to the Partnership Agreement, the General Partners are entitled to 8% of Net Cash Receipts available for distribution, which is subordinated to the receipt by Limited Partners of specified distribution levels following the termination of the offering (See note 1(c) of Notes to Financial Statements for additional information). From the inception of the offering through December 31, 1994, the General Partners' share of Net Cash Receipts totaled approximately $3,776,000, none of which has been paid. The General Partners are entitled to receive such subordinated amounts only from distributed Net Cash Proceeds.
In January 1995, the Partnership paid $1,367,975 ($4.94 per Interest) to the Limited Partners representing the quarterly distribution for the fourth quarter of 1994. This distribution amount is less than the full Special Distribution (as defined in the Partnership Agreement) of ten percent per annum. As stated in the Partnership Agreement, any deficiency in the Special Distribution is payable from distributed Net Cash Proceeds. The General Partners believe the cash flow generated from property operations should enable the Partnership to continue making quarterly distributions to Limited Partners. However, the level of future cash distributions to Limited Partners will be dependent upon the amount of cash flow generated by the Partnership's properties, as to which there can be no assurance. Quarterly distributions increased from $4.63 per Interest for the first and second quarters of 1994 to $4.94 per $250 Interest for the third and fourth quarters of 1994 due to improved operating results at several of the Partnership's mini-warehouse facilities. To date, the Partnership has distributed $163.37 per Interest, of which $160.29 represents Net Cash Receipts and $3.08 represents Net Cash Proceeds. The General Partners intend to retain on behalf of the Partnership cash reserves adequate to meet working capital requirements as they may arise.
One of the General Partners has recently completed the outsourcing of the 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. Each of these transactions occurred after extensive due diligence and competitive bidding processes. The General Partners do 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 and/or sales prices 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.
Item 8.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on Page of 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 information is summarized as follows:
December 31, 1994 December 31, 1993 Financial Tax Financial Tax Statements Return Statements Return
Total assets $ 50,764,405 57,046,797 51,105,762 57,310,121 Partners' capital accounts: General Partners $ 320,967 267,680 272,806 218,744 Limited Partners $ 49,516,046 55,851,225 49,918,204 56,176,625 Net income: General Partners $ 48,161 48,936 40,895 39,303 Limited Partners $ 4,767,906 4,844,664 4,048,627 3,891,018 Per Limited Partnership Interest $ 17.22 17.50 14.62 14.05
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 Storage Partners-85, one of the General Partners, has a Board of Directors.
The other General Partner, Colonial Storage 85, Inc., has a Board of Directors. The sole member is James R. Pruett (see b, c, e, and f below) who has been a director since the formation of Colonial Storage 85, Inc.
(b,c, &e) The names, ages, and business experience of the executive officers and significant employees of the General Partners of the Registrant are as follows:
Balcor Storage Partners-85
Title Name
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.
Colonial Storage 85, Inc.
Name Title James R. Pruett President, Vice President, Director James N. Danford Secretary, Treasurer
James R. Pruett (September 1942) received his Bachelor of Science degree from McMurry College in Abilene, Texas, in 1965. He is the president, sole director and sole shareholder of James R. Pruett, Inc., one of the corporate general partners of Colonial Storage Centers Group, Colonial Storage Centers Group II, and Colonial Storage Centers Group III, the managing general partner of Colonial Storage Centers I, Ltd. (Colonial I), Colonial Storage Centers II, Ltd. (Colonial II) and Colonial Storage Centers III, Ltd. (Colonial III), respectively. Mr. Pruett is also President and a Director of Colonial Storage 86, Inc., which serves as a General Partner of Balcor/Colonial Storage Income Fund - 86 (BCSIF-86). Mr. Pruett developed the first Atlanta, Georgia, Colonial Self Storage mini-warehouse facility in 1972. Since that time, he has handled substantially all business aspects of mini-warehouse development, construction, operation, and management. Mr. Pruett has directed the site selection and development or acquisition of numerous locations for mini-warehouses and office/warehouses including the facilities of Colonial I, Colonial II, and Colonial III. Mr. Pruett is President and a Director of Colonial Storage Management, Inc.("CSM"), Colonial Properties Management, Inc.("CPM"), Colonial Storage Management 85, Inc.("CSM- 85"), and Colonial Storage Management 86, Inc.("CSM-86") which manage the properties of Colonial I and Colonial II, Colonial III, the Registrant, and BCSIF-86, respectively.
James N. Danford (January 1959) received his Bachelor of Business Administration degree from The University of Texas at Arlington. Mr. Danford was a senior accountant with a public accounting firm prior to joining Colonial Storage Centers in June of 1986. Mr. Danford is a Certified Public Accountant, member of the Texas Society of Certified Public Accountants, and is chief financial officer of Colonial Storage Management 85, Inc., Colonial I, Colonial II, Colonial III, Registrant, BCSIF-86, CSM, CPM, CSM- 85 and CSM-86.
The sole director of Colonial Storage 85, Inc. is not a director in any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15 (b) of the Act or any company registered as an investment company under the Investment Company Act of 1940, but is a director of four other corporations which act as general partners of limited partnerships which have a class of securities registered pursuant to Section 12 of the Act.
(d) There is no family relationship between any of the foregoing officers or director.
(f) To the best of the Registrant's knowledge, there have been no events under any bankruptcy act, no criminal proceedings, and no judgements or injunctions material to the evaluation of the ability and integrity of any current director or executive officer of Colonial Storage 85, Inc., Colonial Storage Management 85, Inc., or any current executive officer of Balcor Storage Partners-85 during the past five years.
Item 11.
Item 11. Executive Compensation
(a,b,c, d&e) The Registrant has not paid and does not propose to pay any renumeration to the executive officers and directors of the general partners. Certain of these officers receive compensation from The Balcor Company and Colonial Storage 85-Inc., (but not from the Registrant) for services performed for various affiliated entities, which may include services performed for the Registrant. However, the general partners believe that any such compensation attributable to services performed for the Registrant is immaterial to the Registrant. See Note 3 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 Storage Partners-85 and Colonial Storage 85, Inc. and its officers and director own as a group the following Limited Partnership Interests in the Registrant:
Title of Class Beneficially Owned Percent of Class
Limited Partnership Interests 400 less than 1%
Relatives and affiliates of the officers or director of the General Partners own an additional twenty Limited Partnership Interests in the Registrant.
(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 1 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
See Note 3 of Notes to Financial Statements for additional 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 on page of this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership set forth as Exhibit 3 to Amendment No. 1 to the Registrant's Registration Statement Form S-11 dated May 14, 1985 and to Registrant's Registration Statements dated September 23, 1985, and January 29, 1986 (Registration No. 2-95752, No. 33-357, and No. 33-2977, respectively) are incorporated herein by reference.
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated May 14, 1985 and to Registrant's Registration Statement on Form S-11 dated January 29, 1986 (Registration No. 2-95752, and No. 33-2977, respectively) 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. 0-14340) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the year ended December 31, 1994 is attached hereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1994.
(c) Exhibits: See Item 14 (a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements on Page of this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/COLONIAL STORAGE INCOME FUND -85
By: /s/ James N. Danford James N. Danford Secretary/Treasurer (Principal Financial and Accounting Officer) of Colonial Storage 85, Inc., a General Partner Date: March 28, 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 /s/ Thomas E. Meador Storage Partners-85, a General Partner March 28, 1995 Thomas E. Meador
Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Storage Partners-85, /s/ Allan Wood a General Partner March 28, 1995 Allan Wood
President and Director of Colonial /s/ James Pruett Storage 85 Inc., a General Partner March 28, 1995 James Pruett
Secretary/Treasurer (Principal Financial and Accounting Officer) of Colonial /s/ James N. Danford Storage 85, Inc., a General Partner March 28, 1995 James N. Danford
Pages
Independent Auditors' Report
Financial Statements:
Balance Sheets as of December 31, 1994 and 1993
Statements of Income, years ended December 31, 1994, 1993 and 1992
Statements of Partners' Capital, years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements to
Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners Balcor/Colonial Storage Income Fund - 85:
We have audited the financial statements of Balcor/Colonial Storage Income Fund - 85 (an Illinois Limited Partnership) as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements 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/Colonial Storage Income Fund - 85 as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Fort Worth, Texas February 9, 1995
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Balance Sheets
December 31, 1994 and 1993
1994 1993 Assets Cash and cash equivalents $ 4,014,486 2,834,883 Accounts receivable, net of allowance for doubtful accounts of $27,465 and $18,243 in 1994 and 1993, respectively 110,990 128,857 Mortgage notes receivable (note 2) 1,676,085 1,913,987 Other 152,912 177,326 5,954,473 5,055,053 Mini-warehouse facilities, at cost: Land 14,193,743 14,193,743 Buildings 46,901,166 46,265,292 Furniture, fixtures and equipment 982,631 892,230 62,077,540 61,351,265 Less accumulated depreciation 17,267,608 15,300,556 Mini-warehouse facilities, net of accumulated depreciation 44,809,932 46,050,709 $ 50,764,405 51,105,762 Liabilities and Partners' Capital Accounts payable $ 4,037 - Due to affiliates (note 3) 190,858 115,291 Accrued real estate taxes 302,008 309,320 Other accrued liabilities 54,194 57,364 Security deposits 76,487 131,156 Deferred income 299,808 301,621 Total liabilities 927,392 914,752 Partners' capital (276,918 Limited Partnership Interests issued and outstanding) 49,837,013 50,191,010 $ 50,764,405 51,105,762 See accompanying notes to financial statements.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Statements of Income
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992 Income: Rental $ 10,067,226 9,298,505 8,600,074 Interest on short-term investments 126,665 73,933 74,619 Interest from mortgage notes receivable 167,204 139,085 119,401 10,361,095 9,511,523 8,794,094 Expenses: Property operating 2,759,069 2,681,661 2,771,397 Depreciation 1,967,052 1,941,870 1,914,313 Property management fees (note 3) 297,186 277,295 257,561 General and administrative (note 3) 521,721 480,334 407,117 5,545,028 5,381,160 5,350,388 Income from operations 4,816,067 4,130,363 3,443,706 Loss on sale of land, property and equipment (note 2) - (40,841) - Net income $ 4,816,067 4,089,522 3,443,706
Limited Partners' share of net income ($17.22, $14.62 and $12.31 per Interest for 1994, 1993 and 1992, respectively) $ 4,767,906 4,048,627 3,409,269 General Partners' share of net income 48,161 40,895 34,437 $ 4,816,067 4,089,522 3,443,706
See accompanying notes to financial statements.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1994, 1993 and 1992
Limited General Partners Partners Total
Balance at December 31, 1991 $ 52,481,972 197,474 52,679,446
Net income 3,409,269 34,437 3,443,706
Cash distributions ($17.03 per Interest) (4,715,919) - (4,715,919)
Balance at December 31, 1992 51,175,322 231,911 51,407,233
Net income 4,048,627 40,895 4,089,522
Cash distributions ($19.16 per Interest) (5,305,745) - (5,305,745)
Balance at December 31, 1993 49,918,204 272,806 50,191,010
Net income 4,767,906 48,161 4,816,067
Cash distributions ($18.67 per Interest) (5,170,064) - (5,170,064)
Balance at December 31, 1994 $ 49,516,046 320,967 49,837,013
See accompanying notes to financial statements.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992 Operating activities: Net income $ 4,816,067 4,089,522 3,443,706 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,967,052 1,941,870 1,914,313 Loss on sale of mini-warehouse facilities (note 2) - 40,841 - Net change in: Net accounts receivable 17,867 (6,214) (14,079) Other assets 24,414 (40,777) (4,182) Accounts payable 4,037 (77,738) 72,668 Due to affiliates 75,567 48,395 (4,824) Accrued real estate taxes (7,312) (18,187) (42,361) Other accrued liabilities (3,170) 9,213 24,898 Security deposits (54,669) (31,566) 1,583 Deferred income (1,813) 25,454 8,917 Net cash provided by operating activities 6,838,040 5,980,813 5,400,639
Investing activities: Additions to mini-warehouse facilities, net (726,275) (690,197) (599,621) Proceeds from sale of land, property and equipment - net (note 2) - 404,266 - Collection of principal payments on mortgage notes receivable (note 2) 237,902 18,459 14,062 Net cash used in investing activities (488,373) (267,472) (585,559)
Financing activities: Distributions to Limited Partners (5,170,064) (5,305,745) (4,715,919) Net cash used in financing activities (5,170,064) (5,305,745) (4,715,919)
Net change in cash and cash equivalents 1,179,603 407,596 99,161
Cash and cash equivalents at beginning of year 2,834,883 2,427,287 2,328,126 Cash and cash equivalents at end of year $ 4,014,486 2,834,883 2,427,287
Supplemental Disclosure of Noncash Investing Activities
The Partnership sold two mini-warehouse facilities in 1993 for $1,195,000. Consideration received included mortgage notes receivable for $745,000 (note 2).
See accompanying notes to financial statements.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) Summary of Significant Accounting Policies
(a) Description of Partnership Balcor/Colonial Storage Income Fund - 85 (the "Partnership) is a limited partnership formed in September 1983. The Partnership Agreement provides that Balcor Storage Partners-85 (an Illinois general partnership) and Colonial Storage 85, Inc. (a Texas corporation) are the General Partners of the Partnership and provides for the admission of Limited Partners through the sale of up to 320,000 Limited Partnership Interests at $250 per Interest, of which 276,918 ($69,229,500) Limited Partnership Interests were sold prior to the termination of the offering.
The principal purpose of the Partnership is to acquire, own, maintain, operate, lease, and hold for capital appreciation and current income, existing mini-warehouse facilities offering storage space for business and personal use. The Partnership acquired sixty-nine mini-warehouse facilities from affiliates in 1985 and four mini-warehouse facilities from non-affiliated entities in 1986. The Partnership sold four mini- warehouse facilities prior to 1994.
(b) Allocation of Net Income and Profits
The Partnership Agreement provides that net income (after a deduction for any incentive management fees) from operations shall be allocated 99% and 1% to the Limited Partners and General Partners, respectively.
Additionally, when a property is sold or otherwise disposed of, the General Partners will be allocated profits equal to the greater of 1% of total profits or the amount of Net Cash Proceeds distributable to the General Partners from the sale (in excess of subordinated Net Cash Receipts, note 1(c)). The balance of the profits will be allocated to the Limited Partners.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Notes to Financial Statements
(c) Cash Distributions
Net Cash Receipts available for distribution from operations shall be distributed 92% to the Limited Partners and 8% to the General Partners, 7% as a partnership incentive management fee and 1% as their distributable share from operations. Distributions from operations to the General Partners are subordinated to receipt by the Limited Partners of a return equal to 8% on Adjusted Original Capital during the first twelve month period following the termination of the offering of Interests, 9% during the second twelve month period following the termination of the offering of Interests, and 10% during each twelve month period thereafter.
Net Cash Proceeds from sales or refinancings will be distributed first to the Limited Partners until they have received any deficiencies in the aforementioned minimum cash distributions from operations. Distributions to the Limited Partners will then be made in an amount equal to total Original Capital plus any deficiency in a cumulative distribution of 12% of Adjusted Original Capital for the period commencing approximately one year following the termination of the offering. If the receipt of any portion of the General Partners' 8% share of Net Cash Receipts from operations (approximately $3,776,000 has been deferred as of December 31, 1994) or the property management fee (note 3) has been deferred as a result of subordination, thereafter, available Net Cash Proceeds will be distributed to the General Partners to the extent of such deferred amounts. Thereafter, remaining Net Cash Proceeds will be distributed 85% to the Limited Partners and 15% to the General Partners.
(d) Cash and Cash Equivalents
The Partnership considers all highly liquid investments with maturities at date of purchase of three months or less to be cash equivalents.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Notes to Financial Statements
(e) Mini-Warehouse Facilities
Costs associated with the appraisal and acquisition of mini-warehouse facilities are capitalized.
The buildings, furniture, fixtures, and equipment are depreciated using the straight- line method over their estimated useful lives ranging from 5 to 25 years.
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
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 Partners determine that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
When properties are disposed of, the related costs and accumulated depreciation will be removed from the respective accounts, and any gain or loss on disposition will be recognized in accordance with generally accepted accounting principles.
(f) Income Taxes
Taxable income or loss of the Partnership is includable in the income tax returns of the individual partners; therefore, no provision for income taxes has been made in the accompanying financial statements.
The tax bases of the Partnership's assets and liabilities exceeded the amounts recorded in the Financial Statements at December 31, 1994 and 1993, by $6,281,392 and $6,204,359, respectively.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Notes to Financial Statements
(2) Sale of Mini-warehouse Facilities
On July 16, 1993, the Partnership sold two mini- warehouse facilities located in Albuquerque, New Mexico, for $780,000 and $415,000, respectively. The sales price consisted of cash payments to the Partnership of $250,000 and $200,000 and first mortgage notes of $530,000 and $215,000, respectively. On March 3, 1994 the $215,000 first mortgage note was paid in full. The remaining note bears interest at 8.5% per annum with monthly principal and interest payments based on a 25- year amortization schedule, with a final balloon payment due in 1998. The basis in the properties sold was $781,967 and $408,140, net of accumulated depreciation, and the Partnership recognized losses for financial statement purposes of $32,221 and $8,620, respectively. The General Partners may receive commissions of $23,400 and $12,450, respectively which are subordinated in accordance with the Partnership Agreement.
(3) Transactions With Affiliates
The Partnership has an agreement with Colonial Storage Management 85, Inc., an affiliate of Colonial Storage 85, Inc., a General Partner, to supervise and direct the business and affairs associated with the mini-warehouse facilities for a fee of 6% of the gross revenues of the facilities. One-half of this property management fee is subordinated to receipt by the Limited Partners of a Special Distribution of 8% during the first twelve month period after termination of the offering, 9% during the second twelve month period and 10% during each twelve month period thereafter. Any deferred portion of the property management fee will be paid only from distributed Net Cash Proceeds. As of December 31, 1994 property management fees of $1,916,886 were deferred.
In connection with the sales of the mini-warehouse facilities made to date, the General Partners may each receive a real estate commission of up to $36,975 which have been subordinated in accordance with the Partnership Agreement.
Balcor/Colonial Storage Income Fund - 85 (An Illinois Limited Partnership)
Notes to Financial Statements
Commissions, fees, and expenses paid and payable by the Partnership to affiliates for the years ended December 31, 1994, 1993 and 1992, are:
1994 1993 1992
Paid Payable Paid Payable Paid Payable
Property management fees $ 246,188 74,426 275,081 23,428 257,233 21,214 General and administrative expenses 343,434 42,482 302,912 17,913 294,279 7,582 Real estate commissions - 73,950 - 73,950 - 38,100