Item 1. Business - ----------------
Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (the "Registrant") is a limited partnership governed by the laws of the State of Maryland. The Registrant raised $87,037,000 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of income-producing real properties, and all financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire fourteen real property investments. The Registrant has since disposed of six of these properties. As of December 31, 1994, the Registrant owned the remaining eight properties described under "Properties" (Item 2). The Partnership Agreement generally provides that the proceeds of any sale or refinancing of the Registrant's properties will not be reinvested in new acquisitions.
During 1994, institutionally owned and managed multi-family residential properties in many markets continued to experience favorable operating conditions. These favorable operating conditions were supported by the strong pattern of national economic growth which contributed to job growth and rising income levels in most local economies. However, some rental markets continue to remain extremely competitive; therefore, the General Partner's goals are to maintain high occupancy levels, while increasing rents where possible, and to monitor and control operating expenses and capital improvement requirements at the properties. As discussed in Item 7. Liquidity and Capital Resources, of the Registrant's eight remaining properties, during 1994, six generated positive cash flow while two generated marginal cash flow deficits.
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 devaluations of real estate in particular markets, as has been experienced in the last few years. As a result of these factors, it has become necessary for the Registrant to retain ownership of many of its properties for longer than the holding period for the assets originally described in the prospectus. The General Partner examines the operations of each property and each local market individually when determining the optimal time to sell each of the Registrant's properties.
In March 1994, the Registrant completed the modification of the Ridgepoint Green and Ridgepoint Way first mortgage loans effective April 1994. The Registrant was obligated to sell the properties on or before October 1, 1995 on certain specified terms. Consequently, in August 1994, the Registrant sold the properties. See Item 7. Liquidity and Capital Resources for additional information.
During 1994, the Registrant refinanced the Spring Creek first mortgage loan. See Item 7. Liquidity and Capital Resources for additional 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 Partner is not aware of any potential liability due to environmental issues or conditions that would be material to the Registrant.
The officers and employees of Balcor Partners-84 II, Inc., the General Partner of the Registrant, and its affiliates perform services for the Registrant. The Registrant currently has no employees engaged in its operations.
Item 2.
Item 2. Properties - ------------------ As of December 31, 1994, the Registrant owns the eight properties described below:
Location Description of Property - -------- -----------------------
Tempe, Arizona La Contenta Apartments: a 274-unit apartment complex located on approximately 13 acres.
Pineville, North Carolina * Meadow Creek Apartments: a 250-unit apartment complex located on approximately 23 acres.
Gwinnett County, Georgia Park Colony Apartments: a 352-unit apartment complex located on approximately 29 acres.
Dallas, Texas Ridgetree Apartments (Phase II): a 354-unit apartment complex located on approximately 9 acres.
Lenexa, Kansas ** Rosehill Pointe Apartments: a 498-unit apartment complex located on approximately 35 acres.
Orange County, Florida ** Seabrook Apartments: a 200-unit apartment complex located on approximately 16 acres.
Columbus, Ohio Spring Creek Apartments: a 288-unit apartment complex located on approximately 19 acres.
Irving, Texas Westwood Village Apartments: a 320-unit apartment complex located on approximately 16 acres.
* Owned by the Registrant through a joint venture with the seller.
** Owned by the Registrant through a joint venture with one or more affiliated partnerships.
Each of the above properties is held subject to various mortgages and other forms of financing.
In the opinion of the General Partner, the Registrant has provided for adequate insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property investments.
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 the 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; therefore, the market value of the Limited Partnership Interests cannot reasonably be determined. The Registrant has not made distributions to date to investors. For additional information, see Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations" below.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 8,499.
Item 6.
Item 6. Selected Financial Data - ------------------------------- Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ----------
Total income $17,020,543 $17,984,872 $21,928,782 $21,284,255 $21,254,053 (Loss) before gains on sales of assets and extraordinary items (3,313,544) (3,371,970) (5,099,275) (5,662,553) (5,484,230) Net income (loss) 2,454,938 9,901,817 (5,099,275) (5,662,553) (5,484,230) Net income (loss) per Limited Part- nership Interest 27.92 112.63 (58.00) (64.41) (62.38) Total assets 56,636,602 73,333,165 100,416,387 104,489,888 110,712,217 Mortgage notes payable 65,971,823 84,130,907 120,086,011 120,708,225 122,370,278
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and - ----------------------------------------------------------------------- Results of Operations - ---------------------
Summary of Operations - ---------------------
Balcor Realty Investors 84 - Series II (the "Partnership") sold two properties in August 1994 and an additional property in April 1993. In addition, the Partnership recognized an extraordinary gain on forgiveness of debt relating to the repayment of the mortgage notes in connection with the 1994 property sales and extraordinary gains on two other properties that were lost through foreclosure in March and May of 1993. Finally, in April 1993, the Partnership refinanced the Ridgetree II first mortgage loan at a discount. The timing of the gains related to these events resulted in a decrease in net income during 1994 as compared to 1993, and net income in 1993 as compared to a net loss in 1992. Further discussion of the Partnership's operations are summarized below.
Operations - ----------
1994 Compared to 1993 - ---------------------
The Partnership sold the Butterfield Village Apartments in April 1993 and the Ridgepoint Green and Ridgepoint Way apartment complexes in August 1994. As a
result, the Partnership experienced decreases in rental and service income, interest expense on mortgage notes payable, depreciation, and property management fees during 1994 as compared to 1993. Increased occupancy and/or rental rates at five of the Partnership's remaining properties partially offset the above decrease in rental and service income and, consequently, property management fees.
The Ridgepoint Green and Ridgepoint Way first mortgage loans were modified, effective April 1994. The Partnership had previously recognized interest expense liabilities under the prior terms of these loans. In connection with the modifications, the Partnership wrote-off approximately $290,000 of these liabilities which, along with decreased interest rates, contributed to the decrease in interest expense on mortgage notes payable discussed above. During April, May and December 1993, the Ridgetree II, Meadow Creek and Park Colony loans were refinanced or modified. In addition, in accordance with the loan agreements, the interest rates on the Rosehill Pointe and Westwood Village loans were adjusted to lower rates during July and October 1993, respectively. These events also contributed to the decrease.
During 1994, the General Partner made net advances to the Partnership for additional working capital. This, along with higher interest rates in 1994, resulted in an increase in interest expense on short-term loans during 1994 as compared to 1993.
Due to the sale of the Butterfield Village Apartments and the foreclosure of the Highland Ridge Apartments, the Partnership fully amortized the remaining financing fees related to the corresponding mortgage notes payable in 1993.
Insurance premiums increased at all of the Partnership's properties. This, along with higher utility, payroll, and advertising costs at the La Contenta, Ridgetree II, Rosehill Pointe, Seabrook, Spring Creek, and Westwood Village apartment complexes caused an increase in property operating expense during 1994 as compared to 1993. This was partially offset by a decrease in property operating expense due to the property dispositions discussed above.
Higher maintenance and repair expense, which included exterior painting and wood siding replacement, asphalt repairs, landscaping improvements, plumbing repairs and the replacement of floor coverings, was incurred at the La Contenta, Meadow Creek, Park Colony, Ridgepoint Green, Ridgepoint Way, Seabrook and Spring Creek apartment complexes during 1994. The Partnership had deferred non-critical costs during 1993 at the Ridgepoint Green and Ridgepoint Way apartment complexes due to the bankruptcy filings. In addition, in accordance with the terms of the bankruptcy plans, the Partnership completed exterior painting at these two properties during 1994. These increases were partially offset by the decrease caused by the sale of the Butterfield Apartments in 1993.
During 1994, higher real estate taxes were incurred at the Ridgetree II Apartments as a result of an increased assessment. This additional expense fully offset the reduction in real estate tax expense due to the property dispositions discussed above and resulted in an increase in real estate taxes for 1994 as compared to 1993.
An increase in legal fees relating to the Ridgepoint Green and Ridgepoint Way loan modifications, and higher accounting, portfolio management, and data processing fees resulted in an increase in administrative expense during 1994 as compared to 1993.
During August 1994 and April 1993, the Partnership recognized a gain of $4,257,709 on the sale of the Ridgepoint Green and Ridgepoint Way apartment complexes and a gain of $3,606,825 on the sale of the Butterfield Village Apartments, respectively.
During 1994, the Partnership recognized an extraordinary gain on forgiveness of debt of $1,510,773 in connection with the August 1994 sale of the Ridgepoint
Green and Ridgepoint Way apartment complexes. During 1993, the Partnership recognized an extraordinary gain on forgiveness of debt of $1,234,276 in connection with the April 1993 refinancing of the Ridgetree II Apartments. The Partnership also recognized extraordinary gains on foreclosures totaling $8,432,686 in connection with the foreclosures of the Rancho Mirage and Highland Ridge apartments complexes in March 1993 and May 1993, respectively.
1993 Compared to 1992 - ---------------------
The Partnership sold the Butterfield Village Apartments in April 1993 and did not record operations during 1993 for the Highland Ridge and Rancho Mirage apartment complexes as a result of their receivership status. As a result, the Partnership experienced decreases in rental and service income, interest expense on mortgage notes payable, depreciation, property operating expense, maintenance and repair expense, real estate taxes and property management fees during 1993 as compared to 1992. Increased occupancy levels and/or rental rates at seven of the Partnership's properties during 1993 partially offset the above decrease in rental and service income, and consequently, property management fees.
The Seabrook mortgage loan was originally financed by a bond issuance which matured in 1992. During the third quarter of 1992, the Partnership received interest income from the trustee of the bonds. This, as well as lower interest rates earned on short-term investments in 1993, resulted in a decrease in interest income on short-term investments during 1993 as compared to 1992.
In May and June 1992, the Partnership reached settlements with the sellers of the Rosehill Pointe and Ridgetree II apartment complexes. As a result, settlement income of $273,294 was recognized in connection with these transactions during 1992.
During July 1992 and April and May 1993, the Seabrook, Ridgetree II and Meadow Creek loans were refinanced. In addition, in accordance with the loan agreements, the interest rates on the Rosehill Pointe and Westwood Village loans were adjusted to lower rates during July and October 1993, respectively. These events contributed to the decrease in interest expense on mortgage notes payable during 1993 as compared to 1992.
Due to the sale of the Butterfield Village Apartments and the foreclosure of the Highland Ridge Apartments, as well as the Ridgetree II and Meadow Creek refinancings and the Park Colony modification, the Partnership fully amortized the remaining financing fees related to the corresponding mortgage notes payable during 1993. This resulted in an increase in amortization expense during 1993 as compared to 1992.
Increased administrative and maintenance staff payroll expenses at the Rosehill Pointe and Spring Creek apartment complexes during 1993 partially offset the decrease in property operating expense discussed above.
During 1992, the Partnership incurred substantial expenditures for painting and cleaning and carpet replacement at the Park Colony Apartments in an effort to lease vacant units. In addition, the Partnership deferred non-critical maintenance and repair costs during 1993 at the Ridgepoint Green and Ridgepoint Way apartment complexes due to the bankruptcy filings. This contributed to the decrease in maintenance and repair expense during 1993 as compared to 1992.
During 1993, higher real estate taxes were incurred at the Meadow Creek, Spring Creek and Westwood Village apartment complexes as a result of increased tax rates and/or assessments. The additional expense partially offset the reduction in real estate tax expense due to the property dispositions discussed above and lower assessment at the La Contenta Apartments.
During 1993, Rosehill Pointe Apartments experienced an increase in rental rates and a decrease in interest expense, as discussed above. This improvement in operations resulted in a decrease in the affiliates' participation in losses
from joint ventures during 1993 as compared to 1992. In addition, interest income received during the third quarter of 1992 from the trustee of the bonds, which were collateralized by the Seabrook Apartments and matured in 1992, offset the above decrease.
Liquidity and Capital Resources - -------------------------------
The cash position of the Partnership decreased as of December 31, 1994 when compared to December 31, 1993. The Partnership received funds from investing activities relating to the sale of the Ridgepoint Green and Ridgepoint Way apartment complexes in August 1994. The Partnership used cash to fund certain of its financing activities which included the repayment of the Ridgepoint Green and Ridgepoint Way first mortgage loans in connection with the sale and the payment of principal on the Partnership's loans. In addition, cash was used to fund the Partnership's operating activities. The revenue generated by the Partnership's properties was offset by the payment of property operating expenses, administrative expenses, interest expense on the General Partner loan and expenditures relating to damage caused by a hail storm at the Ridgepoint Green and Ridgepoint Way apartment complexes. The Partnership expects to be reimbursed by its insurance company for the costs of the hail storm damage less the amount of the deductible portion of the claim.
The Partnership has loans of approximately $8,109,000 payable to the General Partner at December 31, 1994 in connection with funds advanced for working capital purposes and for property operating deficits. These loans are expected to be repaid from available cash flow from future property operations, or from proceeds received from the disposition of the Partnership's real estate investments prior to any distributions to the Limited Partners from these sources.
The General Partner may continue to provide additional short-term loans to the Partnership to fund working capital needs or property operating deficits, although there is no assurance that such loans will be available. Should such short-term loans not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available either through the General Partner or third parties, the Partnership may be required to dispose of some of its properties to satisfy these obligations.
In instances where the General Partner concludes that the Partnership's investment objectives cannot be met by continuing to own a particular property and fund operating deficits, the Partnership has suspended and may in the future suspend debt service payments or sell the property at a price less than its original cost. Suspension of debt service payments may lead to a renegotiation of terms with lenders which would permit the Partnership to continue to own properties or may lead to foreclosure or other action by lenders which would result in the relinquishment of title to properties in satisfaction of the outstanding mortgage loan balances. In the case of each property, the General Partner will pursue modification of underlying debt, consider suspending debt service payments and/or deferring non-critical repair and maintenance costs and analyze present and projected market conditions and projections for operations prior to determining the disposition of a property.
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 1994, six of the Partnership's eight remaining properties generated positive cash flow and two generated a marginal cash flow deficit.
During 1993, eight of the Partnership's ten remaining properties generated positive cash flow while two generated marginal cash flow deficits. As discussed above, the Ridgepoint Green and Ridgepoint Way apartment complexes were sold in August 1994.
The Park Colony and Westwood Village apartment complexes generated marginal cash flow deficits during 1993, whereas during 1994, the properties generated positive cash flow due to reduced debt service payments. The Park Colony loan was modified in 1993 and the interest rate on the Westwood Village loan was adjusted to a lower rate during 1993 in accordance with the loan agreement. The Ridgetree II Apartments, which generated positive cash flow during 1993, generated a marginal cash flow deficit during 1994 due to higher real estate taxes resulting from an increase in the assessed value of the property. The Seabrook Apartments, which generated positive cash flow during 1993, incurred expenditures for plumbing repairs and higher debt service payments due to increased interest rates which caused the property to operate at a marginal deficit during 1994.
During July 1994, the Spring Creek first mortgage loan was refinanced. See Note 3 of Notes to Financial Statements for additional information.
The Ridgepoint Green and Ridgepoint Way first mortgage loans were modified, effective April 1994. Pursuant to the modifications, the Partnership was obligated to sell the properties on or before the new October 1, 1995 maturity date on certain specified terms. Consequently, in August 1994, the Partnership sold the properties in an all cash sale for $17,790,715. After payment of the underlying mortgages at a discount and selling costs, the Partnership received proceeds of approximately $956,000 from the sale. A portion of these proceeds was used to reduce the outstanding short-term borrowings owed to the General Partner. See Notes 9 and 10 of Notes to Financial Statements for additional information.
While the cash flow of certain of the Partnership's properties has improved, the General Partner continues to pursue a number of actions aimed at improving the cash flow of the Partnership's properties including refinancing of mortgage loans, improving property operating performance, and seeking rent increases where market conditions allow. As of December 31, 1994, the occupancy rates of the Partnership's properties ranged from 93% to 98%, except Meadow Creek Apartments which had an occupancy rate of 89%. Despite improvements during 1993 and 1994 in the local economies and rental markets where certain of the Partnership's properties are located, the General Partner believes that continued ownership of many of the properties is in the best interests of the Partnership in order to maximize potential returns to Limited Partners. As a result, the Partnership will continue to own these properties for longer than the holding period for the assets originally described in the prospectus.
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 refinancing of many existing loans with new lenders, the Partnership has no third-party, first mortgage financing which matures prior to October 1996.
Westwood Village Apartments is located near the Dallas/Ft. Worth Airport. A proposed expansion plan provides for the construction of two additional runways on airport property. A plan proposed by the Dallas/Fort Worth International Airport Board provides for varying levels of compensation to single family homeowners; however, no similar compensation is planned for the majority of apartment complex owners, including the property. In July 1993, the Partnership and other affected multi-family property owners filed a lawsuit seeking to obtain compensation. In October 1994, the airport board's motion for summary judgment was granted. The plaintiffs filed a motion for a new trial and/or to alter the judgment, which was denied in November 1994. As a result, the Partnership is not entitled to receive any compensation due to the airport expansion. The plaintiffs have decided not to appeal the decision due to the costs of continuing the litigation, but intend to continue to monitor the
situation. Westwood Village Apartments, however, may be entitled to be reimbursed for the costs of soundproofing under the Final Environmental Impact Statement approved by the Federal Aviation Administration. However, a final determination will not be made until the runways are completed and actual noise studies are analyzed.
Although investors have received certain tax benefits, the Partnership has not commenced distributions. Future distributions will depend on improved cash flow from the Partnership's remaining properties and proceeds from future property sales, as to both of which there can be no assurances. In light of the results to date and current market conditions, the General Partner does not anticipate that the investors will recover a substantial portion of their investment.
The General Partner has recently completed the outsourcing of the financial reporting and accounting services, 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. Additionally, Allegiance Realty Group, Inc., which has provided property management services to all of the Partnership's properties, was sold to a third party. Each of these transactions occurred after extensive due diligence and competitive bidding processes. The General Partner does 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 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.
Item 8.
Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- See Index to Financial Statements and Schedule in 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 returns is summarized as follows:
December 31, 1994 December 31, 1993 ------------------------- -------------------------
Financial Tax Financial Tax Statements Returns Statements Returns ---------- --------- ---------- ---------
Total assets $ 56,636,602$ 41,311,618 $ 73,333,165 $ 53,841,280 Partners' capital accounts (deficit): General Partner (937,975)(11,183,177) (962,524) (10,521,827) Limited Partners (17,158,670)(18,151,946) (19,589,059) (25,523,423) Net income (loss): General Partner 24,549 (661,350) 99,018 1,323,647 Limited Partners 2,430,389 7,371,477 9,802,799 18,354,775 Per Limited Part- nership Interest 27.92 84.69 112.63 210.88
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) The Registrant does not have a Board of Directors; however, Balcor Partners-84 II, Inc., the General Partner, does have a Board of Directors which consists of Thomas Meador and Allan Wood. The term of office as a director of the General Partner is one year. Directors are elected at the annual meeting of shareholders.
The directors of Balcor Partners-84 II, Inc., the General Partner of the Registrant, are not directors 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. Messrs Meador and Wood are, however, directors of general partners of three other issuers, which have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(b, c & e) The names, ages and business experiences of the executive officers, directors and significant employees of the General Partner of the Registrant are as follows:
TITLE OFFICERS ----- --------
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.
(d) There is no family relationship between any of the foregoing officers or directors.
(f) None of the foregoing officers, directors or employees are currently involved in any material legal proceedings nor were any such proceedings terminated during the fourth quarter of 1994.
Item 11.
Item 11. Executive Compensation - -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the executive officers and directors of the General Partner. Certain of these officers receive compensation from The Balcor Company for services performed for various affiliated entities, which may include services performed for the Registrant. However, the General Partner believes that any such compensation attributable to services performed for the Registrant is immaterial to the Registrant. See Note 8 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 Partners-84 II, Inc. and its shareholders, directors, and officers own as a group the following Limited Partnership Interests in the Registrant.
Amount Beneficially Title of Class Owned Percent of Class -------------- ------------- ---------------- Limited Partnership Interests 95 Interests Less than 1%
Relatives and affiliates of the partners and officers of the General Partner own 46 Interests.
(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 2 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
See Note 8 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 Schedule, and Reports on Form 8-K - -------------------------------------------------------------------------
(a) (1 & 2) See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership is set forth as Exhibit 3 to Amendment No. 2 to Registrant's Registration Statement on Form S-11 dated July 6, 1984 (Registration No. 2-89319), and said Agreement and Certificate is incorporated herein by reference.
(4) Form of Subscription Agreement and Power of Attorney set forth as Exhibit 4.1 to Amendment No. 2 of the Registrant's Registration Statement on Form S-11 dated July 6, 1984 (Registration No. 2-89319), 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. 0-13334) are incorporated herein by reference.
(10) Material Contracts
Agreement of Sale relating to the sale of Ridgepoint Green and Ridgepoint Way apartment complexes, Dallas, Texas, previously filed as Exhibit (2) to the Registrant's Report on Form 8-K dated July 8, 1994 is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements and Financial Statement Schedule in 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 REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Allan Wood ------------------------ Allan Wood Executive Vice President, Chief Accounting and Financial Officer and Director (Principal Accounting and Financial Officer) of Balcor Partners-84 II, Inc., the General Partner
Date: March 23, 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, Chief Executive Officer (Principal Executive Officer) and Director of Balcor Partners-84 II, /s/Thomas E. Meador Inc., the General Partner March 23, 1995 - -------------------- -------------- Thomas E. Meador
Executive Vice President, and Chief Accounting and Financial Officer and Director (Principal Accounting and Financial Officer) of Balcor Partners-84 II, Inc., the General /s/Allan Wood Partner March 23, 1995 - -------------------- -------------- Allan Wood
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Deficit, for the years ended December 31, 1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Balcor Realty Investors 84-Series II A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule of Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (A Maryland Limited Partnership) as listed in the index of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule 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 Realty Investors 84-Series II, A Real Estate Limited Partnership at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P
Chicago, Illinois February 27, 1995
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 ------------- ------------- Cash and cash equivalents $ 325,412 $ 1,160,704 Escrow deposits 1,094,558 1,149,671 Accounts and accrued interest receivable 364,052 65,276 Deferred expenses, net of accumulated amortization of $585,255 in 1994 and $1,084,192 in 1993 743,815 1,064,613 ------------- ------------- 2,527,837 3,440,264 ------------- ------------- Investment in real estate, at cost: Land 11,076,389 15,412,784 Buildings and improvements 71,945,955 86,867,741 ------------- ------------- 83,022,344 102,280,525 Less accumulated depreciation 28,913,579 32,387,624 ------------- ------------- Investment in real estate, net of accumulated depreciation 54,108,765 69,892,901 ------------- ------------- $ 56,636,602 $ 73,333,165 ============= =============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 8,108,555 $ 7,775,723 Accounts payable 170,393 115,493 Due to affiliates 258,657 268,432 Accrued liabilities, principally interest and real estate taxes 1,131,065 2,274,720 Security deposits 293,922 372,855 Mortgage notes payable 65,971,823 84,130,907 ------------- ------------- Total liabilities 75,934,415 94,938,130
Affiliates' participation in joint ventures (1,201,168) (1,053,382)
Partners' deficit (87,037 Limited Partnership Interests issued and outstanding) (18,096,645) (20,551,583) ------------- ------------- $ 56,636,602 $ 73,333,165 ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT for the years ended December 31, 1994, 1993 and 1992
Partners' Deficit Accounts ----------------------------------------- General Limited Total Partner Partners(A) ------------- ------------- -------------
Balance at December 31, 1991 $(25,354,125) $ (1,010,549) $(24,343,576)
Net loss for the year ended December 31, 1992 (5,099,275) (50,993) (5,048,282) ------------- ------------- ------------- Balance at December 31, 1992 (30,453,400) (1,061,542) (29,391,858)
Net income for the year ended December 31, 1993 9,901,817 99,018 9,802,799 ------------- ------------- ------------- Balance at December 31, 1993 (20,551,583) (962,524) (19,589,059)
Net income for the year ended December 31, 1994 2,454,938 24,549 2,430,389 ------------- ------------- ------------- Balance at December 31, 1994 $(18,096,645) $ (937,975) $(17,158,670) ============= ============= =============
(A) Includes a $95,000 investment by the General Partner.
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Income: Rental and service $ 16,985,963 $ 17,953,526 $ 21,494,257 Interest on short-term investments 34,580 31,346 161,231 Settlement income 273,294 ------------- ------------- ------------- Total income 17,020,543 17,984,872 21,928,782 ------------- ------------- ------------- Expenses: Interest on mortgage notes payable 6,514,973 8,287,777 10,864,977 Interest on short-term loans 399,006 290,389 281,481 Depreciation 2,492,641 2,712,857 3,573,761 Amortization of deferred expenses 211,246 441,513 271,755 Property operating 4,968,623 4,729,076 6,092,794 Maintenance and repairs 2,462,717 1,838,831 2,613,933
Real estate taxes 1,639,635 1,553,880 1,708,931 Property management fees 850,097 893,859 1,047,321 Administrative 870,872 679,625 653,998 ------------- ------------- ------------- Total expenses 20,409,810 21,427,807 27,108,951 ------------- ------------- ------------- Loss before gain on sale of properties, participations in joint ventures and extraordinary items (3,389,267) (3,442,935) (5,180,169) Gain on sale of properties 4,257,709 3,606,825 Affiliates' participation in losses from joint ventures 75,723 70,965 80,894 ------------- ------------- ------------- Income (loss) before extraordinary items 944,165 234,855 (5,099,275) ------------- ------------- ------------- Extraordinary items: Gain on forgiveness of debt 1,510,773 1,234,276 Gain on foreclosure of properties 8,432,686 ------------- ------------ Total extraordinary items 1,510,773 9,666,962 ------------- ------------- ------------- Net income (loss) $ 2,454,938 $ 9,901,817 $ (5,099,275) ============= ============= ============= Income (loss) before extraordinary items allocated to General Partner $ 9,441 $ 2,349 $ (50,993) ============= ============= ============= Income (loss) before extraordinary items allocated to Limited Partners $ 934,724 $ 232,506 $ (5,048,282) ============= ============= ============= Income (loss) before extraordinary items per Limited Partnership Interest (87,037 issued and outstanding) $ 10.74 $ 2.68 $ (58.00) ============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Operating activities:
Net income (loss) $ 2,454,938 $ 9,901,817 $ (5,099,275) Adjustments to reconcile net income (loss) to net cash used in operating activities: Gain on forgiveness of debt (1,510,773) (1,234,276) Gain on foreclosure of properties (8,432,686) Gain on sale of properties (4,257,709) (3,606,825)
Affiliates' participation in losses from joint ventures (75,723) (70,965) (80,894) Depreciation of properties 2,492,641 2,712,857 3,573,761 Amortization of deferred expenses 211,246 441,513 271,755 Deferred interest expense 689,421 Net change in: Escrow deposits 55,113 (360,723) 1,166 Accounts and accrued interest receivable (298,776) 165,444 81,663 Accounts payable 54,900 (185,544) (467,175) Due to affiliates (9,775) 99,586 15,662 Accrued liabilities (615,274) 341,199 (218,889) Security deposits (78,933) (102,146) (17,016) ------------- ------------- ------------- Net cash used in operating activities (1,578,125) (330,749) (1,249,821) ------------- ------------- ------------- Investing activities:
Proceeds from sale of properties 17,790,715 9,385,000 Costs incurred in connection with sale of properties (241,511) (164,056) ------------- ------------ Net cash provided by investing activities 17,549,204 9,220,944 ------------- ------------ Financing activities:
Capital contributions by joint venture partners - affiliates 17,320 114,741 Distributions to joint venture partners - affiliates (89,383) (25,037) (82,416) Proceeds from loans payable - affiliate 866,905 1,086,469 2,383,975 Repayment of loans payable - affiliate (534,073) (1,429,236) Proceeds from issuance of mortgage notes payable 7,448,362 13,236,340 Principal payments on mortgage notes payable (576,339) (614,974) (1,311,635) Repayments of mortgage notes payable (23,693,178) (19,792,049) Payment of deferred expenses (245,985) (414,832) (58,585) ------------- ------------ ------------ Net cash (used in) or provided by financing activities (16,806,371) (7,953,319) 1,046,080 ------------- ------------ ------------ Net change in cash and cash equivalents (835,292) 936,876 (203,741) Cash and cash equivalents at beginning of year 1,160,704 223,828 427,569 ------------- ------------- ------------- Cash and cash equivalents at end of year $ 325,412 $ 1,160,704 $ 223,828 ============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line and accelerated methods. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years ----- Buildings, building appurtenances and land improvements 30 Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
Interest incurred while properties were under construction was capitalized.
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 Partner determines that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
(b) Deferred expenses consist of loan refinancing and modification fees which are amortized over the terms of the respective loan agreements.
(c) Cash equivalents include all highly liquid investments with a maturity of three months or less when purchased.
(d) The Partnership is not liable for Federal income taxes and each partner recognizes his proportionate share of the Partnership income or loss in his tax return; therefore, no provision for income taxes is made in the financial statements of the Partnership.
2. Partnership Agreement:
The Partnership was organized in February 1983. The Partnership Agreement provides for Balcor Partners-84 II, Inc. to be the General Partner and for the admission of Limited Partners through the sale of up to 110,000 Limited Partnership Interests at $1,000 per Interest, 87,037 of which were sold on or prior to September 28, 1984, the termination date of the offering.
The Partnership Agreement provides that the General Partner will be allocated 1% of the profits and losses and the Limited Partners will be allocated 99% of the profits and losses. One hundred percent of Net Cash Receipts available for distribution shall be distributed to the holders of Interests in proportion to their participating percentages as of the record date for such distributions. However, there shall be accrued for the benefit of the General Partner as its distributive share from operations, an amount equivalent to approximately 1% of the total Net Cash Receipts being distributed, which will be paid only out of Net Cash Proceeds. Under certain circumstances, the General Partner may participate in the Net Cash Proceeds of the sale or refinancing of Partnership properties. The General Partner's participation is limited to 15% of Net Cash Proceeds, including its share of accrued Net Cash Receipts, and is subordinated to the return of Original Capital plus any deficiency in a Cumulative Distribution of 6% on Adjusted Original Capital to the holders of Interests, as defined in the Partnership Agreement.
3. Mortgage Notes Payable:Mortgage notes payable at December 31, 1994 and 1993 consisted of the following: See notes (A) through (F).
(A) In May 1993, this loan was refinanced. The interest rate decreased from 10% to 8.54%, the maturity date was extended from September 1993 to June 1998 and the monthly payments decreased from $46,444 to $40,131. Proceeds from the new $5,200,000 first mortgage loan were used to repay the existing first mortgage loan of $5,178,672.
(B) In December 1993, this loan was modified. The interest rate decreased from 10.25% to 9.375%, the maturity date was extended from July 1996 to January 1999, and monthly payments decreased from $92,223 to $78,125.
(C) Plans of reorganization related to these loans were confirmed by the Bankruptcy Court in March 1994 and made effective in April 1994. The lender's secured claims for these loans totaled $19,195,524 which equaled the outstanding principal balances of the loans, unpaid interest through the effective date of the plans and legal and professional fees incurred by the lender in the bankruptcy proceedings. The outstanding principal amount of the loans were to bear interest at 8% through the new maturity date of October 1, 1995. Under the plans, the Partnership had until maturity to sell the properties on certain specified terms, and did so during August 1994. See Notes 9 and 10 of Notes to Financial Statements for additional information.
(D) In April 1993, this loan was refinanced. The interest rate decreased from 11.00% to 10.05%, the maturity date was extended from August 1996 to May 2000 and monthly payments decreased from $83,300 to $70,004. Proceeds from the $7,784,630 first mortgage loan and the $158,870 second mortgage loan, along with a principal payment of $400,302, were used to repay the existing $9,578,078 first mortgage loan which represents a discount of $1,234,276.
(E) In January 1995, this loan was modified. The interest rate remained at 9.75%, the maturity date was extended from January 1995 to January 1998, and the monthly payments of $10,920 increased to $14,238.
(F) In July 1994, this loan was refinanced. The interest rate decreased from 9.25% to 9.21%, the maturity date was extended from August 1994 to August 2000, and the monthly payments increased from $54,729 to $61,060. Proceeds from the new $7,448,362 first mortgage loan were used to repay the existing first mortgage loan of $7,100,000.
The Partnership's loans described above require current monthly payments of principal and interest except for the Park Colony and Seabrook mortgage loans which require interest only payments.
Five-year maturities of the mortgage notes payable are approximately as follows:
1995 $ 700,000 1996 7,738,000 1997 5,891,000 1998 26,912,000 1999 9,903,000
During 1994, 1993 and 1992, the Partnership incurred interest expense on mortgage notes payable of $6,514,973, $8,287,777 and $10,864,977 and paid interest expense of $6,863,768, $7,888,588 and $10,255,657, respectively.
4. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are under management agreements with a third party management company. These management agreements provide for annual fees of 5% of gross operating receipts.
5. Seller's Participation in Joint Venture:
Meadow Creek Apartments is owned by a joint venture between the Partnership and the seller. The seller retains an interest in the property through an interest
in the joint venture. All assets, liabilities, income and expenses of the joint venture are included in the financial statements of the Partnership with the appropriate deduction from income, if any, for the seller's participation in the joint venture.
6. Affiliates' Participation in Joint Ventures:
Rosehill Pointe Apartments is owned by a joint venture between the Partnership and an affiliated partnership. Profits and losses are allocated 61.62% to the Partnership and 38.38% to the affiliate. In addition, Seabrook Apartments is owned by a joint venture between the Partnership and two affiliates of the Partnership. Profits and losses are allocated 83.72% to the Partnership and 16.28% to the affiliates. All assets, liabilities, income and expenses of the joint ventures are included in the financial statements of the Partnership with appropriate adjustment of profit or loss for the affiliates' participation in the joint ventures.
7. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code, rules and regulations promulgated thereunder and existing interpretations thereof. The accompanying financial statements, which are prepared in compliance with generally accepted accounting principles, will differ from the tax returns due to the different treatment of various items as specified in the Internal Revenue Code. The net effect of these accounting differences is that the net income for 1994 in the financial statements is $4,255,189 less than the tax income of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended 12/31/94 12/31/93 12/31/92 ------------------ ------------------ ------------------ Paid Payable Paid Payable Paid Payable --------- ------- -------- ------- -------- ------- Property manage- ment fees $827,716 None $866,889 $104,097 $976,555 $77,127 Reimbursement of expenses to General Partner at cost: Accounting 80,957 31,333 64,215 5,310 65,890 4,813 Data processing 64,251 14,023 36,471 6,722 41,631 3,428 Investment processing 7,068 571 10,056 831 1,711 125 Investor com- munications 12,403 5,388 8,223 680 10,182 744 Legal 15,160 9,948 16,178 1,338 20,582 1,504 Portfolio management 76,659 32,097 73,612 8,332 53,175 12,888 Other 25,194 4,658 15,075 1,246 19,106 1,396
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all of the Partnership's properties until the affiliate was sold to a third party in November 1994.
As of December 31, 1994, the General Partner has advanced $8,108,555, including net advances of $332,832 during 1994, to the Partnership to provide working capital and meet other Partnership obligations. During 1994, 1993 and 1992, the Partnership incurred interest expense of $399,006, $290,389 and $281,481, respectively, in connection with these loans. The Partnership paid interest expense of $378,243, $217,334 and $248,308 during 1994, 1993 and 1992, respectively. As of December 31, 1994, interest of $160,639 was payable on these advances. Interest was computed at the American Express Company cost of
funds rate plus a spread to cover administrative expenses. As of December 31, 1994, this rate was 6.56%.
As of January 1, 1993, the Partnership had a $300,000 outstanding letter of credit which was guaranteed by an affiliate of the General Partner. This letter of credit was required by the lending institution of the Ridgetree II mortgage loan. During 1993, the $300,000 guarantee was released.
The General Partner may continue to provide additional short-term loans to the Partnership or to fund working capital needs or property operating deficits, although there is no assurance that such loans will be available. Should such short-term loans not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available either through the General Partner or third parties, the Partnership may be required to dispose of some of its properties to satisfy these obligations.
The Partnership participates in an insurance deductible program with other affiliated partnerships in which the program pays claims up to the amount of the deductible under the master insurance policies for its properties. The program is administered by an affiliate of the General Partner who receives no fee for administering the program. The Partnership's premiums to the deductible insurance program were $186,498, $126,927 and $158,266 in 1994, 1993 and 1992, respectively.
9. Property Sales:
The Partnership sold the Ridgepoint Green and Ridgepoint Way apartment complexes during 1994 and the Butterfield Village Apartments during 1993 in separate all cash sales for $17,790,715 and $9,385,000, respectively. From the proceeds of the sales, the Partnership paid $16,593,178 and $6,269,575 in full satisfaction of the properties' first mortgage loans, respectively. The bases of these properties totaled $13,291,495 and $5,614,119, net of accumulated depreciation of $5,966,686 and $2,713,101, respectively. For financial statement purposes, the Partnership recognized gains of $4,257,709 and $3,606,825 from the sale of these properties during 1994 and 1993, respectively. The remaining proceeds from the sales were used to repay a portion of the loan from the General Partner.
10. Extraordinary Items:
(a) During 1994, the Ridgepoint Green and Ridgepoint Way apartment complexes were sold. In connection with the sale, the mortgage notes which had outstanding balances of $18,459,488, including accrued interest, were repaid for $16,593,178. The Partnership also fully amortized the remaining $355,537 of loan modification fees related to the 1989 modifications of these mortgage notes. During 1993, the Ridgetree II mortgage note was refinanced. In connection with the refinancing, the mortgage note which had an outstanding balance of $9,578,078, including accrued interest and other fees, was repaid for $8,343,802. These transactions resulted in extraordinary gains on forgiveness of debt totaling $1,510,773 in 1994 and $1,234,276 in 1993 for financial statement purposes.
(b) During 1993, title to the Rancho Mirage and Highland Ridge Apartments were relinquished through foreclosure. The Partnership wrote off the property bases of $19,861,720, net of accumulated depreciation of $8,478,201, mortgage loan balances of $27,645,298, accrued and unpaid interest expense and real estate taxes of $619,926 and security deposits of $29,182. The Partnership recognized extraordinary gains of $8,432,686 during 1993 for financial statement purposes.
BALCOR REALTY INVESTORS 84-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
See Notes (a) through (g).
BALCOR REALTY INVESTORS 84-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
See Notes (a) through (g).
BALCOR REALTY INVESTORS 84-SERIES II, A REAL ESTATE LIMITED PARTNERSHIP (A Maryland Limited Partnership)
NOTES TO SCHEDULE XI
(a) Consists of legal fees, appraisal fees, title costs, other related professional fees and capitalized construction-period interest.
(b) The aggregate cost of land for Federal income tax purposes is $11,472,495 and the aggregate cost of buildings and improvements for Federal income tax purposes is $64,883,866. The total of the above-mentioned is $76,356,361.
(c) Reconciliation of Real Estate --------------------------------------- 1994 1993 1992 ------------ ------------ ------------
Balance at beginning of year $102,280,525 $138,947,666 $138,947,666
Reductions during the year: Cost of real estate sold (19,258,181) (8,327,220) Foreclosure of properties (28,339,921) ------------ ------------ ------------ Balance at end of year $ 83,022,344 $102,280,525 $138,947,666 ============ ============ ============
Reconciliation of Accumulated Depreciation ----------------------------------------- 1994 1993 1992 ------------ ------------ ------------
Balance at beginning of year $32,387,624 $40,866,069 $ 37,292,308 Depreciation expense for the year 2,492,641 2,712,857 3,573,761 Accumulated depreciation of real estate sold (5,966,686) (2,713,101) Foreclosure of properties (8,478,201) ------------ ------------ ------------ Balance at end of year $28,913,579 $ 32,387,624 $ 40,866,069 ============ ============ ============
(d) See description of Mortgage Notes Payable in Note 3 of Notes to Financial Statements.
(e) Depreciation expense is computed based upon the following estimated useful lives:
Years ----- Buildings, building appurtenances and land improvements 30 Furniture and fixtures 5
(f) Guaranteed income earned on properties under the terms of certain management and guarantee agreements is recorded by the Partnership as a reduction of the basis of the property to which the guaranteed income relates.
(g) A reduction of basis was made to write down the property to its December 31, 1988 mortgage liability balance (net of an outstanding letter of credit of $500,000).