Item 1. Business ----------------
IDS/Balcor Income Partners A Real Estate Limited Partnership (the "Registrant") is a limited partnership formed in 1987 under the laws of the State of Delaware. The Registrant raised $18,498,500 through the sale of 73,994 Limited Partnership Interests to the public during 1987, 1988 and 1989. The Registrant's operations consist exclusively of investment in and operation of income producing real property, and all financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire the two real property investments 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 combined with relatively low levels of new construction. 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. During 1994 both of the Registrant's properties generated positive cash flow.
The Registrant's properties are subject to certain competitive conditions in the markets in which they are located. See Liquidity and Capital Resources for additional information.
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.
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 Affiliated Partners-87, Inc., the Registrant's Managing General Partner, and IDS Realty Corporation, the Registrant's Supervising General Partner, and their affiliates perform services for the Registrant. The Registrant currently has no employees engaged in its operations.
Item 2.
Item 2. Properties ------------------
The Registrant owns the properties described below:
Location Description of Property -------- -----------------------
Atlanta, Georgia Post Place Apartments: a 122-unit apartment complex located on approximately 15 acres.
West Lafayette, Indiana Salem Courthouse Apartments: a 240-unit apartment complex located on approximately 16 acres.
See Notes to Financial Statements for other information regarding real property investments.
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 Financial Statements, Statements of Partners' Capital, and 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 2,901.
Item 6.
Item 6. Selected Financial Data -------------------------------
Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ----------
Total income $2,596,525 $2,470,381 $2,322,085 $2,260,007 $2,282,504 Net income 562,501 298,967 343,139 325,190 334,160 Net income per Limited Partner- ship Interest 7.53 4.00 4.59 4.35 4.47 Total assets 10,877,550 11,439,068 12,255,088 13,057,693 13,825,764 Distributions per Limited Part- nership Interest 15.50 15.50 15.245 15.00 15.00
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------------- Results of Operations ---------------------
Summary of Operations ---------------------
The increase in net income for 1994 as compared to 1993 is primarily due to improved operations at Post Place and Salem Courthouse apartment complexes, as well as a decrease in depreciation expense at Salem Courthouse Apartments. Net income was relatively unchanged for 1993 as compared to 1992. Further discussion of IDS/Balcor Income Partners' (the "Partnership") operations is summarized below.
Operations ----------
1994 Compared to 1993 ---------------------
Net income from Post Place Apartments increased during 1994 as compared to 1993 primarily due to increased rental income as a result of increased rental rates and occupancy at the complex.
Net income from Salem Courthouse Apartments increased in 1994 as compared to 1993 primarily due to increased rental income as a result of increased rental rates and occupancy at the complex. In addition, depreciation expense decreased since personal property became fully depreciated in 1993. Repair and maintenance expense also decreased due to exterior wood trim and asphalt driveway repair work which had been substantially completed in 1993. These decreases were partially offset by higher property operating expenses including
insurance and payroll costs.
Administrative expenses increased during 1994 as compared to 1993 primarily as a result of higher accounting, portfolio management and data processing fees.
1993 Compared to 1992 ---------------------
Net income from Post Place Apartments increased during 1993 as compared to 1992 primarily due to increased rental income as a result of an increase in rental rates and occupancy at the complex. This increase was partially offset by an increase in payroll expenses.
Net income from Salem Courthouse Apartments decreased in 1993 as compared to 1992 primarily due to exterior wood trim and asphalt driveway repair work. In addition, real estate tax expense increased during 1993 as compared to 1992 due to an increase in the tax assessment of the property. These additional expenditures were partially offset by higher rental and service income resulting from increased rental rates.
Administrative expenses were higher in 1993 as compared to 1992 primarily due to an increase in accounting fees.
Liquidity and Capital Resources -------------------------------
The cash position of the Partnership decreased slightly from December 31, 1993 to December 31, 1994. The Partnership's operating activities consisted of cash flow generated from property operations, net of administrative expenses. Cash flow from operating activities along with Partnership reserves were used to fund investing and financing activities. Investing activities consisted of the installation of a security gate at Post Place Apartments and the replacement of balconies at Salem Courthouse Apartments, while financing activities consisted of quarterly distributions to Limited Partners.
The Salem Courthouse and Post Place apartment complexes generated positive cash flow during 1994 and 1993. The Partnership defines cash flow generated from its properties as an amount equal to the property's revenue receipts less property related expenditures.
The Salem Courthouse Apartments are located in West Lafayette, Indiana. The property is in the submarket characterized as the west section of West Lafayette. The property contains 240 units, while the direct competition in the submarket consists of five properties with approximately 1500 units. The average occupancy for this submarket at comparable properties is 96%, while Salem Courthouse Apartments had an occupancy of 97% at December 31, 1994. The rental rates at the property are slightly higher than the average for comparable properties in the submarket. Within a mile of Salem Courthouse Apartments there is a new 40 unit apartment complex which is expected to expand to as many as 250 units. This new property is considered to be in direct competition with Salem Courthouse Apartments. The West Lafayette market and this submarket are considered strong as evidenced by high rental and occupancy rates.
The Post Place Apartments are located in Atlanta, Georgia. The property is in the submarket characterized as northeast Atlanta (DeKalb County). The property contains 122 units, while the direct competition in the submarket consists of six properties with approximately 1750 units. The average occupancy for this submarket at comparable properties is 96%, while Post Place Apartments has an occupancy of 98% at December 31, 1994. The rental rates at the property are consistent with the average for comparable properties in the submarket. The construction of one new apartment complex containing 104 units is expected to begin in 1995. This new property is considered to be in direct competition with Post Place Apartments. The Atlanta market and this submarket are considered strong as evidenced by high rental and occupancy rates.
In January 1995, the Partnership made a distribution of $286,727 ($3.875 per Interest) to the holders of Limited Partnership Interests for the fourth quarter of 1994. The Partnership made four distributions to Limited Partners totaling $15.50 per Interest in 1994 and 1993 and four distributions totaling $15.245 per Interest in 1992. See Financial Statements-Statements of Partners' Capital. Including the January 1995 distribution, investors have received distributions of Net Cash Receipts of $95.745 per $250 Interest, as well as certain tax benefits. The General Partners anticipate that the cash flow from property operations should enable the Partnership to continue making quarterly distributions to Limited Partners at the current level during 1995 although there can be no assurances in this regard.
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 one 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 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 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 $10,877,550 $12,714,579 $11,439,068 $13,093,689 Partners' capital accounts: General Partners 14,452 32,606 8,827 25,157 Limited Partners 10,603,803 15,016,452 11,193,834 15,425,899 Net income: General Partners 5,625 7,449 2,990 5,475 Limited Partners 556,876 737,460 295,977 541,973 Per Limited Part- nership Interest 7.53 9.97 4.00 7.32
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 Affiliated Partners-87, Inc. and IDS Realty Corporation, the General Partners, each have a Board of Directors. IDS Realty Corporation is a wholly-owned subsidiary of IDS Management Corporation which is itself a wholly-owned subsidiary of IDS Financial Corporation. Effective January 1, 1995, IDS Financial Corporation changed its name to American Express Financial Corporation and IDS Financial Services Inc. changed its name to American Express Financial Advisors Inc. The term of office as directors of each of the General Partners is one year. Directors are elected at the respective annual meeting of stockholders. The Board of Directors for Balcor Affiliated Partners-87, Inc. consists of Thomas E. Meador and Allan Wood. The Board of Directors for IDS Realty Corporation consists of Janis E. Miller, Juanita Costa, Wendell L. Halvorson, William N. Westhoff, and Lori J. Larson. The names, ages and business experience for the directors are listed below.
(b, c & e) The names, ages and business experience of the executive officers and significant employees of the Managing 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.
The names, ages and business experience of the executive officers and significant employees of the Supervising General Partner of the Registrant are as follows:
TITLE OFFICERS ----- --------
Director and President Janis E. Miller Director and Vice President Juanita Costa Director and Vice President Wendell L. Halvorson Director and Vice President William N. Westhoff Director and Vice President Lori J. Larson Vice President and Treasurer Morris Goodwin, Jr. Vice President and Assistant Secretary Ronald W. Powell Vice President Georgiann L. Holmquist Vice President Lavern G. Johnson Vice President F. Dale Simmons
Janis E. Miller (June 1951) has served as President and Director of IDS Realty Corporation since February 1994. She has also served as American Express
Financial Corporation Vice President of Variable Assets since December 1993 and has overall responsibility for equity, fixed-income and cash mutual funds; the Flexible Annuity; Wealth Management; limited partnerships; and non-proprietary variable products. From June 1990 to November 1993, Ms. Miller held the position of Vice President - Mutual Funds/Limited Partnership Product Development and Marketing. From May 1987 to May 1990, she served as Director of Mutual Fund Product Development and Marketing. Ms. Miller has been employed by American Express Financial Corporation since 1981. She holds a B.S. from Indiana University and M.B.A. with a concentration in finance from the University of Minnesota.
Juanita Costa (December 1948) has served as Director of Financial Education Services ("FES") for American Express Financial Corporation since January 1994. She is responsible for marketing FES programs to corporate clients. Ms. Costa served as Vice President of Investment Services with IDS Trust Company from October 1991 to January 1994. From April 1987 until shortly before joining IDS Trust Company, Ms. Costa was Vice President - Limited Partnership Operations. From June 1984 to April 1987 she was Vice President of L.F. Rothschild and, from January 1980 to June 1984, she was an Assistant Vice President at Prudential Bache Securities. Ms. Costa is a graduate of the University of Nebraska and has an M.B.A. from Boston University.
Wendell L. Halvorson (August 1936) has held the position of Director - Limited Partnership Operations with American Express Financial Corporation since August 1983. He has been employed with American Express Financial Corporation since November 1968. Since August of 1983, he has been responsible for day-to-day management of vendor relationships, due diligence review and investor services for limited partnerships distributed by American Express Financial Advisors Inc. Mr. Halvorson has held a variety of management positions with American Express Financial Corporation throughout his career, including Director - Brokerage Sales, Director - Plan Services Business Products and Vice President - Group Insurance. He is a graduate of the University of Minnesota.
William N. Westhoff (June 1947) has held the position of Senior Vice President - Global Investments with American Express Financial Corporation since August 1994. From November 1989 to August 1994 he held the position of Senior Vice President - Fixed Income Management. Mr. Westhoff joined American Express Financial Corporation in 1971 as a Securities Analyst, Certificate Investments. He held positions of Associate Portfolio Manager, Portfolio Manager and Senior Portfolio Manager in the Certificate and Insurance Investment unit of the Investment Department until his promotion to Vice President - Taxable Fixed Income Mutual Funds in February 1988. He managed the IDS Life Special Income Fund from January 1986 to October 1989. Mr. Westhoff holds an M.B.A. from the University of Minnesota, a B.S. in Economics from Central Missouri State University, and is a Chartered Financial Analyst.
Lori J. Larson (August 1958) has been employed by American Express Financial Corporation since 1981 and currently holds the title of Vice President-Product Development for Variable Assets. Since August 1988, she has been responsible for day-to-day management of vendor relationships, due diligence review, and operational aspects for the limited partnerships distributed by American Express Financial Advisors Inc. In addition, she has responsibility for the product development of the publicly offered mutual funds in the IDS Mutual Fund Group. Ms. Larson has held a variety of management positions with American Express Financial Corporation throughout her career. She is a graduate of, and has an M.B.A. from, the University of Minnesota.
Morris Goodwin, Jr. (August 1951) has held the position of Vice President and Treasurer of American Express Financial Corporation since July 1989. From January 1988 to July 1989, he had been the Chief Financial Officer and Treasurer of IDS Bank & Trust Company. From January 1980 to January 1988, he was a Vice President with Morgan Stanley, an investment banking business headquartered in New York. He is a graduate of Williams College and has an M.B.A. from Stanford University.
Ronald W. Powell (November 1944) has held the position of Vice President and
Assistant General Counsel with American Express Financial Corporation since November 1985. He has been a member of the American Express Financial Corporation Law Department since 1975. He is a graduate of the William Mitchell College of Law.
Georgiann L. Holmquist (October 1957) has been employed by American Express Financial Corporation since February 1981. Since August 1991, she has been responsible for day to day management of vendor relationships, due diligence review and operational aspects for limited partnerships distributed by American Express Financial Advisors Inc. From May 1979 to February 1981 she was an internal auditor for International Multifoods. Ms. Holmquist is a graduate of Concordia College and a Certified Public Accountant.
Lavern G. Johnson (October 1932) has been employed by American Express Financial Corporation since June 1954 and is currently a Portfolio Manager in the Investment Department. He is a graduate of Gustavus Adolphus College and a Chartered Financial Analyst.
F. Dale Simmons (September 1937) has been employed by American Express Financial Corporation since September 1986 as a Senior Portfolio Manager in the Investment Department and currently holds the title of Vice President. From September 1984 to August 1986 he was employed as Senior Vice President - Interim Lending Division of First Interstate Mortgage Company. From September 1983 to August 1984 he was employed as Vice President - Interim Lending Division of FBS Mortgage. From 1972 to 1984 he held various positions with American Express Financial Corporation in the areas of real estate and loan management. He is a graduate of Syracuse University.
The directors of Balcor Affiliated Partners-87, Inc., the Managing General Partner of the Registrant, and IDS Realty Corporation, the Supervising General Partner of the Registrant, are not directors of 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 that 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 two other issuers which have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(d) There are no family relationships 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 Balcor Affiliated Partners-87, Inc. or IDS Realty Corporation, the Managing and Supervising General Partners, respectively. Certain of these officers receive compensation from The Balcor Company or American Express Financial Advisors Inc. (formerly known as IDS Financial Services), (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 5 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) Neither Balcor Affiliated Partners-87, Inc., the Managing General Partner of the Registrant, IDS Realty Corporation, the Supervising General Partner of the Registrant, nor their officers or members of their Boards of Directors own any Limited Partnership Interests of the Registrant.
Relatives and affiliates of the officers and members of the Boards of Directors of the respective General Partners own twenty 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 5 of Notes to Financial Statements for information relating to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
(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 previously filed as Exhibit 3 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated July 2, 1987 (Registration No. 33-12617), is hereby incorporated herein by reference.
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated July 2, 1987 (Registration No. 33-12617) 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. 0-16797) are hereby 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 Schedule: See Index to Financial Statements and Financial Statement Schedule attached hereto in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of l934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IDS/BALCOR INCOME PARTNERS 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 Affiliated Partners-87, Inc., the Managing General Partner Date: March 29, 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 and Director (Principal Executive Officer) of Balcor Affiliated Partners-87, Inc., the /s/Thomas E. Meador Managing General Partner March 29, 1995 -------------------- -------------- Thomas E. Meador
Executive Vice President, Chief Accounting and Financial Officer and Director (Principal Accounting and Financial Officer) of Balcor Affiliated Partners-87, Inc., /s/Allan Wood the Managing General Partner March 29, 1995 -------------------- -------------- Allan Wood
Signatures, continued
Signature Title Date ---------------------- ------------------------------- ------------
President and Director of IDS Realty Corporation,the Supervising /s/Janis E. Miller General Partner March 29, 1995 -------------------- -------------- Janis E. Miller
Vice President and Director of IDS Realty Corporation, the /s/ Lori J. Larson Supervising General Partner March 29, 1995 -------------------- -------------- Lori J. Larson
Vice President and Director of IDS Realty Corporation, the /s/Wendell L. Halvorson Supervising General Partner March 29, 1995 ----------------------- -------------- Wendell L. Halvorson
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, 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 IDS/Balcor Income Partners A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule of IDS/Balcor Income Partners A Real Estate Limited Partnership (A Delaware 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 IDS/Balcor Income Partners 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 14, 1995
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 ------------ ------------ Cash and cash equivalents $ 539,880 $ 606,842 Accounts and accrued interest receivable 59,579 59,264 ------------ ------------ 599,459 666,106 ------------ ------------ Investment in real estate, at cost: Land 1,340,324 1,340,324 Buildings and improvements 13,681,315 13,561,212 ------------ ------------ 15,021,639 14,901,536 Less accumulated depreciation 4,743,548 4,128,574 ------------ ------------ Investment in real estate, net of accumulated depreciation 10,278,091 10,772,962 ------------ ------------ $10,877,550 $11,439,068 ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 47,504 $ 41,427 Due to affiliates 22,208 11,477 Accrued liabilities, principally real estate taxes 144,730 133,473 Security deposits 44,853 50,030 ------------ ------------ Total liabilities 259,295 236,407
Partners' capital (73,994 Limited Partnership Interests issued and outstanding) 10,618,255 11,202,661 ------------ ------------ $10,877,550 $11,439,068 ============ ============
The accompanying notes are an integral part of the financial statements.
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL for the years ended December 31, 1994, 1993 and 1992
Partners' Capital Accounts -------------------------------------- General Limited Total Partners Partners ------------ ------------ ------------
Balance at December 31, 1991 $12,835,500 $ 2,406 $12,833,094
Cash distributions to Limited Partners (A) (1,128,038) (1,128,038) Net income for the year ended December 31, 1992 343,139 3,431 339,708 ------------ ------------ ------------ Balance at December 31, 1992 12,050,601 5,837 12,044,764
Cash distributions to Limited Partners (A) (1,146,907) (1,146,907) Net income for the year ended December 31, 1993 298,967 2,990 295,977 ------------ ------------ ------------ Balance at December 31, 1993 11,202,661 8,827 11,193,834
Cash distributions to Limited Partners (A) (1,146,907) (1,146,907) Net income for the year ended December 31, 1994 562,501 5,625 556,876 ------------ ------------ ------------ Balance at December 31, 1994 $10,618,255 $ 14,452 $10,603,803 ============ ============ ============
(A) Summary of cash distributions per Interest:
1994 1993 1992 ------------ ------------ ------------
First Quarter $ 3.875 $ 3.875 $ 3.750 Second Quarter 3.875 3.875 3.810 Third Quarter 3.875 3.875 3.810 Fourth Quarter 3.875 3.875 3.875
The accompanying notes are an integral part of the financial statements.
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------ ------------ ------------ Income: Rental and service $ 2,575,336 $ 2,451,860 $ 2,300,328 Interest on short-term investments 21,189 18,521 21,757 ------------ ------------ ------------ Total income 2,596,525 2,470,381 2,322,085 ------------ ------------ ------------
Expenses: Depreciation 614,974 747,330 756,394 Property operating 560,352 508,914 468,778 Maintenance and repairs 287,192 385,731 276,864 Real estate taxes 246,529 255,484 223,571 Property management fees 128,488 121,220 114,868 Administrative 196,489 152,735 138,471 ------------ ------------ ------------ Total expenses 2,034,024 2,171,414 1,978,946 ------------ ------------ ------------ Net income $ 562,501 $ 298,967 $ 343,139 ============ ============ ============ Net income allocated to General Partners $ 5,625 $ 2,990 $ 3,431 ============ ============ ============ Net income allocated to Limited Partners $ 556,876 $ 295,977 $ 339,708 ============ ============ ============ Net income per Limited Partnership Interest (73,994 issued and outstanding) $ 7.53 $ 4.00 $ 4.59 ============ ============ ============
The accompanying notes are an integral part of the financial statements.
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------ ------------ ------------ Operating activities:
Net income $ 562,501 $ 298,967 $ 343,139 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of properties 614,974 747,330 756,394 Net change in: Accounts and accrued interest receivable (315) 5,046 45,018 Accounts payable 6,077 23,653 9,265 Due to affiliates 10,731 2,000 (8,117) Accrued liabilities 11,257 9,114 (16,185) Security deposits (5,177) (2,847) (2,669) ------------ ------------ ------------ Net cash provided by operating activities 1,200,048 1,083,263 1,126,845 ------------ ------------ ------------
Investing activities:
Improvements to properties (120,103) ----------- Net cash used in investing activities (120,103) ----------- Financing activities:
Distributions to Limited Partners (1,146,907) (1,146,907) (1,128,038) ------------ ------------ ------------ Net cash used in financing activities (1,146,907) (1,146,907) (1,128,038) ------------ ------------ ------------
Net change in cash and cash equivalents (66,962) (63,644) (1,193) Cash and cash equivalents at beginning of year 606,842 670,486 671,679 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 539,880 $ 606,842 $ 670,486 ============ ============ ============
The accompanying notes are an integral part of the financial statements.
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years -----
Buildings and improvements 20 to 22 Furniture and fixtures 5
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 Partner determines that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
(b) Cash equivalents include all highly liquid investments with a maturity of three months or less when purchased.
(c) 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 March 1987. The Partnership Agreement provides for Balcor Affiliated Partners-87, Inc. to be the Managing General Partner, for IDS Realty Corporation to be the Supervising General Partner and for the admission of Limited Partners through the sale of up to 400,000 Limited Partnership Interests at $250 per Interest. The Partnership sold 73,994 Interests to the public.
The Partnership Agreement provides that, except for profit or loss from the sale or other disposition of Partnership property, the General Partners together shall be allocated from each item of Partnership income from operations the greater of (i) 1% of such item or (ii) the amount of the General Partners' distributions of Net Cash Receipts (in excess of accrued Net Cash Receipts) from the Partnership. The remaining income from operations shall be allocated to the Limited Partners. Of each item of Partnership deduction, loss and credit from operations, 1% shall be allocated to the General Partners and 99% to the Limited Partners.
Net Cash Receipts available for distribution will be distributed 93% to the Limited Partners and 7% to the General Partners, provided that the General Partners' share of Net Cash Receipts will be subordinated on a year-by-year basis to the Limited Partners' receipt of a 7% Preferred Distribution. Net Cash Receipts available for distribution will be applied first toward the current year, and then on a year-by-year basis, commencing with the earliest year in which a deficiency exists or a subordinated amount remains outstanding and continuing for each year thereafter, to pay any deficiencies in the Limited Partners' receipt of their Preferred Distribution for such year and/or any unpaid portion of the General Partners' 7% share of Net Cash Receipts for such year, provided that the Limited Partners have received their Preferred Distribution for such year before the General Partners shall receive any
portion of their share of Net Cash Receipts for such year.
When the Partnership sells or refinances its properties, the Net Cash Proceeds resulting therefrom which are available for distribution shall be distributed (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners have received an amount equal to their Original Capital plus any deficiency in a Cumulative Distribution of 11% per annum for Interests purchased prior to January 1, 1988, and 9% per annum for Interests purchased on or after January 1, 1988, provided, however, that the General Partners' 15% share of Net Cash Proceeds as described below is subordinated to the receipt by Limited Partners who purchased Interests on or after January 1, 1988, of an additional 1% Cumulative Distribution; (ii) next, to pay to the General Partners an amount equal to their share of Net Cash Receipts which has been subordinated and is then unpaid; and (iii) then, 85% to the Limited Partners and 15% to the General Partners.
For Interests purchased prior to June 8, 1988, the commencement date for computing the Cumulative Distribution and the Preferred Distribution is July 1, 1988. For Interests purchased on or after August 1, 1988, the commencement date for computing the Cumulative Distribution and the Preferred Distribution is the first day of the first full calendar quarter after the purchasers of the Interests became Limited Partners.
3. Management Agreements:
As of December 31, 1994, Post Place Apartments is under a management agreement with an affiliate of the seller and Salem Courthouse Apartments is under a management agreement with a third party management company. These management agreements provide for annual fees of 5% of gross operating receipts.
4. 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 accordance 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 $182,408 less than the tax income of the Partnership for the same period.
5. 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 management fees $64,817 None $67,297 $5,774 $64,252 $5,478 Reimbursement of expenses to the Managing General Partner, at cost: Accounting 29,521 10,267 23,510 1,943 25,778 1,812 Data processing 20,464 4,205 13,891 2,661 18,320 1,425 Investor communica- tions 1,990 568 979 80 1,337 94 Legal 2,301 663 721 60 975 69 Other 1,494 995 2,820 233 2,023 142 Portfolio management 12,438 5,510 8,779 726 6,498 457
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 $23,937, $16,371 and $15,021 for 1994, 1993 and 1992, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed one of the Partnership's properties until the affiliate was sold to a third party in November 1994.
6. Subsequent Event:
In January 1995, the Partnership made a distribution of $286,727 ($3.875 per Interest) to the holders of Limited Partnership Interests for the fourth quarter of 1994.
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
See notes (a) through (d).
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
See notes (a) through (d).
IDS/BALCOR INCOME PARTNERS A REAL ESTATE LIMITED PARTNERSHIP (A Delaware Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of acquisition fees, legal fees, appraisal fees, title costs and other related professional fees.
(b) The aggregate cost of land, buildings and improvements is the same for Federal income tax purposes.
(c) Reconciliation of Accumulated Depreciation ------------------------------------------
1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $4,128,574 $3,381,244 $2,624,850
Depreciation expense for the year 614,974 747,330 756,394 ---------- ---------- ----------
Balance at close of year $4,743,548 $4,128,574 $3,381,244 ========== ========== ==========
(d) Depreciation expense is computed based upon the following estimated useful lives: Years -----
Buildings and improvements 20 to 22 Furniture and fixtures 5