Item 1. Business ----------------
Balcor Realty Investors-83 (the "Registrant") is a limited partnership formed in 1981 under the laws of the State of Illinois. The Registrant raised $75,005,000 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of real properties, and all financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire eleven real property investments and a minority joint venture interest in an additional property. The Registrant has since disposed of four of these properties, including the property in which the Registrant held a minority joint venture interest. As of December 31, 1994, the Registrant owns the eight properties as described under "Properties" (Item 2). The Partnership Agreement 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. Of the Registrant's eight properties, during 1994 seven generated positive cash flow while one generated a marginal cash flow deficit. See Item 7. 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. 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 originally described in the prospectus. The General Partner examines the operations of each property and each local market in conjunction with the Registrant's long-term dissolution strategy when determining the optimal time to sell each of the Registrant's properties.
The Registrant completed the refinancings of two mortgage notes payable in 1994 and one in January 1995. See Note 3 of Notes to the Financial Statements 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-XIII, 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 -------- -----------------------
San Antonio, Texas * Deer Oaks Apartments: a 244-unit apartment complex located on approximately 10 acres.
Phoenix, Arizona Desert Sands Apartments: a 412-unit apartment complex located on approximately 20 acres.
Irving, Texas * Eagle Crest Apartments - Phase I: a 296-unit apartment complex located on approximately 12 acres.
Houston, Texas North Cove Apartments: a 556-unit apartment complex located on approximately 16 acres.
Pasadena, Texas Sandridge Apartments - Phase II: a 196-unit apartment complex located on approximately 8 acres.
Las Vegas, Nevada Springs Pointe Village Apartments: a 484-unit apartment complex located on approximately 27 acres.
Corpus Christi, Texas Walnut Ridge Apartments - Phase I: a 380-unit apartment complex located on approximately 11 acres.
Corpus Christi, Texas Walnut Ridge Apartments - Phase II: a 324-unit apartment complex located on approximately 9 acres.
*Owned by the Registrant through a joint venture with the seller.
Each of the properties is held subject to various mortgage loans.
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 --------------------------
Deer Oaks Apartments --------------------
In 1983, a joint venture consisting of the Registrant as general partner and the seller as limited partner (the "Joint Venture") acquired the Deer Oaks Apartments. Previously in 1981, an affiliate of the seller (together with the seller, the "Seller") sold another property to a joint venture affiliated with the Registrant (the "Affiliate"). In 1987, the Joint Venture and the Affiliate filed suit against the Seller, two principals of the Seller and other parties in the 285th District Court, Bexar County, Texas, Case No.: 87-CI-11919, DO Associates, et al. vs. ADC Development Co., et al. The Joint Venture and the Affiliate sought to recover amounts due from the Seller under the management and guarantee agreements and for construction defects at the properties.
The case went to trial in April 1992 and the jury found for the Joint Venture and the Affiliate on certain counts and against them on other counts. The jury
awarded the Joint Venture $45,654 in damages and $150,000 in attorneys' fees and the Affiliate $55,860 in damages and $150,000 in attorneys' fees, which amounts were less than requested. The Joint Venture and the Affiliate filed a notice of appeal in October 1993, in the Fourth Court of Appeals, San Antonio, Texas ("Appellate Court") (Appeal No.: 04-93-00718-CV).
In November 1993, a principal of the Seller filed for protection under Chapter 7 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, District of Nevada, Case No. BK-S93-25-233-LBR, In Re Dustin Gorden, which stayed the proceedings in the Appellate Court. Although the Bankruptcy Court lifted the stay permitting the appeal to proceed, the Joint Venture, the Affiliate and certain defendants filed a motion in the Appellate Court in January 1995 to stay the appeal so that settlement discussions, which are currently ongoing, could proceed.
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. For information regarding previous distributions, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 7,324.
Item 6.
Item 6. Selected Financial Data -------------------------------
Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Total income $16,120,215 $16,565,748 $16,433,299 $15,820,488 $15,488,340 Loss before gain on sale of property and extraordinary items (291,500) (774,247) (1,179,837) (1,541,314) (2,294,938) Net income (loss) 1,108,900 2,994,111 (1,179,837) 1,355,068 (2,294,938) Net income (loss) per Limited Part- nership Interest 14.05 37.92 (14.94) 17.16 (29.07) Total assets 55,306,162 58,987,183 60,133,453 61,884,993 68,903,919 Mortgage notes payable 56,248,201 58,567,203 62,635,603 62,801,950 71,126,492 Distributions per Limited Partner- ship Interest 18.00 None None None None
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------------- Results of Operations ---------------------
Summary of Operations ---------------------
In 1994, Balcor Realty Investors-83 (the "Partnership") recognized an extraordinary gain on forgiveness of debt in connection with the refinancing of the North Cove Apartments' mortgage loan payable. In 1993, the Partnership sold Sunset Place Apartments and recognized a gain on the sale of the property. These gains are the primary reasons the Partnership generated net income during 1994 and 1993 as compared to a net loss in 1992. Further discussion of the Partnership's operations is summarized below.
Operations ----------
1994 Compared to 1993 ---------------------
The sale of Sunset Place Apartments in August 1993 resulted in decreases in rental and service income, interest expense on mortgage notes payable, depreciation, amortization of deferred expenses, property operating expenses, maintenance and repairs expense, real estate taxes and property management fees during 1994 as compared to 1993. These decreases were affected by the events
described below. In connection with the sale, the Partnership recognized a gain of $3,768,358 during 1993.
Higher rental rates at most of the Partnership's remaining properties during 1994 resulted in increases in rental and service income, and correspondingly property management fees, which partially offset the decrease from the Sunset Place Apartments sale.
Due to higher interest rates and larger average cash balances available for investment during 1994 as a result of the net proceeds from the 1993 property sale and refinancings, interest income on short-term investments increased in 1994 as compared to 1993.
Interest expense decreased for 1994 as compared to 1993 as a result of the sale of Sunset Place Apartments, lower interest rates on the Desert Sands and Springs Pointe mortgage loans effective in 1993 when the interest rates were adjusted downward based on a market index in accordance with the loan agreements, lower interest expense relating to the North Cove mortgage loan refinancing in February 1994, and a prepayment penalty (which was classified as interest expense) in connection with the July 1993 refinancing of the Walnut Ridge - Phase II Apartment's mortgage loan. These decreases were partially offset by higher interest expense due to an increase in debt resulting from the 1993 refinancings on Walnut Ridge Phases - I and II apartment complexes.
Primarily due to higher insurance costs at all of the Partnership's properties, property operating expenses increased during 1994 as compared to 1993 and fully offset the decrease from the property sale.
Primarily due to higher roof repair expenditures at the Deer Oaks, Desert Sands, and Sandridge - Phase II apartment complexes, higher exterior painting expenditures at the Desert Sands and Spring Pointe apartment complexes and higher carpet replacement costs at the Eagle Crest - Phase I apartment complex, maintenance and repairs expense increased at these properties during 1994 as compared to 1993. These expenditures fully offset the decrease from the property sale and a decrease resulting from lower painting costs at the Walnut Ridge - Phases I and II apartment complexes.
As a result of higher accounting and data processing fees combined with legal expenses incurred related to the North Cove bankruptcy proceedings, administrative expenses increased during 1994 as compared to 1993.
In February 1994, the North Cove Apartments' mortgage loan payable was refinanced, and the lender forgave deferred interest and a portion of the principal. In connection with this transaction, the Partnership recognized an extraordinary gain on forgiveness of debt during 1994.
1993 Compared to 1992 ---------------------
The sale of Sunset Place Apartments in August 1993 resulted in decreases in rental and service income, interest expense on mortgage notes payable, depreciation, property operating expenses, maintenance and repair expenses and property management fees during 1993 as compared to 1992. These decreases were affected by the events described below.
Increased rental rates at most of the Partnership's remaining properties resulted in an increase in rental and service income in 1993 when compared to 1992 and fully offset the decrease from the property sale.
Due to larger average cash balances available for investment, interest income on short-term investments increased during 1993 as compared to 1992.
The Partnership suspended debt service payments on the North Cove Apartment's mortgage note payable in May 1993. Subsequently the subsidiary of the Partnership which owns the property filed for protection under the U.S. Bankruptcy Code. This loan matured in June 1993, and for financial statement
purposes, interest expense was recognized to the extent of net cash flow remitted to the lender as required by the court. In addition, the interest rates on the Desert Sands and Springs Pointe mortgage notes payable were reduced effective in October 1993. These events resulted in lower interest expense for these properties during 1993 when compared to 1992. However, the refinancing of the Walnut Ridge - Phases I and II apartment complexes' mortgage notes payable increased the total debt on the property and, therefore, increased the related interest expense, which partially offset the above decreases.
Primarily as a result of the full amortization of the deferred expenses related to a prior loan on Walnut Ridge - Phase II Apartments, which was refinanced in July 1993, amortization of deferred expenses increased during 1993 as compared to 1992.
Due to exterior painting at the North Cove and Walnut Ridge - Phases I and II apartment complexes and the purchase of floor coverings and wallpaper at the Desert Sands and Sandridge - Phase II apartment complexes, maintenance and repair expenses increased during 1993 as compared to 1992 and fully offset the decrease from the property sale.
During 1993, the Partnership incurred lower legal fees in connection with the Deer Oaks Apartments litigation, resulting in a decrease in administrative expenses during 1993 as compared to 1992.
Liquidity and Capital Resources -------------------------------
The cash position of the Partnership decreased at December 31, 1994 as compared to December 31, 1993. The Partnership's operating activities consisted primarily of cash flow generated from the operation of the properties and interest income on short-term investments, which were partially offset by the payment of administrative expenses. Investing activities consisted of capital improvements to the North Cove and Sandridge - Phase II apartment complexes. Financing activities consisted of distributions to Limited Partners, principal payments on mortgage notes payable, which included a $1,000,000 principal reduction on the North Cove Apartments loan as required by the February 1994 refinancing, and the payment of costs associated with the refinancing of the Sandridge - Phase II mortgage loan. The Partnership did not realize any net proceeds in connection with the refinancings.
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, seven of the Partnership's remaining properties generated positive cash flow while North Cove Apartments operated at a marginal cash flow deficit. During 1993, seven of the Partnership's properties generated positive cash flow, while Desert Sands Apartments operated at a marginal cash flow deficit. The North Cove Apartments' cash flow decreased primarily due to decreased rental income as a result of lower occupancy and increased insurance costs. Cash flow improved at Desert Sands Apartments due to higher rental income resulting from higher rental rates and lower interest expense resulting from an interest rate adjustment on the mortgage note in accordance with the loan agreement.
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 85% to 97%. Despite improvements in the local economies and rental markets where certain of the Partnership's
properties are located, the General Partner believes that continued ownership of many 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. The General Partner examines the operations of each property and each local market in conjunction with the Partnership's long-term dissolution strategy when determining the optimal time to sell each of the Partnership's properties.
Although an affiliate of the General Partner has, in certain circumstances, provided loans for certain properties of the Partnership, there can be no assurance that loans of this type will be available from either an affiliate or the General Partner in the future. During December 1994, approximately $773,000 of loan financing on the Walnut Ridge - Phase II Apartments with an affiliate of the General Partner matured and was extended for an additional three year period.
Each of the Partnership's properties is owned through the use of mortgage loan financing and, therefore, the Partnership is subject to the financial obligations required by such loans. See Note 3 of Notes to Financial Statements for information concerning outstanding balances, maturity dates, interest rates, and other items related to each of these mortgage loans. During 1995, approximately $4,305,000 of mortgage loan financing collateralized by the Deer Oaks apartment complex matures and the Partnership expects to refinance this loan prior to its maturity.
During 1994, the North Cove and Sandridge - Phase II apartment complexes' mortgage loans were refinanced, and during January 1995, the Eagle Crest - Phase I Apartments' mortgage loan was refinanced. See Note 3 of Notes to Financial Statements for additional information.
Eagle Crest - Phase I 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.
In January 1995, the Partnership paid $337,523 ($4.50 per Interest) to Limited Partners representing the quarterly distribution for the fourth quarter of 1994. The General Partner reinstated quarterly distributions to Limited Partners in January 1994 and made four quarterly distributions totaling $18.00 per Interest during 1994. To date, investors have received distributions of Net Cash Receipts of $57.50 and Net Cash Proceeds of $100, totaling $157.50 per $1,000 Interest, as well as certain tax benefits. The General Partner expects to continue quarterly distributions to Limited Partners based on the current performance of the Partnership's properties. However, the level of future distributions will depend on cash flow from the Partnership's remaining properties, the successful refinancing of certain mortgage loans and proceeds from future property sales, as to all of which there can be no assurances. In light of results to date and current market conditions, the General Partner does not anticipate that investors will recover all of their original investment.
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. The timing of the long-term effects of inflation on real estate may be dictated by general or local economic conditions.
Item 8.
Item 8. Financial Statements and Supplementary Data ---------------------------------------------------
See Index to Financial Statements and Financial Statement 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 $55,306,162 $36,658,363 $58,987,183 $41,109,607 Partners' capital (deficit): General Partner (3,648,355) (5,449,072) (3,703,800) (5,811,883) Limited Partners 887,404 (14,646,823) 1,184,041 (13,351,286) Net income: General Partner 55,445 362,811 149,706 4,262,165 Limited Partners 1,053,455 54,555 2,844,405 1,167,626 Per Limited Part- nership Interest 14.05 .73 37.92 15.57
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and ----------------------------------------------------------------------- Financial Disclosure --------------------
There have been no changes in or disagreements with accountants on any matter of accounting principles, practices or financial statement disclosure.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Partners-XIII, its General Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers 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.
(f) None of the foregoing officers 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 Partners-XIII, the General Partner. Certain of these officers receive compensation from The Balcor Company (but not from the Registrant) 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 7 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-XIII and its officers and partners own as a group the following Limited Partnership Interests in the Registrant:
Amount Beneficially Title of Class Owned Percent of Class -------------- ------------- ----------------
Limited Partnership 99 Interests Less than 1% Interests
Relatives and affiliates of the officers and partners of the General Partner own 18 Limited Partnership 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 7 of Notes to Financial Statements for 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 of Limited Partnership set forth as Exhibit 3 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated December 10, 1982 (Registration No. 2-79043) is incorporated herein by reference.
(4) Amended and Restated Certificate of Limited Partnership set forth as Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated December 10, 1982 (Registration No. 2-79043) and Form of Confirmation regarding Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-11805) are incorporated herein by reference.
(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 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.
BALCOR REALTY INVESTORS LTD.-83
By: /s/Allan Wood --------------------------- Allan Wood Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XIII, the 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 and Chief Executive Officer (Principal Executive Officer) of Balcor Partners-XIII, /s/Thomas E. Meador the General Partner March 29, 1995 -------------------- -------------- Thomas E. Meador Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XIII, the /s/Allan Wood General Partner March 29, 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
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-83:
We have audited the financial statements and the financial statement schedule of Balcor Realty Investors-83 (An Illinois 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-83 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 March 17, 1995
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 ------------- ------------ Cash and cash equivalents $ 5,950,452 $ 8,151,524 Restricted investments 700,000 700,000 Escrow deposits 1,560,542 1,193,269 Accounts and accrued interest receivable 97,846 10,224 Prepaid expenses 36,266 110,253 Deferred expenses, net of accumulated amortization of $631,300 in 1994 and $730,738 in 1993 597,642 579,985 ------------- ------------ 8,942,748 10,745,255 ------------- ------------ Investment in real estate, at cost: Land 10,560,405 10,560,405 Buildings and improvements 66,665,695 66,555,271 ------------- ------------ 77,226,100 77,115,676 Less accumulated depreciation 30,862,686 28,873,748 ------------- ------------ Investment in real estate, net of accumulated depreciation 46,363,414 48,241,928 ------------- ------------ $ 55,306,162 $58,987,183 ============= ============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 214,310 $ 268,123 Due to affiliates 74,058 111,475 Accrued liabilities, principally real estate taxes 1,241,718 2,257,527 Security deposits 288,826 302,614 Mortgage notes payable - affiliate 772,896 894,339 Mortgage notes payable 55,475,305 57,672,864 ------------- ------------ Total liabilities 58,067,113 61,506,942
Partners' deficit (75,005 Limited Partnership Interests issued and outstanding) (2,760,951) (2,519,759) ------------- ------------ $ 55,306,162 $58,987,183 ============= ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts ----------------------------------------- General Limited Total Partner Partners ------------ ------------- ------------
Balance at December 31, 1991 $(4,334,033) $ (3,794,514) $ (539,519)
Net loss for the year ended December 31, 1992 (1,179,837) (58,992) (1,120,845) ------------ ------------- ------------ Balance at December 31, 1992 (5,513,870) (3,853,506) (1,660,364)
Net income for the year ended December 31, 1993 2,994,111 149,706 2,844,405 ------------ ------------- ------------ Balance at December 31, 1993 (2,519,759) (3,703,800) 1,184,041
Cash distributions to Limited Partners (A) (1,350,092) (1,350,092) Net income for the year ended December 31, 1994 1,108,900 55,445 1,053,455 ------------ ------------- ------------ Balance at December 31, 1994 $(2,760,951) $ (3,648,355) $ 887,404 ============ ============= ============
(A) Summary of cash distributions paid per Interest:
1994 1993 1992 ----------- ------------ -----------
First Quarter $ 4.50 None None Second Quarter 4.50 None None Third Quarter 4.50 None None Fourth Quarter 4.50 None None
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------ ------------- ------------ Income: Rental and service $15,796,390 $ 16,422,721 $16,381,385 Interest on short-term investments 323,825 143,027 51,914 ------------ ------------- ------------ Total income 16,120,215 16,565,748 16,433,299 ------------ ------------- ------------
Expenses: Interest on mortgage notes payable 4,477,599 5,843,874 6,372,720 Depreciation 1,988,938 2,144,183 2,240,153 Amortization of deferred expenses 192,062 214,176 171,565 Property operating 4,926,809 4,490,520 4,435,693 Maintenance and repairs 2,008,979 1,797,099 1,492,631 Real estate taxes 1,446,103 1,582,090 1,552,447 Property management fees 789,447 824,080 819,357 Administrative 581,778 443,973 528,570 ------------ ------------- ------------ Total expenses 16,411,715 17,339,995 17,613,136 ------------ ------------- ------------ Loss before gain on sale of property and extraordinary item (291,500) (774,247) (1,179,837)
Gain on sale of property 3,768,358 ------------ ------------- ------------ (Loss) income before extra- ordinary item (291,500) 2,994,111 (1,179,837)
Extraordinary item: Gain on forgiveness of debt 1,400,400 ------------ ------------- ------------ Net income (loss) $ 1,108,900 $ 2,994,111 $(1,179,837) ============ ============= ============ (Loss) income before extra- ordinary item allocated to General Partner $ (14,575) $ 149,706 $ (58,992) ============ ============= ============ (Loss) income before extra- ordinary item allocated to Limited Partners $ (276,925) $ 2,844,405 $(1,120,845) ============ ============= ============ (Loss) income before extra- ordinary item per Limited Partnership Interest (75,005 issued and outstanding) $ (3.69) $ 37.92 $ (14.94) ============ ============= ============ Extraordinary item allocated to General Partner $ 70,020 None None ============ ============= ============ Extraordinary item allocated to Limited Partners $ 1,330,380 None None ============ ============= ============ Extraordinary item per Limited
Partnership Interest (75,005 issued and outstanding) $ 17.74 None None ============ ============= ============
Net income (loss) allocated to General Partner $ 55,445 $ 149,706 $ (58,992) ============ ============= ============ Net income (loss) allocated to Limited Partners $ 1,053,455 $ 2,844,405 $(1,120,845) ============ ============= ============ Net income (loss) per Limited Partnership Interest (75,005 issued and outstanding) $ 14.05 $ 37.92 $ (14.94) ============ ============= ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------ ------------- ------------ Operating activities: Net income (loss) $ 1,108,900 $ 2,994,111 $(1,179,837) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on forgiveness of debt (1,400,400) Gain on sale of property (3,768,358) Depreciation of properties 1,988,938 2,144,183 2,240,153 Amortization of deferred expenses 192,062 214,176 171,565 Deferred interest expense 323,214 662,887 Payments of deferred interest expense (377,109) (831,758) Net change in: Escrow deposits (367,273) (387,049) (64,181) Accounts and accrued interest receivable (87,622) 173,344 (15,924) Prepaid expenses 73,987 (75,022) (412) Accounts payable (53,813) (88,499) 39,709 Due to affiliates (37,417) 29,818 (12,774) Accrued liabilities (82,335) 48,926 (188,319) Security deposits (13,788) (8,331) 5,755 ------------ ------------- ------------ Net cash provided by operating activities 1,321,239 1,223,404 826,864 ------------ ------------- ------------ Investing activities: Improvements to properties (110,424) (93,545) (36,840) Proceeds from sale of real estate 10,600,000 Payment of selling costs (26,200) ------------ ------------- ------------ Net cash used in or provided by investing activities (110,424) 10,480,255 (36,840) ------------ ------------- ------------ Financing activities: Distributions to Limited Partners (1,350,092) Proceeds from loan payable - affiliate 71,892 Repayment of loan payable - affiliate (152,748) Proceeds from issuance of mortgage notes payable 3,000,000 11,043,750 Repayment of mortgage notes payable (3,123,000) (10,916,567) Repayment of mortgage notes payable - affiliate (121,443) (3,837,920) Principal payments on mortgage notes payable (1,607,633) (357,663) (166,347) Payment of deferred expenses (209,719) (275,200) ------------ ------------- ------------ Net cash used in financing
activities (3,411,887) (4,343,600) (247,203) ------------ ------------- ------------ Net change in cash and cash equivalents $(2,201,072) $ 7,360,059 $ 542,821 Cash and cash equivalents at beginning of year 8,151,524 791,465 248,644 ------------ ------------- ------------ Cash and cash equivalents at end of year $ 5,950,452 $ 8,151,524 $ 791,465 ============ ============= ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using straight-line and accelerated methods. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years -----
Buildings and improvements 20 to 30 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 values 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 modification and refinancing fees which are amortized over the terms of the respective 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 December 1981; however, operations did not commence until February 1983. The Partnership Agreement provides for Balcor Partners-XIII to be the General Partner and for the admission of Limited Partners through the sale of up to 75,005 Limited Partnership Interests at $1,000 per Interest, all of which were sold as of March 28, 1983, the termination date of the offering.
The Partnership Agreement provides that the General Partner will be allocated 5% of the operating profits and losses and 1% of capital losses and the greater of 1% of capital profits or an amount equal to Net Cash Proceeds distributed to the General Partner. 100% 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. In addition, there shall be accrued for the benefit of the General Partner as its distributive share from operations, an amount equivalent to 5.26% of the total Net Cash Receipts being distributed, which will be paid only out of available Net Cash Proceeds.
When and as the Partnership sells or refinances properties, the Net Cash Proceeds resulting therefrom which are available for distribution will be distributed only to the Limited Partners until such time as the Limited Partners have received an amount equal to their Original Capital plus any deficiency in the Cumulative Distribution of 6% per annum on Adjusted Original Capital. Only after such returns are made to the Limited Partners would the General Partner receive 18% of further distributed Net Cash Proceeds including its accrued share of Net Cash Receipts, subject to certain limitations as specified in the Partnership Agreement.
3. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1994 and 1993 consisted of the following:
Carrying Carrying Current Final Property Amount of Amount of Inter- Matur- Current Estimated Pledged as Notes at Notes at est ity Monthly Balloon Collateral 12/31/94 12/31/93 Rate % Date Payment Payment ----------------- ---------- ---------- ------ ------- -------- ----------
Mortgage Notes Payable - Nonaffiliates: Apartment Complexes:
Deer Oaks $4,332,577 $4,371,091 10.00% 1995 $39,491 $4,305,000 (A) Desert Sands 9,272,229 9,459,517 6.498% 1998 66,166 8,472,000 Eagle Crest - Phase I (B) 6,939,000 6,939,000 9.621% 2002 61,008 6,776,000 North Cove (C) 9,831,545 11,366,926 8.0% 2001 72,643 9,167,000 Sandridge - Phase II (D) 2,991,895 3,123,000 9.125% 2001 24,409 2,816,000 Springs Pointe Village 11,174,573 11,400,580 6.498% 1998 79,845 10,209,000 Walnut Ridge - Phase I (E) 5,810,155 5,852,276 8.94% 2000 46,968 5,498,000 Walnut Ridge - Phase II (E) 5,123,331 5,160,474 8.94% 2000 41,416 4,848,000 ----------- -----------
Subtotal 55,475,305 57,672,864 ----------- ----------- Mortgage Notes Payable - Affiliate:
Apartment Complex:
Walnut Ridge - Phase II (F) 772,896 894,339 10.50% 1997 (F) 773,000 ----------- -----------
Total $56,248,201 $58,567,203 =========== ===========
(A) The General Partner expects to be able to refinance this loan prior to maturity.
(B) In January 1995, this loan was refinanced. The interest rate increased from 9.025% to 9.621%, the maturity date was extended from November 1994 to February 2002 and the monthly payments increased from $52,187 to $61,008. A portion of the proceeds from the new $7,180,000 first mortgage loan were used to repay the existing first mortgage loan of $6,939,000.
(C) This loan had originally matured in June 1993 and the Partnership remitted the property's monthly cash flow as interest expense until the loan was refinanced in February 1994. Pursuant to the terms of the refinancing, the Partnership was required to remit $1,000,000 to the lender representing a principal reduction, and the lender forgave $466,926 of the principal balance and deferred interest of $933,474, reducing the principal balance from $11,366,926 to $9,900,000. This resulted in a $1,400,400 extraordinary gain on forgiveness of debt in 1994. The new loan bears interest at a rate of 8% per annum with monthly payments due of $72,643 and matures in February 2001.
(D) In July 1994, this loan was refinanced. The interest rate increased from 9.025% to 9.125%, the maturity date was extended from December 1994 to August 2001 and the monthly payments increased from $23,489 to $24,409. The proceeds from the new $3,000,000 first mortgage loan and cash reserves were used to repay the existing first mortgage loan of $3,123,000.
(E) In July 1993, the Walnut Ridge - Phases I and II loans were refinanced. The Partnership obtained a new first mortgage loan of $11,043,750 collateralized by
the Walnut Ridge - Phases I and II apartment complexes. The new first mortgage loan was allocated $5,868,750 to Walnut Ridge - Phase I and $5,175,000 to Walnut Ridge - Phase II. The proceeds from the refinancing were used to repay the existing first mortgage loan of $4,357,000 on Walnut Ridge - Phase II Apartments and mortgage loans totaling $3,837,920 on Walnut Ridge - Phase II Apartments and Sandridge - Phase II Apartments, which were due to Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of the General Partner.
(F) Represents an unsecured loan from BREHI. The pay rate is the net cash flow from the property and payments are applied first to interest and then to principal. The loan matured in December 1994, and BREHI extended the loan for an additional three years.
The Partnership's loans described above require current monthly payments of principal and interest, unless otherwise noted.
Five-year maturities of the mortgage notes payable are approximately as follows:
1995 $ 5,009,000 1996 731,000 1997 1,559,000 1998 19,274,000 1999 338,000
During 1994, 1993 and 1992, the Partnership incurred interest expense on mortgage notes payable to non-affiliates of $4,382,118, $5,519,514 and $5,857,549, respectively. The Partnership paid interest expense to non-affiliates of $4,382,118 in 1994, $5,312,292 in 1993 and $6,000,750 in 1992.
4. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are managed by a third-party management company. These management agreements provide for annual fees of 5% of gross operating receipts.
5. Sellers' Participation in Joint Ventures:
The Deer Oaks and Eagle Crest - Phase I apartment complexes are owned by joint ventures between the Partnership and the respective sellers. Consequently, the sellers retain an interest in each property through their interest in each joint venture. All assets, liabilities, income and expenses of the joint ventures are included in the financial statements of the Partnership with the appropriate adjustment to income or loss, if any, for the sellers' participation in the joint ventures.
6. 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. For 1994, the net effect of these accounting differences is that the net income in the financial statements is $691,534 more than the tax income of the Partnership for the same period.
7. 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 $721,999 None $806,815 $86,121 $817,115 $68,856 Reimbursement of expenses to General Partner, at cost: Accounting 86,414 $30,902 59,807 4,984 57,990 4,342 Data processing 54,173 10,892 31,161 5,706 34,130 2,801 Investor communica- tions 20,528 5,964 18,471 1,539 11,780 882 Legal 13,567 8,702 13,841 1,153 26,578 1,990 Portfolio management 54,667 14,929 54,668 10,974 24,428 1,829 Other 9,785 2,669 11,986 998 12,781 957
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 Partnership has an $772,896 unsecured third loan outstanding to Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of the General Partner. In July 1993, $3,837,920 of the proceeds from the refinancing of the Walnut Ridge - Phases I and II apartment complexes were used to repay all of the Sandridge - Phase II BREHI loan and a portion of the Walnut Ridge - Phase II BREHI loans. The Partnership incurred interest expense on the BREHI loans of $95,481, $324,360 and $510,870 and paid interest expense of $164,371, $381,585 and $536,540 during 1994, 1993 and 1992, respectively. Interest expense of $6,988 and $75,878 was payable as of December 31, 1994 and 1993, respectively, and is included in accrued liabilities on the balance sheet.
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 $161,478, $106,145 and $112,499 for 1994, 1993 and 1992, respectively.
8. Property Sale:
In August 1993, the Partnership sold Sunset Place Apartments for an all cash sales price of $10,600,000. From the proceeds, the Partnership paid $6,559,567 in full satisfaction of the property's first mortgage loan. The basis of the property was $6,805,442, net of accumulated depreciation of $3,744,588. For financial statement purposes, the Partnership recognized a gain of $3,768,358 from the sale of the property.
9. Restricted Investments:
The Partnership has pledged cash of $700,000 as additional collateral related to the mortgage loan on the Desert Sands apartment complex. The amount pledged as collateral is invested in short-term instruments pursuant to the terms of the pledge agreement with the lending institution. Interest earned on this amount accumulates for the benefit of the Partnership.
10. Subsequent Event:
In January 1995, the Partnership made a distribution of $337,523 ($4.50 per Interest) to the holders of Limited Partnership Interests for the fourth quarter of 1994.
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
BALCOR REALTY INVESTORS-83 (An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) See description of Mortgage Notes Payable in Note 3 of Notes to Financial Statements.
(b) Consists of legal fees, appraisal fees, title costs, other related professional fees, and capitalized construction period interest and real estate taxes.
(c) Guaranteed income earned on properties under the terms of certain management and guarantee agreements was recorded by the Partnership as a reduction of the basis of the property to which the guaranteed income related.
(d) The aggregate cost of land for Federal income tax purposes is $10,576,384 and the aggregate cost of buildings and improvements for Federal income tax purposes is $62,016,862. The total of these is $72,593,246.
(e) Reconciliation of Real Estate ----------------------------- 1994 1993 1992 ----------- ----------- -----------
Balance at beginning of year: $77,115,676 $87,572,161 $87,535,321
Additions during year: Improvements 110,424 93,545 36,840 Deductions during year: Cost of real estate sold None (10,550,030) None ----------- ----------- ----------- Balance at close of year $77,226,100 $77,115,676 $87,572,161 =========== =========== ===========
Reconciliation of Accumulated Depreciation ------------------------------------------
1994 1993 1992 ----------- ----------- -----------
Balance at beginning of year $28,873,748 $30,474,153 $28,234,000
Depreciation expense for the year 1,988,938 2,144,183 2,240,153 Accumulated depreciation of real estate sold None (3,744,588) None ----------- ----------- -----------
Balance at close of year $30,862,686 $28,873,748 $30,474,153 =========== =========== ===========
(f) Depreciation expense is computed based upon the following estimated useful lives:
Years -----
Buildings and improvements 20 to 30 Furniture and fixtures 5