Item 1. Business
(a) 	General Development of Business
Participating Development Fund 86, A Real Estate Limited Partnership (the "Partnership"), was formed on December 9, 1985 under the Uniform Limited Partnership Act of the State of Connecticut. The Partnership was originally formed to make five participating investments by entering into land purchase leaseback transactions and concurrently funding leasehold mortgage loans secured by commercial and multi-family residential real estate (the "Participating Investments"). The Partnership made its Participating Investments in the following five properties (the "Properties" or individually a "Property"): Sunnyvale R&D, a one-story research and development building located in Sunnyvale, California; Foothills Tech Plaza, two research and development/service buildings in Phoenix, Arizona; Harris Pond Apartments, a 170-unit luxury apartment complex in Charlotte, North Carolina; Pebblebrook Apartments, a 267-unit luxury apartment complex in Overland Park (Kansas City), Kansas; and 1899 Powers Ferry Road, a four-story office building located in Atlanta, Georgia. The Participating Investment in Harris Pond Apartments was sold on November 1, 1989. As a result of defaults under ground leases on the Sunnyvale, Phoenix, Atlanta and Overland Park Properties, the Partnership took title to these Properties in their entirety. The Partnership anticipated liquidating its remaining investments within seven years from their respective dates of funding, however, competitive market conditions limited favorable sales opportunities. The Partnership does not plan to invest in any additional property.
On June 15, 1992, Phoenix Realty Management, Inc., ("Phoenix") sent a notice of resignation as co-General Partner of the Partnership to PDF86 Real Estate Services Inc. ("RE Services" or the "General Partner"), formerly Shearson Lehman Brothers/PDF 86, Inc. (See Item 10. "Certain Matters Involving Affiliates of RE Services"), the Partnership's other co-General Partner. The effective date of the resignation was June 16, 1992. As a result of the resignation of Phoenix, RE Services, as sole General Partner, manages the affairs of the Partnership.
Foothills Tech Plaza was sold on September 29, 1995 for $10,011,512, net of $226,000 in contracted roof repairs. Additional information regarding the sale is incorporated by reference to the section entitled "Message to Investors" and Note 3 "Real Estate Investments" of the Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
On May 11, 1995, the General Partner executed a letter of intent with an unaffiliated third party to sell Pebblebrook Apartments. During the 1995 third quarter, the prospective buyer rescinded its offer. However, the General Partner subsequently agreed to a letter of intent with another unaffiliated third party to sell Pebblebrook Apartments, and on January 31, 1995 the General Partner executed a purchase and sale agreement for a sales price of $10,570,000, net of commissions. The sale was originally expected to close in late January, 1996 and was subsequently posponed until March, 1996. However, during the due diligence period, the prospective buyer raised certain concerns regarding the physical condition of the Property. While negotiations are continuing and the General Partner remains confident that the sale will be successfully concluded, there is no assurance that an agreement can be reached with the buyer concerning the remaining issues. Therefore, it remains possible that the sale will be further delayed or possibly not close at all.
Additional information regarding the historical development of business is incorporated by reference to Note 1 "Organization," Note 2 "Accounting Policies" and Note 3 "Real Estate Investments" of the Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
(b)	Financial Information About Industry Segment
The Partnership's sole business is the ownership and operation of the Properties. All of the Partnership's revenues, operating profit or losses and assets relate solely to such industry segment.
(c)	Narrative Description of Business
Incorporated by reference to Note 1 "Organization" and Note 3 "Real Estate Investments" of the Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
(d) Competition
Incorporated by reference to the section entitled "Property Profiles & Leasing Update" contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
(e)	Employees
The Partnership has no employees.
Item 2.
Item 2. Properties
Description of Properties and material leases incorporated by reference to the "Property Profiles & Leasing Update" and Note 3 "Real Estate Investments" of the Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995, filed as an exhibit under Item 14.
Item 3.
Item 3. Legal Proceedings
Discussion regarding class action settlement agreement incorporated by reference to Note 7 "Litigation" of Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Unit Holders during the fourth quarter of 1995.
PART II
Item 5.
Item 5. Market for the Partnership's Limited Partnership Units and Related Security Holder Matters
(a)	Market Information
There is no established trading market for the Units of the Partnership.
(b)	Holders
As of December 31, 1995, there were 7,759 holders of record, owning an aggregate of 1,124,000 Units.
(c)	Distributions
A discussion of cash distributions paid to the Limited Partners for the two years ended December 31, 1995 is incorporated by reference to the section entitled "Message to Investors" contained in the Partnership's Annual Report To Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
Item 6.
Item 6. Selected Financial Data
Incorporated by reference to the section entitled "Financial Highlights" contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources - ------------------------------- Foothills Tech Plaza was sold to an unaffiliated third party on September 29, 1995 for $10,011,512, net of $226,000 in contracted roof repairs. The gain on disposition of the property totaled $1,088,860. In anticipation of the sale of Pebblebrook Apartments, the property was reclassified, in the amount of $7,780,273, to "Real estate assets held for sale" on the Partnership's balance sheet. Land, buildings and improvements, net of accumulated depreciation, decreased by $17,452,829 from December 31, 1994 to December 31, 1995 primarily as a result of the Foothills Tech Plaza sale and reclassification of Pebblebrook Apartments.
At December 31, 1995, the Partnership had cash and cash equivalents of $1,480,034 compared with $140,886 at December 31, 1994. The increase is primarily attributable to proceeds from the sale of Foothills Tech Plaza and net cash provided by operating activities in excess of cash distributions paid to Partners. The cash and cash equivalents balance includes amounts reserved for capital and tenant improvements, leasing costs, working capital reserves and cash flow generated from operations of the properties. The Partnership also maintains a restricted cash balance, which is comprised of tenant security deposits. Restricted cash totaled $100,286 at December 31, 1995, compared with $152,162 at December 31, 1994. The decrease is primarily due to the sale of Foothills Tech Plaza.
Prepaid expenses totaled $273,681 at December 31, 1995, compared with $389,472 at December 31, 1994. The decrease is primarily the result of the amortization of leasing commissions associated with the lease-up of Powers Ferry in 1994 and the sale of Foothills Tech Plaza in 1995. Incentives to lease were $188,693 at December 31, 1995 compared to $283,555 at December 31, 1994. The decrease is largely the result of the amortization of a lease buyout at Powers Ferry Office Building. Deferred rent receivable totaled $193,634 at December 31, 1995, compared to $269,701 at December 31, 1994. The decrease is largely due to the write-off of deferred rent resulting from the sale of Foothills Tech Plaza.
Accounts payable and accrued expenses totaled $133,022 at December 31, 1995, compared with $323,897 at December 31, 1994. The decrease primarily is due to a reduction in accrued lease incentives relating to a lease buyout at Powers Ferry Office Building. Security deposits payable totaled $100,286 at December 31, 1995, compared to $152,162 at December 31, 1994. The decrease is mainly due to the sale of Foothills Tech Plaza. Prepaid rent totaled $79,555 at December 31, 1995, compared to $4,085 at December 31, 1994. The increase is largely attributable to the timing of rental payments.
The General Partner has determined that an adequate cash reserve exists to fund anticipated tenant improvement costs and leasing commissions associated with leasing efforts at the Properties, and pay cash distributions to the Limited Partners. For the year ended December 31, 1995, the Partnership declared cash distributions to the Limited Partners totaling $9.79 per Unit. Included in this total was a special distribution in the amount of $8.59 per Unit which was paid on November 24, 1995 and represented proceeds from the sale of Foothills Tech Plaza, and a fourth quarter cash distribution of $0.30 per Unit which was paid on February 9, 1996. In addition, on March 29, 1996 the Partnership paid a special cash distribution in the amount of $.55 per Unit. The distribution was made from the Partnership's cash reserves. The timing and amount of future distributions will depend on several factors, including the adequacy of rental income being generated by current leases and Partnership cash flow.
On February 16, 1996, based upon, among other things, the advice of Partnership counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a resolution that states, among other things, if a Change of Control (as defined below) occurs, the General Partner may distribute the Partnership's cash balances not required for its ordinary course day-to-day operations. "Change of Control" means any purchase or offer to purchase more than 10% of the Units that is not approved in advance by the General Partner. In determining the amount of the distribution, the General Partner may take into account all material factors. In addition, the Partnership will not be obligated to make any distribution to any partner and no partner will be entitled to receive any distribution until the General Partner has declared the distribution and established a record date and distribution date for the distribution. The Partnership filed a form 8-K disclosing this resolution on February 23, 1996.
Results of Operations
1995 Versus 1994 - ---------------- Partnership operations resulted in net income of $2,662,237 for the year ended December 31, 1995, compared with net income of $1,449,548 for the corresponding period in 1994. The increase in net income in 1995 is primarily attributable to the gain on the sale of Foothills Tech Plaza in the amount of $1,088,860.
Rental income totaled $4,397,667 for the year ended December 31, 1995, compared to $4,387,259 for the year ended December 31, 1994. The increase is primarily attributable to higher average occupancy at Powers Ferry Office Building and higher rental rates at Pebblebrook Apartments and Powers Ferry Office Building, partially offset by the sale of Foothills Tech Plaza. Interest income totaled $142,161 for the year ended December 31, 1995, compared to $11,912 for the year ended December 31, 1994. The increase is largely due to the Partnership's higher average cash balance in 1995 resulting from the sale of Foothills Tech Plaza. Other income totaled $8,807 for the year ended December 31, 1995, compared to $189,508 for the year ended December 31, 1994. The decrease is mainly attributable to the receipt of a lease cancellation fee at Powers Ferry Office Building in 1994.
Property operating expenses totaled $1,403,161 for the year ended December 31, 1995, relatively unchanged from $1,407,195 for the year ended December 31, 1994. Depreciation and amortization totaled $1,358,528 for the year ended December 31, 1995, compared to $1,513,099 for the year ended December 31, 1994. The decrease is primarily attributable to a lower depreciable asset base resulting from the sale of Foothills Tech Plaza. The Partnership recognized bad debt expense for the year ended December 31, 1994 totaling $16,905 reflecting the write-off of a former tenant's receivable balance.
As of December 31, 1995, the lease levels at each of the properties were as follows: Powers Ferry Office Building - 94%; Sunnyvale R&D - 100%; and Pebblebrook Apartments - 96%.
1994 Versus 1993 - ---------------- Partnership operations resulted in net income of $1,449,548 for the year ended December 31, 1994, compared with net income of $931,882 for the corresponding period in 1993. The increase in net income in 1994 is primarily attributable to higher rental income and other income in 1994, as well as lower general administrative, bad debt and depreciation expenses. These were offset by lower interest income and higher property operating expenses.
Rental income totaled $4,387,259 for the year ended December 31, 1994, compared with $3,990,962 in 1993. The increase in 1994 is primarily attributable to a rental rate increase at Sunnyvale, increased occupancy at Powers Ferry, scheduled rental rate increases at Pebblebrook and a tenant taking occupancy at Foothills. Other income was $189,508 for the year ended December 31, 1994, compared to $67,093 for the year ended December 31, 1993. The increase of $122,415 is due primarily to the receipt of a tenant's cancellation fee at Powers Ferry. Interest income totaled $11,912 for the year ended December 31, 1994 compared with $42,812 in 1993, reflecting the Partnership's lower average cash balances.
Property operating expenses totaled $1,407,195 for the year ended December 31, 1994, compared to $1,206,605 in 1993. The $200,590 increase is primarily due to higher real estate taxes at the Pebblebrook property and higher repairs and maintenance, payroll, administrative and utility expenses at the Powers Ferry and Pebblebrook properties. Depreciation and amortization expense totaled $1,513,099 for the year ended December 31, 1994, compared with $1,690,501 in 1993. Depreciation and amortization expense was lower for the twelve month period in 1994 due to certain assets becoming fully depreciated during 1994, primarily at the Sunnyvale and Pebblebrook properties.
As of December 31, 1994, the lease levels at each of the properties were as follows: Foothills Tech Plaza - 100%; 1899 Powers Ferry Road - 91%; Sunnyvale R&D - 100%; and Pebblebrook Apartments - 97%.
Item 8.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership is PDF86 Real Estate Services Inc. ("RE Services"), formerly Shearson Lehman Brothers, Inc./PDF 86, Inc., an affiliate of Lehman Brothers Inc. ("Lehman"). See a section captioned "Certain Matters Involving Affiliates of RE Services" for a description of the sale of certain of Shearson Lehman Brothers, Inc. ("Shearson") domestic retail brokerage and asset management business to Smith Barney, Harris Upham & Co. Incorporated, which resulted in a change in the general partner's name. Brief descriptions of the business experience of the directors and officers of the General Partner are provided below. Each of the directors of the General Partner is elected annually. There is no family relationship among any of the persons currently serving as directors or officers of the General Partner.
Certain officers and directors of RE Services are now serving (or in the past have served) as officers and directors of entities which act as general partners of a number of real estate limited partnerships which have sought protection under the provisions of the Federal Bankruptcy Code. The partnerships which have filed bankruptcy petitions own real estate which has been adversely affected by the economic conditions in the markets in which the real estate is located and, consequently, the partnerships sought the protection of bankruptcy laws to protect the partnership's assets from losses through foreclosure.
The executive officers and directors of RE Services are listed below.
Name Office ---------- ------------- Kenneth L. Zakin President and Director William Caulfield Vice President and Chief Financial Officer Lawrence M. Ostow Vice President 	 Kenneth L. Zakin, 48, is a Senior Vice President of Lehman Brothers Inc. and has held such title since November 1988. He is currently a senior manager in Lehman Brothers' Diversified Asset Group and was formerly group head of the Commercial Property Division of Shearson Lehman Brothers' Direct Investment Management Group responsible for the management and restructuring of limited partnerships owning commercial properties throughout the United States. From January 1985 through November 1988, Mr. Zakin was a Vice President of Shearson Lehman Brothers Inc. Mr. Zakin is a director of Lexington Corporate Properties, Inc. He is a member of the Bar of the State of New York and previously practiced as an attorney in New York City from 1973 to 1984 specializing in the financing, acquisition, disposition, and restructuring of real estate transactions. Mr. Zakin is a member of the Real Estate Lender's Association and is currently an associate member of the Urban Land Institute and a member of the New York District Council Advisory Services Committee. He received a Juris Doctor degree from St. John's University School of Law in 1973 and a B.A. degree from Syracuse University in 1969.
William Caulfield, 36, is a Vice President of Lehman Brothers Inc. and is responsible for investment management of commercial real estate in the Diversified Asset Group. Prior to the Shearson/Hutton merger in 1988, Mr. Caulfield was a Senior Analyst with E.F. Hutton since October 1986 in Hutton's Partnership Administration Group. Before joining Hutton, Mr. Caulfield was a Business Systems Analyst at Eaton Corp. from 1985 to 1986. Prior to Eaton, he was an Assistant Treasurer with National Westminster Bank USA. Mr. Caulfield holds a B.S. degree in Finance from St. John's University and an M.B.A. from Long Island University - C.W. Post Campus.
Lawrence M. Ostow, 28, is a Vice President of Lehman Brothers and is responsible for the management of commercial real estate in the Diversified Asset Group. Mr. Ostow joined Lehman Brothers in September 1992. Prior to that, Mr. Ostow was a Senior Consultant with Arthur Andersen & Co. in the Real Estate Services Group, beginning in July 1990. Mr. Ostow is a candidate for an M.B.A. from the Stern School of Business in 1997 and earned a B.A. degree in Economics from the University of Michigan in 1990.
Certain Matters Involving Affiliates of RE Services - --------------------------------------------------- On July 31, 1993, Shearson Lehman Brothers, Inc. sold certain of its domestic retail brokerage and asset management businesses to Smith Barney, Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson changed its name to Lehman Brothers Inc. The transaction did not affect the ownership of the Partnership's General Partner. However, the assets acquired by Smith Barney included the name "Shearson." Consequently, the Shearson Lehman Brothers/PDF 86, Inc. general partner changed its name to PDF86 Real Estate Services Inc. to delete any reference to "Shearson."
Item 11.
Item 11. Executive Compensation
The General Partner and its Affiliates have received certain fees, commissions and reimbursements for expenses incurred as provided for on pages 13 through 17 of the Prospectus which are contained under "Management Compensation" (See Exhibit 3 incorporated herein by reference). The General Partner is entitled to receive a share of cash distributed when and as cash distributions are made to Unit Holders and a share of taxable income or taxable loss, and may be reimbursed for certain out-of-pocket expenses. In addition, the General Partner is entitled to receive various fees and distributions during the liquidation stages of the Partnership. Descriptions of such fees, distribution allocations, and reimbursements is incorporated by reference to Note 5 "Transactions with Related Parties" and Note 6 "Partners' Equity" of the Notes to Financial Statements. Certain officers and directors of the General Partner are employees of Lehman Brothers Inc. and are not compensated by the Partnership or the General Partner for services rendered in connection with the Partnership.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security of Ownership of Certain Beneficial Owners
No person (including any "group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) is known to the Registrant to be the beneficial owner of more than five percent of the outstanding voting Interests as of December 31, 1995.
(b) Security Ownership of Management
No officer or director of the General Partner beneficially owned or owned of record directly or indirectly any Interests as of December 31, 1995.
(c) Changes in Control
None.
Item 13.
Item 13. Certain Relationships and Related Transactions
(a) Transactions With Management and Others
Incorporated by reference to Note 3 "Real Estate Investments," Note 5 "Transactions with Related Parties" and Note 6 "Partners' Equity" of the Notes to Financial Statements contained in the Partnership's Annual Report to Unitholders for the year ended December 31, 1995 filed as an exhibit under Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(i) Index to Financial Statements
Balance Sheets at December 31, 1995 and 1994 (1)
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 (1)
Statements of Partners' Capital (Deficit) for the Years Ended December 31, 1995, 1994 and 1993 (1)
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 (1)
Notes to the Financial Statements (1)
Independent Auditors' Report (1)
(a)(ii) Financial Statement Schedule
Independent Auditors' Report on Schedule III 	 Schedule III - Real Estate and Accumulated Depreciation
(1) Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended December 31, 1995.
(b) Reports on Form 8-K filed in the fourth quarter of 1995:
The Partnership filed a report on Form 8-K on October 12, 1995 regarding the sale of Foothills Tech Plaza. 	 (c) See Exhibit Index contained herein.
Exhibit Number
3 - Agreement of Limited Partnership of Participating Development Fund 86, A Real Estate Limited Partnership. Reference is made to Exhibit A of the Prospectus (the "Prospectus") contained in Amendment No. 2 to Registrant's Form S-11 Registration Statement filed with the Securities and Exchange Commission on December 20, 1985 (the "Registration Statement").
13 - Annual Report to Unitholders for the year ended December 31, 1995.
27 - Financial Data Schedule
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996
PARTICIPATING DEVELOPMENT FUND 86
BY: PDF86 Real Estate Services Inc. General Partner
BY: /s/Kenneth L. Zakin Name: Kenneth L. Zakin Title: Director and President
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 in the capacities and on the dates indicated.
PDF86 REAL ESTATE SERVICES INC. General Partner
Date: March 29, 1996 BY: /s/Kenneth L. Zakin Kenneth L. Zakin Director and President
Date: March 29, 1996 BY: /s/William Caulfield William Caulfield Vice President and Chief Financial Officer
Date: March 29, 1996 BY: /s/Lawrence M. Ostow Lawrence M. Ostow Assistant Vice President
INDEPENDENT AUDITORS' REPORT
The Partners Participating Development Fund 86:
Under date of February 16, 1996 we reported on the balance sheets of Participating Development Fund 86 (a Connecticut limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' capital (deficit) and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to unit holders. These financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned financial statements, we also have audited the related financial statements schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.
In our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts February 16, 1996
PARTICIPATING DEVELOPMENT FUND 86 (A Real Estate Limited Partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Initial Cost to Partnership
Buildings and Description Encumbrances (1) Land Improvements
Commercial Property:
Sunnyvale R&D Building Sunnyvale, CA -- $6,336,962 $4,848,999
1899 Powers Ferry Road Office Building Marietta, GA -- 2,050,628 6,774,215
8,387,590 11,623,214 Real Estate Held for Sale Pebblebrook Apartments Apartment Buildings Overland Park, KS -- 2,095,205 8,118,985
$10,482,795 $19,742,199
PARTICIPATING DEVELOPMENT FUND 86 (A Real Estate Limited Partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Cost Capitalized Subsequent To Acquisition --------------
Buildings and Description Improvements (3) Retirements
Commercial Property:
Sunnyvale R&D Building Sunnyvale, CA $3,141,469 $(2,976,402)
1899 Powers Ferry Road Office Building Marietta, GA 2,189,066 (1,282,863)
5,330,535 (4,259,265)
Real Estate Held for Sale Pebblebrook Apartments Apartment Buildings Overland Park, KS 863,301 (1,250,320)
$6,193,836 $(5,509,585)
PARTICIPATING DEVELOPMENT FUND 86 (A Real Estate Limited Partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Gross Amount at Which Carried at Close of Period --------------------------
Buildings and Accumulated Description Land Improvements Total(1) Depreciation(2)
Commercial Property:
Sunnyvale R&D Building Sunnyvale, CA $6,336,962 $5,014,066 $11,351,028 $(1,369,338)
1899 Powers Ferry Road Office Building Marietta, GA 2,050,628 7,680,418 9,731,046 (2,314,185)
8,387,590 12,694,484 21,082,074 (3,683,523)
Real Estate Held for Sale Pebblebrook Apartments Apartment Buildings Overland Park, KS 2,095,205 7,731,966 9,827,171 (2,046,898)
$10,482,795 $20,426,450 $30,909,245 $(5,730,421)
PARTICIPATING DEVELOPMENT FUND 86 (A Real Estate Limited Partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Life on which Depreciation in Latest Date of Date Income Statements Description Construction Acquired is Computed
Commercial Property:
Sunnyvale R&D Building Sunnyvale, CA 8/86 8/28/86 5 - 35 years
1899 Powers Ferry Road Office Building Marietta, GA 2/86 7/7/87 5 - 35 years
Real Estate Held for Sale Pebblebrook Apartments Apartment Buildings Overland Park, KS N/A 9/4/86 5 - 35 years
(1) For Federal Income Tax Purposes, the aggregate cost of land, building and improvements is $40,039,600.
(2) For Federal income tax purposes, the amount of accumulated depreciation is $3,630,345.
(3) Tenant improvements are depreciated over the terms of the respective leases.
A reconciliation of the carrying amount of real estate and accumulated depreciation for the years ended December 31, 1995, 1994 and 1993:
Real Estate Investments: 1995 1994 1993
Beginning of year $42,595,901 $46,380,563 $46,170,294 Additions 211,470 1,691,770 493,591 Less Retirements (33,151) (5,476,432) (283,322) Dispositions (11,864,975) 0 0
End of year $30,909,245 $42,595,901 $46,380,563
Accumulated Depreciation:
Beginning of year $ 7,744,521 $11,772,231 $10,371,081 Depreciation 1,251,637 1,448,722 1,684,472 Less Retirements (26,391) (5,476,432) (283,322) Depositions (3,239,346) 0 0
End of year $ 5,730,421 $ 7,744,521 $11,772,231