SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-9198
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BALCOR PENSION INVESTORS
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(Exact name of registrant as specified in its charter)
Illinois 36-2943462
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(UNAUDITED)
ASSETS
1995 1994
------------- -------------
Cash and cash equivalents $ 4,735,658 $ 6,226,192
Accounts and accrued interest receivable 279,902 748,024
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5,015,560 6,974,216
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Investment in loans receivable:
Loans receivable - wrap-around mortgages 33,466,592 33,466,592
Less:
Loans payable - underlying mortgages 23,388,332 23,768,581
Allowance for potential loan losses 3,949,328 2,222,781
------------- -------------
Net investment in loans receivable 6,128,932 7,475,230
Real estate held for sale 6,063,025 6,063,025
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12,191,957 13,538,255
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$ 17,207,517 $ 20,512,471
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 197,002 $ 323,430
Due to affiliates 39,032 85,232
Other liabilities, principally real estate
taxes and security deposits 227,208 146,918
Mortgage note payable 575,301 575,301
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Total liabilities 1,038,543 1,130,881
Partners' capital (71,675 Limited
Partnership Interests issued
and outstanding) 16,168,974 19,381,590
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$ 17,207,517 $ 20,512,471
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
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Income:
Interest on loans receivable $ 1,984,873 $ 2,079,024
Less interest on loans payable -
underlying mortgages 1,250,129 1,275,369
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Net interest income on loans receivable 734,744 803,655
Income from operations of real estate
held for sale 478,167 549,595
Interest on short-term investments 225,518 186,570
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Total income 1,438,429 1,539,820
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 1,726,547
General Partner management fees 64,885 29,424
Administrative 540,361 414,823
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Total expenses 2,331,793 444,247
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Net (loss) income $ (893,364) $ 1,095,573
============= =============
Net (loss) income allocated to
General Partner $ (8,934) $ 10,956
============= =============
Net (loss) income allocated to Limited
Partners $ (884,430) $ 1,084,617
============= =============
Net (loss) income per Limited Partnership
Interest (71,675 issued and outstanding) $ (12.34) $ 15.13
============= =============
Distributions to General Partner $ 14,900 $ 7,356
============= =============
Distributions to Limited Partners $ 2,304,352 $ 698,832
============= =============
Distributions per Limited Partnership
Interest $ 32.15 $ 9.75
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
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Income:
Interest on loans receivable $ 661,624 $ 662,847
Less interest on loans payable -
underlying mortgages 414,527 423,111
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Net interest income on loans receivable 247,097 239,736
Income from operations of real estate
held for sale 150,266 47,798
Interest on short-term investments 55,668 76,343
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Total income 453,031 363,877
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 1,726,547
General Partner management fees 15,090 9,808
Administrative 191,274 154,761
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Total expenses 1,932,911 164,569
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Net (loss) income $ (1,479,880) $ 199,308
============= =============
Net (loss) income allocated to
General Partner $ (14,799) $ 1,993
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Net (loss) income allocated to Limited
Partners $ (1,465,081) $ 197,315
============= =============
Net (loss) income per Limited Partnership
Interest (71,675 issued and outstanding) $ (20.44) $ 2.75
============= =============
Distribution to General Partner $ 8,676 $ 2,452
============= =============
Distribution to Limited Partners $ 1,713,033 $ 232,944
============= =============
Distribution per Limited Partnership
Interest $ 23.90 $ 3.25
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
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Operating activities:
Net (loss) income $ (893,364) $ 1,095,573
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Provision for potential losses on
loans, real estate and accrued
interest receivable 1,726,547
Net change in:
Accounts and accrued interest
receivable 468,122 (607,695)
Accounts and accrued interest payable (126,428) 146,545
Due to affiliates (46,200) 51,868
Other liabilities 80,290 35,337
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Net cash provided by operating activities 1,208,967 721,628
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Investing activities:
Proceeds from property sale 4,050,000
Costs incurred in connection with
the sale of real estate (121,500)
Improvements to property (20,000)
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Net cash provided by investing activities 3,908,500
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Financing activities:
Distributions to Limited Partners (2,304,352) (698,832)
Distributions to General Partner (14,900) (7,356)
Principal payments on underlying
loans and mortgage notes payable (380,249) (383,448)
Repayment of underlying loans and
mortgage notes payable (2,453,858)
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Net cash used in financing activities (2,699,501) (3,543,494)
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Net change in cash and cash equivalents (1,490,534) 1,086,634
Cash and cash equivalents at beginning
of period 6,226,192 5,184,665
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Cash and cash equivalents at end of period $ 4,735,658 $ 6,271,299
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has also been made
to the previously reported 1994 statements in order to conform with the
classification used in 1995. This reclassification has not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1995, and all such adjustments are of a normal
and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995, the Partnership did not incur
or pay interest expense on mortgage notes payable on properties owned by the
Partnership. During the nine months ended September 30, 1994, the Partnership
incurred and paid interest expense on mortgage notes payable of $72,493.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1995 are:
Paid
--------------------------
Nine Months Quarter Payable
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Mortgage servicing fees $ 10,445 $ 3,482 $ 1,161
General Partner management fees 59,603 34,706 15,090
Reimbursement of expenses to
the General Partner, at cost 147,263 15,768 22,781
4. Subsequent Events:
(a) In October 1995, the Partnership paid a distribution of $358,375 ($5.00 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution of available Cash Flow for the third quarter of 1995.
(b) In 1990, the Partnership commenced proceedings against the guarantors of
the loan collateralized by the Normandy Mall and Norwood Plaza shopping centers
after the loan was placed in default. The Partnership obtained title to the
properties in 1991 pursuant to a foreclosure but continued the action against
the guarantors. In October 1995, the Partnership received $600,000 from the
guarantors in settlement of the lawsuit.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors (the "Partnership") was formed in 1977 to invest
in wrap-around mortgage loans and, to a lesser extent, in other junior
mortgage loans and first mortgage loans. The Partnership raised $71,675,000
through the sale of Limited Partnership Interests and utilized these
proceeds to fund thirty-six loans. Currently, the Partnership has two loans
and two properties in its portfolio.
Inasmuch as the management's discussion and analysis below relates
primarily to the time period since the end of the last fiscal year,
investors are encouraged to review the financial statements and the
management's discussion and analysis contained in the annual report for
1994 for a more complete understanding of the Partnership's financial
position.
Operations
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Summary of Operations
--------------------
The Partnership recognized a net loss during the nine months and quarter
ended September 30, 1995 as compared to net income during the same periods
in 1994 due to the recognition of a provision for potential losses related
to its loans. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
---------------------
Unless otherwise noted, discussions of fluctuations between 1994 and 1995
refer to the quarter and nine months ended September 30, 1995 and 1994.
Net interest income on loans receivable decreased during the nine months
ended September 30, 1995 as compared to the same period in 1994 primarily
due to reduced payments received on the Waterford/Ferndale Centers loan
which is on nonaccrual status. For nonaccrual loans, income is recorded
only as cash payments are received from borrowers. The funds advanced by
the Partnership for this loan are approximately $1,500,000. The loan
matured in November 1993 and the borrower did not make the payment due.
See Liquidity and Capital Resources, below, for additional information.
Income from operations of real estate held for sale represents the net
property operations of the properties acquired by the Partnership through
foreclosure. The Emerald Ridge Apartments, which were generating income,
were sold in April 1994. Operations at the Nob Hill Apartments - Phase I
improved during 1995 due to increased rental income resulting from
increased occupancy and decreased costs for structural repairs. In
addition, Huntington Plaza Shopping Center received from tenants prior
years' real estate tax reimbursements in 1994 and prior years' common area
maintenance reimbursements in 1994 and August 1995. As a result, income
from real estate held for sale increased during the quarter and decreased
during the nine months ended September 30, 1995 as compared to the same
periods in 1994.
<PAGE>
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan
or in the value of the collateral property. Determinations of fair value
are made periodically on the basis of performance under the terms of the
loan agreement and assessments of property operations. Determinations of
fair value represent estimations based on many variables which affect the
value of real estate, including economic and demographic conditions. The
Partnership recognized a provision for potential losses of $1,726,547
related to the North Capital Building loan during the quarter ended
September 30, 1995. While actual losses may vary from time to time because
of changes in circumstances (such as occupancy rates, rental rates, and
other economic factors), the General Partner believes that adequate
recognition has been given to loss exposure in the portfolio at September
30, 1995.
Primarily as a result of higher interest rates, interest income on
short-term investments increased during the nine months ended September 30,
1995 as compared to the same period in 1994. However, as a result of less
cash available for investment due to special distributions to the Limited
Partners in July 1995, interest income on short-term investments decreased
during the quarter ended September 30, 1995 as compared to the same period
in 1994.
General Partner management fees increased as a result of the special
distribution of Cash Flow made in July 1995.
Administrative expenses increased as a result of higher legal fees relating
to litigation involving Normandy Mall.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of September 30, 1995
when compared to December 31, 1994 primarily due to the payment of special
distributions to Limited Partners in July 1995.
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 the nine months
ended September 30, 1995 and 1994, the Nob Hill Apartments - Phase I and
Huntington Plaza Shopping Center generated positive cash flow. Emerald
Ridge Apartments also generated positive cash flow prior to being sold in
April 1994. As of September 30, 1995, occupancy rates were 89% and 82% at
the Nob Hill Apartments - Phase I and Huntington Plaza, respectively. Many
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.
The Waterford/Ferndale Centers wrap-around loan matured in November 1993.
The borrowers failed to make the payment due and one of the borrowers filed
for protection under the U.S. Bankruptcy Code which proceedings were
dismissed in September 1995. The Partnership continues to negotiate for a
resolution of the outstanding matters.
In 1990, the Partnership commenced proceedings against the guarantors of
the loan collateralized by the Normandy Mall and Norwood Plaza shopping
centers after the loan was placed in default. The Partnership obtained
title to the properties in 1991 pursuant to a foreclosure but continued the
action against the guarantors. In October 1995, the Partnership received
$600,000 from the guarantors in settlement of the lawsuit.
<PAGE>
Because of the weak real estate markets in certain cities and regions of
the country, attributable to local and regional market conditions such as
overbuilding and recessions in local economies and specific industry
segments, certain borrowers have requested that the Partnership allow
prepayment of mortgage loans. The Partnership has allowed some of these
borrowers to prepay such loans, in some cases without assessing prepayment
penalties, under circumstances where the General Partner believed that
refusing to allow such prepayment would ultimately prove detrimental to the
Partnership because of the likelihood that the properties would not
generate sufficient revenues to keep loan payments current.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Generally, distributions are made from Cash Flow generated by
interest and other payments made by borrowers under the Partnership's
mortgage loans and Cash Flow from property operations. Loan prepayments and
repayments can initially cause Cash Flow to increase as prepayment premiums
and participations are paid; however, thereafter prepayments and repayments
will have the effect of reducing Cash Flow. When such proceeds and property
sale proceeds are distributed, Limited Partners will receive a return of
capital and the dollar amount of Cash Flow available for distribution
thereafter can be expected to decrease. Distribution levels can also vary
as loans are placed on nonaccrual status, modified or restructured.
In October 1995, the Partnership made a distribution of $358,375 ($5.00 per
Interest) to the holders of Limited Partnership Interests and $18,862 to
the General Partner representing the quarterly distribution for the third
quarter of 1995. The level of the regular quarterly distribution was
consistent with the amount distributed for the first and second quarters of
1995. To date, Limited Partners have received cumulative distributions of
$1,708.81 per $1,000 Interest, of which $1,161.41 represents Cash Flow from
operations and $547.40 represents a return of original capital.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments and property operations
less payments on the underlying loans and mortgage loans, fees to the
General Partner and administrative expenses. The General Partner believes
it has retained, on behalf of the Partnership, an appropriate amount of
working capital to meet cash or liquidity requirements which may occur. It
is expected that the Partnership will complete the disposition of its
remaining assets and be terminated by the end of 1996.
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.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 3(c) to Amendment
No. 2 to the Registrant's Registration Statement on Form S-11 dated
December 15, 1977 (Registration No. 2-60478) 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. 0-9198) are incorporated herein by reference.
(10) Agreement of sale relating to Emerald Ridge Apartments, previously
filed as Exhibit (2) to the Registrant's Current Report on Form 8-K dated
January 28, 1994, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period
ending September 30, 1995 is attached hereto.
(b) Reports on form 8-K: A Current Report on Form 8-K dated September 14,
1995, as amended by Form 8-K/A dated October 27, 1995, was filed reporting
a change in the Registrant's certifying public accountants.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor
Mortgage Advisors, the General Partner
Date: November 14, 1995
---------------------------
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4736
<SECURITIES> 0
<RECEIVABLES> 6409
<ALLOWANCES> 3949
<INVENTORY> 0
<CURRENT-ASSETS> 5016
<PP&E> 6063
<DEPRECIATION> 0
<TOTAL-ASSETS> 17208
<CURRENT-LIABILITIES> 1039
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 16169
<TOTAL-LIABILITY-AND-EQUITY> 17208
<SALES> 0
<TOTAL-REVENUES> 1438
<CGS> 0
<TOTAL-COSTS> 75
<OTHER-EXPENSES> 530
<LOSS-PROVISION> 1726
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (893)
<INCOME-TAX> 0
<INCOME-CONTINUING> (893)
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<CHANGES> 0
<NET-INCOME> (893)
<EPS-PRIMARY> (12.34)
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