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 June 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
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(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
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------ -------------
Cash and cash equivalents $ 5,787,712 $ 6,226,192
Accounts and accrued interest receivable 782,979 748,024
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6,570,691 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 23,517,264 23,768,581
Allowance for potential loan losses 2,222,781 2,222,781
------------ -------------
Net investment in loans receivable 7,726,547 7,475,230
Real estate held for sale 6,063,025 6,063,025
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13,789,572 13,538,255
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$20,360,263 $ 20,512,471
============ =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 188,898 $ 323,430
Due to affiliates 42,015 85,232
Other liabilities, principally real
estate taxes and escrow deposits 183,486 146,918
Mortgage note payable 575,301 575,301
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Total liabilities 989,700 1,130,881
Partners' capital (71,675 Limited
Partnership Interests issued and
outstanding) 19,370,563 19,381,590
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$20,360,263 $ 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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 1,323,249 $ 1,416,177
Less interest on loans payable -
underlying mortgages 835,602 852,258
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Net interest income on loans receivable 487,647 563,919
Income from operations of real estate
held for sale 327,901 501,797
Interest on short-term investments 169,850 110,227
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Total income 985,398 1,175,943
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Expenses:
General Partner management fees 49,795 19,616
Administrative 349,087 260,062
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Total expenses 398,882 279,678
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Net income $ 586,516 $ 896,265
=============== ==============
Net income allocated to General Partner $ 5,865 $ 8,963
=============== ==============
Net income allocated to Limited Partners $ 580,651 $ 887,302
=============== ==============
Net income per Limited Partnership
Interest (71,675 issued and outstanding) $ 8.10 $ 12.38
=============== ==============
Distributions to General Partner $ 6,224 $ 4,904
=============== ==============
Distributions to Limited Partners $ 591,319 $ 465,888
=============== ==============
Distributions per Limited Partnership
Interest $ 8.25 $ 6.50
=============== ==============
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 June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 661,624 $ 618,313
Less interest on loans payable -
underlying mortgages 416,722 425,109
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Net interest income on loans receivable 244,902 193,204
Income from operations of real estate
held for sale 107,594 278,043
Interest on short-term investments 84,791 65,782
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Total income 437,287 537,029
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Expenses:
General Partner management fees 39,987 9,808
Administrative 215,212 131,007
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Total expenses 255,199 140,815
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Net income $ 182,088 $ 396,214
=============== ==============
Net income allocated to General Partner $ 1,821 $ 3,962
=============== ==============
Net income allocated to Limited Partners $ 180,267 $ 392,252
=============== ==============
Net income per Limited Partnership
Interest (71,675 issued and outstanding) $ 2.51 $ 5.47
=============== ==============
Distribution to General Partner $ 3,772 $ 2,452
=============== ==============
Distribution to Limited Partners $ 358,375 $ 232,944
=============== ==============
Distribution per Limited Partnership $ 5.00 $ 3.25
Interest =============== ==============
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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 586,516 $ 896,265
Adjustments to reconcile net income
to net cash provided by operating
activities:
Net change in:
Accounts and accrued interest
receivable (34,955) (613,541)
Accounts and accrued interest
payable (134,532) (66,952)
Due to affiliates (43,217) 73,172
Other liabilities 36,568 (14,416)
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Net cash provided by operating
activities 410,380 274,528
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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 (591,319) (465,888)
Distributions to General Partner (6,224) (4,904)
Principal payments on underlying loan (251,317) (263,073)
Repayment of underlying loans payable (2,453,858)
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Cash used in financing activities (848,860) (3,187,723)
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Net change in cash and cash equivalents (438,480) 995,305
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 $ 5,787,712 $ 6,179,970
============= =============
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 six months
and quarter ended June 30, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the six months ended June 30, 1995, the Partnership did not incur or pay
interest expense on mortgage notes payable on properties owned by the
Partnership. During the six months ended June 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
six months and quarter ended June 30, 1995 are:
Paid
--------------------
Six Months Quarter Payable
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Mortgage servicing fees $ 6,963 $ 3,482 $ 1,161
General Partner management fees 24,897 15,089 34,706
Reimbursement of expenses to
the General Partner, at cost 131,495 131,495 6,148
4. Subsequent Event:
In July 1995, the Partnership paid a distribution of $1,713,033 ($23.90 per
Interest) to the holders of Limited Partnership Interests. This distribution
includes a regular quarterly distribution of $5.00 per Interest from Cash Flow,
and special distributions of $12.40 per Interest from Mortgage Reductions
related to the Emerald Ridge Apartments sale and $6.50 per Interest from Cash
Flow reserves.
<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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Net income decreased during the six months and quarter ended June 30, 1995
as compared to the same periods in 1994 primarily due to a decrease in
income from operations of real estate held for sale resulting from the
April 1994 sale of Emerald Ridge Apartments, and legal fees relating to
litigation for the Normandy Mall. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
- ---------------------
Net interest income on loans receivable decreased during the six months
ended June 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 non-accrual status. For non-accrual loans, income is recorded only as
cash payments are received from borrowers. Due to the timing of collection
of these payments, however, net interest income on loans receivable
increased during the quarter ended June 30, 1995 as compared to the same
period in 1994. 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. Income from operations of real estate held for sale decreased
during the six months and quarter ended June 30, 1995 as compared to the
same periods in 1994 due to sale of Emerald Ridge Apartments in April 1994,
and the receipt in 1994 of prior years' real estate tax and common area
maintenance reimbursements from certain tenants at the Huntington Plaza
Shopping Center. Higher rental income resulting from increased occupancy
at the Nob Hill Apartments - Phase I partially offset the decrease.
Primarily as a result of higher interest rates, interest income on
short-term investments increased during the six months and quarter ended
June 30, 1995 as compared to the same periods in 1994.
<PAGE>
As a result of the special distribution of Cash Flow made in July 1995,
General Partner management fees increased during the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994.
As a result of higher legal fees relating to litigation for the Normandy
Mall, administrative expense increased during the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994.
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 or 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 no provision for potential losses during the six
months ended June 30, 1995 and 1994. 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 June 30, 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased as of June 30, 1995 when
compared to December 31, 1994. Operating activities included cash flow from
the operations of the Partnership's real estate held for sale and net
interest income earned on its loans receivable and short-term investments,
which were partially offset by the payment of administrative expenses.
Financing activities included the payment of regular quarterly
distributions to the Limited Partners and the General Partner, and the
payment of principal on the underlying loan.
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 six months
ended June 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. The General Partner is continuing its efforts to maintain high
occupancy levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvement requirements at the
properties. As of June 30, 1995, occupancy rates were 96% and 82% at the
Nob Hill Apartments - Phase I and Huntington Plaza, respectively.
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. The Partnership continues to
negotiate for a resolution of the outstanding matters, which may include a
sale of the loan to a third party.
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
<PAGE>
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 non-accrual status, modified or restructured.
In July 1995, the Partnership paid a distribution of $1,713,033 ($23.90 per
Interest) to the holders of Limited Partnership Interests. This
distribution includes a regular quarterly distribution of $5.00 per
Interest from Cash Flow and special distributions of $12.40 per Interest
from Mortgage Reductions related to the Emerald Ridge Apartments sale and
$6.50 per Interest from Cash Flow reserves. In addition, during July 1995,
the Partnership paid $8,676 to the General Partner as its share of Cash
Flow distributed for the second quarter of 1995. The level of the regular
quarterly distribution was consistent with the amount distributed for the
first quarter of 1995. To date, Limited Partners have received cumulative
distributions of $1,703.81 per $1,000 Interest, of which $1,156.41
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 anticipated that the Partnership will be terminated within the next
twelve to eighteen months.
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
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(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 six month period
ending June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended June 30, 1995.
<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: August 3, 1995
---------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5788
<SECURITIES> 0
<RECEIVABLES> 8510
<ALLOWANCES> 2223
<INVENTORY> 0
<CURRENT-ASSETS> 6571
<PP&E> 6063
<DEPRECIATION> 0
<TOTAL-ASSETS> 20361
<CURRENT-LIABILITIES> 990
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19370
<TOTAL-LIABILITY-AND-EQUITY> 20360
<SALES> 0
<TOTAL-REVENUES> 985
<CGS> 0
<TOTAL-COSTS> 57
<OTHER-EXPENSES> 342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 586
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<INCOME-CONTINUING> 586
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<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> 8.25
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