UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
----------------
Balcor Pension Investors (the "Registrant") is a limited partnership formed in
1977 under the laws of the State of Illinois. The Registrant raised $71,675,000
from sales of Limited Partnership Interests. The Registrant's operations
consist of investment in wrap-around mortgage loans and the operation of
properties acquired through foreclosure, and all financial information included
in this report relates to this industry segment.
The Registrant originally funded thirty-six loans. A portion of the Mortgage
Reductions generated by repayments was distributed to the holders of Limited
Partnership Interests and the remainder was added to the Registrant's working
capital reserves. As a result of the repayments, foreclosures and write-offs of
thirty-four loans, the Registrant has two loans in its portfolio as of December
31, 1994. Six properties were acquired through foreclosure, of which three have
been sold and one has been relinquished to the underlying lender through
foreclosure. The Registrant has two properties in its portfolio as of December
31, 1994. See Item 2. Properties for additional information.
During 1994, the Registrant sold Emerald Ridge Apartments to an unaffiliated
party. See Note 9 of Notes to Financial Statements for additional information.
During 1994, the Registrant repaid the mortgage note payable on Nob Hill
Apartments. See Note 6 of Notes to Financial Statements for additional
information.
The Registrant, by virtue of its ownership of real estate acquired through
foreclosure, 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 Mortgage Advisors, 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. Properties
------------------
As of December 31, 1994, the Registrant owns the two properties described
below:
Location Description of Property
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Huntington, Indiana Huntington Plaza: a one-story regional shopping
center containing approximately 199,000 square
feet located on approximately 18 acres.
Winter Park, Florida Nob Hill Apartments - Phase I: a 200-unit
apartment complex located on approximately 10
acres.
The Registrant also owns a building at Normandy Mall located in Jacksonville,
Florida.
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.
<PAGE>
Item 3. Legal Proceedings
-------------------------
Williams class action
---------------------
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.: 90-
C-0726 (U. S. District Court, Northern District of Illinois) against the
Registrant, the General Partner, The Balcor Company, Shearson Lehman Hutton,
Inc., American Express Company, other affiliates, and seven affiliated limited
partnerships (the "Related Partnerships") as defendants. The complaint alleges
that the defendants violated Federal securities laws as to the adequacy and
accuracy of disclosure of information in the offering of limited partnership
interests of the Registrant and the Related Partnerships and alleges breach of
fiduciary duty, fraud, negligence and violations under the Racketeer Influenced
and Corrupt Organizations Act. The complaint seeks compensatory and punitive
damages. The defendants filed their answer, affirmative defenses and a
counterclaim to the complaint. The defendants' counterclaim asserts claims of
fraud and breach of warranty against certain plaintiffs, as well as a request
for declaratory relief regarding the defendants' rights to be indemnified for
their expenses incurred in defending the litigation. The defendants seek to
recover damages to their reputations and business as well as costs and
attorneys' fees in defending the claims.
In May 1993, the Court issued an order denying the plaintiffs' motion for class
certification based principally on the inadequacy of the individual plaintiffs
representing the proposed class. However, the Court gave plaintiffs leave to
propose new individual class representatives. Further, the Court granted the
defendants' motion for sanctions and ordered that plaintiffs' counsel pay
certain of the defendants' attorneys' fees incurred with the class
certification motion. In January 1995, the Court ordered the plaintiffs'
counsel to pay $75,000 to the defendants and $25,000 to the Court.
The plaintiffs retained new co-counsel and proposed new class representatives.
In July 1994, the Court granted plaintiffs' motion certifying a class relating
to the Federal securities fraud claims. The class certified by the Court
includes only the original investors in the Registrant and the Related
Partnerships. The defendants filed a motion for reconsideration in opposition
to the class certification which was denied on December 21, 1994. The Court
has ordered the parties to meet to discuss notice to the class and a schedule
for discovery.
A motion filed by the plaintiffs seeking to dismiss the defendants'
counterclaim for fraud was denied by the Court in August 1994.
The defendants intend to continue vigorously contesting this action. Management
of each of the defendants believes they have meritorious defenses to contest
the claims.
Waterford Shopping Center and Ferndale Supermarket
--------------------------------------------------
In 1980, the Registrant funded a $1,506,653 loan evidenced by a note in the
amount of $4,000,000 and collateralized by a wrap-around mortgage on the
Ferndale Supermarket. The loan is additionally collateralized by an interest
in the Waterford Shopping Center (together with the Ferndale Supermarket, the
"Property"). The loan matured in November 1993 and the amount due was not paid.
The Registrant exercised its assignment of rents so that rents were paid
directly to the Registrant. The Registrant commenced non-judicial foreclosure
proceedings and a foreclosure sale of the Property was scheduled for January
1994. However, in December 1993, one of the borrowers commenced bankruptcy
proceedings under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court, Eastern District of New York, at Westbury, in re Daleford Associates, a
New York Limited Partnership, Case No. 893-87224-22, which stayed the
foreclosure sale. The borrower also filed a proceeding against the Registrant,
<PAGE>
the holder of the first mortgage loan and the Property's tenants seeking an
injunction preventing the Registrant from collecting rents and requesting the
return of all rents collected by the Registrant. In August 1994, the Bankruptcy
Court ruled that the borrower was not entitled to the Property's rents.
Subsequently, however, the Property's net cash receipts are being paid to the
first mortgage holder for monthly debt service, with the remainder placed in an
escrow held by the borrower for the operations of the Property. The Registrant
continues to maintain possession in a segregated account of all rents
previously collected by it. The Registrant, first mortgage holder and the
borrower continue to negotiate for a resolution of the outstanding matters,
which may include a sale of the loan to a third party.
Normandy Mall
-------------
In February 1991, the Registrant acquired title to the Normandy Mall and
Norwood Plaza shopping centers through foreclosure. In July 1993, title to the
properties, with the exception of one building in Normandy Mall (the
"Building"), was relinquished to the first mortgage holder pursuant to a
settlement agreement. The first mortgage loan ("Loan") collateralized by the
Building is held by a different third party lender. The Building has been
vacant and, when title to the remainder of the properties was relinquished in
1993 and all cash flow ceased, the Registrant stopped debt service payments on
the Loan.
On January 19, 1995, the lender commenced foreclosure proceedings in the Fourth
Judicial Circuit Court, Duval County, Florida, Gulf Life Insurance Company vs.
Normandy Norwood Limited Partnership, et al., Case No. 95-00334 CA. The
Registrant is currently analyzing its options regarding the Building and the
foreclosure action.
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.
<PAGE>
PART II
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. For information
regarding previous distributions, see Statements of Partners' Capital and Item
7. Liquidity and Capital Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 3,658.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Total income $2,055,694 $2,633,494 $2,662,072 $4,710,844 $5,330,071
Provision for poten-
tial losses on
loans, real
estate and accrued
interest receivable None 1,988,000 2,750,000 2,500,000 3,000,000
Net income (loss)
before gain on
foreclosure of
property 1,465,209 92,635 (862,690) 710,748 99,281
Net income (loss) 1,465,209 182,117 (862,690) 710,748 99,281
Net income (loss)
per Limited Part-
nership Interest
outstanding 20.24 2.52 (11.92) 9.82 1.37
Total assets 20,512,471 22,374,872 32,538,628 33,200,526 47,679,854
Mortgage notes
payable 575,301 3,057,594 9,247,419 5,658,601 9,022,639
Distributions per
Limited Partner-
ship Interest 13.00 53.76 43.16 154.00 182.75
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
---------------------
Summary of Operations
---------------------
Balcor Pension Investors (the "Partnership") recognized a provision for
potential losses during 1993 but did not recognize a provision in 1994, which
resulted in an increase in net income during 1994 as compared to 1993. This
increase in net income was partially offset by a decrease in net interest
income on loans receivable due to the 1993 loan repayments.
During 1993 and the latter part of 1992, the Partnership foreclosed on three
properties which resulted in a decrease in net interest income on loans
receivable, and an increase in operations of real estate held for sale. In
addition, the provision for potential losses decreased during 1993 as compared
to 1992. The combined effect of these transactions resulted in the Partnership
recognizing net income during 1993 as compared to a net loss during 1992.
Further discussion of the Partnership's operations are summarized below.
<PAGE>
Operations
----------
1994 Compared to 1993
---------------------
The Spring Hill and Circle Hill loan repayments in 1993, were the primary
reasons for the decrease in net interest income on loans receivable, and
mortgage servicing fees, during 1994 as compared to 1993. The Waterford/
Ferndale Centers loan is on non-accrual status as of December 31, 1994. For
non-accrual loans, income is recorded only as cash payments are received from
borrowers. The original funds advanced by the Partnership for this loan were
approximately $1,500,000. The loan matured in November 1993 and the borrower
did not make the payment due. See Note 3 of Notes to Financial Statements and
Item 3. Legal Proceedings for additional information.
Income from operations of real estate held for sale represents the net property
operations of those properties acquired by the Partnership through foreclosure.
Income was generated from the Emerald Ridge Apartments which was acquired
through foreclosure in October 1993 and sold in April 1994, and Huntington
Plaza Shopping Center which was acquired in February 1993. As a result, income
from operations of real estate held for sale increased during 1994 as compared
to 1993. These increases in income were partially offset by decreased rental
income as a result of a fire in November 1993 at one of the Nob Hill - Phase I
apartment buildings. In addition, title to the Normandy Mall and Norwood Plaza,
which were generating income due to the suspension of debt service payments,
was conveyed to the underlying lender in July 1993.
Increased cash available for investment resulting from the repayment of the
Spring Hill loan in September 1993 and the sale of the Emerald Ridge Apartments
in 1994, was the primary reason for an increase in interest income on short-
term investments during 1994 as compared to 1993.
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 1994. In 1993, the Partnership recognized
a provision for potential losses of $700,000 for its loans and $1,288,000 for
its real estate held for sale. Allowances of $1,288,000 were written off in
connection with the sale of the Emerald Ridge Apartments in April 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 December 31, 1994.
The Partnership recognized a gain of $89,482 in connection with the conveyance
of title to the Normandy Mall and Norwood Plaza shopping centers during 1993.
See Note 5 of Notes to Financial Statements for additional information.
1993 Compared to 1992
---------------------
Net interest income on loans receivable, and mortgage servicing fees, decreased
during 1993 as compared to 1992 primarily due to the foreclosures of three
properties in the latter part of 1992 and in 1993. The Partnership's
Waterford/Ferndale centers loan was on non-accrual status as of December 31,
1993.
Income from operations of real estate held for sale represents the net property
operations of those properties acquired by the Partnership through foreclosure.
As a result of the timing of the foreclosures of the Nob Hill Apartments -
Phase I and Huntington Plaza Shopping Center and the improvement in property
<PAGE>
operations at the Nob Hill Apartments - Phase I, income was recognized from
operations of real estate held for sale during 1993 as compared to a loss
during 1992.
The Partnership received additional participation income in connection with the
1993 loan repayments which resulted in an increase in participation income
during 1993 as compared to 1992.
Increased cash available for investment resulting from the 1993 loan repayments
was the primary reason for an increase in interest income on short term
investments during 1993 as compared to 1992.
As a result of legal fees paid during 1992 relating to the property
foreclosures, as well as lower accounting fees during 1993, administrative
expenses decreased during 1993 as compared to 1992.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of December 31, 1994 when
compared to December 31, 1993. 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, which were partially offset by the
payment of administrative expenses. Investing activities consisted of funds
received from the sale of the Emerald Ridge Apartments and funds used for
improvements to Nob Hill Apartments - Phase I and Huntington Plaza shopping
center. Financing activities included the payment of regular quarterly
distributions to the Limited Partners and the General Partner, the payment of
principal on the underlying loan and mortgage notes payable and the repayment
of the underlying mortgage loans on the Emerald Ridge and Nob Hill - Phase I
apartment complexes.
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 once 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 and 1993, the Nob Hill Apartments - Phase I and
Huntington Plaza shopping center generated positive cash flow. Emerald Ridge
Apartments, which was acquired by the Partnership in October 1993 and sold in
April 1994, generated a marginal deficit during 1993 and positive cash flow
during 1994 prior to being sold. The Normandy Mall and Norwood Plaza shopping
centers generated positive cash flow during 1993, due to the suspension of debt
service payments, prior to being relinquished to the underlying lender in July
1993. Had the required debt service payments been made, the property would have
generated a significant cash flow deficit. 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 December 31, 1994, the occupancy rates
were 90% and 83% 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. See Item 3. Legal Proceedings and
Note 3 of Notes to Financial Statements for additional information.
In April 1994, the Partnership repaid the Nob Hill Apartments - Phase I
underlying mortgage note in the amount of $216,407. See Note 6 of Notes to
Financial Statements for additional information.
In April 1994, the Partnership sold the Emerald Ridge Apartments to an
unaffiliated party for $4,050,000. In connection with the sale, the Partnership
used a portion of the sale proceeds to repay the outstanding principal balance
<PAGE>
of the first mortgage loan of $2,237,451. See Note 9 of Notes to Financial
Statements for additional information.
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 non-accrual
status, modified or restructured.
The Partnership paid distributions totaling $13.00 per Interest in 1994 as
compared to $53.76 per Interest in 1993 and $43.16 per Interest in 1992. See
Statements of Partners' Capital for additional information. Distributions were
comprised of $13.00 per Interest of Cash Flow in 1994; $13.00 per Interest of
Cash Flow and $40.76 per Interest of Original Capital in 1993; and $37.75 per
Interest of Cash Flow and $5.41 per Interest of Original Capital in 1992. The
returns of Original Capital were made from Mortgage Reductions received from
various loan repayments. The level of Cash Flow distributions for 1994 is
consistent with the amount distributed in 1993. The reduction of the Cash Flow
distribution level in 1993 from 1992 can be attributed to the decrease in funds
available for distribution due to the Partnership having received repayments of
a number of loans where proceeds have been distributed to Limited Partners,
thereby creating a smaller asset base from which to generate income. Including
the distribution in January 1995, Limited Partners have received distributions
totaling $1,674.91 per $1,000 Interest to date, of which $1,139.91 represents
Cash Flow from operations and $535.00 represents a return of Original Capital.
In January 1995, the Partnership paid a distribution of $232,944 ($3.25 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution of available Cash Flow for the fourth quarter of 1994.
The level of the regular distribution is consistent with the amount distributed
for the third quarter of 1994. In addition, during January 1995, the
Partnership paid $2,452 to the General Partner as its distributive share of
Cash Flow distributed for the fourth quarter of 1994. The General Partner
anticipates that the level of cash flow distributions will increase in 1995.
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 two years.
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
<PAGE>
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
--------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------
(a) Neither the Registrant nor Balcor Mortgage Advisors, 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.
<PAGE>
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. Executive Compensation
-------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of Balcor Mortgage Advisors, 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 8 of
Notes to Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Neither Balcor Mortgage Advisors nor its officers own any Limited
Partnership Interests of the Registrant.
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
<PAGE>
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
(a & b) See Note 8 of Notes to Financial Statements for information relating to
transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K
-------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership, and the Amended
and Restated Certificate of Limited Partnership of Balcor Pension Investors,
previously filed as Exhibits 3(a) and 3(b), respectively, to Amendment No. 2 to
the Registrant's Registration Statement on Form S-11 dated December 15, 1977
(Registration No. 2-60478) are hereby incorporated herein by reference.
(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 the sale of Emerald Ridge Apartments,
Atlanta, Georgia, 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 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 Schedules: None
<PAGE>
SIGNATURES
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.
BALCOR PENSION INVESTORS
By: /s/Allan Wood
----------------------------------
Allan Wood
Executive Vice President, and Chief Accounting
and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors,
the General Partner
Date: March 30, 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 Mortgage
/s/Thomas E. Meador Advisors, the General Partner March 30, 1995
-------------------- --------------
Thomas E. Meador
Executive Vice President and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage
/s/Allan Wood Advisors, the General Partner March 30, 1995
-------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors:
We have audited the accompanying balance sheets of Balcor Pension Investors (An
Illinois Limited Partnership) as of December 31, 1994 and 1993, and the related
statements of partners' capital, income and expenses and cash flows for each of
the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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 Pension Investors 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.
ERNST & YOUNG LLP
Chicago, Illinois
March 21, 1995
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 6,226,192 $ 5,184,665
Accounts and accrued interest receivable 748,024 220,897
------------- -------------
6,974,216 5,405,562
------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around mortgages 33,466,592 33,466,592
Less:
Loans payable - underlying mortgages 23,768,581 24,246,054
Allowance for potential loan losses 2,222,781 2,222,781
------------- -------------
Net investment in loans receivable 7,475,230 6,997,757
Real estate held for sale (net of allowance
of $1,288,000 in 1993) 6,063,025 9,971,553
------------- -------------
13,538,255 16,969,310
------------- -------------
$ 20,512,471 $ 22,374,872
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 323,430 $ 226,535
Due to affiliates 85,232 39,278
Other liabilities, principally real estate
taxes and escrow deposits 146,918 193,500
Mortgage notes payable 575,301 3,057,594
------------- -------------
Total liabilities 1,130,881 3,516,907
Partners' capital (71,675 Limited Partnership
Interests issued and outstanding) 19,381,590 18,857,965
------------- -------------
$ 20,512,471 $ 22,374,872
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts
-----------------------------------------
General Limited
Total Partner Partners
------------- ------------- -------------
Balance at December 31, 1991 $ 26,530,493 $ (96,565) $ 26,627,058
Cash distributions (A) (3,128,898) (35,403) (3,093,495)
Net loss for the year ended
December 31, 1992 (862,690) (8,627) (854,063)
------------- ------------- -------------
Balance at December 31, 1992 22,538,905 (140,595) 22,679,500
Cash distributions (A) (3,863,057) (9,808) (3,853,249)
Net income for the year ended
December 31, 1993 182,117 1,821 180,296
------------- ------------- -------------
Balance at December 31, 1993 18,857,965 (148,582) 19,006,547
Cash distributions (A) (941,584) (9,808) (931,776)
Net income for the year ended
December 31, 1994 1,465,209 14,652 1,450,557
------------- ------------- -------------
Balance at December 31, 1994 $ 19,381,590 $ (143,738) $ 19,525,328
============= ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1994 1993 1992
------------- ------------- -------------
First Quarter $ 3.25 $ 3.25 $ 28.00
Second Quarter 3.25 3.25 8.66
Third Quarter 3.25 24.01 3.25
Fourth Quarter 3.25 23.25 3.25
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 years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------ ------------
Income:
Interest on loans receivable $ 2,740,650 $ 3,952,185 $ 5,015,043
Less interest on loans
payable - underlying
mortgages 1,696,371 2,301,383 2,398,370
------------- ------------- -------------
Net interest income on loans
receivable 1,044,279 1,650,802 2,616,673
Income (loss) from operations
of real estate held for sale 740,966 664,361 (131,692)
Interest on short-term
investments 270,449 146,395 122,571
Participation income 171,936 54,520
------------- ------------- -------------
Total income 2,055,694 2,633,494 2,662,072
------------- ------------- -------------
Expenses:
Provision for potential losses
on loans, real estate and
accrued interest receivable 1,988,000 2,750,000
Mortgage servicing fees 13,926 21,490 30,929
General Partner management
fees 39,232 39,232 39,232
Administrative 537,327 492,137 704,601
------------- ------------- -------------
Total expenses 590,485 2,540,859 3,524,762
------------- ------------- -------------
Net income (loss) before gain
on foreclosure of property 1,465,209 92,635 (862,690)
Gain on foreclosure of property 89,482
------------- ------------- -------------
Net income (loss) $ 1,465,209 $ 182,117 $ (862,690)
============= ============= =============
Net income (loss) allocated to
General Partner $ 14,652 $ 1,821 $ (8,627)
============= ============= =============
Net income (loss) allocated to
Limited Partners $ 1,450,557 $ 180,296 $ (854,063)
============= ============= =============
Net income (loss) per Limited
Partnership Interest (71,675
issued and outstanding) $ 20.24 $ 2.52 $ (11.92)
============= ============= =============
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 years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Operating activities:
Net income (loss) $ 1,465,209 $ 182,117 $ (862,690)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Provision for potential
losses on loans, real
estate and accrued
interest receivable 1,988,000 2,750,000
Accrued interest income
due at maturity (24,278) (42,757)
Gain on foreclosure of
property (89,482)
Net change in:
Accounts and accrued
interest receivable (527,099) 333,330 6,915
Accounts and accrued
interest payable 96,895 (327,781) 399,424
Due to affiliates 45,954 (18,256) (745,328)
Other liabilities (46,582) 143,151 134,978
------------- ------------- -------------
Net cash provided by
operating activities 1,034,377 2,186,801 1,640,542
------------- ------------- -------------
Investing activities:
Collection of principal
payments on loans receivable 8,056,200 1,145,139
Proceeds from property sale 4,050,000
Costs incurred in connection
with the sale of real estate (121,500)
Costs incurred in connection
with real estate held for sale (340,465) (244,698)
Improvements to property (20,000)
Condemnation proceeds 134,200
------------- ------------- -------------
Net cash provided by
investing activities 3,908,500 7,849,935 900,441
------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners (931,776) (3,853,249) (3,093,495)
Distributions to General
Partner (9,808) (9,808) (35,403)
Principal payments on
underlying loans and
mortgage notes payable (505,908) (645,076) (1,014,998)
Repayment of underlying loans
and mortgage notes payable (2,453,858) (3,709,867)
------------- ------------- -------------
Cash used in financing
activities (3,901,350) (8,218,000) (4,143,896)
------------- ------------- -------------
Net change in cash and cash
equivalents 1,041,527 1,818,736 (1,602,913)
<PAGE>
Cash and cash equivalents at
beginning of period 5,184,665 3,365,929 4,968,842
------------- ------------- -------------
Cash and cash equivalents at
end of period $ 6,226,192 $ 5,184,665 $ 3,365,929
============= ============= =============
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 Policies:
(a) The Partnership records wrap-around mortgage loans at the face amount of
the mortgage instrument which includes the outstanding indebtedness of the
borrower under the terms of the underlying mortgage obligations. The underlying
mortgage obligations are recorded as a reduction of the wrap-around mortgage
loan and the resulting balance represents the Partnership's net advance to the
borrower. The Partnership is responsible for making periodic payments to the
underlying mortgage lender only to the extent that payments as required by the
wrap-around mortgage agreement are received by the Partnership from the
borrower.
(b) Income on loans is recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest is discontinued when a loan
becomes ninety days contractually delinquent or sooner when, in the opinion of
the General Partner, an impairment has occurred in the value of the collateral
property securing the loan. Income on nonaccrual loans or loans which are
otherwise not performing in accordance with their terms is recorded on a cash
basis.
Various loan agreements provide for participation by the Partnership in
increases in value of the collateral property when the loan is repaid or
refinanced. In addition, certain loan agreements allow the Partnership to
receive a percentage of rental income exceeding base amount. Participation
income is reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate owned is reflected in the accompanying
Statements of Income and Expenses net of related direct operating expenses.
(c) Allowances are recorded through charges 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
impairment are made periodically on the basis of performance under the terms of
the loan agreement and assessments of property operations.
When the General Partner believes the likelihood of foreclosure is more than
remote, a loss provision is recorded if the loan balance exceeds the estimated
fair value of the collateral property less costs of disposal. Upon foreclosure,
actual losses are charged to the allowance and the fair value of the property
is transferred to real estate held for sale. Determinations of fair value at
any point in time represent estimations based on many variables which affect
the value of real estate, including economic and demographic conditions. An
allowance for loss is recorded when a decline in the value of the property
owned is believed to be temporary. Impairment in value considered to be
permanent results in the direct writedown of the property's carrying value to
its estimated fair value.
(d) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(e) 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.
(f) Several reclassifications have been made to the previously reported 1993
financial statements to conform with the classification used in 1994 including
the reclassification of "loans in substantive foreclosure" to loans to conform
with the provisions of Statement of Financial Accounting Standards No.114 which
was adopted as of January 1, 1994. These reclassifications have not changed the
<PAGE>
1993 results.
2. Partnership Agreement:
The Partnership was organized in October 1977. The Partnership Agreement
provides for Balcor Mortgage Advisors to be the General Partner and for the
admission of Limited Partners through the sale of Limited Partnership Interests
at $1,000 per Interest up to a maximum of 100,000 Interests, 71,675 of which
were sold prior to January 9, 1981, the termination date of the offering.
The Partnership Agreement provides that the General Partner or an affiliate of
the General Partner will service the Partnership's loans and will receive
mortgage servicing fees at an annual rate equal to 1/4 of 1% of the amounts
advanced by the Partnership and outstanding from time to time. The General
Partner will receive a management fee equal to 4% of the Cash Flow distributed
when and as cash distributions are made to the Limited Partners. The General
Partner is also reimbursed for certain expenses incurred in the day-to-day
operations of the Partnership. In addition, the General Partner may receive an
incentive partnership management fee of 10% of distributed Cash Flow
subordinated on an annual basis to a 14% per annum Non-Cumulative Distribution
to Limited Partners on Adjusted Original Capital. See Note 8 of Notes to
Financial Statements for amounts paid or payable to the General Partner for
these fees and services.
All profits and losses of the Partnership are allocated 99% to the capital
accounts of the Limited Partners and 1% to the capital account of the General
Partner. The General Partner also receives a 1% distributive share of Cash Flow
distributed when and as distributions are made to Limited Partners.
3. Investment in Loans Receivable:
(a) The North Capital Office Building wrap-around loan receivable had a balance
of $30,443,927 at December 31, 1994. Current monthly payments of $207,027 at
8.14% are due through maturity in December 1995. The Partnership may receive
additional payments from the borrower representing participation in the
operating results of the collateral property which exceed specified levels and
a share in the appreciation of the collateral property upon repayment or
refinancing. The underlying loan had a balance of $22,015,362 at December 31,
1994. Current monthly payments of $167,639 at 6.887% are due through maturity
in December 1995.
(b) The Waterford/Ferndale Shopping Center wrap-around loan receivable had a
balance of $3,022,665 at December 31, 1994. The underlying loan payable has a
balance of $1,753,220 at December 31, 1994. These loans 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 is
reviewing its options which may include a sale of the loan to a third party.
Loans are classified as non-accrual as a result of noncompliance with the terms
of the respective loan agreement and are hereinafter referred to as impaired
loans. Net interest income relating to the impaired loans would have been
$247,284 in 1994, $632,370 in 1993 and $802,662 in 1992. Net interest income
included in the accompanying statement of Income and Expenses amounted to
$90,605 in 1994, $574,335 in 1993 and $725,975 in 1992.
The Waterford/Ferndale Shopping Center impaired loan balance of $3,022,665 at
December 31, 1994 includes a related allowance for losses of $569,000. The
average recorded investment in the impaired loan during the year ended December
31, 1994 was $3,022,665.
4. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1994 is described in the
table below:
<PAGE>
1994 1993 1992
------------ ----------- -----------
Loans:
Balance at beginning of
year $ 2,222,781 $ 2,772,781 $ 2,732,781
Provision charged to
income 700,000 40,000
Charge-off of losses (1,250,000)
------------ ----------- -----------
Balance at the end of
the year $ 2,222,781 $ 2,222,781 $ 2,772,781
============ =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $ 1,288,000 $ None $ 1,600,000
Provision charged to
income 1,288,000 2,710,000
Charge-off of losses (1,288,000) (4,310,000)
----------- ----------- -----------
Balance at the end of
the year $ None $ 1,288,000 $ None
=========== =========== ==========
Included in the 1992 charge-off of losses are amounts reflecting the
Partnership's adoption of Statement of Position 92-3, "Accounting for
Foreclosed Assets" which required the Partnership to adjust the carrying
amounts of its real estate held for sale and loans previously classified as in
substantive foreclosure to the lower of fair value of the asset less estimated
costs to sell, or the cost of the asset. This change had no effect on the
results of operations of the Partnership in 1992 since the Partnership had
previously recorded these allowances to reflect declines in the value of the
real estate and loans.
5. Disposition of Property Acquired through Foreclosure:
In February 1991, the Partnership acquired title to the Normandy Mall and
Norwood Plaza shopping centers through foreclosure. These properties had two
underlying mortgage loans from separate lenders. One loan related to one of the
buildings within Normandy Mall and the other underlying loan related to the
remainder of the property. In July 1993, title to these properties, with the
exception of the one building within Normandy Mall discussed above, was
conveyed to the lender pursuant to a settlement agreement. In connection with
the conveyance of title, the Partnership wrote-off the carrying value of the
properties of $2,419,528, the outstanding mortgage loan payable balance of
$2,419,528 and other liabilities of $89,482. The Partnership recognized a gain
for financial statement purposes of $89,482. The Partnership still holds title
to the one building within Normandy Mall. The building has been vacant and,
when title to the remainder of the properties was relinquished in 1993 and cash
flow ceased, the Partnership stopped debt service payments. In January 1995,
the lender commenced foreclosure proceedings to acquire the building.
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1994 and 1993 consisted of the
following:
<PAGE>
Carrying Carrying
Amount of Amount of Current Current Final Estimated
Note at Note at Monthly Interest Maturity Balloon
Property 12/31/94 12/31/93 Payment Rate Date Payment
---------------- -------- -------- -------- -------- ------- ---------
Real estate held for sale:
--------------------------
Apartments:
Nob Hill -
Phase I (A) $ 240,395
Emerald Ridge (B) 2,241,898
Shopping Centers:
Normandy Mall $575,301 575,301 (C) (C) (C) $575,000
---------- ----------
Total $575,301 $3,057,594
========== ==========
(A) In April 1994, the Partnership repaid this loan.
(B) In April 1994, the Partnership sold the property related to this loan to an
unaffiliated party. See Note 10 of Notes to Financial Statement for additional
information.
(C) This first mortgage loan relates to one of the buildings within Normandy
Mall. See Note 5 of Notes to Financial Statements for additional information.
Real estate held for sale with an aggregate carrying value of $575,301 at
December 31, 1994 was pledged as collateral for repayment of this mortgage
loan.
During the years ended December 31, 1994, 1993 and 1992, the
Partnership incurred interest expense on the mortgage notes payable of $72,493,
$718,122 and $535,867 and paid interest expense of $72,493, $559,598 and
$535,867, respectively.
7. Management Agreements:
As of December 31, 1994, both properties owned by the Partnership are under
management agreements with a third-party management company. These management
agreements provide for annual fees of 5% of gross operating receipts for the
residential property and 3% to 6% of gross operating receipts for the
commercial property.
8. 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
------ ------- ------ ------- ------ -------
Mortgage servicing fees $17,477 $1,161 $19,129 $4,712 $31,877 $2,351
Property management fees
(A) 84,507 None 109,753 10,850 86,830 9,616
General Partner manage-
ment fees (B) 39,232 9,808 39,232 9,808 799,343 9,808
Reimbursement of expenses
to the General Partner,
<PAGE>
at cost:
Accounting 64,966 27,448 56,698 4,680 74,546 5,780
Data processing 21,334 3,097 13,913 3,601 15,575 1,244
Investor communica-
tions 23,761 8,320 20,526 1,695 27,010 2,095
Legal 7,586 3,252 3,980 328 5,867 455
Portfolio management 44,197 25,227 39,844 3,426 31,494 2,442
Property sales
administration 137 4,262 26,571 None 3,636 23,114
Other 9,870 2,657 2,156 178 8,189 629
(A) 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.
(B) The amounts paid in 1992 include incentive management fees of $657,723 for
1991, earned by the General Partner in accordance with the Partnership
Agreement since Limited Partners received a 14% Non-Cumulative Distribution in
1991. The incentive management fees equal 10% of total Cash Flow distributed in
1991 and were recognized by the Partnership during the fourth quarter of 1991.
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 $27,195, $18,210 and $16,637 for 1994, 1993 and 1992,
respectively.
9. Real Estate Held for Sale:
The Partnership acquired the Emerald Ridge Apartments and the Huntington Plaza
shopping center through foreclosure in 1993 and the Nob Hill Apartments - Phase
I in 1992. The Partnership recorded the costs of the properties at $5,959,457
and $3,052,556 in 1993 and 1992, respectively. These amounts represented the
outstanding loan balances plus any accrued interest receivable. In addition,
the Partnership increased the basis of the properties by $295,213 and $193,248
in 1993 and 1992, respectively, for certain other receivables, liabilities,
escrows and costs recognized or incurred in connection with the foreclosure. At
the date of foreclosure, the property was transferred to real estate held for
sale at its fair value, net of any allowances previously recorded.
During April 1994, the Partnership sold the Emerald Ridge Apartments to an
unaffiliated party for a sale price of $4,050,000. From the proceeds of the
sale, the Partnership paid $2,237,451 in full satisfaction of the property's
first mortgage loan. The basis of the property was approximately $3,928,500 net
of an allowance of $1,288,000. For financial statement purposes, the
Partnership recognized no gain or loss on the sale of this property.
10. Contingencies:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
this action. While a plaintiff class has been certified, no determinations of
the merits have been made. Although the outcome of these matters is not
presently determinable, it is management's opinion that the ultimate outcome
should not have a material adverse affect on the financial position of the
Partnership. Management of the defendants believes they have meritorious
defenses to contest the claims.
11. Subsequent Event:
<PAGE>
In January 1995, the Partnership paid a distribution of $232,944 ($3.25 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution of available Cash Flow for the fourth quarter of 1994.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6226
<SECURITIES> 0
<RECEIVABLES> 8223
<ALLOWANCES> 3511
<INVENTORY> 0
<CURRENT-ASSETS> 6974
<PP&E> 6063
<DEPRECIATION> 0
<TOTAL-ASSETS> 20512
<CURRENT-LIABILITIES> 1132
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19381
<TOTAL-LIABILITY-AND-EQUITY> 20512
<SALES> 0
<TOTAL-REVENUES> 2056
<CGS> 0
<TOTAL-COSTS> 53
<OTHER-EXPENSES> 537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1465
<INCOME-TAX> 0
<INCOME-CONTINUING> 1465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1465
<EPS-PRIMARY> 20.24
<EPS-DILUTED> 20.24
</TABLE>
