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, 1997
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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 (847) 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, 1997 and December 31, 1996
(UNAUDITED)
ASSETS
1997 1996
-------------- -------------
Cash and cash equivalents $ 2,462,863 $ 3,583,628
Accounts and accrued interest receivable 8,398 69,962
-------------- -------------
2,471,261 3,653,590
-------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around mortgages 30,708,107
Less:
Loan payable - underlying mortgage 21,547,919
Allowance for potential loan loss 8,896,008
-------------
Net investment in loans receivable 264,180
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$ 2,471,261 $ 3,917,770
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 9,100
Due to affiliates $ 56,662 72,488
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Total liabilities 56,662 81,588
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Commitments and contingencies
Limited Partners' capital (71,675
Partnership Interests issued
and outstanding) 2,624,120 4,059,555
General Partner's deficit (209,521) (223,373)
-------------- -------------
Total Partners' capital 2,414,599 3,836,182
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$ 2,471,261 $ 3,917,770
============== =============
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, 1997 and 1996
(UNAUDITED)
1997 1996
-------------- -------------
Income:
Interest on loans receivable $ 163,055
Less interest on loan payable -
underlying mortgage 123,667
-------------
Net interest income on loans
receivable 39,388
Income from operations of real estate
held for sale 359,295
Interest on short-term investments $ 73,633 110,093
Recovery of losses on loans, real
estate and accrued interest receivable 1,000,000 300,000
-------------- -------------
Total income 1,073,633 808,776
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Expenses:
Provision for loss on real estate 575,301
Participation expense related to sale
of real estate 473,394
General Partner management fees 15,095 45,269
Administrative 159,826 294,992
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Total expenses 174,921 1,388,956
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Income (loss) before gain on sale of
real estate and extraordinary item 898,712 (580,180)
Gain on sale of real estate 70,769
-------------- -------------
Income (loss) before extraordinary item 898,712 (509,411)
Extraordinary item:
Gain on forgiveness of debt 575,301
-------------- -------------
Net income $ 898,712 $ 65,890
============== =============
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, 1997 and 1996
(UNAUDITED)
(CONTINUED)
1997 1996
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(Loss) before extraordinary item
allocated to General Partner $ (1,238) $ (5,094)
============== =============
Income (loss) before extraordinary item
allocated to Limited Partners $ 899,950 $ (504,317)
============== =============
Income (loss) before extraordinary item
per Limited Partnership Interest
(71,675 issued and outstanding) $ 12.56 $ (7.03)
============== =============
Extraordinary item allocated to General
Partner None $ 5,753
============== =============
Extraordinary item allocated to Limited
Partners None $ 569,548
============== =============
Extraordinary item per Limited
Partnership Interest (71,675 issued
and outstanding) None $ 7.94
============== =============
Net (loss) income allocated
to General Partner $ (1,238) $ 659
============== =============
Net income allocated to Limited Partners $ 899,950 $ 65,231
============== =============
Net income per Limited Partnership Interest
(71,675 issued and outstanding) $ 12.56 $ 0.91
============== =============
Distributions to General Partner $ 3,772 $ 7,544
============== =============
Settlement Distribution to Limited Partners $ 7,380 None
============== =============
Distributions to Limited Partners $ 2,328,005 $ 1,600,503
============== =============
Distributions per Limited Partnership
Interest $ 32.48 $ 22.33
============== =============
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, 1997 and 1996
(UNAUDITED)
1997 1996
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Income:
Income from operations of real estate
held for sale $ 148,313
Interest on short-term investments $ 26,325 54,399
Recovery of losses on loans, real
estate and accrued interest receivable 1,000,000 300,000
-------------- -------------
Total income 1,026,325 502,712
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Expenses:
Participation expense related to sale
of real estate 473,394
General Partner management fees 30,179
Administrative 102,586 211,997
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Total expenses 102,586 715,570
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Income (loss) before gain on sale
of real estate 923,739 (212,858)
Gain on sale of real estate 70,769
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Net income (loss) $ 923,739 $ (142,089)
============== =============
Net (loss) allocated to General
Partner $ (988) $ (1,421)
============== =============
Net income (loss) allocated to Limited
Partners $ 924,727 $ (140,668)
============== =============
Net income (loss) per Limited Partnership
Interest (71,675 issued and outstanding) $ 12.91 $ (1.96)
============== =============
Distribution to General Partner None $ 3,772
============== =============
Distribution to Limited Partners $ 1,969,630 $ 358,375
============== =============
Distribution per Limited Partnership
Interest $ 27.48 $ 5.00
============== =============
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, 1997 and 1996
(UNAUDITED)
1997 1996
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Operating activities:
Net income $ 898,712 $ 65,890
Adjustments to reconcile net income
to net cash used in or
provided by operating activities:
Gain on forgiveness of debt (575,301)
Gain on sale of real estate (70,769)
Participation expense related to
sale of real estate 473,394
Provision for loss on
real estate 575,301
Recovery of losses on loans,
real estate and accrued
interest receivable (1,000,000) (300,000)
Net change in:
Accounts and accrued interest
receivable 61,564 20,650
Accounts and accrued interest
payable (9,100) (11,186)
Due to affiliates (15,826) 26,838
Other liabilities (66,494)
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Net cash used in or provided
by operating activities (64,650) 138,323
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Investing activities:
Proceeds from sale of
loan receivable 1,000,000
Collection of principal payments
on loan receivable 264,180
Proceeds from sale of real estate 2,093,800
Distribution of proceeds to Second
Mortgagee (167,194)
Costs incurred in connection with sale
of real estate (3,088)
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Net cash provided by investing activities 1,264,180 1,923,518
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<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1997 and 1996
(UNAUDITED)
(CONTINUED)
Financing activities:
Distributions to Limited Partners (2,335,385) (1,600,503)
Distributions to General Partner (3,772) (7,544)
Contribution by General Partner 18,862
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Net cash used in financing activities (2,320,295) (1,608,047)
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Net change in cash and cash equivalents (1,120,765) 453,794
Cash and cash equivalents at beginning
of period 3,583,628 5,159,556
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Cash and cash equivalents at end of period $ 2,462,863 $ 5,613,350
============== =============
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) 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, 1997, and all such adjustments are of a normal and
recurring nature.
(b) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General
Partner and Limited Partners to appropriately reflect their respective
remaining economic interests as provided for in the Partnership Agreement, the
General Partner was allocated a loss for financial statement purposes during
1997.
2. Partnership Termination:
Pursuant to the Partnership Agreement, when all interests in real estate and
loans are sold or otherwise disposed of and the General Partner determines
there are no remaining contingencies, the Partnership will be dissolved. In
June 1997, the Partnership sold its remaining asset, the North Capitol Office
Building loan, which proceeds were distributed to the Limited Partners in July
1997. The Partnership expects to issue a final distribution and be terminated
in September 1997. In the event a contingency arises, the Partnership will not
be terminated and reserves may be held by the Partnership for a longer period
of time.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1997 are:
Paid
----------------------
Six Months Quarter Payable
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Mortgage servicing fees $ 2,540 None $ 3,387
General Partner management fees 15,095 None None
Reimbursement of expenses to
the General Partner, at cost 41,661 $35,475 53,275
The General Partner made a contribution of $18,862 in connection with the
settlement of certain litigation as further discussed in Note 6 of Notes to
Financial Statements.
<PAGE>
4. Sale of Loan Receivable:
In June 1997, the Partnership sold the North Capitol Building wrap-around loan
receivable for a sale price of $1,000,000. The purchaser acquired the loan
receivable subject to the existing underlying loans. Prior to the sale, the
note receivable and underlying loan balances were approximately $30,444,000 and
$21,548,000, respectively. The Partnership recognized a recovery of $1,000,000
and wrote off the previously established allowance for losses related to this
loan of $7,896,008.
5. Repayment of Note Receivable:
In January 1997, the Partnership received $264,180 in full payment of the
promissory note received by the Partnership in connection with the 1996 sale of
the Nob Hill Apartments - Phase I.
6. Settlement of Litigation:
A settlement received final approval by the court in November 1996 in the class
action, Paul Williams and Beverly Kennedy, et. al. v. Balcor Pension Investors,
et. al. upon the terms described in the notice to class members in September
1996. The General Partner made a contribution of $18,862 to the Partnership of
which the plaintiffs' counsel received $1,886 pursuant to the settlement
agreement. In February 1997, the General Partner made a settlement payment of
the remaining $16,976 ($.27 per Interest) to members of the class pursuant to
the settlement. Of the remaining settlement amount, $7,380 was paid to
original investors who held their Limited Partnership Interests at the date of
the settlement and was recorded as a distribution to Limited Partners in the
Financial Statements. The remaining portion of the settlement of $9,596 was
paid to original investors who previously had sold their Interests in the
Partnership. This amount was recorded as an administrative expense in the
Financial Statements. The settlement had no material impact on the Partnership.
7. Subsequent Event:
In July 1997, the Partnership paid a distribution to Limited Partners of
$999,867 ($13.95 per Interest) from Mortgage Reductions received in connection
with the sale of the North Capitol Office Building loan.
<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. During June 1997, the Partnership sold the remaining asset 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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
- ---------------------
During the quarter ended June 30, 1997, the Partnership sold the North Capitol
Office Building loan and recognized a recovery of a previously established loss
allowance related to the loan. As a result, the Partnership recognized an
increase in net income during the six months ended June 30, 1997 as compared to
the same period in 1996, and recognized net income for the quarter ended June
30, 1997 as compared to a net loss for the same period in 1996. Further
discussion of the Partnership's operations is summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to both the six months and quarters ended June 30, 1997 and 1996.
The North Capitol Office Building wrap-around loan was placed on non-accrual
status in December 1995 when the borrower did not make the payment due upon the
maturity of the loan. For non-accrual loans, income was recorded only as cash
payments were received from the borrower. In March 1996, the borrower commenced
proceedings under Chapter 11 of the U.S. Bankruptcy Code. As a result, the
Partnership did not recognize interest income on loans receivable in 1997 or
the quarter ended June 30, 1996. The Partnership sold this loan during June
1997. See Note 4 of Notes to Financial Statements for additional information.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. The Partnership
sold the Huntington Plaza Shopping Center and the Nob Hill Apartments - Phase I
in May 1996 and July 1996, respectively. As a result, operations of real estate
held for sale ceased during 1997.
<PAGE>
Interest income on short-term investments decreased primarily as a result of
lower average cash balances during 1997 as compared to 1996, due to sale
proceeds received in 1996 which were invested in short-term investments prior
to being distributed to Limited Partners.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties, a borrower's ability to
repay a 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. During the
quarter ended June 30, 1997, the Partnership recognized a recovery of
$1,000,000 and wrote off the remaining previously established loss allowance of
$7,896,008 related to the North Capitol Office Building loan. The Partnership
did not recognize any provisions on its loan during 1997. During the six months
ended June 30, 1996, the Partnership recognized a provision of $575,301 in
connection with the foreclosure of the remaining building to which the
Partnership held title in the Normandy Mall, and during the quarter ended June
30, 1996 the Partnership recognized a recovery of $300,000 related to the
Huntington Plaza Shopping Center.
During the second quarter of 1996, the Partnership recognized a gain of $70,769
and participation expense of $473,394 in connection with the sale of Huntington
Plaza Shopping Center.
As a result of the discontinuance of quarterly distributions to Partners from
Cash Flow during the first quarter of 1997, General Partner management fees
decreased during 1997 as compared to 1996.
Legal fees incurred in 1996 relating to the Huntington Plaza Shopping Center
and professional fees incurred in 1996 relating to the valuation of the
Partnership's real estate, resulted in a decrease in administrative expenses
during 1997 when compared to 1996.
During 1996, the Partnership recognized an extraordinary gain on forgiveness of
debt of $575,301 in connection with the foreclosure of the remaining building
to which it held title in the Normandy Mall.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership as of June 30, 1997 decreased by
approximately $1,121,000 when compared to December 31, 1996, primarily due to
the distribution of cash reserves to Limited Partners in April 1997 which was
partially offset by the $1,000,000 received from the sale of the North Capitol
Office Building loan. The Partnership used cash of approximately $65,000 in
operating activities. The revenue generated by interest income on short-term
investments was fully offset by the payment of administrative expenses and
General Partner management fees. Cash flow of approximately $1,264,000 from
<PAGE>
investing activities was generated from the sale of the North Capitol Office
Building loan and the repayment of the Nob Hill Apartments - Phase I note
receivable. The Partnership's financing activities consisted primarily of the
payment of distributions to the Partners totaling approximately $2,339,000 and
a contribution by the General Partner of approximately $19,000 in connection
with the settlement of certain litigation.
In June 1997, the Partnership sold the North Capitol Office Building
wrap-around loan for $1,000,000. The purchaser acquired the loan receivable
subject to the existing underlying loans. The net proceeds were distributed to
the Limited Partners in July 1997. See Note 4 of Notes to Financial Statements
for additional information.
In July 1997, the Partnership made a distribution of $999,867 ($13.95 per
$1,000 Interest) to the holders of Limited Partnership Interests from Mortgage
Reductions received in connection with the sale of the North Capitol Office
Building loan. To date, Limited Partners have received cumulative distributions
of $1,861.51 per $1,000 Interest, of which $1,216.41 represents Cash Flow from
operations and $645.10 represents a return of Original Capital.
In February 1997, the General Partner made a settlement payment of $16,976
($.27 per $1,000 Interest) to members of the class pursuant to the settlement
approved by the court in November 1996 in the Paul Williams and Beverly Kennedy
et. al. vs. Balcor Pension Investors, et. al. class action lawsuit. The General
Partner made a contribution of $18,862 to the Partnership of which the
plaintiffs' counsel received $1,886 pursuant to the settlement agreement. Of
the remaining settlement amount, $7,380 was paid to original investors who held
their Limited Partnership Interests at the date of the settlement and was
recorded as a distribution to Limited Partners in the Financial Statements. The
remaining portion of the settlement of $9,596 was paid to original investors
who previously had sold their Interests in the Partnership. This amount was
recorded as an administrative expense in the Financial Statements.
Pursuant to the Partnership Agreement, when all interests in real estate and
loans are sold or otherwise disposed of and the General Partner determines
there are no remaining contingencies, the Partnership will be dissolved. In
June 1997, the Partnership sold its remaining asset, the North Capitol Office
Building loan, which proceeds were distributed to the Limited Partners in July
1997. The Partnership expects to issue a final distribution and be terminated
in September 1997. In the event a contingency arises, the Partnership will not
be terminated and reserves may be held by the Partnership for a longer period
of time.
<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) Material Contracts:
(a)(i) Agreement of Sale and attachment thereto; First Amendment to Agreement
of Sale; Form of Junior Mortgage and Security Agreement; Form of Principal
Note; and Satisfaction and Release, relating to the sale of Huntington Plaza,
Huntington, Indiana, previously filed as Exhibits (2)(a), (b), (c), (d) and (e)
to the Registrant's Current Report on Form 8-K dated April 26, 1996 are
incorporated herein by reference.
(a)(ii) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of Huntington Plaza, Huntington, Indiana, previously filed as Exhibit
(10)(b) to the Registrant's Report on Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.
(b) Agreement of Sale and attachment thereto relating to the sale of Nob Hill
Apartments - Phase I, previously filed as Exhibit 2(a) to the Registrant's
Current Report on Form 8-K dated June 4, 1996, is incorporated herein by
reference.
(c) Loan Purchase and Sale Agreement relating to the sale of the Partnership's
interest in a loan collateralized by the North Capitol Office Buildings,
Washington, D.C. previously filed as Exhibit 2 to the Registrant's Current
Report on Form 8-K dated June 9, 1997, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ended
June 30, 1997 is attached hereto.
(b) Reports on Form 8-K:
A current Report on Form 8-K dated June 9, 1997 was filed reporting the sale of
the Partnership's interest in the loan collateralized by the North Capitol
Office Buildings, Washington, D.C.
<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/ Jayne A. Kosik
------------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting
Officer) of Balcor Mortgage
Advisors, the General Partner
Date: August 7, 1997
-----------------
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2463
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2471
<PP&E> 0
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0
0
<COMMON> 0
<OTHER-SE> 2414
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<TOTAL-REVENUES> 1074
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