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 March 31, 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
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(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
March 31, 1997 and December 31, 1996
(UNAUDITED)
ASSETS
1997 1996
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Cash and cash equivalents $ 3,488,203 $ 3,583,628
Accounts and accrued interest receivable 42,481 69,962
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3,530,684 3,653,590
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Investment in loans receivable:
Loans receivable - wrap-around mortgage 30,443,927 30,708,107
Less:
Loans payable - underlying mortgage 21,547,919 21,547,919
Allowance for potential loan loss 8,896,008 8,896,008
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Net investment in loans receivable 0 264,180
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$ 3,530,684 $ 3,917,770
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 9,100
Due to affiliates $ 70,194 72,488
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Total liabilities 70,194 81,588
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Commitments and contingencies
Limited Partners' capital (71,675
Partnership Interests issued
and outstanding) 3,669,023 4,059,555
General Partner's deficit (208,533) (223,373)
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Total partners' capital 3,460,490 3,836,182
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$ 3,530,684 $ 3,917,770
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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 March 31, 1997 and 1996
(UNAUDITED)
1997 1996
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Income:
Interest on loans receivable $ 163,055
Less interest on loans payable -
underlying mortgages 123,667
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Net interest income on loans
receivable 39,388
Income from operations of real estate
held for sale 210,982
Interest on short-term investments $ 47,308 55,694
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Total income 47,308 306,064
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Expenses:
Provision for potential losses on
real estate 575,301
General Partner management fees 15,095 15,090
Administrative 57,240 82,995
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Total expenses 72,335 673,386
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(Loss) before extraordinary item (25,027) (367,322)
Extraordinary item:
Gain on forgiveness of debt 575,301
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Net (loss) income $ (25,027) $ 207,979
============== ==============
(Loss) before extraordinary item
allocated to General Partner $ (250) $ (3,673)
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(Loss) before extraordinary item
allocated to Limited Partners $ (24,777) $ (363,649)
============== ==============
(Loss) before extraordinary item
per Limited Partnership Interest
(71,675 issued and outstanding) $ (0.35) $ (5.07)
============== ==============
Extraordinary item allocated to General
Partner None $ 5,753
============== ==============
Extraordinary item allocated to Limited
Partners None $ 569,548
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<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1997 and 1996
(UNAUDITED)
(Continued)
Extraordinary item per Limited
Partnership Interest (71,675 issued
and outstanding) None $ 7.94
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Net (loss) income allocated
to General Partner $ (250) $ 2,080
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Net (loss) income allocated
to Limited Partners $ (24,777) $ 205,899
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Net (loss) income per Limited Partnership
Interest (71,675 issued and outstanding) $ (0.35) $ 2.87
============== ==============
Distribution to General Partner $ 3,772 $ 3,772
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Settlement Distribution to Limited Partners $ 7,380 None
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Distribution to Limited Partners $ 358,375 $ 1,242,128
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Distribution per Limited Partnership
Interest $ 5.00 $ 17.33
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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 quarters ended March 31, 1997 and 1996
(UNAUDITED)
1997 1996
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Operating activities:
Net (loss) income $ (25,027) $ 207,979
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Gain on forgiveness of debt (575,301)
Provision for potential losses on
real estate 575,301
Net change in:
Accounts and accrued interest
receivable 27,481 (16,476)
Accounts and accrued interest payable (9,100) 59,124
Due to affiliates (2,294) 5,478
Other liabilities 48,275
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Net cash (used in) provided by
operating activities (8,940) 304,380
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Investing activities:
Collection of principal payments on
loans receivable 264,180
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Cash provided by investing activities 264,180
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Financing activities:
Distribution to Limited Partners (365,755) (1,242,128)
Distribution to General Partner (3,772) (3,772)
Contribution by General Partner 18,862
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Net cash used in financing activities (350,665) (1,245,900)
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Net change in cash and cash equivalents (95,425) (941,520)
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 $ 3,488,203 $ 4,218,036
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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:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1997, and all such adjustments are of a normal and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. While it is the Partnership's intent to complete the disposition
of its remaining asset, the bankruptcy of the borrower on the North Capitol
Office Building loan may prevent the loan from being repaid. The timing of the
termination of the Partnership and final distribution of cash will also depend
upon the nature and extent of liabilities and contingencies which exist or may
arise. The Partnership has retained a portion of the cash from property sales
to satisfy obligations of the Partnership as well as establish a reserve for
contingencies. Such contingencies may include legal and other fees stemming
from litigation involving the Partnership. In the absence of any contingency,
the reserves will be paid within twelve months of the disposition of the
Partnership's interest in the North Capitol Office Building. In the event a
contingency arises, 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
quarter ended March 31, 1997 are:
Paid Payable
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Mortgage servicing fees $ 2,540 $ 847
General Partner management fees 15,095 None
Reimbursement of expenses to
the General Partner, at cost 6,186 69,347
The General Partner made a contribution of $18,862 in connection with the
settlement of certain litigation as further discussed in Note 4 of Notes to
Financial Statements.
<PAGE>
4. 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
$16,976 ($.27 per Interest) to members of the class pursuant to the settlement.
Of the total 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.
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. Subsequent Event:
In April 1997, the Partnership paid a distribution to Limited Partners from
cash reserves of $1,969,630 ($27.48 per Interest).
<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 one loan 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
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Income from operations of the Huntington Plaza Shopping Center and Nob Hill
Apartments - Phase I ceased due to the sale of the properties in 1996. As a
result, the Partnership recognized a net loss during the quarter ended March
31, 1997 as compared to net income during the same period in 1996. Further
discussion of the Partnership's operations is summarized below.
1997 Compared to 1996
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Discussions of fluctuations between 1997 and 1996 refer to the quarters ended
March 31, 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 is recorded only as cash
payments are received from the borrower. In March 1996, the borrower
discontinued the monthly payments required on the wrap-around loan pursuant to
a forbearance agreement. As a result, the Partnership did not recognize
interest income on loans receivable in 1997. The funds advanced by the
Partnership for this loan total approximately $4,100,000, representing 6.4% of
original funds advanced. This loan is fully reserved.
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.
Interest income on short-term investments decreased primarily as a result of
lower average cash balances in 1997 as compared to 1996, due to a special
distribution made in January 1996.
<PAGE>
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. The Partnership
did not recognize any provisions on its remaining loan during 1997 or 1996. The
Partnership recognized a provision of $575,301 during 1996 in connection with
the foreclosure of the remaining building to which the Partnership held title
in the Normandy Mall.
Legal fees, professional fees and other expenses incurred in 1996 relating to
litigation for Normandy Mall resulted in a decrease in administrative expenses
during 1997 when compared to 1996.
During 1996, the Partnership recognized a $575,301 extraordinary gain on
forgiveness of debt in connection with the foreclosure of the remaining
building to which it held title in the Normandy Mall.
Liquidity and Capital Resources
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The cash position of the Partnership as of March 31, 1997 decreased by
approximately $95,000 when compared to December 31, 1996. The Partnership used
cash of approximately $9,000 for operating activities. The revenue generated
primarily 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 $264,000 from investing activities was generated by 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 $370,000 and a
contribution by the General Partner of approximately $19,000 in connection with
the settlement of certain litigation.
In April 1997, the Partnership made a distribution of $1,969,630 ($27.48 per
$1,000 Interest) from cash reserves to the holders of Limited Partnership
Interests. No additional quarterly distributions are expected. To date,
Limited Partners have received cumulative distributions of $1,847.56 per $1,000
Interest, of which $1,216.41 represents Cash Flow from operations and $631.15
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 total 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.
<PAGE>
While it is the Partnership's intent to complete the disposition of its
remaining asset, the bankruptcy of the borrower on the North Capitol Office
Building loan may prevent the loan from being repaid. The timing of the
termination of the Partnership and final distribution of cash will also depend
upon the nature and extent of liabilities and contingencies which exist or may
arise. The Partnership has retained a portion of the cash from property sales
to satisfy obligations of the Partnership as well as establish a reserve for
contingencies. Such contingencies may include legal and other fees stemming
from litigation involving the Partnership. In the absence of any contingency,
the reserves will be paid within twelve months of the disposition of the
Partnership's interest in the North Capitol Office Building. In the event a
contingency arises, reserves may be held by the Partnership for a longer period
of time.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
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) 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.
(27) Financial Data Schedule of the Registrant for the three month period ended
March 31, 1997 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1997.
<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
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors, the General Partner
By: /s/ Jayne A. Kosik
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Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting
Officer) of Balcor Mortgage
Advisors, the General Partner
Date: May 8, 1997
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<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3488
<SECURITIES> 0
<RECEIVABLES> 42
<ALLOWANCES> 8896
<INVENTORY> 0
<CURRENT-ASSETS> 3531
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3531
<CURRENT-LIABILITIES> 70
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3461
<TOTAL-LIABILITY-AND-EQUITY> 3531
<SALES> 0
<TOTAL-REVENUES> 47
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 72
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (25)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
