SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
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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 0-10225
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BALCOR PENSION INVESTORS-II
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(Exact name of registrant as specified in its charter)
Illinois 36-3114027
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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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BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(UNAUDITED)
ASSETS
1998 1997
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Cash and cash equivalents $ 1,266,188 $ 2,007,987
Cash and cash equivalents - Early Investment
Incentive Fund 3,884,202 3,659,687
Accounts and accrued interest receivable 22,160 37,089
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$ 5,172,550 $ 5,704,763
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,219 $ 24,414
Due to affiliates 39,045 27,638
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Total liabilities 44,264 52,052
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Commitments and contingencies
Limited Partners' capital (85,010
Interests issued) 10,143,893 10,617,808
Less Interests held by Early Investment
Incentive Fund (8,136 in 1998 and 1997) (5,015,607) (5,015,607)
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5,128,286 5,602,201
General Partner's capital None 50,510
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Total partners' capital 5,128,286 5,652,711
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$ 5,172,550 $ 5,704,763
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1998 and 1997
(UNAUDITED)
1998 1997
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Income:
Interest on short-term investments $ 204,161 $ 307,865
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Total income 204,161 307,865
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Expenses:
Loss from operations of real
estate held for sale 150,504
Administrative 129,970 227,415
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Total expenses 129,970 377,919
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Net income (loss) $ 74,191 $ (70,054)
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Net loss allocated to
General Partner None $ (5,254)
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Net income (loss) allocated to
Limited Partners $ 74,191 $ (64,800)
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Net income (loss) per average number of
Limited Partnership Interests
outstanding (76,874 in 1998
in 1997) - Basic and Diluted $ 0.97 $ (0.84)
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Distributions to General Partner $ 50,510 $ 336,144
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Settlement distribution to Limited Partners None $ 13,828
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Distributions to Limited Partners $ 548,106 $ 13,329,966
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Distributions per Limited Partnership
Interest outstanding $ 7.13 $ 173.40
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1998 and 1997
(UNAUDITED)
1998 1997
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Income:
Income from operations of real estate
held for sale $ 21,664
Interest on short-term investments $ 67,949 74,944
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Total income 67,949 96,608
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Expenses:
Administrative 33,267 57,861
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Total expenses 33,267 57,861
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Net income $ 34,682 $ 38,747
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Net income allocated to
General Partner None $ 2,906
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Net income allocated to
Limited Partners $ 34,682 $ 35,841
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Net income per average number of Limited
Partnership Interests outstanding
(76,874 in 1998 and 1997)
-Basic and Diluted $ 0.46 $ 0.47
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1998 and 1997
(UNAUDITED)
1998 1997
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Operating activities:
Net income (loss) $ 74,191 $ (70,054)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activites:
Net change in:
Accounts and accrued interest
receivable 14,929 675,645
Accounts payable (19,195) (106,663)
Due to affiliates 11,407 (16,176)
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Net cash provided by operating activities 81,332 482,752
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Financing activities:
Distributions to Limited Partners (548,106) (13,343,794)
Distributions to General Partner (50,510) (336,144)
Contribution by General Partner 38,963
Increase in cash and cash equivalents -
Early Investment Incentive Fund (224,515) (1,643,524)
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Net cash used in financing activities (823,131) (15,284,499)
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Net change in cash and cash equivalents (741,799) (14,801,747)
Cash and cash equivalents
at beginning of year 2,007,987 16,852,472
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Cash and cash equivalents at end of
period $ 1,266,188 $ 2,050,725
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(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 financial statements for the
nine months and quarter ended September 30, 1998, and all such adjustments are
of a normal and recurring nature.
(b) For financial statement purposes, the capital accounts of the General
Partner and Limited Partners have been adjusted to appropriately reflect their
remaining economic interests as provided for in the Partnership Agreement.
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. The Partnership sold its remaining five properties and loan
receivable during 1996. The Partnership has retained a portion of the cash from
the property sales to satisfy obligations of the Partnership as well as
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the lawsuit
discussed in Note 4 of Notes to Financial Statements. Due to this litigation,
the Partnership will not be dissolved and reserves will be held by the
Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
3. Transactions with Affiliates:
Fees and expenses, paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1998 were:
Paid
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Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 23,160 $ 8,655 $ 39,045
The General Partner made a contribution of $38,963 to the Partnership during
1997 in connection with the settlement of certain litigation.
<PAGE>
4. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal, which is pending.
It is not determinable at this time whether or not an unfavorable decision in
this action would have a material adverse impact on the financial position of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-II (the "Partnership") is a limited partnership formed
in 1981 to invest in wrap-around mortgage loans and, to a lesser extent, in
other junior mortgage loans and first mortgage loans. The Partnership raised
$85,010,000 through the sale of Limited Partnership Interests and used these
proceeds to originally fund thirty-three loans. Proceeds from the loan
repayments were used to fund three additional mortgage loans. As of September
30, 1998, the Partnership has no loans outstanding or properties remaining 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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership recognized net income during the nine months ended September
30, 1998 as compared to a net loss during the same period in 1997 primarily due
to the payment in 1997 of additional expenditures related to certain of the
Partnership's properties sold in 1996. The Partnership recognized net income
during the quarters ended September 30, 1998 and 1997 primarily due to interest
income on short-term investments exceeding administrative expenses in both
quarters. Further discussion of the Partnership's operations is summarized
below.
1998 Compared to 1997
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Unless otherwise noted, discussions of fluctuations between 1998 and 1997 refer
to both the nine months and quarters ended September 30, 1998 and 1997.
Due to higher average cash balances in 1997 as a result of the investment of
proceeds received in connection with the 1996 property and loan sales prior to
distribution to Limited Partners in 1997, interest income on short-term
investments was higher during 1997 as compared to 1998.
During the nine months ended September 30,1997, the Partnership paid additional
expenditures related to certain of the properties sold during 1996, which
resulted in a loss from operations of real estate held for sale. In the third
quarter of 1997, the Partnership received refunds from vendors related to
certain of the properties sold during 1996 which resulted in income from
operations of real estate held for sale.
<PAGE>
Primarily due to lower accounting and professional fees, administrative
expenses decreased during 1998 as compared to 1997. In addition, during
February 1997, the General Partner made a payment relating to the settlement of
certain litigation to original investors who previously sold their Interests in
the Partnership, which was accounted for as an administrative expense.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $742,000 as of
September 30, 1998 when compared to December 31, 1997 primarily due to the
distribution made to Limited Partners in January 1998 from remaining available
Cash Flow reserves. The Partnership generated cash flow totaling approximately
$81,000 from its operating activities primarily as a result of the interest
income earned on its short-term investments, net of the payment of
administrative expenses. The Partnership used cash of approximately $823,000 to
fund its financing activities which consisted of the payment of distributions
to the Partners and an increase in cash principally from interest income earned
on the Early Investment Incentive Fund.
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. The Partnership sold its remaining five properties and one loan
receivable during 1996. The Partnership has retained a portion of the cash from
these sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership including, but not limited to, the lawsuit discussed in Note 4 of
Notes to the Financial Statements. Due to this litigation, the Partnership will
not be dissolved and the reserves will be held by the Partnership until the
conclusion of all contingencies. There can be no assurances as to the time
frame for conclusion of these contingencies.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of September 30, 1998, there was 8,136 Interests and cash
of $3,884,202 held in the Early Investment Incentive Fund.
To date, Limited Partners have received distributions totaling $1,750.21 per
$1,000 Interest. Of this amount, $1,101.08 represents Cash Flow from operations
and $649.13 represents a return of Original Capital. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Amounts allocated to the Early Investment
Incentive Fund will also be distributed at that time.
<PAGE>
BALCOR PENSION INVESTORS-II
(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 previously filed as Exhibit 4(a) to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
May 7, 1981 (Registration No. 2-70841) 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. 0-10225)
is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1998.
<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-II
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
Senior Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors, the General
Partner
Date: Nov. 3, 1998
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<PAGE>
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0
0
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