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, 1994
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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 0-11128
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BALCOR PENSION INVESTORS-III
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(Exact name of registrant as specified in its charter)
Illinois 36-3164211
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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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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-III
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(UNAUDITED)
ASSETS
1994 1993
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Cash and cash equivalents $ 11,873,394 $ 10,156,355
Cash and cash equivalents - Early
Investment Incentive Fund 7,644 25,783
Escrow deposits 415,953 375,028
Escrow deposits - restricted 867,001 1,238,638
Accounts and accrued interest receivable 101,735 526,698
Deferred expenses, net of accumulated
amortization of $24,995 in 1994 and
$15,622 in 1993 37,493 46,866
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13,303,220 12,369,368
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Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 82,102,424 102,095,930
Less:
Loans payable - underlying mortgages 42,835,091 47,870,972
Allowance for potential loan losses 4,713,959 8,129,365
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Net investment in loans receivable 34,553,374 46,095,593
Real estate held for sale 23,544,797 17,369,132
Investment in joint ventures with affiliates 6,068,064 5,734,184
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64,166,235 69,198,909
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$ 77,469,455 $ 81,568,277
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 131,998 $ 222,483
Due to affiliates 131,572 62,601
Other liabilities, principally real estate
taxes and escrow deposits 1,530,048 1,823,666
Security deposits 130,182 73,750
Mortgage notes payable 7,220,250 8,436,279
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Total liabilities 9,144,050 10,618,779
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Partners' capital (237,476 Limited
Partnership Interests issued) 72,886,439 75,130,101
Less Interests held by Early Investment
Incentive Fund (10,043 at September 30,
1994 and 8,892 at December 31, 1993) (4,561,034) (4,180,603)
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68,325,405 70,949,498
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$ 77,469,455 $ 81,568,277
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
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Income:
Interest on loans receivable $ 7,732,045 $ 7,809,711
Less interest on loans payable -
underlying mortgages 3,258,431 3,685,790
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Net interest income on loans receivable 4,473,614 4,123,921
Income from operations of real estate
held for sale 615,746 689,782
Participation in income (loss) of joint
ventures with affiliates 374,327 (890,063)
Interest on short-term investments 344,459 184,707
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Total income 5,808,146 4,108,347
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 300,000 2,220,000
Mortgage servicing fees 67,943 78,543
Administrative 601,308 538,304
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Total expenses 969,251 2,836,847
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Net income before net gain on sales
of real estate 4,838,895 1,271,500
Net gain on sales of real estate 119,842 147,992
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Net income $ 4,958,737 $ 1,419,492
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Net income allocated to General Partner $ 371,905 $ 106,462
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Net income allocated to Limited Partners $ 4,586,832 $ 1,313,030
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Net income per average number of Limited
Partnership Interests outstanding
(228,870 in 1994 and 229,206 in 1993) $ 20.04 $ 5.73
============= =============
Distributions to General Partner $ 267,161 $ 296,844
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Distributions to Limited Partners $ 6,935,238 $ 3,440,532
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Distributions per Limited Partnership
Interest outstanding $ 30.35 $ 15.00
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
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Income:
Interest on loans receivable $ 2,182,554 $ 2,568,952
Less interest on loans payable -
underlying mortgages 1,028,447 1,221,852
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Net interest income on loans receivable 1,154,107 1,347,100
Income (loss) from operations of real estate
held for sale 67,279 (130,609)
Participation in income (loss) of joint
ventures with affiliates 122,542 (95,097)
Interest on short-term investments 148,262 74,646
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Total income 1,492,190 1,196,040
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 300,000 500,000
Mortgage servicing fees 18,745 26,125
Administrative 177,300 170,800
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Total expenses 496,045 696,925
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Net income before net gain on sales
of real estate 996,145 499,115
Net gain on sales of real estate 119,842 147,992
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Net income $ 1,115,987 $ 647,107
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Net income allocated to General Partner $ 83,699 $ 48,533
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Net income allocated to Limited Partners $ 1,032,288 $ 598,574
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Net income per average number of Limited
Partnership Interests outstanding
(228,506 in 1994 and 228,972 in 1993) $ 4.52 $ 2.61
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Distribution to General Partner $ 79,159 $ 98,948
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Distribution to Limited Partners $ 912,049 $ 1,145,765
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Distribution per Limited Partnership
Interest outstanding $ 4.00 $ 5.00
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
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Operating activities:
Net income $ 4,958,737 $ 1,419,492
Adjustments to reconcile net income to net
cash provided by operating activities:
Net gain on sales of real estate (119,842) (147,992)
Participation in (income) loss of joint
ventures with affiliates (374,327) 890,063
Provision for potential losses on
loans, real estate and accrued
interest receivable 300,000 2,220,000
Amortization of deferred expenses 9,373 68,678
Accrued interest income due at maturity (50,875)
Net change in:
Escrow deposits (40,925) (200,725)
Escrow deposits - restricted 371,637 (148,522)
Accounts and accrued interest
receivable 388,888 183,928
Accounts payable (90,485) (591,597)
Due to affiliates 68,971 11,862
Other liabilities (189,570) 421,318
Security deposits 56,432 (1,509)
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Net cash provided by operating activities 5,338,889 4,074,121
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Investing activities:
Capital contributions to joint venture
partners - affiliates (78,147) (170,723)
Distributions from joint venture
partners - affiliates 118,594 4,294
Loan fundings (12,379)
Collection of principal payments on
loans receivable 4,900,471 730,992
Additions to real estate (107,172)
Proceeds from sales of real estate 1,200,000 2,600,000
Costs incurred in connection with sales
of real estate (49,586) (118,431)
Costs incurred in connection with real
estate acquired through foreclosure (40,471)
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Net cash provided by investing activities 6,050,861 2,926,581
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Financing activities:
Distributions to Limited Partners (6,935,238) (3,440,532)
Distributions to General Partner (267,161) (296,844)
Decrease in cash and cash equivalents -
Early Investment Incentive Fund 18,139 70,333
Payment of deferred expenses (172,580)
Repurchase of Limited Partnership Interests (380,431) (290,768)
Principal payments on underlying
loans payable (891,991) (923,503)
Repayment of mortgage note payable (2,236,117)
Proceeds from issuance of mortgage
note payable 4,298,400
Principal payments on mortgage notes payable (1,216,029) (261,702)
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Net cash used in financing activities (9,672,711) (3,253,313)
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Net change in cash and cash equivalents 1,717,039 3,747,389
Cash and cash equivalents at beginning of year 10,156,355 6,579,221
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Cash and cash equivalents at end of period $ 11,873,394 $ 10,326,610
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Reclassifications have been made to the previously reported 1993 statements in
order to provide comparability with the 1994 statements. These
reclassifications have not changed the 1993 results. In the opinion of
management, all adjustments necessary for a fair presentation have been made to
the accompanying statements for the nine months and quarter ended September 30,
1994 and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on mortgage notes payable of $610,968 and
$825,638, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
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Nine Months Quarter Payable
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Mortgage servicing fees $ 63,951 $13,330 $12,428
Property management fees 183,782 72,697 24,281
Reimbursement of expenses to
the General Partner, at cost:
Accounting 64,757 45,413 21,259
Data processing 15,092 9,778 27,697
Investor communication 18,642 13,073 4,109
Legal 13,561 9,510 9,873
Portfolio management 72,656 43,404 30,497
Other 7,747 5,433 1,428
4. Real Estate Held for Sale:
In July 1994, the Partnership received title to The Woods Apartments. The
Partnership recorded the basis of the property at $7,198,171 which is equal to
the outstanding loan balance plus accrued interest receivable. In addition, the
Partnership decreased the basis of the property by $32,405 which represented
escrows, net of receivables and increased the basis by $40,471 which
represented costs incurred in connection with the foreclosure.
5. Loan Receivable Prepayment:
In June 1994, the borrower of the $12,767,949 wrap-around loan collateralized
by the Continental Park Office Building located in El Segundo, California
prepaid the loan at a discount. The Partnership received proceeds of
approximately $4,873,085 and the borrower repaid the $4,143,890 underlying
mortgage loan. Allowances for potential loan losses of $3,715,406 were written
off in connection with the prepayment of the loan. The amount written off
consisted of the remaining wrap-around loan receivable balance, net of the
underlying mortgage payable balance and escrow liabilities of $35,568.
6. Sale of Real Estate:
In September 1994, the Partnership sold the Orchards Office Building located in
Loveland, Colorado in an all cash sale for $1,200,000. The carrying value of
the property was $1,030,572 and the Partnership incurred selling expenses of
$49,586. For financial statement purposes, the Partnership recognized a gain of
$119,842 on the sale during the third quarter of 1994. The Partnership
continues to own the Orchards Shopping Center.
7. Subsequent Event:
In October 1994, the Partnership paid $949,904 to Limited Partners representing
the regular quarterly distribution of available Cash Flow of $4.00 per Interest
for the third quarter of 1994.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors - III (the "Partnership") is a limited partnership
formed in 1982 to invest in wrap-around mortgage loans and, to a lesser extent,
other junior mortgage loans and first mortgage loans. The Partnership raised
$118,738,000 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-two loans. As of September 30, 1994, eight loans
remain outstanding in the Partnership's portfolio. In addition, the Partnership
was operating four properties held for sale and holds minority joint venture
interests in two properties.
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 1993 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's provision for potential losses on loans, real estate and
accrued interest receivable decreased during the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993. The Partnership
recognized a gain on the sale of the Orchards Office Building during the third
quarter of 1994 and a net gain on the sales of the Riverview Office Building
and the vacant land adjacent to the Orchards Shopping Center during the third
quarter of 1993. In addition, during the second quarter of 1993, the
Partnership recognized its share of a loss provision related to a decline in
the fair value of the Brookhollow/Stemmons Office Building (in which it holds a
minority joint venture interest). The combined effect of these events resulted
in an increase in net income for the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993. Further discussion of the
Partnership's operations is summarized below.
1994 Compared to 1993
- - ---------------------
Increased interest income was received from the borrowers of the loans
collateralized by the Bannockburn Executive Plaza and Carmel on Providence and
The Woods apartment complexes during the nine months ended September 30, 1994.
In addition, the Partnership purchased the underlying loan collateralized by
The Woods Apartments in December 1993 which reduced interest expense on loans
payable. As a result, net interest income on loans receivable increased during
the nine months ended September 30, 1994 as compared to the same period in
1993. The prepayment of the Airport III Industrial Park and the Continental
Park Office Building loans in November 1993 and June 1994, respectively,
partially offset the above increase and resulted in a decrease in net interest
income on loans receivable during the quarter ended September 30, 1994 as
compared to the same period in 1993.
The Partnership has two non-accrual loans at September 30, 1994 which are
collateralized by Carmel on Providence Apartments, located in Charlotte, North
Carolina and Bannockburn Executive Plaza, located in Bannockburn, Illinois. The
funds advanced by the Partnership for these two loans total approximately
$6,200,000, representing approximately 6% of original funds advanced. For
non-accrual loans, income is recorded only as cash payments are received from
the borrower. During the nine months ended September 30, 1994, the Partnership
received cash payments of net interest income totaling approximately $171,000
on the Carmel on Providence loan. The Partnership would have received
approximately $215,000 of net interest income under the terms of the original
loan agreement. The loan receivable and underlying first mortgage loan
collateralized by the Bannockburn Executive Plaza matured in January 1994.
However, the borrower filed for protection under the U.S. Bankruptcy Code in
November 1993 and did not pay either amount due. The Partnership has received
cash payments of net interest income totaling approximately $458,000 during
1994 while the Partnership, the holder of the underlying loan and the borrower
negotiate an acceptable plan of reorganization.
An allowance for potential losses provides for potential losses on loans and is
based upon past loan loss experience for similar loans and prevailing economic
conditions in the market in which the collateral properties are located and the
General Partner's analysis of specific loans in the Partnership's portfolio.
The allowance has been increased by $300,000 during the third quarter of 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 September 30, 1994. During the second
quarter of 1994, allowances of $3,715,406 related to the Continental Park
Office Building loan were written off in connection with the prepayment of the
loan at a discount.
Operations of real estate held for sale represent the net property operations
of those properties acquired by the Partnership through foreclosure. At
September 30, 1994, the Partnership was operating the Candlewyck and The Woods
apartment complexes and the Crossings and Orchards shopping centers which
represent approximately 14% of original funds advanced. The Riverview Office
Building and the Villa Verde Apartments, which were generating income, were
sold in September and November 1993, respectively. In connection with the sale
of the Riverview Office Building, the Partnership wrote-off accruals for
previous effective rental income adjustments which resulted in a loss from
operations for the third quarter of 1993. Operations at the Crossings Shopping
Center improved during 1994 due to increased rental income and decreased
operating expenses. Operating expenses decreased at the Orchards Shopping
Center due to the completion of roof repairs during the third quarter of 1993.
In addition, the Partnership acquired The Woods Apartments in July 1994, which
generated income. The combined effect of these events resulted in a decrease in
income from real estate held for sale during the nine months ended September
30, 1994 as compared to the same period in 1993 and the recognition of income
during the quarter ended September 30, 1994 as compared to a loss during the
same period in 1993.
Participation in joint venture with affiliates represents the Partnership's
27.5% and 12.68% shares of income (loss) from the Brookhollow/Stemmons and
Perimeter 400 Center office buildings, respectively. During the second quarter
of 1993, the Partnership recognized its share of a loss provision related to a
decline in the fair value of the Brookhollow/Stemmons Office Building. This,
combined with decreased leasing costs and increased average occupancy levels
and rental rates at the Perimeter 400 Center Office Building during 1994, were
the primary reasons for the recognition of income for the nine months and
quarter ended September 30, 1994 as compared to a loss for the same periods in
1993.
Proceeds were received in 1993 in connection with the settlement of the
Kensington Mobile Home Park loan, the refinancing of the loan collateralized by
the Villa Verde Apartments and the sales of the Riverview Office Building,
Villa Verde Apartments and vacant land adjacent to the Orchards Shopping
Center. A portion of these proceeds were distributed in April 1994. The
remainder of these proceeds, along with the proceeds received in 1994 from the
prepayment of the Continental Park Office Building, are invested in short-term
interest-bearing instruments. This, along with higher interest rates earned on
short-term investments, resulted in an increase in interest income on short-
term investments during the nine months and quarter ended September 30, 1994 as
compared to the same periods in 1993.
The prepayment of the Airport III Industrial Park and the Continental Park
Office Building loans and the foreclosure of The Woods Apartments resulted in a
decrease in mortgage servicing fees during the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993.
An increase in accounting and portfolio management fees resulted in an increase
in administrative expense during the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993.
During the nine months ended September 30, 1994, the Partnership recognized a
gain of $119,842 on the sale of the Orchards Office Building located in
Loveland, Colorado. See Note 6 of Notes to Financial Statements for additional
information. During the nine months ended September 30, 1993, the Partnership
recognized a net gain of $147,992 on the sales of the vacant land adjacent to
the Orchards Shopping Center and the Riverview Office Building located in
Nashville, Tennessee.
Liquidity and Capital Resources
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The cash or near cash position of the Partnership increased as of September 30,
1994 when compared to December 31, 1993. The Partnership generated cash flow
from its operating activities primarily as a result of the net interest income
earned on its loans receivable, the operations of its properties, and the
interest received on its short-term investments. The payment of administrative
costs partially offset this cash flow. The Partnership also generated cash from
its investing activities primarily as a result of the discounted prepayment of
the Continental Park Office Building loan and the sale of the Orchards Office
Building. The Partnership used cash to fund its financing activities relating
primarily to the payment of distributions to the General Partner and Limited
Partners and the payment of principal on underlying loans and mortgage notes
payable. The Partnership's cash or near cash position fluctuates during each
quarter, initially decreasing with the payment of Partnership distributions for
the previous quarter, and then gradually increasing each month in the quarter
as mortgage payments and cash from property operations are received.
The Partnership classifies the cash flow performance of its properties as
either positive, marginal or a significant deficit, each after consideration of
debt service payments unless otherwise indicated. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. During the nine months ended September 30, 1994 and 1993, the
Candlewyck Apartments and Orchards Shopping Center generated positive cash flow
while the Crossings Shopping Center generated positive cash flow during 1994
and marginal cash flow deficit during 1993. The Crossings Shopping Center's
operations improved primarily due to slightly lower operating expenses and
decreased real estate taxes resulting from a lower property assessment. The
Woods Apartments, which was acquired through foreclosure in July 1994,
generated positive cash flow during 1994. The Brookhollow/Stemmons and
Perimeter 400 Center office complexes, properties in which the Partnership
holds minority joint venture interests, generated positive cash flow during the
nine months ended September 30, 1994 and 1993. Significant leasing costs were
incurred at the Brookhollow/Stemmons Office Building during both 1994 and 1993
and at the Perimeter 400 Center Office Building during 1993 to lease vacant
space and renew existing tenant leases which were scheduled to expire. These
costs were not included in classifying the cash flow performance of the
properties since they are non-recurring expenditures. Had these costs been
included, the Brookhollow/Stemmons Office Building would have operated at a
marginal cash flow deficit during the nine months ended September 30, 1994 and
both properties would have operated at significant deficits during the nine
months ended September 30, 1993. 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. The General Partner will also examine the terms of any
mortgage loans collateralized by its properties, and may refinance or, in
certain instances, use Partnership reserves to repay such loans.
In addition, certain borrowers have failed to make payments when due to the
Partnership for more than ninety days and, accordingly, these loans have been
placed on non-accrual status (income is recorded only as cash payments are
received). The General Partner has negotiated with some of these borrowers
regarding modifications of the loan terms and has instituted foreclosure
proceedings under certain circumstances. Such foreclosure proceedings may be
delayed by factors beyond the General Partner's control such as bankruptcy
filings by borrowers and state law procedures regarding foreclosures. Further,
certain loans made by the Partnership have been restructured to defer and/or
reduce interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service. In the case of most loan restructurings, the Partnership receives
concessions, such as increased participations or additional interest accruals,
in return for modifications, such as deferral or reduction of basic interest
payments. There can be no assurance, however, that the Partnership will receive
actual benefits from the concessions.
Because of the current 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 premiums, 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. In other cases, borrowers have requested prepayment in
order to take advantage of lower available interest rates. In these cases, the
Partnership has collected substantial prepayment premiums.
In June 1994, the borrower of the $12,767,949 wrap-around loan collateralized
by the Continental Park Office Building located in El Segundo, California
prepaid the loan at a discount due to the diminished value of the property
collateralizing the loan. The Partnership received proceeds of approximately
$4,873,085 which represents a portion of the funds advanced on the loan and the
borrower repaid the $4,143,890 underlying mortgage loan. An allowance for
potential losses of $3,715,406 was written off in connection with the
prepayment of the loan. See Note 5 of Notes to Financial Statements for
additional information.
The borrower on The Woods Apartments loan filed a plan of reorganization in
March 1994 and the Bankruptcy Court permitted the borrower until May 19, 1994
to obtain confirmation of the plan. The borrower failed to obtain plan
confirmation and, in July 1994, the Partnership obtained title to the property
through a non-judicial foreclosure. See Note 4 of Notes to Financial Statements
for additional information.
In September 1994, the Partnership sold the Orchards Office Building located in
Loveland, Colorado in an all cash sale for $1,200,000 and incurred selling
costs of $49,586. The Partnership continues to own the Orchards Shopping
Center. See Note 6 of Notes to Financial Statements and Item 5. Other Events
for additional information.
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.
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. If such
proceeds are distributed, Limited Partners will have received 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 and, if the
Partnership has taken title to properties through foreclosure or otherwise, as
a result of property operations.
In October 1994, the Partnership paid $949,904 to Limited Partners,
representing the regular quarterly distribution of available Cash Flow of $4.00
per Interest for the third quarter of 1994. The level of the quarterly
distribution is consistent with the amount distributed for the second quarter
of 1994. The Partnership also paid $79,159 to the General Partner as its
distributive share of the Cash Flow distributed for the third quarter of 1994
and $26,386 as its contribution to the Early Investment Incentive Fund.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments and Cash Flow from property
operations, less payments on the underlying 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.
During the nine months ended September 30, 1994, the General Partner on behalf
of the Partnership used amounts placed in the Early Investment Incentive Fund
to repurchase 1,151 Interests from Limited Partners at a total cost of
$380,431.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
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. The Partnership's use of
participations for loans receivable is intended to provide a hedge against the
impact of inflation; sharing in cash flow or rental income and/or the capital
appreciation of the properties collateralizing the loans should result in
increases in the total yields on the loans as inflation rates rise.
Part II - Other Information
Item 1. Legal Proceedings
- - --------------------------
Williams proposed class action
- - ------------------------------
With respect to the proposed class action lawsuit filed in the U. S. District
Court, Northern District of Illinois (Paul Williams and Beverly Kennedy, et al.
vs. Balcor Pension Investors, et al., Case No. 90-C-0726), against the
Partnership and certain affiliated entities, in May 1993, the Court issued an
opinion and order denying the plaintiffs' motion for class certification based
in part on the inadequacy of the individual plaintiffs representing the
proposed class. Further, the Court granted the defendants' motion for certain
sanctions against plaintiffs' counsel and ordered the plaintiffs' counsel to
pay the defendants' attorneys' fees incurred with the class certification
motion. The defendants filed a petition for reimbursement of their fees and
costs from plaintiffs' counsel which remains pending. A motion previously filed
by the plaintiffs seeking to dismiss the defendants' counterclaim for fraud was
denied on August 18, 1994.
In July 1993, the Court gave plaintiffs leave to retain new counsel and to
propose new individual class representatives. The plaintiffs retained new
counsel and proposed three new individual class representatives. The
defendants conducted discovery regarding the proposed new class representatives
and, in February 1994, filed a response to the plaintiffs' latest motion for
class certification. On July 29, 1994, the Court indicated an intent to certify
a class relating to the plaintiffs' securities fraud claims, but gave leave for
the defendants to file a further motion opposing class certification. On
August 26, 1994, the defendants filed a motion which has been briefed. The
motion remains pending.
Item 5. Other Events
- - --------------------
Orchards Office Building
- - ------------------------
In 1983, the Partnership funded a $3,709,772 loan collateralized by a wrap-
around mortgage on the Orchards Office Building and Shopping Center, Loveland,
Colorado (the "Property"). The Partnership obtained title to the Property
through foreclosure in 1987 and sold a 1.1-acre outparcel in 1989 for $355,000.
In 1991, the Partnership acquired approximately 83,333 square feet of vacant
land adjacent to the Property for $210,000 and sold the land in 1993 for
$500,000. In 1992, the Partnership refinanced the first mortgage loan with a
new $2,850,000 loan (the "Loan") from an unaffiliated lender (the "Lender"),
providing the Partnership with $1,900,000 in excess proceeds.
On September 29, 1994 ("Closing"), the Partnership sold the office building
portion of the Property (the "Building") for a sale price of $1,200,000 to an
unaffiliated entity, Matador-Orchards, L.L.C., a Colorado limited liability
company ("Purchaser"). From the sale proceeds, the Partnership paid the Lender
a $1,000,000 principal payment and a $50,000 prepayment premium and the Lender
released its first mortgage lien from the Building. The Partnership also paid
$48,000 to an unaffiliated party as a brokerage commission, $1,586 in closing
and other costs and received the remaining $150,414 of sale proceeds. Neither
the General Partner nor its affiliates received a commission in connection with
the sale of the Property.
The Partnership continues to own the shopping center portion of the Property,
which collateralized the remaining principal balance of the Loan.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement, previously filed as Exhibit 4(a) to
Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration Statement No. 2-75938) and as Exhibit 4(a) to the
Registrant's Registration Statement on Form S-11 dated November 2, 1982
(Registration No. 2-80123); 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. 0-11128) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(99) Agreement of Sale relating to the sale of the Orchards Office Building,
Loveland, Colorado.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended September 30, 1994.
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-III
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-II, the General Partner
By: /s/Allan Wood
------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Mortgage Advisors-II, the General Partner
Date: November 14, 1994
----------------------------
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AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), entered into as of the 21 day
of September, 1994, by and between Matador-Orchards, L.L.C., a Colorado limited
liability company ("Purchaser"), and Orchards Investors, an Illinois general
partnership ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of One Million Two Hundred Thousand And No/100 Dollars
($1,200,000.00) (the "Purchase Price"), that certain property commonly known as
World Savings Office Building, Loveland, Colorado legally described and
depicted on Exhibit A attached hereto (the "Property"). Included in the
Purchase Price is all of the personal property set forth in Exhibit B (the
"Personal Property"). The Property and Personal Property specifically do not
include the free standing automatic teller machine located at the Property.
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
(a) Upon the execution of this Agreement, the sum of One Hundred Thousand
and No/100 Dollars ($100,000.00) (the "Earnest Money") to be held in escrow by
and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C; and
(b) On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
A. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by American Heritage Title
Company as agent for First American Title Insurance Company, (hereinafter
referred to as "Title Insurer") dated June 30, 1994 for the Property (the
"Title Commitment"). For purposes of this Agreement, "Permitted Exceptions"
shall mean: (a) the general printed exceptions contained in the standard title
policy to be issued by Title Insurer based on the Title Commitment; (b) general
real estate taxes not yet due and payable; (c) matters shown on the "Existing
Survey" (hereinafter defined); (d) the title exceptions set forth in Schedule B
of the Title Commitment as Numbers 7 through 29 inclusive, to the extent that
same effect the Property; and (e) the "Reciprocal Easement Agreement" (as
hereinafter defined). All the other exceptions to title shall be referred to
as "Unpermitted Exceptions". The Title Commitment shall be conclusive evidence
of good title as therein shown as to all matters to be insured by the title
policy, subject only to the exceptions therein stated. On the Closing Date,
Title Insurer shall deliver to Purchaser a standard title policy in conformance
with the previously delivered Title Commitment, subject only to Permitted
Exceptions (the "Title Policy"). Purchaser shall pay for the costs of the
Title Commitment and Title Policy and any endorsements thereto.
B. Purchaser has received a survey of the Property prepared by Intermill
Land Surveying. (the "Existing Survey"). Purchaser shall pay for the costs of
updating the Existing Survey and Seller shall deliver the updated survey (the
"Updated Survey") to Purchaser within twenty-one (21) days after the date
hereof. Purchaser hereby acknowledges that all matters disclosed by the
Existing Survey are acceptable to Purchaser.
4. PAYMENT OF CLOSING COSTS.
A. In addition to the costs set forth in Paragraphs 3A and B, Purchaser
shall pay for the costs of the documentary or transfer stamps to be paid with
reference to the "Deed" (hereinafter defined) and all other stamps, intangible,
transfer, documentary, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
5. CONDITION OF TITLE.
A. If, prior to Closing, a date-down to the Title Commitment or the
Updated Survey disclose an Unpermitted Exception, Seller shall have thirty (30)
days from the date of the date-down to the Title Commitment or the Updated
Survey, as applicable, to (i) bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, do not exceed $25,000.00, removed from the
Title Commitment or to have the Title Insurer commit to insure against loss or
damage that may be occasioned by such Unpermitted Exceptions, or (ii) have the
right, but not the obligation, to bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, equals or exceeds $25,000.00, removed from
the Title Commitment or to have the Title Insurer commit to insure against loss
or damage that may be occasioned by such Unpermitted Exceptions. The time of
Closing shall be delayed, if necessary, to give effect to said aforementioned
time periods. If Seller fails to cure or have said Unpermitted Exception
removed or have the Title Insurer commit to insure as specified above within
said thirty (30) day period or if Seller elects not to exercise its rights
under (ii) in the preceding sentence, Purchaser may terminate this Agreement
upon notice to Seller within five (5) days after the expiration of said thirty
(30) day period. Absent notice from Purchaser to Seller in accordance with the
preceding sentence, Purchaser shall be deemed to have elected to take title
subject to said Unpermitted Exception. If Purchaser terminates this Agreement
in accordance with the terms of this Paragraph 5A, this Agreement shall become
null and void without further action of the parties and all Earnest Money
theretofore deposited into the escrow by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7.
B. Seller agrees to convey fee simple title to the Property to Purchaser
by special warranty deed ("Deed") in recordable form subject only to the
Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
A. Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss with respect to the Property up to the
earlier of the dates upon which either possession or title is transferred to
Purchaser in accordance with this Agreement. Notwithstanding the foregoing, in
the event of damage to the Property by fire or other casualty prior to the
Closing Date, repair of which would cost less than or equal to $100,000.00 (as
determined by Seller in good faith) Purchaser shall not have the right to
terminate its obligations under this Agreement by reason thereof, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $100,000.00 (as determined by Seller in
good faith), then this Agreement may be terminated at the option of Purchaser,
which option shall be exercised, if at all, by Purchaser's written notice
thereof to Seller within five (5) business days after Purchaser receives
written notice of such fire or other casualty and Seller's determination of the
amount of such damages, and upon the exercise of such option by Purchaser this
Agreement shall become null and void, the Earnest Money deposited by Purchaser
shall be returned to Purchaser together with interest thereon, and neither
party shall have any further liability or obligations hereunder except for
Purchaser's obligations to indemnify Seller and restore the Property, as set
forth more fully in Paragraph 7. In the event that Purchaser does not exercise
the option set forth in the preceding sentence, the Closing shall take place on
the Closing Date and Seller shall assign and transfer to Purchaser on the
Closing Date all of Seller's right, title and interest in and to all insurance
proceeds paid or payable to Seller on account of the fire or casualty.
B. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) materially impair access to the Property; (ii) cause any material non-
compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; or (iii) materially and adversely
impairs the use of the Property as it is currently being operated (hereinafter
collectively referred to as a "Material Event"), Purchaser may:
(a) terminate this Agreement by written notice to Seller, in which event the
Earnest Money deposited by Purchaser, together with interest thereon, shall be
returned to Purchaser and all rights and obligations of the parties hereunder
with respect to the closing of this transaction will cease, except for
Purchaser's obligations to indemnify Seller and restore the Property, as set
forth more fully in Paragraph 7; or
(b) proceed with the Closing, in which event Seller shall assign to Purchaser
all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
Purchaser shall then notify Seller, within five (5) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under subparagraph (a) or subparagraph (b) of this Paragraph 6B.
Closing shall be delayed, if necessary, until Purchaser makes such election.
If Purchaser fails to make an election within such five (5) business day
period, Purchaser shall be deemed to have elected to exercise its rights under
subparagraph (b).
If between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
A. Seller can make no representations or warranties relating to the
condition of the Property. Purchaser acknowledges and agrees that it will be
purchasing the Property based solely upon its inspections and investigations of
the Property, and that Purchaser will be purchasing the Property "AS IS" and
"WITH ALL FAULTS", based upon the condition of the Property as of the date of
this Agreement, wear and tear and loss by fire or other casualty or
condemnation excepted. Without limiting the foregoing, Purchaser acknowledges
that, except as may otherwise be specifically set forth elsewhere in this
Agreement, neither Seller nor its consultants, brokers or agents have made any
other representations or warranties of any kind upon which Purchaser is relying
as to any matters concerning the Property, including, but not limited to, the
condition of the land or any improvements comprising the Property, the
existence or non-existence of any hazardous materials or substances, economic
projections or market studies concerning the Property, any development rights,
taxes, bonds, covenants, conditions and restrictions affecting the Property,
water or water rights, topography, drainage, soil, subsoil of the Property, the
utilities serving the Property or any zoning, environmental or building laws,
rules or regulations affecting the Property. Seller makes no representation or
warranty that the Property complies with Title III of the Americans with
Disabilities Act or any fire code or building code. Purchaser hereby releases
Seller and the Affiliates of Seller from any and all liability in connection
with any claims which Purchaser may have against Seller, and Purchaser hereby
agrees not to assert any claims for contribution, cost recovery or otherwise,
against Seller, relating directly or indirectly to the existence of asbestos or
hazardous materials or substances on, or environmental conditions of, the
Property, whether known or unknown. As used herein, the term "hazardous
materials or substances" means (i) hazardous wastes, hazardous substances,
hazardous constituents, toxic substances or related materials, whether solids,
liquids or gases, including but not limited to substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "pollutants,"
"contaminants," "radioactive materials," or other similar designations in, or
otherwise subject to regulation under, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), 42
U.S.C. Section 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15
U.S.C. Section 2601 et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1802; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 9601. et seq.; the Clear Water Act ("CWA"), 33 U.S.C. Section
1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the
Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq.; and in any permits,
licenses, approvals, plans, rules, regulations or ordinances adopted, or other
criteria and guidelines promulgated pursuant to the preceding laws or other
similar federal, state or local laws, regulations, rules or ordinance now or
hereafter in effect relating to environmental matters (collectively the
"Environmental Laws"); and (ii) any other substances, constituents or wastes
subject to any applicable federal, state or local law, regulator or ordinance,
including any Environmental Law, now or hereafter in effect, including but not
limited to (A) petroleum, (B) refined petroleum products, (C) waste oil, (D)
waste aviation or motor vehicle fuel and (E) asbestos.
B. Seller has provided to Purchaser certain unaudited historical financial
information regarding the Property relating to certain periods of time in which
Seller owned the Property. Seller and Purchaser hereby acknowledge that such
information has been provided to Purchaser at Purchaser's request solely as
illustrative material. Except as specifically set forth herein, Seller makes
no representation or warranty that such material is complete or accurate or
that Purchaser will achieve similar financial or other results with respect to
the operations of the Property, it being acknowledged by Purchaser that
Seller's operation of the Property and allocations of revenues or expenses may
be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller from
any liability with respect to such historical information.
C. Seller has provided to Purchaser the following existing reports: Phase
I Environmental Site Assessment by Law Associates, Inc., dated July 31, 1992;
Indoor Air Quality Survey by Walsh & Associates, Inc., dated February 4, 1993;
and Air Quality Improvement Letter by Environmental Chemistry, Inc., dated May
16, 1994 ("Existing Reports"). Seller makes no representation or warranty
concerning the accuracy or completeness of the Existing Reports. Purchaser
hereby releases Seller from any liability whatsoever with respect to the
Existing Reports, or, including, without limitation, the matters set forth in
the Existing Reports, the accuracy and/or completeness of the Existing Reports.
Furthermore, Purchaser acknowledges that it will be purchasing the Property
with all faults disclosed in the Existing Reports.
D. Purchaser acknowledges that the lease between Seller and Broadview
Financial Inc. ("Broadview") and the lease between Seller and Loveland Controls
("Loveland") may have terminated according to their terms on or shortly after
Closing. Purchaser acknowledges that Seller and Loveland have entered into a
thirty (30) day extension agreement which will extend the terms of the lease
with Loveland to September 30, 1994. Neither Purchaser nor Seller shall enter
into any negotiations with Loveland or Broadview during the period from the
date hereof until the Closing Date.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
September 26, 1994 (the "Closing Date"), at the office of Title Insurer, Fort
Collins, Colorado at which time Seller shall deliver possession of the Property
to Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Colorado, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. In the event of a New York style closing, Seller shall
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be paid for by Purchaser.
9. CLOSING DOCUMENTS.
A. On the Closing Date, Purchaser shall deliver to Seller an executed
closing statement, the assumptions contained in the assignments set forth in
paragraphs 9.B(iii) and (iv) the balance of the Purchase Price, and such other
documents as may be reasonably required by the Title Insurer in order to
consummate the transaction as set forth in this Agreement.
B. On the Closing Date, Seller shall deliver to Purchaser the following:
(i) the Deed (in the form of Exhibit E attached hereto), subject to Permitted
Exceptions and those Unpermitted Exceptions waived by Purchaser;
(ii) a quit claim bill of sale conveying the Personal Property (in the form of
Exhibit F attached hereto);
(iii) assignment and assumption of intangible property (in the form attached
hereto as Exhibit G);
(iv) an assignment and assumption of leases and security deposits (in the form
attached hereto as Exhibit H);
(v) non-foreign affidavit (in the form of Exhibit I attached hereto);
(vi) original, and/or copies of, leases affecting the Property in Seller's
possession;
(vii) all documents and instruments reasonably required by the Title Insurer to
issue the Title Policy;
(viii) possession of the Property to Purchaser;
(ix) an executed closing statement;
(x) notice to the tenants of the Property of the transfer of title and
assumption by Purchaser of the landlord's obligation under the leases and the
obligation to refund the security deposits (in the form of Exhibit J); and
(xi) an updated rent roll.
C. On the Closing Date, Purchaser and Seller shall execute that certain
reciprocal easement agreement in the form of Exhibit K attached hereto (the
"REA"), and Purchaser and Seller shall execute that certain easement agreement
in the form of Exhibit L attached hereto (the "Easement"), which shall be
recorded against the Property (immediately subsequent to the Deed and prior to
any mortgage of Purchaser's lender, if any) and Seller's adjacent property as
set forth in the REA and/or the Easement.
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7A
HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF
A DEFAULT BY PURCHASER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO
DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE
THAT THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES'
REASONABLE ESTIMATE OF SELLER'S DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
SELLER'S DEFAULT IS ITS REFUSAL TO DELIVER THE DEED, THEN PURCHASER WILL BE
ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS.
A. Rents (exclusive of delinquent rents, but including prepaid rents);
refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid operating expenses; management fees in the amount of 6%
or as specified in individual leases; real and personal property taxes prorated
on a "net" basis (i.e. adjusted for all tenants' liability, if any, for such
items); operating expenses which are reimbursable by the tenants for the period
prior to the Proration Date less any amount previously paid by the Tenants
shall be credited to Seller; and other similar items shall be adjusted ratably
as of 11:59 p.m. on the later of: (a) the Closing Date or the actual date of
the closing of this transaction ("Proration Date"), and credited to the balance
of the cash due at Closing. Assessments payable in installments which are due
subsequent to the Closing Date shall be paid by Purchaser. Any refund of the
storm drain fee paid by Seller to the Loveland Waste Water Division shall be
the property of Seller, and if received by Purchaser, shall be delivered to
Seller within five (5) days of receipt by Purchaser. The terms of the
preceding sentence shall survive the Closing and the recording of the Deed. If
the amount of any of the items to be prorated is not then ascertainable, the
adjustments thereof shall be on the basis of the most recent ascertainable
data. All prorations will be final except as to delinquent rent referred to in
Paragraph 12B below and the storm drain fee referred to in this Paragraph 12A.
B. All sums paid following the Closing Date by any tenant of the Property
who is indebted under a lease for any period prior to and including the Closing
Date shall be deemed a "Post-Closing Receipt" until such time as all such
indebtedness is paid in full. Within ten (10) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay to Seller any amount
of such Post-Closing Receipt in excess of amounts then currently due to
Purchaser. Purchaser shall use its best efforts to collect all amounts which,
upon collection, would constitute Post-Closing Receipts hereunder. Paragraph
12B of this Agreement shall survive the Closing and the delivery and recording
of the deed.
13. RECORDING. This Agreement shall not be recorded and the act of recording
by Purchaser shall be an act of default hereunder by Purchaser and subject to
the provisions of Paragraph 10.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10.
15. BROKER. The parties hereto represent and warrant that no broker commission
or finder fee is due and payable in connection with this transaction other than
to The Real Estate Center, Inc. (to be paid by Seller). Seller's commission to
The Real Estate Center, Inc. shall only be payable out of the proceeds of the
sale of the Property in the event the transaction set forth herein closes.
Purchaser shall indemnify, defend and hold Seller and Affiliates of Seller
harmless from any claim whatsoever (including without limitation, reasonable
attorney's fees, court costs and costs of appeal) from anyone claiming by or
through Purchaser any fee, commission or compensation on account of this
Agreement, its negotiation or the sale hereby contemplated other than to The
Real Estate Center, Inc. Purchaser shall undertake its obligations set forth
in the preceding sentence using attorneys selected by Seller in Seller's sole
determination. The provisions of this Paragraph 15 will survive the Closing
and delivery of the Deed.
16. SELLER'S REPRESENTATIONS AND WARRANTIES.
A. Any reference herein to Seller's knowledge, representation, warranty or
notice of any matter or thing shall only mean such knowledge or notice that has
actually been received by William C. Kralovec (hereinafter collectively
referred to as the "Seller's Representative"), and any representation or
warranty of the Seller is based upon those matters of which the Seller's
Representative has actual knowledge. Any knowledge or notice given, had or
received by any of Seller's agents, servants or employees shall not be imputed
to Seller, the general partner or limited partners of Seller, the subpartners
of the general partner or limited partners of Seller or Seller's
Representative.
B. Subject to the limitations set forth in Paragraph A of this Paragraph
16, Seller hereby makes the following representations and warranties, which
representations and warranties are made to the best of Seller's knowledge and
which shall not survive Closing: (i) Seller has no knowledge of any pending or
threatened litigation, claim, cause of action or administrative proceeding
concerning the Property; (ii) Seller has the power to execute this Agreement
and consummate the transactions contemplated herein; (iii) the rent rolls which
Seller has submitted to the Purchaser and updated as of the Closing Date are
accurate; and (iv) the unaudited historical financial information regarding the
Property which Seller has submitted to the Purchaser is accurate.
17. LIMITATION OF LIABILITY. None of Seller's, nor any of its respective
beneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability.
18. SELLER'S CONDITIONS PRECEDENT. Purchaser acknowledges that the performance
of Seller's obligations under this Agreement shall be subject to Seller having
unconditionally procured, using commercially reasonable efforts, on or before
the Closing Date, the following (collectively hereinafter referred to as
"Seller's Conditions Precedent"):
(i) consent to the sale of the Property to Purchaser from any adjacent
landowners having approval rights over the sale of the Property; and
(ii) written approval from Sunlife of Canada to release their first mortgage on
the Property upon terms reasonably acceptable to Seller.
If Seller has not satisfied all of Seller's Conditions Precedent, in Seller's
reasonable opinion, on or before the Closing Date, Seller shall deliver written
notice to Purchaser on or before the Closing Date electing either (1) to
continue the use of commercially reasonable efforts to satisfy all of Seller's
Conditions Precedent for an additional thirty (30) day period, in which event
the Closing of this transaction shall be extended to the date which is five (5)
days after the satisfaction of all of Seller's Conditions Precedent, but in no
event later than thirty (30) days after the original Closing Date or (ii) to
terminate this Agreement. If Seller has delivered written notice as aforesaid
electing to terminate this Agreement, then this Agreement shall be terminated
and the Earnest Money shall be immediately paid to Purchaser, together with any
interest earned thereon, and neither Seller nor Purchaser shall have any right,
obligation or liability under this Agreement.
In the event Seller has elected to extend the date for satisfying Seller's
Conditions Precedent in accordance with the terms hereof, then if Seller has
not satisfied all of Seller's Condition Precedent, in Seller's reasonable
opinion, on or before the expiration of said thirty (30) day period, Seller
shall deliver written notice to Purchaser on or before the expiration of said
thirty (30) day period stating that it has not satisfied all of Seller's
Conditions Precedent, and this Agreement shall be terminated and the Earnest
Money shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Seller nor Purchaser shall have any right, obligation or
liability under this Agreement. In the event Seller does not deliver the
written notice to Purchaser on or before the original scheduled Closing Date,
or if applicable, the additional thirty (30) day period, Seller shall be deemed
to have satisfied Seller's Conditions Precedent.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or may
desire to give or deliver to or make upon the other party shall be in writing
and may be personally delivered or given or made by overnight courier such as
Federal Express or made by United States registered or certified mail addressed
as follows, or delivered via telecopy at the numbers set forth below:
TO SELLER: c/o The Balcor Company
4849 Golf Road
Skokie, Illinois 60077
Attention: Ilona Adams
with copies to: The Balcor Company
4849 Golf Road
Skokie, Illinois 60077
Attention: Alan Lieberman
(708) 677-2900
(708) 982-4027 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Matador-Orchards, L.L.C.
221 East 29th Street, Suite 242
Loveland, Colorado
Attention: David Duke
(303) 663-4700
(303) 667-2321(FAX)
and one copy to: Hammond, Clark & White
200 East Seventh Street, Suite 418
Loveland, Colorado 80537
Attention: Roger Clark, Esq.
(303) 667-1023
(303) 669-9380 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or on the 4th business day after the same is deposited in the United
States Mail as registered or certified matter, addressed as above provided,
with postage thereon fully prepaid, or upon receipt if delivered by telecopy.
Any such notice, demand or document not given, delivered or made by registered
or certified mail or by overnight courier as aforesaid shall be deemed to be
given, delivered or made upon receipt of the same by the party to whom the same
is to be given, delivered or made. Copies of all notices shall be served upon
the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute three
(3) copies of this Agreement and four (4) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(1) Earnest Money;
(2) One (1) fully executed copy of this Agreement; and
(3) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and
deliver a fully executed copy to each of the Purchaser and the
Seller.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Colorado, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of the
21st day of September, 1994.
PURCHASER:
MATADOR-ORCHARDS, L.L.C., a Colorado limited liability
company
By: /s/David Duke
------------------------
Name: David Duke
------------------------
Its: Manager
SELLER:
ORCHARDS INVESTORS, an Illinois general partnership
By: BALCOR PENSION INVESTORS - III, an Illinois limited
partnership, a general partner
By: BALCOR MORTGAGE ADVISORS - II, an Illinois
general partnership, a general partner
By: RGF-BALCOR ASSOCIATES - II, an Illinois
general partnership, a general partner
By: THE BALCOR COMPANY, a Delaware
corporation, a general partner
By: /s/William Kralovec
-----------------------
Name: William Kralovec
-----------------------
Its: Authorized Agent
-----------------------
Cliff Johnson of The Real Estate Center, Inc. ("Purchaser's Broker") executed
this Agreement in its capacity as a real estate broker and acknowledges that
the fee or commission due it from Seller as a result of the transaction
described in this Agreement is as set forth in that certain Letter of Intent,
dated June 30, 1994 between Seller and Purchaser's Broker (the "Listing
Agreement"). Purchaser's Broker also acknowledges that payment of the
aforesaid fee or commission is conditioned upon the Closing and the receipt of
the Purchase Price by the Seller. Purchaser's Broker agrees to deliver a
receipt to the Seller at the Closing for the fee or commission due Purchaser's
Broker and a release stating that no other fees or commissions are due to it
from Seller or Purchaser. Seller and Purchaser acknowledge that Purchaser's
Broker represents Purchaser in this transaction.
THE REAL ESTATE CENTER, INC.
By:__________________________
Cliff Johnson
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Assignment and Assumption of Leases and Security Deposits
I - Non-Foreign Affidavit
J - Notice to Tenants
K - Reciprocal Easement Agreement
L - Easement Agreement
