SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-11128
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BALCOR PENSION INVESTORS-III
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3164211
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
--------------
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
----- -----
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(UNAUDITED)
ASSETS
1995 1994
------------- -------------
Cash and cash equivalents $ 13,544,657 $ 18,445,509
Cash and cash equivalents - Early
Investment Incentive Fund 141,050 21,171
Escrow deposits 221,733 427,562
Escrow deposits - restricted 899,929
Accounts and accrued interest receivable 217,598 286,756
Prepaid expenses 157,264
Deferred expenses, net of accumulated
amortization of $34,369 in 1995 and
$28,120 in 1994 28,119 34,368
------------- -------------
14,310,421 20,115,295
------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 75,131,454 75,491,676
Less:
Loans payable - underlying mortgages 41,642,498 42,548,988
Allowance for potential loan losses 5,013,959 5,013,959
------------- -------------
Net investment in loans receivable 28,474,997 27,928,729
Real estate held for sale 22,005,850 23,801,567
Investment in joint ventures with affiliates 6,279,571 6,023,084
------------- -------------
56,760,418 57,753,380
------------- -------------
$ 71,070,839 $ 77,868,675
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 83,399 $ 119,483
Due to affiliates 10,591 110,862
Other liabilities, principally real estate
taxes and escrow deposits 543,280 1,541,327
Security deposits 118,307 120,870
Mortgage notes payable 5,248,122 7,153,074
------------- -------------
Total liabilities 6,003,699 9,045,616
------------- -------------
Partners' capital (237,476 Limited
Partnership Interests issued) 69,955,007 73,437,669
Less Interests held by Early Investment
Incentive Fund (11,123 at June 30, 1995
and 10,208 at December 31, 1994) (4,887,867) (4,614,610)
------------- -------------
65,067,140 68,823,059
------------- -------------
$ 71,070,839 $ 77,868,675
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------- -------------
Income:
Interest on loans receivable $ 3,940,242 $ 5,549,491
Less interest on loans payable -
underlying mortgages 2,023,459 2,229,984
------------- -------------
Net interest income on loans receivable 1,916,783 3,319,507
Income from operations of real estate
held for sale 1,050,667 548,467
Participation in income of joint
ventures with affiliates 347,217 251,785
Interest on short-term investments 516,000 196,197
------------- -------------
Total income 3,830,667 4,315,956
------------- -------------
Expenses:
Administrative 373,091 473,206
------------- -------------
Total expenses 373,091 473,206
------------- -------------
Income before gain on sale of real estate 3,457,576 3,842,750
Gain on sale of real estate 717,900
------------- -------------
Net income $ 4,175,476 $ 3,842,750
============= =============
Net income allocated to General Partner $ 313,161 $ 288,206
============= =============
Net income allocated to Limited Partners $ 3,862,315 $ 3,554,544
============= =============
Net income per average number of Limited
Partnership Interests outstanding (227,258
in 1995 and 229,055 in 1994) $ 17.00 $ 15.52
============= =============
Distributions to General Partner $ 158,318 $ 188,002
============= =============
Distributions to Limited Partners $ 7,499,820 $ 6,023,189
============= =============
Distributions per Limited Partnership
Interest outstanding $ 33.00 $ 26.35
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------- -------------
Income:
Interest on loans receivable $ 1,968,217 $ 2,648,229
Less interest on loans payable -
underlying mortgages 1,006,294 1,096,206
------------- -------------
Net interest income on loans receivable 961,923 1,552,023
Income from operations of real estate
held for sale 440,771 314,189
Participation in income of joint
ventures with affiliates 218,693 104,204
Interest on short-term investments 221,745 98,682
------------- -------------
Total income 1,843,132 2,069,098
------------- -------------
Expenses:
Administrative 180,030 236,749
------------- -------------
Total expenses 180,030 236,749
------------- -------------
Net income $ 1,663,102 $ 1,832,349
============= =============
Net income allocated to General Partner $ 124,733 $ 137,426
============= =============
Net income allocated to Limited Partners $ 1,538,369 $ 1,694,923
============= =============
Net income per average number of Limited
Partnership Interests outstanding (227,248
in 1995 and 229,027 in 1994) $ 6.77 $ 7.40
============= =============
Distribution to General Partner $ 79,159 $ 79,159
============= =============
Distribution to Limited Partners $ 6,590,751 $ 4,765,977
============= =============
Distribution per Limited Partnership
Interest outstanding $ 29.00 $ 20.85
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------- -------------
Operating activities:
Net income $ 4,175,476 $ 3,842,750
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of real estate (717,900)
Participation in income of joint
ventures with affiliates (347,217) (251,785)
Amortization of deferred expenses 6,249 6,249
Net change in:
Escrow deposits 205,829 67,306
Escrow deposits - restricted 899,929 604,272
Accounts and accrued interest
receivable 69,158 77,717
Prepaid expenses (157,264)
Accounts payable (36,084) 421,540
Due to affiliates (100,271) 107,093
Other liabilities (998,047) (577,389)
Security deposits (2,563) 5,819
------------- -------------
Net cash provided by operating activities 2,997,295 4,303,572
------------- -------------
Investing activities:
Capital contributions to joint venture
partners - affiliates (78,147)
Distributions from joint ventures with
affiliates 90,730 22,427
Collection of principal payments on
loans receivable 22,316 4,889,987
Additions to real estate (56,633)
Proceeds from sale of real estate 856,240
Costs incurred in connection with sale of
real estate (79,750)
------------- -------------
Net cash provided by investing activities 832,903 4,834,267
------------- -------------
Financing activities:
Distributions to Limited Partners (7,499,820) (6,023,189)
Distributions to General Partner (158,318) (188,002)
Increase in cash and cash equivalents -
Early Investment Incentive Fund (119,879) (104,968)
Repurchase of Limited Partnership Interests (273,257) (191,780)
Principal payments on underlying loans
payable (568,584) (612,503)
Principal payments on mortgage notes payable (111,192) (146,649)
------------- -------------
Net cash used in financing activities (8,731,050) (7,267,091)
------------- -------------
Net change in cash and cash equivalents (4,900,852) 1,870,748
Cash and cash equivalents at beginning
of period 18,445,509 10,156,355
------------- -------------
Cash and cash equivalents at end of period $ 13,544,657 $ 12,027,103
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has also been made
to the previously reported 1994 financial statements to conform with the
classification used in 1995. This reclassification has not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the six months
and quarter ended June 30, 1995 and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the quarters ended June 30, 1995 and 1994, the Partnership incurred and
paid interest expense on mortgage notes payable on properties owned by the
Partnership of $262,913 and $392,721, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1995 are:
Paid
---------------------
Six Months Quarter Payable
---------- -------- --------
Mortgage services fees $ 29,034 $ 14,517 $ 4,839
Reimbursement of expenses to
the General Partner, at cost 191,880 191,880 5,752
4. Investments in Joint Ventures with Affiliates:
The Partnership owns a 27.5% joint venture interest in the Brookhollow/Stemmons
Office Center and a 12.68% joint venture interest in the Perimeter 400 Center
Office Building.
The following information has been summarized from the financial statements of
the joint ventures:
1995
-------------
Net investment in real estate as of June 30 $34,289,828
Total liabilities as of June 30 529,601
Total income 3,963,566
Net income 2,049,585
5. Sale of Real Estate:
In January 1995, the Partnership sold the Crossings Shopping Center in a cash
sale for $2,650,000. The purchaser took title to the property subject to the
existing first mortgage loan which had a balance of $1,793,760. The carrying
value of the property was $1,852,350. For financial statement purposes, the
Partnership recognized a gain of $717,900 on the sale during the first quarter
of 1995.
6. Subsequent Event:
In July 1995, the Partnership paid $8,534,889 to Limited Partners representing
the regular quarterly distribution of available Cash Flow of $4.00 per Interest
for the second quarter of 1995 and $31.94 per Interest representing Mortgage
Reductions received from the Continental Park loan prepayment as well as other
prior loan repayments and property sales.
<PAGE>
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 June 30, 1995, seven loans
remain outstanding in the Partnership's portfolio. In addition, the Partnership
was operating three 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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
----------
Summary of Operations
---------------------
The two 1994 loan prepayments caused a decrease in net interest income on loans
receivable and a resulting increase in interest on short-term investments due
to the interest earned on the proceeds received. The Partnership acquired The
Woods Apartments through foreclosure in July 1994, which is generating income
during 1995. The combined effect of these events resulted in decreased net
income for the six months and quarter ended June 30, 1995 as compared to the
same periods in 1994. The Partnership recognized a gain on the sale of the
Crossings Shopping Center during the first quarter of 1995 which offset these
events and resulted in an increase in net income for the six months ended June
30, 1995. Further discussion of the Partnership's operations is summarized
below.
1995 Compared to 1994
---------------------
The prepayment of the Continental Park and North Morris Estates loans in June
and November 1994, respectively, the foreclosure of The Woods Apartments in
July 1994 and a decrease in interest income received from the borrower of the
Bannockburn Executive Plaza loan during 1995 resulted in a decrease in net
interest income on loans receivable during the six months and quarter ended
June 30, 1995 as compared to the same periods in 1994.
The Partnership has two non-accrual loans at June 30, 1995 which are
collateralized by Carmel on Providence Apartments and Bannockburn Executive
Plaza. The funds advanced by the Partnership for these two loans total
approximately $6,200,000. For non-accrual loans, income is recorded only as
cash payments are received from the borrower. During the six months ended June
30, 1995, the Partnership received cash payments of net interest income
totaling approximately $172,000 on the Carmel on Providence loan. The
Partnership would have received approximately $147,000 of net interest income
under the terms of the original loan agreement. Of the net interest income
<PAGE>
received, $25,000 relates to costs incurred by the Partnership prior to the
borrower's bankruptcy filing, which have been capitalized and which accrue
interest, payable by the borrower on a quarterly basis. 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, the holder of the underlying loan and the borrower negotiated
a plan of reorganization which became effective in March 1995. The Partnership
has received cash payments of net interest income totaling approximately
$256,000 during 1995.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis 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 a provision for potential losses on its loans and real estate held
for sale during the six months ended June 30, 1995 or 1994.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At June 30, 1995,
the Partnership was operating the Candlewyck and The Woods apartment complexes
and the Orchards Shopping Center. Original funds advanced by the Partnership
total approximately $12,978,000 for these real estate investments. The
Partnership acquired The Woods Apartments in July 1994, which generated income
during 1995. In addition, operations improved at the Orchards Shopping Center
during 1995 due to increased occupancy levels and decreased interest expense
resulting from the paydown of the first mortgage loan in connection with the
sale of the Orchards Office Building. Operations also improved at the
Candlewyck Apartments due to increased rental income, which resulted from
higher rental rates, and decreased operating expenses. The combined effect of
these events resulted in an increase in income from real estate held for sale
during the six months and quarter ended June 30, 1995 as compared to the same
periods in 1994.
Participation in income of joint ventures with affiliates represents the
Partnership's 27.5% and 12.68% shares of income from the Brookhollow/Stemmons
and Perimeter 400 Center office buildings, respectively. Increased real estate
tax, common area maintenance and tenant construction reimbursements from
tenants at the Brookhollow/Stemmons Office Building resulted in an increase in
income for the six months and quarter ended June 30, 1995 as compared to the
same periods in 1994.
Proceeds received in connection with the sales of the Orchards Office Building
and the Crossings Shopping Center in September 1994 and January 1995,
respectively, along with proceeds received in 1994 from the prepayment of the
Continental Park and North Morris Estates loans were invested when received and
resulted in an increase in interest income on short-term investments during the
six months and quarter ended June 30, 1995 as compared to the same periods in
1994. Higher interest rates earned on short-term investments also contributed
to the increase. A portion of these proceeds were distributed to Limited
Partners in April and July 1995.
<PAGE>
Decreases in legal and mortgage servicing fees resulted in a decrease in
administrative expense during the six months and quarter ended June 30, 1995 as
compared to the same periods in 1994.
During the six months ended June 30, 1995, the Partnership recognized a gain of
$717,900 in connection with the sale of the Crossings Shopping Center. See Note
5 of Notes to Financial Statements for additional information.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of June 30, 1995 when
compared to December 31, 1994 primarily due to a special distribution from
Mortgage Reductions in April 1995. 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 income 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 sale
of the Crossings Shopping Center. 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 made a special distribution
from Mortgage Reductions in July 1995 and has retained cash reserves for
anticipated capital requirements at the Partnership's properties.
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. The Partnership defines cash flow generated from its properties
as an amount equal to the property's revenue receipts less property related
expenditures, which include debt service payments. During the six months ended
June 30, 1995 and 1994, the Candlewyck Apartments and Orchards Shopping Center
generated positive cash flow. The Woods Apartments, which was acquired through
foreclosure in July 1994, also generated positive cash flow during 1995. The
Candlewyck and The Woods apartment complexes and the Orchards Shopping Center
have occupancy rates of 97%, 94% and 86%, respectively. The Crossings Shopping
Center was sold in January 1995. 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 six months
ended June 30, 1995 and 1994. Significant leasing costs were incurred at the
Brookhollow/Stemmons Office Building during 1994 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 property since
they are non-recurring expenditures. Had these costs been included, the
Brookhollow/ Stemmons Office Building would have operated at a significant
deficit for the six months ended June 30, 1994. 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.
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
<PAGE>
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.
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.
During February 1995, a plan of reorganization related to the Bannockburn
Executive Plaza loan was confirmed by the Bankruptcy Court effective March
1995. Pursuant to the plan, the maturity date of the loan was extended to
December 1, 1997 and the loan will continue to bear interest at 14.5% per annum
with a pay rate of 9% per annum. The maturity of the underlying loan was also
extended to December 1, 1997, and the borrower was required to pay $232,031
directly to the holder of the underlying loan to reduce the principal balance
of the loan. In addition, the borrower is required to remit all excess cash
flow from property operations on a monthly basis directly to the holder of the
underlying loan to further reduce the principal balance of the loan. Excess
cash flow of $105,875 was remitted during the second quarter of 1995.
In January 1995, the Partnership sold the Crossings Shopping Center in a cash
sale for $2,650,000. The purchaser took title to the property subject to the
existing $1,793,760 first mortgage loan. See Note 5 of Notes to Financial
Statements for additional information.
In June 1995, the Partnership signed a contract to sell the Candlewyck
Apartments. See Item 5. Other Information for additional information.
In August 1995, the borrower of the $16,750,000 Colony Apartments wrap-around
loan repaid the loan. The loan matured in July 1995. The Partnership received
approximately $8,301,516 which is comprised of the funds advanced on the loan
($6,501,516) and the amount representing the difference between the funds
advanced by the Partnership and the outstanding principal balance on the
underlying loan in accordance with the original loan terms. In addition, the
borrower repaid the underlying mortgage note payable which had a balance of
$7,378,155. Allowances in the amount of $1,070,329 were written off in
connection with the repayment of the loan at its net carrying value.
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
<PAGE>
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 July 1995, the Partnership paid $8,534,889 to Limited Partners representing
the quarterly distribution for the second quarter of 1995 of $4.00 of Cash Flow
per Interest and a special distribution of $31.94 per Interest representing
Mortgage Reductions received from the Continental Park loan prepayment as well
as other prior loan repayments and property sales. The level of the regular
quarterly distribution is consistent with the amount distributed for the first
quarter of 1995. The Partnership also paid $79,159 to the General Partner as
its distributive share of the Cash Flow distributed for the second quarter of
1995 and $26,386 as its contribution to the Early Investment Incentive Fund. To
date, the Partnership has distributed $577.74 per $500 Interest, of which
$435.80 represents Cash Flow from operations and $141.94 represents a return of
Original Capital.
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 and administrative expenses.
The General Partner believes the Partnership has retained an appropriate amount
of working capital to meet cash or liquidity requirements which may occur.
During the six months ended June 30, 1995, the General Partner on behalf of the
Partnership used amounts placed in the Early Investment Incentive Fund to
repurchase 915 Interests from Limited Partners at a total cost of $273,257.
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 - III
(An Illinois Limited Partnershp)
PART II - OTHER INFORMATION
Item 5. Other Information
--------------------------
Candlewyck Apartments
---------------------
In 1983, the Partnership funded a $6,265,969 loan collateralized by a
wrap-around mortgage on the Candlewyck Apartments. The Partnership obtained
title to the property through foreclosure in 1986.
On June 5, 1995, the Partnership contracted to sell the property for a sale
price of $10,000,000 to Price Realty Corporation, a Texas corporation. The
purchaser deposited $200,000 into an escrow account as earnest money upon
signing the contract and deposited an additional $50,000 on July 19, 1995 to
extend the closing date to August 31, 1995. The purchaser will receive a
$150,000 credit against the purchase price at closing for certain deferred
maintenance items. From the proceeds of the sale, the Partnership will pay the
outstanding amounts due under the first, second, and third mortgage loans,
which will total approximately $3,529,911 at closing, and will pay brokerage
commissions of $222,750 to an unaffiliated entity and $100,000 to the
purchaser. The General Partner will be reimbursed by the Partnership for its
actual expenses incurred in connection with the sale.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible that the sale of the property may not
occur.
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 six month period ended
June 30, 1995 is attached hereto.
(99) Agreement of Sale and amendment thereto relating to the contract to sell
Candlewyck Apartments.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended June 30, 1995.
<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-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/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-II, the
General Partner
Date: August 14, 1995
----------------------------
<PAGE>
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<S> <C>
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<PERIOD-END> JUN-30-1995
<CASH> 13686
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<RECEIVABLES> 28850
<ALLOWANCES> 5014
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<PP&E> 22006
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0
0
<OTHER-SE> 65067
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EXHIBIT 99
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), entered into as of the 5th day
of June, 1995, by and between PRICE REALTY CORPORATION, a Texas corporation
("Purchaser"), and BALCOR PENSION INVESTORS - III, an Illinois limited
partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Ten Million And No/100 Dollars ($10,000,000.00) (the "Purchase
Price"), that certain property commonly known as Candlewyck Apartments, Dallas,
Texas, generally described on Exhibit A attached hereto subject to that legal
description being corrected to conform to the description revealed by an
accurate survey and to rectify various scrivener's errors(the "Property").
Included in the Purchase Price is all of the personal property set forth in
Exhibit B hereto (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of Two Hundred
Thousand and No/100 Dollars ($200,000.00) (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
2.2. 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.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Partners Title Company as
agent for Chicago Title Insurance Company, (hereinafter referred to as "Title
Insurer") dated May 4, 1995 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,
association assessments, special district taxes and related charges not yet due
and payable; (c) matters shown on the "Existing Survey" (hereinafter defined);
(d) matters caused by the actions of Purchaser; and (e) the title exceptions
set forth in Schedule B of the Title Commitment as Numbers 1 through 6
inclusive and 9B. through P., to the extent that same affect the Property. All
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 the amount of the Purchase price in
conformance with the previously delivered Title Commitment, subject only to
Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the "Title
Policy"). Seller shall pay for the costs of the Title Commitment and Title
Policy and Purchaser shall pay for the cost of any endorsements to, or extended
coverage on, the Title Policy.
<PAGE>
3.2. Purchaser has received a survey of the Property prepared by Donald
E. Davis Consulting Engineers (the "Existing Survey"). Seller shall pay for the
costs of updating the Existing Survey and Seller shall deliver the updated
survey (the "Updated Survey") to Purchaser within 20 days after the date
hereof. Purchaser hereby acknowledges that all matters disclosed by the
Existing Survey are acceptable to Purchaser.
3.3. The obligations of Seller and Purchaser to pay various costs, if any,
set forth in Paragraphs 3.1 and 3.2 shall survive the termination of this
Agreement.
4. PAYMENT OF CLOSING COSTS.
4.1. In addition to the costs set forth in Paragraphs 3.1 and 3.2, Seller
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.
5.1. If, prior to Closing, a date-down to the Title Commitment or the
Updated Survey discloses any new 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, at Seller's expense, to (i) bond over, cure
and/or have any Unpermitted Exceptions which, in the aggregate, do not exceed
$50,000.00, 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,
equal or exceed $50,000.00, 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. In such event, 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 5.1, 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.
5.2. 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.
<PAGE>
6.1. 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 $200,000.00 (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 $200,000.00 (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. 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.
6.2. 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 Seller and Purchaser reasonably agree 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:
6.2.1. 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; or
6.2.2. 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.
<PAGE>
6.3. 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 Paragraph 6.2.1 or Paragraph 6.2.2. 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 Paragraph 6.2.2. 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.
7.1. During the period commencing on the date hereof and ending at 5:00
p.m. Chicago time on June 7, 1995 (said period being herein referred to as the
"Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property, at
any reasonable time and upon reasonable prior notice to Seller, to inspect the
Property, including a review of leases and any other materials located at the
Property which Seller and Purchaser reasonably agree are relevant to the
transaction set forth herein, and to conduct and prepare such studies, tests
and surveys as Purchaser may deem reasonably necessary and appropriate. In
connection with Purchaser's review of the Property, Seller agrees to deliver to
Purchaser copies of the current rent roll for the Property, the most recent tax
and insurance bills, utility account numbers, service contracts, unaudited year
end 1994 and year to date 1995 operating statements, and other materials which
Seller and Purchaser reasonably agree are relevant to the transaction set forth
herein.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliate of Seller") harmless from any and all liability, cost
and expense (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) suffered or incurred by Seller or Affiliates of
Seller for injury to persons or property caused by Purchaser's investigations
and inspection of the Property. Purchaser shall undertake its obligation to
defend set forth in the preceding sentence using attorneys selected by
Purchaser and reasonably acceptable to Seller. Prior to commencing any such
tests, studies and investigations, Purchaser shall furnish to Seller a
certificate of insurance evidencing comprehensive general public liability
insurance insuring the person, firm or entity performing such tests, studies
and investigations and listing Seller and Purchaser as additional insureds
thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph 7.1
for any reason at Purchaser's sole discretion, Purchaser shall have the right
to terminate this Agreement by giving written notice of such termination to
Seller at any time prior to the expiration of the Inspection Period. If
written notice is not given by Purchaser pursuant to this Paragraph 7.1 prior
<PAGE>
to the expiration of the Inspection Period, then the right of Purchaser to
terminate this Agreement pursuant to this Paragraph 7.1 shall be waived. If
Purchaser terminates this Agreement by written notice to Seller prior to the
expiration of the Inspection Period: (i) Purchaser shall promptly deliver to
Seller copies of all studies, reports and other investigations obtained by
Purchaser in connection with its due diligence during the Inspection Period;
and (ii) the Earnest Money shall be immediately paid to Purchaser, together
with any interest earned thereon, and neither Purchaser nor Seller shall have
any right, obligation or liability under this Agreement, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in this Paragraph 7.1. Notwithstanding anything contained herein to the
contrary, Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in this Paragraph 7.1, shall survive the termination of
this Agreement.
7.2. Seller acquired title to the Property by foreclosure (or
deed-in-lieu thereof) and, therefore, Seller can make no representations or
warranties relating to the condition of the Property or the Personal Property.
Purchaser acknowledges and agrees that it will be purchasing the Property and
the Personal Property based solely upon its inspections and investigations of
the Property and the Personal Property, and that Purchaser will be purchasing
the Property and the Personal Property "AS IS" and "WITH ALL FAULTS", based
upon the condition of the Property and the Personal 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
representations or warranties of any kind upon which Purchaser is relying as to
any matters concerning the Property or the Personal Property, including, but
not limited to, the condition of the land or any improvements comprising the
Property, the existence or non-existence of toxic waste and/or 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 or the Affiliates of Seller, and Purchaser hereby
agrees not to assert any claims for contribution, cost recovery or otherwise,
against Seller or the Affiliates of 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 Clean Water Act
("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
<PAGE>
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.
7.3. 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. 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 and the Affiliates of Seller from
any liability with respect to such historical information.
7.4. Seller has provided to Purchaser the following existing report:
Phase I environmental report by Law Engineering, Inc., dated April 8, 1994
("Existing Report"). Seller makes no representation or warranty concerning
the accuracy or completeness of the Existing Report. Purchaser hereby releases
Seller and the Affiliates of Seller from any liability whatsoever with respect
to the Existing Report, or, including, without limitation, the matters set
forth in the Existing Report, and the accuracy and/or completeness of the
Existing Report. Furthermore, Purchaser acknowledges that it will be
purchasing the Property with all faults disclosed in the Existing Report.
8. CLOSING. The closing of this transaction (the "Closing") shall be on July
31, 1995 (the "Closing Date"), at the office of Title Insurer, Dallas, Texas at
which time Seller shall deliver possession of the Property to Purchaser.
Notwithstanding the foregoing, provided that Purchaser is not in default under
the terms of this Agreement, Purchaser may elect to extend the Closing Date to
August 31, 1995 by depositing, as additional Earnest Money, a non-refundable
amount of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in accordance with the
Escrow Agreement, on or before July 20, 1995. 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 Texas, or at the option of either party, the Closing shall be a
"New York style" closing at which the Purchaser shall wire the balance of the
Purchase Price(with Purchaser receiving a credit against the Purchase Price for
all Earnest Money, including the additional Earnest Money referenced above) 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
divided equally between the parties hereto.
<PAGE>
9. CLOSING DOCUMENTS.
9.1. On the Closing Date, Seller and Purchaser shall execute and deliver
to one another a joint closing statement. In addition, Purchaser shall deliver
to Seller the balance of the Purchase Price, an assumption of the documents set
forth in Paragraph 9.2.3 and 9.2.4 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.
9.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
9.2.1. the Deed (in the form of Exhibit E attached hereto),
subject to Permitted Exceptions and those Unpermitted
Exceptions waived by Purchaser;
9.2.2. a special warranty bill of sale conveying the Personal
Property (in the form of Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation,
the service contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits
(in the form attached hereto as Exhibit I);
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession;
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. 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 K); and
9.2.10. a rent roll updated within 5 days prior to the Closing Date.
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 AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 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.
<PAGE>
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE (i) THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND (ii) REIMBURSEMENT OF ACTUAL
THIRD-PARTY EXPENSES INCURRED BY PURCHASER IN CONNECTION WITH THIS AGREEMENT IN
AN AMOUNT NOT TO EXCEED THE EARNEST MONEY HELD PURSUANT TO THE ESCROW AGREEMENT
AT THE TIME OF SELLER'S DEFAULT, 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 WILLFUL REFUSAL TO DELIVER THE DEED, THEN PURCHASER WILL BE ENTITLED TO
SUE FOR SPECIFIC PERFORMANCE, IN WHICH CASE PURCHASER SHALL NOT BE ENTITLED TO
THE REIMBURSEMENT SET FORTH IN THIS PARAGRAPH 11.
12. PRORATIONS.
12.1. At Closing, the following items shall be prorated in cash as of the
date of Closing: Prepaid rents; fees and assessments; prepaid expenses and
obligations under the service contracts; accrued expenses; real and personal ad
valorem taxes ("Ad Valorem Taxes") for the year of Closing but using the most
recent assessed valuation for purposes of real estate taxes. If the tax rate
for the year of Closing is not known, taxes shall be estimated based on the tax
rate for the year prior to Closing. Assessments payable in installments which
are due subsequent to the Closing Date shall be paid by Purchaser. All
prorations will be final except as to delinquent rent referred to in Paragraph
12.3 below.
12.2. Purchaser shall take all steps necessary to effectuate the transfer
of all utilities to its name as of the Closing Date, and where necessary, post
deposits with the utility companies. Purchaser shall further ensure that all
utility meters are read as of the Closing Date. Seller shall pay all utilities
up to and including the Closing Date and all utilities thereafter used shall be
paid for by Purchaser. Seller shall be entitled to recover any and all
deposits held by any utility company as of the date of Closing; to the extent
Purchaser fails to provide, where required, deposits to any such utility
company(s) so as to prevent the timely release of Seller's deposit(s) by the
utility company(s) on the Closing Date, Purchaser shall pay Seller interest on
all such deposits not timely released at the rate of ten percent (10%) per
annum from the fifth (5th) day following the Closing Date until Seller actually
receives its deposits. Such covenant shall expressly survive the Closing.
Refundable tenant security deposits shall be assigned to and assumed by
Purchaser and credited to Purchaser at Closing.
12.3. Seller shall at Closing pay to Purchaser, in cash, the amount of
any rents paid to the Seller by tenants of the Property, for periods subsequent
to the Closing Date. Seller shall be entitled to all rents for the Closing
Date. No proration shall be made for rents delinquent as of the Closing Date
(hereinafter called the "Delinquent Rents"). All Delinquent Rents collected on
or after the Closing Date shall be allocated to the latest month for which
rental is due for that tenant. Any Delinquent Rents collected by Purchaser
after Closing which are owing to the Seller by tenants of the Property for
periods prior to and including the Closing Date, shall be forthwith paid by
Purchaser to Seller. Once any Delinquent Rents are in excess of ninety (90)
days past due, all rights to pursue collection of such amounts shall vest
solely in Seller, provided, however, Seller shall not be entitled to pursue
eviction proceedings in connection with any such legal action. Purchaser shall
use its best efforts to collect all amounts which, upon collection, would
<PAGE>
constitute Delinquent Rents hereunder. Within 120 days after the Closing Date,
Purchaser shall deliver to Seller a reconciliation statement of Delinquent
Rents through the first 90 days after the Closing Date. Seller retains the
right to conduct an audit, at reasonable times and upon reasonable notice, of
Purchaser's books and records to verify the accuracy of the Delinquent Rents
reconciliation statement and upon the verification of additional funds owing to
Seller, Purchaser shall pay to Seller said additional Delinquent Rents and the
cost of performing Seller's audit. Paragraph 12.3 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 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller, except to
any entity in which Purchaser or Michael J. Ochstein has an ownership interest.
Any assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement other than as set forth herein shall be an act of
default hereunder by Purchaser and subject to the provisions of Paragraph 10
hereof.
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 Cushman & Wakefield and $100,000 to Purchaser (to be paid by
Seller). Seller's commission to Cushman & Wakefield and Purchaser shall only
be payable out of the proceeds of the sale of the Property in the event the
transaction set forth herein closes. Purchaser and Seller shall indemnify,
defend and hold the other party hereto harmless from any claim whatsoever
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) from anyone claiming by or through the indemnifying party any
fee, commission or compensation on account of this Agreement, its negotiation
or the sale hereby contemplated other than to Cushman & Wakefield and
Purchaser. The indemnifying party shall undertake its obligations set forth in
this Paragraph 15 using attorneys selected by the indemnifying party and
reasonably acceptable to the indemnified party. The provisions of this
Paragraph 15 will survive the Closing and delivery of the Deed.
16. SELLER'S REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by Phillip A. Schechter (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.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to 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 not received any written notice of violation of any
Environmental Laws; (iii) Seller has the power to execute this Agreement and
<PAGE>
consummate the transactions contemplated herein; and (iv) the rent rolls which
Seller has submitted to the Purchaser and updated as of the Closing Date are
accurate as of the date set forth thereon.
17. LIMITATION OF LIABILITY. Neither Seller, 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. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. 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:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Complex
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Complex
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
(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: Price Realty Corporation
5495 Belt Line Road
Suite 335
Dallas, Texas 75240
Attention: Mr. Michael J. Ochstein
(214) 788-1925
(214) 788-4665 (FAX)
<PAGE>
and one copy to: Klineman, Rose & Wolf
135 North Pennsylvania
Suite 2000
Indianapolis, Indiana 46204
Attention: Robert Rose, Esq.
(317) 264-5000
(317) 264-5400 (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. 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.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) 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:
(A) Earnest Money;
(B) One (1) copy of this Agreement; and
(C) 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.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of Texas, except that with respect to the retainage of the Earnest Money
as liquidated damages the laws of the State of Illinois shall govern.
22. 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.
23. 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.
24. 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.
25. WAIVER OF DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT. To the
extent permitted by law, Purchaser hereby waives the provisions of the Texas
Deceptive Trade Practices-Consumer Protection Act, Chapter 17, subchapter E
Section 17.41 through 17.63 inclusive, Vernon's Texas Code Annotated, Business
and Commerce Code. In order to evidence this ability to grant such waiver,
<PAGE>
Purchaser hereby represents and warrants to Seller that Purchaser (i) is
represented by legal counsel in the purchase of the Property, and (ii) is not
in a significantly disparate bargaining position in relation to the Seller.<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of the
date first set forth above.
PURCHASER:
PRICE REALTY CORPORATION,
a Texas corporation
By: /s/Michael J. Ochstein
-----------------------
Name: Michael J. Ochstein
-----------------------
Its: President
-----------------------
SELLER:
BALCOR PENSION INVESTORS - III, an Illinois
limited partnership
By: Balcor Mortgage Advisors - II, an Illinois
general partnership, its 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/Philip Schechter
-------------------------
Name: Philip Schechter
-------------------------
Its: Authorized Agent
-------------------------
The undersigned, being Purchaser's local counsel in connection with the
Purchaser's purchase of the Property, hereby executes this Agreement solely for
the purpose of acknowledging that Purchaser is not in a significantly disparate
bargaining position in relation to Seller.
Klineman, Rose and Wolf, P.C.
By: /s/Robert A. Rose
-------------------------
Robert A. Rose
<PAGE>
of Cushman & Wakefield ("Seller'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 shall be based on a purchase price of $9,900,000, and is otherwise as
set forth in that certain Listing Agreement, dated __, 199_ between Seller and
Seller's Broker (the "Listing Agreement"). Seller'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. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release stating that no other fees or commissions are due
to it from Seller or Purchaser.
Cushman & Wakefield
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
<PAGE>
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 - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into this 13th day of June, 1995, by and between Price Realty
Corporation, a Texas corporation ("Purchaser") and Balcor Pension Investors -
III, an Illinois limited partnership ("Seller").
RECITALS:
A. Seller and Purchaser are parties to that certain Agreement of Sale,
dated June 5, 1995 (the "Agreement"), pursuant to which Purchaser has agreed to
purchase and Seller has agreed to sell that certain Property (as defined in the
Agreement) commonly known as Candlewyck apartments, Dallas, Texas, legally
described and depicted on Exhibit A attached to the Agreement.
B. Seller and Purchaser desire to amend the Agreement in accordance with
the terms of this Amendment
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. All terms not otherwise defined herein shall have the meanings ascribed to
each in the Agreement.
2. Purchaser shall receive a $150,000 credit against the Purchase Price at
Closing to compensate Purchaser for certain deferred maintenance items.
3. Seller agrees to complete the termite remediation work set forth in the
proposal by Orkin on or before the Closing Date.
4. The Inspection Period shall end at 12:00 p.m. Chicago time on June 16,
1995.
5. Except as amended hereby, the Agreement shall be and remain unchanged in
full force and effect in accordance with its terms.
6. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument.
IN WITHNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
PURCHASER:
PRICE REALTY CORPORATION,
a Texas corporation
By: /s/Michael J. Ochstein
-------------------------------
Name: Michael J. Ochstein
-------------------------------
Its: President
-------------------------------
<PAGE>
SELLER:
BALCOR PENSION INVESTORS - III, an Illinois limited
partnership
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/Al Lieberman
----------------------------
Name: Al Lieberman
----------------------------
Its: Senior V.P.
----------------------------
