SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11128
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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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
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Cash and cash equivalents $ 1,504,673 $ 3,558,254
Cash and cash equivalents - Early
Investment Incentive Fund 4,794,887 4,520,005
Accounts and accrued interest receivable 30,573 54,198
Prepaid expenses 2,149
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$ 6,332,282 $ 8,132,457
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 36,984 $ 33,055
Due to affiliates 49,167 41,705
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Total liabilities 86,151 74,760
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Commitments and contingencies
Limited Partners' capital (237,476
Interests issued) 13,021,738 14,686,267
Less Interests held by Early Investment
Incentive Fund (21,249 at March 31, 1998
and December 31, 1997) (7,024,362) (7,024,362)
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5,997,376 7,661,905
General Partner's capital 248,755 395,792
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Total partners' capital 6,246,131 8,057,697
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$ 6,332,282 $ 8,132,457
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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 March 31, 1998 and 1997
(Unaudited)
1998 1997
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Income:
Income from operations of
real estate held for sale $ 385,262
Interest on short-term investments $ 87,458 167,234
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Total income 87,458 552,496
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Expenses:
Administrative 82,716 127,947
Participation in loss
of joint ventures with affiliate 7,934
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Total expenses 82,716 135,881
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Net income $ 4,742 $ 416,615
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Net income allocated to General Partner None $ 31,246
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Net income allocated to Limited Partners $ 4,742 $ 385,369
============== ==============
Net income per average number of Limited
Partnership Interests outstanding
(216,227 in 1998 and 1997) - Basic
and Diluted $ 0.02 $ 1.78
============== ==============
Distribution to General Partner $ 147,037 $ 79,159
============== ==============
Settlement Distribution to Limited Partners None $ 30,670
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Distribution to Limited Partners $ 1,669,271 $ 9,513,982
============== ==============
Distribution per Limited Partnership
Interests outstanding $ 7.72 $ 44.00
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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 quarters ended March 31, 1998 and 1997
(Unaudited)
1998 1997
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Operating activities:
Net income $ 4,742 $ 416,615
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in loss of
joint venture with affiliate 7,934
Amortization of deferred expenses 3,124
Net change in:
Escrow deposits 37,858
Accounts and accrued
interest receivable 23,625 45,236
Prepaid expenses (2,149) 19,688
Accounts payable 3,929 (198,587)
Due to affiliates 7,462 (1,102)
Other liabilities (214,433)
Security deposits 5,147
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Net cash provided by operating activities 37,609 121,480
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Investing activities:
Distribution from joint venture
partner - affiliate 44,756
Capital contribution to joint venture
partner - affiliate (67,591)
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Net cash used in investing activities (22,835)
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Financing activities:
Distribution to Limited Partners (1,669,271) (9,544,652)
Distribution to General Partner (147,037) (79,159)
Contribution by General Partner 79,159
Increase in cash and cash equivalents -
Early Investment Incentive Fund (274,882) (982,070)
Principal payments on mortgage
notes payable (11,568)
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Net cash used in financing activities (2,091,190) (10,538,290)
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Net change in cash and cash equivalents (2,053,581) (10,439,645)
Cash and cash equivalents at beginning
of period 3,558,254 19,044,458
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Cash and cash equivalents at end of period $ 1,504,673 $ 8,604,813
============== ==============
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 Policies:
(a) The income allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes during 1998 in order that
the capital account balances more accurately reflect their remaining economic
interests as provided for in the Partnership Agreement.
(b) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1998, and all such adjustments are of a normal and recurring
nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1997, the Partnership sold its remaining two properties. In
addition, during 1997, the Brookhollow/Stemmons Center Office Building was
sold, a property in which the Partnership held a minority joint venture
interest. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as establish a reserve
for contingencies. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuit discussed in Note 5 of Notes to
Financial Statements. In the absence of any contingency, the reserves will be
paid within twelve months of the last property being sold. In the event a
contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
3. Interest Expense:
During the quarter ended March 31, 1997, the Partnership incurred and paid
interest expense on mortgage notes payable of $37,434.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1998 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $ 10,273 $ 49,167
5. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
<PAGE>
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal, which is pending.
It is not determinable at this time whether or not an unfavorable decision in
this action would have a material adverse impact on the financial position,
operations or liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
<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. In addition, proceeds from prior loan
repayments were used to fund five additional loans. Eleven properties were
acquired through foreclosure and two loans were reclassified as investment in
joint ventures with affiliates. As of March 31, 1998, the Partnership has no
loans or real estate in its portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership sold its remaining two properties in 1997, both of which were
generating income prior to their sales. These sales were the primary reason net
income decreased during the quarter ended March 31, 1998 as compared to the
same period in 1997. Further discussion of the Partnership's operations is
summarized below.
1998 Compared to 1997
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Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.
Operations of real estate held for sale represented the net operations of the
properties acquired by the Partnership through foreclosure. The Partnership
sold the Woods Apartments and the Orchards Shopping Center in April and June
1997, respectively. As a result, income from operations of real estate held for
sale ceased during 1997.
Higher average cash balances were available for investment during 1997
primarily as a result of the proceeds received in connection with the 1996 sale
of the Carmel on Providence loan before distribution to Limited Partners in
April 1997. This resulted in decreased interest income on short-term
investments during 1998 as compared to 1997.
During February 1997, the General Partner made a payment relating to the
settlement of certain litigation to original investors who previously sold
<PAGE>
their Interests in the Partnership, which was recognized as an administrative
expense. This was the primary reason administrative expenses decreased during
1998 as compared to 1997.
The Brookhollow/Stemmons Center Office Building was owned by a joint venture
with an affiliate. As a result of the sale of this property during 1997,
participation in loss of joint venture with affiliate ceased during 1997.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $2,054,000 as
of March 31, 1998 when compared to December 31, 1997 due to the payment of
distributions to Limited Partners in January 1998. The Partnership generated
cash of approximately $38,000 from its operating activities primarily from
interest income received on short-term investments, which was partially offset
by the payment of administrative expenses. The Partnership's financing
activities consisted of the payment of distributions to the Partners of
approximately $1,816,000 and an increase in restricted cash and cash
equivalents of approximately $275,000 due to the discontinuance of the
repurchase of Interests from Limited Partners in 1997.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1997, the Partnership sold its remaining two properties. In
addition, during 1997, the Brookhollow/Stemmons Center Office Building was
sold, a property in which the Partnership held a minority joint venture
interest. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as establish a reserve
for contingencies. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuit discussed in Note 5 of Notes to
Financial Statements. In the absence of any contingency, the reserves will be
paid within twelve months of the last property being sold. In the event a
contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of March 31, 1998, there were 21,249 Interests and cash of
$4,794,887 in the Early Investment Incentive Fund.
To date, Limited Partners have received cash distributions totaling $878.18 per
$500 Interest. Of this amount, $510.73 represents Cash Flow from operations and
$367.45 represents a return of Original Capital. No additional distributions
are anticipated to be made prior to the termination of the Partnership.
However, after paying final partnership expenses, any remaining cash reserves
will be distributed.
<PAGE>
BALCOR PENSION INVESTORS - III
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement, previously filed as Exhibit 4(a) to
Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration Statement No. 2-75938) and as previously filed as
Exhibit 4(a) to 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 are incorporated herein by
reference.
(10)(i)(a) Purchase and Sale Agreement regarding the sale of the Registrant's
interest in the Bannockburn Executive Plaza loan, previously filed as Exhibit
(10)(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, is incorporated herein by reference.
(i)(b) First Amendment to Sale Agreement regarding the sale of the Registrant's
interest in the Bannockburn Executive Plaza loan previously reported as Exhibit
(10)(i)(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, is hereby incorporated herein by reference.
(ii) Purchase and Sale Agreement regarding the sale of the Registrant's
interest in the Seafirst Financial Center loan, previously filed as
Exhibit(10)(ii) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, is incorporated herein by reference.
(iii)(a) Agreement of Sale dated March 12, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated March 12, 1997 is incorporated
herein by reference.
(iii)(b) Letter Agreement dated March 20, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (2)(c) to the
Registrant's Current Report on Form 8-K dated December 18, 1996 is incorporated
herein by reference.
(iii)(c) Letter of Agreement dated March 14, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (99)(i) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iii)(d) Letter Agreement dated June 30, 1997 relating to the sale of the Woods
Apartments, Austin, Texas, previously filed as Exhibit (99)(ii) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
<PAGE>
(iii)(e) Letter Agreement dated April 3, 1997 relating to the sale of the Woods
Apartments, Austin, Texas, previously filed as Exhibit (99)(iii) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iv)(a) Agreement of Sale relating to the sale of the Brookhollow/Stemmons
Center Office Building, Dallas, Texas previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iv)(b) Amendment No. 1 to Agreement of Sale relating to the sale of
Brookhollow/Stemmons Center Office Building, Dallas, Texas, previously filed as
Exhibit (10)(iv)(b) to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 1997, is incorporated herein by reference.
(v) Agreement of Sale relating to the sale of Orchards Shopping Center,
Loveland, Colorado, previously filed as Exhibit (2) to the Registrant's Current
Report on Form 8-K dated April 14, 1997 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ended March 31,
1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-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/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
Officer) of Balcor Mortgage Advisors-II,
the General Partner
Date: May 14, 1998
----------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 6300
<SECURITIES> 0
<RECEIVABLES> 31
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6332
<PP&E> 0
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 86
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6246
<TOTAL-LIABILITY-AND-EQUITY> 6332
<SALES> 0
<TOTAL-REVENUES> 88
<CGS> 0
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<OTHER-EXPENSES> 83
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