SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
(Amendment No. 1)
BALCOR PENSION INVESTORS-IV
(Name of Subject Company)
BALCOR PENSION INVESTORS-IV
(Name of Person(s) Filing Statement)
Limited Partnership Interests
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Thomas E. Meador
Chairman
The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
(847) 267-1600
(Name, Address and Telephone Number of Persons Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
Copy To:
Herbert S. Wander
Lawrence D. Levin
Katten Muchin & Zavis
Suite 1600
525 West Monroe Street
Chicago, Illinois 60661-3693
(312) 902-5200
<PAGE>
This Amendment No. 1 to Schedule 14D-9 amends the Schedule 14D-9 (the
"Schedule 14D-9") filed by Balcor Pension Investors-IV, an Illinois limited
partnership (the "Partnership"), filed with the Securities and Exchange
Commission on May 29, 1996. All capitalized terms used herein but not
otherwise defined shall have the meanings ascribed to such terms in the
Schedule 14D-9.
Item 9. Material to be Filed as Exhibits
Item 9 hereby is amended by removing "5. (c)(4) The Darby Valuation
Report {to be filed by amendment}" and substituting in its place "5. (c)(4)
The Darby Valuation Report"
Signature. After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: May 31, 1996 BALCOR PENSION INVESTORS-IV
By: Balcor Mortgage Advisors-III,
its general partner
By: RGF-Balcor Associates-II, a
general partner
By: The Balcor Company, a
general partner
By:/s/ Thomas E. Meador
-----------------------------
Thomas E. Meador, Chairman
<PAGE>
AN APPRAISAL OF
A LIMITED PARTNERSHIP INTEREST
IN
BALCOR PENSION INVESTORS - IV
SKOKIE, ILLINOIS
AS OF MARCH 31, 1996
<PAGE>
May 8, 1996
Balcor Mortgage Advisors - IV
The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
Attention: Mr. John K. Powell, Jr. - First Vice President
Gentlemen:
In accordance with your request, we are pleased to submit our opinion of the
Value of a Limited Partnership Interest in:
Balcor Pension Investors - IV
(An Illinois Limited Partnership)
as of March 31, 1996.
The term "Value" is defined as follows:
The amount, in dollars, which a Limited Partnership Interest in Balcor
Pension Investors - IV is worth to an investor who owns the Interest with
the intention of holding it to maturity, who fully understands the
complexities of the investment, and has an interest in the potential
interest income and capital appreciation of the Limited Partnership
Interest. The valuation does not represent the amount that would be
received by a holder of a Limited Partnership Interest should he/she
decide to liquidate the Interest prior to the maturity of the Partnership.
The value is subject to the terms and limiting conditions set forth in
this report.
It is anticipated that Balcor Pension Investors - IV will be closed by the end
of 1997.
Based on our analyses and conclusions set forth in this report, the estimated
Value of a Limited Partnership Interest in Balcor Pension Investors - IV, as of
March 31, 1996, was in the rounded amount of:
$123.00
The Adjusted Original Capital, as of March 31, 1996, was $248.87.
For the quarter ended June 30, 1995, there was no change in the value of a
Limited Partnership Interest.
For the quarter ended September 30, 1995, the value of a Limited Partnership
Interest decreased $11.00. This was due to a distribution of $12.24 per
Limited Partnership Interest as a Return of Capital in July 1995, partially
offset by a gain of $1,490,000 in the value of the Partnership's interest in
the Perimeter 400 asset.
<PAGE>
For the quarter ended December 31, 1995, the value of a Limited Partnership
Interest decreased $8.00, mainly due to a distribution of $3.89 per Limited
Partnership Interest as a Return of Capital and a reduction of $1,000,000
($2.33 per Limited Partnership Interest) in the value of North Kent Mall.
For the quarter ended March 31, 1996, the value of a Limited Partnership
Interest increased $2.00.
It is noted that this is prior to any distributions to the Limited Partners
under the Early Investment Incentive Fund. The present value of a Unit of the
Early Investment Incentive Fund, as of March 31, 1996, was in the rounded
amount of:
(1) Early Investors on or before August 31, 1983 $10.00
Some of the funds received from prepayments and/or excess funds have been
invested in first mortgage loans vis-a-vis wrap-around mortgage loans. The
cash flow from these first mortgage loans are discounted at a risk rate
somewhat less than that rate used for the wrap-around mortgage loans to
compensate for the lower risk.
The variable components in the total Value of a Limited Partnership Interest
and their values, as estimated by Valuation Counselors Group, Inc./Darby and
Associates, Inc. Joint Venture (Schedule E), are as follows:
Net Investment in Loans Receivable $2,300,000
Unamortized Portion of the
Offering Expenses 1,877,382
Real Estate 54,613,750
A copy of this report is retained in our files, together with the information
from which the report was compiled.
Respectfully submitted,
/s/Raymond Ghelardi /s/Clement H. Darby
Valuation Counselors Group, Inc. Darby & Associates
Raymond Ghelardi Clement H. Darby
Managing Director President
REG/CHD/ded
cc: Mr. David P. Bennett
Ms. Mary J. Mojica
Ms. Jayne Kosik
Ms. Jane Cody
<PAGE>
TABLE OF CONTENTS
Statement of Facts and Limiting Conditions
Introduction
Payments to the Limited Partners and General Partner
Valuation of a Limited Partnership Interest
Valuation of "The Net Investment in Loans Receivable"
(1) Discussion of Risk Rates
(2) The Present Value of the Return on Funds Advanced and
the Return of Principal
(3) The Present Value of the Equity Buildup and Accrued Interest
(4) The Present Value of the "Kickers"
(5) The Value of the Notes
Conclusions of Value of the "Net Investment in Loans Receivable"
Valuation of the "Real Estate Acquired Through Foreclosure"
Calculation of the Unamortized Portion of the Offering Expenses
Other Balance Sheet Adjustments in Anticipation of Dissolution
Calculation of the Value of a Limited Partnership Interest
in Balcor Pension Investors - IV
Calculation of an Interest in the Early Investment Incentive Fund
Schedule
A Distributions to the Limited Partnership
B-1 Unadjusted Balance Sheet of Balcor Pension Investors - IV
as of March 31, 1996
B-2 Statements of Income and Expenses for the quarters
ended March 31, 1996 and 1995
B-3 Statements of Cash Flows for the quarters ended
March 31, 1996 and 1995
C Loan Portfolio Summary
D-1 Real Estate Asset Summary
D-2 Real Estate Appraisal Projections
E Adjusted Balance Sheet of Balcor Pension Investors - IV
as of March 31, 1996
<PAGE>
STATEMENT OF FACTS AND LIMITING CONDITIONS
Valuation Counselors Group, Inc./Darby & Associates Joint Venture strives to
clearly and accurately disclose the assumptions and limiting conditions that
directly affect an appraisal analysis, opinion or conclusion. In order to
assist the reader in interpreting this report, such assumptions are set forth
as follows:
Valuation Counselors Group, Inc./Darby & Associates Joint Venture reserves the
right to make adjustments to the analysis, opinion and conclusions set forth in
the report as deemed necessary by consideration of additional or more reliable
data that subsequently may become available.
No opinion is rendered as to legal fee, property title or mortgage notes
related to the appraised assets, which are assumed to be good and marketable.
It is assumed that no opinion is intended in matters that require legal,
engineering or other professional advice which has been or will be obtained
from professional sources; the valuation report will not be used for guidance
in professional matters exclusive of the appraisal and valuation discipline.
Information furnished by others is presumed to be reliable, and where so
specified in the report, has been verified; however, no responsibility, whether
legal or otherwise, is assumed for its accuracy and cannot be guaranteed as
being certain. All facts and data set forth in the report are true and
accurate to the best of the Appraiser's knowledge and belief. No single item
of information was completely relied upon to the exclusion of other
information.
All financial data, operating histories and other data relating to income and
expenses attributed to the assets and the Partnerships have been provided by
Management or its representatives and have been accepted without further
verification except as specifically stated in the report.
It should be specifically noted that the valuation assumes the appraised assets
will be competently managed and maintained by financially sound owners over the
expected period of ownership except where noted, specifically in assets during
the period of foreclosure where Balcor may not have control. This appraisal
engagement does not entail an evaluation of management's effectiveness, nor are
we responsible for future marketing efforts and other management or ownership
actions upon which actual results will depend.
Neither the report nor any portions thereof, especially any conclusions as to
value, the identity of the appraiser or Valuation Counselors Group, Inc./Darby
& Associates Joint Venture shall be disseminated to the public through public
relations media, news media, sales media, prospectus or any other public means
of communications without the prior written consent and approval of Valuation
Counselors Group, Inc./Darby & Associates Joint Venture. The date of the
valuation to which the value estimate conclusion applies is set forth in the
report.
The preponderance of working paper support for this valuation is maintained in
the offices of management, Balcor Mortgage Advisors.
Neither the fees nor any of the terms and conditions of the appraisal
assignments given to Valuation Counselors Group, Inc./Darby & Associates Joint
Venture by Balcor Mortgage Advisors are contingent upon the values reported.
<PAGE>
No independent investigation of the fair market value of the underlying real
estate assets has been made by Valuation Counselors Group, Inc./Darby &
Associates Joint Venture. We have reviewed the real estate appraisals for
reasonableness, but have assumed the real estate appraisals obtained by Balcor
Mortgage Advisors are independent and accurate. Valuation Counselors assumes
responsibility for real estate appraisals prepared by their own staff.
No independent investigation of the terms and conditions of the mortgage loans
made by Balcor Pension Investors - IV has been made. We have relied on data
furnished to us by Balcor Mortgage Advisors and the validity of the information
was assumed to be correct.
In the event that this appraisal is used as basis to set a market price for a
Limited Partnership Interest in Balcor Pension Investors - IV, no
responsibility is assumed for the seller's inability to obtain a purchaser at
the value reported herein.
The reader of this valuation report should be fully conversant with the terms
and conditions of Balcor Pension Investors - IV Limited Partnership as set
forth in the Prospectus, other related documents, and the prior appraisals of a
Limited Partnership Interest in Balcor Pension Investors - IV.
We have discussed the current status and condition of the mortgage loans and
real estate owned with the management of Balcor Mortgage Advisors and have
accepted their comments as being factual.
<PAGE>
INTRODUCTION
Balcor Pension Investors - IV ("BPI - IV") is a Partnership organized on
October 21, 1982, pursuant to the Uniform Limited Partnership Act of the State
of Illinois. The Partnership serves as an investment vehicle for qualified
pension, profit sharing and other retirement trusts; bank commingled trust
funds for qualified pension and profit sharing plans; Individual Retirement
Accounts and HR-10 Plans; government pension and retirement trusts; and other
entities intended to be exempt from Federal Income Tax, such as certain
religious, charitable, scientific, literary and educational corporation, funds
and foundations. The Limited Partnership provides for Balcor Mortgage Advisors
- - III to be the General Partner. The sale of the Limited Partnership Interests
were at $500 per interest up to an initial maximum of 450,000 interests. The
offering period, during which interests were sold by Balcor Pension Investors -
IV, commenced March 1, 1983, and ran until June 2, 1983. As of June 2, 1983,
the closing date, 429,606 Limited Partnership Interests had been sold.
The Partnership's investment objective was to make wrap-around mortgage loans
and, to a lesser extent, make other junior mortgage loans and first mortgage
loans. As of March 31, 1996, the loan portfolio consisted of one second
mortgage loan (Stonehaven Apts.). In addition there are eight Real Estate
Owned properties. Unfunded monies totaling $4,185,709(1) were invested in
short-term money market instruments and in demand deposit bank accounts.
On August 29, 1983, the Partnership funded two loans in the amounts of
$8,910,957 and $2,900,000 on Phases I and II of the Pavilion Apartments. On
October 31, 1986, the Partnership received a prepayment of approximately
$12,449,000. In addition, the Partnership received one note in the amount of
$2,500,000 and a second note for $1,329,169 which represent additional
interest earned but unpaid. As of June 30, 1989, the Partnership accepted
$50,000 in exchange for the Notes.
On March 5, 1984, the Partnership funded a $4,214,292 mortgage loan on
Briarwood Apartments. On November 24, 1986, the Partnership received a
prepayment of $3,655,000 plus two promissory notes in the amount of
approximately $312,500 and $1,360,372. The $312,500 note is secured by a
second mortgage on the property. We have given no value to the Notes. It is
noted that the Partnership has received $32,000 and expects to receive an
additional $25,000 as payment on these Notes.
In the quarter ended February 28, 1987, the Partnership acquired title to
Haystack Apartments. The property had an appraised value of $3.3 million as of
February 5, 1990. The property was sold for $3.3 million August 11, 1992. Net
cash proceeds after expenses and payoff of the underlying mortgage were
$967,000.
The Partnership acquired title to the University Building on March 7, 1988.
The property was appraised at $2.4 million, the approximate amount of the
underlying mortgage. In April 1991, the Partnership transferred its leasehold
interest to the first mortgage holder but retained an interest in the ground.
University Building land was sold on December 20, 1993, for a gross price of
$100,000 all cash. This sale relinquishes the only land asset in the pension
portfolio.
On April 1, 1986, the Partnership funded $5,685,366 of a $37,000,000 loan
collateralized by a first mortgage loan on the Perimeter 400 Office Complex
<PAGE>
located in Fulton County, Georgia. The remainder was funded by three
affiliated partnerships. In December 1990, the borrower advised the
Partnerships that, due to financial conditions, it could no longer make future
debt service payments. As a result, the Partnerships purchased the property at
a price equal to the outstanding loan amount less amounts held in escrow. The
Partnerships acquired title on February 7, 1991. The property was appraised at
$28,500,000, and the pro rata value assigned to BPI - IV was $4,379,000 as of
March 1, 1991. The property was reappraised in October, 1995 at $34,000,000
and the Partnership's pro rata value was $5,396,732. As of March 31, 1996, it
is valued at $5,460,624 based on its 1996 projected cash flow.
On December 8, 1986, the Partnership funded $3,300,000 of an $8,400,000 first
mortgage loan on Camelot Manor MHP. This loan was paid off on August 25, 1989.
On December 31, 1984, the General Data Mortgage Loan was paid in full. On
October 30, 1985, the Tara Gardens Mortgage Loan was paid in full. On August
22, 1986, the Worthington Park mortgage loan was prepaid for $2,216,458. A
valuation loss of $179,000 was incurred. The College Hills Mall mortgage loan
was paid off in the quarter ended February 28, 1987, for $5,283,252 resulting
in a valuation loss of $278,000. On April 30, 1987, the Chateau Avon MHP
mortgage loan was paid off in the amount of $6,959,297 as compared to a
valuation of $6,736,235 the previous quarter. On June 30, 1987, the Village
Green mortgage loan was paid off at $5,295,617 with a valuation of $5,190,150.
On November 18, 1988, the Pier 39 mortgage loan was prepaid in the amount of
$25,701,884. It had been valued at $21,162,132. The 77 Executive Center
mortgage loan was paid off in the quarter ended June 30, 1989, in the amount of
$2,293,068.
In the quarter ended September 30, 1989, 128/One Office mortgage loan was
prepaid in the amount of $15,843,798, Hidden Lake MHP for $2,149,814, Sand and
Sea MHP for $6,724,454, Whipple Tree for $4,617,317 and Camelot Manor for
$3,434,371.
On November 13, 1990, the Independence Green mortgage loan was paid off for
$26,506,747. A note received in payment for $1,800,000 was valued at zero.
On December 13, 1990, the Partnership sold Creekside Courts I & II for net cash
received of $2,556,075, the approximate September 30, 1990, valuation of the
asset.
On February 14, 1991, the Fridley Industrial Real Estate Owned asset was sold
for $2,200,000 subject to a first mortgage of $1,666,112. BPI - IV netted
$321,463 from the sale.
The Lumber Exchange mortgage loan was paid off in the amount of $8,030,363 on
September 9, 1987. On November 25, 1987, the Partnership funded a $9,683,389
wrap-around mortgage loan on 240 E. Ontario Street. On the quarter ended June
30, 1991, the Building experienced the loss of a tenant occupying 50% of the
space. The property was valued at $4,250,000 as of March 31, 1993, based on an
offer to purchase and was sold for $4,000,000 on June 30, 1993.
In the quarter ended June 30, 1991, Stonehaven Apts. mortgage loan was written
down to $2.3 million. Regency Club Apts., Del Lago Apts. and Shadow Apartments
became Real Estate Owned in the quarter ended September 30, 1990, and were
valued at $5,100,000, $4,400,000 and $2,800,000 respectively as of March 31,
1991. On April 27, 1993, the Shadows Apartments was sold for $1,770,000.
<PAGE>
Subsequently, Regency Club Apts. and Del Lago Apts. were revalued as of March
31, 1996, at $6,604,766 and $3,401,271 respectively based on projected 1996
cash flows.
In the quarter ended September 30, 1990, Colony Apartments, Palm View
(Timberlake Apts.) and Republic Park became Real Estate Owned and were valued
at $4,925,000, $6,600,000 and $2,800,000 respectively as of March 31, 1991.
Colony and Timberlake Apts. were revalued as of March 31, 1996, at $8,166,684
and $7,256,651 based on 1996 projected cash flows.
As of September 30, 1991, Pelican Pointe (formerly Carriage Crossings) became
Real Estate Owned and was valued at $6.7 million as of November 1, 1991. The
property was revalued as of March 31, 1996, at $10,557,824 based on 1996
projected cash flow. In February of 1994 the underlying loan of $2,838,474 was
prepaid. The Partnership was foreclosed out of Oracle Place and the loan was
written off. Stonegate MHP mortgage loan paid off at $425,000 on February 28,
1992.
The Bluffs Apts. mortgage loan was paid off on May 12, 1992, for $4,353,007
plus a note for $300,000. $119,600 of the Note was paid in June, 1992, and the
remainder of the Note is carried at no value.
In the quarter ended December 31, 1992, there were a number of material changes
made in the mortgage loan portfolio. The Partnership was foreclosed out of
Oakwood Apts. mortgage loan, resulting in a $2,300,000 loss. North Kent Mall
mortgage loan lost $3,455,0000 in value based on a court ordered settlement for
$2,000,000. It became Real Estate Owned on January 14, 1994 and is valued at
$5,000,000 as of March 31, 1996, based on an internal estimate of value.
Disposition of the asset currently is under study.
On April 1, 1993, the Partnership obtained a new first mortgage loan on the
Colony Apartments in the amount of $3,465,000. A prior loan of $1,829,202 was
paid off. On August 1, 1995, this loan was repaid in full in the amount of
$8,510,981.99.
In the quarter ended June 30, 1993, several events occurred. On May 17, 1993,
the underlying lender on Oakwood Apts. foreclosed on the property and the
Balcor Pension Investors - IV loan was written off. 240 E. Ontario and the
Shadows Apts. were sold and the mortgage on Colony Apts. was refinanced.
On October 12, 1993, Lantana Cascades mortgage loan was paid off in the amount
of $6,038,130 which was $749,000 greater than the previous quarter's valuation.
The Partnership was able to recover the total value of the Equity and Income
Participations.
The Republic Park Office Building was sold on February 2, 1994, for a gross
price of $3.25 million and net sales proceeds of $2,836,125. The Glendale
Fashion Center mortgage loan became Real Estate Owned on March 16, 1994 and is
carried as of March 31, 1996, at a value of $8,165,930 based on projected 1996
cash flow. Its development potential currently is being evaluated.
For the quarter ended June 30, 1994, the loan on Oppenheimer Hotels, previously
valued at zero, was been deleted from the loan portfolio. A settlement amount
of $100,000 occurred in October 1994.
In the quarter ended September 30, 1994, the Colonial and Castlewood mortgage
loan was written down to approximately $8.6 million. In the quarter ended June
<PAGE>
30, 1995, it was written down to $7.7 million, and sold September 1, 1995 for
net proceeds of $7,501,574. These amounts included the participation in the
loan by BEPI - II.
The stated objectives of Balcor Pension Investors - IV are as follows:
1. Preservation and protection of Limited Partners' capital;
2. Provide the Limited Partners with regular quarterly cash distributions
from cash flow;
3. Provide the Limited Partners with additional cash distributions through
the receipt of deferred interest; and
4. Maximize cash distributions over the life of the Partnership (estimated
to be 12 to 15 years) through the receipt of additional interest in the form of
equity participations.
With the wrap-around mortgage loans the intent is to generate a higher total
return on investment through the "equity buildup" portion of a wrap-around
mortgage whereby there is a spread in the principal reduction between the
wrap-around mortgage and the underlying mortgage loans. Although there is a
mathematical buildup of this equity during the life of the loan, the material
benefit of the equity buildup normally is not realized until the maturity of
the wrap-around loan - which usually occurs in a period of from ten to fifteen
years from the initial funding of the loan. In addition, there are potential
additional earnings available from a participation in the future gross income
as well as a participation in the appreciated value on which Balcor Pension
Investors - IV has made mortgage loans to date. These potential earnings are
commonly known as "kickers."
(1) Source: Balcor Pension Investors - IV Balance Sheet as of March 31, 1996,
Schedule B-1. The Net Investment in Loans Receivable includes funds advanced
as well as earned equity buildup and earned accrued interest, discounted to a
present value, and miscellaneous adjustments.
<PAGE>
PAYMENTS TO THE LIMITED PARTNERS AND GENERAL PARTNER
The Limited Partnership, Balcor Pension Investors - IV, is a partial
self-liquidating real estate investment fund. As of March 31, 1996, the
Partners' capital was invested in one real estate loan (Stonehaven Apts.) with
a maturity of June 30, 1997. Interest income and amortization, as well as
interests in gross income of certain properties, after deducting the General
Partners' expenses, income and reserves, is distributed to the Limited Partners
under certain formulae, terms and conditions set forth in the Limited
Partnership Agreements and described in the summary in the previous section.
The remaining Limited Partners' capital, equity buildup and interests in the
appreciation of certain properties is distributed to the Limited Partners upon
the maturity and/or the successful payoff of the loans. In addition the
Partnership owns eight real estate assets taken in foreclosure.
The Prospectus of Balcor Pension Investors - IV indicated that within 90 days
from the end of the offering period, which expired on June 2, 1983, as well as
during the term of the Partnership, distributions are to be made to the
investors. The following schedule sets forth the actual distributions made to
the Partnership to date.
SCHEDULE A
DISTRIBUTIONS TO THE LIMITED PARTNERSHIP
Number of Annual
Effective
Date Interests Rate Amount Paid
11/30/83 429,606 8.60%$4,618,264
2/29/84 429,606 9.00 4,833,068
5/31/84 429,606 9.40 5,047,870
8/31/84 429,606 9.40 5,047,870
11/30/84 429,606 9.40 5,047,870
2/28/85 429,606 9.40 5,047,870
5/31/85 429,606 9.40 5,047,870
8/31/85 429,606 9.40 5,047,870
11/30/85 429,606 9.40 5,047,870
2/28/86 429,606 9.40 5,047,870
5/31/86 429,606 9.00 4,833,067
6/86 429,606 - 214,803
($0.50 per Interest as a Return of Capital)
8/31/86 429,606 9.01 4,833,067
9/86 429,606 - 214,803
($0.50 per Interest as a Return of Capital)
11/30/86 429,606 9.42 5,047,870
2/28/87 429,606 6.61 $3,544,249
3/87 429,606 - 1,503,621
($3.50 per Interest as a Return of Capital)
5/31/87 429,606 8.68 4,618,264
8/31/87 429,606 8.68 4,618,264
12/31/87 429,606 5.77 3,071,683
1/88 429,606 6,444,090
($15.00 per Interest as a Return of Capital)
3/31/88 429,606 5.95 3,071,683
6/30/88 429,606 5.95 3,071,683
<PAGE>
Effective Number of Annual
Date Interests Rate Amount Paid
7/30/88 429,606 $10,740,150
($25.00 per Interest as a Return of Capital)
9/30/88 429,606 6.28% 3,071,682
10/88 429,606 6,444,090
($15.00 per Interest as a Return of Capital)
12/31/88 429,606 26.33 12,458,574
1/89 429,606- 15,036,210
($35.00 per Interest as a Return of Capital)
3/31/89 429,606 5.18 2,255,432
4/89 429,606 2,148,030
($5.00 per Interest as a Return of Capital)
6/30/89 429,606 5.24 2,255,432
7/89 429,606 2,921,321
($6.80 per Interest as a Return of Capital)
9/30/89 429,606 6.10 2,577,636
10/89 429,606 - 21,480,300
($50.00 per Interest as a Return of Capital)
12/31/89 429,606 6.98 2,577,636
3/31/90 429,606 18.62 6,873,711
6/30/90 429,606 4.66 1,718,424
9/30/90 429,606 4.66 1,718,425
10/90 429,606 4.66 494,047
($1.15 per Interest as a Return of Capital)
12/31/90 429,606 8.76 3,222,045
1/91 429,606 23,198,729
($54.00 per Interest as a Return of Capital)
3/31/91 429,606 4.16 1,288,818
6/30/91 429,606 4.16 1,288,818
9/30/91 429,606 4.16 1,288,818
12/31/91 429,606 4.16 1,288,818
3/31/92 429,606 2.43 751,811
6/30/92 429,606 2.43 751,811
9/30/92 429,606 2.43 751,811
12/31/92 429,606 2.43 751,811
4/93 429,606 0.00 2,148,030
($5.00 per Interest as a Return of Capital)
7/93 429,606 0.00 2,148,030
($5.00 per Interest as a Return of Capital)
10/93 429,606 0.00 2,148,030
($5.00 per Interest as a Return of Capital)
12/31/94 429,606 1.46 429,606
1/94 429,606 - 1,718,424
($4.00 per Interest as a Return of Capital)
3/31/94 429,606 2.23 644,409
4/94 429,606 - 1,954,707
($4.55 per Interest as a Return of Capital)
6/30/94 429,606 2.26 644,409
9/30/94 429,606 2.26 644,409
12/31/94 429,606 2.26 644,409
3/31/95 429,606 2.26 644,409
6/30/95 429,606 1.51 429,606
7/95 429,606 - 5,260,002
($12.24 per Interest as a Return of Capital)
<PAGE>
Effective Number of Annual
Date Interests Rate Amount Paid
9/30/95 429,606 1.58% $429,606
10/95 429,606 - 1,669,235
($3.89 per Interest as a Return of Capital)
12/31/95 429,606 1.61 429,606
3/31/96 429,606 1.61 429,606
($1.00 per Interest)
The Partnership Agreement provides that the General Partner will receive loan
application and loan commitment fees paid by borrowers, subject to certain
limitations, when the Partnership funds mortgage loans or issues commitments to
fund mortgage loans. The General Partner will service the Partnership's
mortgages and will receive a mortgage servicing fee, payable not more
frequently than monthly, at an annual rate equal to 1/4 of 1% of the amounts
advanced by the Partnership and outstanding from time to time. The General
Partner is also reimbursed for certain expenses incurred with respect to the
organization of and in the day to day operations of the Partnership.
Cash Flow available for distribution will be distributed on a quarterly basis
following the termination of the offering. 90% of such Cash Flow will be
distributed to Limited Partners. 10% of such Cash Flow will be paid to the
General Partner as its distributive share from Partnership operations, provided
that 25% of the General Partner's share shall be set aside in the Early
Investment Incentive Fund hereinafter described for payment to Early Investors
if necessary for them to receive on dissolution of the Partnership a return of
their Original Capital plus a Cumulative Return determined as follows: (i) for
Interests purchased on or before May 31, 1983, the greater of 18% per year or
4% per year above the Average Composite AA Bond Yield as measured by Standard &
Poor's ("AA Bond Yield") in effect as of August 31, 1983; and (ii) for
Interests purchased between June 1, 1983, and August 31, 1983, the greater of
16% per year or 2% per year above the AA Bond Yield in effect as of August 31,
1983. The AA Bond Yield was 11.98% as of February 2, 1983, and is published
periodically in various Standard & Poor's publications. After Early Investors
have received such return the amount remaining in the Early Investment
Incentive Fund will be distributed 90% to all Limited Partners and 10% to the
General Partner. In the event that on dissolution of the Partnership, cash
available for distribution and the amount in the Early Investment Incentive
Fund are not sufficient to return to Early Investors their Original Capital
plus the Cumulative Return, the amount of any funds in the Early Investment
Incentive Fund will be distributed first to all Early Investors until they
shall have received a Cumulative Return equal to the rate described in period
(ii) above, and then to those Early Investors who purchased Interests in period
(i) above.
<PAGE>
As noted above, 25% of the General Partner's share of Cash Flow shall be set
aside in the Early Investment Incentive Fund when and as distributions of Cash
Flow are made to the Limited Partners and the General Partner. The amounts in
the Early Investment Incentive Fund will be kept separate and apart from other
Partnership funds and may be utilized to repurchase Interests from Limited
Partners as set forth under "Description of the Partnership
Agreement--Repurchase of Interests." To the extent that the amounts in the
Early Investment Incentive Fund are not so utilized, it is intended that such
amounts shall, pending their distribution to Early Investors, Limited Partners
and the General Partner as described above, be temporarily invested in United
States government securities, securities issued or guaranteed by United States
government agencies, certificates of deposit and time or demand deposits in
state or national banks, securities issued or guaranteed by states or
municipalities, bank repurchase agreements, banker's acceptances, savings and
loan association deposits or deposits in members of the Federal Home Loan Bank
System, commercial paper, securities of mutual funds which invest exclusively
in "money market" instruments with maturities generally not exceeding one year,
and other similar investments.
When and as the Partnership sells a mortgage or a mortgage is repaid, the
Mortgage Reductions resulting therefrom which are not used to make new mortgage
loans and which are available for distribution will be distributed to Limited
Partners. To the extent any such sales or repayments results in excess
Mortgage Proceeds, such Excess Mortgage Proceeds will be included in Cash Flow.
<PAGE>
VALUATION OF A LIMITED PARTNERSHIP INTEREST
The methodology used in estimating the Value of a Limited Partnership Interest
in Balcor Pension Investors - IV is based upon substituting the estimated value
of the mortgage loan portfolio in place of the "Net Investment in Loans
Receivable" as shown on the March 31, 1996 Balance Sheet of Balcor Pension
Investors - IV. In addition, the unamortized portion of the Offering Expenses
is added to the Assets on the same Balance Sheet. The amortization is
calculated by reducing the total Offering Expenses, as set forth in the
financial statements, on a straight line basis, quarterly, to the expiration
date of the loan portfolio. For financial reporting purposes, Balcor Pension
Investors - IV initially deducted the total Offering Expenses from the proceeds
of the Limited Partnership Interest. Where equities exist, they are included
in the Balance Sheet (Schedule E) at their market value based on an independent
real estate appraisals or estimates based on the cash flows of the properties.
Schedules D-1 and D-2 summarize the calculations of Partnership Asset Values
for the Real Estate Acquired Through Foreclosure.
Future General Partner fees and related expenses are not present valued as an
expense because of their unpredictability but rather are taken as a charge in
the quarter incurred.
Valuation Counselors Group, Inc./Darby & Associates Joint Venture has been
retained by Balcor Mortgage Advisors - IV to estimate the Value of a Limited
Partnership Interest in Balcor Pension Investors - IV on a quarterly basis. In
order to accomplish this, we valued the "Net Investment in Loans Receivable" as
well as calculated the "Unamortized Portion of the Offering Expenses."
Cash and Investments in Certificates of Deposit and Marketable Securities are
considered short term investments since eventually all but a working capital
reserve will be funded in real estate loans and real estate owned or returned
to the investor. Consequently, they remain in the valuation at face value in
both Schedules B-1 and E.
A simplified version of the Balance Sheet of Balcor Pension Investors - IV,
prepared by Balcor Mortgage Advisors - IV, before the aforementioned
adjustments, is on the following Schedule B-1. Schedules B-2 and B-3 are
Statements of Income and Expense.
<PAGE>
SCHEDULE B-1
UNADJUSTED BALANCE SHEET
BALCOR PENSION INVESTORS - IV
AS OF MARCH 31, 1996
(UNAUDITED)
Assets
Cash and Cash Equivalents $ 4,185,709
Accounts and Accrued Interest Receivable 42,565
Escrow Deposits 882,532
Deferred Expenses, net of accumulated
amortization 118,475
Prepaid Expenses 50,420
Interest Receivable on Wrap-around Notes
and Short-term Investments 29,590
Real Estate acquired through Foreclosure 53,046,510
(Regency Club Apts., Del Lago Apts., Colony
Apts., Palm View, North Kent Mall, Pelican
Pointe and Glendale Fashion Center)
Net Investment in Loans Receivable
(Stonehaven Apts.) 2,419,804
Discount on Loans Receivable (92,377)
Allowance for Potential Losses (12,883,509)
Investment in Participation - Affiliates
(Perimeter 400) 4,302,263
-----------
Total Assets $52,101,982
===========
Liabilities
Accounts and Accrued Real Estate Taxes
Payable $ 624,982
Due to Affiliates 60,469
Mortgage Notes Payable (1) 10,345,217
Other Liabilities 323,949
-----------
Total Liabilities $11,354,617
Partners' Capital
(429,606 Limited Partnership Interests) 40,747,365
-----------
Total Liabilities and Partners' Capital $52,101,982
===========
(1) Colony Apts., Palm View Apts., North Kent Mall and Glendale Fashion Center.
<PAGE>
SCHEDULE B-2
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
------------- -------------
Income:
Interest on loans receivable $ 31,405 $ 49,142
Income from operations of real estate
held for sale 374,936 655,888
Participation in income of joint
venture with affiliates 80,728 78,179
Interest on short-term investments 53,366 181,250
------------- -------------
Total income 540,435 964,459
------------- -------------
Expenses:
Administrative 156,672 235,824
------------- -------------
Total expenses 156,672 235,824
------------- -------------
Net income $ 383,763 $ 728,635
============= =============
Net income allocated to General Partner $ 28,782 $ 54,648
============= =============
Net income allocated to Limited Partners $ 354,981 $ 673,987
============= =============
Net income per average number of Limited
Partnership interests outstanding
(394,691 in 1996 and 400,623 in 1995) $ .90 $ 1.68
============= =============
Distribution to General Partner $ 35,801 $ 53,701
============= =============
Distribution to Limited Partners $ 394,691 $ 600,934
============= =============
Distribution per Limited Partnership
Interest $ 1.00 $ 1.50
============= =============
<PAGE>
SCHEDULE B-3
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
------------- -------------
Operating activities:
Net income $ 383,763 $ 728,635
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in income of joint
venture with affiliates (80,728) (78,179)
Amortization of deferred expenses 5,632 5,632
Net change in:
Escrow deposits (43,725) (69,411)
Accounts and accrued interest
receivable 157,952 (71,532)
Prepaid expenses 94,398
Accounts and accrued real estate
taxes payable 89,221 (46,835)
Due to affiliates 16,093 54,846
Other liabilities 35,586 (963)
------------- -------------
Net cash provided by operating activities 658,192 522,193
------------- -------------
Investing activities:
Collection of principal payments on
loan receivable 34,359 31,111
Distribution from joint venture
with affiliates 1,740
Additions to real estate (174,887) (99,148)
Costs incurred in connection with real
estate acquired through foreclosure (375,000)
------------- -------------
Net cash used in investing activities (138,788) (443,037)
------------- -------------
Financing activities:
Distribution to Limited Partners (394,691) (600,934)
Distribution to General Partner (35,801) (53,701)
Change in cash and cash equivalents -
Early Investment Incentive Fund (49,797) (64,161)
Principal payments on mortgage notes
payable (73,791) (67,216)
Release of capital improvement escrows 23,060
------------- -------------
Net cash used in financing activities (554,080) (762,952)
------------- -------------
Net change in cash and cash equivalents (34,676) (683,796)
Cash and cash equivalents at beginning
of year 4,220,385 11,860,415
------------- -------------
Cash and cash equivalents at end of period $ 4,185,709 $ 11,176,619
============= =============
<PAGE>
VALUATION OF "THE NET INVESTMENT IN LOANS RECEIVABLE"
The value of the "Net Investment in Loans Receivable" (the loan portfolio) is
equal to the present value of the various income and equity components of the
loan portfolio, discounted at current market rates of interest, commensurate
with the risks, as of March 31, 1996.
The income and equity components of the loan portfolio are as follows:
(1) The present value of the average annual rate of return on funds
advanced (cash received) over the life of the loans,
(2) The present value of the funds advanced, due at maturity,
(3) The present value of the equity buildup for wrap-around mortgage loans
and accrued interest, and
(4) The present value of the "kicker" income, i.e., a share in the future
gross income and the appreciated value, "equity kicker," in certain properties.
(1) Discussion of Risk Rates
The discount rate applied to the cash flow mathematically expresses risk. Risk
represents the uncertainty related to achievement of the prospective cash
flows. The primary components of risk exposure in fixed income securities are
interest rate risk, inflation risk, market risk, liquidity risk and risk of
default. As previously discussed, the valuation of the assets in question have
been predicated upon the present valuing of the components of the loan
portfolio. Therefore, determination of an appropriate risk rate is essential
in the valuation of the net investment in loans receivable.
Financial theory dictates the necessity of incremental return resulting from
incremental risk. Accordingly, the typical risk/return tradeoff indicates that
investors should demand greater rates of return as the perceived riskiness of
the asset or security increases. In examining an investment situation, a
hypothetical investor would weigh the perceived level of risk against the
return expected from the subject investment. In determining the required rate
of return or discount rate on a particular asset or investment, the
hypothetical investor would also consider returns available from alternative
investment opportunities such as government securities, corporate bonds,
mortgages, real estate and common stock, if applicable.
The subject assets consist of a self-liquidating real estate investment fund
with investments in both real estate loans with varying maturities and real
estate assets. Accordingly, in determining an appropriate risk rate associated
with the subject assets, we have considered alternative and comparable rates of
return in the lending and real estate marketplace as indicated by such sources
as the Wall Street Journal, Real Estate Research Corporation Real Estate
Report, Investment Dealers Digest, Corporate Financing Week, American Council
of Life Insurance Investment Bulletin and the National Association of Real
Estate Investment Trusts.
The following table presents yield rates associated with various types of
government and corporate securities as indicated by the March 29,1996 and
January 3, 1996 Wall Street Journals.
<PAGE>
Yield Rates as Indicated by the Wall Street Journal
Security First Quarter 1996 Fourth Quarter 1995
Three Month U.S. Treasury Bills 4.99% 5.04%
Six Month U.S. Treasury Bills 4.97% 5.03%
Prime Rate 8.25% 8.50%
Ten Year U.S. Treasury Bonds 6.60% 5.64%
Twenty Year U.S. Treasury Bonds 6.90% 6.02%
Corporate Bonds
Aaa, Aa 6.72% to 7.60% 6.02% to 6.96%
A, Baa 6.95% to 7.91% 6.23% to 7.31%
Ba, C 9.8% 9.7%
Collateralized Mortgage
Obligations
10 Year 7.90% 6.94%
20 year 8.05% 7.17%
Additionally, information from Moody's Corporate Bond Survey and the Investment
Dealer's Digest indicates the corporate original issue Real Estate Mortgage
Investment Conduit (REMIC) yields from 1988 to 1995 ranged from 7% to 11.3% for
obligations with terms in excess of ten years. A yield difference of one to
three points was exhibited within multiple class REMIC issues where accrued
interest payments did not commence on the (higher yielding) security until
senior class notes were paid in full. A short term issuance collateralized by
elderly living properties exhibited a four point yield differential between
classes.
According to information from the Mortgage-Based Securities Letter, REMIC
issuances in 1994 have decreased substantially from the levels exhibited during
1992 and 1993. Reportedly, many REMIC underwriters and investors incurred
losses due to price corrections in the derivative mortgage securities market.
The price decline was believed to be attributable to several factors including
rising interest rates, increased volatility, average-life extension and lack of
liquidity. According to the Wall Street Journal, new issues of mortgage-backed
securities were down 57% in 1994 as compared to the prior year.
In addition to the previously noted yields on various market securities, we
have also considered mortgage rates associated with various types of commercial
real estate properties. This data is relevant in that it provides an
indication of rates of return associated with similar types of investments.
These statistics have been extracted from the December 29, 1995 and October 1,
1995 editions of the Investment Bulletin published by the American Council of
Life Insurance, is as follows:
<PAGE>
Averages
Contract Interest
Rate
Type of Loan
Property Type Third Quarter Second Quarter
1995 1995
FIXED RATE-FIXED TERM 7.83% 8.23%
Apartment 7.64% 8.13%
Office Building 7.98% 8.23%
Retail 7.79% 8.17%
Industrial 7.84% 8.21%
Other Commercial 7.73% 8.47%
Yield With
Fees
Type of Loan
Property Type Third Quarter Second Quarter
1995 1995
FIXED RATE-FIXED TERM 7.85% 8.24%
Apartment 7.67% 8.15%
Office Building 8.00% 8.24%
Retail 7.81% 8.18%
Industrial 7.85% 8.22%
Other Commercial 7.74% 8.51%
Maturity
(Years/Months)
Type of Loan
Property Type Third Quarter Second Quarter
1995 1995
FIXED RATE-FIXED TERM 11/06 11/02
Apartment 10/11 10/09
Office Building 10/0 09/07
Retail 13/05 10/06
Industrial 10/08 10/00
Other Commercial 11/04 12/02
Additionally, we have considered expected capitalization rates and internal
rates of return extracted from "Korpacz Real Estate Investor Surveys, First
Quarter 1996". For comparative purposes, we have also presented similar data
extracted from "Korpacz Real Estate Investor Surveys, Fourth Quarter 1995".
<PAGE>
National Market Indicators: First Quarter 1996
Retail Office
(National Regional (Central Business
Malls) District)
Range Average Range Average
Free and Clear Equity IRR 10.00%-14.00% 11.50% 10.00%-15.00% 12.10%
Free and Clear Equity Cap
Rate 6.25%-11.00% 8.11% 8.00%-12.50% 9.58%
Terminal Cap Rate 7.00%-11.00% 8.56% 8.25%-12.00% 9.62%
Office National
(National Suburban) Industrial
Range Average Range Average
Free and Clear Equity IRR 10.00%-14.00% 11.90% 9.00%-14.00% 11.27%
Free and Clear Equity Cap
Rate 8.00%-11.00% 9.47% 7.25%-13.00% 9.29%
Terminal Cap Rate 8.50%-12.00% 9.68% 8.00%-11.00% 9.51%
National
Apartment
Range Average
Free and Clear Equity IRR 10.50%-13.00% 11.38%
Free and Clear Equity Cap
Rate 7.50%-10.50% 8.97%
Terminal Cap Rate 8.00%-11.00% 9.29%
<PAGE>
National Market Indicators: Fourth Quarter 1995
Retail Office
(National Regional (Central Business
Malls) District)
Range Average Range Average
Free and Clear Equity IRR 10.00%-14.00% 11.55% 10.00%-15.00% 12.15%
Free and Clear Equity Cap
Rate 6.25%-11.00% 7.86% 7.50%-12.50% 9.52%
Terminal Cap Rate 7.00%-11.00% 8.45% 8.25%-12.00% 9.63%
Office National
(National Suburban) Industrial
Range Average Range Average
Free and Clear Equity IRR 10.00%-15.00% 12.04% 9.00%-14.00% 11.31%
Free and Clear Equity Cap
Rate 8.00%-11.50% 9.57% 7.25%-13.00% 9.36%
Terminal Cap Rate 8.50%-12.00% 9.75% 8.00%-11.00% 9.58%
National
Apartment
Range Average
Free and Clear Equity IRR 10.00%-13.00% 11.50%
Free and Clear Equity Cap
Rate 7.50%-10.50% 8.99%
Terminal Cap Rate 8.00%-11.00% 9.31%
<PAGE>
Our discount rates have been selected based upon the returns exhibited on
alternative securities and real estate properties as previously presented, in
conjunction with the attributes of the subject assets.
Risk Measurement in Real Estate
As previously discussed, the primary components of risk exposure for fixed
income securities include interest rate risk, inflation risk, market risk,
liquidity risk and default risk. For real estate, these risks are similar and
can be segmented into two categories. The first is systematic risk which
includes all risks external to the property. The remaining risks can be
categorized as nonsystematic risk and includes all risks directly related to
the property. Generally, systematic risk affects the overall market as a whole
and is often referred to as market risk. However, nonsystematic risk is
generally more attributable to the property specifics. Nonsystematic risk can
be further broken down into risk relative to the immediate neighborhood or
local market with the residual risks being unique to the property.
When viewing an investment in a single property, the systematic overall market
risk, the nonsystematic local market risk and the nonsystematic unique property
risks must be weighed in the derivation of an appropriate risk rate (discount
rate) to be applied to anticipated cash flows. The overall market risks would
include such factors which effect the market as a whole. Among these factors
would be the level of interest rates, the economic condition of the nation,
federal tax incentives related to real estate and the expected inflation rate.
Each of these factors can have a direct effect on real estate throughout the
nation.
Nonsystematic local market risks are those that effect a regional area or
neighborhood and are not part of the overall market risk. There are many types
of possible local market risks. Some examples of local market risk include
fluctuations in the local economy, changes in transportation systems, local
crime rates and over building. These local market risks may be severe enough
to override the effects of the overall market risk.
Property unique risks are those which effect the subject property in a manner
more specific than the local market risks. Many of the property unique risks
are similar to the local market risks but are more significant for the subject
property. Some examples of property specific risks would include dependence on
single industries or tenants, crime frequency on the property, changes in
immediate traffic patterns, changes in adjacent zoning or adjacent property
conditions and unanticipated capital improvement requirements. These property
specific risks may have a material impact on the property but may not be
reflected in the local market risks.
Investments in individual property would reflect three groups of risks
including the systematic overall market risks, the nonsystematic local market
risks and the nonsystematic property unique risks. However, modern portfolio
theory recognizes that through investment diversification, the nonsystematic
risks associated with the local market and the unique attributes of the
property can be reduced. Furthermore, with sufficient diversification, a
portfolio can virtually eliminate nonsystematic risk.
The benefits of portfolio diversification are reflected in the improvement of
the portfolio's return-risk ratio. The return-risk ratio measures the return
of the investment relative to the volatility of the return. Generally, the
<PAGE>
volatility of return is measured by the standard deviation of the return over a
period of time. Therefore, the return-risk ratio is simply the return of the
investment divided by the standard deviation of the return.
As an example of the application of this ratio, assume that portfolio A invests
in only one type of property in one local market and experiences an average
annual return of 13% over fifteen years with a standard deviation of return of
17%. The return-risk ratio is computed to be 0.76 (13% divided by 17%).
Portfolio A's risk-return ratio can then be compared to the ratio of other
portfolios to evaluate the level of return relative to the risk taken.
To illustrate, assume portfolio B invests in a wide variety of property types
in a numerous geographical regions and only generated an annual return of 12%
over fifteen years. However, the standard deviation of return was only 13%.
The return-risk ratio is computed to be 0.86 (12% divided by 13%). Even though
portfolio A's return exceeded portfolio B's return, the superior return was not
enough to offset the increase in risk. Therefore, an investor would likely
prefer an investment in Portfolio B.
It should be noted, however, that with the reduction in the volatility of
returns, modern portfolio theory also recognizes that there is a reduction in
the level of potential return. This is because that volatility generally
provides the opportunity for added returns. This is the basis for the axiom
that greater risk equals greater reward. However, an investor generally
requires that the increase in risk is offset by an increase in potential
return. Conversely, if an investor is looking for a lower risk, the investor
would expect lower returns.
In the instant case, the discount rates selected for the appraisal of
individual properties which are expected to be sold in the near future reflect
all the systematic and nonsystematic risks associated with each individual
property. The discount rates are derived considering overall market factors,
local market factors and property unique factors. However, for those
properties which are valued as real estate investments on the basis of their
cash flows, the discount rate applied reflects the benefits of reduced
nonsystematic risks through portfolio diversification. These benefits include
the offsetting of local market risks and property unique risks of each property
with the local market risks and property unique risks of the other properties
in the portfolio. As a result, the volatility of returns for each property is
offset by the volatility of returns of the other properties in the portfolio.
The discount rates applied to the latter category of properties are derived
from market data on portfolio returns, which reflect the dichotomies described
above.
<PAGE>
(2) The Present Value of the Return on Funds Advanced and the Return of
Principal
Schedule C lists the one second mortgage loan (Stonehaven Apts.) funded as of
March 31, 1996, with total funds advanced of $2,300,000.
The mortgage loan is valued at funds advanced of
$2,300,000
(3) The Present Value of the Equity Buildup and Accrued Interest
As of March 31, 1996, no values have been assigned to the Equity Buildup and
Accrued Interest.
(4) The Present Value of the Income and Equity Kickers
As of March 31, 1996, no values have been assigned to the kickers.
5) The Value of the Notes
As part of loan payoffs, the Partnership had taken back several notes. The
Pavilion Apartments Notes were paid off for $50,000 in the quarter ended June
30, 1989. On Briarwood Apartments, the Partnership took back a cash surplus
note for $263,900, Note A for $312,500 and Note B for $1,360,371 in a payoff.
We have concluded that the Notes have no current value.
<PAGE>
BALCOR PENSION INVESTORS IV SCHEDULE C
LOAN PORTFOLIO SUMMARY
AS OF: 31-Mar-96
DISCOUNT RATES: WRAPS
FIRSTS
DATE DATE DISCOUNTING CURRENT
LOAN OF OF TERM FUNDS
DEAL TYPE FUNDING MATURITY(IN QUARTERS) ADVANCED
----------------------------------------------------------------------
1,2 STONEHAVEN APTS SECOND 06-Apr-84 30-Jun-97 5.00 2,300,000
------------
2,300,000
LESS: GP 10% SHARE
LESS: GP 5% SHARE (on Loans Valued at Funds Outstanding)
NET TO LIMITED PARTNERS
1. In bankruptcy.
2. Valued at the amount of Funds Advanced.
DISCOUNT RATES: WRAPS 11.00% 11.00% 11.00% 11.00%
FIRSTS 10.25% 10.25% 10.25% 10.25%
DISCOUNTEDDISCOUNTED DISCOUNTED
FUNDS DEBT EQUITY DISCOUNTED
DEAL ADVANCED SERVICE BUILD-UP NOTES
---------------- ----------------------------------------------
STONEHAVEN APTS 2,300,000 0 0 0
----------------------------------------------
2,300,000 0 0 0
LESS: GP 10% SHARE
LESS: GP 5% SHARE 0 0 0
(on Loans Valued at
Funds Outstanding) 0
----------------------------------------------
NET TO LIMITED PARTNERS 2,300,000 0 0 0
==============================================
<PAGE>
DISCOUNT RATES: WRAPS 11.00% 18.00% 18.00%
FIRSTS 10.25% 15.00% 15.00%
DISCOUNTEDDISCOUNTED DISCOUNTED TOTAL
ACCRUED INCOME EQUITY CURRENT
DEAL INTEREST KICKERS KICKERS VALUATION
---------------- ----------------------------------------------
STONEHAVEN APTS 0 0 0 2,300,000
----------------------------------------------
0 0 0 2,300,000
LESS: GP 10% SHARE 0 0 0 0
LESS: GP 5% SHARE 0 0 0 0
(on Loans Valued at
Funds Outstanding)
----------------------------------------------
NET TO LIMITED PARTNERS 0 0 0 2,300,000
==============================================
<PAGE>
CONCLUSIONS OF VALUE OF THE "NET INVESTMENT IN LOANS RECEIVABLE"
The value of the "Net Investment in Loans Receivable" is the sum of the present
values of the various components of the loans described in the foregoing
sections of this report. Our conclusions are summarized as follows:
(1) The Present Value of the Return on Funds
Advanced and Return of Principal $2,300,000
(2) The Present Value of the Equity Buildup
and Accrued Interest 0
(3) The Present Value of the Income and Equity
Kickers 0
(4) The Value of the Notes 0
----------
Total Value of the "Net Investment in
Loans Receivable" as of March 31, 1996 $2,300,000
==========
<PAGE>
VALUATION OF THE "REAL ESTATE ACQUIRED THROUGH FORECLOSURE"
Balcor Pension Investors - IV began in 1983 as a Limited Partnership with an
investment objective to make mortgage loans. Because of the general decline in
the real estate market over the past several years, it was necessary for the
Partnership to acquire a number of the assets, secured by the mortgage loans,
through foreclosure or accepting the deed in lieu of foreclosure. As of March
31, 1996, the Partnership owned seven Real Estate Assets Acquired Through
Foreclosure and one property owned by a joint venture with an affiliate.
Several others have been sold or liquidated prior to this date.
In arriving at an estimate of the value of each asset a number of factors were
considered. Important to the analysis was the Partnership's policy on the
assets as to whether an asset would be retained until the maturity of the
Partnership or sold in the near-term. The decision to sell in the near-term
might be on the basis that there is no long-term potential for the asset to
materially increase in value or that substantial dollars might be necessary to
renovate and repair the asset. Also, the Partnership may have received an
offer to purchase the property for a price that would be difficult to refuse,
based on the factors known at this time. The decision to hold an asset until
the maturity of the Partnership indicates it is to be considered as an
investment with the assumption that the asset will grow in value.
Schedule D-1 lists the eight Real Estate Assets in Balcor Pension Investors -
IV presently owned by the Partnership. The first column indicates the Asset
Present Value without regard to potential payments to the General Partner. The
remaining columns set forth the calculations to determine if there is Excess
Value, and, if so, what amount is due the General Partner. The last column is
the Partnership Asset Value, which is equal to the Asset Present Value minus
the General Partner Share of Excess. The Partnership Asset Value includes the
Underlying Mortgage, where applicable, since the Underlying Mortgage is
deducted later in Schedule E - Liabilities.
Schedule D-2 is a summary of the calculations of the Asset Present Value for
each real estate asset in Balcor Pension Investors - IV. The assets are valued
as real estate investments on the basis of their cash flows, prepared either
internally or by outside consultants. The projected cash receipts up to the
projected sale date are discounted at 10.00% to a present value. The final
years' net cash receipts are capitalized at 9% and the residual is discounted
at 10.50% to a present value. There is a sales cost allowance of 2.50% on the
gross price.
The valuation methodology of the Real Estate Assets Acquired Through
Foreclosure represents a procedure modification commencing with the quarterly
valuation as of December 31, 1992. Prior to that date the valuation relied
heavily on independent appraisals which, by the very nature of the ever
changing real estate market, quickly became obsolete. In addition, it is noted
that, in many cases, when Balcor took over the management of the assets, there
was a marked improvement in the cash flow. In those funds where it is expected
that the assets may be held to maturity to maximize their value, the assets are
valued on the basis of each asset's predicted cash flows. These cash flows and
the residual values are discounted at rates more related to holding the asset
to its maturity rather than forcing a sale in today's market. As previously
stated, where the intention is to sell the asset in the near-term, an
independent appraisal or an internal estimate of value predicated on a
near-term sale is more appropriate. The exceptions to this procedure include
North Kent Mall, where the value is based on an internal appraisal in
<PAGE>
anticipation of selling the asset, and Glendale Fashion Center, valued at funds
advanced.
It should be noted that, as the modifications were made in the valuation
procedures, there were significant changes in the asset value of some of the
individual Real Estate Assets Acquired Through Foreclosure, however, the
overall value of the portfolio did not change substantially. It is believed
that individual values arrived as a result of the revised procedures would
better represent their current asset values based on the assumptions set forth
herein.
<PAGE>
SCHEDULE D-1
Real Estate Asset Summary
BALCOR PENSION INVESTORS IV
ASSET LESS: LESS:
PRESENT VALUEUNDERLYING FUNDS EXCESS
PROPERTY 31-Mar-96 MORTGAGE OUTSTANDING VALUE
- -------------------------------------------------------------------------
Pelican Pointe 11,047,577 0 6,150,048 4,897,524
Regency Club Apts 6,755,296 0 5,250,000 1,505,296
Perimeter 400 Cntr(15.78%) 5,460,624 0 5,685,366 (224,742)
Del Lago Apts 3,401,271 0 4,651,244 (1,249,973)
Colony 8,463,088 3,398,476 2,100,569 2,964,043
Palm View (Timberlake) 7,391,321 2,800,038 3,244,581 1,346,702
North Kent Mall 5,000,000 2,911,888 5,455,654 (3,367,542)
Glendale Fashion Center 8,227,799 1,234,815 6,374,300 618,684
-----------------------------------------------
55,746,976 10,345,217 38,911,762 6,489,997
GENERAL
PARTNER
SHARE OF NET PARTNERSHIP
EXCESS EXCESS ASSET VALUE
PROPERTY AT 10% VALUE 31-Mar-96
- --------------------------------------------------------------
Pelican Pointe 489,753 4,407,776 10,557,824
Regency Club Apts 150,530 1,354,766 6,604,766
Perimeter 400 Cntr(15.78%) 0 (224,742) 5,460,624
Del Lago Apts 0 (1,249,973) 3,401,271
Colony 296,404 2,667,639 8,166,684
Palm View (Timberlake) 134,670 1,212,032 7,256,651
North Kent Mall 0 (3,367,542) 5,000,000
Glendale Fashion Center 61,868 556,815 8,165,930
------------------------------------
1,133,225 5,356,771 54,613,750
<PAGE>
SCHEDULE D-2
Real Estate Appraisal Projections
BALCOR PENSION INVESTORS IV
REO - Discounted Cash Flow Analysis as of 31-Mar-96
PROJECTION SOURCE: APPRAISAL PROJECTIONS and BALCOR PROJECTIONS
DISCOUNT RATES:
Net Cash Receipts 10.00%
Residual Value 10.50%
Sales Commission 2.50%(on Gross Price)
Quarter Factor (for formula reference) 1
ACTUAL ACTUAL ACTUAL ACTUAL
1992 1993 1994 1995
Net Cash Receipts ------------------------------------------
Reo Investments
Pelican Pointe (Carriage Crossings)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 733,440 930,031 883,309
TI/LC/Capital 0 281,004 397,744 293,208
------------------------------------------
Net Cash Receipts 0 452,436 532,287 590,101
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Regency Club Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 591,648 515,326 582,210
TI/LC/Capital 0 157,505 148,105 148,667
------------------------------------------
Net Cash Receipts 0 434,143 367,221 433,543
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Perimeter 400 Center (15.78%)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 301,290 420,147 537,482
TI/LC/Capital 0 375,238 183,912 191,964
------------------------------------------
Net Cash Receipts 0 (73,948) 236,235 345,518
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
<PAGE>
ACTUAL ACTUAL ACTUAL ACTUAL
1992 1993 1994 1995
Net Cash Receipts ------------------------------------------
Reo Investments
Del Lago Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 312,728 254,228 276,378
TI/LC/Capital 0 154,762 132,931 94,604
------------------------------------------
Net Cash Receipts 0 157,966 121,297 181,775
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Colony
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 661,995 569,548 829,095
TI/LC/Capital 0 678,872 147,697 121,688
------------------------------------------
Net Cash Receipts 0 (16,877) 421,851 707,407
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Palm View (Timberlake Apts)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 544,112 609,111 693,920
TI/LC/Capital 0 346,471 167,321 159,740
------------------------------------------
Net Cash Receipts 0 197,641 441,790 534,180
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
North Kent Mall
Value
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
<PAGE>
ACTUAL ACTUAL ACTUAL ACTUAL
1992 1993 1994 1995
Net Cash Receipts ------------------------------------------
Reo Investments
Glendale Fashion Center
Funds Advanced
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 0
TOTAL NCR FROM INVESTMENTS 0 1,151,361 2,120,681 2,792,524
Total Net Cash Receipts PV
Total Residual Value PV
TOTAL PRESENT VALUES
Budget Pro-ject Pro-ject Pro-ject
1996 1997 1998 1999
------------------------------------------
Pelican Pointe (Carriage Crossings)
Balcor Internal Projections
NOI B4 TI/LC/Capital 986,855 1,035,097 1,085,803 0
TI/LC/Capital 225,000 120,000 150,000 0
------------------------------------------
Net Cash Receipts 761,855 915,097
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 11,612,866
Regency Club Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 630,770 646,292 662,819 0
TI/LC/Capital 137,489 92,800 96,280 0
------------------------------------------
Net Cash Receipts 493,281 553,492
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 7,084,259
Perimeter 400 Center (15.78%)
Balcor Internal Projections
NOI B4 TI/LC/Capital 532,710 468,883 542,797 0
TI/LC/Capital 133,823 91,180 83,613 0
------------------------------------------
Net Cash Receipts 398,888 377,703
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 5,796,691
<PAGE>
Budget Pro-ject Pro-ject Pro-ject
1996 1997 1998 1999
------------------------------------------
Del Lago Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 317,196 332,857 349,394 0
TI/LC/Capital 164,051 77,200 115,800 0
------------------------------------------
Net Cash Receipts 153,145 255,657
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 3,669,302
Colony
Balcor Internal Projections
NOI B4 TI/LC/Capital 752,823 788,621 826,467 0
TI/LC/Capital 114,602 110,880 79,200 0
------------------------------------------
Net Cash Receipts 638,221 677,741
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 8,874,193
Palm View (Timberlake Apts)
Balcor Internal Projections
NOI B4 TI/LC/Capital 670,366 701,144 733,596 0
TI/LC/Capital 152,366 121,600 152,000 0
------------------------------------------
Net Cash Receipts 518,366 579,544
------------------------------------------
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 7,795,290
North Kent Mall
Value
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00% 0
Glendale Fashion Center
Funds Advanced
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
TOTAL NCR FROM INVESTMENTS 2,963,756 3,359,234 0 0
<PAGE>
Pro-ject Pro-ject Pro-ject Pro-ject
2000 2001 2002 2003
Pelican Pointe (Carriage Crossings)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Regency Club Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Perimeter 400 Center (15.78%)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Del Lago Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Colony
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
<PAGE>
Pro-ject Pro-ject Pro-ject Pro-ject
2000 2001 2002 2003
Palm View (Timberlake Apts)
Balcor Internal Projections
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
North Kent Mall
Value
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Glendale Fashion Center
Funds Advanced
NOI B4 TI/LC/Capital 0 0 0 0
TI/LC/Capital 0 0 0 0
------------------------------------------
Net Cash Receipts 0 0 0 0
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
TOTAL NCR FROM INVESTMENTS 0 0 0 0
<PAGE>
Pelican Pointe (Carriage Crossings)
Balcor Internal Projections
NOI B4 TI/LC/Capital 1,305,393 NCR Present Value
TI/LC/Capital 9,742,184 Residual Present Value
-----------
Net Cash Receipts 11,047,577 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Regency Club Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 812,219 NCR Present Value
TI/LC/Capital 5,943,077 Residual Present Value
-----------
Net Cash Receipts 6,755,296 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Perimeter 400 Center (15.78%)
Balcor Internal Projections
NOI B4 TI/LC/Capital 597,704 NCR Present Value
TI/LC/Capital 4,862,919 Residual Present Value
-----------
Net Cash Receipts 5,460,624 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Del Lago Apts
Balcor Internal Projections
NOI B4 TI/LC/Capital 323,046 NCR Present Value
TI/LC/Capital 3,078,225 Residual Present Value
-----------
Net Cash Receipts 3,401,271 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Colony
Balcor Internal Projections
NOI B4 TI/LC/Capital 1,018,413 NCR Present Value
TI/LC/Capital 7,444,675 Residual Present Value
-----------
Net Cash Receipts 8,463,088 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
<PAGE>
Palm View (Timberlake Apts)
Balcor Internal Projections
NOI B4 TI/LC/Capital 851,751 NCR Present Value
TI/LC/Capital 6,539,570 Residual Present Value
-----------
Net Cash Receipts 7,391,321 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
North Kent Mall
Value
NOI B4 TI/LC/Capital 0 NCR Present Value
TI/LC/Capital 5,000,000 Residual Present Value
-----------
Net Cash Receipts 5,000,000 Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
Glendale Fashion Center
Funds Advanced
NOI B4 TI/LC/Capital 0 NCR Present Value
TI/LC/Capital 8,227,799 Residual Present Value
-----------
Net Cash Receipts 8,227,799 Asset Present Value
GROWTH RATE 1.04
CAPPED VALUE@ 9.00%
TOTAL NCR FROM INVESTMENTS
Total Net Cash Receipts PV 4,908,526 Total NCR PV
Total Residual Value PV 50,838,449 Total Residual PV
-----------
TOTAL PRESENT VALUES 55,746,976 TOTAL PRESENT VALUES
<PAGE>
CALCULATION OF THE UNAMORTIZED PORTION OF THE OFFERING
EXPENSES
The unamortized portion of the offering expenses of Balcor Pension Investors -
IV, as of March 31, 1996, is calculated on a straight line basis over the life
of the mortgage loan portfolio as follows:
Total Offering Expenses through March 31, 1996 = $18,365,749
----------
Unamortized portion as of March 31, 1992 = $7,040,197
----------
Remaining Quarters as of March 31, 1992 = 21
--
Quarterly Amortization, revised = $335,247
---------
Unamortized Portion as of June 30, 1995 = $7,040,197 - 4,358,221
$2,681,976
==========
In the quarter ended September 30, 1995, the decision was made to
close the Partnership by December 31, 1997. Therefore there are
nine remaining quarters of amortization as of that date.
Unamortized Portion as of March 31, 1996 = $2,681,976 - 804,594
$1,877,382
==========
(7 Remaining Quarters)
<PAGE>
OTHER BALANCE SHEET ADJUSTMENTS IN ANTICIPATION OF DISSOLUTION
For the quarter ended December 31, 1993, and for valuation purposes only, a new
balance sheet adjustment was made. This adjustment continued in each
subsequent quarter until the quarter ended December 31, 1995. The balance
sheet adjustment had commenced with the allocation of an estimated portion of
future cash flow to be accrued for certain costs to be incurred relating to the
dissolution and termination of the Partnership. These anticipated costs were
expected to be comprised of legal fees, accounting fees and other
administrative costs. The General Partner had, on a quarterly basis, accrued a
portion of expected eventual fund charges. For the quarter ended December 31,
1995, the cumulative reserve amount was $1,000,000. However, in the quarter
ended March 31, 1996, it became apparent that dissolution costs would be
minimal, so the balance sheet adjustment will no longer be made.
<PAGE>
CALCULATION OF THE VALUE OF A LIMITED PARTNERSHIP INTEREST
IN BALCOR PENSION INVESTORS - IV
The calculation of the Value of a Limited Partnership Interest in Balcor
Pension Investors - IV calls for the substitution of the value of the assets
appraised for the related accounting numbers. The following Schedule E, which
is Schedule B-1 modified for the values of the appraised assets, summarizes the
calculations.
SCHEDULE E
ADJUSTED BALANCE SHEET
BALCOR PENSION INVESTORS - IV
AS OF MARCH 31, 1996
(UNAUDITED)
Assets
Cash & Cash Equivalents $ 4,185,709
Accounts and Accrued Interest Receivable 42,565
Escrow Deposits 882,532
Deferred Expenses, net of accumulated
amortization 118,475
Prepaid Expenses 50,420
Interest Receivable on Wrap-around Notes
and Short-term Investments 29,590
Net Investment in Loans Receivable
(Stonehaven) (1) 2,300,000
Real Estate Acquired through Foreclosure (2) 54,613,750
Unamortized Portion of Offering Expenses 1,877,382
-----------
Total Assets $64,100,423
===========
Liabilities
Total Liabilities, including Mortgage
Notes Payable of $10,345,217 $ 11,354,617
Partners Capital, adjusted for Value
(429,606 Limited Partnership Interests) 52,745,806
-----------
Total Liabilities and Partners' Capital $64,100,423
===========
(1) From Schedule C.
(2) From Schedule D-1.
<PAGE>
The Value of a Limited Partnership Interest in Balcor Pension Investors - IV,
as of March 31, 1996 =
Partners' Capital, Adjusted for Value of the Assets
--------------------------------------------------- =
Number of Partnership Interests
$52,745,806
----------- = $122.78
429,606 =======
Rounded $123.00
=======
<PAGE>
CALCULATION OF AN INTEREST IN THE EARLY INVESTMENT
INCENTIVE FUND ("FUND")
As described in an earlier section of this report, the Partnership Agreement
provides that, under certain terms and conditions, 2.5% of the cash flow
distributed be set aside in the Early Investment Incentive Fund for payment, on
the dissolution of the Partnership, to two classes of investors who purchased
Interests (1) on or before May 31, 1983, and (2) between June 1, 1983, and
August 31, 1983. For the purpose of this valuation, all 429,606 Interests were
purchased prior to June 1, 1983.
The valuation is based on the sum of (1) the present value of Early Investors'
25% share in the General Partners' 10% share of certain designated earnings of
the Partnership, (2) the Early Investors Capital as of March 31, 1996, and (3)
the present value of the future earnings from repurchased interests.
General Partners' 10% Share of 3/31/96 Valuation
$ 0
Early Investor 25% Share 0
Early Investor Capital @@ 3/31/96 4,418,903
Present Value of Future Earnings on Repurchased
Shares 0
----------
$4,418,903
==========
Value per unit $10.29
======
Rounded Value per unit $10.00
======
