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, 1996
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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 0-11699
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BALCOR PENSION INVESTORS-IV
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(Exact name of registrant as specified in its charter)
Illinois 36-3202727
- ------------------------------- -------------------
(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-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
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Cash and cash equivalents $ 4,185,709 $ 4,220,385
Cash and cash equivalents - Early
Investment Incentive Fund 198,027 148,230
Escrow deposits 882,532 838,807
Accounts and accrued interest receivable 72,155 230,107
Prepaid expenses 50,420 144,818
Deferred expenses, net of accumulated
amortization of $64,218 in 1996 and
$58,586 in 1995 118,475 124,107
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5,507,318 5,706,454
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Investment in loan receivable - first
mortgage 1,623,427 1,657,786
Real estate held for sale (net of allowance
of $2,621,805 in 1996 and 1995) 40,867,001 40,692,114
Investment in joint venture with affiliates 4,302,263 4,223,275
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46,792,691 46,573,175
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$ 52,300,009 $ 52,279,629
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued real estate taxes
payable $ 624,982 $ 535,761
Due to affiliates 60,469 44,376
Other liabilities (principally security
deposits) 323,949 288,363
Mortgage notes payable 10,345,217 10,419,008
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Total liabilities 11,354,617 11,287,508
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Limited Partners' capital (429,606
Interests issued and outstanding) 53,127,572 53,167,282
Less Interests held by Early Investment
Incentive Fund (34,915 in 1996 and 1995) (8,613,130) (8,613,130)
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44,514,442 44,554,152
General Partner's deficit (3,569,050) (3,562,031)
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<PAGE>
Total partners' capital 40,945,392 40,992,121
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$ 52,300,009 $ 52,279,629
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The accompanying notes are an integral part of the financial statements.
<PAGE>
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
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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
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Total income 540,435 964,459
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Expenses:
Administrative 156,672 235,824
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Total expenses 156,672 235,824
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Net income $ 383,763 $ 728,635
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Net income allocated to General Partner $ 28,782 $ 54,648
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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
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Distribution per Limited Partnership
Interest $ 1.00 $ 1.50
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
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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)
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Net cash provided by operating activities 658,192 522,193
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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)
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Net cash used in investing activities (138,788) (443,037)
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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
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Net cash used in financing activities (554,080) (762,952)
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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
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Cash and cash equivalents at end of period $ 4,185,709 $ 11,176,619
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
A reclassification has been made to the previously reported 1995 statements to
provide comparability to the 1996 statements. This reclassification has not
changed the 1995 results. 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, 1996 and all such adjustments are of a normal
and recurring nature.
2. Interest Expense:
During the quarters ended March 31, 1996 and 1995, the Partnership incurred
interest expense on mortgage notes payable of $240,111 and $250,089 and paid
interest expense of $240,374 and $250,089, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1996 are:
Paid Payable
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Mortgage servicing fees $1,750 $ 583
Reimbursement of expenses to
the General Partner, at cost 26,624 59,886
4. Investment in Joint Venture with Affiliates:
The Partnership owns a 15.37% joint venture interest in Perimeter 400 Center
Office Building. The following information has been summarized from the
financial statements of the joint venture:
1996
___________
Net investment in real estate as of March 31 $26,541,734
Total liabilities as of March 31 304,741
Total income 1,336,606
Net income 525,232
5. Subsequent Event:
In April 1996, the Partnership made a distribution of $429,606 to the holders
of Limited Partnership Interests which represents a regular quarterly
distribution of available Cash Flow of $1.00 per Interest for the first quarter
of 1996.
<PAGE>
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-IV (the "Partnership") is a limited partnership formed
in 1982 to invest in wrap-around mortgage loans and, to a lesser extent, make
other junior mortgage loans and first mortgage loans. The Partnership raised
$214,803,000 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-eight loans. As of March 31, 1996 there is one
loan outstanding in the Partnership's portfolio. In addition, the Partnership
is operating seven properties held for sale and holds a minority joint venture
interest in one property.
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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
- ---------------------
Property operations decreased at the Glendale Fashion Center and North Kent
Mall, which was the primary reason for the decrease in net income during the
quarter ended March 31, 1996 as compared to the same period in 1995. Further
discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
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Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
The prepayment of the Colonial Coach Mobile Home Park loan in September 1995
resulted in a decrease in net interest income on loans receivable during 1996
as compared to 1995.
The Partnership's remaining loan collateralized by the Stonehaven South
Apartments is on non-accrual status at March 31, 1996. For non-accrual loans,
income is recorded only as cash payments are received from the borrowers. The
funds advanced by the Partnership for this non-accrual loan are approximately
$2,800,000, representing approximately 1.46% of original funds advanced.
During 1996, the Partnership received cash payments of interest income of
approximately $27,000 on this loan. Under the terms of the original loan
agreement, the Partnership would have received approximately $94,000 of
interest income.
Provisions are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
<PAGE>
including economic and demographic conditions. The Partnership did not
recognize any provisions for potential losses related to its loan or real
estate held for sale during the quarters ended March 31, 1996 and 1995.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At March 31, 1996,
the Partnership was operating seven properties. Original funds advanced by the
Partnership total approximately $30,200,000 for these seven properties. Rental
and service income decreased at the Glendale Fashion Center due to the
termination of certain tenants' leases during 1995 in an effort to prepare the
property for sale as a redevelopment project. In addition, rental and service
income decreased at the North Kent Mall as a result of decreased occupancy and
lower expense reimbursements and percentage rents collected from newly executed
leases. These events resulted in a decrease in income from real estate held for
sale during 1996 as compared to 1995.
Lower average cash balances were available for investment due to the payment of
special distributions to Limited Partners in July and October 1995 of proceeds
received in connection with prior loan repayments and property sales. This
resulted in a decrease in interest income on short-term investments during 1996
as compared to 1995.
Decreased third party professional fees was the primary reason administrative
expenses decreased during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $35,000 as of
March 31, 1996 when compared to December 31, 1995. The Partnership received
cash flow of approximately $658,000 from its operating activities, primarily
from interest income earned on its investment in loans receivable and
short-term interest bearing instruments and cash flow generated by the
Partnership's properties held for sale, net of administrative expenses. The
Partnership used cash of approximately $139,000 for investing activities
relating primarily to the completion of roof repairs at the North Kent Mall.
The Partnership also used cash to fund its financing activities which consisted
primarily of the payment of distributions to the Partners totaling
approximately $430,000 and the payment of principal of approximately $74,000 on
the mortgage notes payable.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments, if applicable. The Del Lago, Pelican Pointe and Regency Club
apartment complexes do not have underlying debt. During each of the quarters
ended March 31, 1996 and 1995, six of the Partnership's seven properties
generated positive cash flow and the Glendale Fashion Center operated at a
significant cash flow deficit. However, significant leasing costs were incurred
at North Kent Mall in order to lease vacant space and renew existing tenant
leases which were scheduled to expire during 1996. These costs were not
included in classifying the cash flow performance of the Mall since they are
non-recurring expenditures. Had these costs been included, North Kent Mall
<PAGE>
would have operated at a significant deficit during 1996. The Perimeter 400
Office Building, a property in which the Partnership holds a minority joint
venture interest, also generated positive cash flow during 1996 and 1995.
As of March 31, 1996, the occupancy rates of the Partnership's residential
properties ranged from 93% to 100% except for the Del Lago Apartments which had
an occupancy rate of 88%. The current occupancy level of North Kent Mall is
47%. After reviewing current market conditions, the General Partner determined
that it is in the best interest of the Partnership to sell the North Kent Mall.
Upon completion of the capital expenditure and leasing program which was
started in 1995, the property will be marketed for sale. The Glendale Fashion
Center is currently vacant due to the Partnership's strategy to market the
property for sale in 1996 as a redevelopment project. Many rental markets
continue to remain extremely competitive; therefore, the General Partner's
goals are to maintain high occupancy levels while increasing rents where
possible, and to monitor and control operating expenses and capital improvement
requirements at the properties.
As previously reported, the General Partner believes that the market for
multifamily housing properties has become increasingly favorable to sellers of
these properties. Currently, the Partnership is preparing to market the
residential properties in its portfolio for sale. As mentioned above, the
Partnership is preparing to market the Glendale Fashion Center and North Kent
Mall for sale. Additionally, the General Partner will explore the sale of the
commercial property in which it holds a minority joint venture interest over
the next year if market conditions are favorable. The General Partner examines
each property individually by property type and market in determining the
optimal time to sell each property. In addition, the General Partner considers
capital factors and Partnership administrative costs as it pertains to
Partnership performance.
In April 1996, an unaffiliated third party initiated discussions with the
General Partner for a potential sale of all of the remaining properties and the
remaining loan of the Partnership. These discussions are preliminary in nature
and as of this time, there is no agreement between the parties as to contract
terms. There can be no assurances that the General Partner will continue
negotiations with this third party. Such a sale of all of the Partnership's
assets will be contingent upon, among other things, the approval of a majority
of the outstanding Interests, as required by the Partnership Agreement.
Therefore, even if negotiations continue and a mutually acceptable contract is
agreed upon, there can be no assurances that a sale will ultimately be
consummated.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate. Lower interest rates
may increase the probability that the borrower may seek prepayment of the
Partnership's loan whereas rising interest rates decrease the yields on the
loan and make prepayment less likely.
Certain of the Partnership's properties held for sale are owned through the use
of third-party mortgage loan financing and, therefore, the Partnership is
subject to the financial obligations required by such loans. The Partnership
has only one loan maturing within the next two years, a mortgage loan of
approximately $2,073,000 collateralized by the North Kent Mall. The Partnership
<PAGE>
is currently negotiating an extension of the maturity of the mortgage loan as
well as preparing to market the property for sale to satisfy the obligation.
In April 1996, the Partnership paid a distribution of $429,606 ($1.00 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution of Cash Flow for the first quarter of 1996. The
level of the regular quarterly distribution is consistent with the amount
distributed for the fourth quarter of 1995. Including the April 1996
distribution, Limited Partners have received cash distributions totaling
$574.23 per $500 Interest. Of this amount, $323.10 represents Cash Flow from
operations and $251.13 represents a return of Original Capital. In April 1996,
the Partnership also paid $35,801 to the General Partner as its distributive
share of Cash Flow distributed for the first quarter of 1996 and made a
contribution to the Early Investment Incentive Fund of $11,934.
The Partnership expects to continue making quarterly cash distributions;
however, the level of such future distributions will be dependent upon the cash
flow generated by the receipt of mortgage payments and operations of the
Partnership's properties held for sale, less administrative expenses. The
General Partner believes the Partnership has retained an appropriate amount of
working capital to meet current cash or liquidity requirements which may occur.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Paul Williams, et al. vs. Balcor Pension Investors, et al.
- ----------------------------------------------------------
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.:
90-C-0726 (U.S. District Court, Northern District of Illinois). The
Partnership, the General Partner, seven affiliated limited partnerships and
other affiliates are the defendants. In July 1994, the Court granted
plaintiffs' motion certifying a class relating to Federal securities fraud
claims. The Court approved the Notice of Class Action in August 1995 which was
sent to potential members of the class in September 1995. Settlement
discussions among the parties are currently on-going but no final settlement
has been reached. There can be no assurance, however, that such settlement
discussions will ultimately be successful.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) (3) Exhibits:
(4) Form of Confirmation regarding Interests in the Registrant set forth as
Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1992 (Commission File No. 0-11699) is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the quarter ended March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1996.
<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-IV
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-III, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-III,
the General Partner
Date: May 14, 1996
----------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4384
<SECURITIES> 0
<RECEIVABLES> 1696
<ALLOWANCES> 2622
<INVENTORY> 0
<CURRENT-ASSETS> 5389
<PP&E> 40867
<DEPRECIATION> 0
<TOTAL-ASSETS> 52300
<CURRENT-LIABILITIES> 1010
<BONDS> 10345
0
0
<COMMON> 0
<OTHER-SE> 40945
<TOTAL-LIABILITY-AND-EQUITY> 52300
<SALES> 0
<TOTAL-REVENUES> 541
<CGS> 0
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<OTHER-EXPENSES> 157
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 384
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<CHANGES> 0
<NET-INCOME> 384
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</TABLE>
