SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 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 2-85270
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BALCOR EQUITY PENSION INVESTORS-I
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3240345
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (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 EQUITY PENSION INVESTORS-I
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
---------------- ---------------
Cash and cash equivlants $ 13,115,946 $ 11,305,552
Accounts and accrued interest receivable 383,792 436,233
Prepaid expenses 332,251 208,240
Deferred expenses, net of accumulated
amortization of $665,769 in 1996
and $610,552 in 1995 392,772 447,989
---------------- ---------------
14,224,761 12,398,014
---------------- ---------------
Investment in real estate:
Land 10,753,713 10,753,713
Buildings and improvements 94,459,569 94,459,569
---------------- ---------------
105,213,282 105,213,282
Less accumulated depreciation 42,994,975 41,143,863
---------------- ---------------
Investment in real estate, net
of accumulated depreciation 62,218,307 64,069,419
---------------- ---------------
$ 76,443,068 $ 76,467,433
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 217,075 $ 238,377
Due to affiliates 47,387 27,398
Accrued real estate taxes 459,609 204,076
Security deposits 478,683 491,955
---------------- ---------------
Total liabilities 1,202,754 961,806
Affiliate's minority interest in
joint venture 1,427,452 1,336,859
Limited Partners' capital (359,229
Partnership Interests issued and
outstanding) 73,982,007 74,471,189
General Partner's deficit (169,145) (302,421)
---------------- ---------------
Total partners' capital 73,812,862 74,168,768
---------------- ---------------
$ 76,443,068 $ 76,467,433
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
---------------- ---------------
Income:
Rental $ 7,772,944 $ 7,370,882
Service 801,662 1,022,250
Interest on short-term investments 315,962 224,910
Interest on loan receivable 102,420
---------------- ---------------
Total income 8,890,568 8,720,462
---------------- ---------------
Expenses:
Depreciation 1,851,112 1,808,464
Amortization of deferred expenses 55,217 53,388
Property operating 4,126,243 3,763,406
Real estate taxes 574,964 662,810
Property management fees 358,208 348,025
Administrative 421,013 329,270
---------------- ---------------
Total expenses 7,386,757 6,965,363
---------------- ---------------
Income before participation in joint
venture 1,503,811 1,755,099
Affiliate's minority interest in
income from joint venture (60,109) (54,200)
---------------- ---------------
Net income $ 1,443,702 $ 1,700,899
================ ===============
Net income allocated to General Partner $ 313,236 $ 335,071
================ ===============
Net income allocated to Limited Partners $ 1,130,466 $ 1,365,828
================ ===============
Net income per Limited
Partnership Interest (359,229 issued
and outstanding) $ 3.15 $ 3.80
================ ===============
Distributions to General Parnter $ 179,960 $ 257,186
================ ===============
Distributions to Limited Partners $ 1,619,648 $ 2,314,676
================ ===============
Distributions per Limited Partnership
Interest:
Taxable $ 3.50 $ 5.00
================ ===============
Tax-exempt $ 4.66 $ 6.66
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
---------------- ---------------
Income:
Rental $ 4,054,306 $ 3,744,887
Service 416,218 610,806
Interest on short-term investments 157,278 112,838
Interest on loan receivable 50,926
---------------- ---------------
Total income 4,627,802 4,519,457
---------------- ---------------
Expenses:
Depreciation 925,556 904,232
Amortization of deferred expenses 26,740 26,694
Property operating 2,176,548 2,159,124
Real estate taxes 287,535 331,385
Property management fees 179,543 177,978
Administrative 317,049 189,503
---------------- ---------------
Total expenses 3,912,971 3,788,916
---------------- ---------------
Income before participation in joint
venture 714,831 730,541
Affiliate's minority interest in
income from joint venture (27,542) (21,612)
---------------- ---------------
Net income $ 687,289 $ 708,929
================ ===============
Net income allocated to General Partner $ 153,093 $ 153,383
================ ===============
Net income allocated to Limited Partners $ 534,196 $ 555,546
================ ===============
Net income per Limited
Partnership Interest (359,229 issued
and outstanding) $ 1.49 $ 1.54
================ ===============
Distribution to General Partner $ 89,980 $ 128,593
================ ===============
Distribution to Limited Partners $ 809,824 $ 1,157,338
================ ===============
Distribution per Limited Partnership
Interest:
Taxable $ 1.75 $ 2.50
================ ===============
Tax-exempt $ 2.33 $ 3.33
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
---------------- ---------------
Operating activities:
Net income $ 1,443,702 $ 1,700,899
Adjustments to reconcile net income
to net cash provided by operating
activities:
Affiliate's minority interest in
income from joint venture 60,109 54,200
Depreciation of properties 1,851,112 1,808,464
Amortization of deferred expenses 55,217 53,388
Net change in:
Accounts and accrued interest
receivable 52,441 (38,170)
Prepaid expenses (124,011) (292,568)
Accounts payable (21,302) (5,129)
Due to affiliates 19,989 (89,995)
Accrued real estate taxes 255,533 348,367
Escrow liabilities 35,534
Security deposits (13,272) (10,130)
---------------- ---------------
Net cash provided by
operating activities 3,579,518 3,564,860
---------------- ---------------
Investing activities:
Collection of principal payments
on loan receivable 87,005
Improvements to properties (58,394)
---------------
Net cash provided by investing
activities 28,611
---------------
Financing activities:
Distributions to Limited Partners (1,619,648) (2,314,676)
Distributions to General Partner (179,960) (257,186)
Contribution from joint venture
partner - affiliate 45,552
Distribution to joint venture
partner - affiliate (15,068) (77,843)
---------------- ---------------
Net cash used in financing activities (1,769,124) (2,649,705)
---------------- ---------------
<PAGE>
Net change in cash and cash
equivalents 1,810,394 943,766
Cash and cash equivalents at
beginning of year 11,305,552 7,207,000
---------------- ---------------
Cash and cash equivalents at
end of period $ 13,115,946 $ 8,150,766
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1996, and all such adjustments are of a normal and recurring
nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 are:
Paid
-----------------------
Six Months Quarter Payable
------------ --------- ----------
Mortgage servicing fee $ 569 None None
Reimbursement of expenses to
the General Partner, at cost $ 70,738 $ 51,033 $ 47,387
3. Subsequent Events:
a) In July 1996, the Partnership paid $809,824 ($1.75 per Taxable Interest
and $2.33 per Tax-exempt Interest) to the holders of Limited Partnership
Interests representing the quarterly distribution for the second quarter of
1996.
b) In August 1996, the Partnership sold the Oxford Square Apartments in an
all cash sale for $10,500,000. From the proceeds of the sale, the Partnership
paid selling costs of $387,578. For financial statement purposes, the
Partnership will recognize a gain of approximately $2,200,000 from the sale of
this property during the third quarter of 1996.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Pension Investors-I (the "Partnership") is a limited partnership
formed in 1983 to make first mortgage loans and to invest in and operate
income-producing real property. The Partnership raised $179,614,500 from sales
of Limited Partnership Interests and utilized these proceeds to fund six loans
and acquire three real property investments. The Partnership accepted deeds in
lieu of foreclosure on two of the loans, acquired one of its collateral
properties at a foreclosure sale, and accepted prepayments on three additional
loans. As of June 30, 1996, the Partnership operated six properties. However,
Oxford Square Apartments was sold in August 1996.
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
- ----------
Summary of Operations
- ---------------------
Increased tenant related expenditures at two of the Partnership's office
buildings resulted in a decrease in net income during the six months ended June
30, 1996 as compared to the same period in 1995. Further discussion of the
Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Discussions of fluctuations between 1996 and 1995 refer to both the six months
and quarters ended June 30, 1996 and 1995, unless otherwise noted.
A decrease in common area maintenance reimbursements from tenants at the GSB
and 8280 Greensboro Drive office buildings resulted in lower service income
during 1996 as compared to 1995.
Increased cash available for short-term investment, due primarily to the
Fairview III loan prepayment in December 1995, was the primary reason for an
increase in interest income on short-term investments during 1996 as compared
to 1995.
As a result of the Fairview Plaza III loan prepayment in 1995, interest income
on loan receivable ceased during 1996 as compared to 1995.
<PAGE>
Increased snow removal costs, tax consultant expense and leasing costs at the
GSB Office Building, in addition to increased common area repairs, tax
consultant expense and tenant related expenditures at the 8280 Greensboro Drive
Office Building, resulted in higher property operating expenses for the six
months ended June 30, 1996 as compared to the same period in 1995. This
increase was partially offset by lower suite rental expenses and apartment
repairs at the Oxford Hills Apartments.
A lower assessed value and tax rate in 1996 at the Oxford Hills Apartments
resulted in a decrease in real estate tax expense in 1996 as compared to 1995.
The Partnership incurred additional legal, consulting, postage and printing
costs in connection with its response to a tender offer and certain related
litigation during the second quarter of 1996. As a result, administrative
expense increased during 1996 as compared to 1995.
The Pacific Center Office Building generated increased income in 1996 due to
higher rental income, which increased affiliate's minority interest in income
from the joint venture for 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $1,810,000 as
of June 30, 1996 as compared to December 31, 1995. Cash flow of approximately
$3,580,000 was provided by operating activities during 1996 consisting
primarily of cash generated from the operation of the Partnership's properties
and interest income from short-term investments which was partially offset by
the payment of administrative expenses. The Partnership's financing activities
consisted primarily of distributions to Partners of approximately $1,800,000.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
For the six months ended June 30, 1996 and 1995, all six of the properties
generated positive cash flow.
As of June 30, 1996, the occupancy rates of the Partnership's residential
properties ranged from 96% to 99% while rates for the commercial properties
ranged from 94% to 100%. 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.
The General Partner believes that the market for multifamily housing properties
is favorable to sellers of these properties. During August 1996, the
Partnership sold the Oxford Square Apartments. The Partnership also is actively
marketing the Oxford Hills Apartments. Additionally, the General Partner is
exploring the sale of its commercial properties. The General Partner examines
each property individually by property type and market in determining the
optimal time to sell each property.
<PAGE>
In June 1996, Heitman/JMB Advisory Corporation, an unaffiliated third party,
initiated discussions with the General Partner for a potential sale of all of
the remaining properties of the Partnership. These discussions did not result
in any agreement of terms between the parties, and it is unlikely at this time
that a sale of the Partnership's assets to them will be consummated. This will
not affect the Partnership's strategy as described in the preceding paragraph.
In August 1996 the Partnership sold the Oxford Square Apartments in an all cash
sale for $10,500,000. From the proceeds of the sale, the Partnership paid
$387,578 in selling costs. Pursuant to the terms of the sale, $250,000 of the
proceeds will be retained by the Partnership until November 1996. The remainder
of the proceeds will be distributed as a special distribution to the Tax-exempt
Limited Partners. See Note 3 of Notes to the Financial Statements for
additional information.
In July 1996, the Partnership paid $809,824 ($1.75 per Taxable Interest and
$2.33 per Tax-exempt Interest) to Limited Partners, representing the quarterly
distribution for the second quarter of 1996. In addition, during July 1996, the
Partnership paid $67,485 to the General Partner as its distributive share of
the Net Cash Receipts distributed for the second quarter of 1996 and made a
contribution of $22,495 to the Repurchase Fund. The level of this distribution
is consistent with that of the prior quarter. Including the July 1996
distribution, Limited Partners have received distributions aggregating
approximately $233 per $500 Taxable Interest, of which $220 represents Net Cash
Receipts and $13 represents Net Cash Proceeds and $328 per $500 Tax-exempt
Interest, of which $292 represents Net Cash Receipts and $36 represents Net
Cash Proceeds. The General Partner expects that the cash flow from property
operations should enable the Partnership to continue making quarterly
distributions to Limited Partners.
During the six months ended June 30, 1996, the General Partner used amounts
placed in the Repurchase Fund to repurchase 20 Interests from Limited Partners
at a cost of $5,821.
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.
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 EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
On May 22, 1996, a proposed class and derivative action complaint was filed,
Chipain vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 05299) (the "Chipain Case"), naming the General Partner and the
general partners (together, the "Balcor Defendants") of nine other limited
partnerships sponsored by The Balcor Company (together, with the Partnership,
the "Affiliated Partnerships") as defendants. Additional defendants were
Insignia Management Group ("Insignia") and Walton Street Capital Acquisition
II, LLC ("Walton") and certain of their affiliates and principals
(collectively, the "Walton and Insignia Defendants"). The complaint alleged,
among other things, that the tender offers for the purchase of limited
partnership interests in the Affiliated Partnerships made by a joint venture
consisting of affiliates of Insignia and Walton were coercive and unfair.
The Walton and Insignia Defendants filed motions to dismiss the complaint,
which were granted on June 5, 1996. The plaintiffs filed an amended complaint,
which all defendants then moved to dismiss. On June 18, 1996, the court
dismissed the complaint in its entirety as to the Walton and Insignia
Defendants and as to the Balcor Defendants on all counts on which dismissal was
sought.
On June 14, 1996, a second proposed class and derivative action complaint was
filed in Chancery Court, Dee vs. Walton Street Capital Acquisition II, LLC
(Case No. 96 CH 06283) (the "Dee Case"). On July 1, 1996, a proposed class
action complaint was filed in the same court, Anderson vs. Balcor Mortgage
Advisors (Case No. 96 CH 06884) (the "Anderson Case"). An amended complaint
consolidating the Dee and Anderson Cases (the "Dee/Anderson Case") was filed on
July 25, 1996. The same day, the plaintiffs in the Chipain Case withdrew their
complaint. The Dee/Anderson Case names the Balcor Defendants, the Affiliated
Partnerships, and the Walton and Insignia Defendants, as defendants. The
complaint seeks to assert class and derivative claims against the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the General Partner's and Insignia's
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs request certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. Management of each of the Balcor Defendants
believes they have meritorious defenses to contest the claims. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the Partnership.
<PAGE>
Item 5. Other Information
- --------------------------
Oxford Square Apartments
- ------------------------
As previously reported, on July 5, 1996, the Partnership contracted to sell
Oxford Square Apartments, Casselberry, Florida (formerly known as Casselberry
Apartments) to an unaffiliated party, TGM Realty Corp.#5, a Delaware
corporation. TGM Realty Corp.#5 assigned its rights under the contract to an
affiliate, TGM Oxford Square Inc., a Delaware corporation, and the sale closed
on August 1, 1996. From the proceeds of the sale, the Partnership paid $72,578
in closing costs, $210,000 to an unaffiliated party as a brokerage commission
and $105,000 to an affiliate of the third party providing property management
service for the property as a fee for services rendered in connection with the
sale of the property. The Partnership received approximately $10,112,422 of
remaining proceeds. Of such amounts, $250,000 will be retained by the
Partnership and will not be available for use or distribution by the
Partnership until 90 days after the closing.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits:
(4) Certificate of Limited Partnership set forth as Exhibit 4.1 to Amendment
No. 2 to the Registrant's Registration Statement on Form S-11 dated October 4,
1983 (Registration No. 2-85270) and Form of Confirmation regarding Interests in
the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 2-85270) are
incorporated herein by reference.
(10) Agreement of Sale and attachment thereto relating to the sale of Oxford
Square Apartments, Casselberry, Florida, previously filed as Exhibit (2) to the
Registrant's Report on Form 8-K dated July 5, 1996 is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1996 is attached hereto.
(b) Reports on Form 8-K: Report on Form 8-K dated July 5, 1996 was filed
reporting the execution of a contract for the sale of Oxford Square
Apartments, Casselberry, Florida.
<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 EQUITY PENSION INVESTORS-I
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Equity Partners-I, 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 Equity Partners-I, the
General Partner
Date: August 13, 1996
--------------------
<PAGE>
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<PERIOD-END> JUN-30-1996
<CASH> 13116
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0
0
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