UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 2-85270
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BALCOR EQUITY PENSION INVESTORS-I
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(Exact name of registrant as specified in its charter)
Illinois 36-3240345
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Equity Pension Investors-I (the "Registrant") is a limited partnership
formed in 1983 under the laws of the State of Illinois. The Registrant raised
$179,614,500 from sales of Limited Partnership Interests. The Registrant has
retained cash reserves from the sale of its real estate investments for
contingencies which exist or may arise. The Registrant's operations currently
consist of interest income earned on short-term investments and the payment of
administrative expenses.
The Registrant used the net offering proceeds to fund six loans and acquire
three real property investments and has since disposed of all of these
investments. The Partnership Agreement provides that the proceeds of any sale
or refinancing of the Registrant's properties will not be reinvested in new
acquisitions.
The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Registrant sold its final real estate investment in March
1997. The Registrant has retained a portion of the cash from property sales to
satisfy obligations of the Registrant as well as to establish a reserve for
contingencies. The timing of the termination of the Registrant and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Registrant
including, but not limited to, the lawsuit discussed in "Item 3. Legal
Proceedings". Due to this litigation, the Registrant will not be dissolved and
reserves will be held by the Registrant until the conclusion of all
contingencies. There can be no assurances as to the time frame for conclusion
of these contingencies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for information regarding the
Registrant's Year 2000 readiness.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by the Registrant.
The officers and employees of Balcor Equity Partners-I, the General Partner of
the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
- ------------------
As of December 31, 1998, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
<PAGE>
See Notes to Financial Statements for other information regarding former real
estate property investments.
Item 3. Legal Proceedings
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Dee vs. Walton Street Capital Acquisition II, LLC
- -------------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as 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.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery 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 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 Balcor Defendants' 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 amended their complaint on October 8,
1996, adding additional claims. The plaintiffs requested certification as a
class and derivative action, unspecified compensatory damages and rescission of
the tender offers. Each of the defendants filed motions to dismiss the
complaint for failure to state a cause of action. On January 7, 1997, the
Chancery Court denied the plaintiffs' motion for leave to amend the complaint
and dismissed the matter for failure to state a cause of action, with
prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois. Oral arguments before the
Appellate Court were held on March 18, 1998. On November 12, 1998, the
Appellate Court issued an opinion affirming the Chancery Court's dismissal of
the case. On December 3, 1998, the plaintiffs filed a notice of intent to
appeal the Appellate Court's ruling to the Illinois Supreme Court.
<PAGE>
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time how the
outcome of this action will impact the remaining cash reserves of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1998.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources".
As of December 31, 1998, the number of record holders of Limited Partnership
Interests of the Registrant was 16,755.
Item 6. Selected Financial Data
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Year ended December 31,
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1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Total income $555,514 $2,859,486 $16,970,317 $17,688,318 $17,358,359
Income (loss)
before gain on
sales of assets 241,143 (289,112) 2,215,797 2,236,014 1,205,826
Net income 241,143 15,102,758 27,100,791 2,236,014 1,205,826
Net income per
Limited Partner-
ship Interest-
Basic and Diluted 0.67 41.87 73.72 4.66 2.11
Total assets 2,822,837 4,929,665 84,820,412 76,467,433 78,832,718
Distributions per
Taxable Limited
Partnership
Interest(A) None 10.00 7.00 8.50 10.00
Distributions per
Tax-exempt Limited
Partnership
Interest(A) 7.58 299.30 52.32 11.32 13.32
(A) These amounts include distributions of original capital of $7.58, $286.00
and $43.00 per Tax-exempt Interest for 1998, 1997 and 1996, respectively. No
distributions of original capital were paid to Taxable Limited Partners during
the last five years.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
<PAGE>
Results of Operations
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Operations
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Summary of Operations
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Balcor Equity Pension Investors-I (the "Partnership") sold four properties
during 1996 and its remaining two properties during 1997 and recognized
significant gains in connection with these sales. As a result of the gains on
sales in 1997, net income decreased during 1998 as compared to 1997. During
1998, interest income earned on short-term investments and income related to a
settlement with a former tenant at a property were partially offset by
administrative expenses, and the Partnership recognized net income for 1998. As
a result of larger gains on sales in 1996 as compared to 1997 and lower income
from property operations during 1997 due to the property sales, net income
decreased during 1997 as compared to 1996. Further discussion of the
Partnership's operations is summarized below.
1998 Compared to 1997
- ---------------------
During 1997, the Partnership sold the GSB and 8280 Greensboro Drive office
buildings and recognized gains totaling $15,391,870 in connection with these
property sales. As a result of the sales of these properties, rental and
service income, depreciation, amortization, real estate taxes and property
management fees ceased during 1997.
Higher average cash balances were available for investment during 1997 due to
proceeds received in connection with the 1996 and 1997 property sales prior to
distribution to Partners. This resulted in a decrease in interest income on
short-term investments during 1998 as compared to 1997.
The Pacific Center Office Buildings, which were owned by a joint venture
consisting of the Partnership and an affiliate, were sold during December 1996.
During April 1998, the Partnership received $396,697 as its share of a
settlement related to a dispute with a former tenant at the property. This
amount has been recognized as settlement income for financial statement
purposes during 1998.
The Partnership recognized other income during 1997 in connection with a
partial refund of prior years' insurance premiums relating to the Partnership's
properties.
Property operating expense decreased during 1998 as compared to 1997 due to the
sales of the Partnership's two remaining properties in 1997. The Partnership
paid additional expenditures during 1998 related primarily to the GSB Office
Building, which was sold in 1997.
<PAGE>
As a result of lower legal, accounting, portfolio management and professional
fees and lower bank charges, administrative expenses decreased in 1998 as
compared to 1997.
1997 Compared to 1996
- ---------------------
During 1997, the Partnership sold the GSB and 8280 Greensboro Drive office
buildings. During 1996, the Partnership sold the Oxford Square and Oxford Hills
apartment complexes and the Park Center and Pacific Center office buildings and
recognized gains totaling $27,175,053 in connection with these property sales.
The sales of these properties resulted in decreases in rental and service
income, depreciation, real estate taxes, property operating expenses and
property management fees during in 1997 as compared to 1996.
Amortization expense increased during 1997 as compared to 1996 due to the
write-off of the remaining unamortized leasing commissions related to the GSB
and 8280 Greensboro Drive office buildings which were sold in 1997.
The Partnership incurred additional legal, consulting, investor processing,
postage and printing costs in connection with its response to tender offers and
certain related litigation during 1996. As a result, administrative expenses
decreased during 1997 as compared to 1996. In addition, lower portfolio
management fees during 1997 contributed to the decrease in administrative
expenses.
In 1996, the Partnership sold the Pacific Center Office Building which was
owned through a joint venture. As a result, affiliate's minority interest in
income from joint venture ceased.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $1,991,000 as
of December 31, 1998 as compared to December 31, 1997 primarily due to the
distribution of remaining available Net Cash Proceeds in January 1998 to
Tax-Exempt Limited Partners. The Partnership generated cash flow from
operations of approximately $332,000 primarily due to a settlement of a dispute
with a former tenant at the Pacific Center Office Buildings and interest income
received on short-term investments, which were partially offset by the payment
of administrative expenses and property operating expenses relating to a sold
property. Investing activities generated cash of approximately $45,000 from the
receipt of restricted escrow deposits associated with the GSB Office Building.
The Partnership used cash in its financing activities of approximately
$2,368,000 to pay a distribution to Tax-Exempt Limited Partners.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in March
1997. The Partnership has retained a portion of the cash from property sales to
satisfy obligations of the Partnership as well as establish a reserve for
contingencies. The timing of the termination of the Partnership and final
<PAGE>
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuit discussed in "Item 3. Legal
Proceedings". Due to this litigation, the Partnership will not be dissolved and
reserves will be held by the Partnership until the conclusion of all
contingencies. There can be no assurances as to the time frame for conclusion
of these contingencies.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of December 31, 1998, there were 11,294 Interests and cash
of $3,472,751 in the Repurchase Fund.
The Pacific Center Office Buildings, which were owned by a joint venture
consisting of the Partnership and an affiliate, were sold during December 1996.
The Partnership received $396,697 as its share of a settlement related to a
dispute with a former tenant at the property in April 1998.
In March 1997, the Partnership sold the GSB Office Building. At closing,
$70,456 of the sale proceeds was placed in escrow until certain tenant
reimbursement issues were resolved. During May 1998, the escrow was released
and the Partnership received $48,946, which included $3,998 of interest income.
The buyer of the property received the remaining escrow amount of $25,508 to
settle outstanding tenant issues.
The Partnership made distributions to Taxable Limited Partners totaling $10.00
and $7.00 per Interest in 1997 and 1996, respectively, and distributions to
Tax-exempt Limited Partners totaling $7.58, $299.30 and $52.32 per Interest in
1998, 1997 and 1996, respectively. The Partnership did not make any
distributions to Taxable Limited Partners in 1998. Distributions to Tax-exempt
Limited Partners during 1998, 1997 and 1996 included Net Cash Proceeds
distributions of $7.58, $286.00 and $43.00 per Interest, respectively.
To date, Limited Partners have received distributions totaling $244.35 per $500
Taxable Interest (of which $231.36 represents Net Cash Receipts and $12.99
represents Net Cash Proceeds) and $680.35 per $500 Tax-exempt Interest (of
which $307.78 represents Net Cash Receipts and $372.57 represents Net Cash
Proceeds). In accordance with the Partnership Agreement, Net Cash Proceeds from
property sales were allocated first to the Tax-exempt Limited Partners. Taxable
and Tax-exempt Limited Partners received quarterly distributions from Net Cash
Receipts. Taxable Limited Partners will not receive aggregate distributions
from the Partnership equal to their original investment. However, Taxable
Limited Partners will receive a distribution from amounts allocated to the
Repurchase Fund. No additional distributions are anticipated to be made prior
to the termination of the Partnership. However, after paying final partnership
expenses, any remaining cash reserves will be distributed in accordance with
the Partnership Agreement. Amounts allocated to the Repurchase Fund will also
be distributed at that time.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales in 1996 and 1997. Since
the Partnership no longer has any operating assets, the number of computer
systems and programs necessary to operate the Partnership has been
<PAGE>
significantly reduced. The Partnership relies on third party vendors to perform
most of its functions and has implemented a plan to determine the Year 2000
compliance status of these key vendors. The Partnership is within its timeline
for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
use of surveys, follow-up discussions and review of data where needed. The
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
the event that current vendors are not substantially Year 2000 compliant by
June 30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
Certain statements in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include statements regarding income or losses as well as
assumptions relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ from any
future results, performance or achievements expressed or implied by the
forward-looking statements.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
<PAGE>
December 31, 1998 December 31, 1997
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ------------ ----------- ------------
Total assets $2,822,837 $21,193,643 $4,929,665 $23,277,324
Partners' capital
(deficit) accounts:
General Partner (494,833) (3,967,584) (494,833) (3,967,584)
Limited Partners 3,235,370 25,078,918 5,361,979 27,201,631
Net income (loss):
General Partner None None 63,189 (3,819,637)
Limited Partners 241,143 245,039 15,039,569 3,538,657
Per Limited Partner-
ship Interest 0.67(A) (B) 41.87(A) (B)
(A) Amount represents basic and diluted net income per Limited Partnership
Interest.
(B) The net income (loss) is $0.78 per Tax-exempt Interest and $0 per Taxable
Interest for 1998 and $(1.68) per Tax-exempt Interest and $86.68 per Taxable
Interest for 1997.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-I, its General Partner,
has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 51) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a member of the board of directors of
The Balcor Company. He is also a Senior Vice President of American Express
Company and is responsible for its real estate operations worldwide. Prior to
joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in
the commercial real estate division where he was involved in various lending
activities. Mr. Meador received his M.B.A. degree from the Indiana University
Graduate School of Business.
Mr. Meador is on the Board of Directors of Grubb & Ellis Company, a publicly
traded commercial real estate firm. Mr. Meador was elected to the Board of
Grubb & Ellis Company in May 1998. Mr. Meador is also a director of AMLI
Commercial Properties Trust, a private real estate investment trust that owns
office and industrial buildings in the Chicago, Illinois area. Mr. Meador was
elected to the Board of AMLI Commercial Properties Trust in August 1998.
Alexander J. Darragh (age 44) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
Jayne A. Kosik (age 41) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
<PAGE>
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1998.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive officers
receive compensation from The Balcor Company (but not from the Registrant) for
services performed for various affiliated entities, which may include services
performed for the Registrant. However, the General Partner believes that any
such compensation attributable to services performed for the Registrant is
immaterial to the Registrant. See Note 8 of Notes to Financial Statements for
information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Ownership of Class
- -------------- ---------------- ---------------- ----------------
Limited Walton Street 28,062.32 7.81%
Partnership Capital Acquisition Limited
Interests Co. II, L.C.C. Partnership
Chicago, Interests
Illinois
Limited Beattie 15,110.48 4.21%
Partnership Place Limited
Interests Greenville, Partnership
South Carolina Interests
While Beattie Place individually owns less than 5% of the Interests, for
purposes of this Item 12, Beattie Place is an affiliate of Walton Street
Capital Acquisition Co. II, L.C.C. and, collectively, they own 12.02% of the
Interests.
(b) Balcor Equity Partners-I (principally through the Repurchase Fund) and its
officers and partners own as a group the following Limited Partnership
Interests of the Registrant:
<PAGE>
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership 11,497 3.20%
Interests
Relatives of the officers and affiliates of the partners of the General Partner
do not own any Interests.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 307 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution
to other Limited Partners in accordance with the Partnership Agreement.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 8 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 4 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and
Restated Certificate of Limited Partnership, previously filed as Exhibits 3 and
4.1, respectively, to Amendment No. 2 to the Registrant's Registration
Statement on Form S-11 dated October 4, 1983 (Registration No. 2-85270), are
incorporated herein by reference.
(4) 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) is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for 1998 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended December 31, 1998.
(c) Exhibits: See Item 14(a)(3) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Equity Partners-I,
the General Partner
Date: March 19, 1999
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
Partners-I, the General Partner
/s/ Thomas E. Meador March 19, 1999
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Equity Partners-I, the
General Partner
/s/ Jayne A. Kosik March 19, 1999
- ------------------ --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1998 and 1997
Statements of Partners' Capital, for the years ended December 31, 1998, 1997
and 1996
Statements of Income and Expenses, for the years ended December 31, 1998, 1997
and 1996
Statements of Cash Flows, for the years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-I:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital, of income and expenses and of cash flows present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-I An Illinois Limited Partnership (the "Partnership") at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. As of December 31, 1998, the Partnership no longer has
an ownership interest in any real estate investment. Upon resolution of the
litigation described in Note 11 to the financial statements, the Partnership
intends to cease operations and dissolve.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 17, 1999
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 2,815,211 $ 4,805,720
Accounts and accrued interest receivable 7,626 53,489
Escrow deposits - restricted 70,456
-------------- --------------
$ 2,822,837 $ 4,929,665
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 35,887 $ 23,799
Due to affiliates 46,413 38,720
-------------- --------------
Total liabilities 82,300 62,519
-------------- --------------
Commitments and Contingencies
Limited Partners' capital (359,229
interests issued and outstanding) 3,235,370 5,361,979
General Partner's deficit (494,833) (494,833)
-------------- --------------
Total partners' capital 2,740,537 4,867,146
-------------- --------------
$ 2,822,837 $ 4,929,665
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1998, 1997 and 1996
Partners' Capital (Deficit) Accounts
--------------------------------------------
General Limited
Total Partner Partners
--------------- -------------- -------------
Balance at December 31, 1995 $ 74,168,768 $ (302,421) $ 74,471,189
Cash distributions (A) (17,031,054) (359,921) (16,671,133)
Net income for the year
ended December 31, 1996 27,100,791 617,999 26,482,792
--------------- -------------- -------------
Balance at December 31, 1996 84,238,505 (44,343) 84,282,848
Cash distributions (A) (94,474,117) (513,679) (93,960,438)
Net income for the year
ended December 31, 1997 15,102,758 63,189 15,039,569
--------------- -------------- -------------
Balance at December 31, 1997 4,867,146 (494,833) 5,361,979
Cash distributions (A) (2,367,752) (2,367,752)
Net income for the year
ended December 31, 1998 241,143 241,143
--------------- -------------- -------------
Balance at December 31, 1998 $ 2,740,537 $ (494,833) $ 3,235,370
=============== ============== =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1998 1997 1996
Taxable --------------- -------------- -------------
--------
First Quarter None $ 10.00 $ 1.75
Second Quarter None None 1.75
Third Quarter None None 1.75
Fourth Quarter None None 1.75
Tax-exempt
----------
First Quarter $ 7.58 134.30 2.33
Second Quarter None 70.00 2.33
Third Quarter None 95.00 2.33
Fourth Quarter None None 45.33
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 years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- -------------- -------------
Income:
Rental $ 1,503,517 $ 14,299,598
Service 400,830 1,755,248
Interest on short-term
investments $ 158,817 934,292 915,471
Settlement income 396,697
Other income 20,847
--------------- -------------- -------------
Total income 555,514 2,859,486 16,970,317
--------------- -------------- -------------
Expenses:
Depreciation 455,830 3,561,739
Amortization of deferred
expenses 388,847 319,997
Property operating 24,189 1,661,114 8,232,023
Real estate taxes 111,676 1,167,490
Property management fees 80,828 651,010
Administrative 290,182 450,303 822,261
--------------- -------------- -------------
Total expenses 314,371 3,148,598 14,754,520
--------------- -------------- -------------
Income (loss) before gain on
sale of properties and
affiliate's minority interest
in income from joint venture 241,143 (289,112) 2,215,797
Gain on sale of properties 15,391,870 27,175,053
Affiliate's minority interest
in income from joint venture (2,290,059)
--------------- -------------- -------------
Net income $ 241,143 $ 15,102,758 $ 27,100,791
=============== ============== =============
Net income allocated to
General Partner None $ 63,189 $ 617,999
=============== ============== =============
Net income allocated to
Limited Partners $ 241,143 $ 15,039,569 $ 26,482,792
=============== ============== =============
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 years ended December 31, 1998, 1997 and 1996
(Continued)
1998 1997 1996
--------------- -------------- -------------
Net income per Limited
Partnership Interest
(359,229 issued and
outstanding) - Basic and
Diluted $ 0.67 $ 41.87 $ 73.72
=============== ============== =============
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 years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- -------------- -------------
Operating activities:
Net income $ 241,143 $ 15,102,758 $ 27,100,791
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Gain on sale of
properties (15,391,870) (27,175,053)
Affiliate's minority
interest in income
from joint venture 2,290,059
Depreciation of properties 455,830 3,561,739
Amortization of deferred
expenses 388,847 319,997
Payment of deferred
expenses (260,855)
Net change in:
Accounts and accrued
interest receivable 45,863 650,555 (267,811)
Escrow deposits -
restricted 25,508
Prepaid expenses 126,457 81,783
Accounts payable 12,088 (278,734) 64,156
Due to affiliates 7,693 (58,476) 69,798
Accrued real estate
taxes (204,076)
Security deposits (182,178) (309,777)
--------------- -------------- -------------
Net cash provided by
operating activities 332,295 813,189 5,270,751
--------------- -------------- -------------
Investing activities:
Proceeds from property sales 49,575,000 57,028,500
Payment of selling costs (1,330,345) (1,565,222)
Release (funding) of escrow
in connection with the
sale of real estate 44,948 (70,456)
Improvements to properties (1,089,160)
--------------- -------------- -------------
Net cash provided by
investing activities 44,948 48,174,199 54,374,118
--------------- -------------- -------------
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 years ended December 31, 1998, 1997 and 1996
(Continued)
1998 1997 1996
--------------- -------------- -------------
Financing activities:
Distributions to Limited
Partners (2,367,752) (93,960,438) (16,671,133)
Distributions to General
Partner (513,679) (359,921)
Capital contributions from
joint venture partner -
affiliate 54,938
Distributions to joint
venture partner - affiliate (3,681,856)
--------------- -------------- -------------
Net cash used in financing
activities (2,367,752) (94,474,117) (20,657,972)
--------------- -------------- -------------
Net change in cash and
cash equivalents (1,990,509) (45,486,729) 38,986,897
Cash and cash equivalents
at beginning of year 4,805,720 50,292,449 11,305,552
--------------- -------------- -------------
Cash and cash equivalents
at end of year $ 2,815,211 $ 4,805,720 $ 50,292,449
=============== ============== =============
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. Nature of the Partnership's Business:
Balcor Equity Pension Investors-I (the "Partnership") has retained cash
reserves from the sale of its real estate investments for contingencies which
exist or may arise. The Partnership's operations currently consist of interest
income earned on short-term investments and the payment of administrative
expenses.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in March
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as to establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership including, but not limited to, the lawsuit discussed in Note 11 of
Notes to the Financial Statements. Due to this litigation, the Partnership will
not be dissolved and reserves will be held by the Partnership until the
conclusion of all contingencies. There can be no assurances as to the time
frame for conclusion of these contingencies.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense was computed using the straight-line method. Rates
used in the determination of depreciation were based upon the following
estimated useful lives:
Years
-----
Buildings and improvements 20 to 40
Furniture and fixtures 5
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.
<PAGE>
As properties were sold, the related costs and accumulated depreciation were
removed from the respective accounts. Any gain or loss on disposition was
recognized in accordance with generally accepted accounting principles.
(c) The Partnership recorded its investments in real estate at the lower of
cost or fair value, and periodically assessed, but not less than on an annual
basis, possible impairment to the value of its properties based on the current
sales price less estimated closing costs. The General Partner determined that
no impairment in value had occurred prior to the sales of the properties. The
General Partner considered the methods referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicated otherwise.
(d) Deferred expenses consisted of leasing commissions which were amortized
over the life of each respective lease. Upon sale of the property, any
remaining unamortized balance was written off to amortization expense.
(e) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases was recognized on a straight line
basis over the respective lease term. Service income included reimbursements of
operating costs such as real estate taxes, maintenance and insurance and was
recognized as revenue in the period the applicable costs were incurred.
(f) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.
(g) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.
(h) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(i) For financial statement purposes, prior to 1997, the partners were
allocated income and losses in accordance with the provisions in the
Partnership Agreement. In order for the capital account balances to more
accurately reflect the partners' remaining economic interests in the
Partnership, the income (loss) allocations have been adjusted.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year-ended December 31, 1997
and has been applied to the prior earnings period presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income per Limited Partnership
Interest.
<PAGE>
(k) Certain reclassifications of prior years information were made to conform
to the 1998 presentation.
4. Partnership Agreement:
The Partnership was organized in July 1983. The Partnership Agreement provided
for the admission of Limited Partners through the sale of up to 800,000 Limited
Partnership Interests at $500 per Interest, 359,229 of which were sold on or
prior to February 24, 1984, the termination date of the offering.
The Partnership Agreement provides for different allocations of profits and
losses and cash distributions to Limited Partners depending on whether the
investor originally acquiring the Interest was a taxable or tax-exempt entity.
Pursuant to the Partnership Agreement, "Operating Income" of the Partnership is
allocated 10% to the General Partner and 90% to the Limited Partners; however,
certain components are specially allocated as described in the Partnership
Agreement. "Operating Losses" and certain other components are allocated 1% to
the General Partner and 99% to the Limited Partners. For financial statement
purposes, prior to 1997, the partners were allocated income and losses in
accordance with the provisions in the Partnership Agreement. In order for the
capital account balances to more accurately reflect the partners' remaining
economic interests in the Partnership, the income (loss) allocations have been
adjusted.
"Net Cash Receipts" available for distribution were distributed as follows: 90%
to Limited Partners, 7.5% to the General Partner as its distributive share from
Partnership operations and 2.5% of such "Net Cash Receipts" was paid to the
General Partner for allocation to the Repurchase Fund.
At the sole discretion of the General Partner and subject to certain
limitations as set forth in the Partnership Agreement, amounts placed in the
Repurchase Fund were available to repurchase Interests from Limited Partners.
Distributions of "Net Cash Receipts" and "Net Cash Proceeds" pertaining to such
repurchased Interests were paid to the Repurchase Fund and were utilized to
repurchase additional Interests. In February 1997, the Partnership discontinued
the repurchase of Interests from Limited Partners. As of December 31, 1998,
there were 11,294 Interests and cash of $3,472,751 in the Repurchase Fund. An
amount not to exceed the dollars originally allocated to the Repurchase Fund is
obligated to be returned by the Repurchase Fund to the Partnership at
liquidation which will be accounted for as a capital contribution from the
General Partner.
The Partnership has disposed of all of its real property investments. The "Net
Cash Proceeds" resulting therefrom, which were available for distribution, were
principally distributed to the Tax-exempt Limited Partners in accordance with
the Partnership Agreement. Since the required subordination levels were not
met, the General Partner has not received any distributions of Net Cash
Proceeds during the lifetime of the Partnership.
<PAGE>
5. Management Agreements:
The Partnership's properties were managed by a third party management company
prior to the sale of the properties. These management agreements provided for
annual fees of 3% to 6% of gross operating receipts.
6. Affiliate's Minority Interest in Joint Venture:
The Pacific Center Office Buildings were owned by a joint venture between the
Partnership and an affiliate. Profits and losses were allocated 77.09% to the
Partnership and 22.91% to the affiliate. All assets, liabilities, income and
expenses of the joint venture were included in the financial statements of the
Partnership with the appropriate adjustment for profit or loss for the
affiliate's participation. Net distributions of $3,626,918 were made to the
joint venture partner during 1996. The property was sold in December 1996 and
the joint venture recognized a gain on the sale of $8,881,597, of which
$2,034,774 was the joint venture partner's share.
7. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. In prior years, the accompanying financial statements, which are
prepared in accordance with generally accepted accounting principles ("GAAP"),
differed from the tax returns due to the different treatment of various items
as specified in the Internal Revenue Code. The net effect of these accounting
differences is that the net income for 1998 in the financial statements is
$3,896 less than the tax income of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $14,750 $10,619 $31,655 $7,260 $18,148 $14,241
Data processing 2,328 872 3,043 1,456 2,825 None
Legal 8,649 6,673 28,037 6,534 12,975 10,093
Portfolio management 38,760 28,249 105,057 23,470 91,965 71,270
Other None None 2,817 None 3,373 1,592
Prior to May 1995, the Partnership participated in an insurance deductible
program with other affiliated partnerships in which the program paid claims up
to the amount of the deductible under the master insurance policy for its
<PAGE>
properties. The program was administered by an affiliate of the General Partner
who received no fee for administering the program. However, the General Partner
was reimbursed for program expenses. The Partnership paid premiums to the
deductible insurance program relating to claims for periods prior to May 1,
1995 of $24,406 for 1996.
9. Property Sales:
(a) In March 1997, the Partnership sold the GSB Office Building in an all cash
sale for $19,575,000. From the proceeds of the sale, the Partnership paid
$638,495 in selling costs. The basis of the property was $13,048,410, which is
net of accumulated depreciation of $14,610,352. For financial statement
purposes, the Partnership recognized a gain of $5,888,095 from the sale of this
property.
(b) In April 1997, the Partnership sold the 8280 Greensboro Drive Office
Building in an all cash sale for $30,000,000. From the proceeds of the sale,
the Partnership paid $691,850 in selling costs. The basis of the property was
$19,804,375, which is net of accumulated depreciation of $5,130,511. For
financial statement purposes, the Partnership recognized a gain of $9,503,775
from the sale of this property.
(c) 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. The basis of the property was $7,897,992, which is
net of accumulated depreciation of $3,486,872. For financial statement
purposes, the Partnership recognized a gain of $2,214,430 from the sale of this
property.
(d) In November 1996, the Partnership sold the Oxford Hills Apartments in an
all cash sale for $22,278,500. From the proceeds of the sale, the Partnership
paid $475,139 in selling costs. The basis of the property was $8,351,921, which
is net of accumulated depreciation of $11,056,013. For financial statement
purposes, the Partnership recognized a gain of $13,451,440.
(e) In December 1996, the Partnership sold the Park Center Office Building in
an all cash sale for $8,300,000. From the proceeds of the sale, the Partnership
paid $271,460 in selling costs. The basis of the property was $5,400,954, which
is net of accumulated depreciation of $2,596,589. For financial statement
purposes, the Partnership recognized a gain of $2,627,586.
(f) The Pacific Center Office Buildings were owned by a joint venture
consisting of the Partnership and an affiliate. The Partnership and the
affiliate held participating percentages in the joint venture of 77.09% and
22.91%, respectively. In December 1996, the joint venture sold the property in
an all cash sale for $15,950,000. From the proceeds of the sale, the joint
venture paid $431,045 in selling costs. The basis of the property was
$6,637,358, which is net of accumulated depreciation of $8,281,094. For
financial statement purposes, the Partnership recognized a gain of $8,881,597
from the sale of this property, of which $2,034,774 was the minority joint
venture partner's share.
<PAGE>
10. Settlement Income:
The Pacific Center Office Buildings, which were owned by a joint venture
consisting of the Partnership and an affiliate, were sold during December 1996.
During April 1998, the Partnership received $396,697 as its share of a
settlement related to a dispute with a former tenant at the property. This
amount has been recognized as settlement income for financial statement
purposes.
11. Contingency:
The Partnership is currently involved in a lawsuit, Dee vs. Walton Street
Capital Acquisition II, LLC, whereby the Partnership, the General Partner and
certain third parties have been named as defendants seeking damages relating to
tender offers to purchase interests in the Partnership and nine affiliated
partnerships initiated by the third party defendants in 1996. The defendants
continue to vigorously contest this action. The action has been dismissed with
prejudice, which dismissal was affirmed by the Illinois Appellate Court.
Plaintiffs have filed a further appeal to the Illinois Supreme Court. It is not
determinable at this time how the outcome of this action will impact the
remaining cash reserves of the Partnership. The Partnership believes that it
has meritorious defenses to contest the claims.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2815
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2823
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2823
<CURRENT-LIABILITIES> 82
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2741
<TOTAL-LIABILITY-AND-EQUITY> 2823
<SALES> 0
<TOTAL-REVENUES> 556
<CGS> 0
<TOTAL-COSTS> 24
<OTHER-EXPENSES> 290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 241
<INCOME-TAX> 0
<INCOME-CONTINUING> 241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
