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, 1999
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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
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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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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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BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1999 and December 31, 1998
(UNAUDITED)
ASSETS
1999 1998
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Cash and cash equivalents $ 2,772,309 $ 2,815,211
Accrued interest receivable 10,883 7,626
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$ 2,783,192 $ 2,822,837
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 32,427 $ 35,887
Due to affiliates 47,633 46,413
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Total liabilities 80,060 82,300
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Commitments and contingencies
Limited Partners' capital (359,229
Partnership Interests issued and
outstanding) 3,197,965 3,235,370
General Partner's deficit (494,833) (494,833)
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Total partners' capital 2,703,132 2,740,537
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$ 2,783,192 $ 2,822,837
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1999 and 1998
(UNAUDITED)
1999 1998
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Income:
Interest on short-term investments $ 69,470 $ 79,672
Settlement income 396,697
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Total income 69,470 476,369
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Expenses:
Property operating 24,133
Administrative 106,875 176,274
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Total expenses 106,875 200,407
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Net (loss) income $ (37,405) $ 275,962
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Net (loss) income allocated to General
Partner None None
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Net (loss) income allocated to Limited
Partners $ (37,405) $ 275,962
============== ==============
Net (loss) income per Limited Partnership
Interest (359,229 issued and
outstanding) - Basic and Diluted $ (0.10) $ 0.77
============== ==============
Distribution to Limited Partners None $ 2,367,752
============== ==============
Distribution per Limited Partnership
Interest:
Taxable None None
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Tax-exempt None $ 7.58
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1999 and 1998
(UNAUDITED)
1999 1998
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Income:
Interest on short-term investments $ 34,002 $ 40,650
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Total income 34,002 40,650
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Expenses:
Property operating 24,133
Administrative 56,911 69,764
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Total expenses 56,911 93,897
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Net loss $ (22,909) $ (53,247)
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Net loss allocated to General Partner None None
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Net loss allocated to Limited Partners $ (22,909) $ (53,247)
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Net loss per Limited Partnership
Interest (359,229 issued and
outstanding) - Basic and Diluted $ (0.06) $ (0.15)
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1999 and 1998
(UNAUDITED)
1999 1998
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Operating activities:
Net (loss) income $ (37,405) $ 275,962
Adjustment to reconcile net (loss) income
to net cash (used in) or provided by
operating activites:
Net change in:
Accounts and accrued interest
receivable (3,257) 46,406
Escrow deposits-restricted 25,508
Accounts payable (3,460) (13,613)
Due to affiliates 1,220 27,434
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Net cash (used in) or provided by
operating activities (42,902) 361,697
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Investing activity:
Release of escrow deposits-restricted 44,948
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Cash provided by investing activity 44,948
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Financing activity:
Distribution to Limited Partners (2,367,752)
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Cash used in financing activity (2,367,752)
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Net change in cash and cash equivalents (42,902) (1,961,107)
Cash and cash equivalents at beginning
of year 2,815,211 4,805,720
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Cash and cash equivalents at end of
period $ 2,772,309 $ 2,844,613
============== ==============
The accompanying notes are an integral part of the financial statements.
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, 1999, and all such adjustments are of a normal and recurring
nature.
2. Partnership Termination:
The partnership agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. 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 to
establish a reserve for contingencies. As previously reported, the Sandra Dee
case was dismissed by the Illinois Supreme Court in April 1999. The Madison
Avenue litigation was filed in May 1999. See Note 4 of Notes to Financial
Statements for additional information regarding the Madison Avenue litigation.
Despite the existence of the Madison Avenue litigation, the Partnership
currently plans to dissolve in December 1999 and distribute remaining cash
reserves to the partners in accordance with the partnership agreement. In the
event that a new contingency (such as a lawsuit) arises during 1999, the
Partnership may not be dissolved and may continue in existence until such new
contingency is resolved. The Partnership does not consider the Madison Avenue
case to be a matter that would preclude the dissolution of the Partnership in
1999.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the six
months and quarter ended June 30, 1999 are:
Paid
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Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 21,032 $ 9,404 $ 47,633
4. Contingency:
In May 1999, a lawsuit was filed against the Partnership, Madison Partnership
Liquidity Investors XX, et al. vs. The Balcor Company, et al. whereby the
Partnership and certain affiliates have been named as defendants. The
plaintiffs are entities that initiated tender offers to purchase and, in fact,
purchased units in eleven affiliated partnerships. The complaint alleges breach
of fiduciary duties and breach of contract under the partnership agreement and
seeks the winding up of the affairs of the Partnership, the establishment of a
liquidating trust, the appointment of an independent trustee for the trust and
the distribution of a portion of the cash reserves to limited partners. The
defendants intend to vigorously contest this action. The Partnership believes
that 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 Partnership.
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. As of June 30, 1999, the
Partnership has no loans or properties remaining in its portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1998 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The operations of the Partnership in 1999 consisted of administrative expenses
which were partially offset by interest income earned on short-term
investments. During the first quarter of 1998, the Partnership recognized
income related to a settlement with a former tenant at the Pacific Center
Office Buildings. Primarily as a result of this event, the Partnership
recognized net income during the six months ended June 30, 1998 as compared to
a net loss in the same period in 1999. The Partnership paid property operating
expenses during the quarter ended June 30, 1998 relating primarily to the GSB
Office Building, which was sold in 1997. This was the primary reason the net
loss decreased during the quarter ended June 30, 1999 as compared to the same
period in 1998. Further discussion of the Partnership's operations is
summarized below.
1999 Compared to 1998
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Unless otherwise noted, discussions of fluctuations between 1999 and 1998 refer
to both the six months and quarters ended June 30, 1999 and 1998.
As a result of lower interest rates and lower average cash balances primarily
due to a distribution to Tax-exempt Limited Partners in January 1998, interest
income on short-term investments decreased during 1999 as compared to 1998.
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 the first quarter of 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 was recognized as settlement income for financial
statement purposes during 1998.
During the quarter ending June 30, 1998, the Partnership paid property
operating expenses relating primarily to the GSB Office Building, which was
sold in 1997.
Primarily due to a decrease in accounting, investor processing and portfolio
management fees, administrative expenses decreased during 1999 when compared to
1998.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $43,000 as of
June 30, 1999 as compared to December 31, 1998 due to cash used in operating
activities for the payment of administrative expenses, which was partially
offset by interest income earned on short-term investments.
The partnership agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. 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 to
establish a reserve for contingencies. As previously reported, the Sandra Dee
case was dismissed by the Illinois Supreme Court in April 1999. The Madison
Avenue litigation, described in Part II, Item 1, of this report, was filed in
May 1999. Despite the existence of the Madison Avenue litigation, the
Partnership currently plans to dissolve in December 1999 and distribute
remaining cash reserves to the partners in accordance with the partnership
agreement. In the event that a new contingency (such as a lawsuit) arises
during 1999, the Partnership may not be dissolved and may continue in existence
until such new contingency is resolved. The Partnership does not consider the
Madison Avenue case to be a matter that would preclude the dissolution of the
Partnership in 1999. As a result of the pending dissolution of the Partnership,
the general partner has suspended transfer of limited partnership interests in
the Partnership. Certain transfers which are not for value (such as death,
divorce, change of custodian or other estate planning) will continue to be
permitted. Limited Partners should contact the Partnership if the suspension of
transfers causes any extraordinary hardships. In the event that dissolution of
the Partnership does not occur during 1999, the Partnership will allow
transfers of limited partnership interests to occur commencing in January 2000.
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). 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.
In 1997, the Partnership discontinued the repurchase of Interests from Limited
Partners. As of June 30, 1999, there were 11,294 Interests and cash of
$3,472,751 in the Repurchase Fund.
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
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 soliciting information from these vendors through the use of
surveys, follow-up discussions and review of data where needed. The Partnership
has received the surveys from these vendors. 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,
these surveys and discussions with the key vendors performing services for the
Partnership indicate that the key vendors are substantially Year 2000 compliant
as of June 30, 1999. The Partnership will continue to monitor the Year 2000
compliance of its key vendors during the third quarter of 1999. In addition,
the Partnership has developed a contingency plan in the event of non-compliance
by these key vendors in the Year 2000 which will be updated by September 30,
1999 based on the results of further surveys, discussions and testing of
systems, where applicable. 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.
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company,
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et al.
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On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH08972). The Partnership, twenty-one additional
limited partnerships which were sponsored by The Balcor Company (together with
the Partnership, the "Affiliated Partnerships"), The Balcor Company, other
affiliated entities and one individual are named defendants in this action.
Plaintiffs are entities that initiated tender offers to purchase units and, in
fact, purchased units in eleven of the Affiliated Partnerships. The complaint
alleges breach of fiduciary duties and breach of contract under the partnership
agreements for each of the Affiliated Partnerships. The complaint seeks the
winding up of the affairs of the Affiliated Partnerships, the establishment of
a liquidating trust for each of the Affiliated Partnerships until a resolution
of all contingencies occurs, the appointment of an independent trustee for each
such liquidating trust and the distribution of a portion of the cash reserves
to limited partners. The complaint also seeks compensatory damages, punitive
and exemplary damages, and costs and expenses in pursuing the litigation. On
July 14, 1999, the defendants filed a Motion to Dismiss the complaint. A
briefing schedule on this motion has not yet been set.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Partnership 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 Partnership.
Item 6. Exhibits and Reports on Form 8-K
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(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.
(27) Financial Data Schedule of the Registrant for the six months ending June
30, 1999, is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1999.
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/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: August 9, 1999
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