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 September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13233
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BALCOR PENSION INVESTORS-V
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(Exact name of registrant as specified in its charter)
Illinois 36-3254673
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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 PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
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Cash and cash equivalents $ 15,585,635 $ 23,623,906
Escrow deposits - restricted 1,001,160 379,685
Accounts and accrued interest receivable 1,238,253 1,285,486
Deferred expenses, net of accumulated
amortization of $279,386 in 1994
and $172,787 in 1993 150,404 257,003
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17,975,452 25,546,080
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Investment in loans receivable:
Loans receivable - wrap-around, first
and junior mortgages 55,370,966 55,081,975
Investment in acquisition loan 8,529,259 8,587,042
Less:
Loans payable - underlying mortgages 4,089,991 9,160,291
Allowance for potential loan losses 5,957,614 5,957,614
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Net investment in loans receivable 53,852,620 48,551,112
Real estate held for sale (net of allowance
of $6,055,000 in 1994 and 1993) 41,739,086 41,430,697
Investment in joint ventures - affiliates 5,003,968 5,172,653
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100,595,674 95,154,462
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$118,571,126 $120,700,542
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 190,789 $ 266,687
Due to affiliates 261,662 136,721
Other liabilities, principally escrow
deposits and accrued real estate taxes 1,915,392 927,341
Security deposits 352,295 290,169
Mortgage note payable 2,245,353
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Total liabilities 2,720,138 3,866,271
Partners' capital (439,305 Limited Partnership
Interests issued and outstanding) 115,850,988 116,834,271
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$118,571,126 $120,700,542
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Interest on loans receivable and from
investment in acquisition loans $ 6,351,967 $ 9,848,929
Less interest on loans payable -
underlying mortgages 385,722 1,101,436
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Net interest income on loans receivable 5,966,245 8,747,493
Income from operations of real estate
held for sale 2,830,724 1,812,410
Interest on short-term investments 509,852 723,813
Participation income 6,271,284
Participation in income (loss) of joint
ventures - affiliates 371,412 (724,591)
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Total income 9,678,233 16,830,409
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 5,600,000
Amortization of deferred expenses 106,599 25,270
Mortgage servicing fees 98,483 117,103
Administrative 936,509 1,036,897
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Total expenses 1,141,591 6,779,270
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Income before equity in loss from investment
in acquisition loan 8,536,642 10,051,139
Equity in loss from investment in
acquisition loan (57,783) (74,067)
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Net income $ 8,478,859 $ 9,977,072
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Net income allocated to General Partner $ 847,886 $ 997,707
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Net income allocated to Limited Partners $ 7,630,973 $ 8,979,365
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Net income per Limited Partnership Interest
(439,305 issued and outstanding) $ 17.37 $ 20.44
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Distributions to General Partner $ 829,799 $ 1,854,844
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Distributions to Limited Partners $ 8,632,343 $ 26,907,431
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Distributions per Limited Partnership
Interest $ 19.65 $ 61.25
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Interest on loans receivable and from
investment in acquisition loans $ 1,893,278 $ 2,105,501
Less interest on loans payable -
underlying mortgages 88,829 200,763
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Net interest income on loans receivable 1,804,449 1,904,738
Income from operations of real estate
held for sale 894,927 571,513
Interest on short-term investments 179,493 192,115
Participation in income (loss) of joint
ventures - affiliates 90,270 (1,116,289)
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Total income 2,969,139 1,552,077
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Expenses:
Provision for potential losses on loans,
real estate and accrued interest
receivable 4,600,000
Amortization of deferred expenses 11,040 8,424
Mortgage servicing fees 32,825 36,353
Administrative 276,375 320,061
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Total expenses 320,240 4,964,838
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Income (loss) before equity in loss from
investment in acquisition loan 2,648,899 (3,412,761)
Equity in loss from investment in
acquisition loan (19,261) (24,689)
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Net income (loss) $ 2,629,638 $ (3,437,450)
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Net income (loss) allocated to General Partner $ 262,964 $ (343,745)
============= =============
Net income (loss) allocated to Limited
Partners $ 2,366,674 $ (3,093,705)
============= =============
Net income (loss) per Limited Partnership
Interest (439,305 issued and outstanding) $ 5.39 $ (7.04)
============= =============
Distribution to General Partner $ 195,247 $ 195,247
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Distribution to Limited Partners $ 1,757,220 $ 3,953,745
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Distribution per Limited Partnership
Interest $ 4.00 $ 9.00
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Operating activities:
Net income $ 8,478,859 $ 3,705,788
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss from investment in
acquisition loan 57,783 74,067
Participation in (income) loss of joint
ventures - affiliates (371,412) 1,053,257
Amortization of deferred expenses 106,599 25,270
Provision for potential losses on
loans, real estate and accrued
interest receivable 5,600,000
Accrued interest income due at maturity (662,301) (531,441)
Collection of interest income due at
maturity 87,069 616,266
Net change in:
Escrow deposits - restricted (621,475) (354,388)
Accounts and accrued interest
receivable 47,233 1,620,896
Accounts and accrued interest payable (75,898) (176,433)
Due to affiliates 124,941 (7,326)
Other liabilities 988,051 739,961
Security deposits 62,126 30,033
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Net cash provided by operating activities 8,221,575 12,395,950
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Investing activities:
Capital contributions to joint venture -
affiliate (5,625)
Distributions from joint venture - affiliate 540,097 235,388
Collection of principal payments on loans
receivable 286,241 37,229,110
Improvements to real estate (308,389) (413,879)
Payment of expenses on real estate
acquired through foreclosure (344,577)
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Net cash provided by investing activities 517,949 36,700,417
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Financing activities:
Distributions to Limited Partners (8,632,343) (26,907,431)
Distributions to General Partner (829,799) (1,854,844)
Principal payments on loans payable -
underlying mortgages (380,429) (627,015)
Repayment of loans payable - underlying
mortgages (4,689,871) (22,110,234)
Principal payments on mortgage notes payable (4,004) (87,947)
Repayment of mortgage notes payable (2,241,349) (3,494,920)
Payment of deferred expenses (87,402)
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Net cash used in financing activities (16,777,795) (55,169,793)
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Net change in cash and cash equivalents (8,038,271) (6,073,426)
Cash and cash equivalents at beginning
of period 23,623,906 24,859,520
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Cash and cash equivalents at end of period $ 15,585,635 $ 18,786,094
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Several reclassifications have been made to the previously reported 1993
statements in order to provide comparability with the 1994 statements. In the
opinion of management, all adjustments necessary for a fair presentation have
been made to the accompanying statements for the nine months and quarter ended
September 30, 1994, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on mortgage notes payable for properties
held of $34,585 and $223,775, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
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Mortgage servicing fees $ 87,552 $ 21,884 $21,882
Property management fees 388,245 133,966 45,145
Reimbursement of expenses to
the General Partner, at cost:
Accounting 55,178 38,330 40,322
Data processing 12,529 12,529 81,016
Investor communications 8,274 5,747 7,811
Legal 8,868 6,160 8,452
Portfolio management 62,426 43,365 46,056
Other 25,608 17,789 10,978
4. Subsequent Event:
In October 1994, the Partnership made a distribution of $1,757,220 ($4.00 per
Interest) to the holders of Limited Partnership Interests which represented the
quarterly distribution for the third quarter of 1994.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-V (the "Partnership") is a limited partnership formed
in 1983 to invest in wrap-around mortgage loans and first mortgage loans and,
to a lesser extent, other junior mortgage loans. The Partnership raised
$219,652,500 from sales of Limited Partnership Interests and utilized these
proceeds to fund a net of thirty-four loans. Currently, there are ten loans
outstanding in the Partnership's portfolio, and the Partnership is operating
eight properties acquired through foreclosure and two investments in joint
ventures with affiliates.
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 1993 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Net Income
- - ---------------------
In March 1993, the borrower of the wrap-around mortgage collateralized by the
Valley West Shopping Center prepaid the loan in full. In connection with this
prepayment, the Partnership received additional interest and participation
income of approximately $7,900,000. In addition, in April 1993, the borrower of
the wrap-around mortgage collateralized by the Lake Worth Mobile Home Park
prepaid the mortgage note, in connection with which the Partnership recognized
additional interest income. The Partnership also recognized a provision for
potential losses on loans, real estate and accrued interest receivable during
the nine months and quarter ended September 30, 1993. As a result, net income
decreased during the nine months ended September 30, 1994 as compared to the
same period in 1993 and net income was generated during the quarter ended
September 30, 1994 as compared to a net loss during the same period in 1993.
Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
- - ---------------------
Interest income on loans receivable decreased during the nine months ended
September 30, 1994 as compared to the same period in 1993 due to the Valley
West loan prepayment in March 1993 and the Lake Worth loan prepayment in April
1993. In addition, the Partnership received significant participation income
from the Valley West loan prepayment in 1993.
Interest expense on loans payable decreased during the nine months ended
September 30, 1994 as compared to the same period in 1993 due to the Valley
West loan prepayment and the purchase of the Seven Trails West Apartments
underlying loan in March 1994. The latter transaction also resulted in a
decrease in interest expense on loans payable during the quarter ended
September 30, 1994 as compared to the same period in 1993.
The Partnership's four non-accrual loans at September 30, 1994 are
collateralized by Fairview Plaza I and II located in Charlotte, North Carolina;
Seven Trails West Apartments located in West Saint Louis, Missouri;
Springwells Park Apartments located in Dearborn, Michigan; and Villa Medici
Apartments located in Overland Park, Kansas. For non-accrual loans, income is
recorded only as cash payments are received from the borrowers. The funds
advanced by the Partnership for these non-accrual loans totaled approximately
$26,770,000, representing approximately 14% of the original funds advanced.
Certain of these non-accrual loans are collateralized by properties located in
areas which are experiencing weak rental markets due to various factors,
including adverse local economic conditions, which have resulted in declining
rental and occupancy rates. The reduced cash flows from these properties have
adversely affected the borrowers' abilities to make mortgage payments to the
Partnership on a timely basis. During the nine months ended September 30, 1994,
the Partnership received cash payments totaling approximately $2,683,000 of net
interest income on these four loans. Under the terms of the original loan
agreements, the Partnership would have received approximately $3,023,000 of net
interest income during the nine months ended September 30, 1994.
Income from operations of real estate held for sale represents net property
operations on the Huntington Meadows apartment complex located in Arlington,
Texas; the Comerica Plaza office building located in Dallas, Texas; the Union
Tower office building located in Lakewood, Colorado; The Glades on Ulmerton
apartment complex located in Largo, Florida; the International Teleport office
building located in Alameda County, California; the Plantation apartment
complex located in Temple Terrace, Florida; the Granada apartment complex
located in Hillsborough County, Florida; and the Waldengreen apartment complex
located in Orlando, Florida. These eight properties comprise approximately 35%
of the Partnership's portfolio based on original funds advanced. The
Partnership foreclosed on the Plantation, Granada and Waldengreen apartment
complexes in April, June and September 1993, respectively. In addition, the
Partnership completed a major repair and renovation program at The Glades on
Ulmerton apartment complex in 1993 which resulted in improved operations in
1994. These increases in income from operations of real estate held for sale
were partially offset by the expenses required for the lease-up of the
International Teleport Office Building which has resulted in higher operating
costs in 1994. As a result, income from operations of real estate held for sale
increased for the nine months and quarter ended September 30, 1994 as compared
to the same periods in 1993. See Liquidity and Capital Resources for further
information.
Due to the Valley West and Lake Worth loan prepayments in 1993 and the timing
of the subsequent distributions to partners, the Partnership's cash balances
were significantly higher during 1993, which resulted in a decrease in interest
income on short-term investments for the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993.
Participation in income or loss of joint ventures - affiliates represents the
Partnership's 25% share of the income of the Whispering Hills Apartments and
22% share of the income or loss of the 45 West 45th Street Office Building
loan. The Partnership recognized its share of a decline in the fair value of
the 45 West 45th Street Office Building during 1993. This resulted in income
from joint ventures - affiliates during the nine months and quarter ended
September 30, 1994 as compared to a loss during the same periods in 1993.
The allowance for potential losses provides for potential loan losses and is
based upon loan loss experience for similar loans and for the industry, upon
prevailing economic conditions and the General Partner's analysis of specific
loans in the Partnership's portfolio. The Partnership did not recognize a
provision for potential losses during the nine months ended September 30, 1994.
While actual losses may vary from time to time because of changes in
circumstances (such as occupancy rates, rental rates, and other economic
factors), the General Partner believes that adequate recognition has been given
to loss exposure in the portfolio at September 30, 1994.
As a result of the prepayment of the underlying mortgage loan on The Glades on
Ulmerton Apartments and the full amortization of the related deferred expenses,
amortization expense increased during the nine months ended September 30, 1994
as compared to the same period in 1993.
Due to the loan foreclosures and prepayments during 1993, the total amount of
loans outstanding decreased, resulting in decreased mortgage servicing fees
during the nine months and quarter ended September 30, 1994 as compared to the
same periods in 1993.
Legal fees incurred during 1993 in connection with foreclosures, non-accrual
loans and loan defaults were the primary reason administrative expenses
decreased during the nine months and quarter ended September 30, 1994 as
compared to the same periods in 1993.
Liquidity and Capital Resources
- - -------------------------------
The Partnership's cash flow provided by operating activities during the nine
months ended September 30, 1994 was generated by net interest income received
from the Partnership's loans receivable and short-term investments, and cash
flow from the operation of the Partnership's properties held for sale. This
cash flow was partially offset by the payment of administrative expenses and
mortgage servicing fees. This cash flow, Partnership reserves and cash flow
from investing activities were utilized for financing activities primarily
consisting of distributions to Limited Partners and the General Partner, the
prepayment of the underlying mortgage loan on The Glades on Ulmerton Apartments
and the purchase of the underlying mortgage loan on Seven Trails West
Apartments. The Partnership's cash or near cash position also fluctuates during
each quarter, initially decreasing with the payment of Partnership
distributions for the previous quarter, and then gradually increasing each
month in the quarter as mortgage payments and cash flow from property
operations are received.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant once it exceeds $250,000 annually or 20% of the
property's rental and service income. All eight properties held by the
Partnership at September 30, 1994, are generating positive cash flow, as
compared to six of the seven properties held by the Partnership at September
30, 1993, excluding Waldengreen Apartments which was acquired through
foreclosure in September 1993. The Glades on Ulmerton apartment complex
generated a significant cash flow deficit after debt service payments during
the nine months ended September 30, 1993 as a result of extensive repairs
completed at the property during 1993. In addition, the Partnership prepaid the
$2,241,349 underlying mortgage on this property in February 1994. Significant
leasing costs of approximately $300,000 were incurred in 1994 at the
International Teleport Office Building, which were not included in classifying
the cash flow performance of the property since they are non-recurring
expenditures. Had these costs been included, the property's cash flow would
have been classified as a marginal deficit for the nine months ended September
30, 1994. 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 will also examine the terms of any mortgage loans collateralized by its
properties, and may refinance or, in certain instances, use Partnership
reserves to repay such loans.
Because of the current weak real estate markets in certain cities and regions
of the country, attributable to local and regional market conditions such as
overbuilding and recessions in local economies and specific industry segments,
certain borrowers have requested that the Partnership allow prepayment of
mortgage loans. The Partnership has allowed some of these borrowers to prepay
such loans, in some cases without assessing prepayment premiums, under
circumstances where the General Partner believed that refusing to allow such
prepayment would ultimately prove detrimental to the Partnership in light of
the probable inability of the properties to generate sufficient revenues to
keep loan payments current. In other cases, borrowers have requested prepayment
in order to take advantage of lower available interest rates. In these cases,
the General Partner evaluates the request for prepayment along with the market
conditions on a case by case basis, and in some cases the Partnership collects
substantial prepayment premiums.
In addition, certain borrowers have failed to make payments when due to the
Partnership for more than ninety days and, accordingly, these loans have been
placed on non-accrual status (income is recorded only as cash payments are
received). The General Partner has negotiated with some of these borrowers
regarding modifications of the loan terms and has instituted foreclosure
proceedings under certain circumstances. Such foreclosure proceedings may be
delayed by factors beyond the General Partner's control such as bankruptcy
filings by borrowers and state law procedures regarding foreclosures. Further,
certain loans made by the Partnership have been restructured to defer and/or
reduce interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service. In the case of most loan restructurings, the Partnership receives
concessions, such as increased participations or additional interest accruals,
in return for modifications, such as deferral or reduction of basic interest
payments. There can be no assurance, however, that the Partnership will receive
actual benefits from the concessions.
In March 1994, the Seven Trails West Apartments loan matured and was extended
for two years on the same terms as the previously modified loan, except for an
increase in the interest rate from 10% to 11%. In connection with this
extension, the Partnership received a $147,000 extension fee. In addition, in
March 1994 the $4,689,871 underlying first mortgage loan on the property was
purchased by the Partnership at face value.
The borrower of the loan collateralized by Cinnamon Square Apartments had
previously repaid the loan except for accrued interest in the amount of
$1,141,771 which was payable pursuant to the terms of a note executed by the
borrower. In April 1994, the Partnership received $600,000 as a discounted pay-
off of the note, which the General Partner believed was in the best interests
of the Partnership. In accordance with its accounting policies, the Partnership
did not reflect this note in its financial statements; therefore, the
discounted pay-off has been recognized as interest income during the second
quarter of 1994.
In September 1994, the Partnership and an affiliate received $1,000,000 as
settlement in full with the seller of the Whispering Hills Apartments and their
insurance companies. The Partnership's share of this settlement was $250,000.
See Item 1. Legal Proceedings for additional information.
The loan collateralized by the Villa Medici apartment complex was placed in
default by the Partnership in 1991. This borrower subsequently filed for
protection under the U.S. Bankruptcy Code. In addition, in April 1993, the
Partnership accelerated the second mortgage loan collateralized by the
Springwells Park Apartments. During December 1993, this borrower filed for
protection under the U.S. Bankruptcy Code, and these proceedings were dismissed
in September 1994. See Item 1. Legal Proceedings for additional information on
both of these loans.
The Partnership and three affiliated partnerships (the "Participants") funded a
$23,000,000 mortgage loan collateralized by the 45 West 45th Street Office
Building. The Partnership funded $5,000,000 of the total loan amount for a
participating percentage of approximately 22%. In September 1991, the loan was
placed in default. The Participants filed consensual foreclosure proceedings
during October 1994. See Item 1. Legal Proceedings for additional information.
The loan collateralized by the Noland Fashion Square shopping center located in
Independence, Missouri, is recorded by the Partnership as an investment in an
acquisition loan. The Partnership has recorded its share of the property's
operations as equity in loss from investment in acquisition loan. The
Partnership's share of operations has no effect on the cash flow of the
Partnership. Amounts representing contractually required debt service are
recorded as interest income.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Generally, distributions are made from Cash Flow generated by interest
and other payments made by borrowers under the Partnership's mortgage loans and
by the operations of the Partnership's properties. Loan prepayments and
repayments can initially cause Cash Flow to increase as prepayment premiums and
participations are paid; however, thereafter, prepayments and repayments will
have the effect of reducing Cash Flow. These fluctuations can be partially
offset if prepayment or repayment proceeds are reinvested in new mortgage
loans. If such proceeds are distributed rather than reinvested, Limited
Partners will receive a return of capital and the dollar amount of Cash Flow
available for distribution thereafter can be expected to decrease. Distribution
levels can also vary as loans are placed on non-accrual status, modified or
restructured and, if the Partnership has taken title to properties through
foreclosure or otherwise, as a result of property operations.
In October 1994, the Partnership made a distribution of $1,757,220 ($4.00 per
Interest) to the holders of Limited Partnership Interests which represented the
quarterly distribution for the third quarter of 1994. The level of the regular
quarterly distribution remained the same as the second quarter of 1994. In
addition, during October 1994, the Partnership paid $146,435 to the General
Partner as its distributive share of the Cash Flow distributed for the third
quarter of 1994 and made a contribution of $48,812 to the Early Investment
Incentive Fund.
During the quarter ended September 30, 1994, the General Partner used amounts
placed in the Early Investment Incentive Fund to repurchase approximately 527
Interests from Limited Partners at a total cost of $164,225.
The General Partner presently expects to continue making cash distributions
from the Cash Flow generated from property operations and by the receipt of
mortgage payments, less payments on the underlying loans, fees to the General
Partner and administrative expenses. The General Partner believes it has
retained, on behalf of the Partnership, an appropriate amount of working
capital to meet current cash or liquidity requirements which may occur.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
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. The Partnership's use of
participations for loans receivable is intended to provide a hedge against the
impact of inflation; sharing in cash flow or rental income and/or the capital
appreciation of the properties securing the loans should result in increases in
the total yields on the loans as inflation rises.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- - -------------------------
45 West 45th Street Office Building
- - -----------------------------------
As previously reported the Partnership and three affiliates (together, the
"Participants") funded a $23,000,000 mortgage loan collateralized by the 45
West 45th Street Office Building. The Partnership funded $5,000,000 of the
loan for a participating percentage of 21.74%. The loan was placed in default,
and after modification negotiations between the Participants and the borrower
were unsuccessful, the borrower agreed to an uncontested foreclosure. On
October 7, 1994, the Participants filed consensual foreclosure proceedings
against the borrower in the Supreme Court of the State of New York, City of New
York, Balcor Mortgage Advisors, Inc. vs. 45 W. 45th Street Associates (Case
No.: 128631/94). The Participants expect to obtain title to the property by the
end of the first quarter of 1995 and, until such time, continue to receive all
net cash flow from property operations which is being applied against the loan.
Springwells Park Apartments
- - ---------------------------
As previously reported, the Partnership received three promissory notes
totaling $4,200,000 representing unpaid amounts upon the partial repayment of
the first mortgage loan secured by the Springwells Park Apartments (the
"Property"). In June 1994, a judgment was entered pursuant to a claim filed by
the Partnership against the borrower and a principal of the borrower (the
"Guarantor") to enforce a guarantee by the Guarantor (Circuit Court of Wayne
County, Michigan, Balcor Pension Investors-V v. Springwells Properties Limited
Partnership, et. al., Case No.: 93-313288CH). In June 1994, the court awarded
the Partnership approximately $2,300,000 from the Guarantor, which has not yet
been received. The Partnership continues to pursue collection of the judgment.
In October 1993, the holder of the first mortgage loan collateralized by the
Property, the Federal National Mortgage Association ("FNMA"), filed non-
judicial foreclosure proceedings against the property. In May 1994, FNMA was
the successful bidder for the Property at a foreclosure sale. The borrower and
the Partnership each have until December 1994 to redeem the Property, or FNMA
will be the owner, in which case the Partnership's second mortgage lien will be
extinguished. The Partnership has also been given the option by FNMA to
purchase the Property for $12,000,000. The Partnership is currently reviewing
its options regarding the Property. The borrower's bankruptcy proceedings,
which had been filed in December 1993 in response to FNMA's foreclosure action,
under Chapter 11 of the U.S. Bankruptcy Code (In re Springwell Properties
Limited Partnership, U.S. Bankruptcy Court for the Eastern District of
Michigan, Case No.: 93-53186-G) were dismissed on September 8, 1994.
The two remaining notes are collateralized by a second mortgage on other real
property owned by an affiliate of the borrower ("Affiliate") and are also
guaranteed by the Guarantor. The Affiliate previously filed bankruptcy
proceedings under Chapter 11 of the U. S. Bankruptcy Code (In re Aspen Hotel
Partners Limited Partnership, U.S. Bankruptcy Court, Eastern District of
Michigan, Case No.: 93-42354). Pursuant to a confirmed plan of reorganization,
the Partnership received $45,000 in February 1994 and $55,000 in October 1994,
which was applied against the $2,770,597 judgment awarded the Partnership
pursuant to the litigation filed by the Partnership against the Affiliate
(Balcor Pension Investors V v. Springwells Properties Limited Partnership and
Anthony S. Brown, Circuit Court of Cook County, Case No.: 92-L-13994) and the
Partnership will release its second mortgage lien on the property. The
Partnership continues to pursue the Guarantor for collection of the balance of
the $2,770,597 judgment awarded the Partnership pursuant to the litigation, as
well as the aforementioned $2,300,000 judgment.
Villa Medici Apartments
- - -----------------------
In the bankruptcy proceedings filed by the borrower of the first mortgage loan
collateralized by the Villa Medici Apartments (the "Property"), under Chapter
11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of
Kansas, In re Wiston XXIV Limited Partnership (Case No.: 91-40410-11), the
Bankruptcy Court dismissed the borrower's appeal of the court's denial of its
plan of reorganization and the Partnership resumed its foreclosure proceedings
in the District Court of Johnson County, Kansas, Balcor Pension Investors-V vs.
Wiston XXIV Limited Partnership, et al., Case No. 92-C-11570. The borrower has
now filed an appeal of the Bankruptcy Court's decision in the U.S. Court of
Appeals for the 10th Circuit, Wiston XXIV Limited Partnership vs. Balcor
Pension Investors-V (Case No.: 94-3281). The foreclosure proceedings have been
stayed pending the outcome of the appeal. The Partnership filed a motion to
vacate the stay in the Circuit Court. A hearing on the Partnership's motion has
not yet been scheduled.
Whispering Hills Apartments
- - ---------------------------
In July 1994, Balcor Mortgage Advisors, Inc., nominee for the Partnership and
an affiliate (together, the "Participants"), the borrower of the loan
collateralized by Whispering Hills Apartments ("Borrower") and the insurance
carriers for the seller of the property ("Seller") to the Borrower, executed a
settlement agreement in which the insurance carriers agreed to pay the
Participants $1,000,000 in full satisfaction of their claims arising from
construction defects at the property (District Court of Johnson County, Kansas,
Arnold L. Porath et al. v. Robertson Homes and Catwil Corporation, and Sixty
Ninth Street Associates, Case No.: 88-C-2457). On September 30, 1994, the
Participants received the $1,000,000, which has been applied against the
principal balance due under the loan. As part of the settlement, the
Participants and the Borrower also agreed to drop the claims in the bankruptcy
proceedings filed by the Seller and its general partner in the bankruptcy cases
filed in the U.S. Bankruptcy Court for the Eastern District of California, In
re Catwil Corporation (Case No.: 92-91348) and In re Sixty Ninth Street
Associates (Case No.: 92-91349).
Williams proposed class action
- - ------------------------------
With respect to the proposed class action lawsuit filed in the U. S. District
Court, Northern District of Illinois (Paul Williams and Beverly Kennedy, et al.
vs. Balcor Pension Investors, et al., Case No. 90-C-0726), against the
Partnership and certain affiliated entities, in May 1993, the Court issued an
opinion and order denying the plaintiffs' motion for class certification based
in part on the inadequacy of the individual plaintiffs representing the
proposed class. Further, the Court granted the defendants' motion for certain
sanctions against plaintiffs' counsel and ordered the plaintiffs' counsel to
pay the defendants' attorneys' fees incurred with the class certification
motion. The defendants filed a petition for reimbursement of their fees and
costs from plaintiffs' counsel which remains pending. A motion previously filed
by the plaintiffs seeking to dismiss the defendants' counterclaim for fraud was
denied on August 18, 1994.
In July 1993, the Court gave plaintiffs leave to retain new counsel and to
propose new individual class representatives. The plaintiffs retained new
counsel and proposed three new individual class representatives. The
defendants conducted discovery regarding the proposed new class representatives
and, in February 1994, filed a response to the plaintiffs' latest motion for
class certification. On July 29, 1994, the Court indicated an intent to certify
a class relating to the plaintiffs' securities fraud claims, but gave leave for
the defendants to file a further motion opposing class certification. On
August 26, 1994, the defendants filed a motion which has been briefed. The
motion remains pending.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
dated January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) 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. 0-13233) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-V
By: /s/Thomas E. Meador
----------------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-V, the General Partner
By: /s/Allan Wood
----------------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Mortgage Advisors-V, the General Partner
Date: November 14, 1994
------------------------------
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