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, 1994
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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 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
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(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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Securities registered pursuant to Section 12(b) of the Act: None
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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 Pension Investors-V (the "Registrant") is a limited partnership formed
in 1983 under the laws of the State of Illinois. The Registrant raised
$219,652,500 from sales of Limited Partnership Interests. The Registrant's
operations currently consist of investment in wrap-around mortgage loans and
first mortgage loans. The Registrant is also currently operating nine
properties acquired through foreclosure. All information included in this
report relates to this industry segment.
The Registrant originally funded thirty-four loans. A portion of the Mortgage
Reductions generated by repayments was reinvested in five additional loans and
a second funding on an existing loan, and a portion was distributed to Limited
Partners. The remainder was added to working capital reserves. As a result of
the repayments, foreclosures and write-offs of thirty loans, the Registrant
currently has eight loans in its portfolio. Ten properties were acquired
through foreclosure and two loans were reclassified to investment in joint
ventures-affiliates. The Registrant sold one of the properties and currently
has nine properties and two investments in joint ventures-affiliates in its
portfolio. See Item 2. Properties for additional information.
During 1994, the Registrant extended the previously modified Seven Trails West
Apartments loan receivable. In connection with this extension, the underlying
first mortgage loan on the property was purchased by the Registrant. See Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations for additional information.
During 1994, the Registrant repaid the mortgage note payable on The Glades on
Ulmerton Apartments. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for additional information.
In February 1995, the Registrant and three affilates acquired title to the 45
West 45th Street Office Building through foreclosure. See Item 3. Legal
Proceedings for additional information.
In March 1995, the Registrant made a successful bid at the foreclosure sale for
the Villa Medici Apartments and received title to the property on March 27,
1995. This property is classified as real estate held for sale at December 31,
1994. See Item 3. Legal Proceedings for additional information.
The Registrant, by virtue of its ownership of real estate acquired through
foreclosure, is subject to federal and state laws and regulations covering
various environmental issues. Management of the Registrant utilizes the
services of environmental consultants to assess a wide range of environmental
issues and to conduct tests for environmental contamination as appropriate. The
General Partner is not aware of any potential liability due to environmental
issues or conditions that would be material to the Registrant.
The officers and employees of Balcor Mortgage Advisors-V, 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
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The Registrant acquired the nine properties and two minority joint venture
interests described below:
Location Description of Property
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Dallas, Texas Comerica Plaza: two four-story office buildings
containing approximately 113,000 square feet.
<PAGE>
Tampa, Florida Granada Apartments: a 110-unit apartment complex
located on approximately 8 acres.
Arlington, Texas Huntington Meadows: a 250-unit apartment complex
located on approximately 11.4 acres.
Alameda County, California Harbor Bay: a two-story office building
containing approximately 120,000 square feet.
Temple Terrace, Florida Plantation Apartments: a 126-unit apartment
complex located on approximately 7.9 acres.
Largo, Florida The Glades on Ulmerton: a 304-unit apartment
complex located on approximately 18.3 acres.
Lakewood, Colorado Union Tower: a fourteen-story office building
containing approximately 196,000 square feet.
Overland Park, Kansas Villa Medici: a 159-unit apartment complex
located on approximately 16 acres.
Orlando, Florida Waldengreen Apartments: a 276-unit apartment
complex located on approximately 15 acres.
The Registrant also holds minority joint venture interests in the Whispering
Hills Apartments located in Overland Park, Kansas and the 45 West 45th Street
Office Building located in New York, New York.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding these
properties.
Item 3. Legal Proceedings
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(a) Springwells Park Apartments
In 1990, the Registrant 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 1993, one
of the notes, in the amount of $2,300,000, collateralized by a second mortgage
on the Property, was placed in default and the Registrant commenced foreclosure
proceedings in the Circuit Court of Wayne County, Michigan, Balcor Pension
Investors-V vs. Springwells Properties Limited Partnership, et. al., Case No.:
93-313288CH, and filed a claim against the borrower and a principal of the
borrower (the "Guarantor") to enforce a guarantee by the Guarantor. In May
1993, the borrower filed a counterclaim against the Registrant alleging lender
liability claims. In June 1994, a judgment was entered in which the Circuit
Court awarded the Registrant approximately $2,300,000 from the Guarantor and
the counterclaims filed against the Registrant were dismissed with prejudice.
In October 1993, the first mortgage holder filed non-judicial foreclosure
proceedings against the Property and in May 1994, was the successful bidder for
the Property at a foreclosure sale. Upon expiration of the statutory redemption
period, the Registrant's second mortgage was released.
The two remaining notes were collateralized by a second mortgage on other
property owned by an affiliate of the borrower ("Affiliate") and were
guaranteed by the Guarantor. Pursuant to a plan of reorganization in the
bankruptcy of the Affiliate, the Registrant received $100,000 in 1994, which
was applied against the $2,770,597 litigation judgment previously awarded the
Registrant, and released its second mortgage lien on the Affiliate's property.
The Registrant is pursuing the Guarantor for collection of the balance of the
<PAGE>
$2,770,597 judgment awarded the Registrant, as well as the aforementioned
$2,300,000 judgment.
(b) Villa Medici Apartments
The Registrant previously funded a $10,850,000 loan to Wiston XXIV Limited
Partnership, collateralized by a first mortgage on Villa Medici Apartments. In
1991, the loan was placed in default and the borrower filed for protection
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 granted the Registrant's motion to proceed
with a foreclosure of the property and the Registrant commenced 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 filed several appeals, all of which were decided in the
Registrant's favor, with the final appeal concluded in the U.S. Court of
Appeals for the 10th Circuit Court on February 16, 1995 (Wiston XXIV Limited
Partnership vs. Balcor Pension Investors-V, Case No.: 94-3281) The Registrant
resumed its foreclosure proceedings, and on March 15, 1995 was the successful
bidder for the property at a foreclosure sale. On March 27, 1995, the
foreclosure sale was confirmed and the Registrant received title to the
property.
(c) Williams class action
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.: 90-
C-0726 (U. S. District Court, Northern District of Illinois) against the
Registrant, the General Partner, The Balcor Company, Shearson Lehman Hutton,
Inc., American Express Company, other affiliates, and seven affiliated limited
partnerships (the "Related Partnerships") as defendants. The complaint alleges
that the defendants violated Federal securities laws as to the adequacy and
accuracy of disclosure of information in the offering of limited partnership
interests of the Registrant and the Related Partnerships and alleges breach of
fiduciary duty, fraud, negligence and violations under the Racketeer Influenced
and Corrupt Organizations Act. The complaint seeks compensatory and punitive
damages. The defendants filed their answer, affirmative defenses and a
counterclaim to the complaint. The defendants' counterclaim asserts claims of
fraud and breach of warranty against certain plaintiffs, as well as a request
for declaratory relief regarding the defendants' rights to be indemnified for
their expenses incurred in defending the litigation. The defendants seek to
recover damages to their reputations and business as well as costs and
attorneys' fees in defending the claims.
In May 1993, the Court issued an order denying the plaintiffs' motion for class
certification based principally on the inadequacy of the individual plaintiffs
representing the proposed class. However, the Court gave plaintiffs leave to
propose new individual class representatives. Further, the Court granted the
defendants' motion for sanctions and ordered that plaintiffs' counsel pay
certain of the defendants' attorneys' fees incurred with the class
certification motion. In January 1995, the Court ordered the plaintiffs'
counsel to pay $75,000 to the defendants and $25,000 to the Court.
The plaintiffs retained new co-counsel and proposed new class representatives.
In July 1994, the Court granted plaintiffs' motion certifying a class relating
to the Federal securities fraud claims. The class certified by the Court
includes only the original investors in the Registrant and the Related
Partnerships. The defendants filed a motion for reconsideration in opposition
to the class certification which was denied on December 21, 1994. The Court
has ordered the parties to meet to discuss notice to the class and a schedule
for discovery.
A motion filed by the plaintiffs seeking to dismiss the defendants'
counterclaim for fraud was denied by the Court in August 1994.
The defendants intend to continue vigorously contesting this action. Management
<PAGE>
of each of the defendants believes they have meritorious defenses to contest
the claims.
(d) 45 West 45th Street Office Building
In 1988 and 1989, Balcor Mortgage Advisors, Inc. ("BMA"), acting as nominee for
the Registrant and three affiliates (together, the "Participants"), funded a
$23,000,000 loan collateralized by a first priority lien on the 45 West 45th
Street office building, New York City, New York. The Registrant's share of the
loan was $5,000,000, for a participating percentage of approximately 22%.
In 1991, the loan was placed in default due to the failure of the borrower to
make payments due under the loan. After modification negotiations were
unsuccessful, the borrower agreed to an uncontested foreclosure (Balcor
Mortgage Advisors, Inc. vs. 45 W. 45th Street Associates, Supreme Court of the
State of New York, City of New York, Case No: 128631/94). On January 23, 1995,
the Participants were the successful bidder at the foreclosure sale and, on
February 2, 1995, a limited partnership in which each of the Participants holds
an interest equal to its participating percentage in the loan obtained title to
the property.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for the 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 Financial Statements, Statements of
Partner's Capital and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 41,344.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
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Total income $12,279,448 $18,846,927 $13,794,232 $15,317,394 $16,525,767
Provision for
losses on loans,
real estate and
accrued inter-
est receivable None 6,755,000 4,000,000 5,749,082 5,500,000
Net income 10,835,098 10,335,746 7,982,124 8,022,644 9,921,710
Net income per
Limited Partner-
ship Interest 22.20 21.17 16.35 16.44 20.33
Total assets 117,976,309 120,700,542 144,257,526 158,402,349 167,064,706
Mortgage notes
payable None 2,245,353 5,840,049 9,503,103 5,317,910
Distributions per
Limited Partner-
ship Interest 23.65 65.25 32.50 49.25 55.50
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Summary of Operations
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Income from operations of real estate held for sale increased during 1994 as
compared to 1993 due to Balcor Pension Investors-V (the "Partnership")
acquiring four properties through foreclosure during the two years ended
December 31, 1994. In addition, operations improved during 1994 at certain
properties. In 1993, the borrower of the Valley West Shopping Center
wrap-around mortgage prepaid the loan in full and in connection with this
prepayment the Partnership received additional interest and participation
income of approximately $7,900,000. This was partially offset by the
Partnership recognizing a provision for potential losses on loans, real estate
and accrued interest receivable during 1993 but not in 1994. The net effect of
these items was increased net income during 1994 as compared to 1993 and 1993
as compared to 1992. Further discussion of the Partnership's operations is
summarized below.
Operations
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1994 Compared to 1993
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Interest income on loans receivable decreased during 1994 as compared to 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 1994 as compared to 1993 due
to the Valley West loan prepayment and the purchase of the Seven Trails West
Apartments underlying loan in 1994.
The Partnership currently has two non-accrual loans which are collateralized by
Fairview Plaza I and II and Seven Trails West Apartments. 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
total $15,080,000, representing approximately 8% of the original funds
advanced. During 1994, the Partnership received cash payments totaling
$1,826,000 of net interest income on these two loans. Under the terms of the
original loan agreements, the Partnership would have received $2,906,000 of net
interest income during 1994.
Income from operations of real estate held for sale represents net property
operations generated by the properties the Partnership has acquired through
foreclosure. Original funds advanced by the Partnership totaled approximately
$78,795,000 for these nine real estate investments. The Partnership foreclosed
on the Plantation, Granada and Waldengreen apartment complexes in April, June
and September 1993, respectively and the Villa Medici Apartments in March 1995.
In addition, the Partnership completed a major repair and renovation program at
The Glades on Ulmerton Apartments 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 Harbor
Bay Office Building which has resulted in higher operating costs in 1994. As a
result, income from operations of real estate held for sale increased during
1994 as compared to 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 than in 1994, which resulted in a
decrease in interest income on short-term investments for 1994 as compared to
1993.
<PAGE>
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. The
Partnership recognized its share of a decline in the fair value of the 45 West
45th Street Office Building during 1993 which resulted in a loss from joint
ventures - affiliates during 1993 as compared to income in 1994.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership recognized no
provision in 1994 and a provision of $700,000 related to its loans in 1993. In
addition, the Partnership recognized a provision of $6,055,000 in 1993 related
to the Partnership's real estate held for sale to provide for declines in the
fair value of certain properties in the Partnership's portfolio.
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,
along with increased amortization of leasing commissions at Harbor Bay Office
Building during 1994, amortization expense increased during 1994 as compared to
1993.
Due to the loan foreclosures and prepayments during 1993, the total amount of
loans outstanding decreased, resulting in decreased mortgage servicing fees
during 1994 as compared to 1993.
Decreased data processing costs and lower legal fees during 1994 were the
primary reasons administrative expenses decreased during 1994 as compared to
1993.
1993 Compared to 1992
---------------------
Interest income on loans receivable decreased during 1993 as compared to 1992
as a result of a decrease in the total amount of loans outstanding, due to the
foreclosure on the Harbor Bay Office Building in October 1992, and the
prepayment of the Imperial Gardens loan in December 1992, the Valley West loan
in March 1993 and the Lake Worth loan in April 1993. This was partially offset
by additional interest income received as a result of the Valley West and Lake
Worth loan prepayments. The Partnership also received significant participation
income from the Valley West loan prepayment in 1993. Interest expense on loans
payable decreased during 1993 as compared to 1992 due to the prepayment of the
Valley West loan and the concurrent repayment of the underlying mortgage loan.
The Partnership's three non-accrual loans at December 31, 1993 are Fairview
Plaza I and II Office Building, Villa Medici Apartments, and Springwells Park
Apartments. The funds advanced by the Partnership for these non-accrual loans
totaled approximately $18,830,000, representing approximately 10% of the
original funds advanced. During 1993, the Partnership received cash payments
totaling approximately $1,377,000 of net interest income on these three loans.
Under the terms of the original loan agreements, the Partnership would have
received approximately $2,093,000 of net interest income during 1993.
Income from operations of real estate held for sale represents net property
operations generated by the eight properties the Partnership has acquired
through foreclosure. These eight properties comprise approximately 35% of the
Partnership's portfolio based on original funds advanced. The increase in
income generated in 1993 resulting from the foreclosures of the Harbor Bay
Office Building in 1992 and the Plantation, Granada and Waldengreen apartment
complexes in 1993, was substantially offset by higher property operating
expenses due to the repair and renovation program at The Glades on Ulmerton
<PAGE>
Apartments and by higher leasing activity at the Union Tower Office Building.
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. 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 a loss from joint
ventures - affiliate during 1993 as compared to income in 1992.
The Partnership recognized a provision for potential losses of $700,000 for its
loans during 1993. In addition, in 1993 a provision of $6,055,000 was
recognized related to the Partnership's real estate held for sale to provide
for further declines in the fair value of certain properties in the
Partnership's portfolio.
As a result of the sale of the Northland Park Industrial Building in January
1992, deferred expenses related to this property were fully amortized resulting
in a decrease in amortization expense during 1993 as compared to 1992.
Due to the loan foreclosures and prepayments during 1992 and 1993, the total
amount of loans outstanding decreased, resulting in decreased mortgage
servicing fees during 1993 as compared to 1992.
Higher foreclosure related costs incurred during 1993 were the primary reason
administrative expenses increased during 1993 as compared to 1992.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of December 31, 1994 when
compared to December 31, 1993. The Partnership's cash flow provided by
operating activities during 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. The cash provided by operating activities, 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 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. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. All eight properties owned by the Partnership at December 31, 1994,
are generating positive cash flow, as compared to seven of the eight properties
held by the Partnership at December 31, 1993. As of December 31, 1994, the
occupancy rates of the Partnership's residential properties ranged from 90% to
97%, and the occupancy rates of the commercial properties ranged from 87% to
100%. The Glades on Ulmerton Apartments generated a significant cash flow
deficit after debt service payments during 1993 as a result of extensive
repairs completed at the property during 1993. In addition, the Partnership
prepaid the underlying mortgage on this property in February 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.
Because of the 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
<PAGE>
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.
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 Cinnamon Square Apartments loan had previously repaid the
loan except for certain interest income which was payable pursuant to the terms
of a subsequent note executed by the borrower. In April 1994, the Partnership
received $600,000 as a repayment of the note. In accordance with its accounting
policies, the Partnership did not reflect this note in its financial
statements; therefore, the repayment amount has been recognized as interest
income during 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 its
insurance companies. The Partnership's share of this settlement was $250,000.
The Villa Medici Apartments loan was placed in default by the Partnership in
1991. This borrower subsequently filed for protection under the U.S. Bankruptcy
Code. During March 1995, the Partnership was the successful bidder for the
property at a foreclosure sale. On March 27, 1995, the foreclosure sale was
confirmed and the Partnership received title to the property. See Item 3. Legal
Proceedings for additional information.
The Springwells Park Apartments second mortgage loan was accelerated in April
1993. During December 1993 the borrower filed for protection under the U.S.
Bankruptcy Code, and these proceedings were dismissed in September 1994. The
Partnership received $100,000 in connection with this loan. See Item 3. Legal
Proceedings for more information.
The Partnership and three affiliates (the "Participants") funded the
$23,000,000 45 West 45th Street Office Building mortgage loan. The Partnership
funded $5,000,000 of the total loan amount for a participating percentage of
approximately 22%. In February 1995, the Participants received title to the
property through foreclosure. The Partnership's investment in the loan was
reclassified from loan in substantive foreclosure to an investment in joint
<PAGE>
venture - affiliate effective January 1993. It is the General Partner's opinion
that the borrower had effectively surrendered control of the property. See Item
3. Legal Proceedings for additional information.
The Noland Fashion Square Shopping Center loan 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.
The Partnership made distributions totaling $23.65 per Interest during 1994 as
compared to $65.25 per Interest during 1993 and $32.50 per Interest in 1992.
See Statements of Partners' Capital (Deficit). Distributions were comprised of
$21.00 of Cash Flow and $2.65 of Mortgage Reductions in 1994, $42.00 of Cash
Flow and $23.25 of Mortgage Reductions in 1993 and $30.00 of Cash Flow and
$2.50 of Mortgage Reductions in 1992. Cash Flow distributions decreased in 1994
as compared to 1993 and increased in 1993 as compared to 1992 due to two loan
prepayments in 1993 and one loan prepayment and one property sale in 1992.
Total distributions increased between 1993 and 1992 due to the distribution to
Limited Partners of the Mortgage Reductions received from loan prepayments and
the property sale. To date, including the distribution in January 1995, Limited
Partners have received cumulative cash distributions of $457.25 per $500
Interest. Of this amount, $349.25 has been Cash Flow from operations and
$108.00 represents a return of Original Capital.
In January 1995, 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 fourth quarter of 1994. The level of the regular
quarterly distribution remained the same as the third quarter of 1994. In
addition, during January 1995, the Partnership paid $146,435 to the General
Partner as its distributive share of the Cash Flow distributed for the fourth
quarter of 1994 and made a contribution of $48,812 to the Early Investment
Incentive Fund.
During 1994, the General Partner used amounts placed in the Early Investment
Incentive Fund to repurchase approximately 1,905 Interests from Limited
Partners at a total cost of $595,346.
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.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
<PAGE>
Inc., which has provided property management services to all of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
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.
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.
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 Mortgage Advisors-V, 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
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) 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 Director of The Balcor Company.
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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
<PAGE>
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(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 1994.
Item 11. Executive Compensation
-------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of a Partner of the General Partner. Certain
of these 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) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Mortgage Advisors-V and its officers and partners own as a group
through the Early Investment Incentive Fund and otherwise the following Limited
Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ---------------- ----------------
Limited Partnership
Interests 17,208 4%
<PAGE>
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional Interests.
(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 information relating to
transactions with affiliates.
See Note 2 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, Financial Statement Schedules 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 of Balcor Pension Investors-V
previously filed as Exhibit 3 and 4.1, respectively, to Amendment No. 1 dated
January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) 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. 0-13233) is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, 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/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: March 30, 1995
--------------
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 Mortgage
/s/Thomas E. Meador Advisors-V, the General Partner March 30, 1995
-------------------- --------------
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage
/s/Allan Wood Advisors-V, the General Partner March 30, 1995
-------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Schedules are omitted for the reason that they are inapplicable or equivalent
information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-V
We have audited the accompanying balance sheets of Balcor Pension Investors-V
(An Illinois Limited Partnership) as of December 31, 1994 and 1993, and the
related statements of partners' capital, income and expenses and cash flows for
each of the three years in the period ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-V at
December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
March 27, 1995
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 16,045,584 $ 23,623,906
Escrow deposits - restricted 384,625 379,685
Accounts and accrued interest receivable 671,734 1,285,486
Deferred expenses, net of accumulated
amortization of $302,661 in 1994
and $172,787 in 1993 349,054 257,003
------------- -------------
17,450,997 25,546,080
------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around, first
and junior mortgages 45,975,827 55,081,975
Investment in acquisition loan 8,517,335 8,587,042
Less:
Loans payable - underlying mortgages 3,998,692 9,160,291
Allowance for potential loan losses 5,957,614 5,957,614
------------- -------------
Net investment in loans receivable 44,536,856 48,551,112
Real estate held for sale (net of allowance
of $6,055,000 in 1994 and 1993) 51,051,376 41,430,697
Investment in joint ventures - affiliates 4,937,080 5,172,653
------------- -------------
100,525,312 95,154,462
------------- -------------
$117,976,309 $120,700,542
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 229,664 $ 266,687
Due to affiliates 136,543 136,721
Other liabilities, principally escrow deposits
and accrued real estate taxes 998,713 927,341
Security deposits 356,629 290,169
Mortgage notes payable 2,245,353
------------- -------------
Total liabilities 1,721,549 3,866,271
Partners' capital (439,305 Limited Partnership
Interests issued and outstanding) 116,254,760 116,834,271
------------- -------------
$117,976,309 $120,700,542
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts
-----------------------------------------
General Limited
Total Partner Partners
------------- ------------- -------------
Balance at December 31, 1991 $144,972,905 $ (1,836,437) $146,809,342
Cash distributions (A) (15,741,762) (1,464,350) (14,277,412)
Net income for the year ended
December 31, 1992 7,982,124 798,212 7,183,912
------------- ------------- -------------
Balance at December 31, 1992 137,213,267 (2,502,575) 139,715,842
Cash distributions (A) (30,714,742) (2,050,091) (28,664,651)
Net income for the year ended
December 31, 1993 10,335,746 1,033,575 9,302,171
------------- ------------- -------------
Balance at December 31, 1993 116,834,271 (3,519,091) 120,353,362
Cash distributions (A) (11,414,609) (1,025,046) (10,389,563)
Net income for the year ended
December 31, 1994 10,835,098 1,083,510 9,751,588
------------- ------------- -------------
Balance at December 31, 1994 $116,254,760 $ (3,460,627) $119,715,387
============= ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1994 1993 1992
------------- ------------- -------------
First quarter $ 9.00 $ 6.25 $ 6.25
Second quarter 6.65 46.00 11.25
Third quarter 4.00 9.00 8.75
Fourth quarter 4.00 4.00 6.25
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Income:
Interest on loans receivable,
and from investment in
acquisition loan $ 8,035,744 $ 11,641,872 $ 13,990,146
Less interest on loans
payable - underlying
mortgages 472,303 1,299,005 3,364,273
------------- ------------- -------------
Net interest income on
loans receivable 7,563,441 10,342,867 10,625,873
Income from operations of
real estate held for sale 3,503,374 1,845,385 1,815,619
Interest on short-term
investments 714,328 928,837 935,793
Participation income 75,506 6,277,197 48,224
Participation in income (loss)
of joint ventures -
affiliates 422,799 (547,359) 368,723
------------- ------------- -------------
Total income 12,279,448 18,846,927 13,794,232
------------- ------------- -------------
Expenses:
Provision for potential
losses on loans, real
estate and accrued
interest receivable 6,755,000 4,000,000
Amortization of deferred
expenses 129,874 35,734 95,646
Mortgage servicing fees 131,284 148,867 218,359
Administrative 1,113,485 1,494,536 1,351,578
------------- ------------- -------------
Total expenses 1,374,643 8,434,137 5,665,583
------------- ------------- -------------
Income before equity in loss from
investment in acquisition loan 10,904,805 10,412,790 8,128,649
Equity in loss from investment
in acquisition loan (69,707) (77,044) (146,525)
------------- ------------- -------------
Net income $ 10,835,098 $ 10,335,746 $ 7,982,124
============= ============= =============
Net income allocated to
General Partner $ 1,083,510 $ 1,033,575 $ 798,212
============= ============= =============
Net income allocated to
Limited Partners $ 9,751,588 $ 9,302,171 $ 7,183,912
============= ============= =============
Net income per Limited
Partnership Interest (439,305
issued and outstanding) $ 22.20 $ 21.17 $ 16.35
============= ============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Operating activities:
Net income $ 10,835,098 $ 10,335,746 $ 7,982,124
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in loss from
investment in acquisition
loan 69,707 77,044 146,525
Participation in (income)
loss of joint ventures -
affiliates (422,799) 547,359 (368,723)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 6,755,000 4,000,000
Amortization of deferred
expenses 129,874 35,734 95,646
Accrued interest income
due at maturity (906,566) (837,826) (737,769)
Collection of interest
income due at maturity 98,055 616,266 581,287
Net change in:
Escrow deposits -
restricted (4,940) (257,304) 411,475
Accounts and accrued
interest receivable 613,752 1,438,226 (1,408,076)
Accounts and accrued
interest payable (37,023) 47,338 (2,145,149)
Due to affiliates (178) 47,120 3,346
Other liabilities 326,774 268,408 (500,726)
Security deposits 66,460 53,842 73,378
------------- ------------- -------------
Net cash provided by
operating activities 10,768,214 19,126,953 8,133,338
------------- ------------- -------------
Investing activities:
Capital contributions to joint
ventures - affiliates (5,625) (56,689)
Distributions from joint
ventures - affiliates 658,372 757,990 166,755
Collection of principal
payments on loans receivable 415,659 37,341,491 6,213,222
Improvements to real estate (377,081) (733,315) (390,320)
Payment of expenses on real
estate acquired through
foreclosure (344,577) (108,561)
Proceeds from sale of real
estate 15,075,828
------------- ------------- -------------
Net cash provided by
investing activities 696,950 37,015,964 20,900,235
------------- ------------- -------------
Financing activities:
<PAGE>
Distributions to Limited
Partners (10,389,563) (28,664,651) (14,277,412)
Distributions to General
Partner (1,025,046) (2,050,091) (1,464,350)
Principal payments on loans
payable - underlying
mortgages (471,728) (812,268) (2,731,218)
Repayment of loans payable -
underlying mortgages (4,689,871) (22,110,234)
Principal payments on mortgage
notes payable (4,004) (99,776) (123,664)
Repayment of mortgage notes
payable (2,241,349) (3,494,920) (5,088,361)
Payment of deferred expenses (221,925) (146,591) (100,198)
------------- ------------- -------------
Net cash used in financing
activities (19,043,486) (57,378,531) (23,785,203)
------------- ------------- -------------
Net change in cash and cash
equivalents (7,578,322) (1,235,614) 5,248,370
Cash and cash equivalents at
beginning of period 23,623,906 24,859,520 19,611,150
------------- ------------- -------------
Cash and cash equivalents at
end of period $ 16,045,584 $ 23,623,906 $ 24,859,520
============= ============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) The Partnership records wrap-around mortgage loans at the face amount of
the mortgage instrument which includes the outstanding indebtedness of the
borrower under the terms of the underlying mortgage obligation(s). The
underlying mortgage obligation(s) are recorded as a reduction of the
wrap-around mortgage loan and the resulting balance represents the
Partnership's net advance to the borrower. The Partnership is responsible for
making periodic payments to the underlying mortgage lender(s) only to the
extent that payments as required by the wrap-around mortgage agreement are
received by the Partnership from the borrower.
(b) Income on loans is recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest is discontinued when a loan
becomes ninety days contractually delinquent or sooner when, in the opinion of
the General Partner, an impairment has occurred in the value of the collateral
property securing the loan. Income on nonaccrual loans or loans which are
otherwise not performing in accordance with their terms is recorded on a cash
basis.
Various loan agreements provide for participation by the Partnership in
increases in value of the collateral property when the loan is repaid or
refinanced. In addition, certain loan agreements allow the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income is reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate owned is reflected in the accompanying
Statements of Income and Expenses net of related direct operating expenses.
(c) Allowances are recorded through charges to income when the General Partner
believes an impairment has occurred, either in a borrower's ability to repay
the loan or in the value of the collateral property. Determinations of
impairment are made periodically on the basis of performance under the terms of
the loan agreement and assessments of property operations.
When the General Partner believes the likelihood of foreclosure is more than
remote, a loss provision is recorded if the loan balance exceeds the estimated
fair value of the collateral property less costs of disposal. Upon foreclosure,
actual losses are charged to the allowance and the fair value of the property
is transferred to real estate held for sale. Determinations of fair value
represent estimations based on many variables which affect the value of real
estate, including economic and demographic conditions. An allowance for loss is
recorded when a decline in the value of a property owned is believed to be
temporary. Impairment in value considered to be permanent results in the direct
writedown of the property's carrying value to its estimated fair value.
(d) Under certain circumstances, the Partnership may accept promissory notes in
satisfaction of a borrower's obligations for certain fees upon prepayment of a
loan as required by the loan agreement. These fees include, among other things,
prepayment penalties and participations in the borrower's appreciation in the
collateral property. The Partnership's policy is to record such income on a
cash basis as payments required under the terms of the promissory notes are
received.
(e) Deferred expenses consist of mortgage brokerage fees which are amortized on
a straight-line basis over the term of the loans to maturity and leasing
commissions which are amortized on a straight-line basis over the average term
of the leases to which they apply.
(f) Investment in acquisition loans represents first mortgage loans which,
<PAGE>
because the loan agreements include certain specified terms, must be accounted
for as an investment in a real estate venture. The investment is therefore
reflected in the accompanying financial statements using the equity method of
accounting. Under this method, the Partnership records its investment at cost
(representing total loan fundings) and subsequently adjusts its investment for
its share of property income or loss.
Amounts representing contractually required debt service are recorded in the
accompanying statements of income and expenses as interest income and
participation income. Equity from investment in acquisition loan represents the
Partnership's share of the collateral properties' operations, including
depreciation and interest expense. The Partnership's share of operations has no
effect on cash flow of the Partnership.
(g) Investment in joint ventures - affiliates represents the Partnership's
interest, under the equity method of accounting, in joint ventures with
affiliated partnerships. Under the equity method of accounting, the Partnership
records its initial investment at cost and adjusts its investment account for
additional capital contributions, distributions and its share of joint venture
income or loss.
(h) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(i) 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.
(j) Several reclassifications have been made in the previously reported 1993
financial statements to conform with the classification used in 1994 including
the reclassification of "loans in substantive foreclosure" to loans or real
estate to conform with the provisions of Statement of Financial Accounting
Standards No.114 which was adopted as of January 1, 1994. These
reclassifications have not changed the 1993 results of operations.
2. Partnership Agreement:
The Partnership was organized in October 1983. The Partnership Agreement
provides for Balcor Mortgage Advisors-V to be the General Partner and for the
admission of Limited Partners through the sale of Limited Partnership Interests
at $500 per Interest, 439,305 of which were sold on or prior to August 31,
1984, the termination date of the offering.
Pursuant to the Partnership Agreement, all income of the Partnership will be
allocated 90% to the Limited Partners and 10% to the General Partner and all
losses will be allocated 99% to the Limited Partners and 1% to the General
Partner.
To the extent that Cash Flow is generated, distributions will be made as
follows: (i) 90% of such Cash Flow will be distributed to the Limited Partners,
(ii) 7.5% of such Cash Flow will be distributed to the General Partner, and
(iii) an additional 2.5% of such Cash Flow will be distributed to the General
Partner and shall constitute the Early Investment Incentive Fund (the "Fund").
Upon the liquidation of the Partnership, the General Partner will return to the
Partnership for distribution to Early Investors an amount not to exceed the
2.5% share originally allocated, if necessary for Early Investors to receive a
return of their Original Capital plus a specified Cumulative Return based on
the date of investment.
At the sole discretion of the General Partner, subject to certain limitations,
amounts placed in the Fund have become available to repurchase Interests from
existing Limited Partners. During 1994, the Fund repurchased 1,905 Interests at
a total cost of $595,346. Distributions of Cash Flow and Mortgage Reductions
pertaining to such repurchased Interests will be paid to the Fund and will be
available to repurchase additional Interests.
<PAGE>
3. Investment in Loans Receivable:
Loans receivable and loans payable at December 31, 1994 consisted of the
following:
Loans Receivable
----------------------------------------------------------
Current Current Original Final
Mortgage Monthly Interest Funding Maturity Additional
Property Balances(A) Payments Rate Date Date Interest
-------------- ----------- -------- ------- ---------------- ----------
First and Wrap-around
Mortgages:
Apartments:
Glen $5,195,185 $41,250 10.00% 1986 1997 (B,C)
Meadow Run 5,606,725 43,063 13.25% 1984 1996 (B,C)
Seven Trails West 15,152,768 122,500 11.00% 1984 1996 (B,D)
Office Building:
Fairview Plaza I &
II 7,073,685 55,496 9.5% 1984 1997
Mobile Home Parks:
Club Wildwood 5,540,989 49,000 14.00% 1984 1996 (B,E)
Four Seasons Estates 3,262,795 34,375 13.75% 1984 1996 (B,E)
Pointe West 4,143,680 37,125 13.50% 1984 1996 (B,E)
-----------
Subtotal 45,975,827
Acquisition Loan:
Noland Fashion
Square Shopping
Center (F) 8,517,335 74,061 9.75% 1989 1999 (C)
-----------
Total $54,493,162
===========
Loans Payable
---------------------------------------
Underlying Current Current Due
Mortgage Monthly Interest Date of
Property Balances Payments Rate Loan
-------------- ---------- -------- ------ ------
Apartments:
Glen $2,578,570 $19,235 7.50% 1997
Fairview Plaza
I & II 442,457 23,613 8.75% 1996
Mobile Home Parks:
Four Seasons Estates 770,043 12,857 10.125% 1996
Pointe West 207,622 7,224 9.00% 1996
----------
Total $3,998,692
==========
(A) All loans are wrap-around mortgage loans except for Club Wildwood, Meadow
Run and Seven Trails West which are first mortgage loans. The notes receivable
balance of the wrap-around mortgage loans includes the underlying loan
balances.
(B) An additional amount of interest accrues on a monthly basis and is payable
to the Partnership upon maturity of the loan, prepayment or upon sale of the
property. This interest is included in the loan balance.
<PAGE>
(C) The Partnership may receive additional payments from the borrower
representing participation in the operating results of the collateral property
which exceed specified levels and a share in the appreciation of the collateral
property upon repayment or refinancing.
(D) 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 addition, in
March 1994 the $4,689,871 underlying first mortgage loan on the property was
purchased by the Partnership at face value.
(E) The three mobile home parks which collateralize these respective loans are
located in the Tampa, Florida area.
(F) The Partnership and two affiliates entered into a participation agreement
to fund a $23,300,000 first mortgage loan collateralized by the Noland Fashion
Square Shopping Center. The Partnership participates ratably in approximately
41% of the original loan amount, interest income and participation income. The
balance of the loan includes the Partnership's share of the cumulative net loss
of the property after the loan was funded.
Loans which have been classified as non-accrual as a result of delinquency or
other noncompliance with terms of loan agreements aggregated $22,226,452 and
$16,988,345 at December 31, 1994 and 1993, respectively.
Under certain circumstances, management of the Partnership has entered into
negotiations with borrowers which resulted in a reduction of interest rates,
periodic payments or the modification of other loan terms. Loans whose monetary
terms have been restructured amounted to $15,250,823 at December 31, 1993 and
none at December 31, 1994, due to the Seven Trails West loan's classification
as non-accrual during 1994. Non-accrual loans and loans which have been
restructured are hereinafter referred to as impaired loans.
Net interest income relating to impaired loans would have been $2,906,000 in
1994, $3,703,000 in 1993 and $4,953,000 in 1992. Net interest income from
impaired loans included in the accompanying Statements of Income and Expenses
amounted to $1,826,000 (cash basis) in 1994, $2,204,000 in 1993 and $3,015,000
in 1992.
The average recorded investment in impaired loans during the year ended
December 31, 1994 was approximately $27,233,000.
4. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1994 is described in the
table below.
<PAGE>
1994 1993 1992
----------- ----------- ------------
Loans:
Balance at beginning
of year $ 5,957,614 $ 6,391,000 $ 15,950,000
Provision charged to
income None 700,000 1,182,000
Charge-off of losses None (1,133,386) (10,741,000)
----------- ----------- ------------
Balance at the end of
the year $ 5,957,614 $ 5,957,614 $ 6,391,000
=========== =========== ============
Real Estate Held for Sale:
Balance at beginning of
year $ 6,055,000 None $ 19,050,000
Provision charged to
income None $ 6,055,000 2,818,000
Charge-off of losses None None (21,868,000)
----------- ----------- ------------
Balance at the end of
the year $ 6,055,000 $ 6,055,000 None
=========== =========== ============
Included in the 1992 charge-off of losses are amounts reflecting the
Partnership's adoption of Statement of Position 92-3, "Accounting for
Foreclosed Assets" which required the Partnership to adjust the carrying
amounts of its real estate held for sale and loans previously classified as in
substantive foreclosure to the lower of fair value of the asset less estimated
costs to sell, or the cost of the asset. This change had no effect on the
results of operations of the Partnership in 1992 since the Partnership had
previously recorded these allowances to reflect declines in the value of the
real estate and loans.
5. Mortgage Notes Payable:
During February 1994 the Partnership prepaid the underlying first mortgage on
The Glades on Ulmerton Apartments in the amount of $2,241,349. At December 31,
1993, the balance of the loan was $2,245,353. During the years ended December
31, 1994, 1993 and 1992, the Partnership incurred interest expense on mortgage
notes payable for properties held during the year of $34,585, $275,882 and
$226,726 and paid interest expense on the mortgage notes payable of $34,585,
$275,882 and $249,357, respectively.
6. Real Estate Held for Sale:
The Partnership acquired the Villa Medici Apartments through foreclosure in
March 1995 and classified it as real estate held for sale at December 31, 1994.
The Waldengreen, Granada and Plantation Apartments were acquired through
foreclosure in 1993 and Harbor Bay Office Building was acquired through
foreclosure in 1992. The Partnership recorded the costs of the properties at
$9,499,000, $12,994,863, and $14,313,055 in 1994, 1993 and 1992, respectively.
These amounts represented the outstanding loan balances plus any accrued
interest receivable. In addition, the Partnership increased the basis of the
properties by $401,310 in 1993 and reduced the basis of the properties by
$255,402, $56,706 and $96,274 in 1994, 1993 and 1992, respectively, for certain
other receivables, liabilities, escrows and costs recognized or incurred in
connection with the foreclosure. At the date of foreclosure, the properties
were transferred to real estate held for sale at their fair value, net of any
allowances previously recorded.
7. Investment in Joint Ventures - Affiliates:
<PAGE>
The Partnership has classified the Whispering Hills Apartments first mortgage
loan investment as an investment in joint venture - affiliate. This investment
represents a joint venture between the Partnership and an affiliate. Profits
and losses are allocated 25% to the Partnership and 75% to the affiliate.
The Partnership and three affiliates (together, the "Participants"), previously
funded a $23,000,000 loan on the 45 West 45th Street Office Building. In
February 1995, the Participants received title to the property through
foreclosure, and the Partnership owns a 21.74% joint venture interest in the
property. The Partnership's investment was reclassified from loan in
substantive foreclosure to an investment in joint venture with an affiliate
effective January 1993. It is the General Partner's opinion that the borrower
had effectively surrendered control of the property. In 1993, the joint venture
recognized a loss relating to the decline in the fair value of the property.
The Partnership's participation in joint ventures with affiliates for 1993
includes the Partnership's share of the loss of $500,000.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $131,305 $10,930 $153,658 $10,951 $222,651 $15,742
Property management fees 460,824 None 361,175 39,167 277,401 23,888
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 84,961 38,028 75,896 6,300 76,751 6,197
Data processing 87,782 20,653 150,141 41,698 158,957 12,800
Investor communica-
tions 36,782 10,098 11,381 945 36,557 2,945
Legal 9,688 8,403 12,197 1,012 19,911 1,608
Portfolio management 100,599 42,147 104,608 33,724 89,851 25,716
Other 27,070 6,284 35,224 2,924 9,394 705
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third party
in November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program. The Partnership's premiums to the deductible
insurance program were $126,944, $60,977 and $23,146 for 1994, 1993 and 1992,
respectively.
9. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 3% to 6% of gross operating receipts.
10. Property Sale:
In January 1992, the Partnership sold the Northland Park Industrial Building,
for a sale price of $15,350,000. The carrying basis of the property at the date
of sale was $15,063,040. A portion of the proceeds from the sale were used to
prepay the three underlying mortgage loans totaling $5,088,361. The Partnership
recognized a gain on the sale of the property of $12,788.
<PAGE>
11. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
this action. While a plaintiff class has been certified, no determinations of
the merits have been made. Although the outcome of these matters is not
presently determinable, it is management's opinion that the ultimate outcome
should not have a material adverse affect on the financial position of the
Partnership. Management of the defendants believes they have meritorious
defenses to contest the claims.
12. Subsequent Events:
(a) In January 1995, the Partnership made a distribution of $1,757,220 ($4.00
per Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1994 from Cash Flow.
(b) In March 1995, the Partnership made a successful bid at the foreclosure
sale for the Villa Medici Apartments and received title to the property on
March 27, 1995.
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 16046
<SECURITIES> 0
<RECEIVABLES> 45209
<ALLOWANCES> 12013
<INVENTORY> 0
<CURRENT-ASSETS> 17102
<PP&E> 51051
<DEPRECIATION> 0
<TOTAL-ASSETS> 117976
<CURRENT-LIABILITIES> 1721
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 116255
<TOTAL-LIABILITY-AND-EQUITY> 117976
<SALES> 0
<TOTAL-REVENUES> 12279
<CGS> 0
<TOTAL-COSTS> 201
<OTHER-EXPENSES> 1243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10835
<INCOME-TAX> 0
<INCOME-CONTINUING> 10835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10835
<EPS-PRIMARY> 22.20
<EPS-DILUTED> 22.20
</TABLE>
