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, 1995
-----------------
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
------------- -------------
Commission file number 0-13233
-------
BALCOR PENSION INVESTORS-V
------------------------------------------------------
(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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(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
- ----------------
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 consist of investment in wrap-around mortgage loans and first
mortgage loans. The Registrant is also operating eight 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 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-four loans, the
Registrant has four loans in its portfolio as of December 31, 1995. Ten
properties were acquired through foreclosure and two loans were reclassified as
investment in joint ventures with affiliates. The Registrant sold two of the
properties and has eight properties and two investments in joint ventures with
affiliates in its portfolio as of December 31, 1995. See Item 2. Properties for
additional information.
During 1995, the Registrant and three affiliates acquired title to the 45 West
45th Street Office Building through foreclosure. In addition, the Registrant
made a successful bid at a foreclosure sale and acquired title to the Villa
Medici Apartments. See Item 7. Liquidity and Capital Resources for additional
information.
During 1995, the Registrant sold the Comerica Office Building and received
prepayments on four wrap-around mortgage loans. See Item 7. Liquidity and
Capital Resources for additional information.
Operationally, existing apartment properties continued to register occupancy
percentages in the 90s, with average rents rising at an annual rate of between
3 and 4 percent. Apartments are still considered one of the top real estate
asset classes in terms of performance. However, some markets are experiencing
new construction of rental units which, if unrestrained, could impact the
performance of existing properties. Most of the new construction is aimed at
the two segments of the rental market which are growing the fastest: low-income
households and upper-income households who prefer to rent rather than own. Of
all the major asset classes, apartments typically display the least volatility
in terms of property values.
With virtually no new construction over the past few years, the national office
market has experienced consistently rising occupancy rates and, recently,
rising rental rates. Investor interest has also returned, typically preferring
suburban buildings over their downtown counterparts. Except for properties
built for a specific tenant, the economic feasibility of new construction in
most markets is still several years away. Build-to-suit construction for large
companies currently in leased space could restrict office appreciation rates
over the next few years. In addition, increased vacancies could result from
companies who restructure their workforce in order to reduce their occupancy
costs.
<PAGE>
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. As a result,
the General Partner is exploring an acceleration of its strategy to sell the
Registrant's residential properties. Additionally, the General Partner will
explore the sale of its commercial properties over the next year if market
conditions are favorable.
Activity for the purchase of limited partnership interests ("tender offers")
has increased in real estate limited partnerships generally. Many of these
tender offers have been made by investors seeking to make a profit from the
purchase of the interests. In the event a tender offer is made for interests
in the Registrant, the General Partner will issue a response to limited
partners expressing the General Partner's opinion regarding the offer. Certain
administrative costs will be incurred to respond to a tender offer. The
General Partner cannot predict with any certainty what impact a tender offer
will have on the operations or management of the Registrant.
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
- ------------------
As of December 31, 1995, the Registrant owns the eight properties described
below:
Location Description of Property
- -------- -----------------------
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.
<PAGE>
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. See Notes 2(g) and 8 of Notes to
Financial Statements for additional information.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate properties.
See Notes to Financial Statements for other information regarding these
properties.
Item 3. Legal Proceedings
- --------------------------
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). The Registrant,
the General Partner, seven affiliated limited partnerships (together with the
Registrant, the "Related Partnerships") and other affiliates are the
defendants. The complaint alleges violations of Federal securities laws as to
the adequacy and accuracy of disclosure of information in the offering of
limited partnership interests in 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 subsequently filed a counterclaim asserting 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 for damage 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. Upon the defendants' motion, the
Court ordered plaintiffs' counsel to pay $75,000 to the defendants and $25,000
to the Court for costs incurred with the class certification motion, which
amounts continue to be outstanding.
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 Related Partnerships. The
defendants filed a motion for reconsideration in opposition to the class
certification, which was denied in December 1994. The Court approved the Notice
of Class Action in August 1995 which was sent to potential members of the class
in September 1995. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
<PAGE>
The defendants intend to continue vigorously contesting this action.
Management of each of the defendants believes they have meritorious defenses to
contest the claims.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1995.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Item 7. Liquidity and Capital Resources.
As of December 31, 1995, the number of record holders of Limited Partnership
Interests of the Registrant was 40,910.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Total income $14,775,396 $11,760,200 $19,394,286 $13,794,232 $15,317,394
Recovery of
losses on loans,
real estate and
accrued inter-
est receivable 1,600,000 None None None None
Provision for
losses on loans,
real estate and
accrued inter-
est receivable 1,117,110 None 6,755,000 4,000,000 5,749,082
Net income 12,145,083 10,835,098 10,335,746 7,982,124 8,022,644
Net income per
Limited Partner-
ship Interest 24.88 22.20 21.17 16.35 16.44
Total assets 99,679,564 117,976,309 120,700,542 144,257,526 158,402,349
Mortgage notes
payable None None 2,245,353 5,840,049 9,503,103
Distributions per
Limited Partner-
ship Interest (A) 64.50 23.65 65.25 32.50 49.25
<PAGE>
(A) These amounts include distributions of original capital of $27.50, $2.65,
$23.25, $2.50 and $24.50 per Limited Partnership Interest for the years 1995,
1994, 1993, 1992 and 1991, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
Income from operations of real estate held for sale increased during 1995 as
compared to 1994 as a result of improved operations at several of Balcor
Pension Investors-V (the "Partnership") properties. The Partnership acquired
four properties through foreclosure during 1994 resulting in increased income
from operations of real estate held for sale during 1994 as compared to 1993.
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 1995 as compared to 1994 and 1994 as compared to
1993. Further discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
- ---------------------
Interest income on loans receivable decreased in 1995 as compared to 1994 due
to the foreclosure of the Villa Medici Apartments in March 1995 and the final
interest income payments received on the Cinnamon Square Apartments loan in
1994. This decrease was partially offset by the receipt of additional interest
income in connection with the Club Wildwood, Four Seasons and Pointe West
mobile home park loan prepayments during 1995. Interest expense on loans
payable decreased during 1995 as compared to 1994 due to the purchase of the
Seven Trails West Apartments underlying loan in March 1994.
The Partnership has one non-accrual loan at December 31, 1995 which is
collateralized by Seven Trails West Apartments. For non-accrual loans, income
is recorded only as cash payments are received from the borrower. The funds
advanced by the Partnership for this loan were approximately $8,000,000,
representing approximately 4% of original funds advanced. During 1995 the
Partnership received cash payments of net interest income of approximately
$1,617,000. Under the terms of the original loan agreement the Partnership
would have received approximately $2,021,000 of net interest income during
1995.
Income from operations of real estate held for sale represents the net
operations of properties acquired by the Partnership through foreclosure. At
December 31, 1995, the Partnership was operating eight properties. Original
funds advanced by the Partnership totaled approximately $69,545,000 for these
properties. The Partnership foreclosed on the Villa Medici Apartments in March
1995. Additionally, occupancy rates at several of the Partnership's properties
<PAGE>
increased while leasing costs decreased at the Harbor Bay Office Building in
1995. As a result, income from operations of real estate held for sale
increased in 1995 as compared to 1994. See Liquidity and Capital Resources
below for further information.
Due to higher Partnership cash balances and interest rates during 1995,
interest income on short-term investments increased in 1995 as compared to
1994.
The Partnership's loans generally bear interest at contractually-fixed interest
rates. Some loans also provide for additional interest in the form of
participations, usually consisting of either a share in the capital
appreciation of the property collateralizing the Partnership's loan and/or a
share in the increase of the gross income of the property above a certain
level. Participation income was recognized during 1995 in connection with the
prepayment of the Club Wildwood, Four Seasons and Point West mobile home parks
loans. Additionally, participation income was recognized on the Glen and Meadow
Run Apartments loans during 1995.
Prepayment premiums totaling $315,000 were received during 1995 in connection
with the prepayments on the Club Wildwood, Four Seasons, and Point West mobile
home park loans.
Participation in joint ventures with affiliates represents the Partnership's
share of the property operations at the Whispering Hills Apartments and the 45
West 45th Street Office Building. The Partnership recognized its share of the
decline in the fair value of the 45 West 45th Street Office Building during
1995 which was the primary reason the Partnership recognized participation in
loss of joint ventures during 1995 as compared to participation in income of
joint ventures in 1994.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a 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. See Note 2(d) of Notes to Financial Statements for further
information regarding the Partnership's accounting policies related to the
determination of the fair value of its loans and real estate held for sale.
During 1995, the Partnership recognized a provision of $300,000 related to the
Meadow Run loan receivable. The Partnership recognized provisions of $817,110
and recoveries of $1,600,000 in 1995 related to its real estate held for sale
to provide for changes in the estimate of the fair value of certain properties
in the Partnership's portfolio. The Partnership did not recognize any
provisions during 1994 related to its loans receivable or real estate held for
sale. During 1995, allowances of $397,881 related to the Fairview I and II loan
receivable prepayment and $317,110 related to the Comerica Office Building sale
were written off.
As a result of the sale of the Comerica Office Building and the full
amortization of the related deferred expenses, amortization expense increased
during 1995 as compared to 1994.
<PAGE>
Decreases in legal fees related to the 1994 foreclosures and mortgage servicing
fees resulted in a decrease in administrative expenses during 1995 as compared
to 1994.
1994 Compared to 1993
- ---------------------
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 had two non-accrual loans at December 31, 1994 which were
collateralized by Fairview Plaza I and II and Seven Trails West Apartments. 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 properties. 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 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 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.
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.
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.
The Partnership recognized 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,
<PAGE>
along with increased amortization of leasing commissions at Harbor Bay Office
Building during 1994, amortization expense increased 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.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $1,635,000 as
of December 31, 1995 as compared to December 31, 1994. The Partnership's cash
flow provided by operating activities during 1995 was generated primarily by
net interest income, participation income, and prepayment premiums received
from the Partnership's loans receivable totaling approximately $8,500,000, and
cash flow from the operation of the Partnership's properties held for sale of
approximately $5,000,000. The Partnership's investing activities generated
cash flow primarily from loan prepayments of approximately $15,800,000 and net
proceeds from the sale of the Comerica Office Building of $2,394,713. The cash
provided by operating and investing activities were principally utilized for
financing activities primarily consisting of distributions to Limited Partners
of $28,335,172 and the General Partner of $1,806,033.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit. A deficit is
considered to be significant if 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. None of the properties have any
underlying debt. During 1995 and 1994, all of the Partnership's properties
generated positive cash flow. The Comerica Office Building generated positive
cash flow prior to its sale in March 1995. In addition, the properties in which
the Partnership holds minority joint venture interest with affiliates, the
Whispering Hills Apartments and the 45 West 45th Street office building,
generated positive cash flow during 1995 and 1994. Significant leasing costs
were incurred at the 45 West 45th Street Office Building in 1995 and at the
Harbor Bay Office Building in 1994. These items were not included in
classifying the cash flow performance of the properties since they are
nonrecurring expenditures. Had these costs been included, the 45 West 45th
Street Office Building would have generated a significant cash flow deficit in
1995 and the Harbor Bay Office Building would have generated a marginal cash
flow deficit in 1994.
As of December 31, 1995, the occupancy rates of the Partnership's residential
properties ranged from 96% to 98%, and the occupancy rates of the commercial
properties were 86% at the Harbor Bay Office Building and 94% at the Union
Tower Office Building. Many rental markets continue to remain extremely
competitive; therefore, the General Partner's goals are to maintain high
occupancy levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvement requirements at the
properties.
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. As a result,
the General Partner is exploring an acceleration of its strategy to sell the
Partnership's residential properties. Additionally, the General Partner will
<PAGE>
explore the sale of its commercial properties over the next year if market
conditions are favorable.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate. Lower interest rates
may increase the probability that borrowers' may seek prepayment of the
Partnership's loan whereas rising interest rates decrease the yields on the
loans and make prepayment less likely.
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
nonaccrual 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.
The Partnership and three affiliates funded the $23,000,000 45 West 45th Street
Office Building mortgage loan in 1988. The Partnership funded $5,000,000 of the
total loan amount for a participating percentage of approximately 22%. In
February 1995, the participants acquired title to the property through
foreclosure. See Note 7 of Notes to Financial Statements for additional
information.
In March 1995 the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208. See Note 11 of Notes to Financial Statements for
additional information.
During March 1995, the Partnership was the successful bidder for the Villa
Medici Apartments at a foreclosure sale. See Note 7 of Notes to Financial
Statements for additional information.
In June 1995, the borrower of the wrap-around mortgage loans collateralized by
the Club Wildwood, Four Seasons and Point West mobile home parks prepaid the
loans in full. The Partnership received proceeds of approximately $13,940,771,
consisting of funds advanced of $9,580,171, additional interest income of
$3,198,400, participation income of $847,200, and prepayment premiums totaling
$315,000.
In December 1995, the Partnership received $6,225,610 as payment in full under
the contractual terms of the wrap-around mortgage loan collateralized by
Fairview Plaza I and II. The proceeds received represented a portion of the
original funds advanced.
<PAGE>
The Seven Trails West Apartments loan matured in February 1996. The Partnership
extended the loan until April 1, 1996 to allow the borrower additional time to
secure alternate financing.
The Partnership made four distributions totaling $64.50, $23.65, and $65.25 per
Interest in 1995, 1994 and 1993, respectively. See Statement of Partners'
Capital for additional information. Distributions were comprised of $37.00 of
Cash Flow and $27.50 of Mortgage Reductions in 1995, $21.00 of Cash Flow and
$2.65 of Mortgage Reductions in 1994 and $42.00 of Cash Flow and $23.25 of
Mortgage Reductions in 1993. Cash Flow distributions increased in 1995 as
compared to 1994 primarily due to loan prepayments. Cash Flow distributions
decreased in 1994 from 1993 due to two loan prepayments in 1993.
In January 1996, the Partnership paid a distribution of $2,196,525 ($5.00 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution of Cash Flow for the fourth quarter of 1995.
Including the January 1996 distribution, Limited Partners have received cash
distributions totaling $522.75 per $500 Interest. Of this amount, $387.25 has
been Cash Flow from operations and $135.50 represents a return of Original
Capital. In January 1996, the Partnership also paid $183,044 to the General
Partner as its distributive share of Cash Flow for the fourth quarter of 1995
and made a contribution to the Early Investment Incentive Fund of $61,015.
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.
During 1995, the General Partner used amounts placed in the Early Investment
Incentive Fund to repurchase 5,953 Interests from Limited Partners at a cost of
$1,690,950.
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.
In 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" which establishes accounting standards for impairment of
long-lived assets and long-lived assets to be disposed of. This statement has
been adopted by the Partnership as of January 1, 1995, and did not have a
material impact on the financial position or results of operations of 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.
<PAGE>
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
- --------------------
On September 14, 1995 the Partnership approved the engagement of Coopers &
Lybrand LLP as its independent auditors for the fiscal year ending December 31,
1995 to replace the firm of Ernst & Young LLP, who were dismissed as auditors
of the Partnership effective September 14, 1995. The General Partner of the
Partnership approved the change in auditors.
The reports of Ernst & Young LLP on the Partnership's financial statements for
the past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
In connection with the audits of the Partnership's financial statements for
each of the two fiscal years ended December 31, 1994, and in the subsequent
interim period, there were no disagreements with Ernst & Young LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
Ernst & Young LLP would have caused Ernst & Young LLP to make reference to the
matter in their report.
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
Senior Vice President Alexander J. Darragh
Senior Vice President Josette V. Goldberg
Senior Vice President Alan G. Lieberman
Senior Vice President, Chief Brian D. Parker
Financial Officer, Treasurer
and Assistant Secretary
Senior Vice President John K. Powell, Jr.
<PAGE>
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. He is
also Senior Vice President of American Express Company and is responsible for
its real estate operations worldwide. Prior to joining Balcor, Mr. Meador was
employed at the Harris Trust and Savings Bank in the commercial real estate
division where he was involved in various lending activities. Mr. Meador
received his M.B.A. degree from the Indiana University Graduate School of
Business.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
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 MIS functions. Ms. Goldberg has been
designated as a Senior Human Resources Professional (SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
Balcor's property sales and capital markets functions. Mr. Lieberman is a
Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief Financial
Officer and Chief Accounting Officer, is responsible for Balcor's financial,
legal and treasury functions. He is a Director of The Balcor Company. 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 portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's risk
management and investor services functions. He received a Master of Planning
degree from the University of Virginia. Mr. Powell 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.
(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 1995.
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 9 of Notes to Financial
Statements for information relating to transactions with affiliates.
<PAGE>
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 23,157 5.1%
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 3 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 9 of Notes to Financial Statements for information relating to
transactions with affiliates.
(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.
(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 (Commission
File No. 0-13233) is hereby incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1995 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K/A dated October 27, 1995,
amending the Current Report on Form 8-K dated September 19, 1995 reporting a
change in the Registrant's certifying accountant, was filed (Commission File
No. 0-13233).
(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/Brian D. Parker
-----------------------
Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor Mortgage
Advisors-V, the General Partner
Date: March 29, 1996
--------------
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 29, 1996
- -------------------- --------------
Thomas E. Meador
Senior Vice President, and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Mortgage
/s/Brian D. Parker Advisors-V, the General Partner March 29, 1996
- -------------------- --------------
Brian D. Parker
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1995 and 1994
Statements of Partners' Capital, for the years ended December 31, 1995, 1994
and 1993
Statements of Income and Expenses, for the years ended December 31, 1995, 1994
and 1993
Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Pension Investors-V
We have audited the accompanying balance sheet of Balcor Pension Investors-V
(An Illinois Limited Partnership) as of December 31, 1995 and the related
statements of partners' capital, income and expenses and cash flows for the
year then ended. 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 audit.
We conducted our audit 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 audit provides 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, 1995, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 27, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-V:
We have audited the accompanying balance sheet of Balcor Pension Investors-V
(An Illinois Limited Partnership) as of December 31, 1994 and the related
statements of partners' capital, income and expenses and cash flows for each of
the two 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 the results of its operations and its cash flows for each
of the two 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, 1995 and December 31, 1994
ASSETS
1995 1994
--------------- ----------------
Cash and cash equivalents $ 17,680,262 $ 16,045,584
Escrow deposits - restricted 42,103 384,625
Accounts and accrued interest receivable 576,378 604,189
Prepaid expenses 145,027
Deferred expenses, net of accumulated
amortization of $261,244 in 1995 and
$302,661 in 1994 149,904 349,054
--------------- ----------------
18,593,674 17,383,452
--------------- ----------------
Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 26,421,997 45,975,827
Investment in acquisition loan 8,439,304 8,517,335
Less:
Loans payable - underlying mortgages 2,539,832 3,998,692
Allowance for potential loan losses 5,859,733 5,957,614
--------------- ----------------
Net investment in loans receivable 26,461,736 44,536,856
Real estate held for sale (net of
allowance of $4,955,000 in 1995
and $6,055,000 in 1994) 50,018,118 51,051,376
Investment in joint ventures - affiliates 4,606,036 5,004,625
--------------- ----------------
81,085,890 100,592,857
--------------- ----------------
$ 99,679,564 $ 117,976,309
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 265,469 $ 229,664
Due to affiliates 49,849 136,543
Other liabilities, principally escrow
deposits and accrued real estate taxes 611,875 998,713
Security deposits 493,733 356,629
--------------- ----------------
Total liabilities 1,420,926 1,721,549
--------------- ----------------
Limited Partners' capital
(439,305 Interests issued
and outstanding) 102,310,790 119,715,387
General Partner's deficit (4,052,152) (3,460,627)
--------------- ----------------
Total Partners' capital 98,258,638 116,254,760
--------------- ----------------
$ 99,679,564 $ 117,976,309
=============== ================
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, 1995, 1994 and 1993
Partners' Capital (Deficit) Accounts
------------------------------------------
General Limited
Total Partner Partners
--------------- ------------- ------------
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
Cash distributions (A) (30,141,205) (1,806,033) (28,335,172)
Net income for the year
ended December 31, 1995 12,145,083 1,214,508 10,930,575
--------------- ------------- ------------
Balance at December 31, 1995 $ 98,258,638 $ (4,052,152) $102,310,790
=============== ============= ============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1995 1994 1993
--------------- ------------- ------------
First quarter $ 4.00 $ 9.00 $ 6.25
Second quarter 5.00 6.65 46.00
Third quarter 31.82 4.00 9.00
Fourth quarter 23.68 4.00 4.00
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, 1995, 1994 and 1993
1995 1994 1993
--------------- ------------- ------------
Income:
Interest on loans receivable,
and from investment in
acquisition loan $ 5,834,417 $ 8,035,744 $ 11,641,872
Less interest on loans
payable - underlying
mortgages 273,184 472,303 1,299,005
--------------- ------------- ------------
Net interest income on
loans receivable 5,561,233 7,563,441 10,342,867
Income from operations of
real estate held for sale 5,366,016 3,406,925 1,845,385
Interest on short-term
investments 1,007,008 714,328 928,837
Participation income 926,139 75,506 6,277,197
Prepayment premiums 315,000
Recovery of losses on loans,
real estate and accrued
interest receivable 1,600,000
--------------- ------------- -------------
Total income 14,775,396 11,760,200 19,394,286
--------------- ------------- -------------
Expenses:
Provision for potential
losses on loans, real
estate and accrued
interest receivable 1,117,110 6,755,000
Participation in loss
(income) of joint
ventures-affiliates 204,085 (422,799) 547,359
Amortization of deferred
expenses 199,150 129,874 35,734
Administrative 1,031,937 1,148,320 1,643,403
--------------- ------------- -------------
Total expenses 2,552,282 855,395 8,981,496
--------------- ------------- -------------
Income before equity in
loss from investment
in acquisition loan 12,223,114 10,904,805 10,412,790
Equity in loss from investment
in acquisition loan (78,031) (69,707) (77,044)
--------------- ------------- -------------
Net income $ 12,145,083 $ 10,835,098 $ 10,335,746
=============== ============= =============
<PAGE>
Net income allocated to
General Partner $ 1,214,508 $ 1,083,510 $ 1,033,575
=============== ============= =============
Net income allocated to
Limited Partners $ 10,930,575 $ 9,751,588 $ 9,302,171
=============== ============= =============
Net income per Limited
Partnership Interest
(439,305 issued and
outstanding) $ 24.88 $ 22.20 $ 21.17
=============== ============= =============
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, 1995, 1994 and 1993
1995 1994 1993
-------------- ------------ ------------
Operating activities:
Net income $ 12,145,083 $ 10,835,098 $ 10,335,746
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in loss from invest-
ment in acquisition loan 78,031 69,707 77,044
Participation in loss
(income) of joint
ventures - affiliates 204,085 (422,799) 547,359
Recovery of losses on loans,
real estate and accrued
interest receivable (1,600,000)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 1,117,110 6,755,000
Amortization of deferred
expenses 199,150 129,874 35,734
Accrued interest income
due at maturity (610,927) (906,566) (837,826)
Collection of interest
income due at maturity 2,591,071 98,055 616,266
Net change in:
Escrow deposits
- restricted 342,522 (4,940) (257,304)
Accounts and accrued
interest receivable (111,371) 681,297 1,438,226
Prepaid expenses (145,027)
Accounts and accrued
interest payable 35,805 (37,023) 47,338
Due to affiliates (86,694) (178) 47,120
Other liabilities (386,838) 326,774 268,408
Security deposits 137,104 66,460 53,842
-------------- ------------ ------------
Net cash provided by
operating activities 13,909,104 10,835,759 19,126,953
-------------- ------------ ------------
<PAGE>
Investing activities:
Capital contributions to joint
ventures - affiliates (204,116) (5,625)
Distributions from joint
ventures - affiliates 398,620 590,827 757,990
Collection of principal
payments on loans receivable 16,060,889 415,659 37,341,491
Improvements to real estate (439,382) (377,081) (733,315)
Payment of expenses on real
estate acquired through
foreclosure (344,577)
Proceeds from sale
of real estate 2,570,208
Costs incurred in
connection with the
sale of real estate (175,495)
-------------- ------------- -------------
Net cash provided by
investing activities 18,210,724 629,405 37,015,964
-------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners (28,335,172) (10,389,563) (28,664,651)
Distributions to General
Partner (1,806,033) (1,025,046) (2,050,091)
Principal payments on loans
payable - underlying
mortgages (343,945) (471,728) (812,268)
Repayment of loans payable -
underlying mortgages (4,689,871) (22,110,234)
Principal payments on mortgage
notes payable (4,004) (99,776)
Repayment of mortgage
note payable (2,241,349) (3,494,920)
Payment of deferred expenses (221,925) (146,591)
-------------- ------------ ------------
Net cash used in financing
activities (30,485,150) (19,043,486) (57,378,531)
-------------- ------------ ------------
Net change in cash and
cash equivalents 1,634,678 (7,578,322) (1,235,614)
Cash and cash equivalents at
beginning of period 16,045,584 23,623,906 24,859,520
-------------- ------------ ------------
Cash and cash equivalents
at end of period $ 17,680,262 $ 16,045,584 $ 23,623,906
============== ============= =============
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. Nature of Partnership's Business:
Balcor Pension Investors-V (the "Partnership") is engaged principally in the
operation of residential and commercial real estate located in various markets
within the United States and to a lesser extent, investment in wrap-around and
first mortgage loans.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) 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 obligations. The underlying
mortgage obligations 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 lenders only to the extent that payments as required by the
wrap-around mortgage agreement are received by the Partnership from the
borrower.
(c) 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 held for sale is reflected in the
accompanying Statements of Income and Expenses net of related direct operating
expenses.
(d) Loan losses on mortgage notes receivable are charged to income and an
allowance account is established when the General Partner believes the loan
balance will not be recovered. The General Partner assesses the collectibility
of each loan on a periodic basis through a review of the collateral property
operations, the property value and the borrower's ability to repay the loan.
Upon foreclosure, the loan net of the allowance is transferred to real estate
held for sale after the fair value of the property, less costs of disposal is
<PAGE>
assessed. Upon the transfer to real estate held for sale, a new basis in the
property is established.
Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121,
the Partnership records its investments in real estate at the lower of cost or
fair value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties by dividing the property's
expected net operating income by a risk adjusted rate of return
or by applying a discounted cash flow analysis both of which consider
economic and demographic conditions in the market. Changes in the property's
fair value are recorded by an adjustment to the property allowance account and
is recognized in the income statement as an increase or decrease through
recovery income or a provision for loss in the period the change in fair value
is determined. The General Partner considers the methods referred to above
to result in a reasonable measurement of a property's fair value, unless
other factors affecting the property's value indicate otherwise.
(e) 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.
(f) Investment in the acquisition loan represents a first mortgage loan which,
because the loan agreement includes 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 funding) 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
25.00% and 21.74% 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) Deferred expenses consist of loan application and processing fees and
mortgage brokerage fees which were amortized over the terms of the respective
agreements, and leasing commissions which are amortized over the life of each
respective lease.
(i) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
<PAGE>
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
from operating costs such as real estate taxes maintenance and insurance and is
recognized as revenue in the period the applicable costs are incurred.
(j) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(k) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash equivalents
are held or invested in primarily two issuers of commercial paper.
(l) 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.
(m) Several reclassifications have been made to the previously reported 1994
and 1993 financial statements to conform with the classification used in 1995.
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has also been made
to the previously reported 1994 and 1993 financial statements to conform with
the classification used in 1995. These reclassifications have not changed the
1994 and 1993 results.
3. 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
<PAGE>
return of their Original Capital plus a specified Cumulative Return based on
the date of investment.
At the sole discretion of the General Partner and subject to certain
limitations as set forth in the Partnership Agreement, amounts placed in the
Fund are available to repurchase Interests from existing Limited Partners.
During 1995, the Fund repurchased 5,953 Interests at a total cost of
$1,690,950. All repurchases of Interests have been made at 90% of the then
current valuation of such Limited Partnership Interests at the previous quarter
end less any distributions made after the previous quarter end. 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.
4. Investment in Loans Receivable:
Loans receivable and loans payable at December 31, 1995 consisted of the
following:
Loans Receivable
----------------------------------------------------------
Current Current Original Final
Mortgage Monthly Interest Funding MaturityAdditional
Property Balances(A) Payments Rate Date Date Interest
- -------------- ----------- -------- -------- -------- ------------------
First and Wrap-around
Mortgages:
Apartments:
Glen $5,253,261 $42,281 10.25% 1986 1997 (B,C)
Meadow Run 6,015,968 43,063 13.25% 1984 1996 (B,C)
Seven Trails West 15,152,768 122,750 11.00% 1984 1996 (B,D)
-----------
Subtotal 26,421,997
Acquisition Loan:
Noland Fashion
Square Shopping
Center (E) 8,517,335 74,061 9.75% 1989 1999 (C)
-----------
Total $34,939,332
===========
(A) All loans are first mortgage loans except for The Glen Apartments which is
a wrap-around mortgage loan. The note receivable balance of this wrap-around
mortgage loan includes the underlying loan balance. The Glen Apartments
underlying mortgage loan has a Balance of $2,539,832 at December 31, 1995. The
loan bears interest at 7.5% and requires current monthly payments of principal
and interest of $19,235. The loan matures in 1997.
(B) An additional amount of interest accrues on a monthly basis and will be
payable to the Partnership upon maturity of the loan, prepayment or upon sale
of the property. This interest is included in the loan balance.
(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.
<PAGE>
(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. The Seven Trails West Apartments
loan matured in February 1996. The Partnership extended the loan until April 1,
1996 to allow the borrower additional time to secure alternate financing.
(E) 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 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 are classified as non-accrual as a result of delinquency or other
noncompliance with terms of loan agreements; such loans aggregated $15,152,768
and $22,226,452 at December 31, 1995 and 1994, respectively.
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 $3,040,000 in 1995, $2,906,000 in 1994 and $3,703,000 in 1993.
Net interest income from impaired loans included in the accompanying Statements
of Income and Expenses amounted to $2,227,000 (cash basis and accrual basis) in
1995, $1,826,000 (cash basis and accrual basis) in 1994 and $2,204,000 in 1993.
Interest income on the Fairview Plaza I and II wrap-around mortgage loan, which
was repaid in December 1995, was recognized using an effective interest rate
equal to the discount rate which equates the present value of the future cash
receipts specified by the new loan terms with the recorded investment in the
receivable.
Impaired loans totaled $15,152,768 and $22,226,452 at December 31, 1995 and
1994, respectively. The impaired loan of $15,152,768 had a related allowance
for losses of $2,478,000 in 1995. Impaired loans of $22,226,452 had no
allowances for losses in 1994.
The average recorded investments in impaired loans during the years ended
December 31, 1995 and December 31, 1994 were approximately $18,689,610 and
$27,233,000, respectively.
5. 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, 1995 is described in the
table below:
1995 1994 1993
----------- ----------- -----------
Loans:
Balance at beginning
of year $ 5,957,614 $ 5,957,614 $ 6,391,000
Provision charged to
income 300,000 None 700,000
Direct write-off
of loans against
allowance (397,881) None (1,133,386)
----------- ----------- ----------
<PAGE>
Balance at the end of
the year $ 5,859,733 $ 5,957,614 $ 5,957,614
=========== =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $ 6,055,000 $ 6,055,000 None
Recovery charged to
income (1,600,000) None None
Provision charged to
income 817,110 None $ 6,055,000
Direct write-off
of real estate
held for sale
against allowance (317,110) None None
----------- ----------- ------------
Balance at the end of
the year $ 4,955,000 $ 6,055,000 $ 6,055,000
=========== =========== ===========
6. Mortgage Notes Payable:
During February 1994 the Partnership prepaid the underlying first mortgage on
The Glades on Ulmerton Apartments of $2,241,349. During the years ended
December 31, 1994 and 1993, the Partnership incurred and paid interest expense
on mortgage notes payable for properties held during the year of $34,585 and
$275,882.
7. 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. These acquisitions represent noncash transactions to the
Partnership, with the exception of costs incurred of $344,577 in 1993.
Accordingly, the noncash aspects of these acquisitions are not presented in the
Partnership's Statements of Cash Flow. The Partnership recorded the costs of
the properties at $9,382,780 and $12,994,863 in 1994 and 1993, 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
$115,493 and $56,706 in 1994 and 1993, 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.
8. Investment in Joint Ventures - Affiliates:
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
<PAGE>
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 as it was the General Partner's opinion that the
borrower had effectively surrendered control of the property. In 1993, the
Partnership recognized a loss of $500,000 representing its share of the decline
in the fair value of the property. In addition, during 1995, the Partnership
recognized $537,630, its share of the provision related to the change in the
estimate of the fair value of the property.
These amounts are included in the Partnership's participation in income (loss)
of joint ventures with affiliates. During 1995, 1994, and 1993 the Partnership
received distributions from these joint ventures totaling $398,620, $590,827,
and $757,990, respectively, and made contributions of $204,116 and $5,625, in
1995 and 1993, respectively.
9. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $91,569 $ 5,481 $131,305 $10,930 $153,658 $10,951
Property management fees None None 460,824 None 361,175 39,167
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 82,348 9,881 84,961 38,028 75,896 6,300
Data processing 49,177 4,775 87,782 20,653 150,141 41,698
Investor communica-
tions 11,014 0 36,782 10,098 11,381 945
Legal 24,592 3,681 9,688 8,403 12,197 1,012
Portfolio management 154,618 25,969 100,599 42,147 104,608 33,724
Other 6,028 62 27,070 6,284 35,224 2,924
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; however, the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $63,806, $126,944, and $60,977 for 1995, 1994 and 1993,
respectively.
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.
10. Management Agreements:
As of December 31, 1995, all of the properties owned by the Partnership are
under management agreements with third-party management companies. These
management agreements provide for annual fees of 5% of gross operating receipts
<PAGE>
for the residential properties, and 3% to 6% of gross operating receipts for
commercial properties.
11. Sale of Real Estate:
In March 1995, the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208, net of a $379,792 credit against the sale price for tenant
improvements to be completed by the purchaser. The carrying value of the
property was $2,711,823. From the proceeds of the sale, the Partnership paid
$147,500 to an unaffiliated party as a sales commission and $27,995 in other
closing costs. The Partnership recognized a loss of $317,110 on disposition.
12. 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. It is not determinable at this time whether or not
an unfavorable decision in this action would have a material adverse impact on
the Partnership. Management of each of the defendants believes they have
meritorious defenses to contest the claims.
13. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts and accrued interest payable approximates fair value.
Loans receivable: The fair value of the Partnership's investment in the loans
receivable approximates the carrying value of $29,001,568.
Mortgage notes payable: The fair value for the Partnership's mortgage notes
payable approximates the carrying value.
The fair value for the Partnership's investments in loans receivable and
mortgage note payable was estimated using discounted cash flow analyses. The
discount rates were based upon rates at the end of 1995 comparable to those the
Partnership could receive or charge in the commercial real estate lending
market with terms and maturities comparable to the Partnership's loans
receivable and mortgage note it presently holds.
14. Subsequent Event:
In January 1996, the Partnership made a distribution of $2,196,525 ($5.00 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1995 from Cash Flow.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 17680
<SECURITIES> 0
<RECEIVABLES> 27038
<ALLOWANCES> 10815
<INVENTORY> 0
<CURRENT-ASSETS> 18444
<PP&E> 50018
<DEPRECIATION> 0
<TOTAL-ASSETS> 99680
<CURRENT-LIABILITIES> 1421
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 98259
<TOTAL-LIABILITY-AND-EQUITY> 99680
<SALES> 0
<TOTAL-REVENUES> 14775
<CGS> 0
<TOTAL-COSTS> 282
<OTHER-EXPENSES> 1231
<LOSS-PROVISION> 1117
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12145
<INCOME-TAX> 0
<INCOME-CONTINUING> 12145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12145
<EPS-PRIMARY> 24.88
<EPS-DILUTED> 24.88
</TABLE>
