SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
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
--------------
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
----- -----
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
-------------- ---------------
Cash and cash equivalents $ 17,473,371 $ 17,680,262
Escrow deposits - restricted 150,276 42,103
Accounts and accrued interest receivable 878,172 576,378
Prepaid expenses 35,978 145,027
Deferred expenses, net of accumulated
amortization of $271,279 in 1996 and
$261,244 in 1995 139,869 149,904
-------------- ---------------
18,677,666 18,593,674
-------------- ---------------
Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 26,421,997 26,421,997
Investment in acquisition loan 8,419,796 8,439,304
Less:
Loans payable - underlying mortgages 2,529,687 2,539,832
Allowance for potential loan losses 5,859,733 5,859,733
-------------- ---------------
Net investment in loans receivable 26,452,373 26,461,736
Real estate held for sale (net of
allowance of $4,955,000 in
1996 and 1995) 50,018,118 50,018,118
Investment in joint ventures - affiliates 4,549,931 4,606,036
-------------- ---------------
81,020,422 81,085,890
-------------- ---------------
$ 99,698,088 $ 99,679,564
============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 170,892 $ 265,469
Due to affiliates 68,749 49,849
Other liabilities, principally escrow
deposits and accrued real estate taxes 654,468 611,875
Security deposits 491,563 493,733
-------------- ---------------
Total liabilities 1,385,672 1,420,926
-------------- ---------------
Limited Partners' capital
(439,305 Interests issued
and outstanding) 102,359,191 102,310,790
General Partner's deficit (4,046,775) (4,052,152)
-------------- ---------------
Total partners' capital 98,312,416 98,258,638
-------------- ---------------
$ 99,698,088 $ 99,679,564
============== ===============
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 quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
-------------- ---------------
Income:
Interest on loans receivable and
investment in acquisition loan $ 1,043,529 $ 1,590,255
Less interest on loans payable -
underlying mortgages 50,699 84,251
-------------- ---------------
Net interest income on loans receivable 992,830 1,506,004
Income from operations of real estate
held for sale 1,351,784 1,385,176
Interest on short-term investments 243,266 425,804
Participation in income of
joint ventures-affiliates 104,879 62,223
-------------- ---------------
Total income 2,692,759 3,379,207
-------------- ---------------
Expenses:
Amortization of deferred expenses 10,035 155,486
Administrative 168,854 273,373
-------------- ---------------
Total expenses 178,889 428,859
-------------- ---------------
Income before equity in loss from
investment in acquisition loan 2,513,870 2,950,348
Equity in loss from investment
in acquisition loan (19,508) (17,426)
-------------- ---------------
Net income $ 2,494,362 $ 2,932,922
============== ===============
Net income allocated to General Partner $ 249,436 $ 293,292
============== ===============
Net income allocated to Limited Partners $ 2,244,926 $ 2,639,630
============== ===============
Net income per Limited Partnership
Interest (439,305 issued and outstanding) $ 5.11 $ 6.01
============== ===============
Distribution to General Partner $ 244,059 $ 195,247
============== ===============
Distribution to Limited Partners $ 2,196,525 $ 1,757,220
============== ===============
Distribution per Limited
Partnership Interest $ 5.00 $ 4.00
============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
-------------- ---------------
Operating activities:
Net income $ 2,494,362 $ 2,932,922
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss from investment
in acquisition loan 19,508 17,426
Participation in income of
joint ventures - affiliates (104,879) (62,223)
Amortization of deferred expenses 10,035 155,486
Accrued interest income due at maturity (253,587)
Net change in:
Escrow deposits - restricted (108,173) (120,294)
Accounts and accrued
interest receivable (301,794) (39,001)
Prepaid expenses 109,049
Accounts and accrued
interest payable (94,577) (18,053)
Due to affiliates 18,900 53,955
Other liabilities 42,593 3,919
Security deposits (2,170) 11,334
-------------- -------------
Net cash provided by operating activities 2,082,854 2,681,884
-------------- -------------
Investing activities:
Capital contributions to joint
ventures - affiliates (58,156)
Distributions from joint
ventures - affiliates 160,984
Collection of principal
payments on loans receivable 75,384
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 160,984 2,411,941
-------------- -------------
Financing activities:
Distribution to Limited Partners (2,196,525) (1,757,220)
Distribution to General Partner (244,059) (195,247)
Principal payments on loans payable
- underlying mortgages (10,145) (121,736)
-------------- -------------
Net cash used in financing activities (2,450,729) (2,074,203)
-------------- -------------
Net change in cash and cash equivalents (206,891) 3,019,622
Cash and cash equivalents at
beginning of period 17,680,262 16,045,584
-------------- -------------
Cash and cash equivalents at end of period $ 17,473,371 $ 19,065,206
============== ===============
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 Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1996, and all such adjustments are of a normal and recurring nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1996 are:
Paid Payable
-------- ---------
Mortgage servicing fees $15,118 $ 4,818
Reimbursement of expenses to
the General Partner, at cost 21,732 63,931
3. Subsequent Event:
In April 1996, the Partnership made a distribution of $6,492,928 ($14.78 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of Cash Flow of $5.00 per Interest for the first
quarter of 1996, and a special distribution from Mortgage Reductions of $9.78
per Interest from the 1995 Fairview Plaza I and II loan prepayment.
<PAGE>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-V (the "Partnership") is a limited partnership formed
in 1983 to invest in wrap-around mortgage loans and first mortgage loans and,
to a lesser extent, other junior mortgage loans. The Partnership raised
$219,652,500 from sales of Limited Partnership Interests and utilized these
proceeds to fund thirty-four loans. There are currently three loans outstanding
in the Partnership's portfolio, and the Partnership is operating eight
properties acquired through foreclosure and owns two investments in joint
ventures with affiliates. The Seven Trails West Apartments loan was repaid in
April 1996.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Partnership recognized a decrease in net interest income from loans
receivable due to the four loan repayments in 1995. As a result, net income
decreased during the quarter ended March 31, 1996 as compared to the same
period in 1995. Further discussion of the Partnership's operations is
summarized below.
1996 Compared to 1995
- ---------------------
Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
Net interest income on loans receivable decreased in 1996 as compared to 1995
due to the repayments of the Club Wildwood, Four Seasons and Point West mobile
home parks and Fairview Plaza I and II loans.
The Partnership had one loan on nonaccrual status which was collateralized by
the Seven Trails West Apartments at March 31, 1996. This loan was repaid in
April 1996. For nonaccrual loans, income is recorded only as cash payments are
received from the borrowers. Original funds advanced by the Partnership for
this nonaccrual loan total approximately $8,000,000. During 1996, the
Partnership received cash payments totaling approximately $539,000 of interest
income on this loan. Under the terms of the original loan agreement, the
Partnership would have received approximately $673,000 of interest income
during 1996.
Due to lower average cash balances resulting from the distribution of the
proceeds from the four loan repayments and the property sale in 1995, as well
as lower interest rates during 1996, interest income on short-term investments
decreased in 1996 as compared to 1995.
<PAGE>
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 participation in
income of joint venture with affiliates during 1996 as compared to a loss
during 1995 due to lower interior maintenance and repairs and legal expenses
during 1996.
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. The Partnership did not recognize any provisions during the
quarters ended March 31, 1996 and 1995 related to its loans receivable or real
estate held for sale.
As a result of the sale of the Comerica Office Building and the full
amortization of the related deferred expenses, amortization expense decreased
during 1996 as compared to 1995.
Decreases in legal and professional fees related to the 1995 foreclosures, as
well as mortgage servicing fees and accounting fees resulted in a decrease in
administrative expenses during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $207,000 as of
March 31, 1996 as compared to December 31, 1995. The Partnership's cash flow
provided by operating activities of approximately $2,083,000 was generated
primarily by net interest income from the Partnership's loans receivable and
cash flow from the operation of the Partnership's properties held for sale. The
Partnership's investing activities generated cash flow of approximately
$161,000 consisting of distributions from joint ventures-affiliates. Cash of
approximately $2,440,000 was used in financing activities consisting of
distributions to Limited Partners and the General Partner.
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 1996 and 1995, all of the Partnership's properties
generated positive cash flow. In addition, the Partnership holds minority joint
venture interests in two other properties. The Whispering Hills Apartments
generated positive cash flow during 1996 and 1995 and the 45 West 45th Street
Office Building generated positive cash flow during 1996 and a marginal deficit
during 1995. The improvement in the cash flow of this property was due to lower
property operating expenses. Significant leasing costs were incurred at the 45
West 45th Street Office Building in 1995. 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.
<PAGE>
As of December 31, 1995, the occupancy rates of the Partnership's residential
properties ranged from 96% to 100%, and the occupancy rates of the Harbor Bay
Office Building and the Union Tower Office Building were 86% and 97%,
respectively. 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.
As previously reported, the General Partner believes that the market for
multifamily housing properties has become increasingly favorable to sellers of
these properties. Currently, the Partnership is preparing to market the
residential properties in its portfolio for sale. The General Partner is
currently marketing the 45 West 45 Street Office Building in which the
Partnership holds a minority joint venture interest. Additionally, the General
Partner may explore the sale of its remaining commercial properties over the
next year if market conditions become favorable. The General Partner examines
each property individually by property type and market in determining the
optimal time to sell each property. In addition, the General Partner considers
capital factors and Partnership administrative costs as it pertains to
Partnership performance.
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.
The Partnership funded a loan collateralized by a wrap-around mortgage in the
amount of $14,700,000 on the Seven Trails Apartments which wrapped an
underlying first mortgage in the amount of $6,714,692 resulting in funds
advanced by the Partnership of $7,985,308. In March 1994, the underlying first
mortgage loan was purchased by the Partnership at face value for $4,689,871
which increased the funds advanced to $12,675,179.The wrap-around mortgage 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 loan
was repaid in full in April 1996. The Partnership received proceeds of
$16,473,402 consisting of funds advanced of $12,675,179, equity buildup related
to principal payments of $2,024,821 made by the Partnership on the underlying
loan and additional interest income of $1,773,402.
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.
<PAGE>
In April 1996, the Partnership paid a distribution of $6,492,928 ($14.78 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution of Cash Flow of $5.00 for the first quarter of
1996 and a special distribution from Mortgage Reductions of $9.78 per Interest
from the 1995 Fairview Plaza I and II loan prepayment. The level of the regular
quarterly Cash Flow distribution was consistent with the prior quarter.
Including the April 1996 distribution, Limited Partners have received cash
distributions totaling $537.53 per $500 Interest. Of this amount, $392.25 has
been Cash Flow from operations and $145.28 represents a return of Original
Capital. In April 1996, the Partnership also paid $183,044 to the General
Partner as its distributive share of Cash Flow for the first quarter of 1996
and made a contribution to the Early Investment Incentive Fund of $61,015.
The Partnership expects to continue making cash distributions. The level of
future distributions is dependent on cash flow from property operations and the
receipt of interest income from the acquisition loan less fees to the General
Partner and administrative expenses. The General Partner, on behalf of the
Partnership, has retained what it believes is an appropriate amount of working
capital to meet current cash or liquidity requirements which may occur.
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>
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
Paul Williams, et al. vs. Balcor Pension Investors, et al.
- ----------------------------------------------------------
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
Partnership, the General Partner, seven affiliated limited partnerships and
other affiliates are the defendants. In July 1994, the Court granted
plaintiffs' motion certifying a class relating to Federal securities fraud
claims. The Court approved the Notice of Class Action in August 1995 which was
sent to potential members of the class in September 1995. Settlement
discussions among the parties are currently on-going but no final settlement
has been reached. There can be no assurance, however, that such settlement
discussions will ultimately be successful.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
dated January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended September 31, 1992 (Commission File No. 0-13233) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1996 is attached hereto.
(b) Reports on form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-V
By: /s/Thomas E. Meador
----------------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-V, the General Partner
By: /s/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: May 15, 1996
------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 17473
<SECURITIES> 0
<RECEIVABLES> 26452
<ALLOWANCES> 10815
<INVENTORY> 0
<CURRENT-ASSETS> 18538
<PP&E> 50018
<DEPRECIATION> 0
<TOTAL-ASSETS> 99698
<CURRENT-LIABILITIES> 1386
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 98312
<TOTAL-LIABILITY-AND-EQUITY> 99698
<SALES> 0
<TOTAL-REVENUES> 2693
<CGS> 0
<TOTAL-COSTS> 20
<OTHER-EXPENSES> 179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2494
<INCOME-TAX> 0
<INCOME-CONTINUING> 2494
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2494
<EPS-PRIMARY> 5.11
<EPS-DILUTED> 5.11
</TABLE>
