SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13348
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BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3314331
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 17,814,317 $ 17,106,496
Accounts and accrued interest receivable 881,860 762,066
Prepaid expenses, principally
real estate taxes 302,432 81,915
Deferred expenses, net of accumulated
amortization of $798,420 in 1995
and $743,106 in 1994 702,891 758,205
Investment in joint venture with an affiliate 1,515,309 1,482,721
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21,216,809 20,191,403
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Investment in loan receivable 7,540,986 7,540,986
Loan application and processing fees,
net of accumulated amortization of
$218,395 in 1995 and $211,843 in 1994 43,680 50,232
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7,584,666 7,591,218
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Investment in real estate:
Land 26,808,775 26,808,775
Buildings and improvements 108,250,048 108,250,048
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135,058,823 135,058,823
Less accumulated depreciation 39,976,116 39,168,092
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Investment in real estate, net of
accumulated depreciation 95,082,707 95,890,731
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$ 123,884,182 $ 123,673,352
============================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 338,052 $ 374,107
Due to affiliates 175,469 124,539
Accrued liabilities, principally
real estate taxes 306,896 415,971
Security deposits 427,994 434,623
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Total liabilities 1,248,411 1,349,240
Affiliates' participation in joint ventures 17,734,233 17,430,588
Partners' capital (939,587 Limited Partnership
Interests issued and outstanding) 104,901,538 104,893,524
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$ 123,884,182 $ 123,673,352
============================
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental income $ 4,357,498 $ 4,326,458
Service income 464,145 427,391
Interest on short-term investments 267,584 142,886
Interest on loan receivable - first
mortgage, net of amortization of
$6,552 in 1995 and 1994 152,965 152,965
Participation in income (loss) of joint
venture with an affiliate 32,588 (21,330)
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Total income 5,274,780 5,028,370
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Expenses:
Depreciation 808,024 799,880
Amortization of deferred expenses 55,314 55,644
Property operating 1,423,065 1,590,506
Real estate taxes 537,322 287,181
Property management fees 167,623 185,938
Administrative 219,456 219,511
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Total expenses 3,210,804 3,138,660
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Income before affiliates' participation
in joint ventures 2,063,976 1,889,710
Affiliates' participation in income
from joint ventures (303,645) (371,264)
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Net income $ 1,760,331 $ 1,518,446
============================
Net income allocated to General Partner $ 240,419 $ 219,091
============================
Net income allocated to Limited Partners $ 1,519,912 $ 1,299,355
============================
Net income per Limited Partnership Interest
(939,587 issued and outstanding) $ 1.62 $ 1.38
============================
Distribution to General Partner $ 175,232 $ 175,232
============================
Distribution to Limited Partners $ 1,577,085 $ 1,577,085
============================
Distribution per Limited Partnership Interest:
Taxable $ 1.30 $ 1.30
============================
Tax-exempt $ 1.73 $ 1.73
============================
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,760,331 $ 1,518,446
Adjustments to reconcile net income to net
cash provided by operating activities:
Affiliates' participation in income
from joint ventures 303,645 371,264
Participation in (income) loss of
joint venture with an affiliate (32,588) 21,330
Depreciation of properties 808,024 799,880
Amortization of deferred expenses 55,314 55,644
Amortization of loan application and
processing fees 6,552 6,552
Net change in:
Accounts and accrued interest
receivable (119,794) 327,211
Prepaid expenses (220,517) (191,891)
Accounts payable (36,055) (547,835)
Due to affiliates 50,930 140,969
Accrued liabilities (109,075) (38,239)
Security deposits (6,629) 1,612
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Net cash provided by operating activities 2,460,138 2,464,943
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Investing activity:
Payment of deferred expenses (55,165)
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Cash used in investing activity (55,165)
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Financing activities:
Distribution to Limited Partners (1,577,085) (1,577,085)
Distribution to General Partner (175,232) (175,232)
Distribution to joint venture
partners - affiliates (304,950)
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Cash used in financing activities (1,752,317) (2,057,267)
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Net change in cash and cash equivalents 707,821 352,511
Cash and cash equivalents at
beginning of period 17,106,496 17,153,575
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Cash and cash equivalents at end of period $ 17,814,317 $ 17,506,086
============================
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
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 financial statements to conform with the
classification used in 1995. This reclassification has not changed the 1994
results. 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, 1995, 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 during the
quarter ended March 31, 1995 are:
Paid Payable
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Mortgage servicing fees $ 5,697 $ 1,899
Reimbursement of expenses to
the General Partner, at cost None 173,570
3. Subsequent Event:
In April 1995, the Partnership made a distribution of $1,577,085 ($1.30 per
Taxable Interest and $1.73 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the first quarter of 1995.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Pension Investors-II A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1984 to make first mortgage
loans and to invest in and operate income-producing real property. The
Partnership raised $234,896,750 through the sale of Limited Partnership
Interests and utilized these proceeds to fund seven loans and acquire five real
property investments and a minority joint venture interest in one additional
real property. From 1987 through 1993, the Partnership acquired three
properties through foreclosure on loans and accepted prepayments on three
additional loans. As of March 31, 1995, the Partnership has one loan
outstanding and operates eight properties and its minority joint venture
interest.
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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership's net income increased during the quarter ended March 31, 1995
as compared to the same period in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
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Higher interest rates resulted in an increase in interest income on short-term
investments during the quarter ended March 31, 1995 when compared to the same
period in 1994.
Participation in income/loss of joint venture with an affiliate reflects the
Partnership's share of property operations at the Pacific Center Office
Buildings. Due to a decrease in expenses associated with lower leasing
activity, and lower utility costs, income was generated at this property during
the first quarter of 1995 resulting in participation in income of joint venture
with an affiliate during the quarter ended March 31, 1995 as compared to
participation in loss during the same period in 1994.
As a result of a decrease in expenses associated with lower leasing activity at
the 100 Ashford Center, Ammendale - Phase I and Westech 360 office buildings,
property operating expense decreased during the quarter ended March 31, 1995 as
compared to the same period in 1994. This decrease was partially offset by
higher expenses associated with leasing activity at the 1275 K Street Office
Building and the Ross Plaza Shopping Center.
<PAGE>
A refund of 1992 taxes was received in the first quarter of 1994 from the local
taxing authority for the 1275 K Street Office Building due to a decrease in the
assessed tax value of this property. This refund caused an increase in real
estate tax expense during the quarter ended March 31, 1995 as compared to the
same period in 1994.
The Westech 360 and 1275 K Street office buildings are owned through joint
ventures with affiliates. Primarily as a result of the refund of real estate
taxes at the 1275 K Street office building in the first quarter of 1994, the
affiliates' income participation decreased during the quarter ended March 31,
1995 as compared to the same period in 1994.
Liquidity and Capital Resources
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The cash position of the Partnership increased at March 31, 1995 as compared to
December 31, 1994.The cash flow provided by the Partnership's operating
activities includes cash flow from the operations of the properties, mortgage
payments received on the loan and interest income on short-term investments,
which are partially offset by the payment of administrative expenses. Financing
activities consisted of the quarterly distributions to the partners. The
Partnership is retaining cash reserves in anticipation of future leasing costs
at several of the Partnership's commercial properties.
During the quarters ended March 31, 1995 and 1994, all of the Partnership's
properties, except the Pacific Center Office Buildings (in which the
Partnership holds a minority joint venture interest), generated positive cash
flow. The Pacific Center Office Buildings, which generated positive cash flow
during the first quarter of 1995, generated a marginal cash flow deficit during
the first quarter of 1994. The improvement is due to expenses incurred during
the first quarter of 1994 related to leasing activity and lower utility costs.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures. As
of March 31, 1995, occupancy rates of the Partnership's commercial properties
ranged from 92% to 100%, except for the Bingham Farms - Phase V Office Building
which was 74% occupied. The low occupancy at Bingham Farms - Phase V Office
Building is a result of the relocation of a major tenant during the third
quarter of 1994. The Partnership is currently working to re-lease this space.
The occupancy rate of Spalding Bridge Apartments was 96%. 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.
<PAGE>
In April 1995, the Partnership paid $1,577,085 ($1.30 per Taxable Interest and
$1.73 per Tax-exempt Interest) to Limited Partners representing the quarterly
distribution for the first quarter of 1995. The level of this distribution was
consistent with the amount distributed to Limited Partners for the previous
quarter. In addition, during April 1995, the Partnership paid $131,424 to the
General Partner, representing its quarterly distribution for the first quarter
of 1995 and made a contribution of $43,808 to the Repurchase Fund. To date,
including the April 1995 distribution, Limited Partners have received
distributions aggregating approximately $101 per $250 Taxable Interest, of
which $75 represents Net Cash Receipts and $26 represents Net Cash Proceeds,
and $126 per $250 Tax-exempt Interest, of which $100 represents Net Cash
Receipts and $26 represents Net Cash Proceeds. The General Partner expects that
the cash flow from property operations and debt service payments on the funded
mortgage loan should enable the Partnership to continue making quarterly
distributions to Limited Partners. However, the level of future distributions
will be dependent on the amount of cash flow generated from property operations
and the receipts from the mortgage loan, as to which there can be no
assurances.
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 EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Forms of Subscription Agreements, previously filed as Exhibits 4.1.1 and
4.1.2 to Amendment No. 2 dated September 20, 1984 to the Registrant's
Registration Statement (Registration No. 2-91810) and to Amendment No. 1 dated
January 25, 1985 to the Registrant's Registration Statement (Registration No.
2-95409) and Form of Confirmation regarding Interests in the Registrant set
forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter
ended June 30, 1992 (Commission File No. 0-13348) are incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1995.
<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 EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Equity Partners-II, the General Partner
By: /s/ Brian Parker
------------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners-II, the
General Partner
Date: May 11, 1995
-------------------------------
<PAGE>
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<PERIOD-END> MAR-31-1995
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<OTHER-SE> 104902
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