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 June 30, 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
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3314331
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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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
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------- --------------
Cash and cash equivalents $ 17,637,537 $ 17,106,496
Accounts and accrued interest receivable 819,686 762,066
Prepaid expenses 300,092 81,915
Deferred expenses, net of accumulated
amortization of $858,231 in 1995
and $743,106in 1994 808,354 758,205
Investment in joint venture with an affiliate 1,459,079 1,482,721
------------- --------------
21,024,748 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
$224,948 in 1995 and $211,843 in 1994 37,127 50,232
------------- --------------
7,578,113 7,591,218
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Investment in real estate:
Land 26,808,775 26,808,775
Buildings and improvements 108,445,691 108,250,048
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135,254,466 135,058,823
Less accumulated depreciation 40,784,510 39,168,092
------------- --------------
Investment in real estate, net of
accumulated depreciation 94,469,956 95,890,731
------------- --------------
$123,072,817 $ 123,673,352
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 190,919 $ 374,107
Due to affiliates 15,897 124,539
Accrued liabilities, principally
real estate taxes 365,239 415,971
Security deposits 462,234 434,623
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Total liabilities 1,034,289 1,349,240
Affiliates' participation in joint ventures 17,368,650 17,430,588
Partners' capital (939,587 Limited Partnership
Interests issued and outstanding) 104,669,878 104,893,524
------------- --------------
$123,072,817 $ 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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental income $ 8,865,105 $ 8,814,817
Service income 1,031,403 1,104,889
Interest on short-term investments 534,317 322,397
Interest on loan receivable - first
mortgage, net of amortization of
$13,105 in 1995 and 1994 305,930 305,930
Participation in income (loss) of joint
venture with an affiliate 54,201 (4,509)
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Total income 10,790,956 10,543,524
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Expenses:
Depreciation 1,616,418 1,599,229
Amortization of deferred expenses 115,125 112,799
Property operating 3,177,815 3,292,512
Real estate taxes 1,073,519 791,203
Property management fees 346,929 366,217
Administrative 500,836 488,890
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Total expenses 6,830,642 6,650,850
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Income before affiliates' participation
in joint ventures 3,960,314 3,892,674
Affiliates' participation in income
from joint ventures (679,326) (644,472)
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Net income $ 3,280,988 $ 3,248,202
============= =============
Net income allocated to General Partner $ 463,507 $ 459,073
============= =============
Net income allocated to Limited Partners $ 2,817,481 $ 2,789,129
============= =============
Net income per Limited Partnership Interest
(939,587 issued and outstanding) $ 3.00 $ 2.97
============= =============
Distributions to General Partner $ 350,464 $ 350,464
============= =============
Distributions to Limited Partners $ 3,154,170 $ 3,154,170
============= =============
Distributions per Limited Partnership
Interest:
Taxable $ 2.60 $ 2.60
============= =============
Tax-exempt $ 3.46 $ 3.46
============= =============
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 June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental income $ 4,507,607 $ 4,488,359
Service income 567,258 677,498
Interest on short-term investments 266,733 179,511
Interest on loan receivable - first
mortgage, net of amortization of
$6,553 in 1995 and 1994 152,965 152,965
Participation in income of joint
venture with an affiliate 21,613 16,821
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Total income 5,516,176 5,515,154
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Expenses:
Depreciation 808,394 799,349
Amortization of deferred expenses 59,811 57,155
Property operating 1,754,750 1,702,006
Real estate taxes 536,197 504,022
Property management fees 179,306 180,279
Administrative 281,380 269,379
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Total expenses 3,619,838 3,512,190
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Income before affiliates' participation
in joint ventures 1,896,338 2,002,964
Affiliates' participation in income
from joint ventures (375,681) (273,208)
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Net income $ 1,520,657 $ 1,729,756
============= =============
Net income allocated to General Partner $ 223,088 $ 239,982
============= =============
Net income allocated to Limited Partners $ 1,297,569 $ 1,489,774
============= =============
Net income per Limited Partnership Interest
(939,587 issued and outstanding) $ 1.38 $ 1.59
============= =============
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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 3,280,988 $ 3,248,202
Adjustments to reconcile net income to net
cash provided by operating activities:
Affiliates' participation in income
from joint ventures 679,326 644,472
Participation in (income) loss of joint
venture with an affiliate (54,201) 4,509
Depreciation of properties 1,616,418 1,599,229
Amortization of deferred expenses 115,125 112,799
Amortization of loan application and
processing fees 13,105 13,105
Net change in:
Accounts and accrued interest
receivable (57,620) 43,914
Prepaid expenses (218,177) 91,177
Accounts payable (183,188) (548,045)
Due to affiliates (108,642) 223,779
Accrued liabilities (50,732) (8,636)
Security deposits 27,611 32,545
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Net cash provided by operating activities 5,060,013 5,457,050
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Investing activities:
Capital contributions to joint venture
with an affiliate (45,065)
Distributions from joint venture
with an affiliate 77,843
Improvements and additions to properties (195,643) (155,297)
Payment of deferred expenses (165,274) (256,617)
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Net cash used in investing activities (283,074) (456,979)
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Financing activities:
Distributions to Limited Partners (3,154,170) (3,154,170)
Distributions to General Partner (350,464) (350,464)
Distributions to joint venture
partners - affiliates (741,264) (1,088,577)
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Cash used in financing activities (4,245,898) (4,593,211)
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Net change in cash and cash equivalents 531,041 406,860
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 $ 17,637,537 $ 17,560,435
============= =============
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 six months
and quarter ended June 30, 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
six months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Mortgage servicing fees $ 11,394 $ 5,697 $ 1,899
Reimbursement of expenses to
the General Partner, at cost 243,320 243,320 13,998
3. Subsequent Event:
In July 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 second 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 June 30, 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
---------------------
There were no events which significantly affected the Partnership during the
six months ended June 30, 1995. A detailed discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
---------------------
Primarily as a result of lower occupancy at the Ross Plaza shopping center and
the Westech 360 office building, service income decreased during the six months
and quarter ended June 30, 1995 as compared to the same periods in 1994.
Higher interest rates resulted in an increase in interest income on short-term
investments during the six months and quarter ended June 30, 1995 when compared
to the same periods 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, there was participation in income of joint venture with an affiliate
during the six months ended June 30, 1995 as compared to participation in loss
during the same period in 1994 and there was a higher participation in income
of joint venture with an affiliate during the quarter ended June 30, 1995 as
compared to the same period in 1994.
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 six months ended June 30, 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 higher rental income caused
by higher rental rates and higher occupancy at the 1275 K Street office
building, the affiliates' participation in income of joint ventures increased
during the quarter ended June 30, 1995 as compared to the same period in 1994.
The increase for the six months ended June 30, 1995 as compared to the same
period in 1994 was partially offset by the 1994 refund of real estate taxes for
the 1275 K Street office building, as mentioned above.
Liquidity and Capital Resources
------------------------------
The cash position of the Partnership increased at June 30, 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 were partially offset by the payment of administrative expenses.
Investing activities consisted of the Partnership's share of operations from
Pacific Center (which is owned through a joint venture with an affiliate), and
improvements and leasing commissions at certain of the Partnership's
properties. Financing activities consisted of the quarterly distri- butions to
the Limited and General Partners and to the affiliated joint venture partners.
The Partnership is retaining cash reserves in anticipation of future leasing
costs at several of the Partnership's commercial properties.
During the six months ended June 30, 1995 and 1994, all of the Partnership's
properties, including the Pacific Center Office Buildings, generated positive
cash flow. 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 June 30, 1995, occupancy rates at the Partnership's
commercial properties ranged from 87% to 100%, except for the Ammendale
Technology Park - Phase I office building, which was 78% occupied. The
occupancy at this property has declined as certain leases have recently
expired. The Partnership is currently working to re-lease this space. The
occupancy rate of Spalding Bridge Apartments was 98%. 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.
In July 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 second quarter of 1995. The level of this distribution was
consistent with the amount distributed to Limited Partners for the previous
quarter. In addition, during July 1995, the Partnership paid $131,424 to the
General Partner, representing its quarterly distribution for the second quarter
of 1995 and made a contribution of $43,808 to the Repurchase Fund. To date,
including the July 1995 distribution, Limited Partners have received
distributions aggregating approximately $102 per $250 Taxable Interest, of
which $76 represents Net Cash Receipts and $26 represents Net Cash Proceeds,
and $128 per $250 Tax-exempt Interest, of which $102 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
<PAGE>
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.
During the first six months of 1995, the General Partner, on behalf of the
Partnership, used amounts placed in the Repurchase Fund to repurchase 705
Interests from Limited Partners at a cost of $89,101.
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
-----------------------------------------
(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 six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 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 D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners-II, the
General Partner
Date: August 14, 1995
-------------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 17638
<SECURITIES> 0
<RECEIVABLES> 8398
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18757
<PP&E> 135254
<DEPRECIATION> 40785
<TOTAL-ASSETS> 123073
<CURRENT-LIABILITIES> 1034
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 104670
<TOTAL-LIABILITY-AND-EQUITY> 123073
<SALES> 0
<TOTAL-REVENUES> 10111
<CGS> 0
<TOTAL-COSTS> 4598
<OTHER-EXPENSES> 2232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3281
<INCOME-TAX> 0
<INCOME-CONTINUING> 3281
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<NET-INCOME> 3281
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