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 September 30, 1997
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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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 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
September 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 25,597,221 $ 66,445,811
Accounts and accrued interest receivable 483,797 498,779
Prepaid expenses 139,249
Deferred expenses, net of accumulated
amortization of $336,570 in 1996 445,672
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26,081,018 67,529,511
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Investment in real estate:
Land 9,442,435
Buildings and improvements 44,700,462
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54,142,897
Less accumulated depreciation 18,141,065
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Investment in real estate, net of
accumulated depreciation 36,001,832
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$ 26,081,018 $ 103,531,343
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 46,783 $ 402,217
Due to affiliates 129,245 117,602
Security deposits 246,359
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Total liabilities 176,028 766,178
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Commitments and contingencies
Affiliates' participation in
joint ventures 1,688,317
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Limited Partners' capital (939,587
Interests issued and outstanding) 26,683,888 101,505,282
General Partner's deficit (778,898) (428,434)
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Total partners' capital 25,904,990 101,076,848
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$ 26,081,018 $ 103,531,343
============== ==============
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 nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Rental income $ 2,395,225 $ 14,453,352
Service income 391,515 1,490,164
Interest on short-term investments 732,572 867,598
Participation in income of joint venture
with an affiliate 93,398
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Total income 3,519,312 16,904,512
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Expenses:
Depreciation 731,235 2,445,941
Amortization of deferred expenses 582,238 187,577
Property operating 1,399,981 5,806,348
Real estate taxes 253,865 1,545,081
Property management fees 112,877 534,580
Administrative 470,567 844,161
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Total expenses 3,550,763 11,363,688
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(Loss) income before net gains on sales of
properties and affiliates' participation
in joint ventures (31,451) 5,540,824
Net gains on sales of properties 8,585,912 3,362,380
Affiliates' participation in income from
joint ventures (1,079,747)
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Net income $ 8,554,461 $ 7,823,457
============== ==============
Net income allocated to General Partner None $ 686,075
============== ==============
Net income allocated to Limited Partners $ 8,554,461 $ 7,137,382
============== ==============
Net income per Limited Partnership
Interest (939,587 issued and
outstanding) $ 9.10 $ 7.60
============== ==============
Distributions to General Partner $ 350,464 $ 1,051,391
============== ==============
Distributions to Limited Partners $ 83,375,855 $ 9,462,510
============== ==============
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
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Distributions per Limited
Partnership Interest:
Taxable $ 2.60 $ 7.80
============== ==============
Tax-exempt $ 100.46 $ 10.38
============== ==============
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 September 30, 1997 and 1996
(Unaudited)
1997 1996
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Income:
Rental income $ 187,885 $ 4,842,705
Service income 59,673 407,838
Interest on short-term investments 258,726 284,452
Participation in income of joint venture
with an affiliate 33,289
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Total income 506,284 5,568,284
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Expenses:
Depreciation 98,550 812,901
Amortization of deferred expenses 223,099 62,002
Property operating 174,805 1,977,247
Real estate taxes 17,255 515,422
Property management fees 15,026 171,699
Administrative 108,609 313,685
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Total expenses 637,344 3,852,956
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(Loss) income before gains on sales of
properties and affiliates' participation
in joint ventures (131,060) 1,715,328
Gains on sales of properties 1,915,889 3,362,380
Affiliates' participation in income from
joint ventures (385,207)
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Net income $ 1,784,829 $ 4,692,501
============== ==============
Net income allocated to General Partner None $ 236,507
============== ==============
Net income allocated to Limited Partners $ 1,784,829 $ 4,455,994
============== ==============
Net income per Limited Partnership
Interest (939,587 issued and
outstanding) $ 1.90 $ 4.75
============== ==============
Distribution to General Partner None $ 350,463
============== ==============
Distribution to Limited Partners None $ 3,154,170
============== ==============
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
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Distribution per Limited
Partnership Interest:
Taxable None $ 2.60
============== ==============
Tax-exempt None $ 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 CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
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Operating activities:
Net income $ 8,554,461 $ 7,823,457
Adjustments to reconcile net
income to net cash provided by
operating activities:
Net gains on sales of properties (8,585,912) (3,362,380)
Affiliates' participation in income
from joint ventures 1,079,747
Participation in income of joint
venture with an affiliate (93,398)
Depreciation of properties 731,235 2,445,941
Amortization of deferred expenses 582,238 187,577
Payment of leasing commissions (136,566) (213,924)
Net change in:
Accounts and accrued interest
receivable 14,982 (20,322)
Prepaid expenses 139,249 (345,837)
Accounts payable (355,434) 2,240
Due to affiliates 11,643 51,932
Accrued real estate taxes (14,963)
Security deposits (246,359) 852
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Net cash provided by operating
activities 709,537 7,540,922
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Investing activities:
Proceeds from sales of properties 45,731,500 9,872,500
Payment of selling costs (1,677,041) (267,092)
Capital contribution to joint venture
with an affiliate (45,552)
Distribution from joint venture with
an affiliate 62,651
Improvements and additions
to properties (197,950) (430,598)
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Net cash provided by investing
activities 43,856,509 9,191,909
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<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Financing activities:
Distributions to Limited Partners (83,375,855) (9,462,510)
Distributions to General Partner (350,464) (1,051,391)
Deemed distribution to Limited Partners (79,768)
Capital contribution from joint venture
partner - affiliate 39,705
Distributions to joint venture
partners - affiliates (1,728,022) (1,269,091)
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Net cash used in financing activites (85,414,636) (11,862,760)
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Net change in cash and cash equivalents (40,848,590) 4,870,071
Cash and cash equivalents at beginning
of period 66,445,811 24,596,293
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Cash and cash equivalents at
end of period $ 25,597,221 $ 29,466,364
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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 Policies:
(a) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General Partner
and Limited Partners to appropriately reflect their remaining economic
interests as provided for in the Partnership Agreement, the income allocations
between the partners have been adjusted for financial statement purposes in
1997.
(b) The Partnership has restated net income for the nine months and quarter
ended September 30, 1996 as a result of the state withholding taxes paid in
connection with the sale of the Spalding Bridge Apartments. Such amounts had
previously been recorded as an expense of sale. The state withholding taxes
are now reflected as a deemed distribution. Accordingly, there was no change to
partners' capital as a result of this restatement.
(c) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1997, and all such adjustments are of a normal
and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold four properties, including two
properties in which the Partnership owned a majority joint venture interest,
and the property in which the Partnership held a minority joint venture
interest. The majority of the proceeds from the sales of these properties were
distributed to Tax-exempt Limited Partners in October 1996 and January 1997.
During February 1997, the Partnership sold the Ammendale Technology Park -
Phase I and 100 Ashford Center North office buildings. The majority of the
proceeds from the sales of these properties were distributed to Tax-exempt
Limited Partners in April 1997. During July and August 1997, the Partnership
sold its remaining two properties, the Bingham Farms Office Plaza - Phase V and
the Ross Plaza Shopping Center, respectively. The majority of the proceeds from
the sales of these properties were distributed to Tax-exempt Limited Partners
in October 1997. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. The Partnership has retained a portion
of the cash to satisfy obligations of the Partnership, as well as establish a
reserve for contingencies. Such contingencies may include legal and other fees
and costs stemming from litigation involving the Partnership, including, but
not limited to, the lawsuits discussed in Note 6 of Notes to Financial
<PAGE>
Statements. In the absence of any contingency, the reserves will be paid within
twelve months of the last property being sold. In the event a contingency
continues to exist or arises, reserves may be held by the Partnership for a
longer period of time.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1997 are:
Paid
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Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $126,356 $49,399 $129,245
4. Property Sales:
(a) In February 1997, the Partnership sold the 100 Ashford Center North office
building in an all cash sale for $17,746,000. From the proceeds of the sale,
the Partnership paid $392,666 in selling costs. The basis of the property was
$10,604,363, which is net of accumulated depreciation of $4,755,475. For
financial statement purposes, the Partnership recognized a gain of $6,748,971
from the sale of the property.
(b) In February 1997, the Partnership sold the Ammendale Technology Park -
Phase I office building in an all cash sale for $7,732,000. From the proceeds
of the sale, the Partnership paid $420,013 in selling costs. The basis of the
property was $7,390,935, which is net of accumulated depreciation of $715,809.
For financial statement purposes, the Partnership recognized a loss of $78,948
from the sale of the property.
(c) In July 1997, the Partnership sold the Bingham Farms Office Plaza - Phase V
in an all cash sale for $11,200,000. From the proceeds of the sale, the
Partnership paid $350,025 in selling costs. The basis of the property was
$9,646,119, which is net of accumulated depreciation of $6,681,081. For
financial statement purposes, the Partnership recognized a gain of $1,203,856
from the sale of the property.
(d) In August 1997, the Partnership sold the Ross Plaza Shopping Center in an
all cash sale for $9,400,000. In connection with the sale, the purchaser
received a credit of $346,500 to remedy certain environmental issues at the
property. From the proceeds of the sale, the Partnership paid $514,337 in
selling costs. The basis of the property was $7,827,130, which is net of
accumulated depreciation of $6,719,935. For financial statement purposes, the
Partnership recognized a gain of $712,033 from the sale of the property.
5. Affiliates' Participation in Joint Ventures:
(a) The 1275 K Street office building was owned by a joint venture consisting
of the Partnership and an affiliate. During December 1996, the joint venture
<PAGE>
sold the property. Pursuant to the sale agreement, $2,287,500 of the sale
proceeds was retained by the Partnership and was unavailable for distribution
until September 1997, at which time the funds were released in full. The
affiliate's share of these proceeds was $903,105.
(b) The Westech 360 office building was owned by a joint venture consisting of
the Partnership and an affiliate. During December 1996, the joint venture sold
the property. Pursuant to the sale agreement, $1,395,000 of the sale proceeds
was retained by the Partnership and was unavailable for distribution until
September 1997, at which time the funds were released in full. The affiliate's
share of these proceeds was $604,035.
6. Contingencies:
(a) The Partnership is currently involved in a lawsuit whereby the Partnership,
the General Partner and certain third parties have been named as defendants
seeking damages relating to tender offers to purchase interests in the
Partnership and nine affiliated partnerships initiated by the third party
defendants in 1996. The defendants continue to vigorously contest this action.
The action has been dismissed with prejudice and plaintiffs have filed an
appeal. It is not determinable at this time whether or not an unfavorable
decision in this action would have a material adverse impact on the financial
position, operations and liquidity of the Partnership. The Partnership believes
it has meritorious defenses to contest the claims.
(b) 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, as well as the marketing efforts related
to, the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination 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 financial position,
operations and liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
7. Subsequent Event:
In October 1997, the Partnership made a distribution of $21,552,341 ($26.06 per
Tax-exempt Interest) to the holders of Tax-exempt Limited Partnership
Interests. This amount represents a special distribution of Net Cash Proceeds
from the 1997 sales of the Bingham Farms Office Plaza - Phase V and the Ross
Plaza Shopping Center, and the release of sale holdbacks from the 1996 sales of
the 1275 K Street and Westech 360 office buildings.
<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. Subsequently, the Partnership acquired three properties through
foreclosure on loans and accepted prepayments on four additional loans. During
1996, the Partnership sold four properties and the property in which the
Partnership held a minority joint venture interest. During February 1997, the
Partnership sold the 100 Ashford Center North and Ammendale Technology Park -
Phase I office buildings. In addition, the Partnership sold its remaining two
properties, the Bingham Farms Office Plaza - Phase V and the Ross Plaza
Shopping Center in July and August 1997, respectively. As of September 30,
1997, the Partnership has no loans outstanding or properties remaining in its
portfolio.
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 1996 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 recognized gains in connection with the sales of the 100
Ashford Center North office building, Bingham Farms Office Plaza - Phase V and
Ross Plaza Shopping Center in February, July and August 1997, respectively. The
Partnership also recognized a loss in connection with the sale of the Ammendale
Technology Park - Phase I in February 1997. The net gains from the sales of the
properties in 1997 were higher than the gain recognized in connection with the
sale of the Spalding Bridge Apartments in September 1996, which was the primary
reason for the increase in net income for the nine months ended September 30,
1997 as compared to the same period in 1996. In addition, the gain recognized
in connection with the sale of the Spalding Bridge Apartments in September 1996
was higher than the net gains recognized by the Partnership during the third
quarter of 1997, which is the primary reason for the decrease in net income
during the quarter ended September 30, 1997 as compared to the same period in
1996. The properties sold in 1996 and 1997 were generating income prior to
their sales. The decrease in income from property operations partially offset
the increase in net income during the nine months ended September 30, 1997 and
contributed to the decrease in net income for the quarter ended September 30,
1997 as compared to the same periods in 1996. Further discussion of the
Partnership's operations is summarized below.
<PAGE>
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to both the nine months and quarters ended September 30, 1997 and 1996.
The Partnership sold the Spalding Bridge Apartments and the 1275 K Street,
Denver Centerpoint, and Westech 360 office buildings during 1996. In addition,
the Partnership sold the Ammendale Technology Park - Phase I and 100 Ashford
Center North office buildings, the Bingham Farms Office Plaza - Phase V and the
Ross Plaza Shopping Center during 1997. As a result, rental income, service
income, depreciation, property operating expenses, real estate taxes and
property management fees decreased during 1997 as compared to 1996.
Higher average cash balances were available for investment in 1996 primarily
due to the proceeds received by the Partnership from the Colonial Coach and
Castlewood West loan prepayment and the sale of Spalding Bridge Apartments,
prior to distribution to Partners. This resulted in a decrease in interest
income on short-term investments during 1997 as compared to 1996. This
decrease was partially offset by the investment in 1997 of proceeds received
from the sale of the Partnership's properties during the fourth quarter of 1996
and in 1997, prior to distribution to Partners.
The Partnership participated in the operations of the Pacific Center office
building, in which it held a joint venture interest, prior to its sale in 1996.
As a result of the sale, the Partnership's participation in income of joint
venture with an affiliate ceased during 1996.
In connection with the 1997 sales of the Ammendale Technology Park - Phase I
and 100 Ashford Center North office buildings, the Bingham Farms Office Plaza -
Phase V and the Ross Plaza Shopping Center, the Partnership wrote off the
remaining unamortized leasing commissions related to the properties. As a
result, amortization of deferred expenses increased during 1997 as compared to
1996. This decrease was partially offset by the write-off in 1996 of the
remaining unamortized leasing commissions related to the properties sold by the
Partnership during 1996.
The Partnership incurred higher consulting, investor processing, legal, postage
and printing costs in connection with its response to a tender offer and
related litigation during 1996, which was the primary reason for the decrease
in administrative expenses during 1997 as compared to 1996.
The Partnership sold the Ammendale Technology Park - Phase I, 100 Ashford
Center North office building, Bingham Farms Office Plaza - Phase V and Ross
Plaza Shopping Center in 1997 and recognized a net gain on sales of properties
of $8,585,912. During 1996, the Partnership recognized a gain of $3,362,380 in
connection with the sale of the Spalding Bridge Apartments. See Note 4 of Notes
to Financial Statements for additional information.
The 1275 K Street and Westech 360 office buildings were owned through joint
ventures with affiliates. The affiliates participated in the operations of the
properties prior to their sales in 1996. As a result of the sales, affiliates'
participation in income from joint ventures ceased during 1996.
<PAGE>
Liquidity and Capital Resources
- ------------------------------
The cash position of the Partnership decreased by approximately $40,849,000 as
of September 30, 1997 when compared to December 31, 1996 primarily due to
special distributions made to Tax-exempt Limited Partners in January and April
1997 from proceeds received in connection with the December 1996 and February
1997 property sales, which was partially offset by the proceeds received from
the July and August 1997 sales. Cash flow of approximately $710,000 was
provided by the Partnership's operating activities consisting primarily of cash
flow from property operations and interest income on short-term investments,
which were partially offset by the payment of expenses on sold properties and
administrative expenses. Investing activities consisted of the net proceeds
received in connection with the 1997 sales of the 100 Ashford Center North and
Ammendale Technology Park - Phase I office buildings, the Bingham Farms Office
Plaza - Phase V and the Ross Plaza Shopping Center totaling approximately
$44,054,000, less improvements to the Ross Plaza Shopping Center of
approximately $198,000. Financing activities consisted of distributions to
Partners of approximately $83,726,000 and net distributions to joint venture
partners - affiliates of approximately $1,689,000. In October 1997, the
Partnership made a special distribution to Tax-exempt Limited Partners of
approximately $21,552,000 representing Net Cash Proceeds from the 1997 sales of
the Bingham Farms Office Plaza - Phase V and Ross Plaza Shopping Center, and
the release of sale holdbacks from the 1996 sales of the 1275 K Street and
Westech 360 office buildings.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurance of certain events, including the disposition of all interests
in real estate. The Partnership sold four properties and the property in
which the Partnership held a minority joint venture interest in 1996, and the
Partnership sold its remaining four properties in 1997, as discussed below.
The timing of the termination of the Partnership and final distribution of
cash will depend upon the nature and extent of liabilities and contingencies
which exist or may arise. The Partnership has retained a portion of the cash
to satisfy obligations of the Partnership as well as establish a reserve for
contingencies. Such contingencies may include legal and other fees and costs
stemming from litigation involving the Partnership including, but not limited
to, the lawsuits discussed in Note 6 of Notes to Financial Statements. In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency continues to exist or
arises, reserves may be held by the Partnership for a longer period of time.
In February 1997, the Partnership sold the 100 Ashford Center North office
building in an all cash sale for $17,746,000. From the proceeds of the sale,
the Partnership paid $392,666 in selling costs. Pursuant to the terms of the
sale, $1,100,000 of the proceeds will be retained by the Partnership until
November 1997. In accordance with the Partnership Agreement, the Partnership
distributed the remaining available proceeds to the Tax-exempt Limited Partners
in April 1997.
In February 1997, the Partnership sold the Ammendale Technology Park - Phase I
office building in an all cash sale for $7,732,000. From the proceeds of the
sale, the Partnership paid $420,013 in selling costs. Pursuant to the terms of
the sale, $229,096 of the proceeds will be held in escrow until November 1997.
In accordance with the Partnership Agreement, the Partnership distributed the
remaining available proceeds to the Tax-exempt Limited Partners in April 1997.
<PAGE>
In July 1997, the Partnership sold the Bingham Farms Office Plaza - Phase V in
an all cash sale for $11,200,000. From the proceeds of the sale, the
Partnership paid $350,025 in selling costs. In accordance with the Partnership
Agreement, the Partnership distributed the remaining available proceeds to the
Tax-exempt Limited Partners in October 1997.
In August 1997, the Partnership sold the Ross Plaza Shopping Center in an all
cash sale for $9,400,000. In connection with the sale, the purchaser received a
credit of $346,500 to remedy certain environmental issues at the property. From
the proceeds of the sale, the Partnership paid $514,337 in selling costs.
Pursuant to the sale agreement, $250,000 of the proceeds is being retained by
the Partnership, of which $150,000 is unavailable for distribution until
November 1997 and $100,000 is unavailable for distribution until the later of
February 1998 or the resolution of a dispute with a tenant at the property. In
accordance with the Partnership Agreement, the Partnership distributed the
remaining available proceeds to the Tax-exempt Limited Partners in October
1997.
The 1275 K Street office building was owned by a joint venture consisting of
the Partnership and an affiliate. During December 1996, the joint venture sold
the property. Pursuant to the sale agreement, $2,287,500 of the sale proceeds
was retained by the Partnership and was unavailable for distribution until
September 1997, at which time the funds were released in full. The
Partnership's share of these proceeds was $1,384,395, which were distributed to
Tax-exempt Limited Partners in October 1997.
The Westech 360 office building was owned by a joint venture consisting of the
Partnership and an affiliate. During December 1996, the joint venture sold the
property. Pursuant to the sale agreement, $1,395,000 of the sale proceeds was
retained by the Partnership and was unavailable for distribution until
September 1997, at which time the funds were released in full. The
Partnership's share of these proceeds was $790,965, which were distributed to
Tax-exempt Limited Partners in October 1997.
In October 1997, the Partnership made a special distribution of $21,552,341
($26.06 per Tax-exempt Interest) from Net Cash Proceeds pursuant to the
Partnership Agreement to Tax-exempt Limited Partners from the 1997 sales of the
Bingham Farms Office Plaza - Phase V and the Ross Plaza Shopping Center, and
the release of sale holdbacks from the 1996 sales of the 1275 K Street and
Westech 360 office buildings. To date, including the October 1997 distribution,
Limited Partners have received cash distributions aggregating approximately
$116.78 per $250 Taxable Interest, of which $90.95 represents Net Cash Receipts
and $25.83 represents Net Cash Proceeds, and $278.10 per $250 Tax-exempt
Interest, of which $121.03 represents Net Cash Receipts and $157.07 represents
Net Cash Proceeds. Taxable Limited Partners will not receive aggregate
distributions from the Partnership equal to their original investment. However,
Taxable Limited Partners will receive amounts allocated to the Repurchase Fund.
In accordance with the Partnership Agreement, Net Cash Proceeds from property
sales are being allocated to the Tax-exempt Limited Partners. Taxable and
Tax-exempt Limited Partners received quarterly distributions from Net Cash
Receipts. Since all of the Partnership's properties have been sold, the
<PAGE>
Partnership discontinued Net Cash Receipts distributions beginning with the
second quarter of 1997. Taxable and Tax-exempt Limited Partners are not
expected to receive further quarterly distributions.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
- -------------------------
Ross Plaza Shopping Center
- --------------------------
As previously reported, on July 30, 1997, the Partnership contracted to sell
the Ross Plaza Shopping Center, Federal Way, Washington, to an unaffiliated
party, The Fremont Group, LLC, a Connecticut limited liability company, for a
sale price of $10,250,000. The Partnership and the purchaser subsequently
agreed to reduce the sale price to $9,400,000. The purchaser assigned its
rights under the agreement of sale to an affiliate, JDI Tacoma Limited
Partnership, an Illinois limited partnership, and the sale closed on August 27,
1997. The purchaser received a $346,500 credit against the sale price to remedy
certain environmental issues at the property. From the proceeds of the sale,
the Partnership paid $235,000 as a brokerage commission to an affiliate of the
third party providing property management services for the property and
$279,337 in closing costs. The Partnership received the remaining $8,539,163 of
sale proceeds. Of such proceeds, $150,000 will be retained by the Partnership
and will not be available for use or distribution by the Partnership until 90
days after closing. An additional $100,000 of proceeds will be retained by the
Partnership and will not be available for use or distribution by the
Partnership until the later of 180 days after closing or the resolution of a
dispute with a tenant at the property as described in the agreement of sale.
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 Current Report on Form 10-Q for the
quarter ended September 30, 1992 (Commission File No. 0-13348), are
incorporated herein by reference.
(10) Material Contracts:
(i) Agreement of Sale and attachments thereto relating to the sale of the 1275
K Street office building, Washington, D.C., previously filed as Exhibit (2) to
the Registrant's Current Report on Form 8-K dated November 29, 1996, is
incorporated herein by reference.
<PAGE>
(ii)(a) Agreement of Sale and attachment thereto relating to the sale of the
100 Ashford Center North office building, Atlanta, Georgia, previously filed as
Exhibit (2) to the Registrant's Current Report on Form 8-K dated January 20,
1997, is incorporated herein by reference.
(ii)(b) Letter Agreement relating to the sale of the 100 Ashford Center North
office building, Atlanta, Georgia, previously filed as Exhibit (10)(ii)(b) to
the Registrant's Current Report on Form 10-K for the year ended December 31,
1996, is incorporated herein by reference.
(iii)(a) Agreement of Sale and attachment thereto relating to the sale of
Bingham Farms Office Plaza - Phase V, Bingham Farms, Michigan, previously filed
as Exhibit (10)(iv) to the Registrant's Current Report on Form 10-Q for the
quarter ended March 31, 1997, is hereby incorporated by reference.
(iii)(b) First Letter Amendment to Agreement of Sale relating to the sale of
Bingham Farms Office Plaza - Phase V, Bingham Farms, Michigan, previously filed
as Exhibit (10)(iii)(b) to the Registrant's Current Report on Form 10-Q for the
quarter ended June 30, 1997, is hereby incorporated by reference.
(iii)(c) Second Amendment to Agreement of Sale relating to the sale of Bingham
Farms Office Plaza - Phase V, Bingham Farms, Michigan, previously filed as
Exhibit (10)(iii)(c) to the Registrant's Current Report on Form 10-Q for the
quarter ended June 30, 1997, is hereby incorporated by reference.
(iv)(a) Agreement of Sale and attachment thereto relating to the sale of the
Ross Plaza Shopping Center, Federal Way, Washington, previously filed as
Exhibit (10)(iv) to the Registrant's Current Report on Form 10-Q for the
quarter ended June 30, 1997, is hereby incorporated by reference.
(iv)(b) First Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of the Ross Plaza Shopping Center, Federal Way, Washington, is
attached hereto.
(iv)(c) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of the Ross Plaza Shopping Center, Federal Way, Washington, is
attached hereto.
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended September 30, 1997.
<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/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Equity Partners-II, the General
Partner
Date: November 7, 1997
-----------------
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE AND ESCROW AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND ESCROW AGREEMENT (this
"Amendment") is made and entered into on this 6th day of August, 1997, by and
among LABROC II LIMITED PARTNERSHIP, an Illinois limited partnership
("Seller"), THE FREMONT GROUP, LLC, a Connecticut limited liability company
("Purchaser") and NEAR NORTH NATIONAL TITLE INSURANCE CORPORATION (the "Escrow
Agent");
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale, dated as of July 30, 1997, (the "Agreement"), pursuant to which Purchaser
has agreed to purchase and Seller has agreed to sell certain Property (as
defined in the Agreement) legally described and depicted on Exhibit A attached
to the Agreement;
WHEREAS, Seller, Purchaser and Escrow Agent are parties to that certain
Escrow Agreement, dated as of July 31, 1997, (the "Escrow Agreement"); and
WHEREAS, Seller and Purchaser desire to amend the Agreement and the Escrow
Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. All terms not otherwise defined herein shall have the meanings ascribed to
each in the Agreement and Escrow Agreement.
2. The Inspection Period shall expire at 5:00 P.M. Chicago time on August 13,
1997.
3. Except as amended hereby, the Agreement and the Escrow Agreement shall be
and remain unchanged and in full force and effect in accordance with their
terms.
4. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute and exchange by telephone facsimile counterparts of
the signature pages, with each facsimile being deemed an "original" for all
purposes.
[EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed the day and year first above written.
PURCHASER:
THE FREMONT GROUP, LLC, a Connecticut limited
liability company
By: /s/Jonathan M. Keller
Name: Jonathan M. Keller
Its: Managing Member
SELLER:
LABROC II LIMITED PARTNERSHIP, an Illinois limited
partnership
By: Balcor Equity Partners-II, an Illinois general
partnership, its general partner
By: The Balcor Company, a Delaware corporation,
its general partner
By: /s/Michael J. Becker
Name: Michael J. Becker
Its: Managing Director
ESCROW AGENT:
NEAR NORTH NATIONAL TITLE INSURANCE CORPORATION
By:
Its: Authorized Agent
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE AND ESCROW AGREEMENT
THIS SECOND AMENDMENT TO AGREEMENT OF SALE AND ESCROW AGREEMENT (this
"Amendment") is made and entered into on this 13th day of August, 1997, by and
among LABROC II LIMITED PARTNERSHIP, an Illinois limited partnership
("Seller"), THE FREMONT GROUP, LLC, a Connecticut limited liability company
("Purchaser") and NEAR NORTH NATIONAL TITLE INSURANCE CORPORATION (the "Escrow
Agent");
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale, dated as of July 30, 1997, and that certain First Amendment to Agreement
of Sale and Escrow Agreement, dated August 6, 1997 (as amended, the
"Agreement"), pursuant to which Purchaser has agreed to purchase and Seller has
agreed to sell certain Property (as defined in the Agreement) legally described
and depicted on Exhibit A attached to the Agreement;
WHEREAS, Seller, Purchaser and Escrow Agent are parties to that certain
Escrow Agreement, dated as of July 31, 1997, and that certain First Amendment
to Agreement of Sale and Escrow Agreement, dated August 6, 1997 (as amended,
the "Escrow Agreement"); and
WHEREAS, Seller and Purchaser desire to amend the Agreement and the Escrow
Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. All terms not otherwise defined herein shall have the meanings ascribed to
each in the Agreement and Escrow Agreement.
2. The Purchase Price is hereby amended from Ten Million Two Hundred Fifty
Thousand and No/100 Dollars ($10,250,000.00) to Nine Million Five Hundred
Thousand and No/100 Dollars ($9,500,000.00).
3. Seller hereby agrees to provide Purchaser with a credit against the
Purchase Price in the amount of Three Hundred Forty-Six Thousand Five Hundred
and No/100 Dollars ($346,500.00) at Closing. This credit is intended to remedy
the environmental issues which relate to the Property.
4. Purchaser hereby agrees to diligently pursue the claim against Blockbuster
referenced in Exhibit O of the Agreement (the "Blockbuster Claim") within
ninety (90) days following the Closing Date and to promptly remit to Seller
one-half (1/2) of any and all monies (less actual expenses incurred by
Purchaser in
<PAGE>
the pursuit of such claim) received by Purchaser in connection with such claim.
In the event that Purchaser does not initiate pursuit of the Blockbuster Claim
within the 90 day time frame then Seller shall have the right to pursue the
Blockbuster Claim on its own, provided that Seller remit to Purchaser one-half
(1/2) of any and all monies (less actual expenses incurred by Seller in the
pursuit of such claim) received by Seller in connection with such claim.
5. With regards to the dispute with Safeway regarding their percentage rent
payments (the "Safeway Issue") and only with regards to the Safeway Issue,
Paragraph 17.3 of the Agreement is hereby amended so that all references to
ninety (90) days shall read one hundred eighty (180) days and the reference to
$250,000.00 shall read $100,000.00.
6. In the event that a Tenant Certificate is not received from each tenant of
the Property prior to the Closing Date then Seller shall have the option to
satisfy the Estoppel Condition (referenced in Paragraph 25 of the Agreement) by
executing and delivering to the Purchaser at Closing a Tenant Certificate on
behalf of those tenants who have not executed a Tenant Certificate (each a
"Seller Certificate"); provided, however, that Seller shall only have this
option for one or more tenants whose aggregate leased space comprises no more
than 8% of the total leased square footage of the Property. Each Seller
Certificate, if any, shall contain materially the same information as the form
of Tenant Certificate shown on Exhibit L of the Agreement, and shall be subject
to the limitations on liability contained in Paragraph 17 of the Agreement.
Upon receipt after Closing by Purchaser of a Tenant Certificate containing the
information required from a tenant under a lease for whom Seller has executed
and delivered a Seller Certificate at Closing, the Seller Certificate executed
and delivered by Seller at Closing shall become null and void and the Tenant
Certificate received from the tenant shall be substituted therefor.
7. Seller hereby agrees to pay all of the closing costs for this transaction
(the "Closing Costs"), such Closing Costs shall consist solely of those
referenced in Paragraphs 3.1, 3.2 and 4 of the Agreement and shall not include
any attorney's fees incurred by Purchaser.
8. Purchaser acknowledges that the Inspection Period has expired, however,
the parties hereby agree to extend the Inspection Period until 5:00 P.M.
Chicago time on August 20, 1997, solely with regard to the issue of the
boundaries of the "no-build" zone surrounding Seafirst National Bank.
9. Except as amended hereby, the Agreement and the Escrow Agreement shall be
and remain unchanged and in full force and effect in accordance with their
terms.
10. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute and exchange by telephone facsimile counterparts of
the signature pages, with each facsimile being deemed an "original" for all
purposes.
[EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed the day and year first above written.
PURCHASER:
THE FREMONT GROUP, LLC, a Connecticut limited
liability company
By: /s/Jonathan M. Keller
Name: Jonathan M. Keller
Its: Managing Member
SELLER:
LABROC II LIMITED PARTNERSHIP, an Illinois limited
partnership
By: Balcor Equity Partners-II, an Illinois general
partnership, its general partner
By: The Balcor Company, a Delaware corporation,
its general partner
By: /s/Beth Goldstein
Name: Beth Goldstein
Its: Authorized Representative
ESCROW AGENT:
NEAR NORTH NATIONAL TITLE INSURANCE CORPORATION
By:
Its: Authorized Agent
<PAGE>
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<PERIOD-END> SEP-30-1997
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