BALCOR EQUITY PENSION INVESTORS II
10-K, 1998-03-24
REAL ESTATE
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               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
                          -----------------

                                      OR
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from            to           

Commission file number 0-13348
                       -------

                      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
- ----------------------------------------             -------------------     
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code (847) 267-1600
                                                   --------------
Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----
Securities registered pursuant to Section 12(g) of the Act:

                         Limited Partnership Interests
                         -----------------------------
                               (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ]  No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
                                    PART I

Item 1. Business
- ----------------

Balcor Equity Pension Investors-II A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1984 under the laws of the
State of Illinois. The Registrant raised $234,896,750 from sales of Limited
Partnership Interests.  The Registrant has retained cash reserves from the sale
of its real estate investments for contingencies which exist or may arise.  The
Registrant's operations currently consist of interest income earned on
short-term investments and the payment of administrative expenses.

The Registrant originally funded seven loans and acquired five real property
investments plus a minority joint venture interest in an additional real
property investment and has since disposed of all of these investments.   The
Partnership Agreement provides that the proceeds of any sale or refinancing of
the Registrant's properties will not be reinvested in new acquisitions.

The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Registrant sold four properties, which included
two properties in which it owned a majority joint venture interest, and the
property in which it held a minority joint venture interest.  During February
1997, the Registrant sold the Ammendale Technology Park - Phase I and 100
Ashford Center North Office Buildings.  During July and August 1997, the
Registrant sold its remaining two properties, the Bingham Farms Office Plaza -
Phase V and the Ross Plaza Shopping Center, respectively. The Registrant has
retained a portion of the cash to satisfy obligations of the Registrant as well
as establish a reserve for contingencies.  The timing of the termination of the
Registrant and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise.  Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Registrant, including, but not limited to, the lawsuit
discussed in "Item 3. Legal Proceedings". 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 Registrant for a longer period of time.

During 1997, the Registrant 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 all cash sales for $7,732,000, $17,746,000,
$11,200,000, and $9,400,000, respectively.  See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" for additional information. 
 
The Registrant no longer has an ownership interest in any real estate
investment.  The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by the Registrant.

The officers and employees of Balcor Equity Partners-II, the General Partner of
the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
<PAGE>
Other Information
- -----------------

In August 1997, the Registrant sold the Ross Plaza Shopping Center to a third
party.  At closing, the purchaser received a credit against the sale price of
$346,500 to remedy certain environmental issues at the property, principally
contamination resulting from a dry cleaning facility located on the property.
The General Partner believes that the Registrant will have no further liability
relating to the environmental issues at the property.

Item 2. Properties
- ------------------
As of December 31, 1997, the Registrant did not own any properties.

In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage.

See Notes to Financial Statements for other information regarding former real
estate property investments.
 
Item 3. Legal Proceedings
- -------------------------

Dee vs. Walton Street Capital Acquisition II, LLC
- -------------------------------------------------

On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships""), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.  

On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.  

The complaint seeks to assert class and derivative claims against the Walton
and Insignia Defendants and alleges that, in connection with the tender offers,
the Walton and Insignia Defendants misused the Balcor Defendants' and
Insignia's fiduciary positions and knowledge in breach of the Walton and
Insignia Defendants' fiduciary duty and in violation of the Illinois Securities
and Consumer Fraud Acts. The plaintiffs amended their complaint on October 8,
1996, adding additional claims. The plaintiffs requested certification as a
class and derivative action, unspecified compensatory damages and rescission of
<PAGE>
the tender offers.  Each of the defendants filed motions to dismiss the
complaint for failure to state a cause of action. On January 7, 1997, the
Chancery Court denied the plaintiffs' motion for leave to amend the complaint
and dismissed the matter for failure to state a cause of action, with
prejudice.

On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois. Plaintiff's brief was filed
with the Appellate Court in September 1997. Defendants filed their reply briefs
in January 1998. Oral arguments before the Appellate Court were held on 
March 18, 1998. The Appellate Court is expected to issue its opinion in the 
spring of 1998, although there can be no assurances on such date.

The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.

Klein, et al. vs. Lehman Brothers, Inc., et al.
- ----------------------------------------------

On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The complaint was amended on each of
October 18, 1996, December 5, 1997, and January 15, 1998. The Registrant,
additional limited partnerships which were sponsored by The Balcor Company,
American Express Company, Lehman Brothers, Inc., Smith Barney, Inc. and various
other entities were originally the named defendants in the action. The December
5, 1997 and January 15, 1998 Amended Complaints, among other changes, no longer
name the Registrant as a defendant and all claims relating to the Registrant
have been eliminated from the Amended Complaint. As a result, this case will be
deleted from all future reports of the Registrant.

Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------

No matters were submitted to a vote of the Limited Partners of the Registrant
during 1997.
<PAGE>
                                    PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------

There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

As of December 31, 1997, the number of record holders of Limited Partnership
Interests of the Registrant was 35,554.

Item 6. Selected Financial Data
- -------------------------------

                                      Year ended December 31,                 
                    ----------------------------------------------------------
                       1997        1996        1995        1994        1993   
                    ----------  ----------  ----------  ----------  ----------

Total income       $3,648,658  $23,817,831$21,585,862 $20,684,580   $21,902,189
Provision for
  investment
  property
  writedowns             None      968,000       None        None     9,810,000
Provision for loan
  receivable
  writedowns             None         None    768,066        None     1,850,000
(Loss) income before
  net gain on
  sales of
  properties,
  affiliates' 
  participation in
  joint ventures and     
  equity in loss
  from investment 
  in acquisition
  loan                (2,997)    7,402,708  5,707,529   5,808,928   (4,149,426)
Net income (loss)   8,582,915   19,499,123  4,556,857   4,889,802   (5,456,189)
Net income (loss)
  per Limited Part-
  nership Interest-
  Basic and Diluted       9.13      19.73        4.00        4.40        (6.64)
Total assets         4,460,240 103,531,343 120,655,642123,673,352   126,764,825
Cash distributions
  per Taxable 
  Limited Partnership
  Interest                2.60       10.40        5.20       5.20          5.35
<PAGE>
Cash distributions 
  per Tax-exempt
  Limited Partnership
  Interest(A)           126.52       22.02         6.92      6.92          7.12

(A) These amounts include distributions of original capital of $123.06 and
$8.18 per Tax-exempt Limited Partnership Interest during 1997 and 1996,
respectively. 

Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------

Operations
- ----------

Summary of Operations
- ---------------------

Balcor Equity Pension Investors - II A Real Estate Limited Partnership (the
"Partnership") sold four properties and the property in which it held a
minority joint venture interest in 1996 and sold its remaining four properties
in 1997.  As a result of lower net gains from property sales in 1997 as
compared to 1996 and lower income from property operations in 1997 due to the
property sales, net income decreased during 1997 as compared to 1996.  As a
result of the net gains from property sales in 1996, net income increased
during 1996 as compared to 1995. Further discussion of the Partnership's
operations is summarized below. 

1997 Compared to 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 in 1996 primarily due to the
proceeds received by the Partnership from the Colonial Coach and Castlewood
West loan prepayment in 1995 prior to distribution to Partners in October of
1996 and the proceeds received from the sale of the Spalding Bridge Apartments
in September 1996 prior to distribution to Partners in January 1997. This
resulted in a decrease in interest income on short-term investments during 1997
as compared to 1996.

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.
<PAGE>
The Partnership recognized other income during 1997 in connection with refunds
of prior years' insurance premiums relating to the Partnership's properties.

The Partnership's amortization expense during 1997 and 1996 consisted of the
amortization of deferred leasing commissions related to the commercial
properties and, upon sale of the properties, the write-off of the remaining
unamortized leasing commissions.

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.  As a result, administrative expenses decreased
during 1997 as compared to 1996. 
 
Provisions were charged to income when the General Partner believed an
impairment had occurred to the value of its properties. Determinations of fair
value were made periodically on the basis of assessments of property operations
and the property's estimated sales price less closing costs. Determinations of
fair value represented estimations based on many variables which affect the
value of real estate, including economic and demographic conditions. During
1996, the Partnership recognized a provision for investment property writedown
of $968,000 to provide for a change in the estimate of fair value of the
Ammendale Technology Park - Phase I.

During 1997, 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 and recognized gains totaling $8,664,860 on three of
the property sales and recognized a loss of $78,948 on the Ammendale Technology
Park - Phase I sale. During 1996, the Partnership sold the Spalding Bridge
Apartments and the Denver Centerpoint, Westech 360 and 1275 K Street office
buildings and recognized gains totaling $20,627,020 on three of the property
sales and recognized a loss of $5,028,903 on the 1275 K Street Office Building
sale.  See Note 12 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.

1996 Compared to 1995
- ---------------------

Rental income increased by approximately $655,000 during 1996 as compared to
1995 due to lease buy-out income received at the Westech 360 office building,
higher occupancy rates at the 100 Ashford Center North office building and the
Bingham Farms Office Plaza - Phase V and higher percentage rental income at the
Ross Plaza Shopping Center. These increases in rental income were partially
offset by lower rental income from the Spalding Bridge Apartments of
approximately $350,000 due to the sale of the property in September 1996.

In 1995, the Partnership accepted a discounted prepayment on the Colonial Coach
and Castlewood West loan receivable.  The Partnership recognized interest
income on this loan receivable prior to the prepayment.  In connection with the
discounted prepayment, the Partnership recognized a provision of $768,066 for
loan receivable write-down.
<PAGE>
The Partnership recognized its share of the gain on the sale of the Pacific
Center office building, in which it held a joint venture interest, resulting in
an increase in participation in income of joint venture with an affiliate
during 1996 as compared to 1995.
 
Due to the 1996 sales of the Denver Centerpoint, Westech 360 and 1275 K Street
office buildings, the Partnership fully amortized the remaining deferred
leasing commissions and as a result, amortization of deferred expenses
increased during 1996 as compared to 1995.  

The Partnership incurred  higher consulting, investor processing, legal,
printing and postage costs in connection with its response to a tender offer
and related litigation during 1996.  As a result, administrative expenses
increased during 1996 as compared to 1995. 

The 1275 K Street and Westech 360 office buildings were owned through joint
ventures with affiliates. As a result of the affiliates' share of the gain
recognized on the sale of the Westech 360 office building of approximately
$4,288,000 during 1996, affiliates' participation in income from joint ventures
increased during 1996 as compared to 1995. This increase was partially offset
by the affiliates' share of the loss recognized on the sale of the 1275 K
Street office building of approximately $1,925,000.

Liquidity and Capital Resources
- -------------------------------

The cash position of the Partnership decreased by approximately $62,145,000 as
of December 31, 1997 when compared to December 31, 1996 primarily due to  
distributions made to Tax-exempt Limited Partners in 1997, which were partially
offset by the proceeds received from the sale of the Partnership's remaining
four properties in 1997.  Cash flow of approximately $966,000 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 $105,279,000 and net distributions to joint venture
partners - affiliates of approximately $1,688,000.  

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 it owned a majority joint venture interest, and the
property in which it held a minority joint venture interest. During 1997, the
Partnership sold its remaining four properties.  The Partnership has retained a
portion of the cash to satisfy obligations of the Partnership as well as
establish a reserve for contingencies.  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.  Such
contingencies may include legal and other fees and costs stemming from
<PAGE>
litigation involving the Partnership including, but not limited to, the lawsuit
discussed in "Item 3. Legal Proceedings". 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 was retained by the Partnership until November
1997, at which time the funds were released in full. In accordance with the
Partnership Agreement, the Partnership distributed the 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 was held in escrow until November 1997.  The
escrow proceeds were released in full in December 1997.  In accordance with the
Partnership Agreement, the Partnership distributed the available proceeds to
the Tax-exempt Limited Partners in April 1997.  

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 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, $150,000 of the proceeds was retained by the
Partnership until December 1997, at which time the funds were released in full.
In addition, pursuant to the sale agreement, $100,000 of the proceeds is being
retained by the Partnership and is not available for distribution until a
dispute with a tenant at the property is resolved.  In accordance with the
Partnership Agreement, the Partnership distributed the 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.
<PAGE>
The Partnership made distributions totaling $2.60, $10.40 and $5.20 per Taxable
Interest and $126.52, $22.02 and $6.92 per Tax-exempt Interest in 1997, 1996
and 1995, respectively. Distributions to Tax-exempt Limited Partners were
comprised of $3.46 of Net Cash Receipts and $123.06 of Net Cash Proceeds in
1997, $13.84 of Net Cash Receipts and $8.18 of Net Cash Proceeds in 1996 and
$6.92 of Net Cash Receipts in 1995. Distributions to Taxable Limited Partners
were comprised of Net Cash Receipts in all three years.

To date, Limited Partners have received cash distributions aggregating $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.  In accordance with the Partnership Agreement, Net Cash Proceeds from
property sales were allocated to the Tax-exempt Limited Partners. Taxable and
Tax-exempt Limited Partners received quarterly distributions from Net Cash
Receipts.  The Partnership expects to distribute the available Net Cash
Proceeds from the release of certain property sale holdbacks to Tax-exempt
Limited Partners in April 1998.  Thereafter, no additional distributions are
anticipated to be made prior to the termination of the Partnership.  However,
after paying final partnership expenses, any remaining cash reserves will be
distributed in accordance with the Partnership Agreement.  Taxable Limited
Partners will not receive aggregate distributions from the Partnership equal to
their original investment. However, Taxable Limited Partners will receive a
distribution from amounts allocated to the Repurchase Fund.
  
In February 1997, the Partnership discontinued the repurchase of Interests
from Limited Partners.  As of December 31, 1997, there were 24,071 Interests
and cash of $2,878,143 in the Repurchase Fund.

Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------

See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.

The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
 
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:

                         December 31, 1997         December 31, 1996    
                      ----------------------   -------------------------
                      Financial        Tax       Financial        Tax
                      Statements     Returns    Statements      Returns 
                      ----------    ---------   ----------     ---------

Total assets          $4,460,240 $26,833,516   $103,531,343  $126,008,880
Partners' capital
  (deficit):
  General Partner       (778,898) (3,898,625)      (428,434)      591,309
  Limited Partners     5,160,001  30,676,130    101,505,282   145,472,847
<PAGE>
Net income (loss):
  General Partner           None  (4,139,470)       962,253       689,035
  Limited Partners     8,582,915  (9,868,521)    18,536,870   (12,640,017)
  Per Limited Part-
  nership Interest          9.13(A)    (B)            19.73(A)      (B)  

(A) Amount represents basic and diluted net income per Limited Partnership
Interest.

(B) The net income (loss) is ($16.08) per Tax-exempt Interest and $30.46 per
Taxable Interest for 1997 and $(16.70) per Tax-exempt Interest and $10.40 per
Taxable Interest for 1996.

Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------

There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
                                   PART III

Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------

(a) Neither the Registrant nor Balcor Equity Partners-II, its General Partner,
has a Board of Directors.

(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as 
follows:

          TITLE                              OFFICERS

Chairman, President and Chief             Thomas E. Meador
   Executive Officer
Senior Vice President                     Alexander J. Darragh
Senior Vice President                     John K. Powell, Jr.
Senior Managing Director, Chief           Jayne A. Kosik
   Financial Officer, Treasurer
   and Assistant Secretary

Thomas E. Meador (age 50) joined Balcor in July 1979.  He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a member of the board of directors of
The Balcor Company. He is also Senior Vice President of American Express
Company and is responsible for its real estate operations worldwide. Prior to
joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in
the commercial real estate division where he was involved in various lending
activities. Mr. Meador received his M.B.A. degree from the Indiana University
Graduate School of Business.

Alexander J. Darragh (age 43) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.

John K. Powell Jr. (age 47) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management  
function. He is a member of the board of directors of The Balcor Company. He
received a Master of Planning degree from the University of Virginia. Mr.
Powell has been designated a Certified Real Estate Financier by the National
Society for Real Estate Finance and is a full member of the Urban Land
Institute.

Jayne A. Kosik (age 40) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.

(d) There is no family relationship between any of the foregoing officers.
<PAGE>
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1997.

Item 11. Executive Compensation
- -------------------------------

The Registrant paid $6,252 in 1997 with respect to one of the executive
officers and directors of Balcor Equity Partners-II, the General Partner.  The
Registrant has not paid and does not propose to pay any remuneration to the
remaining executive officers and directors of the General Partner.  The other
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 11 of Notes to Financial
Statements for information relating to transactions with affiliates.

Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------

(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:

                  Name and        Amount and
                  Address of      Nature of      Percent
                  Beneficial      Beneficial     of
Title of Class    Owner           Ownership      Class    
- -----------------------------------------------------------
Limited           Walton Street    50,143.68      5.34%
Partnership       Capital          Limited
Interests         Acquisition      Partnership
                  Co. II, L.C.C.   Interests
                  Chicago,         
                  Illinois

Limited           Beattie          27,000.43      2.87%
Partnership       Place            Limited
Interests         Greenville,      Partnership
                  South Carolina   Interests

While Beattie Place individually owns less than 5% of the Interests, for
purposes of this Item 12, Walton Street Capital Acquisition Co. II, L.C.C. is
an affiliate of Beattie Place and, collectively, they own 8.21% of the
Interests.
                                                                               
(b) Balcor Equity Partners-II (principally through the Repurchase Fund) and its
officers own as a group the following Limited Partnership Interests of the
Registrant:
<PAGE>
                                  Amount
                               Beneficially
         Title of Class            Owned       Percent of Class
         --------------        -------------   ----------------
         Limited Partnership
          Interests           24,499 Interests  Approximately 3%

Relatives of the officers and affiliates of the partners of the General Partner
own 32 additional Interests.

(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.

Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------

(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.

See Note 11 of Notes to Financial Statements for additional information
relating to transactions with affiliates.

(c) No management person is indebted to the Registrant.

(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
                                    PART IV

Item 14. Exhibits and Reports on Form 8-K
- -----------------------------------------

(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.

(3) Exhibits:

(3) The Amended and Restated Agreement and Certificate of Limited Partnership,
previously filed as Exhibit 3 to Amendment No. 2 to the Registrant's
Registration Statement on Form S-11 dated September 20, 1984 (Registration No.
2-91810) and to Amendment No. 1 to the Registrant's Registration Statement on
Form S-11 dated January 24, 1985 (Registration No. 2-95409), are hereby
incorporated herein by reference.

(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 24, 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 Quarterly 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.

(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 Annual 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 Quarterly 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 Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, is hereby incorporated by reference.
<PAGE>
(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 Quarterly 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 Quarterly 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, previously
filed as Exhibit (10)(iv)(b) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, is hereby incorporated by reference.

(iv)(c) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of the Ross Plaza Shopping Center, Federal Way, Washington, previously
filed as Exhibit (10)(iv)(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, is hereby incorporated by reference.

(27) Financial Data Schedule of the Registrant for 1997 is attached hereto.

(b) Reports on Form 8-K: A Current Report on Form 8-K dated January 15, 1998
was filed reporting the status of proposed class action litigation to which the
Registrant was a party.

(c) Exhibits: See Item 14 (a)(3) above.
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                         BALCOR EQUITY PENSION INVESTORS-II
                         A REAL ESTATE LIMITED PARTNERSHIP

                         By:/s/Jayne A. Kosik         
                             --------------------------
                               Jayne A. Kosik
                               Senior Managing Director and 
                               Chief Financial Officer (Principal
                               Accounting Officer) of
                               Balcor Equity Partners-II,
                               the General Partner

Date:  March 24, 1998 
      ------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

       Signature                     Title                       Date    
- ---------------------   -------------------------------      ------------
                         President and Chief Executive
                         Officer (Principal Executive
                         Officer) of Balcor Equity
/s/Thomas E. Meador      Partners-II, the General Partner    March 24, 1998
- --------------------                                         --------------
   Thomas E. Meador

                         Senior Managing Director and Chief
                         Financial Officer (Principal
                         Accounting Officer) of
                         of Balcor Equity Partners-II,
/s/Jayne A. Kosik        the General Partner                 March 24, 1998 
- --------------------                                         --------------
   Jayne A. Kosik
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

Report of Independent Accountants

Financial Statements:

Balance Sheets, December 31, 1997 and 1996

Statements of Partners' Capital, for the years ended December 31, 1997, 1996
and 1995

Statements of Income and Expenses, for the years ended December 31, 1997, 1996
and 1995

Statements of Cash Flows, for the years ended December 31, 1997, 1996 and 1995

Notes to Financial Statements

Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Balcor Equity Pension Investors-II
A Real Estate Limited Partnership:

We have audited the financial statements of Balcor Equity Pension Investors-II
A Real Estate Limited Partnership (An Illinois Limited Partnership) as listed
in the Index of this Form 10-K. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-II A Real Estate Limited Partnership at December 31, 1997 and 1996,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. 

As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests.  As of December 31, 1997, the Partnership has disposed
of all of its remaining real estate interests. Upon the resolution of the
litigation described in Note 14 to the financial statements, the Partnership
intends to cease operations and dissolve.


                                   COOPERS & LYBRAND L.L.P.


Chicago, Illinois
March 19, 1998
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-II
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (AN ILLINOIS LIMITED PARTNERSHIP)

                                BALANCE SHEETS
                          December 31, 1997 and 1996
                                               
                                    ASSETS

                                                 1997             1996
                                             ------------     ------------
Cash and cash equivalents                  $   4,301,091    $  66,445,811
Accounts and accrued interest receivable         159,149          498,779
Prepaid expenses                                                  139,249
Deferred expenses, net of accumulated
  amortization of $336,570 in 1996                                445,672
                                             ------------     ------------
                                               4,460,240       67,529,511
                                             ------------     ------------
Investment in real estate  
  Land                                                          9,442,435
  Buildings and improvements                                   44,700,462
                                                              ------------
                                                               54,142,897
  Less accumulated depreciation                                18,141,065
                                                              ------------
Investment in real estate, net of
  accumulated depreciation                                     36,001,832
                                             ------------     ------------
                                           $   4,460,240    $ 103,531,343
                                             ============     ============

                       LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                           $      33,835    $     402,217
Due to affiliates                                 45,302          117,602
Security deposits                                                 246,359
                                             ------------     ------------
    Total liabilities                             79,137          766,178
                                             ------------     ------------
Affiliates' participation in joint ventures                     1,688,317
                                                              ------------
Commitments and Contingencies
                                              
Limited Partners' capital (939,587 Interests
  issued and outstanding)                      5,160,001      101,505,282
General Partner's deficit                       (778,898)        (428,434)
                                             ------------     ------------
    Total partners' capital                    4,381,103      101,076,848
                                             ------------     ------------
                                           $   4,460,240    $ 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 PARTNERS' CAPITAL 
             for the years ended December 31, 1997, 1996 and 1995

                                    Partners' Capital (Deficit) Accounts
                                  ----------------------------------------
                                                  General       Limited
                                     Total        Partner       Partners
                                  ------------  ------------  ------------

Balance at December 31, 1994    $ 104,893,524 $     (85,033)$ 104,978,557

Cash distributions to:
  Limited Partners (A)             (6,308,340)                 (6,308,340)
  General Partner                    (700,928)     (700,928)
                                   
Net income for the year            
  ended December 31, 1995           4,556,857       797,128     3,759,729
                                  ------------  ------------  ------------
Balance at December 31, 1995      102,441,113        11,167   102,429,946

Cash distributions to:
  Limited Partners (A)            (19,381,766)                (19,381,766)
  General Partner                  (1,401,854)   (1,401,854)
Deemed distribution to
  Limited Partners (B)                (79,768)                    (79,768)
                                   
Net income for the year            
  ended December 31, 1996          19,499,123       962,253    18,536,870
                                  ------------  ------------  ------------
Balance at December 31, 1996      101,076,848      (428,434)  101,505,282

Cash distributions to:
  Limited Partners (A)           (104,928,196)               (104,928,196)
  General Partner                    (350,464)     (350,464)
                                   
Net income for the year            
  ended December 31, 1997           8,582,915                   8,582,915
                                  ------------  ------------  ------------
Balance at December 31, 1997    $   4,381,103 $    (778,898)$   5,160,001
                                  ============  ============  ============
                               
(A) Summary of cash distributions paid per Interest:

               Taxable                1997          1996          1995
                                  ------------  ------------  ------------

               First Quarter    $        2.60 $        2.60 $        1.30
               Second Quarter            None          2.60          1.30
               Third Quarter             None          2.60          1.30
               Fourth Quarter            None          2.60          1.30

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 PARTNERS' CAPITAL 
               for the years ended December 31, 1997, 1996 and 1995
                                   (Continued)                                 
                                       
               Tax-Exempt             1997          1996          1995
                                  ------------  ------------  ------------

               First Quarter    $       73.46 $        3.46 $        1.73
               Second Quarter           27.00          3.46          1.73
               Third Quarter             None          3.46          1.73
               Fourth Quarter           26.06         11.64          1.73


(B)  This amount represents a state withholding tax paid on behalf of the
     Limited Partners relating to the gain on the sale of Spalding Bridge 
     Apartments.

                               
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 years ended December 31, 1997, 1996 and 1995

                                      1997          1996          1995
                                  ------------  ------------  ------------
Income:
  Rental income                 $   2,378,168 $  18,293,214 $  17,988,052
  Service income                      391,515     1,966,035     2,004,731
  Interest on short-term
    investments                       868,685     1,268,523     1,188,150
  Interest on loan receivable -
    first mortgage, net of
    amortization of $50,232 in 1995                               392,298
  Participation in income of
    joint venture with an affiliate               2,290,059        12,631
  Other income                         10,290
                                  ------------  ------------  ------------
    Total income                    3,648,658    23,817,831    21,585,862
                                  ------------  ------------  ------------
Expenses:
  Depreciation                        731,235     3,261,148     3,235,980
  Amortization of deferred
    expenses                          591,434       578,114       246,167
  Property operating                1,374,417     7,633,003     7,970,936
  Real estate taxes                   253,865     2,193,939     2,057,705
  Property management fees            112,878       685,822       687,925
  Administrative                      587,826     1,095,097       911,554
  Provision for investment 
    property writedown                              968,000
  Provision for loan receivable
    writedown                                                     768,066
                                  ------------  ------------  ------------
    Total expenses                  3,651,655    16,415,123    15,878,333
                                  ------------  ------------  ------------
(Loss) income before net gain on
  sales of properties and affiliates' 
  participation in joint ventures      (2,997)    7,402,708     5,707,529
Net gain on sales of properties     8,585,912    15,598,117
Affiliates' participation in
  income from joint ventures                     (3,501,702)   (1,150,672)
                                  ------------  ------------  ------------
Net income                      $   8,582,915 $  19,499,123 $   4,556,857
                                  ============  ============  ============
Net income allocated to                          
  General Partner                       None  $     962,253 $     797,128
                                  ============  ============  ============

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 years ended December 31, 1997, 1996 and 1995
                                  (Continued)

                                      1997          1996          1995
                                 ------------  ------------  ------------
Net income allocated to            
  Limited Partners              $   8,582,915 $  18,536,870 $   3,759,729
                                  ============  ============  ============
Net income  per Limited
  Partnership Interest (939,587
  issued and outstanding) - 
  Basic and Diluted             $        9.13 $       19.73 $        4.00
                                  ============  ============  ============

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 years ended December 31, 1997, 1996 and 1995

                                        1997          1996          1995
                                    ------------  ------------  ------------
Operating activities:
  Net income                       $   8,582,915 $  19,499,123 $   4,556,857
  Adjustments to reconcile net
    income to net cash provided
    by operating activities:
      Net gain on sales of properties (8,585,912)  (15,598,117)
      Affiliates' participation
        in income from joint
        ventures                                     3,501,702     1,150,672
      Participation in income
        of joint venture 
        with an affiliate                           (2,290,059)      (12,631)
      Depreciation of properties         731,235     3,261,148     3,235,980
      Amortization of deferred
        expenses                         591,434       578,114       246,167
      Amortization of loan
        application and
        processing fees                                               50,232
      Provision for investment
        property writedown                             968,000
      Provision for loan
        receivable writedown                                         768,066
      Payment of leasing
        commissions                     (145,762)     (283,693)     (228,055)
      Net change in:
        Accounts and accrued
          interest receivable            339,630        39,262       224,025
        Prepaid expenses                 139,249        73,992      (131,326)
        Accounts payable                (368,382)      120,203       (92,093)
        Due to affiliates                (72,300)       84,024       (90,961)
        Accrued real estate taxes                     (448,030)       32,059
        Security deposits               (246,359)     (221,241)       32,977
                                     ------------  ------------  ------------
  Net cash provided by
    operating activities                 965,748     9,284,428     9,741,969
                                     ------------  ------------  ------------

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 years ended December 31, 1997, 1996 and 1995
                                 (Continued)

                                      1997          1996          1995
                                  ------------  ------------  ------------
Investing activities:
  Proceeds from sales of 
    properties                    $ 45,731,500  $71,502,500
  Payment of selling costs         (1,677,041)   (1,984,090)
  Capital contributions to joint
    venture with an affiliate                       (54,938)
  Distributions from joint
    venture with an affiliate                     3,681,856      $158,493
  Collection of principal 
    payment on loan receivable                                  6,772,920
  Improvements and additions to
    properties                       (197,950)     (920,158)     (576,364)
                                  ------------  ------------  ------------
Net cash provided by 
    investing activities           43,856,509    72,225,170     6,355,049
                                  ------------  ------------  ------------
Financing activities:
  Distributions to
    Limited Partners             (104,928,196)  (19,381,766)   (6,308,340)
  Distributions to General
    Partner                          (350,464)   (1,401,854)     (700,928)
  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)  (18,796,692)   (1,597,953)
                                  ------------  ------------  ------------
  Cash used in financing
    activities                   (106,966,977)  (39,660,080)   (8,607,221)
                                  ------------  ------------  ------------
Net change in cash and cash
  equivalents                     (62,144,720)   41,849,518     7,489,797
Cash and cash equivalents at
  beginning of year                66,445,811    24,596,293    17,106,496
                                  ------------  ------------  ------------
Cash and cash equivalents at
  end of year                   $   4,301,091 $  66,445,811 $  24,596,293
                                  ============  ============  ============
                                                 
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. Nature of the Partnership's Business:

Balcor Equity Pension Investors-II A Real Estate Limited Partnership (the
"Partnership") has retained cash reserves from the sale of its real estate
investments for contingencies which exist or may arise.  The Partnership's
operations currently consist of interest income earned on short-term
investments and the payment of administrative expenses.

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 it owned a majority joint venture interest, and the
property in which it held a minority joint venture interest.  During February
1997, the Partnership sold the Ammendale Technology Park - Phase I and 100
Ashford Center North office buildings.  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 Partnership has
retained a portion of the cash to satisfy obligations of the Partnership, as
well as establish a reserve for contingencies. 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.  Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership, including, but not limited to, the
lawsuit discussed in Note 14 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.

3. Accounting Policies:

(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.

(b) Depreciation expense was computed using straight-line and accelerated
methods. Rates used in the determination of depreciation were based upon the
following estimated useful lives:

                                                    Years
                                                    -----
                                                           
               Buildings and improvements          20 to 35
               Furniture and fixtures                 5
<PAGE>
Depreciation expense for tenant improvements was computed using a straight-line
method over the term of the lease. 

Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.

As properties were sold, the related costs and accumulated depreciation were
removed from the respective accounts. Any gain or loss on disposition was
recognized in accordance with generally accepted accounting principles.

(c) Interest income on the loan receivable consisted of monthly payments
received from the borrower, which were recorded in the period they were earned
as determined by the terms of the loan agreement. The accrual of interest was
discontinued when the loan became ninety days contractually delinquent or
sooner, when in the opinion of the General Partner, an impairment had occurred
in the value of the collateral property securing the loan. Once the loan
receivable had been placed on non-accrual status, income was recorded only as
cash payments were received from the borrower. The Partnership received a
prepayment of its last mortgage loan receivable in 1995.

(d) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership recorded its investments in real estate at the lower of cost or
fair value, and periodically assessed, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determined an
impairment in value had occurred, and the carrying amount of the real estate
asset would not be recovered, a provision was recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considered the methods referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicated otherwise.

Loan losses on mortgage notes receivable were charged to income when the 
General Partner believed the loan balance would not be recovered. The General
Partner assessed the collectibility of each loan on a periodic basis through a
review of the collateral property operations, the property value and the
borrower's ability to repay the loan.  Upon foreclosure, the loan balance was
transferred to real estate, after the fair value of the property less costs of
disposal was assessed. Upon the transfer to real estate, a new basis in the
property was established. Consistent with the Partnership's investment
objectives to own income producing real property to be held for long-term
appreciation, real estate acquired through foreclosure was recorded as
investment in real estate.

(e) Deferred expenses consisted of leasing commissions which were amortized
over the life of each respective lease. Upon sale of the property, the
remaining balance was written off. Deferred expenses also consisted of loan
application and processing fees and mortgage brokerage fees which were
amortized over the average term of the loans.
<PAGE>
(f) Revenue was recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases was recognized on a straight line
basis over the respective lease term.  Service income included reimbursements
for operating costs such as real estate taxes, maintenance and insurance and
was recognized as revenue in the period the applicable costs were incurred. 

(g) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Statement No. 107 does not apply to all balance sheet items and
excludes certain financial instruments and all non-financial instruments such
as real estate and investment in joint ventures from its disclosure
requirements.

(h) Investment in joint venture with an affiliate represented the Partnership's
22.91% interest, under the equity method of accounting, in a joint venture with
an affiliated partnership. Under the equity method of accounting, the
Partnership recorded its initial investment at cost and adjusted its investment
account for additional capital contributions, distributions and its share of
joint venture income or loss.

(i) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.   

(j) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.

(k) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the provisions 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.

(l) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership for the year-ended December 31, 1997 and has
been applied to all prior earnings periods presented in the financial
statements.  Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income per Limited Partnership
Interest.

4. Partnership Agreement:

The Partnership was organized on May 29, 1984. The Partnership Agreement
provides for Balcor Equity Partners-II to be the General Partner and for the
admission of Limited Partners through the sale of up to 1,000,000 Limited
Partnership Interests at $250 per Interest, 939,587 of which were sold on or
prior to February 20, 1985, the termination date of the offering.
<PAGE>
The Partnership Agreement provides for different allocations of profits and
losses and cash distributions to Limited Partners depending on whether the
investor originally acquiring the Interest was a taxable or tax-exempt entity.

"Operating Income" of the Partnership is allocated 10% to the General Partner
and 90% to the Limited Partners; however, certain components are specially
allocated as described in the Partnership Agreement. "Operating Losses" and
certain other components are allocated 1% to the General Partner and 99% to the
Limited Partners. For financial statement purposes, in previous years partners
were allocated income and loss in accordance with the provisions 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, income allocations
between the partners have been adjusted for financial statement purposes in
1997.

"Net Cash Receipts" available for distribution were distributed as follows: 90%
to Limited Partners, 7.5% to the General Partner as its distributive share from
Partnership operations and 2.5% of such "Net Cash Receipts" was paid to the
General Partner for allocation to the Repurchase Fund.

At the sole discretion of the General Partner and subject to certain
limitations as set forth in the Partnership Agreement, amounts placed in the
Repurchase Fund were available to repurchase Interests from Limited Partners.
All repurchases of Interests were made at 90% of the then current valuation of
such Limited Partnership Interests at the previous quarter end less any
distributions made after the previous quarter end. Distributions of "Net Cash
Receipts" and "Net Cash Proceeds" pertaining to such repurchased Interests were
paid to the Repurchase Fund and were utilized to repurchase additional
Interests. In February 1997, the Partnership discontinued the repurchase of
Interests from Limited Partners.  As of December 31, 1997, there were 24,071
Interests and cash of $2,878,143 in the Repurchase Fund.

An amount not to exceed the dollars originally allocated to the Repurchase Fund
will be returned by the Repurchase Fund to the Partnership at liquidation which
will be accounted for as a capital contribution from the General Partner.  

The Partnership has disposed of all of its real property investments.  The "Net
Cash Proceeds" resulting therefrom, which were available for distribution, were
principally distributed to the Tax-exempt Limited Partners in accordance with
the Partnership Agreement.  The General Partner will not receive any
distributions of Net Cash Proceeds in accordance with the provisions of the
Partnership Agreement.

5. Loan Receivable Prepayment:

The Partnership and an affiliated partnership (together, the "Participants")
funded a first mortgage loan collateralized by the Colonial Coach and
Castlewood West mobile home parks. The Partnership participated in
approximately 88% of the loan amount and interest income.  In 1995, the
Partnership accepted a discounted prepayment on the loan for $6,772,920. The
carrying value of the loan was $7,540,986. As a result, the Partnership
recognized a provision for loan receivable writedown of $768,066.
<PAGE>
Under the original loan terms, the interest income received relating to this
impaired loan would have been approximately $669,000 in 1995. Interest income
received from this impaired loan and included in the accompanying Statements of
Income and Expenses was approximately $443,000 in 1995. 

6. Investment Property Writedown:

In 1996, the Partnership determined that an impairment had occurred to the 
asset value of the Ammendale Technology Park - Phase I located in Prince 
George's County, Maryland. During 1996, the property was written down to its 
current sales price, less estimated closing costs, and a $968,000 provision for
investment property writedown was recognized.

7. Management Agreements:

The Partnership's properties were under management agreements with a third
party management company prior to the sale of the properties. These management
agreements provided for annual fees of 3% to 6% of gross operating receipts.

8. Affiliate's Participation in Joint Ventures:

The 1275 K Street Office Building and the Westech 360 Office Buildings were
owned by the Partnership and an affiliated partnership. Both of the properties
were sold in 1996. See Note 12 of Notes to Financial Statements for additional
information regarding the sales. For the 1275 K Street Office Building, profits
and losses were allocated approximately 61% to the Partnership and 39% to the
affiliate. For the Westech 360 Office Buildings, profits and losses were
allocated approximately 57% to the Partnership and 43% to the affiliate. All
assets, liabilities, income and expenses of the joint ventures are included in
the financial statements of the Partnership with the appropriate adjustment of
profit or loss for the affiliate's participation.  For financial statement
purposes, the Partnership recognized a loss of $5,028,903 in connection with
the sale of the 1275 K Street office building, of which $1,924,848 was the
affiliate's share. In addition, the Partnership recognized a gain of $9,904,921
in connection with the sale of the Westech 360 Office Buildings, of which
$4,288,415 was the affiliate's share.  The joint venture made net distributions
of $1,688,317, $18,796,692 and $1,597,953 to the partners during 1997, 1996,
and 1995, respectively. 

Pursuant to the sale agreement for the 1275 K Street Office Building,
$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.
Pursuant to the sale agreement for the Westech 360 Office Buildings, $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.

9. Investment in Joint Venture with an Affiliate:

The Partnership owned approximately a 23% joint venture interest in the Pacific
Center Office Buildings. The joint venture partner was an affiliate with
investment objectives similar to those of the Partnership. In December 1996,
the joint venture sold the property in an all cash sale for $15,950,000. From
the proceeds of the sale, the joint venture paid $431,045 in selling costs.
For financial statement purposes, the joint venture recognized a gain of
<PAGE>
$8,881,597 from the sale of this property, of which $2,034,774 is the
Partnership's share.

During 1996 and 1995, the Partnership received net distributions from the joint
venture of $3,626,918, and $158,493, respectively.

The following unaudited financial information has been summarized from the
December 31, 1996 financial statements of the joint venture:

            Total income                       $2,448,000
            Loss before gain on sale           (1,847,000)
            Gain on sale                        8,882,000
            Net income                          7,035,000

10. Tax Accounting:

The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder, and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles (GAAP), will differ
from the tax returns due to the different treatment of various items as
specified in the Internal Revenue Code. The net effect of these accounting
differences is that the net income for 1997 in the financial statements is
$22,590,906 greater than the tax loss for the same period resulting primarily
from higher gains on the sales of properties for GAAP reporting as a result of
lower amounts capitalized to the basis of the properties for GAAP reporting in
prior years and due to provisions for investment property write-downs taken in
prior years for GAAP reporting.

11. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates are:

                            Year Ended       Year Ended       Year Ended
                             12/31/97         12/31/96         12/31/95   
                          --------------   --------------   --------------
                           Paid  Payable    Paid  Payable    Paid  Payable
                          ------ -------   ------ -------   ------ -------

Mortgage servicing fees     None    None    None    None  $15,192     None
Reimbursement of expenses 
  to the General Partner,
  at cost:
    Accounting           $50,775  $9,819 $23,466  $16,077  75,593  $ 5,742
    Data processing       12,742   2,682   7,630    2,740  52,281    2,906
    Investor communica-
      tions                 None    None    None    None   10,517     None
    Legal                 16,479   3,028  12,513    8,573  31,299    2,388
    Portfolio management 163,190  29,248 125,643   86,082 165,535   22,487
    Other                  8,889     525   6,028    4,130   5,983       55

The Partnership participated in an insurance deductible program with other
affiliated partnerships in which the program paid claims up to the amount of
the deductible under the master insurance policies for its properties. The
<PAGE>
program was administered by an affiliate of the General Partner who received no
fee for administering the program; however, the General Partner was reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $28,112 and $104,720 for 1996 and 1995, respectively.

12. 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. The General Partner believes that the Partnership will have no 
further liability relating to the 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.

(e) In September 1996, the Partnership sold the Spalding Bridge Apartments in
an all cash sale for $9,872,500.  From the proceeds of the sale, the
Partnership paid $267,092 in selling costs.  In addition, the Partnership paid
a state withholding tax of $79,768 on behalf of the Limited Partners relating
to the gain on the sale of the property which has been recorded as a deemed
distribution for financial statement purposes. The basis of the property was
$6,243,028, which is net of accumulated depreciation of $3,831,256.  For
financial statement purposes, the Partnership recognized a gain of $3,362,380
from the sale of the property.

(f) In December 1996, the Partnership sold the Denver Centerpoint Office
Buildings in an all cash sale for $15,000,000. From the proceeds of the sale,
the Partnership paid $327,876 in selling costs. The basis of the property was
$7,312,405, which is net of accumulated depreciation of $6,198,430. For
financial statement purposes, the Partnership recognized a gain of $7,359,719
from the sale of the property.
<PAGE>
(g) The 1275 K Street Office Building was owned by a joint venture consisting
of the Partnership and an affiliate.  The Partnership and the affiliate hold
participating percentages in the joint venture of approximately 61% and 39%
respectively. In December 1996, the joint venture sold the property in an all
cash sale for $28,300,000. From the proceeds of the sale, the joint venture
paid $911,470 in selling costs. The basis of the property was $32,417,433,
which is net of accumulated depreciation of $14,555,713. For financial
statement purposes, the Partnership recognized a loss of $5,028,903 from the
sale of the property, of which $1,924,848 was the minority joint venture
partner's share.

(h) The Westech 360 Office Buildings was owned by a joint venture consisting of
the Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of approximately 57% and 43%
respectively. In December 1996, the joint venture sold the property in an all
cash sale for $18,330,000. From the proceeds of the sale, the joint venture
paid $477,652 in selling costs. The basis of the property was $7,947,427, which
is net of accumulated depreciation of $2,938,756.  For financial statement
purposes, the Partnership recognized a gain of $9,904,921 from the sale of the
property, of which $4,288,415 was the minority joint venture partner's share.

13. Fair Value of Financial Instruments:

The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1997 and 1996 are as follows:

The carrying value of cash and cash equivalents, accounts and accrued interest
receivable, and accounts payable approximates the fair value.

14. Contingency:

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.
<PAGE>

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                            4301
<SECURITIES>                                         0
<RECEIVABLES>                                      159
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                  4460
<PP&E>                                               0
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                                    4460
<CURRENT-LIABILITIES>                               79
<BONDS>                                              0
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                        4381
<TOTAL-LIABILITY-AND-EQUITY>                      4460
<SALES>                                              0
<TOTAL-REVENUES>                                 12235
<CGS>                                                0
<TOTAL-COSTS>                                     1741
<OTHER-EXPENSES>                                  1910
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                   8583
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                               8583
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                      8583
<EPS-PRIMARY>                                     9.13
<EPS-DILUTED>                                     9.13
        

</TABLE>


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