SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1999
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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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BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1999 and December 31, 1998
(Unaudited)
ASSETS
1999 1998
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Cash and cash equivalents $ 3,559,662 $ 3,594,151
Accrued interest receivable 14,936 9,758
Prepaid expense 1,896
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$ 3,576,494 $ 3,603,909
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 38,973 $ 51,784
Due to affiliates 66,098 62,112
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Total liabilities 105,071 113,896
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Commitments and Contingencies
Limited Partners' capital (939,587
Interests issued and outstanding) 4,374,325 4,374,325
General Partner's deficit (902,902) (884,312)
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Total partners' capital 3,471,423 3,490,013
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$ 3,576,494 $ 3,603,909
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The accompanying notes are an integral part of the financial statements.
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BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 46,317 $ 59,184
Other income 117,892
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Total income 46,317 177,076
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Expenses:
Administrative 64,907 148,000
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Total expenses 64,907 148,000
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Net (loss) income $ (18,590) $ 29,076
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Net loss allocated to General Partner $ (18,590) None
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Net income allocated to Limited Partners None $ 29,076
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Net income per Limited Partnership Interest
(939,587 issued and outstanding)
- Basic and Diluted None $ 0.03
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The accompanying notes are an integral part of the financial statements.
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BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1999 and 1998
(Unaudited)
1999 1998
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Operating activities:
Net (loss) income $ (18,590) $ 29,076
Adjustments to reconcile net (loss)
income to net cash (used in) or
provided by operating activities:
Net change in:
Accounts and accrued interest
receivable (5,178) 3,793
Prepaid expenses (1,896) (2,024)
Accounts payable (12,811) 21,816
Due to affiliates 3,986 8,689
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Net cash (used in) or provided by
operating activites (34,489) 61,350
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Net change in cash and cash equivalents (34,489) 61,350
Cash and cash equivalents at beginning
of period 3,594,151 4,301,091
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Cash and cash equivalents at end of period $ 3,559,662 $ 4,362,441
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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 Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1999, 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. The Partnership sold its final real estate investment in August
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership, as well as to 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. There can be no assurances as to the time frame for the conclusion
of contingencies which exist or may arise.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1999 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $ 9,822 $ 66,098
4. Contingency:
The Partnership was involved in a lawsuit, Dee vs. Walton Street Capital
Acquisition II, LLC, whereby the Partnership, the General Partner and certain
third parties were 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 action has
been dismissed with prejudice, which dismissal was affirmed by the Appellate
Court of Illinois. Plaintiffs filed a further appeal to the Illinois Supreme
Court. The Illinois Supreme Court has issued a ruling in which it has declined
to hear the appeal. As a result, the Appellate Court of Illinois dismissed the
case on April 22, 1999.
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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. As of March 31, 1999, 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 1998 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The operations of the Partnership in 1999 and 1998 consisted of administrative
expenses which were partially offset by interest income earned on short-term
investments. In addition, during 1998, the Partnership recognized other income
of $117,892 related to a settlement of a dispute with a former tenant at the
Pacific Center office buildings. As a result of this event, the Partnership
recognized net income during the quarter ended March 31, 1998 as compared to a
loss during the quarter ended March 31, 1999. Further discussion of the
Partnership's operations is summarized below.
1999 Compared to 1998
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Discussions of fluctuations between 1999 and 1998 refer to the quarters ended
March 31, 1999 and 1998.
As a result of lower average cash balances due to a distribution to Limited
Partners in April 1998 and lower interest rates in 1999, interest income on
short-term investments decreased during 1999 when compared to 1998.
The Pacific Center office buildings, which were owned by a joint venture
consisting of the Partnership and an affiliate, were sold in December 1996.
During April 1998, the Partnership received $117,892 as its share of a
settlement related to a dispute with a former tenant at the property. This
amount was recognized as other income for financial statement purposes during
the first quarter of 1998.
<PAGE>
Primarily due to a decrease in accounting, portfolio management, and investor
processing fees, administrative expenses decreased during 1999 when compared to
1998.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $34,000 as of
March 31, 1999 when compared to December 31, 1998 due to cash used in operating
activities for the payment of administrative expenses, which was partially
offset by interest income earned on short-term investments.
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. The Partnership sold its final real estate investment in August
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership, as well as to 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. There can be no assurances as to the time frame for the conclusion
of contingencies which exist or may arise. See "Item 1. Legal Proceedings" for
additional information.
Taxable 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 Tax-exempt Limited Partners have
received cash distributions aggregating $279.05 per $250 Tax-exempt Interest,
of which $121.03 represents Net Cash Receipts and $158.02 represents Net Cash
Proceeds. 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. Amounts allocated to the Repurchase Fund will also
be distributed at that time. 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 1997, the Partnership discontinued the repurchase of Interests from Limited
Partners. As of March 31, 1999, there were 24,071 Interests and cash of
$2,896,122 in the Repurchase Fund.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Tax-exempt Limited
Partners in 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
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use of surveys, follow-up discussions and review of data where needed. The
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
the event that current vendors are not substantially Year 2000 compliant by June
30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Dee vs. Walton Street Capital Acquisition II, LLC
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The Illinois Supreme Court has issued a ruling in which it has declined to hear
the appeal filed by the plaintiffs in the Dee vs. Walton Street Capital
Acquisition II, LLC case. As a result, the Appellate Court of Illinois
dismissed the case on April 22, 1999. This case will be deleted from all future
reports of the Partnership.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Forms of Subscription Agreements, previously filed as Exhibits 4.1.1 and
4.1.2 to Amendment No. 2 dated September 20, 1984 to the Registrant's
Registration Statement (Registration No. 2-91810) and to Amendment No. 1 dated
January 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 Current Report on Form 10-Q for the
quarter ended June 30, 1992 (Commission File No. 0-13348), are incorporated
herein by reference.
(10) Material Contracts:
(i)(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.
(i)(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.
(i)(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 the quarter ending March 31,
1999, is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1999.
<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
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Equity Partners-II, the General Partner
By: /s/Jayne A. Kosik
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Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor Equity
Partners-II, the General Partner
Date: May 7, 1999
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<PAGE>
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