SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1995 0-13624
--------------------- ----------------------
I.R.E. PENSION INVESTORS, LTD.
(Exact name of Registrant as specified in its
Certificate of Limited Partnership)
Florida 59-2483870
--------------------- -------------------------------------
(State of Organization) (I.R.S. Employer Identification Number)
1750 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304
- --------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 760-5200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
$250 Per Unit - Minimum Purchase 20 Units/
8 Units for Individual Retirement Accounts,
Keogh Plans and Corporate Pension Plans
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
------- -------
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statements of Operations
For the Nine and Three Month Periods ended September 30, 1994 and 1995
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1994 1995 1994 1995
---- ---- ---- ----
Revenues:
Rental income $ 868,645 997,589 292,711 383,416
Interest income 70,704 119,383 28,857 41,065
Other income 3,346 6,572 395 2,150
------- --------- ------- -------
Total revenues 942,695 1,123,544 321,963 426,631
------- --------- ------- -------
Costs and expenses:
Depreciation 365,972 393,403 124,453 134,585
Property operations:
Taxes 52,059 52,026 17,230 17,503
Insurance 24,597 32,956 10,786 11,579
Utilities 138,824 153,666 41,996 48,900
Property management fees
to affiliate 52,319 60,250 17,061 23,134
Repairs and maintenance 137,597 177,365 38,857 58,663
Other 59,539 65,694 19,990 24,968
General and administrative:
To affiliates 40,928 32,673 11,558 10,031
Other 30,989 25,821 6,187 4,922
Reversal of interest
accrued related to
the Hess litigation - (69,420) - (69,420)
------- --------- ------- -------
Total costs and expenses 902,824 924,434 288,118 264,865
------- --------- ------- -------
Net income $ 39,871 199,110 33,845 161,766
======= ========= ======= =======
Net income per weighted
average limited partnership
unit outstanding $ .62 3.09 .53 2.51
======= ========= ======= =======
See accompanying notes to unaudited financial statements.
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Balance Sheets
December 31, 1994 and September 30, 1995
(Unaudited)
Assets
December 31, September 30,
1994 1995
------------ -------------
Cash and cash equivalents $ 303,072 563,629
Securities available for sale 2,377,757 2,481,809
Investment in real estate:
Office building 7,562,066 7,755,105
Less accumulated depreciation (2,999,846) (3,393,249)
---------- ----------
Net investment in real estate 4,562,220 4,361,856
Other assets, net 25,400 50,531
---------- ----------
$ 7,268,449 7,457,825
========== ==========
Liabilities and Partners' Capital
Accrued expenses 72,640 52,937
Accounts payable and other liabilities 114,639 120,013
Due to affiliates 10,799 15,394
---------- ----------
Total liabilities 198,078 188,344
Partners' capital:
63,776 limited partnership units issued
and outstanding 7,070,371 7,269,481
---------- ----------
$ 7,268,449 7,457,825
========== ==========
See accompanying notes to unaudited financial statements.
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statement of Partners' Capital
For the Nine Months Ended September 30, 1995
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -------
Balance at December 31, 1994 $ 7,084,237 (13,866) 7,070,371
Net income 197,119 1,991 199,110
--------- ------- ---------
Balance at September 30, 1995 $ 7,281,356 (11,875) 7,269,481
========= ======= =========
See accompanying notes to unaudited financial statements.
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1994 and 1995
(Unaudited)
1994 1995
---- ----
Operating Activities:
Net income $ 39,871 199,110
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 365,972 393,403
Non-cash portion of rental income 1,091 1,763
Changes in operating assets and liabilities:
(Decrease) in accrued expenses
accounts payable and other liabilities,
and due to affiliates (60,853) (9,734)
(Increase) in other assets, net (5,365) (26,893)
--------- -------
Net cash provided by operating activities 340,716 557,649
--------- -------
Investing Activities:
Increase in securities available for sale - (2,481,809)
Decrease in securities available for sale - 2,377,757
Property improvements (172,714) (193,040)
--------- -------
Net cash (used) in investing activities (172,714) (297,092)
--------- -------
Financing Activities:
Limited partner distributions (500,262) -
--------- -------
Net cash (used) in financing activities (500,262) -
--------- -------
Increase (decrease) in cash and
cash equivalents (332,260) 260,557
Cash and cash equivalents at beginning of year 2,942,559 303,072
--------- -------
Cash and cash equivalents at end of quarter $ 2,610,299 563,629
========= =======
See accompanying notes to unaudited financial statements.
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1995
NOTE 1 - GENERAL
- ----------------
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1994 Annual Report and
should be read in conjunction with the notes to financial statements which
appear in that report.
NOTE 2 - LITIGATION
- -------------------
During May 1988, an individual investor filed an action against two individual
defendants who allegedly sold securities without being registered as securities
brokers, two corporations organized and controlled by such individuals, and
against approximately sixteen publicly offered limited partnerships, including
the Partnership, interests in which were sold by the individual and corporate
defendants.
Plaintiff alleged that the sale of limited partnership interests in the
Partnership (among other affiliated and unaffiliated partnerships) by persons
and corporations not registered as securities brokers under the Illinois
Securities Act constituted a violation of such Act, and that the Plaintiff, and
all others who purchased securities through the individual or corporate
defendants, should be permitted to rescind their purchases and recover their
principal plus 10% interest per year, less any amounts received. The
Partnership's securities were properly registered in Illinois and the basis of
the action relates solely to the alleged failure of the Broker Dealer to be
properly registered.
In November 1988, Plaintiff's class action claims were dismissed by the Court.
Amended complaints, including additional named plaintiffs, were filed subsequent
to the dismissal of the class action claims. Motions to dismiss were filed on
behalf of the Partnership and the other co-defendants. In December 1989, the
Court ordered that the Partnership and the other co-defendants rescind sales of
any plaintiff that brought suit within three years of the date of sale. Under
the Court's order of December 1989, the Partnership would not be required to
rescind any sales. Plaintiffs appealed, among other items, the Court's order
with respect to plaintiffs that brought suit after three years of the date of
sale. While there has been no formal dismissal of the claims against the
Partnership, it has been determined that none of the sales made to investors of
the Partnership occurred during the time periods which are still being
considered in this case and therefore, there is no longer any ongoing claims
against the Partnership in this matter.
Through June 30, 1995, an accrual of $69,000 for interest on amounts that would
be due upon rescission had been made. Based upon the determination that the
Partnership had no ongoing claims against it, the accrual was reversed during
the quarter ended September 30, 1995.
NOTE 3 - OTHER MATTERS
- ----------------------
A preliminary environmental site assessment and asbestos survey of Independence
Tower revealed the presence of asbestos containing materials. The estimated cost
to remove and replace the asbestos items is approximately a range of $1.6 to
$2.2 million. Implementation of an operations and maintenance program has been
initiated, however, in the future, it may be necessary for the Partnership to
remove any asbestos in order to sell or refinance this property.
NOTE 4 - COMPENSATION TO GENERAL PARTNERS AND AFFILIATES
- --------------------------------------------------------
During the nine and three month periods ended September 30, 1994 and 1995
compensation to general partners and affiliates were as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
------------------ ------------------
1994 1995 1994 1995
---- ---- ---- ----
Reimbursement for
administrative and
accounting services $ 40,928 32,673 11,558 10,031
Property management fees 52,319 60,250 17,061 23,134
------- ------- ------- -------
Total $ 93,247 92,923 28,619 33,165
======= ======= ======= =======
NOTE 5 - SECURITIES AVAILABLE FOR SALE
- --------------------------------------
The Partnership's securities are available for sale. In accordance with
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("FAS 115") issued in May 1993 by the
Financial Accounting Standards Board ("FASB"), these securities are carried at
fair value, with any related unrealized appreciation or and depreciation
reported as a separate component of partners capital. At December 31, 1994 and
September 30, 1995 the cost of securities available for sale approximated their
fair value.
NOTE 6 - RECLASSIFICATIONS
- --------------------------
For comparative purposes, certain prior year balances have been reclassified to
conform with the 1995 financial statement presentation.
NOTE 7 - MANAGEMENT REPRESENTATION
- ----------------------------------
In the opinion of Partnership management, all adjustments, none of which were
other than normal recurring accruals, necessary for a fair presentation of the
accompanying financial information have been included.
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
September 30, 1995
The Partnership owns Independence Tower, a 107,000 square foot office building
located in Charlotte, North Carolina.
The reason for the changes in the rental income, and property operating expenses
for the nine and three month periods ended September 30, 1995 as compared to the
comparable periods in 1994 all relate to the operations of Independence Tower.
Rental income increased approximately $129,000 and $91,000 for the nine and
three month periods ended September 30, 1995,respectively, as compared to the
comparable periods in 1994 primarily due to additional rents received from an
increase in occupancy. Interest income increased approximately $49,000 and
$12,000 for the nine and three month periods ended September 30, 1995,
respectively, as compared to the comparable periods in 1994 primarily due to
increases in funds available for investment and yields on those investments.
Other income increased $3,000 and $2,000 for the nine and three month periods
ended September 30, 1995, respectively, as compared to the comparable 1994
periods as a result of late fees charged to delinquent tenants. Depreciation
expense increased approximately $27,000 and $10,000 for the nine and three month
periods ended September 30, 1995, respectively, as compared with the prior year
comparable periods due to depreciation related to additional property
improvements. Insurance expense increased approximately $8,000 for the nine
month period ended September 30, 1995 as compared to the same period in 1994
primarily due to an increase in property insurance premiums. Utilities expense
increased approximately $15,000 and $7,000 for the nine and three month periods
ended September 30, 1995, respectively, as compared to the comparable periods in
1994 as a result of an increase in electrical consumption during 1995. Property
management fees to affiliate increased approximately $8,000 and $6,000 for the
nine and three month periods ended September 30, 1995, respectively, as compared
to the same periods in 1994 due to an increase in rental income. Repairs and
maintenance expense increased approximately $40,000 and $20,000 for the nine and
three month periods ended September 30, 1995, respectively, as compared to the
comparable periods in 1994 primarily due to an increase in janitorial cost,
windows maintenance and general repair and maintenance costs. Property
operations, other increased approximately $6,000 and $5,000 for the nine and
three month periods ended September 30, 1995, respectively, as compared to the
same periods in 1994 primarily due to an increase in legal fees. General and
administrative expense to affiliates decreased approximately $8,000 for the nine
month period ended September 30, 1995 as compared to the comparable period in
1994 as a result of decreased costs associated with administrative and
accounting service reimbursements. Other general and administrative expenses
decreased approximately $5,000 for the nine month period ended September 30,
1995, as compared to the comparable period in 1994 primarily due to a decrease
in auditing fees and elimination of interest accruals, during the third quarter
of 1995, relating to the Hess litigation. During the quarter ended September 30,
1995, the interest that had been accrued through June 30, 1995 of approximately
$69,000 related to the Hess litigation was reversed based upon the determination
that the Partnership had no ongoing claims against it.
A summary of the Partnership's cash flows is as follows:
Nine Months Ended September 30,
-------------------------------
1994 1995
---- ----
Net cash provided (used) by:
Operating activities $ 340,716 557,649
Investing activities (172,714) (297,092)
Financing activities (500,262) -
-------- --------
$ (332,260) 260,557
======== ========
The changes in operating activities were impacted by the changes in net income
described above and the changes in operating assets and liabilities between the
periods. Investing activities include an increase and a decrease in securities
available for sale related to the redemption and purchase of treasury bills and
property improvements related to Independence Tower. Such improvements normally
are incurred in connection with the obtaining or renewal of tenant leases.
Although there are no significant improvements contemplated for the property,
improvement costs will be incurred in connection with the obtaining or renewal
of tenant leases. Any costs related to the asbestos removal and replacement
issue discussed below would be considered property improvements subject to an
impairment test for the property. Present costs of implementing an operations
and maintenance program for the asbestos issue are considered a cost of
operations.
At September 30, 1995, the Partnership had cash and cash equivalents of
approximately $564,000 and approximately $2.5 million in Treasury Bills included
in securities available for sale. Management is of the opinion that the
Partnership's liquidity, based on its current activities is adequate to meet
anticipated, normal operating requirements during the near term. The costs of
asbestos removal at Independence Tower is estimated at from $1.6 million to $2.2
million and the Partnership has retained funds for such removal if it becomes
necessary. Should the cost of removal exceed the above estimates, it may need to
be funded through financing of this property. Implementation of an operations
and maintenance program has been initiated; however, in the future it may be
necessary for the Partnership to remove any asbestos in order to sell or
refinance the property.
In addition to the items discussed above, the Partnership's long term prospects
will be primarily effected by future occupancy levels and rental rates achieved
at Independence Tower. Due to the uncertain economic climate in general and the
real estate market in particular, management cannot reasonably determine the
Partnership's long term liquidity position.
On November 6, 1995, the Partnership entered into an agreement to sell
Independence Tower to an unaffiliated third party for a sales price of
$4,000,000 with a closing scheduled to take place during the first quarter of
1996. Consummation of this sale pursuant to its contract is subject to a number
of conditions and there is no assurance that the conditions will be met or that
the property will be sold pursuant to the agreement. Upon sale of the property
and resolution of outstanding issues, the Board of Directors of the Managing
General Partner will consider the possible liquidation of the Partnership.
Part II - Other Information
September 30, 1995
ITEM 1 - LEGAL PROCEEDINGS
- --------------------------
Martha Hess, et. al., on behalf of themselves and all others similarly situated,
v. Gordon, Boula, Financial Concepts, Ltd., KFB Securities, Inc., et al. In the
Circuit Court of Cook County, Illinois. On or about May 20, 1988, an individual
investor filed the above referenced action against two individual defendants,
who allegedly sold securities without being registered as securities brokers,
two corporations organized and controlled by such individuals, and against
approximately sixteen publicly offered limited partnerships, including
Registrant, interests in which were sold by the individual and corporate
defendants.
Plaintiff alleged that the sale of limited partnership interests in Registrant
(among other affiliated and unaffiliated partnerships) by persons and
corporations not registered as securities brokers under the Illinois Securities
Act constituted a violation of such Act, and that the Plaintiff, and all others
who purchased securities through the individual or corporate defendants, should
be permitted to rescind their purchases and recover their principal plus 10%
interest per year, less any amounts received. The Partnership's securities were
properly registered in Illinois and the basis of the action relates solely to
the alleged failure of the Broker Dealer to be properly registered.
In November 1988, Plaintiff's class action claims were dismissed by the Court.
Amended complaints, including additional named plaintiffs, were filed subsequent
to the dismissal of the class action claims. Motions to dismiss were filed on
behalf of the Partnership and the other co-defendants. In December 1989, the
Court ordered that the Partnership and the other co-defendants rescind sales of
any plaintiff that brought suit within three years of the date of sale. Under
the Court's order of December 1989, the Partnership would not be required to
rescind any sales. Plaintiffs appealed, among other items, the Court's order
with respect to plaintiffs that brought suit after three years of the date of
sale. While there has been no formal dismissal of the claims against the
Partnership, it has been determined that none of the sales made to investors of
the Partnership occurred during the time periods which are still being
considered in this case and therefore, there is no longer any ongoing claims
against the Partnership in this matter.
ITEM 2 THROUGH 5
- ----------------
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Index to exhibits
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession - Not applicable.
(4) Instruments defining the rights of security holders, including
indentures - Not applicable.
(10) Material contracts - Not applicable.
(11) Statement re computation of per unit earnings - Not applicable.
(15) Letter re unaudited interim financial information - Not applicable.
(18) Letter re change in accounting principles - Not applicable.
(19) Report furnished to security holders - Not applicable.
(22) Published report regarding matters submitted to vote of security
holders - Not applicable.
(23) Consents of experts and counsel - Not applicable.
(24) Power of attorney - Not applicable.
(27) Financial data schedule - Included as Exhibit 27.
(99) Additional exhibits - Not applicable.
b. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
I.R.E. PENSION INVESTORS, LTD.
Registrant
By: I.R.E. Pension Advisors, Corp.
Managing General Partner of Registrant
----------------------------------------
Date: November 7, 1995 By: /s/ Glen R. Gilbert
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
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<LEGEND>
This schedule contains summary financial information extracted from the third
quarter Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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