SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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
June 30, 1996 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) (IRS 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 [ ]
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statements of Operations For the Six and
Three Month Periods ended June 30, 1995 and 1996
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1995 1996 1995 1996
---- ---- ---- ----
Revenues:
Rental income $ 614,173 645,788 315,361 309,004
Interest income 78,318 74,183 39,047 34,869
Other income 4,422 2,823 1,550 1,743
------- ------- ------- --------
Total revenues 696,913 722,794 355,958 345,616
------- ------- ------- -------
Costs and expenses:
Depreciation 258,818 276,152 131,307 138,559
Property operations:
Taxes 34,523 34,465 17,213 17,305
Insurance 21,377 23,160 10,591 11,581
Utilities 104,766 106,794 48,804 51,051
Property management fees
to affiliate 37,116 38,917 19,015 18,645
Repairs and maintenance 118,702 112,694 64,521 58,686
Other 40,726 57,620 20,789 31,510
General and administrative:
To affiliates 22,642 20,923 11,391 9,740
Other 20,899 15,382 9,025 12,051
------- ------- ------- -------
Total costs and expenses 659,569 686,107 332,656 349,128
------- ------- ------- -------
Net income (loss) $ 37,344 36,687 23,302 (3,512)
======= ======= ======= =======
Net income (loss) per weighted
average limited partnership
unit outstanding $ .58 .57 .36 (.05)
======== ======= ======= =======
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Balance Sheets
December 31, 1995 and June 30, 1996
(Unaudited)
Assets
December 31, June 30,
1995 1996
---- ----
Cash and cash equivalents $ 624,850 398,069
Securities available for sale 2,517,404 2,047,916
Investments in real estate:
Office building 7,129,075 7,163,824
Less accumulated depreciation (3,529,452) (3,805,604)
----------- -----------
Net investment in real estate 3,599,623 3,358,220
Other assets, net 68,673 37,787
---------- ----------
$ 6,810,550 5,841,992
========== ==========
Liabilities and Partners' Capital
Accrued expenses 1,987 37,234
Accounts payable and other liabilities 164,293 129,359
Due to affiliates 12,215 11,019
---------- ----------
Total liabilities 178,495 177,612
Partners' capital:
63,776 limited partnership units issued
and outstanding 6,632,055 5,664,380
---------- ----------
$ 6,810,550 5,841,992
========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statement of Partners' Capital
For the Six Months Ended June 30, 1996
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1995 $ 6,650,305 (18,250) 6,632,055
Limited partner distributions (1,004,362) - (1,004,362)
Net income 36,320 367 36,687
--------- ------- ---------
Balance at June 30, 1996 $ 5,682,263 (17,883) 5,664,380
========= ======== =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
---- ----
Operating Activities:
Net income $ 37,344 36,687
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 258,818 276,152
Non-cash portion of rental income 1,045 1,197
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses
accounts payable and other liabilities,
and due to affiliates 68,335 (883)
Decrease in other assets, net 725 29,689
--------- ----------
Net cash provided by operating activities 366,267 342,842
--------- ----------
Investing Activities:
Increase in securities available for sale (2,446,333) (5,648,709)
Decrease in securities available for sale 2,377,757 6,118,197
Property improvements (128,663) (34,749)
--------- ----------
Net cash provided (used) in investing
activities (197,239) 434,739
--------- ----------
Financing Activities:
Limited partner distributions - (1,004,362)
--------- ----------
Net cash (used) in financing activities - (1,004,362)
--------- ----------
Increase (decrease) in cash and
cash equivalents 169,028 (226,781)
Cash and cash equivalents at beginning of year 303,072 624,850
--------- ---------
Cash and cash equivalents at end of quarter $ 472,100 398,069
========= =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
June 30, 1996
Note 1 - General
- ----------------
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1995 Annual Report and
should be read in conjunction with the notes to financial statements which
appear in that report.
Note 2 - Litigation
- -------------------
In May 1995, the lease of a tenant occupying approximately 5,000 square feet at
Independence Tower expired. Prior to expiration, the Partnership attempted to
negotiate a renewal with the tenant, however, the parties were never able to
reach agreement. The tenant contended that a lease extension was agreed to by
the parties. The tenant brought an action against the Partnership seeking
specific performance under the lease the tenant claimed exists, or in the
alternative, damages that would be sustained by tenant if it was forced to move,
an injunction to keep the Partnership from seeking an order for eviction,
damages caused by the Partnership's unfair and deceptive trade practices and for
attorneys' fees. Subsequently, the Partnership brought an action for possession
of the premises. The tenant also had a note due to the Partnership for prior
delinquent rent and when a default occurred under the terms of the note, the
Partnership filed suit against the tenant and the co-maker under the note. A
trial was held in June 1996 regarding the possession portion of the above and a
jury ruled in favor of the Partnership to remove the defendant from the
premises. A hearing is scheduled in August 1996 regarding damage claims against
the tenant.
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 six and three month periods ended June 30, 1995 and 1996 compensation
to general partners and affiliates were as follows:
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1995 1996 1995 1996
---- ---- ---- ----
Reimbursement for
administrative and
accounting services $ 22,642 20,923 11,391 9,740
Property management fees 37,116 38,917 19,015 18,645
------ ------ ------ ------
Total $ 59,758 59,840 30,406 28,385
====== ====== ====== ======
Note 5 - Securities Available for Sale
- --------------------------------------
The Partnership's securities are available for sale and are carried at fair
value, with any related unrealized appreciation or and depreciation reported as
a separate component of partners' capital. At December 31, 1995 and June 30,
1996 the cost of securities available for sale approximated their fair value.
Note 6 - 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.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1996
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 six and three month periods ended June 30, 1996 as compared to the
comparable period in 1995 all relate to the operations of Independence Tower.
Rental income increased approximately $32,000 for the six month period ended
June 30, 1996 as compared to the comparable period in 1995 primarily due to
additional rents received from an increase in occupancy. This increase was
offset with an increase in a provision for uncollectible tenant receivable.
Rental income decreased $6,000 for the three month period ended June 30, 1996 as
compared to the same period in 1995 primarily due to a provision for
uncollectible tenant receivable. This decrease was offset with an increase in
occupancy. Interest income decreased approximately $4,000 for the six and three
month periods ended June 30, 1996 as compared to the same periods in 1995
primarily due to a decrease in yields on investment of funds. Depreciation
expense increased approximately $17,000 and $7,000 for the six and three month
periods ended June 30 1996 as compared with the prior year comparable periods
due to depreciation related to additional property improvements. Repairs and
maintenance decreased approximately $6,000 for the six and three month periods
ended June 30, 1996 as compared to prior year comparable periods primarily due
decreases in window maintenance and general repair maintenance costs. Property
operations, other increased approximately $17,000 and $11,000 for the six and
three month periods ended June 30, 1996, as compared to the same periods in 1995
primarily due to an increase in legal fees. Other general and administrative
expenses decreased approximately $6,000 for the period ended June 30, 1996, as
compared to the comparable period in 1995 primarily due to a decrease in
auditing fees and professional fees. This decrease was offset with an increase
of approximately $3,000 during the three month period ended June 30, 1996 as
compared to the same period in 1995 primarily due to an increase in investor
relations cost.
A summary of the Partnership's cash flows is as follows:
Six Months Ended June 30,
1995 1996
---- ----
Net cash provided (used) by:
Operating activities $ 366,267 342,842
Investing activities (197,239) 434,739
Financing activities - (1,004,362)
--------- ----------
$ 169,028 (226,781)
========= ==========
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. Financing activities for 1996 reflect a cash distribution to limited
partners of $15.75 per unit.
At June 30, 1996, the Partnership had approximately $398,000 of cash and cash
equivalents and approximately $2.0 million in Treasury Bills included in
securities available for sale. A distribution of approximately $1.0 million
($15.75 per limited partnership unit) was paid on May 31, 1996 to unit holders
of record on May 15, 1996. Management is of the opinion that the Partnership's
liquidity, based on its current activities and after the above distribution 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.
In November 1995, the Partnership entered into an agreement to sell Independence
Tower to an unaffiliated third party for a sales price of $4.0 million, subject
to a number of conditions pursuant to the agreement. During the first quarter of
1996, this agreement was terminated in accordance with its terms. The
Partnership is actively seeking to sell the property and is currently working
with a potential buyer. 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.
<PAGE>
Part II - Other Information
June 30, 1996
Item 1 - Legal Proceedings
- --------------------------
Knight Communications, Inc. v. I.R.E. Pension Investors, Ltd., In the North
Carolina Superior Court Division 95-CVS-7381. I.R.E. Pension Investors, Ltd. v.
Knight Communications, Inc. North Carolina District Court Division -
95-CVD-9645. I.R.E. Pension Investors, Ltd. v. Randall Knight in the North
Carolina Superior Court Division 96-CVS-1383. In May 1995, the lease of a tenant
occupying approximately 5,000 square feet at Independence Tower expired. Prior
to expiration, the Partnership attempted to negotiate a renewal with the tenant,
however, the parties were never able to reach agreement. The tenant contended
that a lease extension was agreed to by the parties. The tenant brought an
action against the Partnership seeking specific performance under the lease the
tenant claimed exists, or in the alternative, damages that would be sustained by
tenant if it was forced to move, an injunction to keep the Partnership from
seeking an order for eviction, damages caused by the Partnership's unfair and
deceptive trade practices and for attorneys' fees. Subsequently, the Partnership
brought an action for possession of the premises. The tenant also had a note due
to the Partnership for prior delinquent rent and when a default occurred under
the terms of the note, the Partnership filed suit against the tenant and the
co-maker under the note. A trial was held in June 1996 regarding the possession
portion of the above and a jury ruled in favor of the Partnership to remove the
defendant from the premises. A hearing is scheduled in August 1996 regarding
damage claims against the tenant.
Item 2 through 5
- ----------------
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibit 27 - Financial Data Schedule
b) No report on Form 8-K was filed during the quarter ended June 30, 1996.
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: August 6, 1996 By: /s/ Glen R. Gilbert
-------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
June 30, 1996 Form 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 398,069
<SECURITIES> 2,047,916
<RECEIVABLES> 127,087
<ALLOWANCES> 89,523
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,163,824
<DEPRECIATION> 3,805,604
<TOTAL-ASSETS> 5,841,992
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,664,380
<TOTAL-LIABILITY-AND-EQUITY> 5,841,992
<SALES> 0
<TOTAL-REVENUES> 722,794
<CGS> 0
<TOTAL-COSTS> 686,107
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 36,687
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,687
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
