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
September 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
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 Nine and Three Month Periods ended September 30, 1995 and 1996
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
Revenues:
Rental income $997,589 997,556 383,416 351,768
Interest income 119,383 106,723 41,065 32,540
Other income 6,572 4,497 2,150 1,674
-------- -------- -------- --------
Total revenues 1,123,544 1,108,776 426,631 385,982
-------- -------- -------- --------
Costs and expenses:
Depreciation 393,403 415,868 134,585 139,716
Property operations:
Taxes 52,026 51,625 17,503 17,160
Insurance 32,956 29,626 11,579 6,466
Utilities 153,666 153,376 48,900 46,582
Property management
fees to affiliate 60,250 60,123 23,134 21,206
Repairs and maintenance 177,365 162,110 58,663 49,416
Other 65,694 95,543 24,968 37,923
General and administrative:
To affiliates 32,673 31,750 10,031 10,827
Other 25,821 20,268 4,922 4,886
Reversal of interest
accrued related to
the litigation (69,420) -- (69,420) --
-------- -------- -------- --------
Total costs and expenses 924,434 1,020,289 264,865 334,182
-------- -------- -------- --------
Net income $199,110 88,487 161,766 51,800
======== ======== ======== ========
Net income per weighted
average limited partnership
unit outstanding $ 3.09 1.37 2.51 .80
======== ======== ======== ========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Balance Sheets
December 31, 1995 and September 30, 1996
(Unaudited)
Assets
December 31, September 30,
1995 1996
---- ----
Cash and cash equivalents $ 624,850 547,877
Securities available for sale 2,517,404 2,075,090
Investments in real estate:
Office building 7,129,075 7,205,785
Less accumulated depreciation (3,529,452) (3,945,320)
---------- ----------
Net investment in real estate 3,599,623 3,260,465
Other assets, net 68,673 29,746
---------- ----------
$6,810,550 5,913,178
========== ==========
Liabilities and Partners' Capital
Accrued expenses 1,987 59,405
Accounts payable and other liabilities 164,293 125,207
Due to affiliates 12,215 12,386
---------- ----------
Total liabilities 178,495 196,998
Partners' capital:
63,776 limited partnership units issued
and outstanding 6,632,055 5,716,180
---------- ----------
$6,810,550 5,913,178
========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statement of Partners' Capital
For the Nine Months Ended September 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 87,602 885 88,487
--------- ------- ---------
Balance at September 30, 1996 $ 5,733,545 (17,365) 5,716,180
========= ======== =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1996
(Unaudited)
1995 1996
---- ----
Operating Activities:
Net income $ 199,110 88,487
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 393,403 415,868
Non-cash portion of rental income 1,763 1,197
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses
accounts payable and other liabilities,
and due to affiliates (9,734) 18,503
Decrease (increase) in other assets, net (26,893) 37,730
---------- ----------
Net cash provided by operating activities 557,649 561,785
---------- ----------
Investing Activities:
Increase in securities available for sale (2,481,809) (7,711,028)
Decrease in securities available for sale 2,377,757 8,153,342
Property improvements (193,040) (76,710)
---------- ----------
Net cash provided (used) in investing
activities (297,092) 365,604
---------- ----------
Financing Activities:
Limited partner distributions -- (1,004,362)
---------- ----------
Net cash (used) in financing activities -- (1,004,362)
---------- ----------
Increase (decrease) in cash and
cash equivalents 260,557 (76,973)
Cash and cash equivalents at beginning of year 303,072 624,850
---------- ----------
Cash and cash equivalents at end of quarter $ 563,629 547,877
========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
September 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. In August 1996, settlement agreement was reached and actions were
dismissed by both parties.
Note 3 - Other Matters
In October 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. In August
1996, the October 1995 agreement was reinstated by an amendment that was also
subject to a number of conditions. The primary condition was for the prospective
buyer to obtain financing on the property. The prospective buyer has made
application for financing, however, it is not anticipated that the lender will
be able to close the loan until late November. There is no assurance that the
conditions of the contract will be met or that the property will be sold
pursuant to the agreement.
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 between approximately $1.6 million
and $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 all remaining asbestos in order to sell or refinance this property.
The Partnership will not be required to do anything with respect to the asbestos
if the property is sold to the prospective buyer under the agreement described
in the above paragraph.
Note 4 - Compensation to General Partners And Affiliates
During the nine and three month periods ended September 30, 1995 and 1996
compensation to general partners and affiliates were as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
Reimbursement for
administrative and
accounting services $ 32,673 31,750 10,031 10,827
Property management fees 60,250 60,123 23,134 21,206
------ ------- ------ -------
Total $ 92,923 91,873 33,165 32,033
======= ====== ====== ======
Note 5 - Securities Available for Sale
The Partnership holds securities available for sale which are carried at fair
value, with any related unrealized appreciation or depreciation reported as a
separate component of partners' capital. At December 31, 1995 and September 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
September 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 nine and three month periods ended September 30, 1996 as compared to the
comparable period in 1995 all relate to the operations of Independence Tower.
Rental income decreased $32,000 for the three month period ended September 30,
1996 as compared to the same period in 1995 primarily due to additional rent
received in September 1995, not accrued for in prior periods. Interest income
decreased approximately $13,000 and $8,000 for the nine and three month periods
ended September 30, 1996, respectively, as compared to the same periods in 1995
primarily due to decreases in funds available for investment and yields on those
investments. Depreciation expense increased approximately $22,000 and $5,000 for
the nine and three month periods ended September 30 1996, respectively, as
compared with the prior year comparable periods due to depreciation related to
certain property improvements made. Insurance expense decreased $3,000 and
$5,000 for the nine and three month periods ended September 30, 1996,
respectively, as compared to the comparable periods in 1995 primarily due to a
decrease in insurance premiums. Repairs and maintenance decreased approximately
$15,000 and $9,000 for the nine and three month periods ended September 30,
1996, respectively, as compared to prior year comparable periods primarily due
to decreases in window maintenance and janitorial costs. Property operations,
other increased approximately $30,000 and $13,000 for the nine and three month
periods ended September 30, 1996, respectively, 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 nine month period
ended September 30, 1996, as compared to the comparable period in 1995 primarily
due to a decrease in auditing fees, postage and elimination of interest
accruals, during the third quarter of 1995, relating to litigation. During the
quarter ended September 30, 1995, the interest that had been accrued through
June 30, 1995 of approximately $69,000 for 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,
-------------------------------
1995 1996
---- ----
Net cash provided (used) by:
Operating activities $ 557,649 561,785
Investing activities (297,092) 365,604
Financing activities -- (1,004,362)
---------- ----------
$ 260,557 (76,973)
========== ==========
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 included 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 September 30, 1996, the Partnership had approximately $548,000 of cash and
cash equivalents and approximately $2.1 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
between $1.6 million and $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 all
remaining asbestos in order to sell or refinance the property. The Partnership
will not be required to do anything with respect to the asbestos if the property
is sold to the prospective buyer under the agreement described in the paragraph
below.
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 October 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. In August
1996, the October 1995 agreement was reinstated by an amendment that was also
subject to a number of conditions. The primary condition was for the prospective
buyer to obtain financing on the property. The prospective buyer has made
application for financing, however, it is not anticipated that the lender will
be able to close the loan until late November. There is no assurance that the
conditions of the contract will be met or that the property will be sold
pursuant to the agreement.
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, economic, competitive and other factors affecting the Company's operations,
markets, products and services, expansion strategies and other factors discussed
elsewhere in this report and the documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report
will, in fact, occur.
<PAGE>
Part II - Other Information
September 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. In August 1996, a settlement agreement was reached
and the actions were dismissed by both parties.
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
September 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: November 8, 1996 By: /s/ Glen R. Gilbert
-------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<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>
<CIK> 0000748827
<NAME> I.R.E. Pension Investors, Ltd.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 547,877
<SECURITIES> 2,075,090
<RECEIVABLES> 29,523
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,205,785
<DEPRECIATION> 3,945,320
<TOTAL-ASSETS> 5,913,178
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,716,180
<TOTAL-LIABILITY-AND-EQUITY> 5,913,178
<SALES> 0
<TOTAL-REVENUES> 1,108,776
<CGS> 0
<TOTAL-COSTS> 1,020,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 88,487
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,487
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
