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
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________
Commission file number 0-14332
BALCOR PENSION INVESTORS-VI
(Exact name of registrant as specified in its charter)
Illinois 36-3319330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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 .
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 60,008,259 $ 48,820,877
Restricted investment 700,000 700,000
Escrow deposits - restricted 238,983
Accounts and accrued interest receivable 1,235,083 1,798,891
Prepaid expenses 65,676 131,352
Deferred expenses, net of accumulated
amortization of $569,890 in 1994 and
$516,617 in 1993 1,140,933 1,194,206
-------------- --------------
63,149,951 52,884,309
-------------- --------------
Investment in loans receivable:
Loans receivable - first mortgages 9,635,000 31,272,000
Investment in acquisition loan 4,497,431 4,507,534
Less:
Allowance for potential loan losses 1,308,594 1,308,594
-------------- --------------
Net investment in loans receivable 12,823,837 34,470,940
Loan in substantive foreclosure (net of
allowance of $2,400,000 in 1993) 3,652,250
Real estate held for sale (net of allowance
of $4,065,000 in 1994 and 1993) 140,160,970 139,802,469
Investment in joint ventures with affiliates 13,789,952 10,003,319
-------------- --------------
166,774,759 187,928,978
-------------- --------------
$ 229,924,710 $ 240,813,287
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 372,091 $ 428,576
Due to affiliates 287,973 154,415
Other liabilities, principally escrow
liabilities and real estate taxes 1,029,571 1,090,697
Security deposits 666,930 666,823
Mortgage notes payable 21,197,711 21,257,668
-------------- --------------
Total liabilities 23,554,276 23,598,179
-------------- --------------
Affiliates' participation in joint ventures 20,151,727 19,636,325
Partners' capital (1,382,562 Limited
Partnership Interests issued and
outstanding) 186,218,707 197,578,783
-------------- --------------
$ 229,924,710 $ 240,813,287
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Interest on loans receivable, loans in
substantive foreclosure and from
investment in acquisition loans $ 654,417 $ 2,127,018
Less interest on loans payable -
underlying mortgages 245,655
-------------- --------------
Net interest income on loans receivable 654,417 1,881,363
Income from operations of real estate
held for sale 2,711,080 2,339,478
Interest on short-term investments 417,851 113,795
Participation income 3,000,000
-------------- --------------
Total income 6,783,348 4,334,636
-------------- --------------
Expenses:
Provision for potential losses on loans,
real estate and accrued interest receivable 1,000,000
Administrative 466,818 403,027
Mortgage servicing fees 21,710 50,317
Amortization of deferred expenses 53,273 23,371
-------------- --------------
Total expenses 541,801 1,476,715
-------------- --------------
Income before joint venture participations 6,241,547 2,857,921
Participation in income of joint ventures -
affiliates 312,062 181,945
Equity in loss from investment in
acquisition loan (10,103) (12,950)
Affiliates'participation in income of
joint ventures (421,854) (208,312)
-------------- --------------
Net income $ 6,121,652 $ 2,818,604
============== ==============
Net income allocated to General Partner $ 612,165 $ 281,860
============== ==============
Net income allocated to Limited Partners $ 5,509,487 $ 2,536,744
============== ==============
Net income per Limited Partnership Interest
(1,382,562 issued and outstanding) $ 3.98 $ 1.83
============== ==============
Distribution to General Partner $ 614,472 $ 307,236
============== ==============
Distribution to Limited Partners $ 16,867,256 $ 2,765,124
============== ==============
Distribution per Limited Partnership Interest $ 12.20 $ 2.00
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Operating activities:
Net income $ 6,121,652 $ 2,818,604
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in income of joint
ventures - affiliates (312,062) (181,945)
Equity in loss from investment in
acquisition loan 10,103 12,950
Affiliates' participation in income
of joint ventures 421,854 208,312
Amortization of deferred expenses 53,273 23,371
Provision for potential losses on
loans, real estate and accrued
interest receivable 1,000,000
Net change in:
Escrow deposits - restricted 238,983 18,018
Accounts and accrued interest
receivable 563,808 13,016
Prepaid expenses 65,676 16,445
Accounts and accrued interest payable (56,485) 135,426
Due to affiliates 133,558 71,902
Other liabilities (61,126) (96,379)
Security deposits 107 4,890
-------------- --------------
Net cash provided by operating activities 7,179,341 4,044,610
-------------- --------------
Investing activities:
Distribution from joint venture
partner - affiliates 177,679
Collection of principal payments
on loans receivable 21,637,000
Improvements to properties (358,501) (718,849)
Payment of deferred expenses (158,712)
-------------- --------------
Net cash provided by (used in) investing
activites 21,456,178 (877,561)
-------------- --------------
Financing activities:
Distribution to Limited Partners $ (16,867,256) $ (2,765,124)
Distribution to General Partner (614,472) (307,236)
Distributions to joint venture partners -
affiliates (30,167)
Capital contributions by joint venture
partners - affilates 123,715
Principal payments on underlying loans
and mortgage notes payable (59,957) (94,319)
-------------- --------------
Net cash used in financing activities (17,448,137) (3,166,679)
-------------- --------------
Net change in cash and cash equivalents 11,187,382 370
Cash and cash equivalents at beginning
of period 48,820,877 14,279,189
-------------- --------------
Cash and cash equivalents at end of period $ 60,008,259 $ 14,279,559
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Several reclassifications have been made to the previously reported 1993
statements in order to provide comparability with the 1994 statements. These
reclassifications have not changed the 1993 results. 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, 1994, and all such
adjustments are of a normal and recurring nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1994 are:
Paid Payable
Mortgage servicing fees $ 20,129 $ 12,259
Property management fees 263,756 82,258
Reimbursement of expenses to
the General Partner - at cost:
Accounting 4,339 42,529
Data processing None 67,068
Investor communications 776 7,180
Legal 1,358 17,835
Portfolio management 16,356 51,928
Other 793 6,916
3. Subsequent Event:
In April 1994, the Partnership made a distribution of $16,590,744 ($12.00 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1994. This distribution includes a regular quarterly distribution of $2.00
per Interest from Cash Flow and a special distribution of $10.00 per Interest
from Mortgage Reductions received from previous loan prepayments.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors - VI (the "Partnership") is a limited partnership
formed in 1984 to invest in first mortgage loans and, to a lesser extent,
wrap-around loans and junior mortgage loans. The Partnership raised
$345,640,500 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-one loans. Currently, the Partnership has two
loans outstanding in its portfolio, owns eleven properties acquired through
foreclosure and holds minority joint venture interests with affiliates in three
additional properties. The Partnership reclassified its investment in the loan
collateralized by the 45 West 45th Street Office Building to an investment in
joint venture with affiliates effective January 1994. In addition, the
Northgate and Gatewood apartment complexes loans are classified as real estate
held for sale.
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 1993 for a more complete understanding of
the Partnership's financial position.
Operations
Summary of Net Income
In February 1994, the Partnership received significant participation income in
connection with the prepayment of the loans collateralized by the Breckenridge
and Highland Green apartment complexes. In addition, the Partnership recognized
a provision for potential losses on loans and real estate during the quarter
ended March 31, 1993, but did not recognize such a provision during the same
period in 1994. These were the primary reasons for the increase in net income
during the quarter ended March 31, 1994 as compared to the same period in 1993.
The prepayment of three loans during 1993 resulted in a decrease in net
interest income on loans receivable, which partially offset the increase in net
income. Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
As a result of the 1993 prepayment of the Miami Free Zone, Pinellas Cascade,
Land of Lakes Pinellas Park and Skyway, Mariwood and Hickory Knoll loans, net
interest income on loans receivable, and consequently mortgage servicing fees,
decreased during the quarter ended March 31, 1994 as compared to the same
period in 1993.
Income from operations of real estate held for sale represents the net property
operations of the following properties:
Occupancy
Date of Percent at
Property Acquisition* March 31, 1994
Hammond Aire Plaza Shopping Center December 1987 92%
Park Central Office Building April 1988 95%
Brookhollow/Stemmons Center Office
Complex August 1990 89%
Hawthorne Heights Apartments September 1990 97%
Flamingo Pines Shopping Center October 1990 95%
Perimeter 400 Center Office Complex December 1990 98%
Symphony Woods Office Center September 1991 85%
Sun Lake Apartments December 1991 98%
420 North Wabash Office Building October 1992 85%
Woodscape Apartments December 1992 94%
Shoal Run Apartments December 1992 95%
Northgate Apartments October 1993 95%
Gatewood Apartments October 1993 95%
* For financial statement purposes
The properties owned by the Partnership at March 31, 1994 comprise
approximately 53% of the Partnership's portfolio based on original funds
advanced. Income from operations of real estate held for sale increased during
the quarter ended March 31, 1994 as compared to the same period in 1993 due to
the acquisition of the Northgate and Gatewood apartment complexes and improved
operations at seven of the properties, but primarily at the Perimeter 400
Center Office Complex resulting from significant leasing activity in 1993.
Occupancy increased from 81% at March 31, 1993 to 98% at March 31, 1994. This
increase was partially offset by a decrease in rental income at the remaining
properties, but primarily the Symphony Woods Office Center due to new leases
signed in the latter part of 1993 at lower market rental rates.
The 1993 and 1994 loan prepayments, along with the sale of Winchester Mall,
resulted in an increase in cash available for investment and correspondingly,
an increase in interest income on short-term investments during the quarter
ended March 31, 1994 as compared to the same period in 1993.
Participation income is recognized from participations in cash flow from
properties securing certain of the Partnership's loans. The Partnership's loans
generally bear interest at contractually fixed interest rates. Some loans also
provide for additional interest in the form of participations, usually
consisting of either a share in the capital appreciation of the property
securing the Partnership's loan and/or a share in the increase of gross income
of the property above a certain level. The Partnership received participation
income totaling $3,000,000 in connection with the February 1994 prepayments of
the loans collateralized by the Breckenridge and Highland Green apartment
complexes.
The allowance for potential losses provides for potential loan losses and is
based upon loan loss experience for similar loans and for the industry, upon
prevailing economic conditions and the General Partner's analysis of specific
loans in the Partnership's portfolio. A provision for potential losses was not
recognized during the quarter ended March 31, 1994. While actual losses may
vary from time to time because of changes in circumstances (such as occupancy
rates, rental rates, and other economic factors), the General Partner believes
that adequate recognition has been given to loss exposure in the portfolio at
March 31, 1994.
As a result of higher legal, accounting and portfolio management fees and bank
charges, administrative expenses increased during the quarter ended March 31,
1994 as compared to the same period in 1993.
During 1993, the Partnership incurred leasing commissions in connection with
leases signed at the Perimeter 400 Center and Brookhollow/Stemmons Center
office complexes and the Park Central and 420 N. Wabash office buildings which
resulted in an increase in amortization of deferred expenses during the quarter
ended March 31, 1994 as compared to the same period in 1993.
Participation in income of joint ventures with affiliates represents the
Partnership's 44.63% share of the operations of the Sand Pebble Village and
Sand Pebble Village II apartment complexes, and the Partnership's investment in
the loan collateralized by the 45 West 45th Street Office Building which was
reclassified to an investment in joint venture with an affiliate effective
January 1994. The Partnership purchased its share of Sand Pebble Village II in
October 1993. As a result of the reclassification of the 45 West 45th Street
loan and the purchase of Sand Pebble Village II, both of which generated income
in 1994, income from joint ventures with affiliates increased during the
quarter ended March 31, 1994 as compared to the same period in 1993.
Affiliates' participation in income of joint ventures represents the
affiliates' shares of income or loss at the Sun Lake Apartments, Perimeter 400
Center Office Complex and Brookhollow/Stemmons Center Office Complex. Improved
operations at the Perimeter 400 Center Office Complex, resulting primarily from
increased average occupancy levels, resulted in an increase in affiliates'
participation in income of joint ventures during the quarter ended March 31,
1994 as compared to the same period in 1993.
Liquidity and Capital Resources
The cash or near cash position of the Partnership increased as of March 31,
1994 when compared to December 31, 1993. The Partnership's operating
activities include cash flow from the operations of the Partnership's real
estate held for sale, participation income from the loan prepayments and
interest income from the Partnership's remaining loans. This cash flow, along
with interest earned on short-term investments, was used to pay Partnership
administrative expenses and mortgage servicing fees. The Partnership received
funds from investing activities relating primarily to two loan prepayments in
February 1994 and used funds for improvements to certain properties. The
Partnership's financing activities included distributions to Partners and the
payment of principal on the underlying loans and mortgage notes payable.
Currently, the Partnership holds approximately $33,152,000 of Mortgage
Reductions from loan prepayments. The Partnership made special distributions of
Mortgage Reductions of approximately $11,337,000 and $13,826,000 in January and
April 1994, respectively. The remaining Mortgage Reductions have been retained
while the Partnership analyzes future working capital requirements.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income, each after consideration of debt service. During
the quarter ended March 31, 1994, all of the Partnership's thirteen properties
generated positive cash flow. The Partnership assumed management of the
Northgate and Gatewood apartment complexes in October 1993, and these
properties generated positive cash flow during the first quarter of 1994.
During the quarter ended March 31, 1993, ten of the Partnerships twelve
properties generated positive cash flow. Winchester Mall, which was sold in
September 1993, generated a marginal cash flow deficit during the first quarter
of 1993. The Woodscape Apartments, which has underlying debt, generated
positive cash flow during the first quarter of 1994 as compared to a marginal
deficit during the same period in 1993. The improvement in operations at the
property is due primarily to a decrease in painting and cleaning expenditures
incurred during 1993.
The Partnership holds minority joint venture interests in three properties, all
of which generated positive cash flow during the quarter ended March 31, 1994.
Sand Pebble Village Apartments, which was acquired by the partnership through
foreclosure in 1992, also generated positive cash flow during the quarter ended
March 31, 1993. The Partnership purchased a minority joint venture interest in
the Sand Pebble Village II Apartments in October 1993, and reclassified its
investment in the loan collateralized by the 45 West 45th Street Office
Building to an investment in joint venture with an affiliate effective January
1994.
The General Partner is continuing its efforts to maintain high occupancy
levels, while increasing rents where possible, and to monitor and control
operating expenses and capital improvement requirements at the properties. The
General Partner will also examine the terms of any mortgage loans
collateralized by its properties, and may refinance or, in certain instances,
use Partnership reserves to repay such loans.
The Partnership and three affiliated partnerships (the "Participants") funded a
$23,000,000 mortgage loan collateralized by the 45 West 45th Street Office
Building located in New York, New York. The Partnership funded $9,500,000 of
the total loan amount for a participating percentage of approximately 41%. In
September 1991, the loan was placed in default. The Participants expect to file
foreclosure proceedings during 1994.
Because of the current weak real estate markets in certain cities and regions
of the country, attributable to local and regional market conditions such as
overbuilding and recessions in local economies and specific industry segments,
certain borrowers have requested that the Partnership allow prepayment of
mortgage loans. The Partnership has allowed some of these borrowers to prepay
such loans, in some cases without assessing prepayment premiums, under
circumstances where the General Partner believed that refusing to allow such
prepayments would ultimately prove detrimental to the Partnership because of
the likelihood that the properties would not generate sufficient revenues to
keep loan payments current. In other cases, borrowers have requested
prepayment in order to take advantage of lower available interest rates. In
these cases, the Partnership has collected substantial prepayment premiums.
In February 1994, the borrower of the loan collateralized by the Breckenridge
Apartments located in Richmond, Virginia prepaid the loan in full in the amount
of $15,782,123, comprised of the original funds advanced on the loan
($13,737,000), unpaid interest thereon ($140,423), and additional interest
($1,904,700).
In February 1994, the borrower of the loan collateralized by the Highland Green
Apartments located in Raleigh, North Carolina prepaid the loan in full in the
amount of $9,023,389, comprised of the original funds advanced on the loan
($7,900,000), unpaid interest thereon ($28,089), and additional interest
($1,095,300).
In February 1994, the Partnership entered into a contract for the sale of the
Hammond Aire Plaza Shopping Center to an unaffiliated party for $16,300,000,
the closing of which is expected to occur in 1994.
The loan collateralized by the Noland Fashion Square Shopping Center has been
recorded by the Partnership as an investment in acquisition loan. The
Partnership has recorded its share of the collateral property operations as
equity in loss from investment in acquisition loan. The Partnership's share of
the loss has no effect on the cash flow of the Partnership, and amounts
representing contractually required debt service are recorded as interest
income.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Loan prepayments and repayments can initially cause Cash Flow to
increase as prepayment premiums and participations are paid; however,
thereafter prepayments and repayments will have the effect of reducing Cash
Flow. If such proceeds are distributed, Limited Partners will have received a
return of capital and the dollar amount of Cash Flow available for distribution
thereafter can be expected to decrease. Distribution levels can also vary as
loans are placed on non-accrual status, modified or restructured and, if the
Partnership has taken title to properties through foreclosure or otherwise, as
a result of property operations.
In April 1994, the Partnership paid a distribution of $16,590,744 ($12.00 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1994. This distribution includes a regular quarterly distribution of $2.00
per Interest from Cash Flow and a special distribution of $10.00 per Interest
from Mortgage Reductions received from previous loan prepayments. The level of
the regular quarterly distribution is consistent with the amount distributed
for the fourth quarter of 1993. During the quarter ended March 31, 1994 the
Partnership also paid $230,427 to the General Partner as its distributive share
of the Cash Flow distributed for the fourth quarter of 1993 and made a
contribution to the Early Investment Incentive Fund in the amount of $76,809.
The Partnership expects to continue making cash distributions from the Cash
Flow generated from property operations less payments on the underlying loans,
fees to the General Partner and administrative expenses and by the receipt of
mortgage payments. The level of future distributions is dependent on cash flow
from property operations and the receipt of interest income from mortgage
loans. The General Partner, on behalf of the Partnership, has retained what it
believes is an appropriate amount of working capital to meet current cash or
liquidity requirements which may occur.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values. The Partnership's use of
equity participations for loans receivable is intended to provide a hedge
against the impact of inflation; sharing in cash flow or rental income and/or
the capital appreciation of the properties collateralizing the loans should
result in increases in the total yields on the loans as inflation rates rise.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated January 4,
1985 (Registration No. 2-93840) and Form of Confirmation regarding Interests in
the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-14332) are
incorporated herein by reference.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1994.
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 PENSION INVESTORS-VI
By: /s/ Thomas E. Meador
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VI, the General Partner
By: /s/ Allan Wood
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Mortgage Advisors-VI, the General Partner
Date: May 11, 1994
