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, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14332
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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.)
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
-------------
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>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
---------------- ---------------
Cash and cash equivalents $ 17,036,178 $ 16,076,834
Escrow deposits 709,233 557,405
Accounts and accrued interest receivable 2,493,539 2,522,489
Prepaid expenses 104,248 283,525
Deferred expenses, net of accumulated
amortization of $1,085,762 in 1996 and
$1,014,165 in 1995 1,863,444 1,935,041
---------------- ---------------
22,206,642 21,375,294
---------------- ---------------
Investment in loan receivable:
Investment in acquisition loan 4,419,812 4,434,410
Less:
Allowance for potential loan loss 274,594 274,594
---------------- ---------------
Net investment in loan receivable 4,145,218 4,159,816
Real estate held for sale (net of
allowance of $7,300,000 in 1996 and
1995) 130,149,878 130,149,878
Investment in joint ventures with
affiliates 21,395,970 21,214,156
---------------- ---------------
155,691,066 155,523,850
---------------- ---------------
$ 177,897,708 $ 176,899,144
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 961,130 $ 763,742
Due to affiliates 70,529 51,700
Accrued liabilities, principally
real estate taxes 828,202 808,262
Security deposits 740,501 665,005
Mortgage note payable 15,613,431 15,657,066
---------------- ---------------
Total liabilities 18,213,793 17,945,775
---------------- ---------------
Affiliates' participation in joint
ventures 20,483,467 19,861,816
---------------- ---------------
Limited Partners' capital (1,382,562
Interests issued and
outstanding) 146,372,802 146,274,796
General Partner's deficit (7,172,354) (7,183,243)
---------------- ---------------
Total partners' capital 139,200,448 139,091,553
---------------- ---------------
$ 177,897,708 $ 176,899,144
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
---------------- ---------------
Income:
Interest on loans receivable and from
investment in acquisition loan $ 116,938 $ 187,767
Income from operations of real estate
held for sale 3,038,288 3,129,972
Interest on short-term investments 209,658 465,142
---------------- ---------------
Total income 3,364,884 3,782,881
---------------- ---------------
Expenses:
Amortization of deferred expenses 71,597 73,168
Administrative 208,371 297,748
---------------- ---------------
Total expenses 279,968 370,916
---------------- ---------------
Income before joint venture participations
and equity in loss from investment
in acquistion loan 3,084,916 3,411,965
Participation in income of joint
ventures - affiliates 510,460 239,523
Equity in loss from investment in
acquisition loan (14,598) (5,293)
Affiliates' participation in income of
joint ventures (399,523) (393,551)
---------------- ---------------
Net income $ 3,181,255 $ 3,252,644
================ ===============
Net income allocated to General Partner $ 318,125 $ 325,264
================ ===============
Net income allocated to Limited Partners $ 2,863,130 $ 2,927,380
================ ===============
Net income per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ 2.07 $ 2.12
================ ===============
Distribution to General Partner $ 307,236 $ 307,236
================ ===============
Distribution to Limited Partners $ 2,765,124 $ 2,765,124
================ ===============
Distribution per Limited Partnership
Interest $ 2.00 $ 2.00
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
---------------- ---------------
Operating activities:
Net income $ 3,181,255 $ 3,252,644
Adjustments to reconcile net income to
net cash provided by operating
activities:
Amortization of deferred expenses 71,597 73,168
Participation in income of joint
ventures - affiliates (510,460) (239,523)
Equity in loss from investment in
acquisition loan 14,598 5,293
Affiliates' participation in income
of joint ventures 399,523 393,551
Net change in:
Escrow deposits (151,828)
Accounts and accrued interest
receivable 28,950 83,962
Prepaid expenses 179,277 (3,034)
Accounts payable 197,388 (20,100)
Due to affiliates 18,829 57,170
Accrued liabilities 19,940 86,183
Security deposits 75,496 (17,118)
---------------- ---------------
Net cash provided by operating
activities 3,524,565 3,672,196
---------------- ---------------
Investing activities:
Distributions from joint ventures -
affiliates 328,646
Contribution to joint ventures -
affiliates (138,899)
Improvements to properties (114,882)
---------------- ---------------
Net cash provided by or used in
investing activities 328,646 (253,781)
---------------- ---------------
Financing activities:
Distribution to Limited Partners (2,765,124) (2,765,124)
Distribution to General Partner (307,236) (307,236)
Capital contributions by joint venture
partners - affiliates 222,128
Principal payments on mortgage
note payable (43,635)
---------------- ---------------
Net cash used in financing activities (2,893,867) (3,072,360)
---------------- ---------------
Net change in cash and cash equivalents 959,344 346,055
Cash and cash equivalents at beginning
of period 16,076,834 31,007,746
---------------- ---------------
Cash and cash equivalents at end of
period $ 17,036,178 $ 31,353,801
================ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(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,
1996, 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, 1996 are:
Paid Payable
----------- --------
Mortgage servicing fees $ 2,872 $ 957
Reimbursement of expenses to
the General Partner, at cost 32,432 69,572
3. Investment in Joint Ventures with Affiliates:
The Partnership owns a 41.30% joint venture interest in the 45 West 45th Street
Office Building, a 44.63% joint venture interest in Sand Pebble Village and
Sand Pebble Village II apartment complexes and a 46.50% joint venture interest
in the Jonathan's Landing Apartments.
The following information has been summarized from the March 31, 1996 financial
statements of the joint ventures:
Net investment in real estate $51,397,309
Total liabilities 5,492,663
Total income 2,690,057
Net income 1,129,513
4. Subsequent Event:
In April 1996, the Partnership made a distribution of $3,954,127 ($2.86 per
Interest) to the holders of Limited Partnership Interests for the first
quarter of 1996. This distribution includes a regular quarterly distribution of
$2.00 per Interest from Cash Flow and a special distribution of $.86 per
Interest from Mortgage Reductions.
<PAGE>
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 one
loan outstanding in its portfolio, owns eleven properties acquired through
foreclosure and holds minority joint venture interests with affiliates in four
other properties.
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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
Net income remained relatively unchanged for the quarter ended March 31, 1996
as compared to the same period in 1995. Further discussion of the Partnership's
operations is summarized below.
1996 Compared to 1995
- ---------------------
Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
Interest income on loans receivable decreased in 1996 as compared to 1995 as a
result of the July 1995 foreclosure of the Jonathan's Landing Apartments loan.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
At March 31, 1996, the Partnership was operating eleven properties. Original
funds advanced by the Partnership totals approximately $145,000,000 for these
eleven properties. Income from operations of real estate held for sale
decreased during 1996 as compared to 1995 primarily due to increased tenant
related expenditures at the Park Central and Perimeter 400 office buildings.
Interest income on short-term investments decreased as a result of less cash
available for investment due to special distributions paid to the Limited
Partners in April, July and October 1995.
<PAGE>
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a loan or in the value of the collateral property.
Determinations of fair value are made periodically on the basis of performance
under the terms of the loan agreement and assessments of property operations.
Determinations of fair value represent estimations based on many variables
which affect the value of real estate, including economic and demographic
conditions. The Partnership recognized no provisions for potential losses
during the quarters ended March 31, 1996 or 1995.
As a result of a decrease in accounting, investor processing and professional
fees, administrative expenses decreased during 1996 as compared to 1995.
Participation in income of joint ventures with affiliates represents the
Partnership's share of the operations of the Sand Pebble Village, Sand Pebble
Village II and Jonathan's Landing apartment complexes and the 45 West 45th
Street Office Building. Participation in income of joint ventures with
affiliates increased in 1996 as compared to 1995, due to the July 1995
foreclosure of the Jonathan's Landing Apartments loan and lower interior
maintenance and repairs and legal expenses at 45 West 45th Street Office
Building.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $959,000 as of
March 31, 1996 when compared to December 31, 1995. Operating activities
generated cash of approximately $3,525,000, primarily due to cash flow from the
operations of the Partnership's real estate held for sale, and interest income
from short-term investments and from the Partnership's remaining loan, which
were partially offset by the payment of administrative expenses. Investing
activities consisted of distributions from joint ventures-affiliates of
approximately $329,000. Financing activities consisted primarily of
distributions paid to Partners of approximately $3,072,000 and capital
contributions received from joint venture partners-affiliates of approximately
$222,000.
<PAGE>
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures, which include debt service payments. The Sun Lake
Apartments is the Partnership's only property with underlying debt. During 1996
and 1995, all eleven of the Partnership's properties and three of the four
properties in which the Partnership holds minority joint venture interests with
affiliates generated positive cash flow. The 45 West 45th Street Office
Building, in which the Partnership holds a minority joint venture interest,
generated positive cash flow during 1996 and a marginal deficit during 1995.
The improvement in the cash flow of this property was due to lower interior
maintenance and repairs and legal expenses. The property is currently 86%
occupied. Significant leasing costs were incurred in 1995 at the 45 West 45th
Street Office Building. These non-recurring expenditures were not included in
classifying the cash flow performance of the property. Had these nonrecurring
expenditures been included, the property would have generated a significant
deficit in 1995. The Jonathan's Landing Apartments, in which the Partnership
holds a minority joint venture interest, generated positive cash flow after
being acquired in 1995. As of March 31, 1996, the occupancy rates of the
Partnership's commercial properties ranged from 87% to 100% and the occupancy
rates of the residential properties ranged from 90% to 98%.
Many rental markets continue to be extremely competitive; therefore, the
General Partner's goals are to maintain high occupancy levels, while increasing
rents where possible, and to monitor and control operating expenses and capital
improvement requirements at the properties.
As previously reported, the General Partner believes that the market for
multifamily housing properties has become increasingly favorable to sellers of
these properties. Currently the General Partner is preparing to market three of
the Partnership's residential properties for sale, including two properties in
which the Partnership holds a minority joint venture interest, and is actively
marketing four additional residential properties, including one property in
which the Partnership holds a minority joint venture interest. In addition, the
commercial property in which the Partnership holds a minority joint venture
interest is currently being marketed for sale. The General Partner may explore
the sale of the Partnership's remaining commercial properties over the next
year if market conditions are favorable. The General Partner examines each
property individually by property type and market in determining the optimal
time to sell each property. In addition, the General Partner considers capital
factors and Partnership administrative costs as it pertains to Partnership
performance.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate. Lower interest rates
may increase the probability the borrower may seek prepayment of the
Partnership's loan whereas rising interest rates decrease the yield on the loan
and make prepayment less likely.
<PAGE>
The Noland Fashion Square shopping center loan has been recorded by the
Partnership as an investment in acquisition loan. The Partnership has recorded
its share of the collateral property's operations as equity in loss from
investment in acquisition loan. The Partnership's share of operations has no
effect on the cash flow of the Partnership, and amounts representing
contractually required debt service are recorded as interest income.
In April 1996, the Partnership paid a distribution of $3,954,127 ($2.86 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of $2.00 per Interest from Cash Flow and a
special distribution of $.86 per Interest from Mortgage Reductions for the
first quarter of 1996. The level of the quarterly distribution is consistent
with the amount distributed for the fourth quarter of 1995. Including the
April 1996 distribution, Limited Partners have received cash distributions
totaling $206.18 per $250 Interest. Of this amount, $130.52 represents Cash
Flow from operations and $75.66 represents a return of Original Capital. In
April 1996, the Partnership also paid $230,427 to the General Partner as its
distributive share of the Cash Flow distributed for the first quarter of 1996
and made a contribution to the Early Investment Incentive Fund of $76,809.
The Partnership expects to continue making cash distributions. The level of
future distributions is dependent on cash flow from property operations and the
receipt of interest income from the acquisition loan less fees to the General
Partner and administrative expenses. 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 sale 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.
<PAGE>
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
Paul Williams, et al. vs. Balcor Pension Investors, et al.
- ----------------------------------------------------------
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.:
90-C-0726 (U.S. District Court, Northern District of Illinois). The
Partnership, the General Partner, seven affiliated limited partnerships and
other affiliates are the defendants. In July 1994, the Court granted
plaintiffs' motion certifying a class relating to Federal securities fraud
claims. The Court approved the Notice of Class Action in August 1995 which was
sent to potential members of the class in September 1995. Settlement
discussions among the parties are currently on-going but no final settlement
has been reached. There can be no assurance, however, that such settlement
discussions will ultimately be successful.
Item 5. Other Information
- --------------------------
As previously reported, on March 21, 1996, the Partnership contracted to sell
the Hawthorne Heights Apartments for a sale price of $8,425,000. The purchaser
exercised its option to terminate the agreement of sale and the closing did not
occur. Pursuant to the agreement of sale, the $250,000 in earnest money
previously deposited and interest accrued thereon will be returned to the
purchaser less costs expended by the Partnership relating to this transaction.
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.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1996 is attached hereto.
(99)(i) First Amendment to Agreement of Sale relating to the Sale of Hawthorne
Heights Apartments is attached hereto.
(ii) Letter of termination relating to the Agreement of Sale for Hawthorne
Heights Apartments is attached hereto.
(b) Reports on form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1996.
<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 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/Brian D. Parker
-----------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VI, the
General Partner
Date: May 15, 1996
---------------------------
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT AGREEMENT OF SALE (this "Amendment") is made and
entered into as of the 4 day of April, 1996 by and between Hawthorne Heights
Limited Partnership, an Illinois limited partnership ("Seller") and Elkor
Realty Corporation, an Illinois corporation ("Purchaser").
WITNESSETH
WHEREAS, Seller and Purchaser entered into that certain Agreement of Sale
(the "Agreement") dated as of March 21, 1996 for the purchase and sale of the
apartment complex commonly known as Hawthorne Heights Apartments, as more
particularly described in the Agreement.
WHEREAS, Seller and Purchaser desire to amend the Agreement as further set
forth herein.
NOW, THEREFORE, in consideration of the recitals, the mutual covenants
hereafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are mutually acknowledged, it is agreed by and between the
parties as follows:
1. Paragraph 16a. of the Agreement shall be amended by deleting the date
"April 8, 1996" from the fourth line thereof and inserting in lieu thereof the
date, "April 15, 1996".
2. Except as amended herein, the Agreement shall continue in full force
and effect.
3. This Amendment may be executed in any number of identical
counterparts, any or all of which may contain the signature of less than all of
the parties, and all of which shall be construed together as but a single
instrument.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed as of the day and year first above written.
SELLER:
HAWTHORNE HEIGHTS LIMITED
PARTNERSHIP, an Illinois limited
partnership
By: HAWTHORNE HEIGHTS LIMITED
PARTNERS, INC., an Illinois corporation,
its general partner
By: /s/ Phillip Schechter
Its: Authorized Agent
PURCHASER:
ELKOR REALTY CORPORATION,
an Illinois corporation
By: /s/ Jeffrey S. Elowe
Its: President
<PAGE>
ELKOR REALTY CORPORATION
April 15, 1996
VIA FACSIMILE
847/317-4462 and
VIA MESSENGER
The Balcor Company
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Mr. Al Lieberman and Ms. Ilona Adams
Re: Hawthorne Heights Apartments, Indianapolis, Indiana (the "Property")
Dear Mr. Lieberman and Ms. Adams:
Reference is made to that certain Agreement of Sale dated as of March 21,
1996 by and between Elkor Realty Corporation ("Purchaser") and Hawthorne
Heights Limited Partnership ("Seller"), as amended by that certain First
Amendment to Agreement of Sale dated as of April 4, 1996 (as amended, the
"Agreement"). Any capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement. Pursuant to Paragraph 16 of the
Agreement, this shall serve as Purchaser's Notice of Disapproval of the
Documents and the condition of the Property, and Purchaser hereby terminates
the Agreement. Enclosed is the Notice of Disapproval required under the Escrow
Agreement. The Escrow Agent is hereby authorized to return the Earnest Money
to Purchaser in accordance with the Agreement and the Escrow Agreement.
The undersigned has not received any Reports other than previously
provided by Seller.
Very truly yours,
ELKOR REALTY CORPORATION
By: /s/ Jeffrey S. Elowe
Its: President
cc: Morton Poznak, Esq. (via facsimile, 312/222-0818)
Ms. Frances Chetta (via facsimile, 713/242-1144)
Stephen L. Berger, Esq.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 17036
<SECURITIES> 0
<RECEIVABLES> 6639
<ALLOWANCES> 7575
<INVENTORY> 0
<CURRENT-ASSETS> 20343
<PP&E> 130150
<DEPRECIATION> 0
<TOTAL-ASSETS> 177898
<CURRENT-LIABILITIES> 2600
<BONDS> 15613
0
0
<COMMON> 0
<OTHER-SE> 139200
<TOTAL-LIABILITY-AND-EQUITY> 177898
<SALES> 0
<TOTAL-REVENUES> 3476
<CGS> 0
<TOTAL-COSTS> 15
<OTHER-EXPENSES> 280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3181
<INCOME-TAX> 0
<INCOME-CONTINUING> 3181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3181
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.07
</TABLE>
