UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-14348
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BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3354308
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
----------------
Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1985 under the laws of the
State of Illinois. The Registrant raised $170,801,000 from sales of Limited
Partnership Interests. The Registrant's operations currently consist of the
operation of income-producing real property, and all financial information
included in this report relates to this industry segment.
The Registrant originally funded four first mortgage loans, two of which were
jointly funded with affiliates, and acquired five real property investments and
a minority joint venture interest in another real property investment. Two
properties were acquired through foreclosure and the two loans were
reclassified to investment in joint ventures with affiliates. The Registrant
has seven properties and three investments in joint ventures with affiliates in
its portfolio as of December 31, 1994. See Item 2. Properties for additional
information.
The commercial real estate industry is beginning to emerge from several years
of decline and re-structuring. Office properties have begun to emerge from the
effects of overbuilding and corporate downsizing. Effective rents and occupancy
levels began to increase nationally in 1994 and some markets are experiencing a
shortage of large blocks of contiguous space. With new construction expected to
remain at a minimum for 1995, office market conditions are expected to continue
their upward performance for the next year.
Retail property performance was buoyed by increasing sales in 1994, reversing
the trend from the early 1990's. Interest rate sensitive sectors - automotive,
home improvement, and home furnishing related goods - have led the retail
industry recovery while other sectors, such as apparel, continue to languish.
The outlook for 1995 will depend on the reaction of consumers to rising
interest rates. With consumers financing the bulk of their purchases, retail
sales levels are particularly sensitive to rising interest rates, which may
increase again in 1995 if economic growth continues at its current pace. The
emergence of different retailing strategies, such as discount stores, power
centers, superstores, catalogs and other forms of home shopping, will continue
to challenge the retail property sector.
During 1994, institutionally owned and managed multi-family residential
properties in many markets continued to experience favorable operating
conditions combined with relatively low levels of new construction. These
favorable operating conditions were supported by the strong pattern of national
economic growth which contributed to job growth and rising income levels in
most local economies. However, some rental markets continue to remain
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.
During 1994, the Registrant's seven properties and the three properties in
which the Registrant holds minority joint venture interests all generated
positive cash flow.
Historically, real estate investments have experienced the same cyclical
characteristics affecting most other types of long-term investments. While
real estate values have generally risen over time, the cyclical character of
real estate investments, together with local, regional and national market
conditions, has resulted in periodic devaluations of real estate in particular
markets, as has been experienced in the last few years. As a result of these
factors, it has become necessary for the Registrant to retain ownership of many
of its properties for longer than the holding period for the investments
originally described in the Prospectus. The General Partner examines the
operations of each property and each local market in conjunction with the
<PAGE>
Registrant's long-term dissolution strategy when determining the optimal time
to sell each of the Registrant's properties.
The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Equity Partners-III, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
------------------
As of December 31, 1994, the Registrant owns the seven properties described
below:
Location Description of Property
-------- -----------------------
Prince George's County, Ammendale Technology Park - Phase II: three
Maryland one-story office buildings containing
approximately 109,000 square feet on
approximately 16 acres.
Ann Arbor, Michigan * Arborland Consumer Mall: a regional enclosed mall
containing approximately 348,000 square feet
located on approximately 37 acres.
Renton, Washington Belmont Apartments: a 202-unit apartment complex
located on approximately 11 acres.
Bingham Farms, Michigan Bingham Farms Office Plaza - Phase IV: a 4-story
office building containing approximately 145,000
square feet.
Colorado Springs, Colorado Erindale Centre: a neighborhood shopping center
containing approximately 167,000 square feet
located on approximately 13 acres.
Lisle, Illinois Green Trails Apartments: a 440-unit apartment
complex located on approximately 21 acres.
Lake Oswego, Oregon Westlake Meadows Apartments: a 162-unit apartment
complex located on approximately 8 acres.
* Owned by the Registrant through a joint venture with the seller.
The Registrant also holds minority joint venture interests in the 1275 K Street
Office Building, Washington, D.C.; the Westech 360 Office Buildings, Austin,
Texas; and the Perimeter 400 Center, Fulton County, Georgia.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
-------------------------
The Registrant is not subject to any material pending legal proceedings, nor
were any such proceedings terminated during the fourth quarter of 1994.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------------------
Matters
-------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Financial Statements, Statements of
Partners' Capital, and Item 7. Liquidity and Capital Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 34,082.
Item 6. Selected Financial Data
-------------------------------
Year ended December 31,
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1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Total income $16,938,456 $16,634,266 $12,253,384 $8,834,696 $15,604,556
Provision for
investment
property
writedowns None 2,700,000 6,700,000 3,900,000 None
Income (loss)
before loss
on sale of
property 4,820,354 2,288,740 (5,152,193) (4,879,581) 6,023,061
Net income (loss) 4,820,354 2,288,740 (5,327,305) (4,879,581) 6,023,061
Net income (loss)
per Limited
Partnership
Interest 5.88 2.17 (8.87) (8.33) 7.35
Total assets 105,268,922 107,200,193 112,597,525 126,679,218 141,830,575
Distributions per
taxable Limited
Partnership
Interest 7.00 7.50 9.25 10.00 10.00
Distributions per
tax-exempt
Limited Partner-
ship Interest 9.32 9.98 12.30 13.32 13.32
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
---------------------
Summary of Operations
---------------------
Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Partnership") recognized a provision for investment property writedown on the
Ammendale Technology Park-Phase II office building during 1993, which was the
primary reason for the increase in net income during 1994 as compared to 1993.
During 1993, operations improved at several of the Partnership's properties.
During 1992, the Partnership recognized provisions for investment property
writedowns on four properties, including two of the properties in which the
Partnership holds minority joint venture interests. The combined effect of
these events resulted in net income for the year ended December 31, 1993 as
compared to a net loss for the same period in 1992. Further discussion of the
Partnership's operations is summarized below.
<PAGE>
Operations
----------
1994 Compared to 1993
---------------------
Due to higher average cash balances and higher interest rates earned on short-
term investments, interest income on short-term investments increased during
1994 as compared to 1993.
During 1993, the Partnership recognized its share of a provision for loss
relating to the Perimeter 400 Center office building. This, together with
improved operations at the property resulting from significant leasing activity
in 1993, caused participation in income of joint ventures with affiliates to
increase during 1994 as compared to 1993. These improvements were partially
offset by an increase in leasing activity during 1994 at the Westech 360 office
buildings.
As a result of higher lobby, hallway and common area expenditures at the
Bingham Farms Office Plaza-Phase IV and increased leasing activity and basement
repairs at the Erindale Centre shopping center, maintenance and repairs expense
increased during 1994 as compared to 1993. This increase was partially offset
by a decrease in maintenance costs at the Green Trails Apartments, which had
extensive exterior painting work completed in 1993.
During 1993, the Partnership recognized a provision for investment property
writedown on the Ammendale Technology Park-Phase II office building of
$2,700,000.
Higher accounting, legal and portfolio management fees were the primary reasons
for the increase in administrative expense during 1994 as compared to 1993.
This increase was partially offset by a decrease in data processing costs.
The seller/joint venture partner of the Arborland Consumer Mall shares in the
cash flow of the property after the Partnership receives a preferential
distribution. The joint venture has retained a portion of the cash flow
generated at the property to fund leasing costs anticipated to be incurred in
the near future, and consequently, no distributions were made to the joint
venture partner in 1994. As a result, no seller's participation from the joint
venture was recognized during 1994.
1993 Compared to 1992
---------------------
The Partnership received title to the Green Trails Apartments through
foreclosure in September 1992. This resulted in an increase in rental income,
depreciation, property operating expenses, maintenance and repairs expense,
real estate tax expense and property management fees during the 1993 as
compared to 1992. In addition, interest income on loans receivable and mortgage
servicing fees ceased, and the remaining unamortized loan application and
processing fees and unamortized deferred expenses related to the Green Trails
Apartments loan were fully amortized in 1992.
In addition to the increase in rental income resulting from the Green Trails
Apartments foreclosure, rental income also increased during 1993 as compared to
1992, primarily due to higher average occupancy levels at the Erindale Centre
shopping center.
As a result of lower operating expense reimbursements in 1993 at the Arborland
Consumer Mall and the 1992 sale of one of the four Ammendale Phase II office
buildings, service income was lower during 1993 as compared to 1992.
Operations improved at two of the three properties in which the Partnership
holds minority joint venture interests. Operations improved at the Westech 360
office buildings as a result of higher rental rate and operating expense
reimbursements. Operations improved at the 1275 K Street office building as a
<PAGE>
result of higher rental rates and operating expense reimbursements and lower
depreciation and real estate tax expense. These improvements were partially
offset by higher property operating expenses and leasing costs. Additionally,
operations at the Perimeter 400 Center declined significantly primarily due to
increased leasing costs and lower average occupancy levels and rental rates. In
addition, the joint ventures recognized provisions for investment property
writedowns for the Perimeter 400 Center and the 1275 K Street office building
in 1992. The Partnership's share of writedowns taken in 1992 for the Perimeter
400 Office Center and the 1275 K Street office building were $1,676,541 and
$1,540,000, respectively. The net effect of these transactions resulted in
participation in income of joint ventures with affiliates during 1993 as
compared to participation in loss during 1992.
The increase in depreciation expense during 1993 as compared to 1992 was a
result of the Green Trails Apartments foreclosure. This increase was partially
offset by decreased depreciation expense resulting from writedowns of the
Erindale Centre shopping center and the Bingham Farms Office Plaza - Phase IV
in 1992 due to the impairment in the asset values of the properties.
As a result of the Greentrails Apartments foreclosure, property operating
expenses increased during 1993 as compared to 1992. This increase was partially
offset by the recognition of lower bad debt expense at the Arborland Consumer
Mall.
In addition to the increase in maintenance and repairs expense resulting from
the Green Trails Apartments foreclosure, maintenance and repairs also increased
during 1993 as compared to 1992 due to expenditures for unit upgrades at the
Belmont and Westlake Meadows apartment complexes.
The increase in real estate tax expense during 1993 as compared to 1992 was a
result of the Green Trails Apartments foreclosure. This increase was partially
offset by decreases at the Bingham Farms Office Plaza - Phase IV office
building due to a lower assessment from the taxing authority and at the
Arborland Consumer Mall due to lower tax rates and refunds received from prior
years.
During 1992, the Partnership recognized a provision for investment property
writedown on the Erindale Centre shopping center and the Bingham Farms Office
Plaza - Phase IV of $3,300,000 and $3,400,000, respectively.
As a result of higher consulting and appraisal fees, administrative expenses
increased during the year ended December 31, 1993 as compared to 1992.
The seller/joint venture partner of the Arborland Consumer Mall shares in the
cash flow of the property after the Partnership receives a preferential
distribution. The joint venture has retained a portion of the cash flow
generated at the property to fund leasing costs anticipated to be incurred in
the near future. As a result, cash flow available for distribution from the
property decreased, leading to a decrease in seller's participation in income
from the joint venture during 1993 as compared to 1992.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of December 31, 1994 as
compared to December 31, 1993. The cash flow provided by the Partnership's
operating activities includes cash flow from the operations of the
Partnership's properties and interest income on short-term investments, which
were partially offset by the payment of administrative expenses. Investing
activities consisted of the Partnership's share of operations from properties
owned through joint ventures with affiliates, property improvements and leasing
commissions at certain of the Partnership's properties. Financing activities
consisted of quarterly distributions to the Partners.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit. A deficit is
<PAGE>
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. During the years ended December 31, 1994 and 1993, all of
the Partnership's properties, including the three properties in which the
Partnership holds minority joint venture interests, generated positive cash
flow. Significant leasing costs were incurred at the Perimeter 400 Center
office building to lease vacant space and renew existing tenant leases which
were scheduled to expire during 1993. These costs were not included in
classifying the cash flow performance of the property since they are
non-recurring expenditures. Had these costs been included, the property would
have operated at a significant deficit during 1993. As of December 31, 1994,
the occupancy rates of the Partnership's residential properties ranged from 93%
to 98% and the occupancy rates of the commercial properties ranged from 84% to
94%. Many rental markets continue to remain 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.
In January 1995, the Partnership paid $1,563,370 ($1.75 per Taxable Interest
and $2.33 per Tax-exempt Interest) to Limited Partners, representing the
quarterly distribution for the fourth quarter of 1994. The Partnership made
four distributions from Net Cash Receipts totaling $7.00 and $9.32 per Taxable
and Tax-exempt Interest, respectively, in 1994 as compared to $7.50 and $9.98
per Taxable and Tax-exempt Interest, respectively, in 1993 and $9.25 and $12.30
per Taxable and Tax-exempt Interest, respectively, in 1992. See Statements of
Partners' Capital for additional information. Including the January 1995
distribution, Limited Partners have received cumulative distributions of Net
Cash Receipts of $75.30 per $250 Taxable Interest and $100.22 per $250
Tax-exempt Interest. There have been no distributions of Net Cash Proceeds. The
General Partner expects that the cash flow from property operations should
enable the Partnership to continue making quarterly distributions to Limited
Partners. However, the level of future distributions will be dependent on the
amount of cash flow generated from property operations as to which there can be
no assurances.
In addition during January 1995, the Partnership paid $173,708 to the General
Partner as its distributive share of Net Cash Receipts distributed for the
quarter of 1994 and made a $43,427 contribution to the Repurchase Fund. During
1994, the General Partner used amounts placed in the Repurchase Fund to
purchase 1,322 Interests from Limited Partners for a cost of $237,774.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
Inc., which has provided property management services to some of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
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.
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.
<PAGE>
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1994 December 31, 1993
----------------------- -----------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- ---------- ----------- ----------
Total assets $105,268,922 $154,489,777 $107,200,193 $155,516,460
Partners' capital
accounts:
General Partner 198,093 445,065 89,955 266,842
Limited Partners 103,561,039 152,571,918 105,797,135 153,972,575
Net income:
General Partner 802,970 873,055 808,777 793,185
Limited Partners 4,017,384 4,852,822 1,479,963 4,171,818
Per Limited Part-
nership Interest 5.88 (A) 2.17 (A)
(A) Net income is $7.11 per Tax-exempt Interest and $7.00 per Taxable
Interest for 1994 and $6.00 per Tax-exempt Interest and $7.50 per
Taxable Interest for 1993.
Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure
--------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners - III, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company.
Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and
Savings Bank in the commercial real estate division where he was involved in
various lending activities. Mr. Meador received his M.B.A. degree from the
Indiana University Graduate School of Business.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
<PAGE>
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(d) There are no family relationships between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1994.
<PAGE>
Item 11. Executive Compensation
-------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers of Balcor Equity Partners-III, the General Partner. Certain
of these officers receive compensation from The Balcor Company (but not from
the Registrant) for services performed for various affiliated entities, which
may include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 10 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Equity Partners-III (principally through the Repurchase Fund) and
its officers and partners own as a group the following Limited Partnership
Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership 10,936 Interests 1.6%
Interest
Relatives and affiliates of the officers and partners of the General Partner
own an additional twenty Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
(a & b) See Note 10 of Notes to Financial Statements for information relating
to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
previously filed as Exhibit 3 to Amendment No. 2 to Registrant's Registration
Statement on Form S-11 dated September 25, 1985 (Registration Statement No.
2-97579) is incorporated herein by reference.
(4) Specimen Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 2
to the Registrant's Registration Statement on Form S-11 dated September 25,
1985 (Registration Statement No. 2-97579) 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. 0-14348)
are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule attached hereto in this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Allan Wood
--------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Equity Partners-III,
the General Partner
Date: March 30, 1995
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
/s/Thomas E. Meador Partners-III, the General Partner March 30, 1995
-------------------- --------------
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Equity
/s/Allan Wood Partners-III, the General Partner March 30, 1995
-------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reports of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Equity Pension Investors-III
A Real Estate Limited Partnership:
We have audited the accompanying balance sheets of Balcor Equity Pension
Investors-III A Real Estate Limited Partnership (An Illinois Limited
Partnership) as of December 31, 1994 and 1993, and the related statements of
partners' capital, income and expenses and cash flows for each of the three
years in the period ended December 31, 1994. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of
Balcor Equity Pension Investors-II, an affiliate, which is the majority joint
venturer of the partnerships which own the 1275 K Street and Westech 360
Investments. The Partnership's share of the combined operating income of these
joint ventures, before the investment property writedowns described in Note 7,
included in the accompanying 1994, 1993 and 1992 statements of income and
expenses totaled approximately $919,000, $1,235,000 and $902,000, respectively.
The financial statements of Balcor Equity Pension Investors-II were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for the aforementioned investments in
joint ventures, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and on the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Balcor Equity Pension Investors-III A Real
Estate Limited Partnership at December 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1995
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-III
A Real Estate Limited Partnership:
We have audited the balance sheets of Balcor Equity Pension Investors-II A Real
Estate Limited Partnership (An Illinois Limited Partnership) at December 31,
1994 and 1993 and the related statements of partners' capital, income and
expenses and cash flows for each of the three years in the period ended
December 31, 1994 (not presented separately herein). These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-II A Real Estate Limited Partnership at December 31, 1994 and 1993,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 20, 1995
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 9,862,343 $ 8,268,552
Accounts and accrued interest receivable 2,331,185 2,295,269
Prepaid expenses, principally real estate
taxes 489,030 470,925
Deferred expenses, net of accumulated
amortization of $238,795 in 1994 and
$166,172 in 1993 277,496 321,303
-------------- --------------
12,960,054 11,356,049
-------------- --------------
Investment in real estate:
Land 14,394,281 14,394,281
Buildings and improvements 80,871,376 80,708,913
-------------- --------------
95,265,657 95,103,194
Less accumulated depreciation 26,259,390 23,287,761
-------------- --------------
Investment in real estate, net of
accumulated depreciation 69,006,267 71,815,433
-------------- --------------
Investment in joint ventures with
affiliates 23,302,601 24,028,711
-------------- --------------
$ 105,268,922 $ 107,200,193
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 587,400 $ 417,717
Due to affiliates 102,973 91,550
Accrued liabilities, principally real
estate taxes 514,034 510,527
Security deposits 305,383 293,309
-------------- --------------
Total liabilities 1,509,790 1,313,103
Partners' capital (683,204 Limited
Partnership Interests issued and
outstanding) 103,759,132 105,887,090
-------------- --------------
$ 105,268,922 $ 107,200,193
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital Accounts
----------------------------------------------
General Limited
Total Partner Partners
-------------- -------------- --------------
Balance at December 31,
1991 $ 125,536,875 $ 209,463 $ 125,327,412
Cash distributions to:
Limited Partners (A) (8,253,563) (8,253,563)
General Partner (917,063) (917,063)
Net (loss) income for the
year ended December 31,
1992 (5,327,305) 732,838 (6,060,143)
-------------- -------------- --------------
Balance at December 31, 1992 111,038,944 25,238 111,013,706
Cash distributions to:
Limited Partners (A) (6,696,534) (6,696,534)
General Partner (744,060) (744,060)
Net income for the year
ended December 31, 1993 2,288,740 808,777 1,479,963
-------------- -------------- --------------
Balance at December 31, 1993 105,887,090 89,955 105,797,135
Cash distributions to:
Limited Partners (A) (6,253,480) (6,253,480)
General Partner (694,832) (694,832)
Net income for the year
ended December 31, 1994 4,820,354 802,970 4,017,384
-------------- -------------- --------------
Balance at December 31,
1994 $ 103,759,132 $ 198,093 $ 103,561,039
============== ============== ==============
(A) Summary of cash distributions paid per Interest:
1994 1993 1992
-------------- -------------- --------------
Taxable
-------
First Quarter $ 1.75 $ 2.25 $ 2.50
Second Quarter 1.75 1.75 2.25
Third Quarter 1.75 1.75 2.25
Fourth Quarter 1.75 1.75 2.25
<PAGE>
Tax-Exempt
----------
First Quarter 2.33 2.99 3.33
Second Quarter 2.33 2.33 2.99
Third Quarter 2.33 2.33 2.99
Fourth Quarter 2.33 2.33 2.99
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Income:
Rental $ 12,655,105 $ 12,618,664 $ 10,121,238
Service 2,503,431 2,550,841 2,911,641
Participation in income
(loss) of joint ventures
with affiliates 1,382,726 1,188,674 (1,773,138)
Interest on short-term
investments 397,194 276,087 274,575
Interest on loans
receivable - first
mortgages, net of
amortization of $457,017
in 1992 719,068
-------------- -------------- --------------
Total income 16,938,456 16,634,266 12,253,384
-------------- -------------- --------------
Expenses:
Depreciation 2,971,629 2,999,530 2,874,464
Amortization of deferred
expenses 72,623 65,379 94,855
Property operating 4,518,564 4,290,613 4,049,220
Maintenance and repairs 1,407,023 1,150,652 745,993
Real estate taxes 1,668,374 1,705,695 1,621,080
Property management fees 707,876 695,168 548,471
Mortgage servicing fees 37,056
Provision for investment
property writedowns 2,700,000 6,700,000
Administrative 772,013 701,252 603,063
-------------- -------------- --------------
Total expenses 12,118,102 14,308,289 17,274,202
-------------- -------------- --------------
Income (loss) before loss
on sale of property and
seller's participation in
income from joint venture 4,820,354 2,325,977 (5,020,818)
Loss on sale of property (175,112)
Seller's participation in
income from joint venture (37,237) (131,375)
-------------- -------------- --------------
Net income (loss) $ 4,820,354 $ 2,288,740 $ (5,327,305)
============== ============== ==============
Net income allocated to
General Partner $ 802,970 $ 808,777 $ 732,838
============== ============== ==============
Net income (loss) allocated
to Limited Partners $ 4,017,384 $ 1,479,963 $ (6,060,143)
============== ============== ==============
Net income (loss) per
Limited Partnership
Interest (683,204 issued
and outstanding) $ 5.88 $ 2.17 $ (8.87)
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Operating activities:
Net income (loss) $ 4,820,354 $ 2,288,740 $ (5,327,305)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Loss on sale of
property 175,112
Seller's participation
in income from joint
venture 37,237 131,375
Participation in
(income) loss of
joint ventures with
affiliates (1,382,726) (1,188,674) 1,773,138
Depreciation of
properties 2,971,629 2,999,530 2,874,464
Amortization of
deferred expenses 72,623 65,379 94,855
Amortization of loan
application and
processing fees 457,017
Provision for
investment property
writedowns 2,700,000 6,700,000
Net change in:
Escrow deposits -
restricted 226,303
Accounts and accrued
interest receivable (35,916) (912,183) (566,145)
Prepaid expenses (18,105) 134,055 (291,981)
Accounts payable 169,683 (193,814) 117,294
Due to affiliates 11,423 31,864 (1,394)
Escrow liabilities (108,781)
Accrued liabilities 3,507 (83,332) 133,860
Security deposits 12,074 (196) 121,937
-------------- -------------- --------------
Net cash provided by
operating activities 6,624,546 5,878,606 6,509,749
-------------- -------------- --------------
<PAGE>
Investing activities:
Capital contributions to
joint ventures with an
affiliate (26,096) (257,697) (52,099)
Distributions from joint
ventures with affiliates 2,134,932 1,491,606 1,783,096
Improvements to property (162,463) (488,485)
Payment of leasing
commissions (28,816) (31,263)
Net proceeds from sale of
property 1,878,694
Payment of expenses on
real estate acquired
through foreclosure (297,856)
-------------- -------------- --------------
Net cash provided by
investing activities 1,917,557 1,202,646 2,823,350
-------------- -------------- --------------
Financing activities:
Distributions to Limited
Partners (6,253,480) (6,696,534) (8,253,563)
Distributions to General
Partner (694,832) (744,060) (917,063)
Distributions to joint
venture partner -
seller (37,237) (131,375)
-------------- -------------- --------------
Cash used in financing
activities (6,948,312) (7,477,831) (9,302,001)
-------------- -------------- --------------
Net change in cash and
cash equivalents 1,593,791 (396,579) 31,098
Cash and cash equivalents
at beginning of year 8,268,552 8,665,131 8,634,033
-------------- -------------- --------------
Cash and cash equivalents
at end of year $ 9,862,343 $ 8,268,552 $ 8,665,131
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:
Years
-----
Buildings and improvements 20 to 31
Furniture and fixtures 4 to 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
When properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
(b) Deferred expenses consist of leasing commissions which are amortized over
the term of the lease to which they apply.
(c) Loan application and processing fees and mortgage brokerage fees were
amortized over the term of the loan.
(d) Income from operating leases with abatements and scheduled rent increases
is recognized on a straight-line basis over the respective lease terms.
(e) Investment in joint ventures with affiliates represents the Partnership's
39.48%, 43.3% and 21.95% interests, under the equity method of accounting, in
three joint ventures with affiliated partnerships. Under the equity method of
accounting, the Partnership records its initial investment at cost and adjusts
its investment account for additional capital contributions, distributions and
its share of joint venture income or loss.
(f) Interest on loans receivable was earned in accordance with the terms of the
related loan agreements. The accrual of interest was discontinued when a loan
became ninety days contractually delinquent or sooner when, in the opinion of
Partnership's management, an impairment had occurred in the value of the
collateral properties which secured the loans. Income on nonaccrual loans, or
loans which were not performing in accordance with their terms, was recorded on
a cash basis.
(g) The Partnership's investment objectives provide for investment in income
producing real property to be held for long-term appreciation. The Partnership
makes periodic assessments concerning possible permanent impairment to the
value of all of its properties. In the event that the Partnership determines
that a permanent impairment in value has occurred, the carrying basis of the
property is reduced to its fair value.
(h) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(i) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
<PAGE>
2. Partnership Agreement:
The Partnership was organized in April 1985. The Partnership Agreement provides
for Balcor Equity Partners-III to be the General Partner and for the admission
of Limited Partners through the sale of up to 1,000,000 Limited Partnership
Interests at $250 per Interest, 683,204 of which were sold on or prior to
August 1, 1986, the termination date of the offering.
"Operating Income" of the Partnership is allocated 10% to the General Partner
and 90% to the Limited Partners; however, certain components are specially
allocated as described in the Partnership Agreement. "Operating Losses" and
certain other components are allocated 1% to the General Partner and 99% to the
Limited Partners pursuant to terms set forth in the Partnership Agreement.
The Partnership Agreement provides for different allocations of profits and
losses and cash distributions to Limited Partners depending on whether the
investor originally acquiring the Interest was a taxable or tax-exempt entity.
"Net Cash Receipts" available for distribution are distributed as follows: 90%
to Limited Partners, 7.5% to the General Partner as its distributive share from
Partnership operations and an additional 2.5% to the General Partner for
allocation to the Repurchase Fund which may be used to repurchase Interests
from Limited Partners pursuant to the terms set forth in the Partnership
Agreement.
At the sole discretion of the General Partner and subject to certain
limitations, amounts placed in the Repurchase Fund are available to be used to
repurchase Interests from existing Limited Partners. During 1994, the General
Partner used amounts placed in the Repurchase Fund to repurchase 1,322
Interests from Limited Partners at a cost of $237,774. An amount not to exceed
the amount originally allocated to the Repurchase Fund will be returned to the
Partnership at liquidation, if necessary, to permit payment to the Limited
Partners of their "Original Capital" plus any deficiency in their "Liquidation
Preference" as defined in the Partnership Agreement.
Subject to the provisions of the Partnership Agreement, "Net Cash Proceeds"
which are available for distribution will be distributed only to the Limited
Partners until such time as the Limited Partners have received a return of
their "Original Capital" and their "Liquidation Preference"; thereafter, the
remaining "Net Cash Proceeds" will be distributed 90% to the Limited Partners
and 10% to the General Partner. The General Partner's share of Net Cash
Proceeds shall be returned to the Partnership if necessary to permit payment to
the Limited Partners of any deficiency in the return of their Original Capital
and Preferential Cumulative Distributions.
3. Real Estate Acquired through Foreclosure:
The Partnership originally funded a $27,500,000 first mortgage loan
collateralized by the Green Trails Apartments. The Partnership received title
to the property in 1992. The Partnership recorded the cost of the property at
$25,636,731 representing the outstanding loan balance plus any accrued interest
receivable. In addition, the Partnership increased the basis of the property by
$451,178 for certain other liabilities and costs incurred in connection with
the foreclosure.
4. Property Sale:
In 1992, the Partnership sold one of the four buildings that comprise Ammendale
Technology Park - Phase II, along with a 2.5 acre parcel of land on which the
building is located, in an all cash sale for $1,900,000. The basis of the
property totaled $2,053,806. For financial statement purposes, the Partnership
recognized a loss of $175,112 from the sale of this property.
<PAGE>
5. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 3% to 6% of gross operating receipts.
6. Seller's Participation in Joint Venture:
The Arborland Consumer Mall is owned by a joint venture between the Partnership
and the seller. Consequently, the seller retains an interest in the property
through its interest in the joint venture. All assets, liabilities, income and
expenses of the joint venture are included in the financial statements of the
Partnership with the appropriate deduction from income, if any, for the
seller's cash flow participation in the joint venture. The seller shares in the
cash flow of the property only after the Partnership receives a preferential
distribution. During 1993 and 1992, the Partnership made distributions to the
seller of $37,237 and $131,375, respectively, representing the seller's share
of the respective year's operations. The Partnership made no distribution to
the seller in 1994.
7. Investment in Joint Ventures with Affiliates:
(a) The Partnership owns a 39.48% joint venture interest in the 1275 K Street
Office Building in Washington, D.C.. The joint venture partner is an affiliate
of the Partnership. During 1994, 1993 and 1992 the Partnership received
distributions of $1,379,998, $1,075,474 and $1,104,476, respectively, from the
joint venture. During 1992, the joint venture recognized a provision for
investment property writedown of $3,900,000 due to a decline in the value of
the property. The Partnership's participation in loss of joint ventures with
affiliates for 1992 includes the Partnership's share of the provision of
$1,540,000.
(b) The Partnership owns a 43.3% joint venture interest in the Westech 360
Office Buildings in Austin, Texas. The joint venture partner is an affiliate of
the Partnership. During 1994, 1993 and 1992, the Partnership received
distributions of $290,889, $308,273 and $229,917, respectively, from the joint
venture. During 1993 and 1992, the Partnership made capital contributions of
$52,099 and $113,537, respectively, to the joint venture.
(c) The Partnership owns a 21.95% joint venture interest in the Perimeter 400
Center office building in Fulton County, Georgia. Three affiliated partnerships
and the Partnership are participants in the joint venture. During 1994, 1993
and 1992, the Partnership received distributions of $464,045, $107,860 and
$448,703, respectively, from the joint venture. During 1994 and 1993, the
Partnership made additional capital contributions of $26,096 and $257,697 to
the joint venture. During 1993 and 1992, the joint venture recognized a
provision for loss of $665,000 and $7,638,000, respectively, due to a decline
in the value of the property. The Partnership's participation in loss of joint
ventures with affiliates includes the Partnership's share of the provisions of
$145,968 and $1,676,541, respectively.
The following information has been summarized from the financial statements of
the joint ventures:
1994 1993 1992
---------- ---------- ----------
Net investment in real estate
as of December 31 $68,282,318 $69,149,078 $69,640,626
Total liabilities as of
December 31 751,926 596,505 657,960
Total income 13,124,088 12,843,241 12,914,540
Net income before loss
provisions 4,437,187 3,524,043 4,732,812
Net income (loss) 4,437,187 2,859,043 (6,805,188)
<PAGE>
8. Provision for Investment Property Writedowns:
The Partnership determined that an impairment to the asset values of the
Ammendale Technology Park - Phase II office buildings, the Erindale Centre
shopping center and the Bingham Farms Office Plaza - Phase IV had occurred. The
properties were written down to the Partnership's estimate of their fair value.
The Partnership recognized a provision for investment property writedown on the
Ammendale Technology Park - Phase II of $2,700,000 in 1993 and on the Erindale
Centre shopping center and Bingham Farms Office Plaza - Phase IV of $3,300,000
and $3,400,000, respectively, in 1992.
9. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, differ from the tax
returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1994 in the financial statements is $905,523 less than the
taxable income of the Partnership for the same period. The Partnership's
aggregate cost of land and buildings and improvements for Federal income tax
purposes is $109,362,311.
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees None None None None $42,350 None
Property management fees $706,757 None $482,771 $43,232 317,656 $35,166
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 77,188 $28,693 68,717 5,678 78,165 6,196
Data processing 79,700 23,037 124,341 33,998 132,240 10,695
Investment processing 16,063 1,290 8,413 695 7,098 563
Investor communica-
tions 12,740 7,211 10,875 899 17,649 1,399
Legal 18,725 10,009 14,899 1,231 21,172 1,678
Portfolio management 67,524 27,154 61,708 4,809 42,989 3,408
Other 27,922 5,579 12,203 1,008 7,325 581
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed six
of the Partnership's properties until the affiliate was sold to a third party
in November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who recieves no
fee for administering the program. The Partnership's premiums to the deductible
insurance program were $89,149, $60,460 and $37,995 for 1994, 1993 and 1992,
respectively.
11. Rentals under Operating Leases:
The Partnership receives rental income from the leasing of office and retail
shopping center space under operating leases. The minimum future rentals
(excluding amounts representing executory costs such as taxes, maintenance and
insurance) based on operating leases held at December 31, 1994 are
<PAGE>
approximately as follows:
1995 $ 5,929,000
1996 5,758,000
1997 5,416,000
1998 3,868,000
1999 1,543,000
Thereafter 4,472,000
-----------
$ 26,986,000
===========
Minimum future rentals do not include amounts which may be received from
certain tenants based upon a percentage of their gross sales in excess of
stipulated minimums. Percentage rentals were not significant during 1994, 1993
and 1992.
The Partnership is subject to the usual business risks regarding the collection
of these rentals.
Approximately 77% of the space at the Bingham Farms Office Plaza - Phase IV is
leased to Allnet Communications Services, and 14% of the Partnership's total
rental income recognized during 1994 relates to Allnet. In August 1992, Allnet
extended its lease for an additional six years through July 1998.
12. Subsequent Event:
In January 1995, the Partnership made a distribution from Net Cash Receipts of
$1,563,370 ($1.75 per Taxable Interest and $2.33 per Tax-exempt Interest) to
the holders of Limited Partnership Interests for the fourth quarter of 1994.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
<CAPTION>
Col. A Col. B Col. C Col. D
--------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (a) (b)
--------------------- ------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase II, three
109,000 sq. ft. one-
story ofc. bldgs. in
Prince George's
County, MD None $4,642,744 $2,416,214 $ 391,233 $177,650 $(2,700,000)
Arborland Consumer Mall,
348,000-sq. ft. mall
in Ann Arbor, MI None 2,400,000 18,344,680 251,043 85,161
Belmont Apts., 202-
units in Renton, WA None 1,011,730 7,672,086 None 12,317
Bingham Farms Office
Plaza-Phase IV, 4-
story 145,000-sq.
ft. office bldg. in
Bingham Farms, MI None 1,000,000 17,180,850 677,651 15,047 (3,400,000)
Erindale Centre,
167,000-sq. ft.
shpg. cntr. in
Colorado Springs, CO None 2,630,000 14,710,425 280,901 86,273 (7,200,000)
Green Trails Apts.,
440-units in
Lisle, IL None 4,634,385 21,155,668 None 297,856
Westlake Meadows Apts.,
162-units in Lake
Oswego, OR None 900,000 7,557,445 None 34,298
----------- ----------- ---------- -------- ------------
Total $17,218,859 $89,037,368 $1,600,828 $708,602 $(13,300,000)
=========== =========== ========== ======== ============
</TABLE
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
</TABLE>
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion(d) struction uired is Computed
------------------- -------- ---------- ----------- --------- ---------- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase II, three
one-story ofc. bldgs.
containing 109,000
sq. ft. in Prince
George's County, MD $2,991,777 $ 1,936,064 $ 4,927,841 $ 257,324 (e) 10/91(f) (g)
Arborland Consumer Mall,
348,000-sq. ft. mall
in Ann Arbor, MI 2,409,851 18,671,033 21,080,884 8,184,685 (h) 5/86 (g)
Belmont Apts., 202-
units in Renton, WA 1,013,170 7,682,963 8,696,133 2,825,703 1986 7/86 (g)
Bingham Farms Office
Plaza-Phase IV, 4-
story 145,000-sq.
ft. office bldg. in
Bingham Farms, MI 820,628 14,652,920 15,473,548 5,592,022 1982 1/86 (g)
Erindale Centre,
167,000-sq. ft.
shpg. cntr. in
Colorado Springs, CO 1,567,301 8,940,298 10,507,599 4,864,516 (i) 9/86 (g)
Green Trails Apts.,
440-units in
Lisle, IL 4,687,909 21,400,000 26,087,909 1,989,103 1988 9/92(f) (g)
Westlake Meadows Apts.,
162-units in Lake
Oswego, OR 903,645 7,588,098 8,491,743 2,546,037 1986 7/86 (g)
----------- ----------- ----------- -----------
Total $14,394,281 $80,871,376 $95,265,657 $26,259,390
=========== =========== =========== ===========
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs and other related
professional fees.
(b) Represents a reduction of basis due to a permanent impairment of the asset
value.
(c) The aggregate cost of land for Federal income tax purposes is $17,417,431
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $91,944,880. The total of these is $109,362,311.
(d) Reconciliation of Real Estate
-----------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $95,103,194 $97,803,194 $80,008,639
Additions during the year:
Acquisition through
foreclosure 26,087,909
Improvements 162,463 488,485
Deductions during the year:
Investment property
writedowns (2,700,000) (6,700,000)
Cost of property sold (2,081,839)
----------- ----------- ---------
Balance at end of year $95,265,657 $95,103,194 $97,803,194
=========== =========== ===========
Reconciliation of Accumulated Depreciation
------------------------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $23,287,761 $20,288,231 $17,441,800
Depreciation expense for
the year 2,971,629 2,999,530 2,874,464
Accumulated depreciation of
property sold (28,033)
----------- ----------- -----------
Balance at end of year $26,259,390 $23,287,761 $20,288,231
=========== =========== ===========
(e) The office buildings were completed in phases in 1985 and 1987.
(f) This property was acquired through foreclosure.
(g) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 20 to 31
Furniture and fixtures 4 to 5
(h) This consumer mall was completed in 1960 and enclosed in 1973.
(i) This shopping center was completed in phases in 1983 and 1985.
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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<SECURITIES> 0
<RECEIVABLES> 2331
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12683
<PP&E> 95266
<DEPRECIATION> 26259
<TOTAL-ASSETS> 105269
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 105269
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<CGS> 0
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