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
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
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
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(Exact name of registrant as specified in its charter)
Illinois 36-3354308
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(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
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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
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BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 10,640,391 $ 9,862,343
Accounts and accrued interest receivable 1,975,112 2,331,185
Prepaid expenses, principally real
estate taxes 319,447 489,030
Deferred expenses, net of accumulated
amortization of $257,060 in 1995 and
$238,795 in 1994 259,231 277,496
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13,194,181 12,960,054
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Investment in real estate:
Land 14,394,281 14,394,281
Buildings and improvements 80,888,680 80,871,376
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95,282,961 95,265,657
Less accumulated depreciation 27,002,297 26,259,390
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Investment in real estate, net of
accumulated depreciation 68,280,664 69,006,267
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Investment in joint ventures with affiliates 23,717,894 23,302,601
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$ 105,192,739 $105,268,922
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 422,599 $ 587,400
Due to affiliates 141,776 102,973
Accrued liabilities, principally
real estate taxes 626,438 514,034
Security deposits 323,919 305,383
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Total liabilities 1,514,732 1,509,790
Partners' capital (683,204 Limited Partnership
Interests issued and outstanding) 103,678,007 103,759,132
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$ 105,192,739 $105,268,922
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental $ 3,170,369 $ 3,194,215
Service 629,344 669,100
Participation in income of joint
ventures with affiliates 415,293 516,391
Interest on short-term investments 144,899 69,866
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Total income 4,359,905 4,449,572
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Expenses:
Depreciation 742,907 741,683
Amortization of deferred expenses 18,265 17,257
Property operating 1,157,183 1,258,203
Real estate taxes 441,489 426,656
Property management fees 178,006 160,803
Administrative 166,102 145,617
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Total expenses 2,703,952 2,750,219
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Net income $ 1,655,953 $ 1,699,353
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Net income allocated to General Partner $ 246,053 $ 249,813
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Net income allocated to Limited Partners $ 1,409,900 $ 1,449,540
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Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 2.06 $ 2.12
============== =============
Distribution to General Partner $ 173,708 $ 173,708
============== =============
Distribution to Limited Partners $ 1,563,370 $ 1,563,370
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Distribution per Limited Partnership
Interest:
Taxable $ 1.75 $ 1.75
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Tax-exempt $ 2.33 $ 2.33
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,655,953 $ 1,699,353
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in income of joint
ventures with affiliates (415,293) (516,391)
Depreciation of properties 742,907 741,683
Amortization of deferred expenses 18,265 17,257
Net change in:
Accounts and accrued interest
receivable 356,073 (273,678)
Prepaid expenses 169,583 146,083
Accounts payable (164,801) (188,326)
Due to affiliates 38,803 72,726
Accrued liabilities 112,404 116,072
Security deposits 18,536 4,024
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Net cash provided by operating activities 2,532,430 1,818,803
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Investing activities:
Capital contribution to joint venture
with an affiliate (26,096)
Distributions from joint ventures
with an affiliate 304,950
Improvements to property (17,304) (142,487)
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Net cash used in or provided
by investing activities (17,304) 136,367
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Financing activities:
Distribution to Limited Partners (1,563,370) (1,563,370)
Distribution to General Partner (173,708) (173,708)
Payment of deferred expenses (24,807)
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Cash used in financing activities (1,737,078) (1,761,885)
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Net change in cash and cash equivalents 778,048 193,285
Cash and cash equivalents at beginning
of period 9,862,343 8,268,552
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Cash and cash equivalents at end of period $ 10,640,391 $ 8,461,837
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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 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,
1995, 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 during the
quarter ended March 31, 1995 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost None $141,776
3. Subsequent Event:
In April 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 first quarter of 1995.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to make first mortgage
loans and to invest in and operate income-producing real property. The
Partnership raised $170,801,000 through the sale of Limited Partnership
Interests. The Partnership 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. The four
properties collateralized by the Partnership's mortgage loans were acquired
through foreclosure, including the loans funded jointly with affiliates which
were reclassified to investment in joint venture with affiliates. The
Partnership currently has seven properties and three investments in joint
ventures with affiliates in its portfolio.
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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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1995 Compared to 1994
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Operations at the 1275 K Street Office Building declined as a result of
increased leasing costs during the quarter ended March 31, 1995 and a real
estate tax refund received in 1994 for prior year taxes. As a result,
participation in income of joint ventures with affiliates decreased during the
quarter ended March 31, 1995 as compared to the same period in 1994.
Due to higher average cash balances and higher interest rates, interest income
on short-term investments increased during the quarter ended March 31, 1995 as
compared to the same period in 1994.
Lower advertising costs at the Arborland Consumer Mall and lower utility
expenses at the Bingham Farms Office Plaza - Phase IV, were the primary reasons
for the decrease in property operating expenses during the quarter ended March
31, 1995 as compared to the same period in 1994.
Effective April 1994, rental concessions ceased for a major tenant at the
Bingham Farms Office Plaza - Phase IV, resulting in an increase in rental and
service income collected at the property, and correspondingly, an increase in
property managagement fees during the quarter ended March 31, 1995 as compared
to the same period in 1994. In addition, due to the timing of collections at
certain of the Partnership's other properties, rental and service income
decreased during the quarter ended March 31, 1995 as compared to the same
period in 1994.
As a result of higher legal fees, administrative expense increased during the
quarter ended March 31, 1995 as compared to the same period in 1994.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership increased as of March 31, 1995 as compared
to December 31, 1994. Operating activities included 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 improvements to one of the
Partnership's commercial properties, while 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
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 quarters ended March 31, 1995 and 1994, six of
the seven properties owned by the Partnership, and the three properties in
which the Partnership holds minority joint venture interests, generated
positive cash flow. The Bingham Farms Office Plaza - Phase IV generated
positive cash flow during the quarter ended March 31, 1995 as compared to a
significant cash flow deficit during the same period in 1994 due to rental
concessions given to a major tenant which occupies approximately 73% of the
building. This tenant's lease provided for free rent through March 1994. As of
March 31, 1995, the occupancy rates of the Partnership's residential properties
ranged from 89% to 96% 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 April 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 first quarter of 1995. The level of this distribution was
consistent with the amount paid for the fourth quarter of 1994. To date,
Limited Partners have received cumulative distributions of Net Cash Receipts of
$77.05 per $250 Taxable Interest and $102.55 per 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.
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.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 3
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 the three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1995.
<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 EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Thomas E. Meador
---------------------------------
Thomas E. Meador
President and Chief Executive Officer (Principal
Executive Officer) of Balcor Equity Partners-III,
the General Partner
By: /s/ Brian Parker
-----------------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners-III, the
General Partner
Date: May 11, 1995
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<PAGE>
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