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 June 30, 1995
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-14348
-------
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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 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 EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 11,384,641 $ 9,862,343
Accounts and accrued interest receivable 1,889,984 2,331,185
Prepaid expenses, principally real
estate taxes and insurance 278,620 489,030
Deferred expenses, net of accumulated
amortization of $275,325 in 1995 and
$238,795 in 1994 240,966 277,496
-------------- --------------
13,794,211 12,960,054
-------------- --------------
Investment in real estate:
Land 14,394,281 14,394,281
Buildings and improvements 80,888,680 80,871,376
-------------- --------------
95,282,961 95,265,657
Less accumulated depreciation 27,745,205 26,259,390
-------------- --------------
Investment in real estate, net of
accumulated depreciation 67,537,756 69,006,267
-------------- --------------
Investment in joint ventures with affiliates 23,440,515 23,302,601
-------------- --------------
$ 104,772,482 $ 105,268,922
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 276,619 $ 587,400
Due to affiliates 15,149 102,973
Accrued liabilities, principally
real estate taxes 466,978 514,034
Security deposits 329,178 305,383
-------------- --------------
Total liabilities 1,087,924 1,509,790
Partners' capital (683,204 Limited
Partnership Interests issued and
outstanding 103,684,558 103,759,132
-------------- --------------
$ 104,772,482 $ 105,268,922
============== ==============
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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Rental $ 6,407,808 $ 6,243,345
Service 1,329,966 1,345,350
Participation in income of joint
ventures with affiliates 999,866 928,386
Interest on short-term investments 304,976 157,641
-------------- --------------
Total income 9,042,616 8,674,722
-------------- --------------
Expenses:
Depreciation 1,485,815 1,492,177
Amortization of deferred expenses 36,530 35,976
Property operating 2,493,758 2,544,449
Real estate taxes 854,970 858,877
Property management fees 350,425 343,277
Administrative 421,536 310,611
-------------- --------------
Total expenses 5,643,034 5,585,367
-------------- --------------
Net income $ 3,399,582 $ 3,089,355
============== ==============
Net income allocated to General Partner $ 501,061 $ 469,960
============== ==============
Net income allocated to Limited Partners $ 2,898,521 $ 2,619,395
============== ==============
Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 4.24 $ 3.83
============== ==============
Distributions to General Partner $ 347,416 $ 347,416
============== ==============
Distributions to Limited Partners $ 3,126,740 $ 3,126,740
============== ==============
Distributions per Limited Partnership
Interest:
Taxable $ 3.50 $ 3.50
============== ==============
Tax-exempt $ 4.66 $ 4.66
============== ==============
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 June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Rental $ 3,237,439 $ 3,049,130
Service 700,622 676,250
Participation in income of joint
ventures with affiliates 584,573 411,995
Interest on short-term investments 160,077 87,775
-------------- --------------
Total income 4,682,711 4,225,150
-------------- --------------
Expenses:
Depreciation 742,908 750,494
Amortization of deferred expenses 18,265 18,719
Property operating 1,336,575 1,286,246
Real estate taxes 413,481 432,221
Property management fees 172,419 182,474
Administrative 255,434 164,994
Total expenses 2,939,082 2,835,148
-------------- --------------
Net income $ 1,743,629 $ 1,390,002
============== ==============
Net income allocated to General Partner $ 255,008 $ 220,147
============== ==============
Net income allocated to Limited Partners $ 1,488,621 $ 1,169,855
============== ==============
Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 2.18 $ 1.71
============== ==============
Distribution to General Partner $ 173,708 $ 173,708
============== ==============
Distribution to Limited Partners $ 1,563,370 $ 1,563,370
============== ==============
Distribution per Limited Partnership
Interest:
Taxable $ 1.75 $ 1.75
============== ==============
Tax-exempt $ 2.33 $ 2.33
============== ==============
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 six months ended June 30, 1995 and 1994
(UNAUDITED)
1995 1994
-------------- --------------
Operating activities:
Net income $ 3,399,582 $ 3,089,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in income of joint
ventures with affiliates (999,866) (928,386)
Depreciation of properties 1,485,815 1,492,177
Amortization of deferred expenses 36,530 35,976
Net change in:
Accounts and accrued interest
receivable 441,201 (167,962)
Prepaid expenses 210,410 414,133
Accounts payable (310,781) 43,261
Due to affiliates (87,824) 128,892
Accrued liabilities (47,056) (47,098)
Security deposits 23,795 8,449
-------------- --------------
Net cash provided by operating activities 4,151,806 4,068,797
-------------- --------------
Investing activities:
Capital contribution to joint venture
with an affiliate (26,096)
Distributions from joint ventures
with affiliates 861,952 1,258,810
Improvements to property (17,304) (145,274)
-------------- --------------
Net cash provided by investing activities 844,648 1,087,440
-------------- --------------
Financing activities:
Distributions to Limited Partners (3,126,740) (3,126,740)
Distributions to General Partner (347,416) (347,416)
Payment of deferred expenses (28,816)
-------------- --------------
Cash used in financing activities (3,474,156) (3,502,972)
-------------- --------------
Net change in cash and cash equivalents 1,522,298 1,653,265
Cash and cash equivalents at beginning
of period 9,862,343 8,268,552
-------------- --------------
Cash and cash equivalents at end of period $ 11,384,641 $ 9,921,817
============== ==============
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 six months and quarter
ended June 30, 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
six months and quarter ended June 30, 1995 are:
Paid
----------------------
Six Months Quarter Payable
----------- -------- ---------
Reimbursement of expenses to
the General Partner, at cost $204,334 $204,334 $15,149
3. Subsequent Event:
In July 1995, the Partnership made a distribution of $2,362,136 ($2.65 per
Taxable Interest and $3.52 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the second quarter of 1995. This distribution
includes a regular quarterly distribution of $1.75 per Taxable Interest and
$2.33 per Tax-exempt Interest from Net Cash Receipts, and a special
distribution of $ .90 per Taxable Interest and $1.19 per Tax-exempt Interest
from Net Cash Receipts reserves.
<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. All 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
----------
Improved operations at several of the Partnership's properties as well as at
two of the Partnership's investments in joint ventures with affiliates caused
net income to increase during the six months and quarter ended June 30, 1995 as
compared to the same periods in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
---------------------
Primarily as a result of higher rental rates at the Green Trails Apartments,
rental income increased during the six months and quarter ended June 30, 1995
as compared to the same periods in 1994.
Improved operations at the 1275 K Street Office Building resulting from higher
occupancy and rental rates, as well as improved operations at Perimeter 400
Office Center resulting from higher rental rates and lower repairs and
maintenance costs, caused participation in income of joint ventures with
affiliates to increase during the quarter ended June 30, 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 six months and quarter ended
June 30, 1995 as compared to the same periods in 1994.
Primarily as a result of legal fees incurred by the Partnership relating to
lawsuits involving the Partnership, administrative expense increased during the
six months and quarter ended June 30, 1995 as compared to the same periods in
1994.
<PAGE>
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of June 30, 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 the Parntership's share of
operations from the properties owned through joint ventures with affiliates and
improvements to one of the Partnership's commercial 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
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 six months ended June 30, 1995 and 1994, all
seven properties owned by the Partnership, and the three properties in which
the Partnership holds minority joint venture interests, generated positive cash
flow. Leasing costs of approximately $195,000 were incurred at the Ammendale
Technology Park - Phase II Office Building during the first six months of 1994
to lease vacant space and renew existing tenant leases which were scheduled to
expire in 1994. These costs were not included in classifying the cash flow
performance of this property since they are non-recurring expenditures. Had
these cost been included, this property would have operated at a marginal cash
flow deficit during the first six months of 1994. As of June 30, 1995, the
occupancy rates of the Partnership's residential properties ranged from 91% to
99% and the occupancy rates of the commercial properties ranged from 84% to
93%. 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 July 1995, the Partnership paid a distribution of $2,362,136 ($2.65 per
Taxable Interest and $3.52 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the second quarter for 1995. This distribution
includes a regular quarterly distribution of $1.75 per Taxable Interest and
$2.33 per Tax-exempt Interest from Net Cash Receipts, and a special
distribution of $.90 per Taxable Interest and $1.19 per Tax-exempt Interest
from Net Cash Receipts reserves. The level of the regular quarterly
distribution was consistent with the amount distributed for the first quarter
of 1995. Including the July 1995 distribution, Limited Partners have received
cumulative distributions of Net Cash Receipts of $79.70 per $250 Taxable
Interest and $106.07 per Tax-exempt Interest. There have been no distributions
of Net Cash Proceeds. In July 1995, the Partnership also paid $196,845 to the
General Partner as its distributive share of the Net Cash Receipts distributed
for the second quarter of 1995 and made a contribution to the Repurchase Fund
of $65,615. 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.
<PAGE>
During the quarter ended June 30, 1995, the General Partner, on behalf of the
Partnership, used amounts placed in the Repurchase Fund to repurchase 769
interests from Limited Partners at a total cost of $141,275.
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
-----------------------------------------
(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 six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended June 30, 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 D. Parker
-----------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners-III, the
General Partner
Date: August 14, 1995
----------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 11385
<SECURITIES> 0
<RECEIVABLES> 1890
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13553
<PP&E> 95283
<DEPRECIATION> 27745
<TOTAL-ASSETS> 104772
<CURRENT-LIABILITIES> 1088
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 103684
<TOTAL-LIABILITY-AND-EQUITY> 104772
<SALES> 0
<TOTAL-REVENUES> 9043
<CGS> 0
<TOTAL-COSTS> 3699
<OTHER-EXPENSES> 1944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3400
<INCOME-TAX> 0
<INCOME-CONTINUING> 3400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3400
<EPS-PRIMARY> 4.24
<EPS-DILUTED> 4.24
</TABLE>
