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 September 30, 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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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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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<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- ---------------
Cash and cash equivalents $ 11,169,648 $ 9,862,343
Accounts and accrued interest receivable 1,737,685 2,331,185
Prepaid expenses, principally real
estate taxes and insurance 569,817 489,030
Deferred expenses, net of accumulated
amortization of $293,590 in 1995 and
$238,795 in 1994 222,701 277,496
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13,699,851 12,960,054
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Investment in real estate:
Land 14,394,281 14,394,281
Buildings and improvements 81,103,631 80,871,376
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95,497,912 95,265,657
Less accumulated depreciation 28,488,112 26,259,390
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Investment in real estate, net of
accumulated depreciation 67,009,800 69,006,267
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Investment in joint ventures with
affiliates 23,045,207 23,302,601
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$ 103,754,858 $ 105,268,922
============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 225,296 $ 587,400
Due to affiliates 30,560 102,973
Accrued liabilities, principally
real estate taxes 456,598 514,034
Security deposits 328,985 305,383
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Total liabilities 1,041,439 1,509,790
Partners' capital (683,204 Limited
Partnership Interests issued and
outstanding) 102,713,419 103,759,132
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$ 103,754,858 $ 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 nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental $ 9,667,032 $ 9,471,533
Service 1,967,152 1,997,001
Participation in income of joint
ventures with affiliates 1,354,407 1,195,507
Interest on short-term investments 463,076 269,911
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Total income 13,451,667 12,933,952
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Expenses:
Depreciation 2,228,722 2,246,453
Amortization of deferred expenses 54,795 54,359
Property operating 3,739,739 4,008,234
Real estate taxes 1,250,734 1,290,806
Property management fees 535,653 519,991
Administrative 588,985 506,319
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Total expenses 8,398,628 8,626,162
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Net income $ 5,053,039 $ 4,307,790
============== ==============
Net income allocated to General Partner $ 747,198 $ 673,373
============== ==============
Net income allocated to Limited Partners $ 4,305,841 $ 3,634,417
============== ==============
Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 6.30 $ 5.32
============== ==============
Distributions to General Partner $ 609,876 $ 521,124
============== ==============
Distributions to Limited Partners $ 5,488,876 $ 4,690,110
============== ==============
Distributions per Limited Partnership
Interest:
Taxable $ 6.15 $ 5.25
============== ==============
Tax-exempt $ 8.18 $ 6.99
============== ==============
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 quarters ended September 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Rental $ 3,269,756 $ 3,228,938
Service 626,654 650,901
Participation in income of joint
ventures with affiliates 354,541 267,121
Interest on short-term investments 158,100 112,270
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Total income 4,409,051 4,259,230
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Expenses:
Depreciation 742,907 754,276
Amortization of deferred expenses 18,265 18,383
Property operating 1,245,981 1,463,785
Real estate taxes 395,764 431,929
Property management fees 185,228 176,714
Administrative 167,449 195,708
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Total expenses 2,755,594 3,040,795
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Net income $ 1,653,457 $ 1,218,435
============== ==============
Net income allocated to General Partner $ 246,137 $ 203,413
============== ==============
Net income allocated to Limited Partners $ 1,407,320 $ 1,015,022
============== ==============
Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 2.06 $ 1.49
============== ==============
Distribution to General Partner $ 262,460 $ 173,708
============== ==============
Distribution to Limited Partners $ 2,362,136 $ 1,563,370
============== ==============
Distribution per Limited Partnership
Interest:
Taxable $ 2.65 $ 1.75
============== ==============
Tax-exempt $ 3.52 $ 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 nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 5,053,039 $ 4,307,790
Adjustments to reconcile net income to
net cash provided by operating
activities:
Participation in income of joint
ventures with affiliates (1,354,407) (1,195,507)
Depreciation of properties 2,228,722 2,246,453
Amortization of deferred expenses 54,795 54,359
Net change in:
Accounts and accrued interest
receivable 593,500 (198,083)
Prepaid expenses (80,787) 63,022
Accounts payable (362,104) 121,138
Due to affiliates (72,413) 91,993
Accrued liabilities (57,436) (52,522)
Security deposits 23,602 (2,542)
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Net cash provided by operating activities 6,026,511 5,436,101
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Investing activities:
Capital contribution to joint venture
with an affiliate (26,096)
Distributions from joint ventures with
affiliates 1,611,801 1,806,277
Improvements to property (232,255) (145,274)
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Net cash provided by investing activities 1,379,546 1,634,907
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Financing activities:
Distributions to Limited Partners (5,488,876) (4,690,110)
Distributions to General Partner (609,876) (521,124)
Payment of deferred expenses (28,816)
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Cash used in financing activities (6,098,752) (5,240,050)
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Net change in cash and cash equivalents 1,307,305 1,830,958
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 $ 11,169,648 $ 10,099,510
============== ==============
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:
A reclassification has been made to the previously reported 1994 financial
statements in order to provide comparability with the 1995 statements. This
reclassification has not changed the 1994 results. In the opinion of
management, all adjustments necessary for a fair presentation have been made to
the accompanying statements for the nine months and quarter ended September 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
nine months and quarter ended:
Paid
------------------------
Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $241,177 $36,843 $30,560
3. Subsequent Event:
In October 1995, the Partnership made a distribution 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 third 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 with an affiliate 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 ventures 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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Improved operations at several of the Partnership's properties as well as at
one of the Partnership's joint venture investments caused net income to
increase during the nine months and quarter ended September 30, 1995 as
compared to the same periods in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
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Unless otherwise noted, discussion of fluctuations between 1995 and 1994 refer
to both the nine months and quarters ended September 30, 1995 and 1994.
Primarily as a result of higher rental rates at the Green Trails Apartments,
rental income increased during the nine months ended September 30, 1995 as
compared to the same period in 1994.
Improved operations at the Westech 360 Office Buildings resulting from higher
rental rates caused participation in income of joint ventures with affiliates
to increase during 1995 as compared to 1994.
Due to higher average cash balances and higher average interest rates, interest
income on short-term investments increased during 1995 as compared to 1994.
As a result of decreased leasing costs and repairs at the Erindale Centre
Shopping Center, property operating expense decreased during the quarter ended
September 30, 1995 when compared to the same period in 1994.
Primarily as a result of legal fees incurred during 1995 by the Partnership
relating to lawsuits involving the Partnership, administrative expense
<PAGE>
increased during the nine months ended September 30, 1995 as compared to the
same period in 1994. However, due to the timing of the recognition of third
party accounting fees, administrative expense decreased during the third
quarter of 1995 as compared to the same period in 1994.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of September 30, 1995 as
compared to December 31, 1994. The Partnership generated cash flow from the
operation of its properties, which include the Partnership's investments in
joint ventures, and funded distributions to the Limited Partners and the
General Partner.
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 nine months ended September 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. As of
September 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 94% to 99% and the occupancy rates of the commercial
properties ranged from 91% to 98%. 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 October 1995, the Partnership paid a distribution 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 third quarter of 1995. The level of this regular
quarterly distribution is consistent with the amount distributed for the second
quarter of 1995. Including the October 1995 distribution, Limited Partners have
received cumulative distributions of Net Cash Receipts of $81.45 per $250
Taxable Interest and $108.40 per Tax-exempt Interest. There have been no
distributions of Net Cash Proceeds. In October 1995, the Partnership also paid
$130,281 to the General Partner as its distributive share of the Net Cash
Receipts distributed for the third quarter of 1995 and made a contribution to
the Repurchase Fund of $43,427. 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.
During the nine months ended September 30, 1995, the General Partner, on behalf
of the Partnership, used amounts placed in the Repurchase Fund to repurchase
1,667 interests from Limited Partners at a cost of $310,242.
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 nine month period ending
September 30, 1995 is attached hereto.
(b) Reports on form 8-K: A Current Report on Form 8-K dated September 14,
1995, as amended by Form 8-K/A dated October 27, 1995, was filed reporting a
change in the Registrant's certifying public accountants.
<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: November 14, 1995
----------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 11170
<SECURITIES> 0
<RECEIVABLES> 1738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13477
<PP&E> 95498
<DEPRECIATION> 28488
<TOTAL-ASSETS> 103755
<CURRENT-LIABILITIES> 1041
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 102714
<TOTAL-LIABILITY-AND-EQUITY> 103755
<SALES> 0
<TOTAL-REVENUES> 13452
<CGS> 0
<TOTAL-COSTS> 5526
<OTHER-EXPENSES> 2873
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5053
<INCOME-TAX> 0
<INCOME-CONTINUING> 5053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5053
<EPS-PRIMARY> 6.30
<EPS-DILUTED> 6.30
</TABLE>
