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, 1996
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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 (847) 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
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
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Cash and cash equivalents $ 12,587,650 $ 11,280,395
Accounts and accrued interest receivable 1,373,997 1,775,121
Prepaid expenses, principally real
estate taxes and insurance 303,858 531,549
Deferred expenses, net of accumulated
amortization of $330,120, 1996 and
$311,855 in 1995 186,171 204,436
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14,451,676 13,791,501
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Investment in real estate:
Land 14,394,281 14,394,281
Buildings and improvements 81,277,182 81,277,182
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95,671,463 95,671,463
Less accumulated depreciation 29,985,097 29,238,934
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Investment in real estate, net of
accumulated depreciation 65,686,366 66,432,529
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Investment in joint ventures with
affiliates 23,102,280 23,017,239
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$ 103,240,322 $ 103,241,269
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 212,860 $ 289,191
Due to affiliates 48,492 29,973
Accrued liabilities, principally
real estate taxes 625,300 519,233
Security deposits 324,341 329,099
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Total liabilities 1,210,993 1,167,496
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Limited Partners' capital (683,204
Interests issued and outstanding) 101,599,665 101,720,792
General Partner's capital 429,664 352,981
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Total partners' capital 102,029,329 102,073,773
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$ 103,240,322 $ 103,241,269
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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, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Rental $ 3,306,814 $ 3,170,369
Service 546,788 629,344
Participation in income of joint
ventures with affiliates 496,138 415,293
Interest on short-term investments 144,575 144,899
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Total income 4,494,315 4,359,905
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Expenses:
Depreciation 746,163 742,907
Amortization of deferred expenses 18,265 18,265
Property operating 1,323,492 1,157,183
Real estate taxes 406,811 441,489
Property management fees 176,359 178,006
Administrative 130,591 166,102
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Total expenses 2,801,681 2,703,952
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Net income $ 1,692,634 $ 1,655,953
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Net income allocated to General Partner $ 250,391 $ 246,053
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Net income allocated to Limited Partners $ 1,442,243 $ 1,409,900
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Net income per Limited Partnership Interest
(683,204 issued and outstanding) $ 2.11 $ 2.06
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Distribution to General Partner $ 173,708 $ 173,708
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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, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net income $ 1,692,634 $ 1,655,953
Adjustments to reconcile net income to
net cash provided by operating
activities:
Participation in income of joint
ventures with affiliates (496,138) (415,293)
Depreciation of properties 746,163 742,907
Amortization of deferred expenses 18,265 18,265
Net change in:
Accounts and accrued interest
receivable 401,124 356,073
Prepaid expenses 227,691 169,583
Accounts payable (76,331) (164,801)
Due to affiliates 18,519 38,803
Accrued liabilities 106,067 112,404
Security deposits (4,758) 18,536
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Net cash provided by operating activities 2,633,236 2,532,430
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Investing activities:
Distributions from joint ventures with
affiliates 411,097
Improvements to property (17,304)
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Net cash provided by or used in
investing activities 411,097 (17,304)
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Financing activities:
Distribution to Limited Partners (1,563,370) (1,563,370)
Distribution to General Partner (173,708) (173,708)
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Cash used in financing activities (1,737,078) (1,737,078)
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Net change in cash and cash equivalents 1,307,255 778,048
Cash and cash equivalents at beginning
of period 11,280,395 9,862,343
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Cash and cash equivalents at end of period $ 12,587,650 $ 10,640,391
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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,
1996, and all such adjustments are of a normal and recurring nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $24,981 $48,492
3. Investment in Joint Venture with Affiliates:
The Partnership owns a 39.48% joint venture interest in the 1275 K Street
Office Building, a 43.3% joint venture interest in the Westech 360 Office
Building and a 21.95% joint venture interest in the Perimeter 400 Center Office
Building. The following information has been summarized from the financial
statements of the joint ventures:
1996
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Net investment in real estate
as of March 31 $67,113,953
Total liabilities as of March 31 388,136
Total income 3,697,289
Net income 826,806
4. Subsequent Event:
In April 1996, the Partnership made a distribution of $2,496,319 ($2.80 per
Taxable Interest and $3.72 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the first quarter of 1996.
<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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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The Partnership's net income remained relatively unchanged during the quarter
ended March 31, 1996 as compared to the same period in 1995. Further discussion
of the Partnership's operations is summarized below.
1996 Compared to 1995
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Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
Primarily as a result of decreased tenant reimbursements at the Arborland
Consumer Mall, service income decreased during 1996 as compared to 1995.
Participation in income of joint ventures with affiliates represents the
Partnership's share of operations of the 1275 K Street, Westech 360 and
Perimeter 400 office buildings. Operations at the Westech 360 and Perimeter 400
office buildings remained relatively unchanged during 1996 as compared to 1995.
Improved operations at the 1275 K Street Office Building resulting from higher
rental rates caused participation in income of joint ventures with affiliates
to increase during 1996 as compared to 1995.
As a result of increased leasing costs at Bingham Farms Office Plaza - Phase
IV, increased snow removal fees at the Ammendale Technology Park - Phase II
Office Building and increased parking lot repairs and leasing costs at Erindale
Center Shopping Center, property operating expense increased during 1996 as
compared to 1995.
Primarily as a result of decreased legal and investor processing fees,
administrative expenses decreased during 1996 as compared to 1995.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $1,307,000 as
of March 31, 1996 when compared to December 31, 1995. The Partnership generated
cash flow totaling approximately $2,633,000 from its operating activities which
represent 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 distributions
received from joint ventures with affiliates of approximately $411,000 and
financing activities consisted of quarterly distributions paid to Partners of
approximately $1,737,000.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit. 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, 1996 and 1995, 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 March 31, 1996, the occupancy rates of the Partnership's residential
properties ranged from 93% to 99% and the occupancy rates of the commercial
properties ranged from 95% to 99% except for the Arborland Consumer Mall which
had an occupancy of 78%. 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 1996, the Partnership paid $2,496,319 ($2.80 per Taxable Interest and
$3.72 per Tax-exempt Interest) to Limited Partners, representing the quarterly
distribution of Net Cash Receipts for the first quarter of 1996. This
distribution increased from the amount paid for the fourth quarter of 1995,
primarily due to increased cash flow from the Partnership's properties during
1996 when compared to 1995. Including the April 1996 distribution, Limited
Partners have received Net Cash Receipts distributions of $86.00 per $250
Taxable Interest and $114.45 per Tax-exempt Interest. There have been no
distributions of Net Cash Proceeds. In April 1996, the Partnership also paid
$208,027 to the General Partner as its distributive share of Net Cash Receipts
distributed for the first quarter of 1996 and made a contribution to the
Repurchase Fund of $69,342. The General Partner expects that the cash flow from
property operations should enable the Partnership to continue making quarterly
distributions. 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.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
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 quarter ending March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR 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: May 15, 1996
----------------------
<PAGE>
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