UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 1996
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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
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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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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(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 ]
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Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Operations
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Summary of Operations
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During 1996, Balcor Equity Pension Investors - III A Real Estate Limited
Partnership (the "Partnership") recognized gains on the sales of two of its
properties and two of the three properties in which it held a joint venture
interest. These gains were partially offset by its share of a loss on the sale
of one of the properties in which it held a joint venture interest, and a
provision for investment property writedown on one of the Partnership's
remaining properties. The combined effect of these events resulted in higher
net income during 1996 as compared to 1995 and 1994. Improved operations at
several of the properties caused net income to increase in 1995 as compared to
1994. Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
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The Partnership sold Westlake Meadows and Green Trails apartment complexes in
June and July 1996, respectively, which was the primary reason for the decrease
in rental income during 1996 when compared to 1995.
Participation in income of joint ventures with affiliates represents the
Partnership's share of the income or loss of the 1275 K Street, Westech 360 and
Perimeter 400 office buildings. As a result of the Partnership's share of the
gains recognized on the sales of the Westech 360 and Perimeter 400 office
buildings totaling approximately $7,014,000, participation in income from joint
ventures with affiliates increased during 1996 as compared to 1995. This
increase was partially offset by the Partnership's share of a loss recognized
on the sale of the 1275 K Street office building of approximately $1,925,000.
Higher average cash balances due to the investment of the proceeds from the
property sales prior to distribution to Partners, resulted in an increase in
interest income on short-term investments during 1996 as compared to 1995.
Depreciation expense decreased during 1996 as compared to 1995 due to the sales
of the Westlake Meadows and Green Trails apartment complexes.
Property operating expense decreased during 1996 when compared to 1995 by
approximately $500,000 which was primarily due to the sales of the Westlake
Meadows and Green Trails apartment complexes of approximately $566,000. In
addition, there was a decrease in property operating expense at the Bingham
Farms Office Plaza - Phase IV due to structural repairs in 1995 of
approximately $197,000. These decreases were partially offset by an increase
in property operating expense at the Arborland Consumer Mall due to leasing
costs of approximately $350,000 incurred in 1996.
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Real estate tax expense decreased during 1996 as compared to 1995 primarily due
to the sales of the Westlake Meadows and Green Trails apartment complexes.
Property management fees decreased during 1996 as compared to 1995 due to the
sales of the Westlake Meadows and Green Trails apartment complexes.
The Partnership incurred higher consulting, investor processing, printing and
postage costs in connection with a response to a tender offer during 1996. As
a result, administrative expenses increased during 1996 as compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties. Determinations of fair
value are made periodically, but not less than annually, on the basis of
property operations. Determinations of fair value represent estimations based
on many variables which affect the value of real estate, including economic and
demographic conditions. During 1996, the Partnership recognized a provision
for investment property writedown of $3,777,000 for the Arborland Consumer
Mall. This estimate was based on the property's sale value less estimated
closing costs.
The Partnership sold the Westlake Meadows and Green Trails apartment complexes
in 1996, and recognized gains totaling $14,608,840 during 1996.
1995 Compared to 1994
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Primarily as a result of higher rental rates at the Green Trails Apartments,
rental income increased during 1995 as compared to 1994.
Improved operations at the Westech 360 Office Buildings resulting from higher
rental rates, and a recovery of a provision related to the change in the
estimate of the fair value of the Perimeter 400 Center Office Building, 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 structural repairs at the Erindale
Centre Shopping Center and lower advertising costs and repairs and maintenance
expenditures at the Arborland Consumer Mall, property operating expense
decreased during 1995 as compared to 1994.
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $24,243,000 as
of December 31, 1996 as compared to December 31, 1995 primarily due to proceeds
received from the sales of the Westlake Meadows and Green Trails apartment
complexes and the three properties in which the Partnership held minority joint
venture interests. The Partnership generated cash flow of approximately
$6,542,000 from operating activities which represent the operations of the
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Partnership's properties and interest income on short-term investments, which
were partially offset by the payment of administrative expenses. Investing
activities consisted of net proceeds received from the sales of the Westlake
Meadows and Green Trails apartment complexes of approximately $42,647,000,
improvements to properties of approximately $359,000, and net distributions
received from joint ventures with affiliates of approximately $27,446,000.
Financing activities consisted of distributions to the Partners of
approximately $52,034,000. In January 1997, the Partnership made a special Net
Cash Proceeds distribution to tax-exempt Limited Partners of approximately
$23,955,000.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
During 1996 and 1995, all of the remaining properties as of December 31, 1996
generated positive cash flow. The Westlake Meadows and Green Trails apartment
complexes, which were sold in June and July 1996, respectively, generated
positive cash flow during 1995 and prior to their sales in 1996. All of the
three properties in which the Partnership held minority joint venture
interests, generated positive cash flow in 1995 and prior to their sales in
1996.
As of December 31, 1996, the occupancy rate of the Partnership's remaining
residential property was 92% and the occupancy rates of the commercial
properties ranged from 87% to 95% except for the Arborland Consumer Mall which
had an occupancy rate of 77%.
During June 1996 and July 1996, the Partnership sold the Westlake Meadows and
Green Trails apartment complexes, respectively. During December 1996, the
General Partner also sold the 1275 K Street, Westech 360, and Perimeter 400
office buildings, in which the Partnership held minority joint venture
interests. During 1997, the Partnership sold the Ammendale Technology Park -
Phase II office buildings. The Partnership currently has contracts to sell the
Arborland Consumer Mall and the Erindale Centre Shopping Center for the sales
prices of $7,750,000 and $7,600,000, respectively. The Partnership is actively
marketing the remaining two properties in its portfolio.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
In June 1996, the Partnership sold the Westlake Meadows Apartments in an all
cash sale for $10,800,000. From the proceeds of the sale, the Partnership paid
$344,963 in selling costs. In accordance with the Partnership Agreement, the
Partnership distributed the proceeds to the Tax-exempt Limited Partners in
October 1996. See Note 11 of Notes to Financial Statements for additional
information.
<PAGE>
In July 1996, the Partnership sold the Green Trails Apartments in an all cash
sale for $33,050,000. In addition, the buyer assumed a $415,682 liability for
the real estate taxes. From the proceeds of the sale, the Partnership paid
$857,567 in selling costs. Pursuant to the terms of the sale, $250,000 of the
proceeds were retained by the Partnership until December 1996. The full amount
of the holdback was released in December 1996. In accordance with the
Partnership Agreement, the Partnership distributed a majority of the proceeds
to the Tax-exempt Limited Partners in October 1996. The remaining proceeds were
distributed to the Tax-exempt Limited Partners in January 1997. See Note 11 of
Notes to Financial Statements for additional information.
The 1275 K Street Office Building was owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $28,300,000. From the proceeds of the sale,
the joint venture paid $911,470 in selling costs. The net proceeds of the sale
were $27,388,530, of which $10,812,992 was the Partnership's share. Pursuant
to the terms of the sale, $2,287,500 of the proceeds will be retained by the
joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to
Financial Statements for additional information.
The Westech 360 Office Building was owned by a joint venture consisting of the
Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $18,330,000. From the proceeds of the sale,
the joint venture paid $477,653 in selling costs. The net proceeds of the sale
were $17,852,348, of which $7,730,067 was the Partnership's share. Pursuant to
the terms of the sale, $1,395,000 of the proceeds will be retained by the joint
venture until September 1997. In accordance with the Partnership Agreement,
the remaining proceeds received by the Partnership were distributed to the
Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to Financial
Statements for additional information.
The Perimeter 400 Office Building was owned by a joint venture consisting of
the Partnership and three affiliates. In December 1996, the joint venture sold
the property in an all cash sale for $40,700,000. From the proceeds of the
sale, the joint venture paid $882,765 in selling costs. The net proceeds of
the sale were $39,817,235, of which $8,739,883 was the Partnership's share.
Pursuant to the terms of the sale, $1,750,000 of the proceeds will be retained
by the joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to
Financial Statements for additional information.
In February 1997, the Partnership sold the Ammendale Technology Park - Phase II
in an all cash sale for $5,768,000. From the proceeds of the sale, the
Partnership paid $289,417 in selling costs. Pursuant to the terms of the sale,
$170,904 of the proceeds has been placed in escrow until November 1997. The
Partnership expects to distribute the remaining proceeds to the Tax-exempt
Limited Partners in 1997 in accordance with the Partnership Agreement. See
Note 15 of Notes to Financial Statements for additional information.
<PAGE>
In January 1997, the Partnership made a distribution of $26,451,647 ($2.80 per
Taxable Interest and $41.50 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the fourth quarter of 1996. This distribution
includes a regular quarterly distribution of $2.80 per Taxable Interest and
$3.72 per Tax-exempt Interest, and a special distribution of $37.78 per
Tax-exempt Interest pursuant to the Partnership Agreement from Net Cash
Proceeds from the sales of the three properties in which the Partnership held
minority joint venture interests. In January 1997, the Partnership also paid
$208,027 to the General Partner as its distributive share of Net Cash Receipts
distributed for the fourth quarter of 1996 and made a contribution to the
Repurchase Fund of $69,342.
The Partnership made four distributions totaling $16.35, $7.90 and $7.00 per
Taxable Interest and $78.24, $10.51 and $9.32 per Tax-exempt Interest in 1996,
1995 and 1994, respectively. Distributions to Tax-Exempt Limited Partners were
comprised of $21.74 of Net Cash Receipts and $56.50 of Net Cash Proceeds in
1996, $10.51 of Net Cash Receipts in 1995 and $9.32 of Net Cash Receipts in
1994. Distributions to Taxable Limited Partners were comprised of Net Cash
Receipts in all three years. Net Cash Receipts distributions increased from
1995 to 1996 due to improved operations at the Partnership's properties and due
to a special distribution of Net Cash Receipts reserves in 1996. Including the
January 1997 distribution, Limited Partners have received Net Cash Receipts
distributions of $100.60 per $250 Taxable Interest and $133.86 per Tax-exempt
Interest, and Net Cash Proceeds of $94.28 per $250 Tax-exempt Interest. Future
distributions will be made from cash flow generated from property operations
from the remaining properties and future property sales. In light of results to
date, the General Partner does not anticipate that taxable investors will
recover all of their original investment.
During 1996, the General Partner, on behalf of the Partnership, used amounts
placed in the Repurchase Fund to repurchase 7,554 Interests from Limited
Partners at a total cost of $992,928. In February 1997, the Partnership
discontinued the repurchase of Interests from Limited Partners.
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.
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to properties of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
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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/ Jayne A. Kosik
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Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Equity Partners-III, the General Partner
Date: April 4, 1997
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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
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President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
/s/ Thomas E. Meador Partners-III, the General Partner April 4, 1997
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Thomas E. Meador
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Equity Partners-III, the General
/s/ Jayne A. Kosik Partner April 4, 1997
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Jayne A. Kosik
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