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 June 30, 1999
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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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BALCOR EQUITY PENSION INVESTORS - III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1999 and December 31, 1998
(Unaudited)
ASSETS
1999 1998
-------------- --------------
Cash and cash equivalents $ 2,895,763 $ 2,961,482
Accrued interest receivable 14,411 8,461
Escrow deposits - restricted 109,526 109,526
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$ 3,019,700 $ 3,079,469
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 41,254 $ 47,555
Due to affiliates 55,563 53,814
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Total liabilities 96,817 101,369
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Commitments and contingencies
Limited Partners' capital (683,204
Interests issued and outstanding) 3,520,189 3,575,406
General Partner's deficit (597,306) (597,306)
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Total partners' capital 2,922,883 2,978,100
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$ 3,019,700 $ 3,079,469
============== ==============
The accompanying notes are an integral part of the financial statements.
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, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 73,723 $ 95,407
Other income 3,437
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Total income 77,160 95,407
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Expenses:
Administrative 132,377 243,211
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Total expenses 132,377 243,211
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Net loss $ (55,217) $ (147,804)
============== ==============
Net loss allocated to General Partner None $ (2,976)
============== ==============
Net loss allocated to Limited Partners $ (55,217) $ (144,828)
============== ==============
Net loss per Limited Partnership Interest
(683,204 issued and outstanding)
- Basic and Diluted $ (0.08) $ (0.21)
============== ==============
Distributions to General Partner None $ 27,595
============== ==============
Distributions to Limited Partners None $ 5,631,654
============== ==============
Distributions per Limited Partnership
Interest:
Taxable None $ 0.28
============== ==============
Tax-Exempt None $ 8.86
============== ==============
The accompanying notes are an integral part of the financial statements.
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, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 35,713 $ 37,761
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Total income 35,713 37,761
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Expenses:
Administrative 73,378 101,611
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Total expenses 73,378 101,611
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Net loss $ (37,665) $ (63,850)
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Net loss allocated to General Partner None None
============== ==============
Net loss allocated to Limited Partners $ (37,665) $ (63,850)
============== ==============
Net loss per Limited Partnership Interest
(683,204 issued and outstanding)
- Basic and Diluted $ (0.05) $ (0.09)
============== ==============
Distribution to General Partner None $ 1,528
============== ==============
Distribution to Limited Partners None $ 13,756
============== ==============
Distribution per Limited Partnership
Interest:
Taxable None $ 0.28
============== ==============
Tax-Exempt None None
============== ==============
The accompanying notes are an integral part of the financial statements.
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, 1999 and 1998
(Unaudited)
1999 1998
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Operating activities:
Net loss $ (55,217) $ (147,804)
Adjustments to reconcile net loss
to net cash (used in) or provided
by operating activities:
Net change in:
Accounts and accrued interest
receivable (5,950) 164,181
Escrow deposits - restricted 25,000
Accounts payable (6,301) (33,545)
Due to affiliates 1,749 33,020
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Net cash (used in) or provided by
operating activities (65,719) 40,852
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Financing activities:
Distributions to Limited Partners (5,631,654)
Distributions to General Partner (27,595)
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Cash used in financing activities (5,659,249)
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Net change in cash and cash equivalents (65,719) (5,618,397)
Cash and cash equivalents at beginning
of period 2,961,482 8,638,754
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Cash and cash equivalents at end of period $ 2,895,763 $ 3,020,357
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) 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, 1999, and all such adjustments are of a normal and
recurring nature.
(b) A reclassification has been made to the previously reported 1998 financial
statements in order to provide comparability with the 1999 statements. This
reclassification has not changed the 1998 results.
2. Partnership Termination:
The partnership agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. The Partnership sold its final real estate
investment in October 1997. The Partnership has retained a portion of the cash
from property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. As previously reported, the Sandra Dee
case was dismissed by the Illinois Supreme Court in April 1999. The Madison
Avenue litigation was filed in May 1999. See Note 4 of Notes to Financial
Statements for additional information regarding the Madison Avenue litigation.
Despite the existence of the Madison Avenue litigation, the Partnership
currently plans to dissolve in December 1999 and distribute remaining cash
reserves to the partners in accordance with the partnership agreement. In the
event that a new contingency (such as a lawsuit) arises during 1999, the
Partnership may not be dissolved and may continue in existence until such new
contingency is resolved. The Partnership does not consider the Madison Avenue
case to be a matter that would preclude the dissolution of the Partnership in
1999.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1999 are:
Paid
-------------------------
Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 20,255 $ 9,940 $ 55,563
4. Other Income:
During the first quarter of 1999, the Partnership received $3,437 representing
a refund of real estate taxes related to the Green Trails Apartments, which was
sold in 1996. This amount has been recognized as other income for financial
statement purposes.
5. Contingency:
In May 1999, a lawsuit was filed against the Partnership, Madison Partnership
Liquidity Investors XX, et al. vs. The Balcor Company, et al. whereby the
Partnership and certain affiliates have been named as defendants. The
plaintiffs are entities that initiated tender offers to purchase and, in fact,
purchased units in eleven affiliated partnerships. The complaint alleges
breach of fiduciary duties and breach of contract under the partnership
agreement and seeks the winding up of the affairs of the Partnership, the
establishment of a liquidating trust, the appointment of an independent trustee
for the trust and the distribution of a portion of the cash reserves to limited
partners. The defendants intend to vigorously contest this action. The
Partnership believes that it has meritorious defenses to contest the claims.
It is not determinable at this time how the outcome of this action will impact
the remaining cash reserves of the Partnership.
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. As of June 30, 1999, the Partnership has no loans outstanding or
properties remaining 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 1998 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The operations of the Partnership in 1999 and 1998 consisted primarily of
administrative expenses which were partially offset by interest income earned
on short-term investments. As a result of lower administrative expenses in
1999, the Partnership's net loss decreased during the six months and quarter
ended June 30, 1999 as compared to the same periods in 1998. The decrease in
the net loss was partially offset by lower interest income earned on short-term
investments. Further discussion of the Partnership's operations is summarized
below.
1999 Compared to 1998
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Unless otherwise noted, discussions of fluctuations between 1999 and 1998 refer
to the six months and quarters ended June 30, 1999 and 1998.
As a result of lower interest rates in 1999 and higher cash balances in 1998
prior to the distribution to Limited Partners in January 1998, interest income
on short-term investments decreased during 1999 as compared to 1998.
During the first quarter of 1999, the Partnership received $3,437 representing
a refund of real estate taxes related to the Green Trails Apartments, which was
sold in 1996. This amount has been recognized as other income for financial
statement purposes.
Primarily due to a decrease in accounting, portfolio management, investor
processing and legal fees, administrative expenses decreased during 1999 as
compared to 1998.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $66,000 as of
June 30, 1999 as compared to December 31, 1998 due primarily to cash used in
operating activities for the payment of administrative expenses, which was
partially offset by interest income earned on short-term investments.
The partnership agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. The Partnership sold its final real estate
investment in October 1997. The Partnership has retained a portion of the cash
from property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. As previously reported, the Sandra Dee
case was dismissed by the Illinois Supreme Court in April 1999. The Madison
Avenue litigation, described in Part II, Item 1, of this report, was filed in
May 1999. Despite the existence of the Madison Avenue litigation, the
Partnership currently plans to dissolve in December 1999 and distribute
remaining cash reserves to the partners in accordance with the partnership
agreement. In the event that a new contingency (such as a lawsuit) arises
during 1999, the Partnership may not be dissolved and may continue in existence
until such new contingency is resolved. The Partnership does not consider the
Madison Avenue case to be a matter that would preclude the dissolution of the
Partnership in 1999. As a result of the pending dissolution of the
Partnership, the general partner has suspended transfer of limited partnership
interests in the Partnership. Certain transfers which are not for value (such
as death, divorce, change of custodian or other estate planning) will continue
to be permitted. Limited Partners should contact the Partnership if the
suspension of transfers causes any extraordinary hardships. In the event that
dissolution of the Partnership does not occur during 1999, the Partnership will
allow transfers of limited partnership interests to occur commencing in January
2000.
Limited Partners have received Net Cash Receipts distributions of $103.98 per
$250 Taxable Interest and $138.36 per $250 Tax-exempt Interest, and Net Cash
Proceeds of $159.97 per $250 Tax-exempt Interest. Distributions to Tax-exempt
Limited Partners total $298.33 per $250 Interest. No additional distributions
are anticipated to be made prior to the termination of the Partnership.
However, after paying final partnership expenses, any remaining cash reserves
will be distributed in accordance with the Partnership Agreement. Amounts
allocated to the Repurchase Fund will also be distributed at that time. Taxable
Limited Partners will not receive aggregate distributions from the Partnership
equal to their original investment. However, Taxable Limited Partners will
receive a distribution from amounts allocated to the Repurchase Fund.
The Partnership sold the Arborland Consumer Mall in October 1997. In connection
with the sale, $109,526 related to tenant reimbursements was placed in escrow
at closing and will be held in escrow until such time as the buyer receives
reimbursement from the tenants. The Partnership expects to receive the full
amount of the escrow.
In 1997, the Partnership discontinued the repurchase of Interests from Limited
Partners. As of June 30, 1999, there were 19,585 Interests and cash of
$2,770,137 in the Repurchase Fund.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves soliciting information from these vendors through the use of
surveys, follow-up discussions and review of data where needed. The Partnership
has received the surveys from these vendors. While the Partnership cannot
guarantee Year 2000 compliance by its key vendors, and in many cases will be
relying on statements from these vendors without independent verification,
these surveys and discussions with the key vendors performing services for the
Partnership indicate that the key vendors are substantially Year 2000 compliant
as of June 30, 1999. The Partnership will continue to monitor the Year 2000
compliance of its key vendors during the third quarter of 1999. In addition,
the Partnership has developed a contingency plan in the event of non-compliance
by these key vendors in the Year 2000 which will be updated by September 30,
1999 based on the results of further surveys, discussions and testing of
systems, where applicable. The Partnership does not believe that failure by any
of its key vendors to be Year 2000 compliant by the year 2000 would have a
material effect on the business, financial position or results of operations of
the Partnership.
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Madison Partnership Liquidity Investors XX, et al. vs. The Balcor
- -----------------------------------------------------------------
Company, et al.
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On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH08972). The Partnership, twenty-one additional
limited partnerships which were sponsored by The Balcor Company (together with
the Partnership, the "Affiliated Partnerships"), The Balcor Company, other
affiliated entities and one individual are named defendants in this action.
Plaintiffs are entities that initiated tender offers to purchase units and, in
fact, purchased units in eleven of the Affiliated Partnerships. The complaint
alleges breach of fiduciary duties and breach of contract under the partnership
agreements for each of the Affiliated Partnerships. The complaint seeks the
winding up of the affairs of the Affiliated Partnerships, the establishment of
a liquidating trust for each of the Affiliated Partnerships until a resolution
of all contingencies occurs, the appointment of an independent trustee for each
such liquidating trust and the distribution of a portion of the cash reserves
to limited partners. The complaint also seeks compensatory damages, punitive
and exemplary damages, and costs and expenses in pursuing the litigation. On
July 14, 1999, the defendants filed a Motion to Dismiss the complaint. A
briefing schedule on this motion has not yet been set.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Partnership believes it has meritorious defenses
to contest the claims. It is not determinable at this time how the outcome of
this action will impact the remaining cash reserves of the Partnership.
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 six months ending June
30, 1999 is attached hereto.
(b) Reports on Form 8-K: No Reports were filed on Form 8-K during the quarter
ended June 30, 1999.
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/Jayne A. Kosik
-----------------------------------
Jayne A. Kosik
Senior Managing Director and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners - III, the
General Partner
Date: August 9, 1999
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