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, 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 0-15528
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BALCOR PENSION INVESTORS-VII
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(Exact name of registrant as specified in its charter)
Illinois 36-3390487
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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 PENSION INVESTORS-VII
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 12,414,235 $ 13,194,808
Escrow deposits 125,573 82,831
Accounts and accrued interest receivable 270,784 288,392
Prepaid expense, principally insurance 239,032
Deferred expenses, net of accumulated
amortization of $138,136 in 1995 and
$124,711 in 1994 40,458 53,883
-------------- --------------
13,090,082 13,619,914
-------------- --------------
Investment in loan receivable:
Loan receivable - first mortgage 10,865,000
Loan application and processing fees, net
of accumulated amortization of $2,308,717
in 1995 and $2,152,041 in 1994 156,676
Less:
Allowance for potential loan losses 1,166,260
--------------
Net investment in loan receivable 9,855,416
Real estate held for sale (net of allowance
of $4,537,000 in 1995 and 1994) 85,044,907 66,516,056
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85,044,907 76,371,472
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$ 98,134,989 $ 89,991,386
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 175,478 $ 214,042
Due to affiliates 10,283 69,852
Accrued liabilities, principally real
estate taxes 339,236 259,772
Security deposits 372,793 374,695
Mortgage note payable 4,915,114 4,941,641
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Total liabilities 5,812,904 5,860,002
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Affiliates' participation in joint ventures 21,727,619 13,068,237
Partners' capital (461,470 Limited
Partnership Interests issued and
outstanding) 70,594,466 71,063,147
-------------- --------------
$ 98,134,989 $ 89,991,386
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Interest on loans receivable, net of
amortization of loan application and
processing fees of $156,676 in 1995
and $158,524 in 1994 $ 292,509 $ 1,782,531
Income from operations of real estate
held for sale 3,429,808 2,180,504
Interest on short-term investments 362,561 93,879
-------------- --------------
Total income 4,084,878 4,056,914
-------------- --------------
Expenses:
Administrative 345,910 537,581
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Total expenses 345,910 537,581
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Income before affiliates' participation in
income of joint ventures 3,738,968 3,519,333
Affiliates' participation in income of
joint ventures (703,040) (634,224)
-------------- --------------
Net income $ 3,035,928 $ 2,885,109
============== ==============
Net income allocated to General Partner $ 303,593 $ 288,511
============== ==============
Net income allocated to Limited Partners $ 2,732,335 $ 2,596,598
============== ==============
Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 5.92 $ 5.63
============== ==============
Distributions to General Partner $ 205,098 $ 307,646
============== ==============
Distributions to Limited Partners $ 3,299,511 $ 2,768,820
============== ==============
Distributions per Limited Partnership
Interest $ 7.15 $ 6.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Interest on loans receivable, net of
amortization of loan application and
processing fees of $145,552 in 1995
and $22,549 in 1994 $ 136,788 $ 1,399,459
Income from operations of real estate
held for sale 1,670,051 1,141,498
Interest on short-term investments 182,601 54,707
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Total income 1,989,440 2,595,664
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Expenses:
Administrative 193,771 275,686
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Total expenses 193,771 275,686
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Income before affiliates' participation
in income of joint ventures 1,795,669 2,319,978
Affiliates' participation in income of
joint ventures (335,392) (308,243)
-------------- --------------
Net income $ 1,460,277 $ 2,011,735
============== ==============
Net income allocated to General Partner $ 146,028 $ 201,174
============== ==============
Net income allocated to Limited Partners $ 1,314,249 $ 1,810,561
============== ==============
Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 2.85 $ 3.92
============== ==============
Distribution to General Partner $ 102,549 $ 153,823
============== ==============
Distribution to Limited Partners $ 922,940 $ 1,384,410
============== ==============
Distribution per Limited Partnership
Interest $ 2.00 $ 3.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 3,035,928 $ 2,885,109
Adjustments to reconcile net income to net
cash provided by operating activities:
Affiliates' participation in income
of joint ventures 703,040 634,224
Amortization of deferred expenses 13,425 17,461
Amortization of loan application and
processing fees 156,676 158,524
Net change in:
Escrow deposits (42,742) (53,474)
Accounts and accrued interest
receivable 17,608 340,256
Prepaid expense (239,032)
Accounts payable (38,564) (182,481)
Due to affiliates (59,569) 116,813
Accrued liabilities 79,464 147,627
Security deposits (1,902) 112,157
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Net cash provided by operating activities 3,624,332 4,176,216
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Investing activities:
Costs incurred in connection with real
estate acquired through foreclosure (229,111)
Improvements to properties (114,721)
Collection of principal payments
on loans receivable 150,000
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Net cash used in or provided by investing
activities (229,111) 35,279
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Financing activities:
Distributions to Limited Partners (3,299,511) (2,768,820)
Distributions to General Partner (205,098) (307,646)
Distributions to joint venture
partners - affiliates (644,658) (627,183)
Principal payments on mortgage note
payable (26,527) (24,712)
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Cash used in financing activities (4,175,794) (3,728,361)
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Net change in cash and cash equivalents (780,573) 483,134
Cash and cash equivalents at beginning
of period 13,194,808 5,243,553
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Cash and cash equivalents at end of period $ 12,414,235 $ 5,726,687
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Reclassifications have been made to the previously reported 1994 statements to
conform with the classifications used in 1995, including mortgage servicing
fees which have been reclassified and are included in administrative expenses
during 1995. These reclassifications have 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 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 for the six
months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Mortgage servicing fees $13,581 $6,790 $2,263
Reimbursement of expenses to
the General Partner, at cost 155,699 155,699 8,020
3. Real Estate Held For Sale:
The Partnership acquired Butler Plaza through foreclosure in January 1995. This
property was classified as real estate held for sale at December 31, 1994. The
property was transferred to real estate held for sale at its fair value of
$9,100,000, net of allowances previously recorded. In addition, the Partnership
increased the basis of the property by $229,111 in 1995 for costs incurred in
connection with the foreclosure.
4. Subsequent Events:
(a) The Partnership and an affiliate (together, the "Participants") previously
funded a $23,500,000 mortgage loan on Jonathan's Landing Apartments. On July
14, 1995, the Participants made a successful bid at a foreclosure sale and
received title to the property. As the majority owner (53%), the Partnership
consolidates all assets, liabilities, income and expenses of the joint venture
within the financial statements of the Partnership, with the appropriate
adjustment for the affiliate's participation in the joint venture. The
property was transferred to real estate held for sale at June 30, 1995 at its
fair value of $18,299,740 net of allowances previously recorded.
(b) In July 1995, the Partnership paid $4,766,985 ($10.33 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow of $2.00 per Interest for the second
quarter of 1995 and a special distribution of $8.33 per Interest representing
Mortgage Reductions received from the prepayment of the Eastgate Village Mobile
Home Park loan.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors - VII (the "Partnership") is a limited partnership
formed in 1985 to invest in first mortgage loans. The Partnership raised
$115,367,500 from sales of Limited Partnership Interests and utilized these
proceeds to fund eight loans. As of June 30, 1995, one loan remains outstanding
in the Partnership's portfolio, and the Partnership owns six properties;
however, the Whispering Hills loan is accounted for as real estate held for
sale. The Jonathan's Landing Apartments was acquired through foreclosure in
July 1995, and is accounted for as real estate held for sale at June 30, 1995.
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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Summary of Operations
---------------------
Interest income on short-term investments increased during 1995 due to higher
average cash balances as a result of the discounted prepayment of the Eastgate
Village Mobile Home Park loan in July 1994 and higher interest rates. This was
the primary reason for the increase in net income during the six months ended
June 30, 1995 as compared to the same period in 1994. Interest income on loans
receivable decreased during the quarter ended June 30, 1995 due to the loan
repayment in July 1994 and foreclosures in March 1994 and January 1995. As a
result, net income decreased during the quarter ended June 30, 1995 as compared
to the same period in 1994. Further discussion of the Partnership's operations
is summarized below.
1995 Compared to 1994
---------------------
The prepayment of the Eastgate Village Mobile Home Park loan in July 1994 and
the foreclosures of the Hickory Creek Apartments loan in March 1994 and the
Butler Plaza shopping center loan in January 1995 resulted in a decrease in
interest income on loans receivable during the six months and quarter ended
June 30, 1995 as compared to the same periods in 1994.
Income from operations of real estate held for sale represents the net
operations of six properties. At June 30, 1995, the Partnership was operating
the U.S. West Direct Center office building, the Butler Plaza shopping center,
and the Whispering Hills, Sand Pebble Village - Phase I, Sand Pebble Village -
Phase II, and Hickory Creek - Phases I and II apartment complexes. The
Jonathan's Landing Apartments was acquired through foreclosure in July 1995.
Original funds advanced by the Partnership total approximately $77,360,000 for
these seven real estate investments. The Partnership acquired the Butler Plaza
shopping center in January 1995 and Hickory Creek Apartments - Phases I and II
<PAGE>
in March 1994, both of which generated income during the second quarter of
1995. This was the primary reason for the increase in income from operations of
real estate held for sale during the six months and quarter ended June 30, 1995
as compared to the same periods in 1994.
As a result of higher average cash balances resulting from the discounted
prepayment of the Eastgate Village Mobile Home Park loan in July 1994 and due
to higher interest rates, interest income on short-term investments increased
during the six months and quarter ended June 30, 1995 when compared to the same
periods in 1994.
Legal fees were incurred in 1994 in connection with the foreclosures of the
Butler Plaza shopping center and the Hickory Creek Apartments - Phases I and
II. This was the primary reason for the decrease in administrative expenses
during the six months and quarter ended June 30, 1995 as compared to the same
periods in 1994.
As a result of improved operations at the Sand Pebble Village - Phases I and II
apartment complexes, affiliates' participation in income from joint ventures
increased for the six months ended June 30, 1995 as compared to the same period
in 1994.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of June 30, 1995 when
compared to December 31, 1994. The Partnership generated cash flow from its
operating activities primarily as a result of property operations and interest
income earned on its loan receivable and short-term investments. The payment of
administrative costs partially offset this cash flow. The Partnership used cash
to fund its investing activity which consisted of the payment of costs incurred
in connection with the Butler Plaza shopping center foreclosure. The
Partnership also used cash to fund its financing activities, which consisted
primarily of distributions to the Limited Partners and General Partner, as well
as distributions to affiliated joint venture partners, which represented their
share of property operations. The Partnership made a special distribution from
Mortgage Reductions in July 1995 and has retained cash reserves for anticipated
capital requirements at certain Partnership properties.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit each after
consideration of debt service payments unless otherwise indicated. The
Partnership defines cash flow generated from its properties as an amount equal
to the property's revenue receipts less property related expenditures, which
include debt service payments. Sand Pebble Village Apartments - Phase II is the
only property that has underlying debt. The U.S. West Direct Center office
building and the Whispering Hills and Sand Pebble Village - Phases I and II
apartment complexes generated positive cash flow during 1995 and 1994. Hickory
Creek Apartments - Phases I and II and the Butler Plaza shopping center, which
were acquired through foreclosure in March 1994 and January 1995, respectively,
also generated positive cash flow during the six months ended June 30, 1995. As
of June 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 93% to 99%, while the occupancy rates at the U.S. West
Direct Center office building and the Butler Plaza shopping center were 97% and
86%, respectively. 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.
<PAGE>
In January 1995, the Partnership placed the Jonathan's Landing Apartments loan
in default and accelerated the loan due to the sale of the property by the
borrower without prior consent from the Partnership and an affiliate. The
property was posted for a foreclosure sale on July 14, 1995, at which time the
Partnership received title to the property.
In January 1995, the Partnership acquired the Butler Plaza shopping center
through foreclosure. See Note 3 of Notes to the Financial Statements for
additional information.
In July 1995, the Partnership paid $4,766,985 ($10.33 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow of $2.00 per Interest for the second
quarter of 1995 and a special distribution of $8.33 per Interest representing
Mortgage Reductions received from the prepayment of the Eastgate Village Mobile
Home Park loan. The regular quarterly distribution level is consistent with the
amount distributed for the first quarter of 1995. In July 1995, the Partnership
also paid $76,912 to the General Partner as its distributive share of the Cash
Flow distributed for the second quarter of 1995 and $25,637 as its contribution
to the Early Investment Incentive Fund. To date, Limited Partners have received
$99.56 of Cash Flow from operations and a return of Original Capital of $36.33,
totaling $135.89 per $250 Interest.
The Partnership expects to continue making cash distributions to Limited
Partners from the Cash Flow generated by property operations less
administrative expenses. The General Partner believes the Partnership has
retained an appropriate amount of working capital to meet cash or liquidity
requirements which may occur.
During the six months ended June 30, 1995, the General Partner used amounts
placed in the Early Investment Incentive Fund to repurchase 605 Interests from
Limited Partners for a total cost of $109,356.
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
will increase operating costs and replacement costs and may lead to increased
rental revenues and real estate values.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
Jonathan's Landing Apartments:
-----------------------------
As previously reported, Jonathan's Landing Apartments was posted for a
foreclosure sale to occur on July 14, 1995. The owner had commenced
proceedings in the Circuit Court of Cook County, Illinois (Chandler's Bay II
Vistas, Inc. vs. Balcor Mortgage Advisors, Inc. et al, Case No. 95 CH 04392) to
enjoin the foreclosure, which suit was dismissed upon the motion of the owner
on July 12, 1995. The foreclosure sale proceeded on July 14, 1995 at which
time the Partnership and an affiliate acquired title to the property.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated March 6,
1986 (Registration No. 33-01630) 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. 0-15528) 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: No reports were 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 PENSION INVESTORS-VII
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VII, 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 Mortgage Advisors-VII,
the General Partner
Date: August 10, 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> 12414
<SECURITIES> 0
<RECEIVABLES> 271
<ALLOWANCES> 4537
<INVENTORY> 0
<CURRENT-ASSETS> 13050
<PP&E> 85045
<DEPRECIATION> 0
<TOTAL-ASSETS> 98135
<CURRENT-LIABILITIES> 898
<BONDS> 4915
<COMMON> 0
0
0
<OTHER-SE> 70594
<TOTAL-LIABILITY-AND-EQUITY> 98135
<SALES> 0
<TOTAL-REVENUES> 3382
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 346
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3036
<INCOME-TAX> 0
<INCOME-CONTINUING> 3036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3036
<EPS-PRIMARY> 5.92
<EPS-DILUTED> 5.92
</TABLE>
