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 0-15528
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BALCOR PENSION INVESTORS-VII
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(Exact name of registrant as specified in its charter)
Illinois 36-3390487
- ------------------------------- -------------------
(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
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 9,057,486 $ 13,194,808
Escrow deposits 93,907 82,831
Accounts and accrued interest receivable 417,058 288,392
Prepaid expense, principally insurance 205,946
Deferred expenses, net of accumulated
amortization of $144,848 in 1995 and
$124,711 in 1994 33,746 53,883
-------------- --------------
9,808,143 13,619,914
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Investment in loan receivable:
Loan receivable - first mortgages 10,865,000
Loan application and processing fees,
net of accumulated amortization of
$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 $4,537,000 in 1995 and 1994) 85,099,286 66,516,056
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85,099,286 76,371,472
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$ 94,907,429 $ 89,991,386
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 164,889 $ 214,042
Due to affiliates 33,924 69,852
Accrued liabilities, principally real
estate taxes 671,424 259,772
Security deposits 361,509 374,695
Mortgage note payable 4,901,494 4,941,641
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Total liabilities 6,133,240 5,860,002
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Affiliates' participation in joint ventures 21,866,338 13,068,237
Partners' capital (461,470 Limited
Partnership Interests issued and
outstanding) 66,907,851 71,063,147
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$ 94,907,429 $ 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 nine months ended September 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 $309,741 in 1994 $ 323,053 $ 2,357,666
Income from operations of real estate
held for sale 4,976,651 3,446,280
Interest on short-term investments 499,042 206,505
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Total income 5,798,746 6,010,451
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Expenses:
Administrative 525,544 744,155
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Total expenses 525,544 744,155
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Income before affiliates' participation in
income of joint ventures 5,273,202 5,266,296
Affiliates' participation in income
of joint ventures (1,054,355) (942,257)
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Net income $ 4,218,847 $ 4,324,039
============== ==============
Net income allocated to General Partner $ 421,885 $ 432,404
============== ==============
Net income allocated to Limited Partners $ 3,796,962 $ 3,891,635
============== ==============
Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 8.23 $ 8.43
============== ==============
Distributions to General Partner $ 307,647 $ 461,469
============== ==============
Distributions to Limited Partners $ 8,066,496 $ 4,153,230
============== ==============
Distributions per Limited Partnership
Interest $ 17.48 $ 9.00
============== ==============
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 September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable, net of
amortization of loan application and
processing fees of $151,217 in 1994 $ 30,544 $ 575,135
Income from operations of real estate
held for sale 1,546,843 1,258,122
Interest on short-term investments 136,481 112,626
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Total income 1,713,868 1,945,883
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Expenses:
Administrative 179,634 198,920
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Total expenses 179,634 198,920
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Income before affiliates' participation
in income of joint ventures 1,534,234 1,746,963
Affiliates' participation in income of
joint ventures (351,315) (308,033)
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Net income $ 1,182,919 $ 1,438,930
============== ==============
Net income allocated to General Partner $ 118,292 $ 143,893
============== ==============
Net income allocated to Limited Partners $ 1,064,627 $ 1,295,037
============== ==============
Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 2.31 $ 2.80
============== ==============
Distribution to General Partner $ 102,549 $ 153,823
============== ==============
Distribution to Limited Partners $ 4,766,985 $ 1,384,410
============== ==============
Distribution per Limited Partnership
Interest $ 10.33 $ 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 nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Operating activities:
Net income $ 4,218,847 $ 4,324,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Affiliates' participation in income
of joint ventures 1,054,355 942,257
Amortization of deferred expenses 20,137 27,776
Amortization of loan application and
processing fees 156,676 309,741
Net change in:
Escrow deposits (11,076) (95,498)
Accounts and accrued interest
receivable (128,666) 379,894
Prepaid expense (205,946)
Accounts payable (49,153) (164,959)
Due to affiliates (35,928) 88,507
Accrued liabilities 411,652 349,083
Security deposits (13,186) 126,182
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Net cash provided by operating activities 5,417,712 6,287,022
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Investing activities:
Costs incurred in connection with real
estate acquired through foreclosure (283,490)
Improvements to properties (114,721)
Collection of principal payments on
loans receivable 6,400,000
Proceeds from litigation settlement 1,000,000
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Net cash (used in) or provided
by investing activities (283,490) 7,285,279
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Financing activities:
Distributions to Limited Partners (8,066,496) (4,153,230)
Distributions to General Partner (307,647) (461,469)
Distributions to joint venture partners -
affiliates (857,254) (1,128,285)
Principal payments on mortgage note
payable (40,147) (37,400)
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Cash used in financing activities (9,271,544) (5,780,384)
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Net change in cash and cash equivalents (4,137,322) 7,791,917
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 $ 9,057,486 $ 13,035,470
============== ==============
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 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 for the
nine months and quarter ended September 30, 1995 are:
Paid
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Nine Months Quarter Payable
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Mortgage servicing fees $ 17,013 $ 3,432 None
Reimbursement of expenses to
the General Partner, at cost 182,379 26,680 $33,924
3. Real Estate Held For Sale:
(a) 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.
(b) The Partnership and an affiliate (together, the "Participants") previously
funded a $23,500,000 mortgage loan on Jonathan's Landing Apartments. In July
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. However,
prior to the foreclosure, only the Partnership's 53% interest in the mortgage
loan was recorded on the Partnership's balance sheet. The property was
transferred to real estate held for sale at its fair value of $18,299,740, net
of allowances previously recorded. In addition, the Partnership increased the
basis of the property by $54,379 in 1995 for costs incurred in connection with
the foreclosure.
4. Subsequent Event:
In October 1995, the Partnership paid $1,384,410 ($3.00 per Interest) to the
holders of Limited Partnership Interests representing the regular quarterly
distribution of available Cash Flow for the third quarter of 1995.
<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 September 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.
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
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Interest income on loans receivable decreased during the nine months and
quarter ended September 30, 1995 as compared to 1994 due to a loan repayment
in July 1994 and foreclosures in March 1994, January 1995 and July 1995. As a
result, net income decreased 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
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1995 and 1994
refer to both the quarter and nine months ended September 30, 1995 and 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, the
Butler Plaza shopping center loan in January 1995 and the Jonathan's Landing
Apartments loan in July 1995 resulted in a decrease in interest income on
loans receivable during 1995 as compared to 1994.
Income from operations of real estate held for sale represents the net
operations of seven properties. At September 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, Jonathan's Landing and Hickory Creek - Phases I and
II apartment complexes. Original funds advanced by the Partnership total
approximately $77,360,000 for these seven real estate investments. The
Partnership acquired the Jonathan's Landing Apartments in July 1995, the
Butler Plaza shopping center in January 1995 and the Hickory Creek Apartments
- - Phases I and II in March 1994, all of which generated income during 1995.
<PAGE>
This was the primary reason for the increase in income from operations of real
estate held for sale during 1995 as compared to 1994.
As a result of higher average cash balances resulting from the discounted
prepayment of the Eastgate Village Mobile Home Park loan in 1994 and higher
interest rates in 1995, interest income on short-term investments increased
during 1995 when compared to 1994.
Legal fees were incurred in 1994 in connection with the foreclosures of the
loans secured by 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 nine months ended 1995 as compared to 1994.
As a result of income from operations of the Jonathan's Landing Apartments,
acquired through foreclosure in July 1995, and improved operations at the Sand
Pebble Village - Phase I Apartments, affiliates' participation in income from
joint ventures increased during 1995 as compared to 1994.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased as of September 30, 1995 when
compared to December 31, 1994, resulting primarily from a special distribution
to Limited Partners in July 1995.
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. All of the Partnership's
properties owned during 1995 and 1994 generated positive cash flow. As of
September 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 86% to 95%, while the occupancy rates at the U.S. West
Direct Center office building and the Butler Plaza shopping center were 92%
and 86%, respectively. 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.
The Partnership acquired the Butler Plaza shopping center and the Jonathan's
Landing Apartments through foreclosure in January and July 1995, respectively.
See Note 3 of Notes to Financial Statements for additional information.
In October 1995, the Partnership paid $1,384,410 ($3.00 per Interest) to the
holders of Limited Partnership Interests representing the regular quarterly
distribution of available Cash Flow for the third quarter of 1995. The
quarterly distribution level increased from the amount distributed for the
second quarter of 1995 due to the improved operations at the Partnership's
properties. In October 1995, the Partnership also paid $115,367 to the
General Partner as its share of the Cash Flow distributed for the third
quarter of 1995 and $38,456 as its contribution to the Early Investment
Incentive Fund. Including the October 1995 distribution, Limited Partners have
received $102.56 of Cash Flow from operations and a return of Original Capital
of $36.33, totaling $138.89 per $250 Interest.
The Partnership expects to continue making cash distributions to Limited
Partners from the Cash Flow generated by property operations less
<PAGE>
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 nine months ended September 30, 1995, the General Partner used
amounts placed in the Early Investment Incentive Fund to repurchase 1,273
Interests from Limited Partners at a cost of $225,102.
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 6. Exhibits and Reports on Form 8-K
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(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 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 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: November 13, 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> 9057
<SECURITIES> 0
<RECEIVABLES> 417
<ALLOWANCES> 4537
<INVENTORY> 0
<CURRENT-ASSETS> 9774
<PP&E> 85099
<DEPRECIATION> 0
<TOTAL-ASSETS> 94907
<CURRENT-LIABILITIES> 1232
<BONDS> 4901
<COMMON> 0
0
0
<OTHER-SE> 66908
<TOTAL-LIABILITY-AND-EQUITY> 94907
<SALES> 0
<TOTAL-REVENUES> 4744
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4219
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<INCOME-CONTINUING> 4219
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4219
<EPS-PRIMARY> 8.23
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