UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1994
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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 0-15528
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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.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(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 ]
<PAGE>
PART I
Item 1. Business
----------------
Balcor Pension Investors-VII (the "Registrant") is a limited partnership formed
in 1985 under the laws of the State of Illinois. The Registrant raised
$115,367,500 from sales of Limited Partnership Interests. The Registrant's
operations consist of investment in two first mortgage loans. The Registrant
also currently operates five properties, four of which were acquired through
foreclosure. All financial information included in this report relates to this
industry segment.
The Registrant originally funded eight loans. As a result of the repayments and
foreclosures of six loans, the Registrant has two loans in its portfolio as of
December 31, 1994; however, as discussed below, one of these loans is accounted
for as real estate held for sale. Four properties were acquired through
foreclosure and one property adjacent to a property acquired through
foreclosure was purchased. As of December 31, 1994, the Registrant has five
properties in its portfolio. See Item 2. Properties for additional information.
During July 1994, the Registrant accepted a discounted prepayment of the
Eastgate Village loan. See Item 7. Liquidity and Capital Resources for
additional information.
During September 1994, the Registrant received $1,000,000 as a result of the
settlement of litigation on the Whispering Hills loan. See Item 7. Liquidity
and Capital Resources for additional information.
During January 1995, the Registrant placed the Jonathan's Landing loan in
default and accelerated the loan. See Item 3. Legal Proceedings for additional
information.
The Registrant acquired the Hickory Creek Apartments - Phases I & II and Butler
Plaza through foreclosure in March 1994 and January 1995, respectively. These
loans were classified as real estate held for sale at December 31, 1993 and
1994, respectively. See Item 7. Liquidity and Capital Resources for additional
information.
The Registrant, by virtue of its ownership of real estate acquired through
foreclosure is subject to federal and state laws and regulations covering
various environmental issues. Management of the Registrant utilizes the
services of environmental consultants to assess a wide range of environmental
issues and to conduct tests for environmental contamination as appropriate.
The General Partner is not aware of any potential liability due to
environmental issues or conditions that would be material to the Registrant.
The officers and employees of Balcor Mortgage Advisors-VII, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
------------------
As of December 31, 1994, the Registrant currently owns the five properties
described below:
Location Description of Property
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Murray, Utah U.S. West Direct Center: a six-story office
building containing approximately 134,000 square
feet.
Riverside, California * Sand Pebble Village Apartments: a 440 unit garden
apartment complex located on approximately 20
<PAGE>
acres.
Riverside, California * Sand Pebble Village Apartments - Phase II: a 274
unit garden apartment complex located on
approximately 14 acres.
Columbus, Ohio Hickory Creek Apartments - Phase I & II: a 372
unit garden apartment complex located on
approximately 21 acres.
Orlando, Florida ** Butler Plaza: a shopping center containing
222,903 square feet located on approximately 23
acres.
* Owned by the Registrant through a joint venture with an affiliate.
** This property was acquired by the Registrant through foreclosure during
1995. See Note 9 of Notes to Financial Statements for additional information.
The Whispering Hills loan is accounted for as real estate held for sale;
however, the Registrant presently does not hold title to this property.
Sand Pebble Village Apartments - Phase II is held subject to mortgage
indebtedness.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance for its real estate held for sale.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
-------------------------
Jonathan's Landing Apartments
-----------------------------
In 1987, Balcor Mortgage Advisors, Inc. ("BMA"), acting as nominee for the
Registrant and an affiliate, funded a $23,500,000 loan evidenced by a
promissory note and collateralized by a first mortgage on Jonathan's Landing
Apartments. The Registrant's share of the loan was $12,455,000 for a
participating percentage of 53%.
In November 1994, the borrower, without notice to or consent from BMA, as
required by the loan, sold the property to a third party. On January 5, 1995,
BMA placed the loan in default and accelerated the loan. The loan was not
repaid and on January 24, 1995, BMA commenced proceedings in the Superior Court
of King County, Washington (Balcor Mortgage Advisors, Inc. vs. Executive Life
Insurance Co., et al., Case No.: 95-2019811) and filed a motion for the
appointment of a receiver to manage the property and for enforcement of the
assignment of rents. The motion was denied on February 27, 1995.
The Registrant and affiliate are currently negotiating with the new owner. If
unsuccessful, the Registrant and affiliate may proceed with a non-judicial
foreclosure of the property.
Butler Plaza
------------
In 1986, the Registrant funded a $13,000,000 loan collateralized by a first
mortgage on the Butler Plaza shopping center. In 1993, the Registrant placed
the loan in default and applied $136,600 held in a tax escrow and replacement
reserve against the outstanding loan balance. The borrower filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Southern District of New York, (In Re Butler Plaza Associates,
Case #93 B 44571), which case was transferred to the Middle District of
Florida. Effective June 6, 1994, the Bankruptcy Court granted the Registrant's
<PAGE>
motion to dismiss the borrower's bankruptcy. As a result, the Registrant's
foreclosure action, previously filed in the 18th Judicial Circuit Court,
Seminole County, Florida (Balcor Pension Investors-VII, et al v. Butler Plaza
Associates, Ltd. Case #93-1940-CA-14-3), resumed. The Registrant permitted the
borrower to sell an outparcel at the property on November 1, 1994 and the
Registrant received all $389,760 of the proceeds from the sale, which was
applied against the outstanding principal loan balance. On January 5, 1995,
the Registrant was the successful bidder for the property at a foreclosure
sale, and obtained title to the property on January 18, 1995.
Williams class action
---------------------
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.: 90-
C-0726 (U. S. District Court, Northern District of Illinois) against the
Registrant, the General Partner, The Balcor Company, Shearson Lehman Hutton,
Inc., American Express Company, other affiliates, and seven affiliated limited
partnerships (the "Related Partnerships") as defendants. The complaint alleges
that the defendants violated Federal securities laws as to the adequacy and
accuracy of disclosure of information in the offering of limited partnership
interests of the Registrant and the Related Partnerships and alleges breach of
fiduciary duty, fraud, negligence and violations under the Racketeer Influenced
and Corrupt Organizations Act. The complaint seeks compensatory and punitive
damages. The defendants filed their answer, affirmative defenses and a
counterclaim to the complaint. The defendants' counterclaim asserts claims of
fraud and breach of warranty against certain plaintiffs, as well as a request
for declaratory relief regarding defendants' rights to be indemnified for their
expenses incurred in defending the litigation. The defendants seek to recover
damages to their reputations and business as well as costs and attorneys' fees
in defending the claims.
In May 1993, the Court issued an order denying the plaintiffs' motion for class
certification based principally on the inadequacy of the individual plaintiffs
representing the proposed class. However, the Court gave plaintiffs leave to
propose new individual class representatives. Further, the Court granted the
defendants' motion for sanctions and ordered that plaintiffs' counsel pay
certain of the defendants' attorneys' fees incurred with the class
certification motion. In January 1995, the Court ordered the plaintiffs'
counsel to pay $75,000 to the defendants and $25,000 to the Court.
The plaintiffs retained new co-counsel and proposed new class representatives.
In July 1994, the Court granted plaintiffs' motion certifying a class relating
to the Federal securities fraud claims. The class certified by the Court
includes only the original investors in the Registrant and the Related
Partnerships. The defendants filed a motion for reconsideration in opposition
to the class certification which was denied on December 21, 1994. The Court
has ordered the parties to meet to discuss notice to the class and a schedule
for discovery.
A motion filed by the plaintiffs seeking to dismiss the defendants'
counterclaim for fraud was denied by the Court in August 1994.
The defendants intend to continue vigorously contesting this action. Management
of each of the defendants believes they have meritorious defenses to contest
the claims.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------------------
Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Financial Statements, Statements of
Partners' Capital, and Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 16,160.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
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Total income $7,875,908 $7,000,942 $7,051,802 $5,803,010 $7,540,278
Provision for
potential losses on
loans, real estate
and accrued interest
receivable None 4,150,000 3,000,000 3,275,000 2,000,000
Net income 6,238,369 2,400,958 2,319,684 1,428,637 5,083,971
Net income per
Limited Partnership
Interest 12.17 4.68 4.52 2.79 9.92
Total assets 89,991,386 90,585,381 88,668,751 84,639,355 89,050,704
Mortgage note
payable 4,941,641 4,991,956 None None None
Distributions per
Limited Partnership
Interest 12.00 12.00 16.00 11.50 30.94
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
---------------------
Summary of Operations
---------------------
Balcor Pension Investors-VII (the "Partnership") recognized a provision for
potential losses on loans, real estate and accrued interest receivable during
1993 due to a decline in the fair value of a property in which the Partnership
holds a majority joint venture interest. No provision for potential losses on
loans and real estate held for sale was recognized in 1994. As a result, the
Partnership recognized higher net income during 1994 as compared to 1993.
Participation income received in connection with the August 1993 loan
prepayment and an increase in income from operations of real estate held for
sale due to the 1992 foreclosure of a property were the primary reasons for the
increase in net income for 1993 as compared to 1992. This increase was
partially offset by an increase in the Partnership's provision for potential
losses on loans, real estate and accrued interest receivable during 1993 as
compared to 1992. Further discussion of the Partnership's operations is
summarized below.
Operations
----------
<PAGE>
1994 Compared to 1993
---------------------
The Partnership received approximately $861,000 representing cash flow
generated during the bankruptcy proceedings for the Hickory Creek Apartments -
Phases I and II loan during the second quarter of 1994 which resulted in an
increase in interest income on loans receivable during 1994 as compared to
1993. Decreased income resulting from the August 1993 prepayment of the ROC
Properties loan partially offset this increase. As of December 31, 1994, the
Jonathan's Landing Apartments loan was on non-accrual status. The funds
advanced by the Partnership for this non-accrual loan totaled approximately
$12,455,000. For non-accrual loans, income is recorded only as cash payments
are received from the borrowers. During 1994, the Partnership received cash
payments of interest income totaling approximately $1,001,000 on this loan,
which agreed to the payments required under the terms of the loan agreement.
Income from operations of real estate held for sale represents the net
operations of the five properties acquired by the Partnership. At December 31,
1994, the Partnership was operating the U.S. West Direct Center Office
Building, and the Whispering Hills, Sand Pebble Village - Phase I, Sand Pebble
Village - Phase II, and Hickory Creek - Phases I and II apartment complexes.
Original funds advanced by the Partnership totaled approximately $51,905,000
for these five real estate investments. The Partnership purchased Sand Pebble
Village Apartments - Phase II through a joint venture consisting of the
Partnership and an affiliate and acquired the Hickory Creek Apartments - Phases
I and II through foreclosure in October 1993 and March 1994, respectively.
Income generated from operations at these apartment complexes was the primary
reason for the increase in income from operations of real estate held for sale
during 1994 as compared to 1993.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments 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. The Partnership recognized no
provision in 1994 and a provision of $750,000 related to its loans in 1993. In
addition, the Partnership recognized a provision of $3,400,000 in 1993 related
to the Partnership's real estate held for sale to provide for a decline in the
fair value of Sand Pebble Village Apartments - Phase I.
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 market interest rates, interest income on short-term investments
increased during 1994 as compared to 1993.
The Partnership's loans generally bear interest at contractually fixed interest
rates. Some loans also provide for additional interest in the form of
participations, usually consisting of either a share in the capital
appreciation of the property collateralizing the Partnership's loan and/or a
share in the increase of the gross income of the property above a certain
level. Participation income was recognized during 1993 in connection with the
August 1993 ROC Properties loan prepayment.
The prepayment of the ROC Properties loan in 1993 and the Eastgate Village
Mobile Home Park loan in 1994, and the foreclosure of the Hickory Creek
Apartments - Phases I and II loan in 1994 resulted in a decrease in mortgage
servicing fees during 1994 as compared to 1993.
An increase in legal fees paid in connection with the Whispering Hills
Apartments litigation and the Hickory Creek Apartments - Phases I and II and
Butler Plaza foreclosures, resulted in an increase in administrative expenses
during 1994 as compared to 1993.
During 1993, the Partnership recognized a loss provision related to a decline
<PAGE>
in the fair value of Sand Pebble Village Apartments - Phase I, which is owned
by a joint venture with an affiliate. This was the primary reason the
Partnership recognized affiliates' participation in income for 1994 as compared
to affiliates' participation in loss for 1993.
1993 Compared to 1992
---------------------
A decrease in interest income received on the Hickory Creek Apartments - Phases
I and II and Butler Plaza loans along with the July 1992 foreclosure of the
Sand Pebble Village Apartments - Phase I loan, which generated interest income
during seven months of 1992, were the primary reasons for the decrease in
interest income on loans receivable during 1993 as compared to 1992. As of
December 31, 1993, the loans collateralized by the Butler Plaza Shopping Center
and the Eastgate Village Mobile Home Park were on non-accrual status. The funds
advanced by the Partnership for these loans totaled $21,050,000.
Income from operations of real estate held for sale represents the net property
operations of the U.S. West Direct Center office building, and the Whispering
Hills and Sand Pebble Village - Phase I apartment complexes. Original funds
advanced by the Partnership totaled approximately $37,175,000 for these three
real estate investments. In addition, income from operations of real estate
held for sale includes operations from Sand Pebble Village Apartments - Phase
II. Income generated from operations at Sand Pebble Village - Phase I and Sand
Pebble Village - Phase II Apartments, which were acquired in July 1992 and
October 1993, respectively, was the primary reason for the increase in income
from operations of real estate held for sale during 1993 as compared to 1992.
Due to lower interest rates earned on cash available for investment, interest
income on short-term investments decreased during 1993 as compared to 1992.
The foreclosure on the Sand Pebble Village Apartments - Phase I in July 1992
and the repayment of the ROC Properties loan in August 1993 reduced the number
of loans outstanding in the Partnership's portfolio, resulting in a decrease in
mortgage servicing fees during 1993 as compared to 1992.
Due primarily to increased accounting and portfolio management fees,
administrative expenses increased during 1993 as compared to 1992.
Primarily due to the increase in the provision for potential losses on real
estate due to a decline in the fair value of Sand Pebble Village Apartments -
Phase I, affiliates' participation in loss of joint ventures was recognized
during 1993 as compared to affiliates participation in income of joint ventures
during 1992.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of December 31, 1994 when
compared to December 31, 1993. The Partnership generated cash flow from its
operating activities primarily as a result of property operations and interest
income earned on loans receivable and short-term investments. The payment of
administrative costs partially offset this cash flow. The Partnership also
generated cash flow from its investing activities primarily as a result of the
prepayment of the Eastgate Village Mobile Home Park loan and the proceeds
received from the Whispering Hills litigation settlement. The Partnership used
cash to fund its financing activities relating primarily to the payment of
distributions.
The Partnership classifies the cash flow performance of its properties as
either positive, marginal 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
<PAGE>
Whispering Hills, Sand Pebble Village - Phases I and II apartment complexes
generated positive cash flow during 1994 and 1993. Hickory Creek Apartments -
Phases I and II, which was acquired through foreclosure in March 1994, also
generated positive cash flow during 1994. As of December 31, 1994, the
occupancy rates of the Partnership's residential properties ranged from 92% to
98%, while the occupancy rate at the U.S. West Direct Center Office Building
was 100%. 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 July 1994, the Partnership accepted a prepayment of the Eastgate Village
Mobile Home Park loan at a discount due to the diminished value of the
collateral property. The Partnership received $6,400,000 in full settlement of
the $8,050,000 mortgage loan. The discount was written off against the
previously established allowance for potential losses.
In September 1994, the Partnership and an affiliate received $1,000,000 as a
result of the settlement of litigation on the Whispering Hills Apartments loan.
The Partnership's share of the settlement was $750,000. See Note 8 of Notes to
Financial Statements for additional information.
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 its affiliate. See Item
3. Legal Proceedings for additional information.
During March 1994 and January 1995, the Partnership acquired the Hickory Creek
Apartments - Phases I and II and Butler Plaza, respectively, through
foreclosure. See Note 9 of Notes to the Financial Statements for additional
information.
The Partnership made four distributions in each of 1994, 1993 and 1992 totaling
$12.00, $12.00 and $16.00 per Interest, respectively. See Financial Statements,
Statements of Partners' Capital. To date, Limited Partners have received $95.56
of Cash Flow from operations and a return of Original Capital of $28.00
totaling $123.56 per $250 Interest. Distributions per Interest were comprised
of $12.00 of Cash Flow in each of 1994 and 1993 and $12.00 of Cash Flow and
$4.00 of Mortgage Reductions in 1992. Distributions of Cash Flow remained
unchanged during the three year period. The Partnership expects to continue
making cash distributions to Limited Partners from the Cash Flow generated by
property operations and the receipt of mortgage payments less administrative
expenses and mortgage servicing fees. The General Partner believes it has
retained, on behalf of the Partnership, an appropriate amount of working
capital to meet cash or liquidity requirements which may occur.
In January 1995, the Partnership paid $2,376,571 ($5.15 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 fourth
quarter of 1994 and $3.15 per Interest representing a portion of the Mortgage
Reductions received from the prepayment of the Eastgate Village Mobile Home
Park loan. The level of the regular quarterly distribution decreased from the
amount distributed for the third quarter of 1994 due to the Eastgate Village
loan prepayment. In January 1995, the Partnership also paid $76,912 to the
General Partner as its distributive share of the Cash Flow distributed for the
fourth quarter of 1994 and $25,637 as its contribution to the Early Investment
Incentive Fund.
During 1994, the General Partner used amounts placed in the Early Investment
Incentive Fund to purchase 1,417 Interests from Limited Partners at a cost of
$239,463.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
<PAGE>
Inc., which has provided property management services to all of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
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.
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
--------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------
(a) Neither the Registrant nor Balcor Mortgage Advisors-VII, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company.
Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and
Savings Bank in the commercial real estate division where he was involved in
various lending activities. Mr. Meador received his M.B.A. degree from the
Indiana University Graduate School of Business.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
<PAGE>
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1994.
Item 11. Executive Compensation
-------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. Certain of these
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 7 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Mortgage Advisors-VII, principally through the Early Investment
Incentive Fund, and its officers and partners own as a group the following
Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership 8,127 Interests Less than 2%
Interest
<PAGE>
Relatives and affiliates of the officers and partners of the General Partner
own an additional 40 Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
(a & b) See Note 2 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 7 of Notes to Financial Statements for additional information relating
to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership,
previously filed as Exhibit 3 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 dated March 6, 1986 (Registration No.
33-01630), is incorporated herein by reference.
(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 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/Allan Wood
--------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VII,
the General Partner
Date: March 30, 1995
--------------
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
---------------------- --------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Mortgage
/s/Thomas E. Meador Advisors-VII, the General Partner March 30, 1995
-------------------- --------------
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage
/s/Allan Wood Advisors-VII, the General Partner March 30, 1995
-------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-VII:
We have audited the accompanying balance sheets of Balcor Pension Investors-VII
(An Illinois Limited Partnership) as of December 31, 1994 and 1993, and the
related statements of partners' capital, income and expenses and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-VII
(An Illinois Limited Partnership) at December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
March 14, 1995
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 13,194,808 $ 5,243,553
Escrow deposits 82,831 60,590
Escrow deposits - restricted 106,154
Accounts and accrued interest receivable 288,392 834,486
Deferred expenses, net of accumulated
amortization of $124,711 in 1994 and
$90,224 in 1993 53,883 88,370
------------- -------------
13,619,914 6,333,153
------------- -------------
Investment in loans receivable:
Loans receivable - first mortgages 10,865,000 30,160,926
Loan application and processing fees, net of
accumulated amortization of $2,152,041 in
1994 and $1,801,424 in 1993 156,676 507,293
Less:
Allowance for potential loan losses 1,166,260 5,854,326
------------- -------------
Net investment in loans receivable 9,855,416 24,813,893
Real estate held for sale (net of allowance of
$4,537,000 in 1994 and $3,400,000 in 1993) 66,516,056 59,438,335
------------- -------------
76,371,472 84,252,228
------------- -------------
$ 89,991,386 $ 90,585,381
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 214,042 $ 313,035
Due to affiliates 69,852 74,069
Accrued liabilities, principally
real estate taxes 259,772 85,262
Escrow liabilities 106,154
Security deposits 374,695 210,629
Mortgage note payable 4,941,641 4,991,956
------------- -------------
Total liabilities 5,860,002 5,781,105
------------- -------------
Affiliates' participation in joint ventures 13,068,237 13,826,566
Partners' capital (461,470 Limited Partnership
Interests issued and outstanding) 71,063,147 70,977,710
------------- -------------
$ 89,991,386 $ 90,585,381
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts
-----------------------------------------
General Limited
Total Partner Partners
------------- ------------- -------------
Balance at December 31, 1991 $ 80,408,812 $ (1,225,589) $ 81,634,401
Cash distributions to:
Limited Partners (A) (7,383,520) (7,383,520)
General Partner (615,292) (615,292)
Net income for the year
ended December 31, 1992 2,319,684 231,968 2,087,716
------------- ------------- -------------
Balance at December 31, 1992 74,729,684 (1,608,913) 76,338,597
Cash distributions to:
Limited Partners (A) (5,537,640) (5,537,640)
General Partner (615,292) (615,292)
Net income for the year
ended December 31, 1993 2,400,958 240,096 2,160,862
------------- ------------- -------------
Balance at December 31, 1993 70,977,710 (1,984,109) 72,961,819
Cash distributions to:
Limited Partners (A) (5,537,640) (5,537,640)
General Partner (615,292) (615,292)
Net income for the year
ended December 31, 1994 6,238,369 623,837 5,614,532
------------- ------------- -------------
Balance at December 31, 1994 $ 71,063,147 $ (1,975,564) $ 73,038,711
============= ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1994 1993 1992
------------- ------------- -------------
First Quarter $ 3.00 $ 3.00 $ 3.00
Second Quarter 3.00 3.00 3.00
Third Quarter 3.00 3.00 7.00
Fourth Quarter 3.00 3.00 3.00
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Income:
Interest on loans receivable,
net of amortization of loan
application and processing
fees of $350,617 in 1994,
$151,069 in 1993 and
$304,414 in 1992 $ 2,890,249 $ 2,660,577 $ 3,965,095
Income from operations of
real estate held for sale 4,608,100 3,758,483 2,829,992
Interest on short-term
investments 377,559 173,799 233,566
Participation income 408,083 23,149
------------- ------------- -------------
Total income 7,875,908 7,000,942 7,051,802
------------- ------------- -------------
Expenses:
Provision for potential losses
on loans, real estate and
accrued interest receivable 4,150,000 3,000,000
Mortgage servicing fees 64,345 114,042 134,144
Administrative 852,138 717,106 628,137
------------- ------------- -------------
Total expenses 916,483 4,981,148 3,762,281
------------- ------------- -------------
Income before affiliates'
participation in (income) loss
of joint ventures 6,959,425 2,019,794 3,289,521
Affiliates' participation in
(income) loss of joint
ventures (721,056) 381,164 (969,837)
------------- ------------- -------------
Net income $ 6,238,369 $ 2,400,958 $ 2,319,684
============= ============= =============
Net income allocated to
General Partner $ 623,837 $ 240,096 $ 231,968
============= ============= =============
Net income allocated to
Limited Partners $ 5,614,532 $ 2,160,862 $ 2,087,716
============= ============= =============
Net income per Limited
Partnership Interest (461,470
issued and outstanding) $ 12.17 $ 4.68 $ 4.52
============= ============= =============
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 years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Operating activities:
Net income $ 6,238,369 $ 2,400,958 $ 2,319,684
Adjustments to reconcile net
income to net cash provided
by operating activities:
Affiliates' participation
in income (loss) of
joint ventures 721,056 (381,164) 969,837
Amortization of
deferred expenses 34,487 38,587 38,587
Amortization of loan
application and
processing fees 350,617 151,069 304,414
Provision for potential
losses on loans, real
estate and accrued
interest receivable 4,150,000 3,000,000
Net change in:
Escrow deposits (22,241) (60,590)
Escrow deposits -
restricted 35,364
Accounts and accrued
interest receivable 401,194 (183,687) (44,992)
Accounts payable (98,993) 236,651 (390,057)
Due to affiliates (4,217) 29,392 (21,835)
Accrued liabilities 174,510 (2,986) (26,920)
Security deposits 164,066 50,338 106,060
------------- ------------- -------------
Net cash provided by
operating activities 7,958,848 6,428,568 6,290,142
------------- ------------- -------------
Investing activities:
Improvements to properties (114,721) (51,318) (378,104)
Purchase of property (9,357,449)
Collection of principal
payments on loans receivable 6,789,760 3,154,074 437,902
Proceeds from litigation
settlement 1,000,000 125,000
------------- ------------- -------------
Net cash provided by or (used
in) investing activities 7,675,039 (6,129,693) 59,798
------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners (5,537,640) (5,537,640) (7,383,520)
Distributions to General
Partner (615,292) (615,292) (615,292)
Distributions to joint venture
partners - affiliates (1,479,385) (1,032,696) (302,991)
Contributions from joint
venture partners -
affiliates 1,932,910 74,507
Proceeds from issuance of
<PAGE>
mortgage note payable 5,000,000
Payment of deferred expenses (27,410)
Principal payments on mortgage
note payable (50,315) (8,044)
------------- ------------- -------------
Net cash used in financing
activities (7,682,632) (288,172) (8,227,296)
------------- ------------- -------------
Net change in cash and
cash equivalents 7,951,255 10,703 (1,877,356)
Cash and cash equivalents
at beginning of year 5,243,553 5,232,850 7,110,206
------------- ------------- -------------
Cash and cash equivalents
at end of year $ 13,194,808 $ 5,243,553 $ 5,232,850
============= ============= =============
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 Policies:
(a) Income on loans is recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest is discontinued when a loan
becomes ninety days contractually delinquent or sooner when, in the opinion of
the Partnership's management, an impairment has occurred in the value of the
collateral property securing the loan. Income on non-accrual loans or loans
which are otherwise not performing in accordance with their terms is recorded
on a cash basis.
Various loan agreements provide for participation by the Partnership in
increases in value of the collateral property when the loan is repaid or
refinanced. In addition, certain loan agreements allow the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income is reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate owned is reflected in the accompanying
Statements of Income and Expenses net of related direct operating expenses.
(b) Allowances are recorded through charges to income when the General Partner
believes an impairment has occurred, either in a borrower's ability to repay
the loan or in the value of the collateral property. Determinations of
impairment are made periodically on the basis of performance under the terms of
the loan agreement and assessments of property operations.
When the General Partner believes the likelihood of foreclosure is more than
remote, a loss provision is recorded if the loan balance exceeds the estimated
fair value of the collateral property less costs of disposal. Upon foreclosure,
actual losses are charged to the allowance and the fair value of the property
is transferred to real estate held for sale. Determinations of fair value
represent estimations based on many variables which affect the value of real
estate, including economic and demographic conditions. An allowance for loss is
recorded when a decline in the value of a property owned is believed to be
temporary. Impairment in value considered to be permanent results in the direct
writedown of the property's carrying value to its estimated fair value.
(c) Loan application and processing fees include mortgage brokerage fees which
are amortized over the average term of the mortgage loans.
(d) Deferred expenses consist of leasing commissions which are amortized on a
straight line basis over the term of the respective lease.
(e) Income from operating leases with significant abatements and/or scheduled
rent increases is recognized on a straight line basis over the respective lease
terms.
(f) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(g) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(h) Several reclassifications have been made in the previously reported 1993
and 1992 financial statements to conform with the classifications used in 1994
including the reclassification of "loans in substantive foreclosure" to loans
to conform with the provisions of Statement of Financial Accounting Standards
No.114 which was adopted as of January 1, 1994. These reclassifications have
not changed the 1993 or 1992 results.
<PAGE>
2. Partnership Agreement:
The Partnership was organized on October 25, 1985. The Partnership Agreement
provides for Balcor Mortgage Advisors-VII to be the General Partner and for the
admission of Limited Partners through the sale of up to 1,600,000 Limited
Partnership Interests at $250 per Interest, 461,470 of which were sold on or
prior to January 31, 1987, the termination date of the offering.
For financial statement purposes, the Partnership's results of operations are
allocated 90% to Limited Partners and 10% to the General Partner, of which 2.5%
relates to the Early Investment Incentive Fund.
To the extent that Cash Flow is distributed, distributions are made as follows:
(i) 90% is distributed to the Limited Partners, (ii) 7.5% is distributed to the
General Partner, and (iii) an additional 2.5% is distributed to the General
Partner and constitutes the Early Investment Incentive Fund (the "Fund"). Upon
the liquidation of the Partnership, the General Partner will return to the
Partnership for distribution to Early Investors an amount not to exceed the
amount originally allocated to the Fund, if necessary, for Early Investors to
receive a return of their Original Capital plus a specified Cumulative Return
based on the date of investment.
Amounts placed in the Fund are available, at the sole discretion of the General
Partner and subject to certain limitations, to be used to repurchase Interests
from existing Limited Partners. During 1994, the Fund repurchased 1,417
Interests at a cost of $239,463. All repurchases of Interests have been made at
amounts representing 90% of the value of such Limited Partnership Interests at
the previous quarter end. Distributions of Cash Flow and Mortgage Reductions
pertaining to such repurchased Interests will be paid to the Fund and will be
available to repurchase additional Interests.
3. Investment in Loan Receivable:
The Jonathan's Landing Apartments loan receivable which was funded in 1987 has
a balance of $10,865,000 at December 31, 1994. This loan was placed in default
in January 1995 and is in process of foreclosure. Current monthly payments of
$87,665 are due representing an interest rate of 9.50%. The loan matures in
1997.
Loans which have been classified as non-accrual as a result of delinquency or
other noncompliance with terms of the loan agreements aggregated $10,865,000
and $19,295,926 at December 31, 1994 and 1993, respectively.
Under certain circumstances, the General Partner has entered into negotiations
with borrowers which resulted in a reduction of interest rates, periodic
payments or the modification of other loan terms. There were no loans at
December 31, 1994 or 1993 whose monetary terms had been restructured.
Nonaccrual loans and loans which have been restructured or placed in default
are hereinafter referred to as impaired loans.
Interest income relating to impaired loans would have been $1,001,000 in 1994,
$2,107,000 in 1993 and $2,050,000 in 1992. Interest income from impaired loans
included in the accompanying Statements of Income and Expenses amounted to
$1,001,000 in 1994, $1,201,000 in 1993 and $1,058,000 in 1992.
The Jonathan's Landing impaired loan balance of $10,865,000 at December 31,
1994 has a related allowance for losses of $1,166,260.
4. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1994 is described in the
table below.
<PAGE>
1994 1993 1992
------------ ----------- -----------
Loans:
Balance at beginning of
year $ 5,854,326 $ 6,104,326 $ 5,275,000
Provision charged to
income (1,137,000) 750,000 2,768,326
Charge-off of losses (3,551,066) (1,000,000) (1,939,000)
------------ ----------- -----------
Balance at the end of
the year $ 1,166,260 $ 5,854,326 $ 6,104,326
============ =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $ 3,400,000 None $11,600,000
Provision charged to
income 1,137,000 $ 3,400,000 231,674
Charge-off of losses None None (11,831,674)
----------- ----------- ------------
Balance at the end of
the year $ 4,537,000 $ 3,400,000 None
=========== =========== ===========
Included in the 1992 charge-off of losses are amounts reflecting the
Partnership's adoption of Statement of Position 92-3, "Accounting for
Foreclosed Assets" which required the Partnership to adjust the carrying
amounts of its real estate held for sale and loans previously classified as in
substantive foreclosure to the lower of fair value of the asset less estimated
costs to sell, or the cost of the asset. This change had no effect on the
results of operations of the Partnership in 1992 since the Partnership had
previously recorded these allowances to reflect declines in the value of the
real estate and loans.
5. Mortgage Note Payable:
In October 1993, the Partnership purchased the Sand Pebble Village Apartments -
Phase II which had a carrying value of $9,357,449 at December 31, 1994. The
Partnership obtained a $5,000,000 first mortgage loan from an unaffiliated
lender in connection with the purchase. At December 31, 1994 and 1993, the loan
had a balance of $4,941,641 and $4,991,956, respectively. The loan bears
interest at a rate of 7.11% per annum and requires monthly payments of
principal and interest of $33,635. The loan matures in November 1998 with an
estimated balloon payment of $4,718,000. During 1994 and 1993, the Partnership
incurred and paid interest expense on the mortgage note payable of $353,309 and
$66,139, respectively.
Future annual maturities of the above mortgage note payable are approximately
as follows:
1995 $ 54,000
1996 58,000
1997 62,000
1998 4,768,000
6. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 5% of gross operating receipts for residential
properties and a range of 3% to 6% of gross operating receipts for commercial
properties.
<PAGE>
7. Transactions with Affiliates:
Commissions, fees and expenses paid and payable by the Partnership to
affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $71,178 $2,264 $114,667 $9,097 $136,641 $9,722
Property management fees 477,796 None 303,566 36,023 194,647 18,084
Reimbursement of expenses
to the General Partner
at cost:
Accounting 70,376 16,061 57,724 4,773 59,991 4,552
Data processing 49,777 10,164 68,440 16,598 80,897 6,281
Investor communica-
tions 22,578 7,610 11,764 973 25,132 1,907
Legal 8,591 2,647 5,747 475 4,739 360
Portfolio management 59,323 25,221 55,492 4,588 43,368 3,291
Other 17,005 5,885 18,897 1,542 6,321 480
Allegiance Realty Group, Inc., an affiliate of the General Partner managed all
of the Partnerships properties until the affiliate was sold to a third party in
November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program. The Partnership's premiums to the deductible
insurance program were $99,135, $52,865 and $37,148 for 1994, 1993 and 1992,
respectively.
8. Affiliates' Participation in Joint Ventures:
The Partnership has classified the first mortgage loan investment
collateralized by the Whispering Hills Apartments as real estate held for sale.
This investment represents a joint venture between the Partnership and an
affiliate. Profits and losses are allocated 75% to the Partnership and 25% to
the affiliate. In September 1994, the joint venture received $1,000,000 as a
result of the settlement of litigation which was used to reduce the basis of
the property. Of this amount, $250,000 was distributed to the affiliate for its
share of the settlement.
The Sand Pebble Village Phase I and the Sand Pebble Village - Phase II
apartment complexes are owned by joint ventures consisting of the Partnership
and an affiliate. Profits and losses are allocated 55.36% to the Partnership
and 44.64% to the affiliate.
All assets, liabilities, income and expenses of the joint ventures are included
in the financial statements of the Partnership with the appropriate adjustment
for the affiliates' participation in income or loss of the joint ventures.
Distributions of $1,479,385 and $1,032,696 and net distributions of $228,484
were made to the joint venture partners during 1994, 1993 and 1992,
respectively. In 1993, the Sand Pebble Village Apartments - Phase II joint
venture partner made contributions of $1,932,910 for its share of the
acquisition costs of the apartment complex. In addition, the joint venture
partners of Sand Pebble Village - Phase I and Whispering Hills apartment
complexes were allocated the appropriate percentage of the provision for
potential losses in the amount of $512,000, $1,517,420 and $371,899 during
1994, 1993 and 1992, respectively.
9. Real Estate Held for Sale:
<PAGE>
The Partnership acquired the following properties through foreclosure: Butler
Plaza which was acquired in January 1995 and classified as real estate held for
sale at December 31, 1994; Hickory Creek Apartments - Phases I and II which was
acquired in March 1994 and classified as real estate held for sale at December
31, 1993; and, with an affiliate, the Sand Pebble Village Apartments - Phase I
in 1992. The Partnership recorded the costs of the properties at $9,100,000,
$10,338,837 and $22,135,668 in 1994, 1993 and 1992, respectively. These amounts
represented the outstanding loan balances plus any accrued interest receivable.
In addition, the Partnership reduced the basis of the property by $117,994 in
1992 for other escrows and costs recognized in connection with the
foreclosures. At the date of foreclosure, the property was transferred to real
estate held for sale at its fair value, net of allowances previously recorded.
The Partnership and an affiliate (together, the "Participants") purchased the
Sand Pebble Village Apartments - Phase II in October 1993 for $9,300,000. The
Participants paid $4,300,000 in cash as part of the purchase price of which the
Partnership's share was $2,380,480. The remainder of the purchase price was
paid with the proceeds of a $5,000,000 first mortgage loan. See Note 5 of Notes
to Financial Statements for additional information. An additional $57,449 in
fees were paid by the Participants in connection with the purchase, of which
the Partnership's share was $31,804 and were capitalized to the basis of the
property.
10. Contingencies:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
this action. While a plaintiff class has been certified, no determinations of
the merits have been made. Although the outcome of these matters is not
presently determinable, it is management's opinion that the ultimate outcome
should not have a material adverse affect on the financial position of the
Partnership. Management of the defendants believes they have meritorious
defenses to contest the claims.
11. Subsequent Event:
In January 1995, the Partnership paid $2,376,571 (5.15 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 fourth
quarter of 1994 and $3.15 per Interest representing a portion of the Mortgage
Reductions received from the prepayment of the Eastgate Village Mobile Home
Park loan in July 1994.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 13195
<SECURITIES> 0
<RECEIVABLES> 10144
<ALLOWANCES> 5703
<INVENTORY> 0
<CURRENT-ASSETS> 13566
<PP&E> 66516
<DEPRECIATION> 0
<TOTAL-ASSETS> 89991
<CURRENT-LIABILITIES> 918
<BONDS> 4942
<COMMON> 0
0
0
<OTHER-SE> 71063
<TOTAL-LIABILITY-AND-EQUITY> 89991
<SALES> 0
<TOTAL-REVENUES> 7155
<CGS> 0
<TOTAL-COSTS> 65
<OTHER-EXPENSES> 852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6238
<INCOME-TAX> 0
<INCOME-CONTINUING> 6238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6238
<EPS-PRIMARY> 12.17
<EPS-DILUTED> 12.17
</TABLE>
