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 March 31, 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.)
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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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
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 12,586,719 $ 13,194,808
Escrow deposits 132,630 82,831
Accounts and accrued interest receivable 330,945 288,392
Deferred expenses, net of accumulated
amortization of $131,423 in 1995 and
$124,711 in 1994 47,171 53,883
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13,097,465 13,619,914
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Investment in loan receivable:
Loan receivable - first mortgage 10,865,000 10,865,000
Loan application and processing fees, net
of accumulated amortization of $2,163,165
in 1995 and $2,152,041 in 1994 145,552 156,676
Less:
Allowance for potential loan losses 1,166,260 1,166,260
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Net investment in loan receivable 9,844,292 9,855,416
Real estate held for sale (net of allowance
of $4,537,000 in 1995 and 1994) 66,745,167 66,516,056
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76,589,459 76,371,472
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$ 89,686,924 $ 89,991,386
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 166,260 $ 214,042
Due to affiliates 108,809 69,852
Accrued liabilities, principally real
estate taxes 427,277 259,772
Escrow liabilities 86,850
Security deposits 373,670 374,695
Mortgage note payable 4,928,495 4,941,641
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Total liabilities 6,091,361 5,860,002
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Affiliates' participation in joint ventures 13,435,885 13,068,237
Partners' capital (461,470 Limited
Partnership Interests issued and
outstanding) 70,159,678 71,063,147
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$ 89,686,924 $ 89,991,386
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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 March 31, 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 $11,124 in 1995
and $135,975 in 1994 $ 155,721 $ 383,072
Income from operations of real estate
held for sale 1,759,757 1,039,006
Interest on short-term investments 179,960 39,172
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Total income 2,095,438 1,461,250
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Expenses:
Administrative 152,139 261,895
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Total expenses 152,139 261,895
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Income before affiliates' participation
in income of joint ventures 1,943,299 1,199,355
Affiliates' participation in income
of joint ventures (367,648) (325,981)
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Net income $ 1,575,651 $ 873,374
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Net income allocated to General Partner $ 157,565 $ 87,337
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Net income allocated to Limited Partners $ 1,418,086 $ 786,037
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Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 3.07 $ 1.70
============== ==============
Distribution to General Partner $ 102,549 $ 153,823
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Distribution to Limited Partners $ 2,376,571 $ 1,384,410
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Distribution per Limited Partnership
Interest $ 5.15 $ 3.00
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,575,651 $ 873,374
Adjustments to reconcile net income to net
cash provided by operating activities:
Affiliates' participation in income
of joint ventures 367,648 325,981
Amortization of deferred expenses 6,712 9,189
Amortization of loan application and
processing fees 11,124 135,975
Net change in:
Escrow deposits (49,799) (42,025)
Accounts and accrued interest
receivable (42,553) 353,601
Accounts payable (47,782) (194,064)
Due to affiliates 38,957 50,767
Accrued liabilites 167,505 376,217
Escrow liabilities 86,850
Security deposits (1,025) 99,822
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Net cash provided by operating activities 2,113,288 1,988,837
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Investing activity:
Costs incurred in connection with real
estate acquired through foreclosure (229,111)
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Net cash used in investing activity (229,111)
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Financing activities:
Distribution to Limited Partners (2,376,571) (1,384,410)
Distribution to General Partner (102,549) (153,823)
Distributions to joint venture partners -
affiliates (258,862)
Principal payments on mortgage note
payable (13,146) (12,247)
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Net cash used in financing activities (2,492,266) (1,809,342)
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Net change in cash and cash equivalents (608,089) 179,495
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 $ 12,586,719 $ 5,423,048
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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:
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has also been made
to the previously reported 1994 financial statements to conform with the
classification used in 1995. This reclassification has 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 quarter
ended March 31, 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
quarter ended March 31, 1995 are:
Paid Payable
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Mortgage servicing fees $6,791 $ 2,264
Reimbursement of expenses to
the General Partner, at cost None 106,545
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 Event:
In April 1995, the Partnership paid $922,940 ($2.00 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow for the first 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 March 31, 1995, two loans remain
outstanding in the Partnership's portfolio, and the Partnership owns five
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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Income from operations of real estate increased due to the foreclosure of two
properties in March 1994 and January 1995. This was the primary reason for the
increase in net income during the quarter ended March 31, 1995 as compared to
the same period in 1994. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
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The prepayment of the Eastgate Village Mobile Home Park loan in July 1994 and
the foreclosure of the Butler Plaza shopping center loan in January 1995
resulted in a decrease in interest income on loans receivable during the
quarter ended March 31, 1995 as compared to the same period in 1994. As of
March 31, 1995, the Jonathan's Landing Apartments loan was on non-accrual
status. The funds advanced by the Partnership for this non-accrual loan total
approximately $12,455,000. For non-accrual loans, income is recorded only as
cash payments are received from the borrowers. During the first quarter of
1995, the Partnership received cash payments of interest income of
approximately $255,000 on this loan, which agreed to the payments required
under the terms of the loan agreement.
<PAGE>
Income from operations of real estate held for sale represents the net
operations of six properties. At March 31, 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. Original
funds advanced by the Partnership total approximately $64,905,000 for these six
real estate investments. The Partnership acquired the Butler Plaza shopping
center in January 1995 and Hickory Creek Apartments - Phases I and II in March
1994, both of which generated income during the first quarter of 1995. This was
the primary reason for the increase in income from operations of real estate
held for sale during the quarter ended March 31, 1995 as compared to the same
period in 1994.
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 did not
recognize a provision for potential losses on its loans and real estate held
for sale during the quarters ended March 31, 1995 and 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 market interest rates, interest income on short-term investments
increased during the quarter ended March 31, 1995 when compared to the same
period 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 quarter ended March 31, 1995 as compared to the same period in 1994.
Liquidity and Capital Resources
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The cash position of the Partnership decreased as of March 31, 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 relating primarily
to the payment of distributions to partners.
<PAGE>
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 first quarter of 1995. As of March
31, 1995, the occupancy rates of the Partnership's residential properties
ranged from 92% to 97%, while the occupancy rates at the U.S. West Direct
Center office building and the Butler Plaza shopping center were 95% and 90%,
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.
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 has been posted for a foreclosure sale scheduled to occur on July 14,
1995. See Item 1. Legal Proceedings for additional information.
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 April 1995, the Partnership paid $922,940 ($2.00 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow for the first quarter of 1995. The
quarterly distribution level is consistent with the amount distributed for the
fourth quarter of 1994. In April 1995, the Partnership also paid $76,912 to the
General Partner as its distributive share of the Cash Flow distributed for the
first quarter of 1995 and $25,637 as its contribution to the Early Investment
Incentive Fund. To date, Limited Partners have received $97.56 of Cash Flow
from operations and a return of Original Capital of $28.00, totaling $125.56
per $250 Interest.
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. The General Partner believes
the Partnership has retained an appropriate amount of working capital to meet
cash or liquidity requirements which may occur.
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
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Jonathan's Landing Apartments
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As previously reported, the $23,000,000 loan collateralized by a first mortgage
on Jonathan's Landing Apartments was placed in default and accelerated in
January 1995 due to the sale of the property by the borrower without consent.
Negotiations with the new owner were not successful and the property has been
posted for a non-judicial foreclosure sale scheduled to occur on July 14, 1995.
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 three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 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 Parker
-----------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VII,
the General Partner
Date: May 11, 1995
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<PAGE>
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<PERIOD-END> MAR-31-1995
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<ALLOWANCES> 5703
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<PP&E> 66745
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0
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<OTHER-SE> 70160
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