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, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15528
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BALCOR PENSION INVESTORS-VII
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(Exact name of registrant as specified in its charter)
Illinois 36-3390487
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
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Cash and cash equivalents $ 9,228,073 $ 8,595,511
Escrow deposits 172,428 80,519
Accounts and accrued interest receivable 230,065 188,638
Prepaid expenses 29,570 120,902
Deferred expenses, net of accumulated
amortization of $158,272 in 1996 and
$151,560 in 1995 88,984 95,696
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9,749,120 9,081,266
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Real estate held for sale (net of
allowance of $4,537,000 in 1996 and 1995) 85,099,286 85,099,286
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85,099,286 85,099,286
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$ 94,848,406 $ 94,180,552
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 236,517 $ 249,632
Due to affiliates 46,625 26,616
Accrued real estate taxes 539,623 281,776
Security deposits 425,323 410,618
Mortgage note payable 4,873,519 4,887,630
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Total liabilities 6,121,607 5,856,272
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Affiliates' participation in joint ventures 22,076,792 21,748,967
Limited Partners' capital (461,470
Interests issued and
outstanding) 68,537,117 68,469,893
General Partner's deficit (1,887,110) (1,894,580)
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Total partners' capital 66,650,007 66,575,313
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$ 94,848,406 $ 94,180,552
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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, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Interest on loans
receivable, net of
amortization of loan
application and processing
fees of $11,124 in 1995 $ 155,721
Income from operations of
real estate held for sale $ 2,203,981 1,759,757
Interest on short-term
investments 111,678 179,960
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Total income 2,315,659 2,095,438
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Expenses:
Administrative 138,713 152,139
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Total expenses 138,713 152,139
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Income before affiliates'
participation in income
of joint ventures 2,176,946 1,943,299
Affiliates' participation in
income of joint ventures (564,019) (367,648)
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Net income $ 1,612,927 $ 1,575,651
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Net income allocated to
General Partner $ 161,293 $ 157,565
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Net income allocated to
Limited Partners $ 1,451,634 $ 1,418,086
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Net income per Limited
Partnership Interest
(461,470 issued and
outstanding) $ 3.15 $ 3.07
============= =============
Distribution to General Partner $ 153,823 $ 102,549
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Distribution to Limited Partners $ 1,384,410 $ 2,376,571
============= =============
Distribution per Limited Partnership
Interest $ 3.00 $ 5.15
============= =============
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, 1996 and 1995
(UNAUDITED)
1996 1995
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Operating activities:
Net income $ 1,612,927 $ 1,575,651
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Affiliates'
participation in
income of joint ventures 564,019 367,648
Amortization of
deferred expenses 6,712 6,712
Amortization of loan
application and
processing fees 11,124
Net change in:
Escrow deposits (91,909) (49,799)
Accounts and accrued
interest receivable (41,427) (42,553)
Prepaid expense 91,332
Accounts payable (13,115) (47,782)
Due to affiliates 20,009 38,957
Accrued liabilities 257,847 167,505
Escrow liabilities 86,850
Security deposits 14,705 (1,025)
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Net cash provided by
operating activities 2,421,100 2,113,288
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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 (1,384,410) (2,376,571)
Distribution to General
Partner (153,823) (102,549)
Distributions to joint
venture partners -
affiliates (236,194)
Principal payments on
mortgage note payable (14,111) (13,146)
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<PAGE>
Net cash used in financing
activities (1,788,538) (2,492,266)
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Net change in cash and cash
equivalents 632,562 (608,089)
Cash and cash equivalents at
beginning of year 8,595,511 13,194,808
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Cash and cash equivalents at
end of period $ 9,228,073 $ 12,586,719
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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:
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,
1996, 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, 1996 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $19,008 $46,625
3. Subsequent Event:
In April 1996, the Partnership paid $2,381,185 ($5.16 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow of $3.00 per Interest for the first quarter
of 1996 and a special distribution of $2.16 per Interest from Mortgage
Reductions.
<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 principally 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, 1996, 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 1995 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 ceased and income from operations of real
estate held for sale increased during the quarter ended March 31, 1996 as
compared to the same period in 1995 due to the foreclosure of the Jonathan's
Landing Apartments loan in July 1995. As a result of this transaction, net
income increased slightly during the quarter ended March 31, 1996 as compared
to the same period in 1995. Further discussion of the Partnership's operations
is summarized below.
1996 Compared to 1995
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Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to the quarters ended March 31, 1996 and 1995.
The foreclosure of the Jonathan's Landing Apartments loan in July 1995 resulted
in the cessation of interest income on loans receivable during 1996 as compared
to 1995.
Income from operations of real estate held for sale represents the net
operations of seven properties. Original funds advanced by the Partnership
total approximately $77,360,000 for these seven properties. The Partnership
acquired the Jonathan's Landing Apartments in July 1995, which generated income
during the first quarter of 1996. This was the primary reason for the increase
in income from operations of real estate held for sale during 1996 as compared
to 1995.
As a result of lower average cash balances resulting from a special
distribution made to the Limited Partners in July 1995, interest income on
short-term investments decreased during 1996 when compared to 1995.
<PAGE>
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties. Determinations of fair
value are made periodically on the basis of assessments of property operations.
Determinations of fair value represent estimates based on many variables which
affect the value of real estate, including economic and demographic conditions.
The Partnership did not recognize any provisions during the quarters ended
March 31, 1996 or 1995.
The Jonathan's Landing Apartments is one of the properties owned by the
Partnership through a joint venture with an affiliate. As a result of income
recognized from operations of the property which was acquired through
foreclosure in July 1995, affiliates' participation in income from joint
ventures increased during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of March 31, 1996, when
compared to December 31, 1995. The cash flow of approximately $2,421,000
provided by the Partnership's operating activities consisted of property
operations and interest income earned on short-term investments, net of the
payment of administrative expenses. Financing activities consisted primarily of
distributions to Partners of approximately $1,540,000 and distributions to
joint venture partners of approximately $236,000.
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 generated positive cash flow during 1996 and 1995.
As of March 31, 1996, the occupancy rates of the Partnership's residential
properties ranged from 96% to 100%. The occupancy rates at the U.S. West Direct
Center Office Building and the Butler Plaza Shopping Center were 92% and 85%,
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.
As previously reported, the General Partner believes that the market for
multifamily housing properties has become increasingly favorable to sellers of
these properties. Currently, the Partnership is preparing to market two of its
residential properties for sale and is actively marketing two additional
residential properties. Additionally, the General Partner may explore the sale
of its commercial properties over the next year if market conditions become
favorable. The General Partner examines each property individually by property
type and market in determining the optimal time to sell each property. In
addition, the General Partner considers capital factors and Partnership
administrative costs as it pertains to Partnership performance.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
<PAGE>
In April 1996, the Partnership paid $2,381,185 ($5.16 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow of $3.00 per Interest for the first quarter
of 1996 and a special distribution of $2.16 per Interest from Mortgage
Reductions. The regular quarterly distribution level remained unchanged from
the amount distributed for the fourth quarter of 1995. In April 1996, the
Partnership also paid $115,367 to the General Partner as its share of the Cash
Flow distributed for the first quarter of 1996 and $38,456 as its contribution
to the Early Investment Incentive Fund. Including the April 1996 distribution,
Limited Partners have received $108.56 of Cash Flow from operations and a
return of Original Capital of $38.49, totaling $147.05 per $250 Interest.
The Partnership expects to continue making cash distributions to Limited
Partners from the Cash Flow generated by property operations less
administrative expenses. The General Partner believes the Partnership has
retained an appropriate amount of working capital to meet cash or liquidity
requirements which may occur.
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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Paul Williams, et al. vs. Balcor Pension Investors, et al.
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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). The
Partnership, the General Partner, seven affiliated limited partnerships and
other affiliates are the defendants. In July 1994, the Court granted
plaintiffs' motion certifying a class relating to Federal securities fraud
claims. The Court approved the Notice of Class Action in August 1995 which was
sent to potential members of the class in September 1995. Settlement
discussions among the parties are currently on-going but no final settlement
has been reached. There can be no assurance, however, that such settlement
discussions will ultimately be successful.
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 quarter ending March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1996.
<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: May 15, 1996
---------------------------
<PAGE>
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