SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15528
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BALCOR PENSION INVESTORS-VII
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(Exact name of registrant as specified in its charter)
Illinois 36-3390487
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 14,870,698 $ 17,297,262
Accounts and accrued interest receivable 780,055 411,712
Escrow deposits 560,000
Prepaid expenses 61,204
Deferred expenses, net of accumulated
amortization of $177,082 in 1996 70,174
-------------- --------------
16,210,753 17,840,352
-------------- --------------
Real estate held for sale (net of
allowance of $3,935,000 in 1996) 25,986,259
-------------- --------------
$ 16,210,753 $ 43,826,611
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 14,813 $ 251,125
Due to affiliates 87,965 88,416
Accrued real estate taxes 106,465
Security deposits 70,823
-------------- --------------
Total liabilities 102,778 516,829
-------------- --------------
Commitments and contingencies
Affiliates' participation in joint venture 3,584,170
Limited Partners' capital (461,470
Interests issued and outstanding) 16,222,758 41,621,252
General Partner's deficit (114,783) (1,895,640)
-------------- --------------
Total partners' capital 16,107,975 39,725,612
-------------- --------------
$ 16,210,753 $ 43,826,611
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Income from operations of
real estate held for sale $ 913,916 $ 5,273,649
Interest on short-term investments 597,485 464,027
Recovery of losses on real estate 95,250 2,080,943
-------------- --------------
Total income 1,606,651 7,818,619
-------------- --------------
Expenses:
Provision for potential losses
on real estate 1,700,000
Administrative 461,824 685,317
-------------- --------------
Total expenses 461,824 2,385,317
-------------- --------------
Income before gains on sales,
affiliates' participation in
income of joint ventures
and extraordinary item 1,144,827 5,433,302
Gains on sales of real estate 8,906,309 5,954,905
Affiliates' participation in
income of joint ventures (659,794) (3,312,719)
-------------- --------------
Income before extraordinary item 9,391,342 8,075,488
-------------- --------------
Extraordinary item:
Debt extinguishment expense (145,775)
Affiliate's participation in debt
extinguishment expense 65,074
--------------
Total extraordinary item (80,701)
-------------- --------------
Net income $ 9,391,342 $ 7,994,787
============== ==============
Income before extraordinary
item allocated to General Partner $ 1,998,774 $ 807,549
============== ==============
Income before extraordinary
item allocated to Limited Partners $ 7,392,568 $ 7,267,939
============== ==============
<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Income before extraordinary item
per Limited Partnership
Interest (461,470 issued and
outstanding) $ 16.02 $ 15.75
============== ==============
Extraordinary item allocated
to General Partner None $ (8,070)
============== ==============
Extraordinary item allocated
to Limited Partners None $ (72,631)
============== ==============
Extraordinary item allocated per
Limited Partnership Interest
(461,470 issued and outstanding) None $ (0.16)
============== ==============
Net income allocated to
General Partner $ 1,998,774 $ 799,479
============== ==============
Net income allocated to
Limited Partners $ 7,392,568 $ 7,195,308
============== ==============
Net income allocated per Limited
Partnership Interest (461,470
issued and outstanding) $ 16.02 $ 15.59
============== ==============
Distributions to General Partner $ 333,285 $ 461,469
============== ==============
Settlement Distribution to Limited Partners $ 72,839 None
============== ==============
Distributions to Limited Partners $ 32,718,223 $ 5,150,005
============== ==============
Distributions per Limited Partnership
Interest (461,470 issued and
outstanding) $ 70.90 $ 11.16
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Income from operations of
real estate held for sale $ 8,028 $ 1,202,189
Interest on short-term investments 262,056 254,463
Recovery of losses on real estate 2,080,943
-------------- --------------
Total income 270,084 3,537,595
-------------- --------------
Expenses:
Provision for potential losses
on real estate 1,700,000
Administrative 70,633 208,723
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Total expenses 70,633 1,908,723
-------------- --------------
Income before gains on sales,
affiliates' participation in
income of joint ventures and
extraordinary item 199,451 1,628,872
Gains on sales of real estate 5,954,905
Affiliates' participation in
income of joint ventures (2,253,263)
-------------- --------------
Income before extraordinary item 199,451 5,330,514
-------------- --------------
Extraordinary item:
Debt extinguishment expense (145,775)
Affiliate's participation in debt
extinguishment expense 65,074
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Total extraordinary item (80,701)
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Net income $ 199,451 $ 5,249,813
============== ==============
Income before extraordinary item
allocated to General Partner $ 4,458 $ 533,052
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 194,993 $ 4,797,462
============== ==============
Income before extraordinary item
per Limited Partnership Interest
(461,470 issued and outstanding) $ 0.42 $ 10.40
============== ==============
<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Extraordinary item allocated
to General Partner None $ (8,070)
============== ==============
Extraordinary item allocated
to Limited Partners None $ (72,631)
============== ==============
Extraordinary item allocated per
Limited Partnership Interest
(461,470 issued and outstanding) None $ (0.16)
============== ==============
Net income allocated to
General Partner $ 4,458 $ 524,982
============== ==============
Net income allocated to
Limited Partners $ 194,993 $ 4,724,831
============== ==============
Net income allocated per Limited
Partnership Interest (461,470
issued and outstanding) $ 0.42 $ 10.24
============== ==============
Distribution to General Partner $ 128,187 $ 153,823
============== ==============
Distribution to Limited Partners $ 17,074,390 $ 1,384,410
============== ==============
Distribution per Limited Partnership
Interest (461,470 issued and
outstanding) $ 37.00 $ 3.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Operating activities:
Net income $ 9,391,342 $ 7,994,787
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for potential losses
on real estate 1,700,000
Recovery of losses on real estate (95,250) (2,080,943)
Affiliates' participation in
income of joint ventures 659,794 3,312,719
Affiliate's participation in
debt extinguishment expense (65,074)
Gains on sales of real estate (8,906,309) (5,954,905)
Payment of leasing commissions (145,488)
Amortization of deferred
expenses 215,662 19,805
Net change in:
Escrow deposits 80,519
Accounts and accrued
interest receivable 185,907 (264,822)
Prepaid expenses 61,204 (20,013)
Accounts payable (236,312) 48,989
Due to affiliates (451) 44,911
Accrued liabilities (106,465) 219,330
Security deposits (70,823) (267,323)
-------------- --------------
Net cash provided by operating
activities 952,811 4,767,980
-------------- --------------
Investing activities:
Proceeds from sales of real estate 35,900,000 45,800,000
Payment of selling costs (1,096,914) (1,054,145)
Funding of escrow related to property sale (1,100,000)
Release of escrow related to property sale 540,000
Proceeds relating to land condemnation 113,900
Improvements to properties (369,518)
-------------- --------------
Net cash provided by investing
activities 33,873,568 44,859,755
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<PAGE>
BALCOR PENSION INVESTORS - VII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Financing activities:
Distributions to Limited Partners (32,791,062) (5,150,005)
Distributions to General Partner (333,285) (461,469)
Contribution by General Partner 115,368
Distributions to joint venture
partners - affiliates (4,243,964) (12,721,291)
Repayment of mortgage note payable (4,859,155)
Principal payments on mortgage
note payable (28,475)
-------------- --------------
Net cash used in financing
activities (37,252,943) (23,220,395)
-------------- --------------
Net change in cash and cash
equivalents (2,426,564) 26,407,340
Cash and cash equivalents at
beginning of year 17,297,262 8,595,511
-------------- --------------
Cash and cash equivalents at
end of period $ 14,870,698 $ 35,002,851
============== ==============
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) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the provisions in the Partnership Agreement.
In order for the capital accounts of the General Partner and Limited Partners
to appropriately reflect their remaining economic interests as provided for in
the Partnership Agreement, the income allocations between the partners have
been adjusted for financial statement purposes in 1997.
(b) A reclassification has been made to the previously reported 1996
statements. This reclassification has not changed the 1996 results.
(c) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1997, and all such adjustments are of a normal
and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold four properties. During 1997,
the Partnership sold its remaining three real estate investments, the U.S. West
Direct Center Office Building, the Butler Plaza Shopping Center and the loan
collateralized by the Whispering Hills Apartments, which was accounted for as
real estate held for sale. The Partnership distributed the available proceeds
from the sales of the U.S. West Direct Center Office Building and Butler Plaza
Shopping Center in July 1997 and distributed the available proceeds from the
Whispering Hills Apartments loan sale in October 1997. The Partnership has
retained a portion of the proceeds from the sales to satisfy obligations of the
Partnership as well as establish a reserve for contingencies. The timing of the
termination of the Partnership and final distribution of cash will depend upon
the nature and extent of liabilities and contingencies which exist or may
arise. Such contingencies may include legal and other fees and costs stemming
from litigation involving the Partnership including, but not limited to, the
lawsuit discussed in Note 5 of Notes to Financial Statements. In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency continues to exist or arises,
reserves may be held by the Partnership for a longer period of time.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
nine months and quarter ended September 30, 1997 are:
<PAGE>
Paid
----------------------
Nine Months Quarter Payable
------------ --------- ----------
Mortgage servicing fees $7,359 None $9,813
Reimbursement of expenses to
the General Partner, at cost 98,450 $33,695 78,152
The General Partner made a contribution of $115,368 in connection with the
settlement of certain litigation as further discussed in Note 6 of Notes to
Financial Statements.
4. Property Sales:
(a) In April 1997, the Partnership sold the U.S. West Direct Center Office
Building in an all cash sale for $14,250,000. From the proceeds of the sale,
the Partnership paid $324,819 in selling costs. The basis of the property was
$6,812,133. For financial statement purposes, the Partnership recognized a
gain of $7,113,048 from the sale of the property.
(b) In May 1997, the Partnership sold the Butler Plaza Shopping Center in an
all cash sale for $5,200,000. From the proceeds of the sale, the Partnership
paid $378,790 in selling costs. The basis of the property was $4,725,960, which
is net of an allowance of $3,935,000. In addition, the basis includes a
reduction of $554,250 related to the second installment of proceeds from a land
condemnation which is expected to be received in the fourth quarter of 1997.
The amount is recorded as an account receivable in the financial statements at
September 30, 1997. The Partnership recognized no gain or loss on the sale of
this property for financial statement purposes. The Partnership had previously
established an allowance for potential losses related to the property against
which its remaining net investment of $3,839,750 was written off. The
Partnership recognized a recovery of the loss allowance of $95,250.
(c) The loan collateralized by the Whispering Hills Apartments, which was
accounted for as real estate held for sale, was owned by a joint venture
consisting of the Partnership and an affiliate. The Partnership and the
affiliate held participating percentages in the joint venture of 75% and 25%,
respectively. In June 1997, the joint venture sold the loan in an all cash sale
for $17,200,000. From the proceeds of the sale, the joint venture paid $750,000
to the borrower in accordance with an amendment to the modified loan agreement
and $393,305 in selling costs. The basis of the property was $14,263,434. For
financial statement purposes, the Partnership recognized a gain of $1,793,261
from the sale of this property, of which $499,141 is the minority joint venture
partner's share.
5. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
<PAGE>
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations and
liquidity of the Partnership. The Partnership believes that it has meritorious
defenses to contest the claims.
6. Settlement of Litigation:
A settlement received final approval by the court in November 1996 in the class
action, Paul Williams and Beverly Kennedy et. al. v. Balcor Pension Investors,
et. al. upon the terms described in the notice to class members in September
1996. The General Partner made a contribution of $115,368 to the Partnership,
of which the plaintiff's counsel received $11,537 pursuant to the settlement
agreement. In February 1997, the General Partner paid the remainder of the
settlement of $103,831 ($0.22 per Interest) to members of the class. Of the
settlement amount, $72,839 was paid to original investors who held their
Limited Partnership Interests at the date of the settlement and was recorded as
a distribution to Limited Partners in the Financial Statements. The remaining
portion of the settlement of $30,992 was paid to original investors who
previously sold their Interests in the Partnership. This amount was recorded as
an administrative expense in the Financial Statements. Similar contributions
and payments were made on the seven other partnerships included in the lawsuit
in addition to those payments described above. The Balcor Company paid an
additional $635,000 to the plaintiffs' class counsel and The Balcor Company
received approximately $946,000 from the eight partnerships as a reimbursement
of its legal expenses, of which $90,979 was the Partnership's share. The
settlement had no material impact on the Partnership.
7. Subsequent Event:
In October 1997, the Partnership paid $13,013,454 ($28.20 per Interest) to the
holders of Limited Partnership Interests. This amount represents a special
distribution of Mortgage Reductions from the sale of the loan collateralized by
the Whispering Hills Apartments.
<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. Prior to 1996, two of the loans were
repaid, title to five properties were acquired through foreclosure and one
additional property was purchased. During 1996, the Partnership sold four
properties. During 1997, the Partnership sold its remaining properties, the
U.S. West Direct Center Office Building and the Butler Plaza Shopping Center,
and the loan collateralized by Whispering Hills Apartments, which was accounted
for as real estate held for sale. As of September 30, 1997, the Partnership no
longer holds an interest in any loans or real estate.
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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Partnership recognized higher gains in connection with the second quarter
1997 sales of the U.S. West Direct Center Office Building and the loan
collateralized by the Whispering Hills Apartments, which was accounted for as
real estate held for sale, as compared to the third quarter 1996 sales of the
Sand Pebble Village Apartments - Phase II and the Hickory Creek Apartments.
This was the primary reason net income increased for the nine months ended
September 30, 1997 as compared to the same period in 1996. The increase in net
income due to the higher gains was partially offset by a decrease in income
from operations of real estate held for sale as a result of the 1996 and 1997
sales. The gains recognized from the third quarter 1996 sales were the primary
reason net income decreased for the quarter ended September 30, 1997 as
compared to the same period in 1996. Further discussion of the Partnership's
operations is summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to the nine months and quarters ended September 30, 1997 and 1996.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
The Partnership sold four properties during 1996 and three properties during
<PAGE>
1997, including the loan collateralized by Whispering Hills Apartments, which
was accounted for as real estate held for sale. All of these properties were
generating income from operations prior to their sales. As a result, income
from operations of real estate held for sale decreased during 1997 as compared
to 1996.
The timing of the property sales in 1996 and 1997 and the investment of
proceeds from the sales prior to distribution to Limited Partners resulted in
higher interest income on short-term investments during 1997 as compared to
1996.
Provisions were charged to income when the General Partner believed an
impairment had occurred to the value of its properties. Determinations of fair
value were made periodically on the basis of assessments of property operations
and the property's estimated sales price less closing costs. Determinations of
fair value represented estimates based on many variables which affect the value
of real estate, including economic and demographic conditions. During 1997,
the Partnership recognized a recovery of $95,250 and wrote off $3,839,750 of a
previously established loss allowance in connection with the sale of the Butler
Plaza Shopping Center. During 1996, the Partnership recognized a provision of
$1,700,000 to provide for a change in the estimate of the fair value of the
Butler Plaza Shopping Center and recognized a recovery of loss on real estate
of $2,080,943 as a result of the sale of Sand Pebble Village Apartments - Phase
I, of which $928,933 was the minority joint venture partner's share.
The Partnership incurred higher consulting, investor processing, printing and
postage costs in connection with its response to a tender offer during 1996. As
a result, administrative expense decreased during 1997 as compared to 1996.
During 1997, the Partnership sold the U.S. West Direct Center Office Building
and the loan collateralized by Whispering Hills Apartments, which was accounted
for as real estate held for sale and recognized gains totaling $8,906,309 in
connection with these sales for financial statement purposes. During 1996, the
Partnership sold the Sand Pebble Village Apartments - Phase II and the Hickory
Creek Apartments and recognized gains totaling $5,954,905 in connection with
these sales.
The Jonathan's Landing, Sand Pebble Village - Phases I and II and Whispering
Hills apartment complexes were owned by joint ventures with affiliates. As a
result of the sales of the Sand Pebble Village - Phases I and II apartment
complexes during the third quarter of 1996 and the resulting recovery of a
previously established loss allowance and gain on sale, respectively, and the
decrease in income from operations of these four properties due to their sales,
affiliates' participation in income of joint ventures decreased during the nine
months and ceased during the quarter ended September 30, 1997 as compared to
the same periods in 1996. The gain on the sale of the Whispering Hills
Apartments during the second quarter of 1997 partially offset this decrease
during the nine months ended September 30, 1997.
In connection with the 1996 sale of Sand Pebble Village Apartments - Phase II,
the Partnership incurred a prepayment penalty of $145,775 which was recognized
as an extraordinary item and classified as debt extinguishment expense. The
minority joint venture partner's share of the extraordinary item is $65,074.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $2,427,000 as
of September 30, 1997, when compared to December 31, 1996 primarily due to the
distributions to Partners of the proceeds from the 1996 and 1997 property sales
which was partially offset by the proceeds received from the 1997 property
sales. Operating activities provided cash flow of approximately $953,000 from
the operations of the Partnership's properties and interest income earned on
short-term investments, offset by the payment of administrative expenses.
Investing activities consisted of net proceeds received from the sales of the
U.S. West Direct Center Office Building, the Butler Plaza Shopping Center, and
the loan collateralized by Whispering Hills Apartments totaling approximately
$34,803,000, less the remaining escrow funds of $560,000 related to the sale of
the U.S. West Direct Center Office Building and improvements to the U.S. West
Direct Center Office Building of approximately $370,000. Financing activities
consisted primarily of the payment of distributions to Limited Partners
totaling approximately $32,791,000 and distributions to the joint venture
partners - affiliates totaling approximately $4,244,000. In addition, in
October 1997 the Partnership made a distribution of approximately $13,013,000
to Limited Partners primarily from the available net proceeds from the sale of
the loan collateralized by Whispering Hills Apartments.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold four properties. During 1997,
the Partnership sold its remaining three real estate investments, the U.S. West
Direct Center Office Building, the Butler Plaza Shopping Center and the loan
collateralized by the Whispering Hills Apartments, which was accounted for as
real estate held for sale. The Partnership distributed the available proceeds
from the sales of U.S. West Direct Center Office Building and Butler Plaza
Shopping Center in July 1997 and distributed the available proceeds from the
Whispering Hills Apartments loan sale in October 1997. The Partnership has
retained a portion of the proceeds from the sales to satisfy obligations of the
Partnership as well as establish a reserve for contingencies. The timing of the
termination of the Partnership and final distribution of cash will depend upon
the nature and extent of liabilities and contingencies which exist or may
arise. Such contingencies may include legal and other fees and costs stemming
from litigation involving the Partnership including, but not limited to, the
lawsuit as discussed in Note 5 of Notes to Financial Statements. In the absence
of any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency continues to exist or arises,
reserves may be held by the Partnership for a longer period of time.
In April 1997, the Partnership sold the U.S. West Direct Center Office Building
in an all cash sale for $14,250,000. From the proceeds of the sale, the
Partnership paid $324,819 in selling costs. Pursuant to the terms of the sale,
$1,100,000 of the proceeds was held in escrow. Of the proceeds originally held
in escrow, $540,000 was returned to the Partnership in September 1997. The
remaining $560,000 will remain in escrow until the earlier of October 31, 1998
or such time as certain environmental problems at the property are corrected.
After payment of the Partnership's share of the cost of the work, the
Partnership is entitled to receive all amounts remaining in the escrow. The
<PAGE>
remainder of the available proceeds were distributed to the Limited Partners in
July 1997. See Note 4 of Notes to the Financial Statements for additional
information.
In 1996, the Partnership was awarded $303,200 in connection with the
condemnation of a parcel of land at the Butler Plaza Shopping Center. In 1997,
the Partnership was awarded an additional $364,950 related to the land
condemnation. The Partnership received $113,900 in 1996 and expects to receive
$554,250 in the fourth quarter of 1997. The proceeds were recorded as a
reduction of the carrying value of the property, prior to its sale, in the
financial statements.
In May 1997, the Partnership sold the Butler Plaza Shopping Center in an all
cash sale for $5,200,000. From the proceeds of the sale, the Partnership paid
$378,790 in selling costs. The net available proceeds were distributed to the
Limited Partners in July 1997. See Note 4 of Notes to Financial Statements
for additional information.
The loan collateralized by the Whispering Hills Apartments, which was accounted
for as real estate held for sale, was owned by a joint venture consisting of
the Partnership and an affiliate. In June 1997, the joint venture sold the loan
in an all cash sale for $17,200,000. From the proceeds of the sale, the joint
venture paid $750,000 to the borrower in accordance with an amendment to the
modified loan agreement and $393,305 in selling costs. The net proceeds of the
sale were $16,056,695, of which $12,042,521 was the Partnership's share. The
Partnership distributed to the joint venture partner its share of the sales
proceeds in July 1997. The Partnership's share of the proceeds was distributed
to Limited Partners in October 1997.
Pursuant to the sale agreement for the Hickory Creek Apartments, $250,000 of
the sale proceeds was retained by the Partnership and was unavailable for
distribution until March 1997, at which time the funds were released in full.
In February 1997, the General Partner made a settlement payment of $103,831
($0.22 per $250 Interest) to members of the class pursuant to the settlement
approved by the court in November 1996 in the Paul Williams and Beverly
Kennedy, et al, v. Balcor Pension Investors, et al class action lawsuit. The
General Partner made a contribution of $115,368 to the Partnership from which
the plaintiff's counsel received $11,537 pursuant to the settlement agreement.
Of the remaining settlement amount, $72,839 was paid to original investors who
held their Limited Partnership Interests at the date of the settlement and was
recorded as a distribution to Limited Partners in the Financial Statements.
The remaining portion of the settlement of $30,992 was paid to original
investors who previously had sold their Interests in the Partnership. This
amount was recorded as an administrative expense in the Financial Statements.
Similar contributions and payments were made on the seven other partnerships
included in the lawsuit in addition to those payments described above. The
Balcor Company paid an additional $635,000 to the plaintiffs' class counsel and
The Balcor Company received approximately $946,000 from the eight partnerships
as a reimbursement of its legal expenses, of which $90,979 was the
Partnership's share.
In October 1997, the Partnership paid $13,013,454 ($28.20 per Interest) to the
holders of Limited Partnership Interests. This amount represents a special
<PAGE>
distribution of Mortgage Reductions from the sale of the loan collateralized by
the Whispering Hills Apartments. Since all of the real estate assets have been
sold, it is not expected that any further quarterly distributions will be made,
however, the Limited Partners are expected to receive a distribution from the
Butler Plaza Shopping Center condemnation proceeds. Including the October 1997
distribution, Limited Partners have received $123.06 of Cash Flow from
operations and a return of Original Capital of $187.09, totaling $310.15 per
$250 Interest.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated March 6,
1986 (Registration No. 33-01630) and Form of Confirmation regarding Interests
in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form
10-Q for the quarter ended September 30, 1992 (Commission File No. 0-15528) are
incorporated herein by reference.
(10) Material Contracts:
(a)(i) Agreement of Sale and attachment thereto relating to the sale of the
U.S. West Office Building, Murray, Utah, previously filed as Exhibit (99) to
the Registrant's Current Report on Form 8-K dated January 14, 1997, is
incorporated herein by reference.
(a)(ii) First Amendment to Agreement of Sale relating to the sale of the
U.S. West Office Building, Murray, Utah, previously filed as Exhibit
(10)(a)(ii) to the Registrant's Form 10-K dated December 31, 1996, is
incorporated herein by reference.
(a)(iii) Second Amendment to Agreement of Sale relating to the sale of
the U.S. West Office Building, Murray, Utah, previously filed as Exhibit
(10)(a)(iii) to the Registrant's Form 10-K dated December 31, 1996, is
incorporated herein by reference.
(a)(iv) Third Amendment to Agreement of Sale relating to the sale of the U.S.
West Office Building, Murray, Utah, previously filed as Exhibit (10)(a)(iv) to
the Registrant's Form 10-K dated December 31, 1996, is incorporated herein by
reference.
(b) Agreement of Sale and attachments thereto relating to the sale of Sand
Pebble Village Apartments - Phase I previously filed as Exhibit (2)(a) to the
Registrant's Current Report on Form 8-K dated June 28, 1996, is incorporated
herein by reference.
(c) Agreement of Sale and attachments thereto relating to the sale of Sand
Pebble Village Apartments - Phase II previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated June 28, 1996, is incorporated
herein by reference.
(d)(i) Agreement of Sale and attachments thereto relating to the sale of
Hickory Creek Apartments previously filed as Exhibit (10)(i) to the
Registrant's Form 10-Q dated June 30, 1996, is incorporated herein by
reference.
<PAGE>
(d)(ii) Letter Agreement dated August 14, 1996, relating to the sale of Hickory
Creek Apartments previously filed as Exhibit (10)(c)(ii) to the Registrant's
Form 10-Q dated September 30, 1996 is incorporated herein by reference.
(e)(i) Agreement of Sale and attachment thereto relating to the sale of
Jonathan's Landing Apartments previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated August 30, 1996, is incorporated
herein by reference.
(e)(ii) First Amendment to the Agreement of Sale relating to the sale of
Jonathan's Landing Apartments previously filed as Exhibit (10)(d)(ii) to the
Registrant's Form 10-Q dated September 30, 1996 is incorporated herein by
reference.
(f)(i) Agreement of Sale and attachment thereto relating to the sale of Butler
Plaza Shopping Center, Orlando, Florida, previously filed as Exhibit (10)(f) to
the Registrant's Form 10-K dated December 31, 1996, is incorporated herein by
reference.
(f)(ii) First Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of Butler Plaza Shopping Center, Orlando, Florida, previously filed as
Exhibit (10)(f)(ii) to the Registrant's Form 10-Q dated March 31, 1997, is
incorporated herein by reference.
(g)(i) Agreement to Purchase Loan Documents relating to the sale of the loan
collateralized by the Whispering Hills Apartments, Overland Park, Kansas,
previously filed as Exhibit (10)(g) to the Registrant's Form 10-Q dated March
31, 1997, is incorporated herein by reference.
(g)(ii) First Amendment to Agreement to Purchase Loan Documents related to the
sale of the loan collateralized by the Whispering Hills Apartments, Overland
Park, Kansas, previously filed as Exhibit (10)(g)(ii) to the Registrant's Form
10-Q dated June 30, 1997, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ended
September 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended September 30, 1997.
<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/Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors-VII, the General
Partner
Date: November 12, 1997
---------------------------
<PAGE>
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