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, 1998
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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, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
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Cash and cash equivalents $ 1,944,187 $ 1,983,142
Accounts and accrued interest receivable 10,039 26,582
Prepaid expenses 2,066
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$ 1,956,292 $ 2,009,724
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 30,866 $ 24,673
Due to affiliates 51,542 41,771
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Total liabilities 82,408 66,444
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Commitments and contingencies
Limited Partners' capital (461,470
Interests issued and outstanding) 1,988,848 2,058,244
General Partner's deficit (114,964) (114,964)
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Total partners' capital 1,873,884 1,943,280
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$ 1,956,292 $ 2,009,724
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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, 1998 and 1997
(Unaudited)
1998 1997
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Income:
Interest on short-term investments $ 26,789 $ 114,949
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Total income 26,789 114,949
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Expenses:
Loss (income) from operations
of real estate held for sale 7,541 (837,434)
Administrative 88,644 191,704
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Total expenses 96,185 (645,730)
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(Loss) income before affiliate's
participation in income of joint venture (69,396) 760,679
Affiliate's participation in income of
joint venture (92,699)
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Net (loss) income $ (69,396) $ 667,980
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Net income allocated to General Partner None $ 66,798
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Net (loss) income allocated to Limited
Partners $ (69,396) $ 601,182
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Net (loss) income per Limited Partnership
Interest (461,470 issued and outstanding)
- Basic and Diluted $ (0.15) $ 1.30
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Distribution to General Partner None $ 153,823
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Settlement Distribution to Limited Partners None $ 72,839
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Distribution to Limited Partners None $ 11,075,280
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Distribution per Limited Partnership
Interest (461,470 issued and outstanding) None $ 24.00
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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, 1998 and 1997
(Unaudited)
1998 1997
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Operating activities:
Net (loss) income $ (69,396) $ 667,980
Adjustments to reconcile net (loss) income
to net cash (used in) or provided by
operating activities:
Affiliate's participation in income
of joint venture 92,699
Amortization of deferred expenses 4,956
Payment of leasing commissions (145,488)
Net change in:
Accounts and accrued interest
receivable 16,543 (189,622)
Prepaid expenses (2,066) 40,974
Accounts payable 6,193 (26,843)
Due to affiliates 9,771 (2,192)
Accrued real estate taxes 125,193
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Net cash (used in) or provided by
operating activities (38,955) 567,657
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Financing activities:
Distribution to Limited Partners (11,148,119)
Distribution to General Partner (153,823)
Contribution by General Partner 115,368
Distribution to joint venture partners -
affiliates (67,898)
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Net cash used in financing activities (11,254,472)
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Net change in cash and cash equivalents (38,955) (10,686,815)
Cash and cash equivalents at beginning of
year 1,983,142 17,297,262
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Cash and cash equivalents at end of period $ 1,944,187 $ 6,610,447
============= ==============
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) The loss allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes during 1998 in order that
the capital account balances more accurately reflect their remaining economic
interests as provided for in the Partnership Agreement.
(b) 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, 1998, 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 1997, the Partnership sold its remaining three real estate
investments. The Partnership has retained a portion of the cash from the
property 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 4 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
quarter ended March 31, 1998 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $ 10,924 $ 51,542
The General Partner made a contribution of $115,368 during 1997 in connection
with the settlement of certain litigation.
4. 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
<PAGE>
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal, which is pending.
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.
<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. Two of these loans were repaid, five
properties were acquired through foreclosure and subsequently sold and one of
the loans was sold. In addition, the Partnership purchased and subsequently
sold one property. As of March 31, 1998, the Partnership has no loans or real
estate in its portfolio.
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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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As a result of the 1997 sales of the Partnership's remaining three real estate
investments, income from operations of real estate held for sale ceased. The
Partnership's operations in 1998 consist primarily of the payment of
administrative expenses offset by interest income on short-term investments.
As a result, the Partnership recognized a net loss during the quarter ended
March 31, 1998 as compared to net income during the same period in 1997.
Further discussion of the Partnership's operations is summarized below.
1998 Compared to 1997
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Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.
During 1997, income from operations of real estate held for sale represented
the net operations of the U.S. West Direct Center Office Building, the Butler
Plaza Shopping Center and the loan collateralized by Whispering Hills
Apartments, which was accounted for as real estate held for sale. These
properties were generating income prior to their sales in 1997. The
Partnership paid additional expenditures during 1998 related to certain of
these sold properties which is the reason for a loss from operations of real
estate held for sale.
As a result of higher cash balances in 1997 due to the investment of proceeds
received from property sales during the fourth quarter of 1996 prior to
distribution to Limited Partners in 1997, interest income on short-term
investments decreased in 1998 as compared to 1997.
<PAGE>
During February 1997, the General Partner made a payment relating to the
settlement of certain litigation to original investors who previously sold
their Interests in the Partnership which was accounted for as an administrative
expense. The Partnership also incurred legal costs related to this settlement.
As a result, administrative expenses decreased during 1998 as compared to 1997.
The Whispering Hills Apartments was owned by a joint venture with an affiliate.
As a result of the sale of this property during 1997, affiliate's participation
in income of joint venture ceased during 1997.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $39,000 as of
March 31, 1998, when compared to December 31, 1997 due to cash flow used in
operating activities. These activities consisted primarily of the payment of
administrative expenses and operating expenses related to sold properties which
were partially offset by interest income earned on short-term investments.
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 1997, the Partnership sold its remaining three real estate
investments. The Partnership has retained a portion of the cash from the
property 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 4 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 1997, the Partnership sold the U.S. West Direct Center Office Building.
Pursuant to the terms of the sale, $1,100,000 of the proceeds was placed in
escrow. Of this amount, $540,000 was paid to the Partnership in 1997. The
remaining $560,000 continues to be held in escrow to be used for the payment of
costs relating to the removal of soil contamination at the property. This
amount will remain in escrow until the earlier of October 31, 1998 or such time
as the environmental issues at the property are corrected. After payment of
any amounts needed to correct the environmental issues at the property, the
Partnership is entitled to receive all amounts remaining in the escrow, which
will be recorded as income when received.
In 1996, the Partnership was awarded $300,300 in connection with the
condemnation of a portion of the land at the Butler Plaza Shopping Center. The
Partnership as well as tenants at the property are parties to the condemnation
proceedings. In 1997, the Partnership agreed to resolve the land condemnation
by receiving an additional $367,850. The Partnership received $113,900 in
1996. Of the remaining $554,250, $196,387 was paid to the Partnership during
April 1998. The remaining $357,863 is expected to be paid to the Partnership
upon the resolution of certain issues with the tenants in the condemnation
proceedings during the second quarter of 1998. Amounts will be recorded as
income when received.
<PAGE>
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of March 31, 1998, there were 18,456 Interests and cash
of $1,577,712 in the Early Investment Incentive Fund.
To date, Limited Partners have received distributions of $123.06 of Cash Flow
from operations and a return of Original Capital of $187.09, totaling $310.15
per $250 Interest. The Partnership expects to distribute any proceeds
available from the U.S. West Direct Center Office Building escrow and the
Butler Plaza Shopping Center land condemnation proceeds. Thereafter, no
additional distributions are anticipated to be made prior to the termination of
the Partnership. However, after paying final partnership expenses, any
remaining cash reserves will be distributed.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated March 6,
1986 (Registration No. 33-01630) and Form of Confirmation regarding Interests
in the Registrant set forth as Exhibit 4.2 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-15528)
are incorporated herein by reference.
(10) Material Contracts:
(a) 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.
(b) 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.
(c)(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 Quarterly Report on Form 10-Q dated June 30, 1996, is incorporated
herein by reference.
(c)(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
Quarterly Report on Form 10-Q dated September 30, 1996 is incorporated herein
by reference.
(d)(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.
(d)(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 Quarterly Report on 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 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.
<PAGE>
(e)(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 Annual Report on Form 10-K dated December 31,
1996, is incorporated herein by reference.
(e)(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 Annual Report on Form 10-K dated December 31,
1996, is incorporated herein by reference.
(e)(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 Annual Report on Form 10-K dated December 31, 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 Annual Report on 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 Quarterly Report on 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 Quarterly Report on
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
Quarterly Report on Form 10-Q dated June 30, 1997, is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the three months ended March
31, 1998 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended March 31, 1998.
<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
Senior Managing Director and Chief
Financial Officer (Principal Accounting
Officer)of Balcor Mortgage Advisors-VII,
the General Partner
Date: May 6, 1998
---------------------------
<PAGE>
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<PERIOD-END> MAR-31-1998
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0
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