UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------- -------------
Commission file number 0-15648
-------
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3447130
- ------------------------------- -------------------
(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
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
PART I
Item 1. Business
- ----------------
Balcor Equity Pension Investors-IV A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1986 under the laws of the
State of Illinois. The Registrant raised $46,371,500 from sales of Limited
Partnership Interests. The Registrant has retained cash reserves from the sale
of its real estate investments for contingencies which exist or may arise. The
Registrant's operations currently consist of interest income earned on
short-term investments and the payment of administrative expenses.
The Registrant originally funded one acquisition loan and acquired two real
property investments and subsequently foreclosed on the acquisition loan. The
Registrant has since disposed of all of these investments. The Partnership
Agreement generally provides that the proceeds of any sale or refinancing of
the Registrant's properties will not be reinvested in new acquisitions, but
will be distributed to the extent not required to meet the Registrant's cash
requirements.
The Registrant no longer has an ownership interest in any real estate
investment. As previously reported, an environmental study of Evanston Plaza
Shopping Center identified certain environmental contamination at the site. The
property was sold in December 1998. As part of the sale of the property, the
purchaser agreed to indemnify the Registrant for the first $3,700,000 of costs
incurred in connection with the remediation of the property, including amounts
expended by the purchaser towards remediation. The purchaser performed
remediation of certain of the contamination in 1999. The Registrant has not yet
received information from the purchaser as to the amounts spent towards
remediation of the property. However, certain of the contamination was not
required to be currently remediated and, in fact, was not remediated during
1999. The Registrant believes that it is unlikely that it would have any
liability for the remaining environmental issues at the property, although
there can be no assurances in this regard. In the event that any party sought
to hold the Registrant liable for the remaining contamination, the Registrant
would seek indemnification from any such liability from the purchaser of the
property and/or from the companies that originally caused the contamination.
Except with regard to the Evanston Plaza Shopping Center, the General Partner
is not aware of any material potential liability relating to environmental
issues or conditions affecting real estate formerly owned by the Registrant.
The officers and employees of Balcor Equity Partners-IV, the General Partner of
the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
- ------------------
As of December 31, 1999, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
See Notes to Financial Statements for other information regarding former real
estate property investments.
Item 3. Legal Proceedings
- -------------------------
Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et
- -----------------------------------------------------------------------------
al.
- ---
Sandra Dee vs. The Balcor Company, et al.
- -----------------------------------------
On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH 08972). The General Partner of the
Partnership, the general partners of twenty-one additional limited partnerships
which were sponsored by The Balcor Company, The Balcor Company and one
individual are named as defendants in this action. The Partnership and the
twenty-one additional limited partnerships are referred to herein as the
"Affiliated Partnerships". Plaintiffs are entities that initiated tender offers
to purchase units and, in fact, purchased units in eleven of the Affiliated
Partnerships.
On June 1, 1999, a proposed class action complaint was filed, and on August 16,
1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et al.
(Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH
08123). This complaint is identical in all material respects to the Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company et al.
complaint filed in May 1999. The defendants filed on September 15, 1999 a
motion to consolidate the Dee case with the Madison Partnership case. On
September 20, 1999, the motion was granted and this case was consolidated with
the Madison Partnership case.
The complaints allege breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. The
complaints seek the winding up of the affairs of the Affiliated Partnerships,
the establishment of a liquidating trust for each of the Affiliated
Partnerships until a resolution of all contingencies occurs, the appointment of
an independent trustee for each such liquidating trust and the distribution of
a portion of the cash reserves to limited partners. The complaints also seek
compensatory damages, punitive and exemplary damages, and costs and expenses in
pursuing the litigation.
The defendants filed motions to dismiss the complaints on July 14, 1999 and on
September 15, 1999. On January 19, 2000 a hearing on the motions was held and
the class allegations in the complaints were struck regarding eleven Affiliated
Partnerships, but not the Partnership. In all other respects, the motions to
dismiss were denied. While the court directed the plaintiffs to file an amended
complaint by February 18, 2000, as of this date they have yet to do so.
The defendants intend to vigorously contest this action. No class has been
certified as of this date.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1999.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding distributions, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources".
As of December 31, 1999, the number of record holders of Limited Partnership
Interests of the Registrant was 6,115.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Total income $223,308 $2,310,008 $4,003,399 $5,327,280 $5,191,721
Provision for
investment
property
writedown None 3,400,000 850,000 4,782,000 None
(Loss) income before
participation
in income of
joint venture
with affiliates
and (loss) gain
on sales of
properties (78,170) (3,412,728) 341,078 (3,304,603) 1,277,771
Net (loss) income (78,170) (3,539,428) 4,559,177 (2,849,269) 905,702
Net (loss) income
per Limited
Partnership
Interest-Basic
and Diluted None (18.10) 23.58 (16.54) 3.82
Total assets 1,613,614 5,590,314 9,931,923 21,923,945 26,733,957
Distributions
per Taxable
Limited
Partnership
Interest (A) 20.54 None 88.19 9.16 11.37
Distributions
per Tax-exempt
Limited Partnership
Interest (A) 20.51 None 88.10 9.04 9.76
(A) These amounts include distributions of original capital of $18.08 in 1999
and $81.32 in 1997 per Taxable and Tax-exempt Limited Partnership Interest.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
Summary of Operations
- ---------------------
Balcor Equity Pension Investors - IV A Real Estate Limited Partnership (the
"Partnership") recognized a net loss in 1999 as administrative expenses were
higher than interest income earned on short-term investments and settlement
income received in connection with amounts owed by former tenants at the
Evanston Plaza Shopping Center. The Partnership recognized a significant
provision for investment property writedown related to a decline in the fair
value of the Evanston Plaza Shopping Center during 1998 and a smaller provision
during 1997. In addition, during 1997, the Partnership sold the Gleneagles
Apartments and recognized a gain in connection with this sale. As a result of
these events, the Partnership recognized a net loss during 1998 and net income
during 1997. Further discussion of the Partnership's operations is summarized
below.
1999 Compared to 1998
- ---------------------
The Partnership sold the Evanston Plaza Shopping Center in December 1998 and
recognized a loss of $126,700 in connection with the sale. As a result of this
sale, rental income, service income, depreciation, property operating expenses,
real estate taxes and property management fees ceased during 1998.
Interest income on short-term investments decreased during 1999 as compared to
1998 primarily due to the distribution to partners of proceeds received in
connection with the December 1998 sale of the Evanston Plaza Shopping Center
and Net Cash Receipts reserves in February 1999.
During 1999, the Partnership received $107,996 from settlements with former
tenants at the Evanston Plaza Shopping Center. The settlements relate to rental
income owed to the Partnership pursuant to the tenants' leases. These amounts
have been recognized as settlement income for financial statement purposes.
During 1999, the Partnership received $5,266 in connection with a partial
refund of a prior year's insurance premium related to the Evanston Plaza
Shopping Center. This amount has been recognized as other income for financial
statement purposes.
Primarily as a result of legal and environmental consulting expenses incurred
during 1998 related to environmental issues at the Evanston Plaza Shopping
Center and the sale of the property, administrative expenses decreased during
1999 as compared to 1998.
Provisions were charged to income when the General Partner believed an
impairment had occurred to the value of its property. 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 estimations based on many variables which affected the
value of real estate, including economic and demographic conditions. During
1998, the Partnership recognized a provision for investment property writedown
of $3,400,000 to provide for a change in the estimate of the fair value of the
Evanston Plaza Shopping Center. The decline in value was attributable to the
purchase price reduction granted to the purchaser of the property due primarily
to estimated expenditures that are necessary to correct environmental issues at
the property.
1998 Compared to 1997
- ---------------------
The Partnership sold the Gleneagles Apartments in May 1997 and recognized a
gain of $4,218,099 in connection with the sale. Primarily as a result of this
sale, rental income, depreciation, property operating expense, real estate
taxes and property management fees decreased during 1998 as compared to 1997.
In addition to the decrease in rental income due to the sale of the Gleneagles
Apartments, rental income also decreased during 1998 due to a decrease in
average occupancy levels at the Evanston Plaza Shopping Center.
As a result of lower real estate tax reimbursements from tenants at the
Evanston Plaza Shopping Center primarily due to lower occupancy and a decline
in real estate taxes due to a reduction in the assessed value of the property,
service income decreased during 1998 as compared to 1997.
Higher average cash balances were available for investment in 1997 primarily
due to the proceeds received in connection with the May 1997 sale of the
Gleneagles Apartments prior to distribution to Limited Partners in July 1997.
This resulted in a decrease in interest income on short-term investments during
1998 as compared to 1997.
In 1997, the Partnership entered into a settlement agreement with the
manufacturer of the roof at the Evanston Plaza Shopping Center relating to
alleged defects. The Partnership received $276,068 in satisfaction of its
claims. The amount received was recognized by the Partnership as settlement
income for financial statement purposes.
The Partnership recognized other income during 1997 primarily in connection
with partial refunds of prior years' insurance premiums relating to the
Partnership's properties.
In addition to the decrease in depreciation expense due to the sale of the
Gleneagles Apartments, depreciation expense also decreased during 1998 due to
the writedowns of the basis of the Evanston Plaza Shopping Center as a result
of the declines in the fair value of the property.
In addition to the decrease in real estate taxes due to the sale of the
Gleneagles Apartments, real estate taxes also decreased during 1998 due to a
reduction in the assessed value of the Evanston Plaza Shopping Center.
Primarily as a result of legal and environmental consulting expenses incurred
during 1998 related to environmental issues at the Evanston Plaza Shopping
Center and the sale of the property, administrative expenses increased in 1998
as compared to 1997.
During 1997, the Partnership recognized a provision for investment property
writedown of $850,000 that was primarily attributable to a decline in occupancy
at the Evanston Plaza Shopping Center and an overall softness in the retail
market.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $3,919,000 as
of December 31, 1999 when compared to December 31, 1998 primarily due to the
payment of a distribution to Partners in February 1999 which included proceeds
received in connection with the December 1998 sale of the Evanston Plaza
Shopping Center. The Partnership used cash of approximately $110,000 for its
operating activities to pay administrative expenses, which were partially
offset by settlement income received in connection with amounts owed by former
tenants at the Evanston Plaza Shopping Center and interest income earned on
short-term investments. Investing activities consisted of the release of an
escrow set up in connection with the sale of the Evanston Plaza Shopping Center
of $46,000. Financing activities consisted of the payment of a distribution to
Partners of approximately $3,855,000.
In December 1998, the Partnership sold the Evanston Plaza Shopping Center. The
purchaser performed remediation at the property in 1999 and has represented to
the Partnership that the remediation was performed in accordance with the
remedial action plan filed with the Illinois Environmental Protection Agency.
The purchaser has not yet provided the Partnership with detailed information
regarding the costs associated with the remediation. The Partnership expects to
receive such information from the purchaser during 2000. At such time, the
Partnership will make its determination whether or not to pursue its potential
claims against third parties for the contamination at the property. In
connection with the sale, $517,651 related to tenant reimbursements was placed
in escrow at closing and will be held in escrow until such time as payment of
these reimbursements are received from the tenants. The Partnership will
recognize income as amounts are received from this escrow. In addition, $46,000
was being held in escrow until a lien waiver was received from the former
property management company regarding the payment of its fees. Those funds were
released in full to the Partnership in March 1999.
The Partnership made distributions totaling $20.54 and $88.19 per Taxable
Interest and $20.51 and $88.10 per Tax-exempt Interest in 1999 and 1997,
respectively. No distributions were made to Limited Partners during 1998.
Distributions to Taxable Limited Partners were comprised of $2.46 of Net Cash
Receipts and $18.08 of Net Cash Proceeds in 1999 and $6.87 of Net Cash Receipts
and $81.32 of Net Cash Proceeds in 1997. Distributions to Tax-exempt Limited
Partners was comprised of $2.43 of Net Cash Receipts and $18.08 of Net Cash
Proceeds in 1999 and $6.78 of Net Cash Receipts and $81.32 of Net Cash Proceeds
in 1997.
It should be noted that distributions of Net Cash Receipts to Taxable Limited
Partners and Tax-exempt Limited Partners are computed by different formulas as
set forth in the Partnership Agreement; therefore, the amount of distributions
to Taxable Limited Partners when compared to the amount of distributions to
Tax-exempt Limited Partners fluctuated from quarter to quarter.
Limited Partners have received cumulative distributions of $199.82 per $250
Taxable Interest, of which $100.17 represents Net Cash Receipts and $99.65
represents Net Cash Proceeds, and $197.61 per $250 Tax-exempt Interest, of
which $97.96 represents Net Cash Receipts and $99.65 represents Net Cash
Proceeds. 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 in accordance with
the Partnership Agreement. Amounts allocated to the Repurchase Fund will also
be distributed at that time. Limited Partners will not recover all of their
original investment.
In 1997, the Partnership discontinued the repurchase of Interests from Limited
Partners. As of December 31, 1999, there was cash of $398,864 in the Repurchase
Fund.
The Partnership believes that its key vendors were Year 2000 compliant with
respect to the Partnership's operations as of December 31, 1999 and that there
was no material effect on the business, financial position or results of
operations of the Partnership related to Year 2000 issues.
Certain statements in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include statements regarding income or losses as well as
assumptions relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ from any
future results, performance or achievements expressed or implied by the
forward-looking statements.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1999 December 31, 1998
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
------------- ---------- ------------ -----------
Total assets $1,613,614 $8,952,969 $5,590,314 $12,932,709
Partners' capital
(deficit) accounts:
General Partner (348,599) (669,293) (220,348) (557,293)
Limited Partners 1,727,027 9,439,252 5,531,879 13,211,127
Net (loss) income:
General Partner (78,170) (61,919) (181,720) (814,986)
Limited Partners None 32,977 (3,357,708) (11,941,608)
Per Limited Part-
nership Interest None (B) (18.10)(A) (B)
(A) Amount represents basic and diluted net loss per Limited Partnership
Interest.
(B) The net income (loss) is $0.18 per Tax-exempt Interest and Taxable Interest
for 1999 and ($63.16) per Tax-exempt Interest and ($75.84) per Taxable Interest
for 1998.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-IV, its General Partner,
has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 52) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a member of the board of directors of The Balcor
Company. He is also Senior Vice President of American Express Company and is
responsible for its real estate operations worldwide. Prior to joining Balcor,
Mr. Meador was employed at the Harris Trust and Savings Bank in the commercial
real estate division where he was involved in various lending activities. Mr.
Meador received his M.B.A. degree from the Indiana University Graduate School
of Business.
Mr. Meador is on the Board of Directors of AMLI Commercial Properties Trust, a
private real estate investment trust that owns office and industrial buildings
in the Chicago, Illinois area. Mr. Meador was elected to the Board of AMLI
Commercial Properties Trust in August 1998.
Jayne A. Kosik (age 42) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1999 except that Mr. Meador is named, in his capacity as an
officer of Balcor, as a defendant in the Madison/Dee lawsuit described in "Item
3. Legal Proceedings".
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive officers
receive compensation from The Balcor Company (but not from the Registrant) for
services performed for various affiliated entities, which may include services
performed for the Registrant. However, the General Partner believes that any
such compensation attributable to services performed for the Registrant is
immaterial to the Registrant. See Note 7 of Notes to Financial Statements for
the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
-------------- ----------- ----------- ---------
Limited Engineers Joint 12,780 Limited 6.9%
Partnership Pension Fund Partnership
Interests Syracuse, New York Interests
(b) Balcor Equity Partners-IV and its officers and partners own no interests in
the Registrant as a group. The Repurchase Fund, however, owns the following
Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ---------------- ---------------
Limited 3,192 Interests 1.72%
Partnership
Interests
Relatives of the officers and affiliates of the partners of the General Partner
do not own any Interests.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 125 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution to
other Limited Partners in accordance with the Partnership Agreement.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 3 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 7 of Notes to Financial Statements for additional information relating
to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
of Balcor Equity Pension Investors-IV A Real Estate Limited Partnership,
previously filed as Exhibit 3 to Amendment No. 1 dated November 28, 1986 to the
Registrant's Registration Statement on Form S-11 (Registration No. 33-7133), is
hereby incorporated herein by reference.
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
to Registrant's Registration Statement on Form S-11 dated November 28, 1986
(Registration No. 33-7133) 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. 0-15648) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for 1999 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended December 31, 1999.
(c) Exhibits: See Item 14(a)(3) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
By:/s/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor
Equity Partners-IV, the General Partner
Date: March 28, 2000
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ----------------------------- -------------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
Partners-IV, the General Partner
/s/Thomas E. Meador March 28, 2000
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer) of
Balcor Equity Partners-IV,
the General Partner
/s/Jayne A. Kosik March 28, 2000
- -------------------- --------------
Jayne A. Kosik
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1999 and 1998
Statements of Partners' Capital, for the years ended December 31, 1999, 1998
and 1997
Statements of Income and Expenses, for the years ended December 31, 1999, 1998
and 1997
Statements of Cash Flows, for the years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-IV:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital, of income and expenses and of cash flows present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-IV A Real Estate Limited Partnership (An Illinois Limited
Partnership, the "Partnership") at December 31, 1999 and 1998, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 28, 2000
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
----------- -----------
Cash and cash equivalents $ 1,605,938 $ 5,525,151
Accounts and accrued interest receivable 7,676 19,163
Escrow deposits - restricted 46,000
----------- -----------
$ 1,613,614 $ 5,590,314
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 120,757 $ 193,118
Due to affiliates 114,429 85,665
----------- -----------
Total liabilities 235,186 278,783
----------- -----------
Commitments and contingencies
Limited Partners' capital (185,486
Interests issued and outstanding) 1,727,027 5,531,879
General Partner's deficit (348,599) (220,348)
----------- -----------
Total partners' capital 1,378,428 5,311,531
----------- -----------
$ 1,613,614 $ 5,590,314
=========== ===========
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1999, 1998 and 1997
Partners' Capital (Deficit) Accounts
------------ ------------- -------------
General Limited
Total Partner Partners
------------ ------------- -------------
Balance at December 31, 1996 $ 20,774,614 $ (84,420) $ 20,859,034
Cash distributions to:
Limited Partners (A) (16,342,921) (16,342,921)
General Partner (139,911) (139,911)
Net income for the year
ended December 31, 1997 4,559,177 185,703 4,373,474
------------ ------------- -------------
Balance at December 31, 1997 8,850,959 (38,628) 8,889,587
Net loss for the year
ended December 31, 1998 (3,539,428) (181,720) (3,357,708)
------------ ------------- -------------
Balance at December 31, 1998 5,311,531 (220,348) 5,531,879
Cash distribution to:
Limited Partners (A) (3,804,852) (3,804,852)
General Partner (50,081) (50,081)
Net loss for the year
ended December 31, 1999 (78,170) (78,170)
------------ ------------- -------------
Balance at December 31, 1999 $ 1,378,428 $ (348,599) $ 1,727,027
============ ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1999, 1998 and 1997
(Continued)
(A) Summary of cash distributions paid per Interest:
1999 1998 1997
------------ ------------- -------------
Taxable
- -----------------
First Quarter $ 20.54 None $ 11.11
Second Quarter None None 2.29
Third Quarter None None 74.79
Fourth Quarter None None None
Tax-exempt
- -----------------
First Quarter 20.51 None 11.08
Second Quarter None None 2.26
Third Quarter None None 74.76
Fourth Quarter None None None
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Income:
Rental $ $ 1,286,167 $ 2,370,636
Service 845,860 1,033,553
Interest on short-term
investments 110,046 177,981 313,116
Settlement 107,996 276,068
Other 5,266 10,026
------------ ------------ ------------
Total income 223,308 2,310,008 4,003,399
------------ ------------ ------------
Expenses:
Depreciation 146,700 360,128
Property operating 266,450 673,464
Real estate taxes 777,100 1,106,624
Property management fees 110,607 164,345
Administrative 301,478 1,021,879 507,760
Provision for investment
property writedown 3,400,000 850,000
------------ ------------ ------------
Total expenses 301,478 5,722,736 3,662,321
------------ ------------ ------------
(Loss) income before (loss)
gain on sales of properties (78,170) (3,412,728) 341,078
(Loss) gain on sales of
properties (126,700) 4,218,099
------------ ------------ ------------
Net (loss) income $ (78,170) $ (3,539,428) $ 4,559,177
============ ============ ============
Net (loss) income allocated to
General Partner $ (78,170) $ (181,720) $ 185,703
============ ============ ============
Net (loss) income allocated to
Limited Partners None $ (3,357,708) $ 4,373,474
============ ============ ============
Net (loss) income per Limited
Partnership Interest (185,486
issued and outstanding)
- Basic and Diluted None $ (18.10) $ 23.58
============ ============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Operating activities:
Net (loss) income $ (78,170) $ (3,539,428) $ 4,559,177
Adjustments to reconcile net
(loss) income to net cash
(used in) or provided
by operating activities:
Loss (gain) on sales of
properties 126,700 (4,218,099)
Depreciation of properties 146,700 360,128
Amortization of deferred
expenses 34,929 5,588
Provision for investment
property writedown 3,400,000 850,000
Net change in:
Accounts and accrued
interest receivable 11,487 167,342 (47,224)
Prepaid expenses 38,439
Accounts payable (72,361) 155,913 5,502
Due to affiliates 28,764 59,168 (32,680)
Accrued liabilities (1,007,379) 11,811
Security deposits (9,883) (53,000)
------------ ------------ ------------
Net cash (used in) or provided
by operating activities (110,280) (465,938) 1,479,642
------------ ------------ ------------
Investing activities:
Proceeds from sale of
properties 3,158,319 13,300,000
Payment of selling costs (153,755) (525,090)
Release (funding) of escrow in
connection with the sale of
property 46,000 (46,000)
Distribution from joint
venture - affiliates 76,101
------------ ------------ ------------
Net cash provided by investing
activities 46,000 2,958,564 12,851,011
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Continued)
1999 1998 1997
------------ ------------ ------------
Financing activities:
Distributions to Limited
Partners $(3,804,852) $(16,342,921)
Distributions to General
Partner (50,081) (139,911)
------------ ------------
Cash used in financing
activities (3,854,933) (16,482,832)
------------ ------------
Net change in cash and cash
equivalents (3,919,213) 2,492,626 (2,152,179)
Cash and cash equivalents at
beginning of year 5,525,151 3,032,525 5,184,704
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 1,605,938 $ 5,525,151 $ 3,032,525
============ ============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS - IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Equity Pension Investors-IV A Real Estate Limited Partnership (the
"Partnership") has retained cash reserves from the sale of its real estate
investments for contingencies which exist or may arise. The Partnership's
operations currently consist of interest income earned on short-term
investments and the payment of administrative expenses.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense was computed using the straight-line methods. Rates
used in the determination of depreciation were based upon the following
estimated useful lives:
Buildings and improvements 25 to 30 years
Furniture and fixtures 5 years
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account. As properties were
sold, the related costs and accumulated depreciation were removed from the
respective accounts. Any gain or loss on disposition was recognized in
accordance with generally accepted accounting principles.
(c) The Partnership recorded its investment in real estate at the lower of cost
or fair value, and periodically assessed, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determined an
impairment in value had occurred, and the carrying amount of the real estate
asset would not be recovered, a provision was recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the method referred to above to result in a reasonable measurement of
a property's fair value, unless other factors affecting the property's value
indicated otherwise.
(d) Deferred expenses consisted of leasing commissions which were amortized
over the life of each respective lease. Upon sale of the property, the
remaining unamortized balance was written off.
(e) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases was recognized on a straight line
basis over the respective lease term. Service income included reimbursements
for operating costs such as real estate taxes, maintenance and insurance and
was recognized as revenue in the period the applicable costs were incurred.
(f) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.
(g) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested primarily in one financial institution.
(h) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(i) In order for the capital account balances to appropriately reflect the
partners' remaining economic interests in the Partnership, the (loss) income
allocations have been adjusted.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year-ended December 31, 1997.
Since the Partnership has no dilutive securities, there is no difference
between basic and diluted net (loss) income per Limited Partnership Interest.
3. Partnership Agreement:
The Partnership was organized on June 20, 1986. The Partnership Agreement
provided for the admission of Limited Partners through the sale of up to
1,000,000 Limited Partnership Interests at $250 per Interest, 185,486 of which
were sold through December 14, 1987, the termination date of the offering.
Pursuant to the terms set forth in the Partnership Agreement, "Operating Income
from Real Properties" of the Partnership is allocated 10% to the General
Partner and 90% to the Limited Partners; "Operating Losses from Real
Properties" and certain other components is allocated 1% to the General Partner
and 99% to the Limited Partners; and "Other 'Operating Income' or 'Operating
Losses'" is allocated 10% to the General Partner and 90% to the Limited
Partners. In order for the capital account balances to appropriately reflect
the partners' remaining economic interests in the Partnership, the (loss)
income allocations have been adjusted.
The Partnership Agreement provides for different allocations of profits and
losses and cash distributions to Limited Partners depending on whether the
investor originally acquiring the Limited Partnership interest was a taxable or
tax-exempt entity.
The Partnership Agreement provides that ninety percent of Net Cash Receipts
available for distribution will be distributed to Limited Partners. To the
extent possible, Taxable Limited Partners received an allocation of such
available Net Cash Receipts generated by the operation of the Partnership's two
properties in the same manner as if their investment in the Partnership had
been attributable solely to the properties. Taxable Limited Partners were to
commence sharing in such available Net Cash Receipts generated by the
Partnership's investment in the 45 West 45th Street Office Building at such
time as the Taxable Limited Partners' investment in the Partnership was not
then solely attributable to the two properties (which time was originally
anticipated to be upon the sale of both properties). The Tax-exempt Limited
Partners were allocated all other Net Cash Receipts to be allocated to the
Limited Partners, consisting of (i) 100% of such available Net Cash Receipts
that had been generated by the investment in the 45 West 45th Street Office
Building (until such time as both of the properties were sold, as described
above) plus (ii) the Net Cash Receipts generated by the operation of the two
properties, to the extent not allocated to the Taxable Limited Partners as
described above. Of the remaining 10% of Net Cash Receipts, 7 1/2% was paid to
the General Partner as its distributive share from Partnership operations and
an additional 2 1/2% was paid to the General Partner for allocation to the
Repurchase Fund.
At the sole discretion of the General Partner and subject to certain
limitations, amounts placed in the Repurchase Fund were used to repurchase
Interests from existing Limited Partners. In February 1997, the Partnership
discontinued the repurchase of Interests from Limited Partners. An amount not
to exceed that originally allocated to the Repurchase Fund will be returned to
the Partnership at liquidation, which will be accounted for as a capital
contribution from the General Partner. As of December 31, 1999, there was cash
of $398,864 in the Repurchase Fund.
The Partnership has disposed of all of its remaining real property investments.
The "Net Cash Proceeds" resulting therefrom, which were available for
distribution, were distributed solely to the Taxable and Tax-exempt Limited
Partners in accordance with the Partnership Agreement. Since the required
subordination levels were not met, the General Partner has not received any
distributions of Net Cash Proceeds during the lifetime of the Partnership.
4. Provision for Investment Property Writedown:
In 1998 and 1997, the General Partner determined that impairments to the asset
value of the Evanston Plaza Shopping Center located in Evanston, Illinois, had
occurred. As a result, the property was written down by $3,400,000 in 1998 and
$850,000 in 1997, to an amount representing the Partnership's estimate of the
property's sales value less estimated closing costs. During 1998, the decline
in value was attributable to the purchase price reduction granted to the
purchaser of the property due primarily to estimated expenditures necessary to
correct environmental issues at the property. During 1997, the decline in value
was attributable to a decline in occupancy at the property, certain tenant
bankruptcies in 1996 and an overall softness in the retail market.
5. Management Agreement:
The Partnership's properties were managed by third party management companies
prior to the sale of the properties. These management agreements provided for
annual fees of 3% to 6% of gross operating receipts.
6. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles ("GAAP"), will differ
from the tax returns due to the different treatment of various items as
specified in the Internal Revenue Code. The net effect of these accounting
differences is that the taxable loss for 1999 is $49,228 less than the net loss
in the financial statements.
7. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $7,726 $11,847 $6,876 $7,213 $20,128 $3,789
Data processing 6,333 13,746 3,200 1,443 3,227 None
Legal 34,135 59,785 38,818 44,736 11,092 2,088
Portfolio management 12,320 29,051 30,038 32,273 97,825 19,021
Other None None 1,599 None 8,495 1,599
Subject to the provisions of the partnership agreement, the Partnership has
agreed to advance the legal fees incurred by the General Partner in defending
the Madison Partnership lawsuit discussed in Note 11 of Notes to Financial
Statements.
8. Property Sales:
(a) In December 1998, the Partnership sold the Evanston Plaza Shopping Center
in an all cash sale for $3,500,000, less credits totaling $341,681 related to
leasing commissions and roof repairs. From the proceeds of the sale, the
Partnership paid $153,755 in selling costs. In connection with the sale,
$517,651 related to tenant reimbursements was placed in escrow at closing and
will be held in escrow until such time as payment of these reimbursements are
received from the tenants. The Partnership will recognize income as amounts are
received from the escrow. In addition, $46,000 was being held in escrow until a
lien waiver was received from the former property management company regarding
the payment of its fees. The funds were released in full in March 1999. The
basis of the property at the date of sale was $3,131,264, net of accumulated
depreciation of $5,435,224. For financial statement purposes, the Partnership
recognized a loss of $126,700 from the sale of this property.
An environmental study of Evanston Plaza in 1997 identified certain
environmental issues on the site including the presence of arsenic, lead and
PNA's in the ground soil and vinyl chloride in the ground water. The
Partnership filed a Remedial Action Plan ("RAP") with the Illinois
Environmental Protection Agency ("IEPA"). In November 1998, the Partnership
received a letter from the IEPA approving the RAP, as revised. The RAP
contemplates the remediation of most of the contaminated ground soil at the
property. However, there may be contaminated soil under certain parts of the
center (principally under existing stores) that is not anticipated to be
remediated under the RAP. Additionally, the contaminants present in the ground
water are not required to, and therefore will not be, remediated under the RAP.
The purchaser of the property has agreed to indemnify the Partnership for the
first $3,700,000 of costs incurred in connection with the remediation of the
property, including amounts expended by the purchaser for those items covered
in the RAP. The purchaser of the property performed remediation at the property
in 1999. The purchaser has not yet provided the Partnership with detailed
information regarding the costs associated with the remediation. The purchaser
was not required to, and in fact did not, remediate all contamination at the
property. The Partnership believes it is unlikely that it would have any
liability for the remaining environmental issues at the property. Limited
Partners would not have any liability for any environmental costs regardless of
whether such costs are incurred before or after dissolution of the Partnership.
(b) In May 1997, the Partnership sold the Gleneagles Apartments in an all cash
sale for $13,300,000. From the proceeds of the sale, the Partnership paid
$525,090 in selling costs. The basis of the property was $8,556,811 which is
net of accumulated depreciation of $5,051,642. For financial statement
purposes, the Partnership recognized a gain of $4,218,099 from the sale of this
property.
9. Settlement Income:
(a) During 1999, the Partnership received $107,996 from settlements with former
tenants at the Evanston Plaza Shopping Center. The settlements relate to rental
income owed to the Partnership pursuant to the tenants' leases. These amounts
have been recognized as settlement income for financial statement purposes.
(b) In 1997, the Partnership entered into a settlement agreement with the
manufacturer of the roof at the Evanston Plaza Shopping Center relating to
alleged defects. The Partnership received $276,068 in satisfaction of its
claims. The amount received was recognized by the Partnership as settlement
income for financial statement purposes.
10. Other Income:
The Partnership recognized other income of $5,266 in 1999 and $10,026 in 1997
in connection with partial refunds of prior years' insurance premiums relating
to the Partnership's properties.
11. Contingency:
In May 1999, a lawsuit was filed, Madison Partnership Liquidity Investors XX,
et al. vs. The Balcor Company, et al. whereby the General Partner and certain
affiliates have been named as defendants. The plaintiffs are entities that
initiated tender offers to purchase and, in fact, purchased units in eleven
affiliated partnerships. The complaint alleges breach of fiduciary duties and
breach of contract under the partnership agreement and seeks the winding up of
the affairs of the Partnership, the establishment of a liquidating trust, the
appointment of an independent trustee for the trust and the distribution of a
portion of the cash reserves to limited partners. On June 1, 1999 a second
lawsuit was filed and was served on August 16, 1999, Sandra Dee vs. The Balcor
Company, et al. The Dee complaint is virtually identical to the Madison
Partnership complaint and on September 20, 1999 was consolidated into the
Madison Partnership case. On January 19, 2000, a hearing was held on the
defendants' motion to dismiss; the motion to dismiss was denied as to the
Partnership. The defendants intend to vigorously contest these actions. It is
not determinable at this time how the outcome of these actions will impact the
remaining cash reserves of the Partnership.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1606
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1614
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1614
<CURRENT-LIABILITIES> 235
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1378
<TOTAL-LIABILITY-AND-EQUITY> 1614
<SALES> 0
<TOTAL-REVENUES> 223
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (78)
<INCOME-TAX> 0
<INCOME-CONTINUING> (78)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
