SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-17653
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BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3523598
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.,
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 PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
----------- -----------
Cash and cash equivalents $ 2,769,043 $ 3,062,342
Accounts and accrued interest receivable 145,054 54,970
----------- -----------
2,914,097 3,117,312
----------- -----------
Investment in acquisition loan receivable 7,799,522 7,817,596
Less:
Allowance for potential loan losses 545,000 545,000
----------- -----------
Net investment in acquisition loan receivable 7,254,522 7,272,596
Investment in joint ventures - affiliates 5,041,992 4,801,982
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12,296,514 12,074,578
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$ 15,210,611 $ 15,191,890
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 13,728 $ 82,545
Due to affiliates 19,149 13,952
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Total liabilities 32,877 96,497
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Limited Partners' capital (292,708 Interests
issued and outstanding) 15,219,637 15,137,296
General Partner's deficit (41,903) (41,903)
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Total partners' capital 15,177,734 15,095,393
----------- -----------
$ 15,210,611 $ 15,191,890
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Interest on loans $ 205,810 $ 205,810
Interest on short-term investments 35,452 67,262
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Total income 241,262 273,072
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Expenses:
Administrative 45,275 71,071
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Total expenses 45,275 71,071
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Income before participation in income of
joint ventures - affiliates and equity in
loss from investment in acquisition loan 195,987 202,001
Participation in income of joint ventures -
affiliates 84,556 52,229
Equity in loss from investment in
acquisition loan (18,074) (16,145)
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Net income $ 262,469 $ 238,085
=========== ===========
Net income allocated to General Partner $ 4,503 $ 4,503
=========== ===========
Net income allocated to Limited Partners $ 257,966 $ 233,582
=========== ===========
Net income per Limited Partnership Interest
(292,708 issued and outstanding) $ 0.88 $ 0.80
=========== ===========
Distribution to General Partner $ 4,503 $ 4,503
=========== ===========
Distribution to Limited Partners $ 175,625 $ 175,625
=========== ===========
Distribution per Limited Partnership Interest$ 0.60 $ 0.60
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net income $ 262,469 $ 238,085
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss from investment in
acquisition loan 18,074 16,145
Participation in income of joint
ventures - affiliates (84,556) (52,229)
Net change in:
Accounts and accrued interest
receivable (90,084) 6,504
Accounts payable (68,817) (34,976)
Due to affiliates 5,197 12,906
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Net cash provided by operating activities 42,283 186,435
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Investing activities:
Capital contribution to joint venture -
affiliate (242,854) (58,156)
Distribution from joint venture -
affiliate 87,400
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Net cash used in investing activities (155,454) (58,156)
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Financing activities:
Distribution to Limited Partners (175,625) (175,625)
Distribution to General Partner (4,503) (4,503)
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Cash used in financing activities (180,128) (180,128)
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Net change in cash and cash equivalents (293,299) (51,849)
Cash and cash equivalents at beginning of
period 3,062,342 4,256,384
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Cash and cash equivalents at end of period $ 2,769,043 $ 4,204,535
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1996, and all such adjustments are of a normal and recurring nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 are:
Paid Payable
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Mortgage servicing fees $ 5,277 $ 1,759
Reimbursement of expenses to
the General Partner, at cost 7,105 17,390
For the quarter ended March 31, 1996, the General Partner subordinated receipt
of one-half of its share of distributed Cash Flow, totaling $6,004. This amount
will be paid to the General Partner only after required distribution levels to
investors have been met and such amounts, if any, will be allocated to the
Repurchase Fund.
3. Investments in Joint Ventures - Affiliates:
The following information has been summarized from the financial statements of
the 45 West 45th Street Office Building and Sun Lake Apartments joint ventures:
March 31, 1996
---------------
Net investment in real
estate as of March 31 $30,786,840
Total liabilities as
of March 31 15,910,125
Total income 1,492,457
Net income 257,119
4. Subsequent Event:
In April 1996, the Partnership paid $234,166 ($.80 per Interest) to Limited
Partners, representing the distribution for the first quarter of 1996 from Cash
Flow, as well as $1,340,603 ($4.58 per Interest), representing a special
distribution of a portion of the Mortgage Reductions received in connection
with the repayment of the Skyline Village Mobile Home Park loan.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Preferred Pension - 12 A Real Estate Limited Partnership (the
"Partnership") was formed in 1987 to invest in first mortgage loans,
wrap-around mortgage loans and other junior mortgage loans. The Partnership
raised $29,270,800 through the sale of Limited Partnership Interests and
utilized these proceeds to invest in four loans. The Partnership subsequently
reclassified its investment in two of these loans in which it held minority
participations to investment in joint ventures with affiliates. In addition,
one of the loans was repaid. As of March 31, 1996, the Partnership had an
investment in one participating first mortgage loan and two joint venture
investments in 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 1995 for a more complete understanding of
the Partnership's financial position.
Summary of Operations
- ---------------------
The Partnership's net income increased slightly during the quarter ended March
31, 1996 as compared to the same period in 1995. Further discussion of the
Partnership's operations is summarized below.
1996 Compared to 1995
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Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
As a result of lower interest rates and lower average cash balances due to the
special distribution to Limited Partners in July 1995, interest income on
short-term investments decreased during 1996 as compared to 1995.
Primarily as a result of lower accounting and professional fees, administrative
expenses decreased during 1996 as compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its joint venture properties or in the
borrower's ability to repay the loan or in the value of the collateral
property. Determinations of fair value are made periodically on the basis of
performance under the terms of the loan agreement and assessments of property
operations. Determinations of fair value represent estimations based on many
variables which affect the value of real estate, including economic and
demographic conditions. The Partnership recognized no provisions during the
quarters ended March 31, 1996 and 1995 related to its loan.
Participation in joint ventures with affiliates represents the Partnership's
share of the income or loss for the Sun Lake Apartments and the 45 West 45th
Street Office Building. Primarily as a result of lower interior maintenance
<PAGE>
and repairs and legal expenses at the 45 West 45th Street Office Building,
participation in income of joint ventures with affiliates increased during 1996
as compared to 1995.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $293,000 as of
March 31, 1996 as compared to December 31, 1995. During the quarter ended March
31, 1996, cash flow of approximately $42,000 was provided by the Partnership's
operating activities, which included mortgage payments on the loan receivable
and interest income on short-term investments, which were partially offset by
the payment of administrative expenses. Investing activities included a capital
contribution made to the Sun Lake Apartments joint venture of approximately
$243,000, related primarily to the Partnership's share of the costs of the
property's 1995 bond refunding. Investing activities also included a
distribution received from the 45 West 45th Street Office Building joint
venture of approximately $87,000. Financing activities consisted of the
quarterly distribution to the Partners of approximately $180,000.
The Partnership classifies the cash flow performance of the properties in which
it has a joint venture interest as either positive, a marginal deficit or a
significant deficit. A deficit is considered to be significant if it exceeds
$250,000 annually or 20% of the property's rental and service income. The
Partnership defines cash flow generated from the properties as an amount equal
to the property's revenue receipts less property related expenditures, which
include any debt service payments. The 45 West 45th Street Office Building,
which does not have any underlying debt, generated positive cash flow during
the quarter ended March 31, 1996 as compared to a marginal cash flow deficit
during the same period in 1995 due to lower interior maintenance and repairs
and legal expenses at the property. In addition, significant leasing costs
were incurred during the quarter ended March 31, 1995 at the property. These
items were not included in classifying the cash flow performance of the
property since they are nonrecurring expenditures. Had these costs been
included, the property would have generated a significant cash flow deficit for
the quarter ended March 31, 1995. The occupancy rate of this property was 86%
at March 31, 1996. The Sun Lake Apartments, which has an underlying first
mortgage loan, generated positive cash flow during the quarters ended March 31,
1996 and 1995. The occupancy rate of the property was 98% at March 31, 1996.
Rental markets continue to remain extremely competitive; therefore, the General
Partner's goals are to maintain high occupancy levels, while increasing rents
where possible, and to monitor and control operating expenses and capital
improvement requirements at the properties.
As previously reported, the General Partner believes that the market for multi-
family housing properties has become increasingly favorable to sellers of these
properties. Currently, the General Partner is actively marketing the Sun Lake
Apartments, in which the Partnership has a joint venture interest.
Additionally, the General Partner is currently marketing the 45 West 45th
Street Office Building for sale. The Partnership also holds a joint venture
interest in this property. The General Partner examines each property
individually by property type and market in determining the optimal time to
sell each property. In addition, the General Partner considers capital factors
and Partnership administrative costs as it pertains to Partnership performance.
<PAGE>
The Noland Fashion Square loan has been recorded by the Partnership as an
investment in acquisition loan. The Partnership has recorded its share of the
collateral property's operations as equity in loss from investment in
acquisition loan. The Partnership's share of operations has no effect on the
cash flow of the Partnership. Amounts representing contractually required debt
service are recorded as interest income on loans.
In April 1996, the Partnership paid $234,166 ($.80 per Interest) to Limited
Partners, representing the distribution for the first quarter of 1996 from Cash
Flow, as well as $1,340,603 ($4.58 per Interest), representing a special
distribution of a portion of the Mortgage Reductions received in connection
with the repayment of the Skyline Village Mobile Home Park loan. The level of
the regular quarterly distribution increased from $.60 per Interest to $.80 per
Interest as compared to the prior quarter as a result of improved cash flow
from the operations of the 45 West 45th Street Office Building. The Partnership
also paid $6,004 to the General Partner as its unsubordinated distributive
share of Cash Flow for the first quarter of 1996. To date, including the April
1996 distribution, the Partnership has distributed $55.87 per $100 Limited
Partnership Interest, of which $37.92 represents Cash Flow from operations and
$17.95 represents Original Capital.
The Partnership expects to continue making quarterly cash distributions from
available Cash Flow. In accordance with the Partnership Agreement, ninety-five
percent of such Cash Flow will be distributed to Limited Partners, and five
percent will be distributed to the General Partner as its share from
Partnership operations, subject to certain subordinations. Cash available for
distribution will be determined by the General Partner after it creates any
reserves or makes expenditures appropriate for the operation of the
Partnership. There is no assurance that the Partnership will generate Cash Flow
or that, if generated, it will be available for distribution or be sufficient
to provide a return of Original Capital, the Warranty Distribution or the
Cumulative Return. For the quarter ended March 31, 1996, $6,004, which
represents one-half of the General Partner's share of distributed Cash Flow,
was subordinated in accordance with the terms of the Partnership Agreement.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate. Lower interest rates
may increase the probability that the borrower may seek prepayment of the
Partnership's loan whereas rising interest rates decrease the yields on the
loan and make prepayment less likely.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Paul Williams, et al. vs. Balcor Pension Investors, et al.
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In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.:
90-C-0726 (U.S. District Court, Northern District of Illinois). The
Partnership, the General Partner, seven affiliated limited partnerships and
other affiliates are the defendants. In July 1994, the Court granted
plaintiffs' motion certifying a class relating to Federal securities fraud
claims. The Court approved the Notice of Class Action in August 1995 which was
sent to potential members of the class in September 1995. Settlement
discussions among the parties are currently on-going but no final settlement
has been reached. There can be no assurance, however, that such settlement
discussions will ultimately be successful.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 in Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated December 9,
1987 (Registration No. 33-16145) 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. 0-17653) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1996 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VIII, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VIII,
the General Partner
Date: May 15, 1996
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2769
<SECURITIES> 0
<RECEIVABLES> 7400
<ALLOWANCES> 545
<INVENTORY> 0
<CURRENT-ASSETS> 2914
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15211
<CURRENT-LIABILITIES> 33
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15178
<TOTAL-LIABILITY-AND-EQUITY> 15211
<SALES> 0
<TOTAL-REVENUES> 326
<CGS> 0
<TOTAL-COSTS> 18
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 262
<INCOME-TAX> 0
<INCOME-CONTINUING> 262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
