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, 1993
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 0-11699
BALCOR PENSION INVESTORS-IV
(Exact name of registrant as specified in its charter)
Illinois 36-3202727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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 Pension Investors-IV (the "Registrant") is a limited partnership formed
in 1982 under the laws of the State of Illinois. The Registrant raised
$214,803,000 from sales of Limited Partnership Interests. The Registrant's
operations consist of servicing wrap-around mortgage loans and, to a lesser
extent, servicing other junior mortgage loans and first mortgage loans. The
Registrant also currently operates seven properties acquired through
foreclosure and holds a minority joint venture interest in one additional
property. All financial information included in this report relates to this
industry segment.
The Registrant originally funded thirty-eight loans. Eighteen of these loans
have been prepaid in prior years and the Lantana Cascades Mobile Home Park loan
was prepaid in 1993. The Mortgage Reductions generated by the prepayments
prior to 1990 were used by the Registrant to fund four additional mortgage
loans and to make special distributions to Limited Partners. Of the remaining
Mortgage Reductions, a portion was distributed to the Limited Partners and the
remainder has been retained for working capital reserves. During prior years,
the Registrant also wrote off three loans, relinquished its interest in one
loan to the first mortgage holders, and sold its interest in one loan to the
borrower for a negotiated amount. During 1993, the Registrant relinquished its
interest in the Oakwood Village Apartments loan to the first mortgage holder.
In addition, the Registrant acquired fourteen properties through foreclosure,
including the North Kent Mall and the Glendale Fashion Center which were
acquired in January and March 1994, respectively and classified as real estate
held for sale at December 31, 1993. The Registrant has since disposed of seven
of these properties through sale or relinquishment to the lender through
foreclosure, including the Republic Park Office Building which was sold in
February 1994. A portion of the proceeds generated by the sales was
distributed to the Limited Partners and the remainder has been retained for
working capital reserves. The Registrant also holds a minority joint venture
interest with affiliates in one additional property. As of December 31, 1993,
the Registrant has two loans outstanding in its investment portfolio and owns
the properties described under Item 2 "Properties".
As a result of the current weak real estate markets in certain cities and
regions of the country, certain borrowers have requested that the Registrant
allow prepayment of mortgage loans. The General Partner considers each of
these requests individually and may allow prepayments in certain cases. In
addition, certain borrowers have failed to make payments when due to the
Registrant for more than ninety days and, accordingly, these loans have been
placed on non-accrual status (income is recorded only as cash payments are
received). The General Partner has negotiated with some of these borrowers
regarding modifications of the loan terms and has instituted foreclosure
proceedings under certain circumstances. Such foreclosure proceedings may be
delayed by factors beyond the General Partner's control such as bankruptcy
filings by borrowers and state law procedures regarding foreclosures.
In addition, certain loans made by the Registrant have been restructured to
defer and/or reduce interest payments where the properties collateralizing the
loans were generating insufficient cash flow to support property operations and
debt service. In the case of most loan restructurings, the Registrant receives
concessions, such as increased participations or additional interest accruals,
in return for modifications, such as deferral or reduction of basic interest
payments. There can be no assurance, however, that the Registrant will receive
actual benefits from the concessions.
As of December 31, 1993, the Stonehaven South Apartments had been placed on
non-accrual status and is in substantive foreclosure. The funds advanced by
the Registrant for this loan total approximately $2,800,000, representing
approximately 1% of original funds advanced.
In April 1992, the loan collateralized by the Oakwood Village Apartments was
placed in default by the Registrant and the underlying first mortgage lender.
The first mortgage lender filed for foreclosure which was granted by the court
in February 1993. A foreclosure sale of the property was held during May 1993.
The Registrant did not make a bid for the property at the foreclosure sale as
the General Partner did not believe that this would be in the best interests of
the Registrant due to the significant diminishment in the value of the
property. The Registrant no longer has an interest in the loan.
The Registrant is a 12% participant in the first mortgage loan collateralized
by the Colonial Coach and Castlewood mobile home parks. In February 1993, the
participants and the borrower executed a second modification agreement and in
August 1993, a third modification agreement was executed. See Item 7.
Liquidity and Capital Resources for additional information.
In October 1993, the borrower of the $6,000,000 wrap-around mortgage loan
collateralized by the Lantana Cascades Mobile Home Park located in Lantana,
Florida repaid the loan. See Item 7. Liquidity and Capital Resources for
additional information.
The Registrant previously funded a $5,455,654 wrap-around mortgage loan
collateralized by the North Kent Mall, located in Grand Rapids, Michigan. The
Registrant placed the loan in default in September 1991 and obtained title to
the property pursuant to a deed in lieu of foreclosure in January 1994. See
Item 3. Legal Proceedings and Item 7. Liquidity and Capital Resources for
additional information.
The Registrant previously funded a $6,734,301 wrap-around mortgage loan
collateralized by the Glendale Fashion Center, located in Glendale, California.
The Registrant placed the loan in default in October 1990 and obtained title to
the property through foreclosure in March 1994. See Item 3. Legal Proceedings
and Item 7. Liquidity and Capital Resources for additional information.
As described in the Prospectus, mortgage loans are subject to the risk of
default, in which event the Registrant has the responsibility of foreclosing
and protecting its loans. As of December 31, 1993, the Registrant had eight
properties held for sale, including the North Kent Mall and Glendale Fashion
Center, and a minority joint venture interest in one property. The properties
owned at December 31, 1993 and the minority joint venture interest comprise
approximately 24% of the Registrant's original funds advanced.
During 1993, the Registrant refinanced the loans collateralized by the Colony
and Palm View apartment complexes. See Item 7. Liquidity and Capital Resources
for additional information.
During 1993, the Registrant sold the Shadows Apartments located in Phoenix,
Arizona and the 240 E. Ontario Office Building located in Chicago, Illinois in
separate all cash sales totaling $5,770,000. After payment of selling costs of
$371,734 and the prepayment of the existing first mortgage loans on the
properties of $2,223,796, the Registrant received the remaining proceeds of
$3,174,470 which were retained as cash reserves. See Item 7. Liquidity and
Capital Resources for additional information.
The Registrant used a portion of its cash reserves to repay the $2,160,797
mortgage note payable collateralized by the Del Lago Apartments and the
$2,838,473 mortgage note payable collateralized by the Pelican Pointe
Apartments in December 1993 and January 1994, respectively.
Historically, real estate investments have experienced the same cyclical
characteristics affecting most other long-term investments. For this reason
and based upon past loss experience for similar loans and prevailing economic
conditions in the market in which the collateral property is located, the
Registrant has established an allowance for potential losses on loans in the
amount of $250,000.
As described in Item 7. Liquidity and Capital Resources, during 1993, the
Pelican Pointe and Regency Club apartment complexes and the Republic Park
Office Building generated positive cash flow while the Del Lago and Palm View
apartment complexes generated marginal cash flow deficits. The Colony
Apartments generated a significant cash flow deficit during 1993. The Regency
Club Apartments and the Republic Park Office Building do not have underlying
debt. A deficit is considered to be significant if it exceeds $250,000
annually or 20% of the property's rental and service income. Many rental
markets continue to remain extremely competitive; therefore, the General
Partner's goals are to maintain high occupancy levels, while increasing rents
where possible, and to monitor and control operating expenses and capital
improvement requirements at the properties.
The officers and employees of Balcor Mortgage Advisors-III, the General Partner
of the Registrant, and its affiliates, perform services for the Registrant.
The Registrant currently has 38 full-time and 3 part-time employees engaged in
its operations.
OTHER INFORMATION
a) Republic Park One Office Building
In February 1984, the Registrant funded a $10,250,000 loan evidenced by a
promissory note and collateralized by a first mortgage on the Republic Park One
Office Building, Aurora, Colorado ("Property"). The borrower defaulted on its
obligations under the Registrant's loan and, in 1990, the Registrant acquired
title to the Property pursuant to a deed in lieu of foreclosure.
The Registrant's cash investment in the Property as of December 31, 1993 was
approximately $10,931,401. However, in accordance with its accounting
policies, the Registrant previously reduced the carrying value of the Property
in its financial statements to $1,835,094.
On February 2, 1994, the Registrant sold the Property to an unaffiliated party,
HMB Partners, a Colorado corporation, for a sale price of $3,250,000. The
Registrant paid $130,000 to an unaffiliated party as a brokerage commission and
approximately $114,000 in closing and other costs and received the remaining
sale proceeds of approximately $3,006,000. Neither the General Partner nor any
of its affiliates received a commission in connection with the sale of the
Property.
b) University Building Land
In 1988, the borrower of the loan collateralized by a leasehold interest
("Leasehold Interest") in the University Building ("Building"), Denver,
Colorado, conveyed the Leasehold Interest to the Registrant, subject to a first
mortgage loan ("Loan") from an unaffiliated party. The Registrant also
received an ownership interest in certain land ("Land") underneath the
Building. The Registrant ceased making debt service payments on the Loan and,
in June 1991, conveyed the Leasehold Interest to the holder of the Loan. The
Registrant retained its interest in the Land and continued to receive ground
rent payments from the lessee.
The Registrant did not recognized any value of the Land in its financial
statements as the Registrant did not have a cash investment in the Land.
On December 20, 1993, the Registrant sold the Land to an unaffiliated party,
University Land Corp., a Colorado corporation, for a sale price of $100,000.
The Registrant paid approximately $228 in closing costs and received the
remaining sale proceeds of approximately $99,772. Neither the General Partner
nor any of its affiliates received a commission in connection with the sale of
the Land.
Item 2. Properties
As of December 31, 1993, the Registrant owns the eight properties described
below:
Location Description of Property
Chapel Hill, North Carolina Colony Apartments: a 197-unit apartment complex
located on approximately 13.6 acres.
Tampa, Florida Del Lago Apartments: a 193-unit apartment complex
located on approximately 12 acres.
Glendale, California * Glendale Fashion Center: a shopping center
containing 294,360 square feet located on
approximately 6.7 acres.
Grand Rapids, Michigan * North Kent Mall: a shopping center containing
167,401 square feet located on approximately 19
acres.
St. Petersburg, Florida Palm View Apartments: a 304-unit apartment
complex located on approximately 22 acres.
Pompano Beach, Florida Pelican Pointe Apartments: a 300-unit apartment
complex located on approximately 13 acres.
Evansville, Indiana Regency Club Apartments: a 232-unit apartment
complex located on approximately 18 acres.
Aurora, Colorado ** Republic Park Office Building: a six story office
building containing approximately 91,500 square
feet.
* This property was acquired by the Registrant through foreclosure during
1994. See Note 7 of Notes to Financial Statements for additional
information.
** This property was sold during 1994. See Note 10 of Notes to Financial
Statements for additional information.
Certain of the above properties are held subject to various mortgages.
The Registrant also holds a minority joint venture interest in the
Perimeter 400 Center Office Building located in Fulton County, Georgia.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
a) Williams proposed class action
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) against the
Registrant, the General Partner, The Balcor Company, Shearson Lehman Hutton,
Inc., American Express Company, other affiliates, and seven affiliated limited
partnerships (the "Related Partnerships") as defendants. Several parties have
since been joined as additional named plaintiffs. The complaint alleges that
the defendants violated Federal securities laws with regard to the adequacy and
accuracy of disclosure of information in respect of the offering of limited
partnership interests of the Registrant and the Related Partnerships and also
alleges breach of fiduciary duty, fraud, negligence and violations under the
Racketeer Influenced and Corrupt Organizations Act. The complaint seeks
compensatory and punitive damages. The defendants filed their answer,
affirmative defenses and a counterclaim to the complaint. The defendants'
counterclaim asserts claims of fraud and breach of warranty against plaintiffs,
as well as a request for declaratory relief regarding certain defendants'
rights under their partnership agreements to be indemnified for their expenses
incurred in defending the litigation. The defendants seek to recover damages
to their reputations and business as well as costs and attorneys' fees in
defending against the claims brought by plaintiffs.
In May 1993, the Court issued an opinion and order denying the plaintiffs'
motion for class certification based in part on the inadequacy of the
individual plaintiffs representing the proposed class. Further, the Court
granted the defendants' motion for sanctions and ordered that plaintiffs'
counsel pay the defendants' attorneys fees incurred with the class
certification motion. The defendants have filed a petition for reimbursement
of their fees and costs from plaintiffs' counsel, which remains pending.
A motion filed by the plaintiffs is currently pending seeking to dismiss the
defendants' counterclaim for fraud. In July 1993, the Court gave the
plaintiffs leave to retain new counsel. In September 1993, the plaintiffs
retained new counsel and filed a new amended complaint and motion for class
certification which named three new class representatives. The defendants have
conducted discovery with respect to the new representatives and, on February
16, 1994, filed a response to the plaintiffs' latest motion for class
certification. The motion is expected to be briefed by March 30, 1994.
The defendants intend to continue vigorously contesting this action. As of
this time, no plaintiff class has been certified. Management of each of the
defendants believes they have meritorious defenses to contest the claims.
b) North Kent Mall
In October 1983, the Registrant funded a $5,455,654 loan evidenced by a
promissory note in the amount of $11,000,000 and collateralized by a wrap-
around mortgage on North Kent Mall, Grand Rapids, Michigan (the "Property").
In September 1991, the loan was placed in default and, in April 1992, the
Registrant posted the Property for a non-judicial foreclosure.
In June 1992, the borrower filed for protection under Chapter 11 of the U. S.
Bankruptcy Code in the U. S. Bankruptcy Court, Eastern District of Michigan,
Southern Division (In re North Kent Mall Limited Partnership, Case No.: 92-
07467), which action stayed the foreclosure proceedings. In December 1992, the
Bankruptcy Court approved a plan of reorganization which allowed the borrower
the option to purchase the Registrant's equity in the loan on or before January
1, 1994 for $2,000,000, representing a discount of approximately $5,435,000.
If the Registrant's equity in the loan was not purchased by the borrower by
such date, the plan provided for the Registrant to acquire the Property
pursuant to a deed in lieu of foreclosure.
The borrower failed to purchase the Registrant's equity in the loan and, on
January 14, 1994, the Registrant obtained title to the Property pursuant to a
deed in lieu of foreclosure, subject to two mortgage loans collateralized by
the Property, which are held by unaffiliated lenders. The Registrant's net
investment in the Property was $7,851,693 as of December 31, 1993. However, in
accordance with its accounting policies, the Registrant previously reduced the
carrying value of the Property in its financial statements to $5,955,400. An
unaffiliated party has been retained to provide property management services
for the Property.
c) Glendale Fashion Center
In October 1983, the Registrant funded $6,734,301 evidenced by a promissory
note in the amount of $10,000,000 and collateralized by a wrap-around mortgage
on the Glendale Fashion Center, Glendale, California. The Registrant placed
the loan in default in October 1990 and subsequently filed a complaint for
foreclosure and for the appointment of a receiver, Balcor Pension Investors-IV
vs. Glendale Fashion Center, Superior Court of the State of California, County
of Los Angeles, Case No.: BC-041-193. A receiver was appointed to manage the
property in December 1991.
In December 1991, the borrower commenced proceedings under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court, Central District of
California, (the "Bankruptcy Court"), Case No.: LA 91-13321-SB, In re Glendale
Fashion Center, which stayed the foreclosure proceedings. In October 1993, the
Registrant filed a motion in the Bankruptcy Court to lift the stay imposed by
the bankruptcy proceedings in order to proceed with a foreclosure. On December
15, 1993, the Bankruptcy Court agreed to lift the stay effective February 10,
1994 if the borrower did not file an acceptable financing commitment to repay
the Partnership's loan and fund certain costs. The borrower failed to file the
commitment and, on March 16, 1994, a foreclosure sale of the property was held.
The Registrant made a successful bid and obtained title to the property,
subject to the first mortgage loan held by an unaffiliated lender. An
affiliate of the General Partner has been retained to provide property
management services for the property.
Item 4. Submission of Matters to a Vote of Security Holders
(a, b,
c & d) No matters were submitted to a vote of the Limited Partners of the
Registrant during 1993.
PART II
Item 5. Market for 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 previous distributions, see Financial Statements, Statements of
Partners' Capital, page F-4, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources," below.
As of December 31, 1993, the number of record holders of Limited Partnership
Interests of the Registrant was 32,203.
Item 6. Selected Financial Data
Year ended December 31,
1993 1992 1991 1990 1989
Net interest
income on loans
receivable $2,574,627 $2,796,944 $3,317,247 $8,335,020 $12,567,266
Income (loss) from
operations of
real estate held
for sale 374,948 (52,136) (301,232) 627,538 (158,154)
Provision for
potential losses on
loans, real estate
and accrued inter-
est receivable None 5,750,000 8,969,116 4,000,000 4,000,000
Interest on short-
term investments 471,235 553,631 1,055,947 1,517,581 1,767,688
Administrative
expenses 1,425,641 1,314,372 1,228,760 896,317 617,346
Net income (loss) 2,885,608 (4,599,843) (6,022,076) 5,429,599 12,703,244
Net income (loss)
per average number
of Limited Part-
nership Interests
outstanding 6.58 (10.44) (13.51) 12.03 27.89
Cash and cash
equivalents 14,917,086 14,460,945 11,745,674 40,362,859 19,204,230
Net investment in
loans receivable 997,350 4,582,802 5,969,732 30,492,473 66,267,330
Loans in substan-
tive foreclosure 1,896,953 17,781,918 31,926,857 20,668,572 28,760,465
Investment in
joint venture -
affiliates 4,090,735 4,019,676 5,113,274 5,293,832 None
Real estate held
for sale 42,852,935 33,530,152 30,797,898 30,081,654 20,624,843
Total assets 67,655,261 75,497,151 87,390,808 119,731,510 124,898,763
Mortgage notes
payable 14,410,060 17,366,929 20,486,394 24,219,309 23,411,590
Distributions to
Limited Partners 6,800,334 3,367,894 29,304,799 13,040,057 60,078,380
Distributions per
Limited Partner-
ship Interest 16.75 8.25 70.50 31.15 142.30
Number of loans
outstanding at
end of year 2 6 9 11 17
Properties owned
at end of year 8 8 8 9 6
Investment in joint
venture with
affiliates 1 1 1 1 None
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Balcor Pension Investors-IV (the "Partnership") is a limited partnership formed
in 1982 to invest in wrap-around mortgage loans and to a lesser extent, make
other junior mortgage loans and first mortgage loans. The Partnership raised
$214,803,000 through the sale of Limited Partnership Interests and utilized
these proceeds to fund a total of thirty-eight loans. To date, the Partnership
has distributed $542.05 per $500 Interest, of which $311.60 represents Cash
Flow from operations and $230.45 represents a return of Original Capital. As
of December 31, 1993, there are two loans outstanding in the Partnership's
portfolio. In addition, the Partnership was operating six properties held for
sale and holds a minority joint venture interest in one property.
Additionally, during January and March 1994, the Partnership acquired the North
Kent Mall and Glendale Fashion Center, respectively. These investments were
classified as real estate held for sale at December 31, 1993.
Operations
Summary of Operations
The Partnership did not recognize a provision for potential losses on loans and
accrued interest receivable during 1993. In addition, during 1992, the
Partnership recognized its share of the reduction in the carrying value of the
Perimeter 400 Center Office Building (in which it has a minority joint venture
interest). The combined effect of these events was the primary cause for the
recognition of net income during 1993 as compared to a net loss for 1992.
A decrease in the provision for potential losses on loans, real estate and
accrued interest receivable was the primary reason for the decrease in the net
loss in 1992 as compared to 1991. The Partnership's share of the reduction in
the carrying value of the Perimeter 400 Center Office Building during 1992 and
a reduction in interest income earned by the Partnership on its short-term
interest-bearing instruments and investments in loans receivable partially
offset the decrease in net loss. Further discussion of the Partnership's
operations is summarized below.
1993 Compared to 1992
The prepayment of The Bluffs loan in May 1992 and the repayment of the Lantana
Cascades loan in October 1993 were the primary reasons for the decrease in net
interest income on loans receivable during 1993 as compared to 1992. Interest
income received during 1993 from the borrower of the Glendale Fashion Center
due to a ruling by the Bankruptcy Court and interest income on the residual
notes received as part of The Bluffs and Independence Green prepayments
partially offset the decrease.
The Partnership has one non-accrual loan at December 31, 1993 which is
collateralized by the Stonehaven South Apartments located in Kansas City,
Missouri. The funds advanced by the Partnership for this non-accrual loan
total approximately $2,800,000, representing approximately 1% of original funds
advanced. For non-accrual loans, income is recorded only as cash payments are
received from the borrowers. During 1993, the Partnership received cash
payments of net interest income totaling approximately $131,000 on this loan.
Under the terms of the original loan agreement, the Partnership would have
received approximately $375,000 of net interest income. This loan is
classified as a loan in substantive foreclosure at December 31, 1993. Loans
are classified as loans in substantive foreclosure when a determination has
been made that the borrower has little or no equity remaining in the collateral
property in consideration of current fair value, or the Partnership has taken
certain actions which result in taking effective control of operations of the
collateral property.
The allowance for potential losses provides for potential losses on loans and
is based upon loan loss experience for similar loans and prevailing economic
conditions in the market in which the collateral properties are located and the
General Partner's analysis of specific loans in the Partnership's portfolio.
While actual losses may vary from time to time because of changes in
circumstances (such as occupancy rates, rental rates, and other economic
factors), the General Partner believes that adequate recognition has been given
to loss exposure in the portfolio at December 31, 1993.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At December 31,
1993, the Partnership was operating six properties which comprised
approximately 15% of the Partnership's portfolio based on original funds
advanced. Rental income increased and repair and maintenance expense decreased
at the Pelican Pointe Apartments due to increased occupancy resulting from the
completion of lease-up and stabilization programs during 1992. Rental income
also increased at the Republic Park Office Building due to increased occupancy.
Service income increased at the Palm View Apartments due to a refund from a
utility company for services that had been overcharged in prior years. In
addition, due to the requirements of the refinancing agreement, the Partnership
began a major repair program during the second quarter of 1993 at the Colony
Apartments which caused the property to generate a loss in 1993. Finally,
Haystack and Shadows apartment complexes, which were generating income, were
sold in August 1992 and April 1993, respectively, and the 240 E. Ontario
Office Building, acquired by the Partnership in April 1992 and sold in June
1993, continued to operate at a loss during 1993. The combined effect of these
events resulted in the recognition of income from the operations of the
Partnership's properties during 1993 as compared to a loss during 1992.
Lower interest rates earned on short-term investments caused a decrease in
interest income on short-term investments during 1993 as compared to 1992.
The Partnership's loans generally bear interest at contractually-fixed interest
rates. Some loans also provide for additional interest in the form of
participations, usually consisting of either a share in the capital
appreciation of the property collateralizing the Partnership's loan and/or a
share in the increase of the gross income of the property above a certain
level. Participation income increased during 1993 as compared to 1992
primarily due to significant participations totaling $849,169 received in
connection with the Lantana Cascades loan repayment in October 1993.
Participation in loss of joint venture with affiliates represents the
Partnership's 15.37% share of the operations of the Perimeter 400 Center Office
Building. During 1992, the Partnership also recognized a loss of $1,173,961 as
its share of a reduction in the carrying value of this property. As a result
participation in loss of joint venture with affiliates decreased during 1993 as
compared to 1992.
The reduced amount of loans being serviced during 1993, due to the
relinquishment of the Oakwood Village Apartments loan through foreclosure, and
the Bluffs and Lantana Cascades loan repayments and the foreclosure of the loan
collateralized by the 240 E. Ontario Office Building, has resulted in a
decrease in mortgage servicing fees during 1993 as compared to 1992.
During 1993, the Partnership recognized a net gain of $124,039 on the sales of
the Shadows Apartments located in Phoenix, Arizona, the 240 E. Ontario Office
Building located in Chicago, Illinois and the land related to the University
Office Building located in Denver, Colorado. See Note 10 of Notes to Financial
Statements for additional information.
1992 Compared to 1991
The foreclosures of the Shadows and Pelican Pointe apartment complexes during
1991, the foreclosure of the 240 E. Ontario Office Building in April 1992, The
Bluffs loan prepayment in May 1992, and a decrease in cash flow received from
certain of the borrowers of the loans placed on non-accrual status were the
primary reasons for the decrease in net interest income on loans receivable
during 1992 as compared to 1991. Additional interest income received in
connection with The Bluffs loan prepayment partially offset the decrease.
The Partnership had four loans on non-accrual status at December 31, 1992 which
were collateralized by the Glendale Fashion Center located in Glendale,
California; North Kent Mall located in Grand Rapids, Michigan; Oakwood Village
Apartments located in Orlando, Florida; and Stonehaven South Apartments located
in Kansas City, Missouri. The funds advanced by the Partnership for these four
loans totaled approximately $18,100,000, which represented approximately 9% of
original funds advanced. During 1992, the Partnership received cash payments
of net interest income totaling approximately $1,191,000 on the non-accrual
loans. Under the terms of the original loan agreements, the Partnership would
have received approximately $3,309,000 of net interest income on these loans.
The loans collateralized by the Oakwood Village and Stonehaven South apartment
complexes, the Glendale Fashion Center and the North Kent Mall were classified
as loans in substantive foreclosure at December 31, 1992.
The Partnership recognized a provision for potential losses of $5,750,000 for
its loans and real estate during 1992. The Partnership also wrote-off its
remaining investment in the Stonegate Arlington Mobile Home Park loan in the
amount of $963,041 after applying proceeds received from the discounted payoff
of the loan in February 1992 and its remaining investment in the Haystack
Apartments in the amount of $1,345,615 after applying proceeds received from
the sale of the property in August 1992.
At December 31, 1992, the Partnership was operating eight properties which
comprised approximately 21% of the Partnership's portfolio based on original
funds advanced. The Partnership acquired the Pelican Pointe Apartments in July
1991 and the 240 E. Ontario Office Building in April 1992, both of which
generated losses in 1992 and operations improved at the Colony, Del Lago, Palm
View, Regency Club and Shadows apartment complexes and the Republic Park Office
Building during 1992. The combined effect of these events resulted in a
decrease in the loss from operations of the Partnership's properties during
1992 as compared to 1991.
A special distribution was made in January 1991 from the proceeds received in
connection with the Independence Green loan prepayment in November 1990. Prior
to this distribution, these proceeds were invested in short-term
interest-bearing instruments. In addition, interest rates were lower in 1992
than in 1991. As a result, interest income on short-term investments decreased
during 1992 as compared to 1991.
During 1992, the Partnership recognized a loss of $1,173,961 as its share of
the reduction in the carrying value of the Perimeter 400 Center Office
Building. As a result, the Partnership recognized a participation in loss of
joint venture with affiliates during 1992 as compared to a participation in
income of joint venture with affiliates during 1991.
The reduced dollar amount of mortgages being serviced during 1992 due to the
loan write-offs, loan prepayments and property foreclosures has resulted in a
decrease in mortgage servicing fees during 1992 as compared to 1991.
Liquidity and Capital Resources
The Partnership received cash flow from its operating activities. The
operating cash flow generated from interest income earned on its investment in
loans receivable and short-term interest bearing instruments and cash flow
generated by the Partnership's properties held for sale offset the funding of
operating escrows and the payment of administrative expenses. The Partnership
also received funds from investing activities relating primarily to the sales
of the Shadows Apartments, the 240 E. Ontario Office Building and the land
related to the University Office Building in April, June and December 1993,
respectively and the repayment of the Lantana Cascades loan in October 1993.
The Partnership used cash to fund its financing activities which consisted
primarily of the payment of distributions to Limited Partners, the repayment of
the mortgage notes on the Del Lago and Shadows apartment complexes and the 240
E. Ontario Office Building, the repayment of the underlying loan on the
Lantana Cascades Mobile Home Park and the payment of principal on both the
underlying loans and the mortgage notes payable. This use of cash was
partially offset by the net proceeds generated by the refinancing of the Colony
Apartments. The Partnership's cash or near cash position fluctuates during
each quarter, initially decreasing with the payment of Partnership
distributions for the previous quarter, and then gradually increasing each
month in the quarter as mortgage payments and cash flow from property
operations are received.
During 1993, the Pelican Pointe and Regency Club apartment complexes and the
Republic Park Office Building generated positive cash flow and the Del Lago and
Palm View apartment complexes generated marginal cash flow deficits. The
Colony Apartments generated a significant cash flow deficit. The Regency Club
Apartments and the Republic Park Office Building do not have underlying debt.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit
is considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income.
During 1992, the Colony and Regency Club apartment complexes generated positive
cash flow and the Del Lago, Palm View and Pelican Pointe apartment complexes
and the Republic Park Office Building generated marginal deficits. The Pelican
Pointe Apartments improved from a marginal deficit to positive cash flow during
1993 due to the completion during 1991 and early 1992 of repairs and
maintenance deferred by the previous owners and increased occupancy resulting
from these improvements. The improvement from a marginal deficit to positive
cash flow during 1993 for the Republic Park Office Building was the result of
improved average occupancy levels. The Partnership focused its efforts to
lease-up the property in order to improve operations, and consequently,
incurred additional leasing costs which were not included in classifying the
cash flow performance of the property since they were non-recurring
expenditures. Had these costs been included, the property would have operated
at a marginal deficit during 1993. The Colony Apartments, which had generated
cash flow during 1992, operated at a significant cash flow deficit during 1993
due to the repair program required under the terms of the refinancing
agreement. The General Partner is continuing its efforts to maintain high
occupancy levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvement requirements at the
properties. The General Partner will also examine the terms of any mortgage
loans collateralized by its properties, and may refinance or, in certain
instances, use Partnership reserves to repay such loans.
The Partnership used a portion of its cash reserves to repay the loan, in the
amount of $2,160,797, collateralized by the Del Lago Apartments and the loan,
in the amount of $2,838,473, collateralized by the Pelican Pointe Apartments in
December 1993 and January 1994, respectively.
In April 1993, the Partnership completed the refinancing of the loan
collateralized by the Colony Apartments. The refinancing resulted in the
Partnership obtaining a new $3,465,000 first mortgage loan from an unaffiliated
lender. From these proceeds the Partnership repaid the prior loan of
$1,829,202 and deposited $429,276 into a replacement reserve account and
$740,334 into a repair escrow account for approved repairs and replacements on
the property. See Note 5 of Notes to Financial Statements for additional
information.
In May 1993, the Partnership completed the refinancing of the loan
collateralized by the Palm View Apartments. The refinancing resulted in the
Partnership obtaining a new $2,866,013 first mortgage loan from an unaffiliated
lender. From these proceeds the Partnership repaid the prior loan of
$2,749,909 and deposited $100,650 into a repair escrow account. See Note 5 of
Notes to Financial Statements for additional information.
In addition, certain borrowers have failed to make payments when due to the
Partnership for more than ninety days and, accordingly, these loans have been
placed on non-accrual status (income is recorded only as cash payments are
received). The General Partner has negotiated with some of these borrowers
regarding modifications of the loan terms and has instituted foreclosure
proceedings under certain circumstances. Such foreclosure proceedings may be
delayed by factors beyond the General Partner's control such as bankruptcy
filings by borrowers and state law procedures regarding foreclosures. Further,
certain loans made by the Partnership have been restructured to defer and/or
reduce interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service. In the case of most loan restructurings, the Partnership receives
concessions, such as increased participations or additional interest accruals,
in return for modifications, such as deferral or reduction of basic interest
payments. There can be no assurance, however, that the Partnership will
receive actual benefits from the concessions.
Because of the current weak real estate markets in many cities and regions of
the country, attributable to local and regional market conditions such as
overbuilding and recessions in local economies and specific industry segments,
certain borrowers have requested that the Partnership allow prepayment of
mortgage loans. The Partnership has allowed some of these borrowers to prepay
such loans, in some cases without assessing prepayment premiums, under
circumstances where the General Partner believed that refusing to allow such
prepayment would ultimately prove detrimental to the Partnership in light of
the probable inability of the properties to generate sufficient revenues to
keep loan payments current. In other cases, borrowers have requested
prepayment in order to take advantage of lower available interest rates. In
these cases, the Partnership has collected substantial prepayment premiums.
The General Partner instituted foreclosure proceedings on the Oakwood Village
Apartments in 1988, the Glendale Fashion Center in 1991 and the North Kent Mall
in 1992, as discussed below.
The first mortgage lender on the Oakwood Village Apartments loan filed for
foreclosure which was granted by the court in February 1993. A foreclosure
sale of the property was held during May 1993. The Partnership did not make a
bid for the property at the foreclosure sale as the General Partner did not
believe that this would be in the best interests of the Partnership due to the
significant diminishment in the value of the property. The Partnership no
longer has an interest in the loan.
In December 1991, the borrower of the Glendale Fashion Center commenced
bankruptcy proceedings. In October 1993, the Partnership filed a motion in the
Bankruptcy Court to lift the stay imposed by the proceedings in order to
proceed with a foreclosure of the property. In December 1993, the Bankruptcy
Court agreed to lift the stay effective February 10, 1994, if the borrower did
not file an acceptable financing commitment to repay the Partnership's loan and
fund certain costs. The borrower failed to file the commitment and, in March
1994, the Partnership obtained title to the property, subject to two underlying
loans totaling $1,853,499. See Item 3. Legal Proceedings for additional
information.
The borrower on the North Kent Mall loan filed a plan of reorganization in
October 1992 which was confirmed in December 1992. Pursuant to the plan, the
borrower had the option to purchase the Partnership's interest in the loan on
or before January 1, 1994 for $2,000,000. Since the borrower did not purchase
the Partnership's interest in the loan, the borrower conveyed title to the
property to the Partnership in January 1994, subject to two underlying mortgage
loans totaling $3,413,341.
The Partnership is a 12% participant in the first mortgage loan collateralized
by the Colonial Coach and Castlewood mobile home parks. In February 1993, the
participants and the borrower executed a second loan modification agreement and
in August 1993, a third loan modification agreement was executed. See Note 3
of Notes to Financial Statements for additional information.
In October 1993, the borrower of the $6,000,000 wrap-around mortgage loan
collateralized by the Lantana Cascades Mobile Home Park located in Lantana,
Florida repaid the loan. The Partnership received net proceeds of
approximately $6,029,883, net of the repayment of the underlying first mortgage
loan of $1,970,263. These net proceeds were comprised of the funds advanced on
the loan ($3,663,557), accrued and unpaid interest thereon ($135,977), accrual
interest ($1,015,000), participation income ($849,169) and the amount
representing the difference between the original principal balance and the
outstanding principal balance due on the underlying loan ($366,180). The funds
advanced by the Partnership represented the difference between the wrap-around
loan receivable of $6,000,000 and the original balance of the underlying
mortgage note payable of $2,336,443.
In April 1993, the Partnership sold the Shadows Apartments located in Phoenix,
Arizona in an all cash sale for $1,770,000. The Partnership incurred selling
expenses of $81,298 and used a portion of the proceeds from the sale to prepay
in full the existing first mortgage loan on the property in the amount of
$976,572. See Note 10 of Notes to Financial Statements for additional
information.
In June 1993, the Partnership sold the 240 E. Ontario Office Building located
in Chicago, Illinois in an all cash sale for $4,000,000. The Partnership
incurred selling expenses of $290,436 and used a portion of the proceeds from
the sale to repay in full the existing first mortgage loan on the property in
the amount of $1,247,224. See Note 10 of Notes to Financial Statements for
additional information.
In December 1993, the Partnership sold the land related to the University
Office Building located in Denver, Colorado in an all cash sale for $100,000.
The Partnership incurred selling expenses of $228. See Note 10 of Notes to
Financial Statements for additional information.
In February 1994, the Partnership sold the Republic Park Office Building
located in Aurora, Colorado in an all cash sale for $3,250,000. The
Partnership incurred selling expenses of $244,360. The proceeds have been
retained as cash reserves. See Note 10 of Notes to Financial Statements for
additional information.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Generally, distributions are made from Cash Flow generated by
interest and other payments made by borrowers under the Partnership's mortgage
loans. Loan prepayments and repayments can initially cause Cash Flow to
increase as prepayment premiums and participations are paid; however,
thereafter prepayments and repayments will have the effect of reducing Cash
Flow. If such proceeds are distributed, Limited Partners will have received a
return of capital and the dollar amount of Cash Flow available for distribution
thereafter can be expected to decrease. Distribution levels can also vary as
loans are placed on non-accrual status, modified or restructured and, if the
Partnership has taken title to properties through foreclosure or otherwise, as
a result of property operations.
In January 1994, the Partnership paid $2,148,030 ($5.00 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Cash Flow of $1.00 per Interest for the fourth
quarter of 1993, and $4.00 per Interest representing a portion of the Mortgage
Reductions received from the repayment of the Lantana Cascades Mobile Home Park
loan. The Partnership made four distributions totaling $1.75 in Cash Flow and
$15.00 of Mortgage Reductions in 1993, $8.25 in Cash Flow in 1992, and $16.50
in Cash Flow and $54.00 of Mortgage Reductions in 1991. See Statement of
Partners' Capital. The distributions of Mortgage Reductions in 1993 resulted
from the prepayment of The Bluffs loan, the sale of the Haystack Apartments and
the refinancing of the Colony Apartments. The distributions of Mortgage
Reductions in 1991 resulted from the prepayment of the Independence Green loan.
The distributions made from Cash Flow decreased between 1993 and 1992 due to
the cash flow requirements of the Partnership. The distributions made from
Cash Flow decreased between 1992 and 1991 due to the loan prepayments in 1990
and 1991, the loans on non-accrual status and the acquisition of properties
through foreclosure. To date, the Partnership has distributed $542.05 per $500
Interest, of which $311.60 represents Cash Flow from operations and $230.45
represents a return of Original Capital.
The Partnership expects to continue making quarterly cash distributions;
however, the level of such future distributions will be dependent upon the cash
flow generated by the receipt of mortgage payments and improved operations of
the Partnership's properties held for sale, mortgage servicing fees and
administrative expenses. The General Partner, on behalf of the Partnership,
has retained what it believes to be an appropriate amount of working capital to
meet current cash or liquidity requirements which may occur.
During 1993, the General Partner, on behalf of the Partnership, used amounts
placed in the Early Investment Incentive Fund to repurchase 3,167 Interests
from Limited Partners at a total cost of $440,264.
In 1993, the Financial Accounting Standards Board issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan." This statement addresses
accounting by creditors for impairment of loans and also eliminates the
classification of loans as "in substantive foreclosure." This statement has
been adopted by the Partnership as of January 1, 1994, and will not have a
material impact on the financial position or results of operations of the
Partnership.
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.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Financial Statement Schedules in this
Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
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 Mortgage Advisors-III, 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 NAMES
Chairman Marvin H. Chudnoff
President Thomas E. Meador
and Chief Operating Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
Senior Vice President Robert H. Lutz, Jr.
Senior Vice President Michael J. O'Hanlon
First Vice President Gino A. Barra
First Vice President Daniel A. Duhig
First Vice President David S. Glasner
First Vice President Josette V. Goldberg
First Vice President G. Dennis Hartsough
First Vice President Lawrence B. Klowden
First Vice President Alan G. Lieberman
First Vice President Lloyd E. O'Brien
First Vice President Brian D. Parker
First Vice President John K. Powell, Jr.
First Vice President Jeffrey D. Rahn
First Vice President Reid A. Reynolds
Marvin H. Chudnoff (April 1941) joined Balcor in March 1990 as Chairman. He
has responsibility for all strategic planning and implementation for Balcor,
including management of all real estate projects in place and financing and
sales for a varied national portfolio valued in excess of $6.5 billion. Mr.
Chudnoff also holds the position of Vice Chairman of Edward S. Gordon Company
Incorporated, New York, a major national commercial real estate firm, which he
joined in 1983. He has also served on the Board of Directors of Skippers, Inc.
and Acorn Inc., both publicly held companies, and of Waxman Laboratories of Mt.
Sinai Hospital, New York. Mr. Chudnoff has been a guest lecturer at the
Association of the New York Bar and at Yale and Columbia Universities.
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is President and
Chief Operating Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a Director of The Balcor Company. 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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for all
financial and administrative functions. He is directly responsible for all
accounting, treasury, data processing, legal, risk management, tax and
financial reporting activities. He is also a Director of The Balcor Company.
Mr. Wood is a Certified Public Accountant. Prior to joining Balcor, he was
employed by Price Waterhouse where he was involved in auditing public and
private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis in support of asset management, institutional advisory
and capital markets functions as well as for Balcor Consulting Group, Inc.,
which provides real estate advisory services to Balcor affiliated entities and
third party clients. In addition, Mr. Darragh has supervisory responsibility
of Balcor's Investor Services Department. Mr. Darragh received masters degrees
in Urban Geography from Queens University and in Urban Planning from
Northwestern University.
Robert H. Lutz, Jr. (September 1949) joined Balcor in October 1991. He is
President of Allegiance Realty Group, Inc., formerly known as Balcor Property
Management, Inc. and, as such, has primary responsibility for all its
management and operations. He is also a Director of The Balcor Company. From
March 1991 until he joined Balcor, Mr. Lutz was Executive Vice President of
Cousins Properties Incorporated. From March 1986 until January 1991, he was
President and Chief Operating Officer of The Landmarks Group, a real estate
development and management firm. Mr. Lutz received his M.B.A. from Georgia
State University.
Michael J. O'Hanlon (April 1951) joined Balcor in February 1992 as Senior Vice
President in charge of Asset Management, Investment/Portfolio Management,
Transaction Management and the Capital Markets Group which includes sales and
refinances. From January 1989 until joining Balcor, Mr. O'Hanlon held
executive positions at Citicorp in New York and Dallas, including Senior Credit
Officer and Regional Director. He holds a B.S. degree in Accounting from
Fordham University, and an M.B.A. in Finance from Columbia University. He is
a full member of the Urban Land Institute.
Gino A. Barra (December 1954) joined Balcor's Property Sales Group in
September 1983. He is First Vice President of Balcor and assists with the
supervision of Balcor's Asset Management Group, Transaction Management, Quality
Control and Special Projects.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for various asset management matters relating to investments made
by Balcor and its affiliated partnerships, including negotiations for
modifications or refinancings of real estate mortgage investments and the
disposition of real estate investments.
David S. Glasner (December 1955) joined Balcor in September 1986 and has
primary responsibility for special projects relating to investments made by
Balcor and its affiliated partnerships and risk management functions. Mr.
Glasner received his J.D. degree from DePaul University College of Law in June
1984.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters relating to Balcor personnel,
including training and development, employment, salary and benefit
administration, corporate communications and the development, implementation
and interpretation of personnel policy and procedures. Ms. Goldberg also
supervises Balcor's payroll operations and Human Resources Information Systems
(HRIS). In addition, she has supervisory responsibility for Balcor's
Facilities, Corporate and Field Services and Telecommunications Departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
G. Dennis Hartsough (October 1942) joined Balcor in July 1991 and is
responsible for asset management matters relating to all investments made by
Balcor and its affiliated partnerships in office and industrial properties.
From July 1989 until joining Balcor, Mr. Hartsough was Senior Vice President of
First Office Management (Equity Group) where he directed the firm's property
management operations in eastern and central United States. From June 1985 to
July 1989, he was Vice President of the Angeles Corp., a real estate management
firm, where his primary responsibility was that of overseeing the company's
property management operations in eastern and central United States.
Lawrence B. Klowden (March 1952) joined Balcor in November 1981 and is
responsible for supervising the administration of the investment portfolios of
Balcor and its loan and equity partnerships. Mr. Klowden is a Certified Public
Accountant and received his M.B.A. degree from DePaul University's Graduate
School of Business.
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Lloyd E. O'Brien (December 1945) joined Balcor in April 1987 and has
responsibility for the operations and development of Balcor's Information and
Communication systems. Mr. O'Brien received his M.B.A. degree from the
University of Chicago in 1984.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury, budget activities and
corporate purchasing. Mr. Parker is a Certified Public Accountant and holds an
M.S. degree in Accountancy from DePaul University and an M.A. degree in
Social Service Administration from the University of Illinois.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for Balcor Consulting Group, Inc. which provides real estate
advisory services to Balcor affiliated entities and third party clients. Mr.
Powell received a Master of Planning degree from the University of Virginia.
Jeffrey D. Rahn (June 1954) joined Balcor in February 1983 and has primary
responsibility for Balcor's Asset Management Department. He is responsible for
the supervision of asset management matters relating to equity and loan
investments held by Balcor and its affiliated partnerships. Mr. Rahn received
his M.B.A. degree from DePaul University's Graduate School of Business.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
(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 1993.
Item 11. Executive Compensation
(a, b, c,
d & e) The Registrant has not paid and does not propose to pay any
compensation, retirement or other termination of employment benefits to any of
the five most highly compensated executive officers of the General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Mortgage Advisors-III and its officers and partners own as a group
the following Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
Limited Partnership 20 Interests Less than 1%
Interests
Relatives and affiliates of the partners and officers of the General Partner
own 2 additional Interests.
(c) The Registrant is not aware of any arrangements, the operations of which
may result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
(a & b) See Note 2 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profit and
losses.
See Note 8 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 Schedules, and Reports on Form 8-K
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedules in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and
Restated Certificate of Limited Partnership, previously filed as Exhibits 3(a)
and 3(b) to Amendment No. 2 to the Registrant's Registration Statement on
Form S-11 dated February 23, 1983 (Registration No. 2-80287) and to the
Registrant's Registration Statement dated April 8, 1983 (Registration No.
2-82952), are incorporated herein by reference.
(4) Form of Confirmation regarding Interests in the Registrant set forth as
Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1992 (Commission File No. 0-11699) is incorporated herein by
reference.
(10) (a) Agreement of Sale relating to the sale of Republic Park One Office
Building, Aurora, Colorado, previously filed as Exhibit (2) to the Registrant's
Current Report on Form 8-K dated February 2, 1994 is incorporated herein by
reference.
(b) Agreement of Sale and Escrow Agreement relating to the sale of 240 E.
Ontario Street Office Building, Chicago, Illinois, previously filed as Exhibit
(2) to the Registrant's Current Report on Form 8-K dated April 15, 1993, is
incorporated herein by reference.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended December 31, 1993.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements and
Financial Statement Schedules attached hereto in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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-IV
By: /s/ Allan Wood
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-III,
the General Partner
Date: March 30, 1994
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 Mortgage
Advisors-III, the General
/s/ Thomas E. Meador Partner March 30, 1994
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage
/s/ Allan Wood Advisors-III, the General Partner March 30, 1994
Allan Wood
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1993 and 1992
Statements of Partners' Capital, for the years ended December 31, 1993, 1992
and 1991
Statements of Income and Expenses, for the years ended December 31, 1993, 1992
and 1991
Statements of Cash Flows, for the years ended December 31, 1993, 1992 and 1991
Notes to Financial Statements
Schedules:
I - Marketable Securities - Other Investments, as of December 31, 1993
X - Supplementary Income Statement Information, for the years ended December
31, 1993, 1992 and 1991
Schedules, other than those listed, are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-IV:
We have audited the accompanying balance sheets of Balcor Pension Investors-IV
(An Illinois Limited Partnership) as of December 31, 1993 and 1992, and the
related statements of partners' capital, income and expenses and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-IV at
December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ Ernst & Young
Ernst & Young
Chicago, Illinois
March 14, 1994
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1993 and 1992
ASSETS
1993 1992
------------- -------------
Cash and cash equivalents $ 14,917,086 $ 14,460,945
Cash and cash equivalents - Early Investment
Incentive Fund 278,978 176,367
Escrow deposits 1,607,545 265,799
Escrow deposits - restricted 232,452 4,249
Accounts and accrued interest receivable 533,526 606,517
Deferred expenses, net of accumulated
amortization of $13,530 in 1993 169,163
Other assets 78,538 68,726
------------- -------------
17,817,288 15,582,603
------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around
and first mortgage 1,247,350 8,109,632
Less:
Loan payable - underlying mortgage 1,999,025
Allowance for potential loan loss 250,000 1,527,805
------------- -------------
Net investment in loans receivable 997,350 4,582,802
Loans in substantive foreclosure 1,896,953 17,781,918
Real estate held for sale (net of
allowance of $1,277,805 in 1993) 42,852,935 33,530,152
Investment in joint venture with affiliates 4,090,735 4,019,676
------------- -------------
49,837,973 59,914,548
------------- -------------
$ 67,655,261 $ 75,497,151
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 727,417 $ 905,691
Due to affiliates 86,745 71,888
Other liabilities (principally
escrow deposits) 545,134 849,097
Mortgage notes payable 14,410,060 17,366,929
------------- -------------
Total liabilities 15,769,356 19,193,605
------------- -------------
Partners' capital (429,606 Limited
Partnership Interests issued) 59,327,887 63,305,264
Less Interests held by Early Investment
Incentive Fund (25,777 in 1993 and 22,610
in 1992) (7,441,982) (7,001,718)
------------- -------------
51,885,905 56,303,546
------------- -------------
$ 67,655,261 $ 75,497,151
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1993, 1992 and 1991
Partners' Capital Accounts
-----------------------------------------
General Limited
Total Partner Partners
------------- ------------- -------------
Balance at December 31, 1990 $102,200,715 $ (2,013,534) $104,214,249
Repurchase of 7,260 Limited
Partnership Interests (1,406,038) (1,406,038)
Cash distributions (A) (29,895,506) (590,707) (29,304,799)
Net loss for the year
ended December 31, 1991 (6,022,076) (451,656) (5,570,420)
------------- ------------- -------------
Balance at December 31, 1991 64,877,095 (3,055,897) 67,932,992
Repurchase of 1,841 Limited
Partnership Interests (310,458) (310,458)
Cash distributions (A) (3,663,248) (295,354) (3,367,894)
Net loss for the year
ended December 31, 1992 (4,599,843) (344,988) (4,254,855)
------------- ------------- -------------
Balance at December 31, 1992 56,303,546 (3,696,239) 59,999,785
Repurchase of 3,167 Limited
Partnership Interests (440,264) (440,264)
Cash distributions (A) (6,862,985) (62,651) (6,800,334)
Net income for the year
ended December 31, 1993 2,885,608 216,421 2,669,187
------------- ------------- -------------
Balance at December 31, 1993 $ 51,885,905 $ (3,542,469) $ 55,428,374
============= ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1993 1992 1991
------------- ------------- -------------
First Quarter $ 1.75 $ 3.00 $ 61.50
Second Quarter 5.00 1.75 3.00
Third Quarter 5.00 1.75 3.00
Fourth Quarter 5.00 1.75 3.00
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1993, 1992 and 1991
1993 1992 1991
------------- ------------- -------------
Income:
Interest on loans receivable
and loans in substantive
foreclosure $ 3,241,345 $ 3,508,993 $ 4,313,832
Less interest on loans
payable - underlying
mortgages 666,718 712,049 996,585
------------- ------------- -------------
Net interest income on
loans receivable 2,574,627 2,796,944 3,317,247
Income (loss) from operations
of real estate held for sale 374,948 (52,136) (301,232)
Interest on short-term
investments 471,235 553,631 1,055,947
Participation income 849,169 12,737 116,463
------------- ------------- -------------
Total income 4,269,979 3,311,176 4,188,425
------------- ------------- -------------
Expenses:
Provision for potential losses
on loans, real estate and
accrued interest receivable 5,750,000 8,969,116
Participation in loss (income)
of joint venture with
affiliates 32,660 779,403 (78,782)
Mortgage servicing fees 50,109 67,244 91,407
Administrative 1,425,641 1,314,372 1,228,760
------------- ------------- -------------
Total expenses 1,508,410 7,911,019 10,210,501
------------- ------------- -------------
Income (loss) before net gain
on sales of real estate 2,761,569 (4,599,843) (6,022,076)
Net gain on sales of real estate 124,039
------------- ------------- -------------
Net income (loss) $ 2,885,608 $ (4,599,843) $ (6,022,076)
============= ============= =============
Net income (loss) allocated to
General Partner $ 216,421 $ (344,988) $ (451,656)
============= ============= =============
Net income (loss) allocated to
Limited Partners $ 2,669,187 $ (4,254,855) $ (5,570,420)
============= ============= =============
Net income (loss) per average
number of Limited Partnership
interests outstanding (405,785
407,728 and 412,302 for the
years ended December 31, 1993,
1992 and 1991, respectively) $ 6.58 $ (10.44) $ (13.51)
============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1993, 1992 and 1991
1993 1992 1991
------------- ------------- -------------
Operating activities:
Net income (loss) $ 2,885,608 $ (4,599,843) $ (6,022,076)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Net gain on sales of real
estate (124,039)
Participation in loss
(income) of joint venture
with affiliates 32,660 779,403 (78,782)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 5,750,000 8,969,116
Accrued interest income
due at maturity (152,718) (194,759) (176,813)
Collection of interest
income due at maturity 1,015,000
Amortization of deferred
expenses 13,530
Amortization of deferred
loan fees (113,640) (30,303)
Net change in:
Escrow deposits (132,721) (23,492) 51,115
Escrow deposits-restricted (228,203) 490,310 399,557
Accounts and accrued
interest receivable 32,380 146,136 53,480
Other assets (9,812) (15,800) (52,926)
Accounts and accrued
interest payable (446,122) 380,910 (259,936)
Due to affiliates 14,857 (27,436) 32,146
Other liabilities 50,049 (328,210) (344,792)
------------- ------------- -------------
Net cash provided by
operating activities 2,950,469 2,243,579 2,539,786
------------- ------------- -------------
Investing activities:
Capital contributions to joint
venture with affiliates (127,990)
Distributions from joint
venture with affiliates 24,271 314,195 259,340
Collection of principal
payments on loans receivable
and in loans in substantive
foreclosure 6,110,965 6,559,678 1,227,848
Additions to real estate (170,502) (277,512) (226,098)
Proceeds from sales of real
estate 5,870,000 3,300,000 2,200,000
Costs incurred in connection
with sales of real estate (371,962) (135,971) (336,384)
Costs incurred in connection
with real estate acquired
through foreclosure (693,219) (343,581)
Costs incurred in connection
with real estate relinquished
through foreclosure (127,659)
------------- ------------- -------------
Net cash provided by
investing activities 11,334,782 9,067,171 2,653,466
------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners (6,800,334) (3,367,894) (29,304,799)
Distributions to General
Partner (62,651) (295,354) (590,707)
Change in cash and cash
equivalents - Early
Investment Incentive Fund (102,611) 30,217 187,583
Repurchase of Limited
Partnership Interests (440,264) (310,458) (1,406,038)
Principal payments on
underlying loans payable (28,762) (30,988) (711,963)
Repayment of underlying
loan payable (1,970,263) (1,915,128)
Principal payments on mortgage
notes payable (399,816) (682,825) (318,401)
Proceeds from mortgage note
refinancings 6,331,013
Repayment of mortgage
notes payable (8,963,704) (2,023,049) (1,666,112)
Funding of capital improvement
escrows (1,309,675)
Release of capital improvement
escrows 100,650
Payment of deferred expenses (182,693)
------------- ------------- -------------
Net cash used in
financing activities (13,829,110) (8,595,479) (33,810,437)
------------- ------------- -------------
Net change in cash and
cash equivalents 456,141 2,715,271 (28,617,185)
Cash and cash equivalents at
beginning of year 14,460,945 11,745,674 40,362,859
------------- ------------- -------------
Cash and cash equivalents at
end of year $ 14,917,086 $ 14,460,945 $ 11,745,674
============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) The Partnership records wrap-around mortgage loans at the face amount of
the mortgage instrument which includes the outstanding indebtedness of the
borrower under the terms of the underlying mortgage obligation(s). The
underlying mortgage obligation(s) are recorded as a reduction of the
wrap-around mortgage loan and the resulting balance represents the
Partnership's net advance to the borrower. The Partnership is responsible for
making periodic payments to the underlying mortgage lender(s) only to the
extent that payments as required by the wrap-around mortgage agreement are
received by the Partnership from the borrower.
(b) Net interest income on the Partnership's wrap-around mortgage loans is
primarily comprised of the differential between the interest portion of the
monthly payment received from the borrower and the interest portion of the
underlying debt service paid to the mortgage lender(s). This interest is
recorded in the period that it is earned as determined by the terms of the
mortgage loan agreements. Certain mortgage loans also contain provisions for
specific amounts of interest to accrue on a periodic basis and be paid to the
Partnership upon maturity of the loans. Interest of this type is recognized
only to the extent of the net present value of the total amount due to date.
The accrual of interest is discontinued when payments become contractually
delinquent ninety days or more unless the loan is in process of collection.
Once a loan has been placed on a non-accrual status, income is recorded only as
cash payments are received from the borrower until such time as the borrower
has demonstrated an ability to make regular payments under the terms of the
original or renegotiated loan agreement.
(c) The Partnership provides for potential loan losses based upon past loss
experience for similar loans and properties, prevailing economic conditions in
the geographic areas in which collateral is located, delinquencies with respect
to repayment terms, and the valuation of specific loans in the Partnership's
portfolio.
(d) Under certain circumstances, the Partnership may accept promissory notes in
satisfaction of a borrower's obligations for certain fees upon prepayment of a
loan as required by the loan agreement. These fees include, among other
things, prepayment premiums and participations in the borrower's equity in the
collateral property. The Partnership's policy is to record such income on a
cash basis as payments required under the terms of the promissory notes are
received.
(e) Deferred expenses consist of refinancing fees which are amortized over the
term of the respective loan.
(f) Loans are classified in substantive foreclosure when a determination has
been made that the borrower has little or no equity remaining in the collateral
property in consideration of current fair value, or the Partnership has taken
certain actions which result in taking effective control of operations of the
collateral property. These loans are on non-accrual status; therefore, income
is recorded only as cash payments are received from the borrower.
(g) Real estate held for sale and loans in substantive foreclosure are recorded
at the lower of fair value less estimated costs to sell or cost at the
foreclosure date or the date of substantive foreclosure, respectively. Any
future declines in fair value will be charged to income and recognized as a
valuation allowance, while subsequent increases in value will reduce the
valuation allowance, but not below zero.
(h) In 1993, the Financial Accounting Standards Board issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan." This statement addresses
accounting by creditors for impairment of loans and also eliminates the
classification of loans as "in substantive foreclosure." This statement has
been adopted by the Partnership as of January 1, 1994, and will not have a
material impact on the financial position or results of operations of the
Partnership.
(i) Investment in joint venture with affiliates represents the Partnership's
15.37% interest in a joint venture with affiliated partnerships. Under the
equity method of accounting, the Partnership records its initial investment at
cost and adjusts its investment account for additional capital contributions,
distributions and its share of joint venture income or loss.
(j) The Partnership records repurchases of Interests by the Early Investment
Incentive Fund as a reduction of Partners' Capital (see Note 2 of Notes to
Financial Statements). Cash and cash equivalents not yet utilized to
repurchase Interests, but which are part of the Early Investment Incentive
Fund, are classified as restricted assets of the Partnership.
(k) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(l) 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.
(m) Several reclassifications have been made to the previously reported 1992
and 1991 statements in order to provide comparability with the 1993 statements.
These reclassifications have not changed the 1992 or 1991 results.
2. Partnership Agreement:
The Partnership was organized on October 21, 1982; however, operations did not
commence until 1983. The Partnership Agreement provides for Balcor Mortgage
Advisors-III to be the General Partner and for the admission of Limited
Partners through the sale of up to 450,000 Limited Partnership Interests at
$500 per Interest, 429,606 of which were sold on or prior to June 2, 1983, the
termination date of the offering. For financial statements purposes, profits
and losses are allocated 92.5% to the Limited Partners, of which 2.5% relates
to the Early Investment Incentive Fund, and 7.5% to the General Partner.
To the extent that Cash Flow is distributed, distributions will be made as
follows: (i) 90% of such Cash Flow will be distributed to the Limited Partners,
(ii) 7.5% of such Cash Flow will be distributed to the General Partner, and
(iii) 2.5% of such Cash Flow will be set aside in the Early Investment
Incentive Fund (the "Fund") for payment on dissolution of the Partnership to
those investors who subscribed prior to August 31, 1983 ("Early Investors") if
necessary for them to receive a return of their Original Capital plus a
specified Cumulative Return based on the date of investment. Amounts, if any,
remaining in the Fund after Early Investors have received such returns will be
distributed 90% to all Limited Partners and 10% to the General Partner.
Amounts placed in the Fund may, at the sole discretion of the General Partner
and subject to certain limitations, be used to repurchase Interests from
existing Limited Partners. During 1993, the Fund repurchased 3,167 Interests
at a cost of $440,264. The amounts of the repurchases are as follows:
Date Number of
Repurchased Interests Cost
First Quarter 1993 342 $ 54,460
Second Quarter 1993 393 55,460
Third Quarter 1993 1557 212,657
Fourth Quarter 1993 875 117,687
All repurchases of Interests have been made at 90% of the then current value of
such Limited Partnership Interests at the previous quarter end.
Distributions of Cash Flow and Mortgage Reductions pertaining to such
repurchased Interests are paid to the Fund. To the extent that amounts in the
Fund are not utilized to repurchase Interests, such amounts are invested in
short-term interest-bearing instruments with interest thereon being earned by
the Fund.
3. Investment in Loan Receivable:
In December 1986, the Partnership and an affiliated Partnership (together, the
"Participants") funded a first mortgage loan collateralized by the Colonial
Coach and Castlewood West mobile home parks. The Partnership participates
ratably in approximately 12% of the original loan amount, interest income and
participation income. The net carrying value of the loan was $997,350 at
December 31, 1993.
In August 1992, the borrower failed to make the required payments due under the
loan agreement and the Participants subsequently placed the borrower in
default. In February 1993, the Participants and the borrower executed a second
modification agreement which resulted in a decrease in the contract rate of the
loan from 10% per annum to 8% per annum for the period commencing March 1993
through February 1995. Thereafter, through maturity in January 1997, the
contract rate of the loan was to be 11% per annum.
In August 1993, a third modification agreement on this loan was executed which
resulted in a change in the contract rate to 10% per annum with an 8% pay rate
per annum, effective with the September 1993 payment through an extended
maturity date of July 1998. The difference between the 10% contract rate and
the 8% pay rate is deferred and payable at maturity. The third modification
also eliminated all types of contingent additional interest. None of these
amounts were previously recognized since receipt was dependent on various
conditions. Under the terms of the original loan agreement, the Partnership
would have received interest payments of approximately $130,000 during each of
1993, 1992 and 1991, while under the terms of the modifications, the
Partnership has received payments of $96,000, $120,000 and $91,000 during 1993,
1992 and 1991, respectively.
4. Loan in Substantive Foreclosure:
The carrying value of the loan in substantive foreclosure at December 31, 1993
was $1,896,953. The loan is collateralized by the Stonhaven South Apartments
located in Kansas City, Missouri.
5. Mortgage Notes Payable:
The mortgage notes payable at December 31, 1993 and 1992 consisted of the
following:
Balance Balance Current Current Due
at at Monthly Interest Date of Balloon
Property 12/31/93 12/31/92 Payments Rate % Loan Payment
Real estate held for sale:
Del Lago Apartments
(carrying value
$3,200,000)(A) $2,210,099
Colony Apartments
(carrying value
$4,507,984)(B) $3,451,048 1,833,089 $23,363 7.50% 5/2028 None
Palm View Apartments
(carrying value
$5,727,000)(C) 2,853,699 2,780,026 22,118 8.54 6/1998 $2,740,000
Shadows Apartments(D) 989,190
Pelican Pointe
Apartments
(carrying value
$7,423,577)(E) 2,838,473 2,917,690
240 E. Ontario
Office Building(F) 1,245,168
North Kent Mall
(carrying value
$5,955,400) 2,543,614 35,126 9.50 7/1996 2,073,000
869,727 9,617 11.00 2/2010 None
Glendale Fashion
Center
(carrying value
$8,570,881) 1,234,815 9,261 9.00 11/1999 1,235,000
618,684 4,640 9.00 12/1995 619,000
----------- -----------
Total real estate
held for sale 14,410,060 11,975,262
----------- -----------
Loans in substantive foreclosure:
Glendale Fashion
Center (G) 1,224,256
641,633
North Kent Mall(H) 2,638,921
886,857
-----------
Total loans in
substantive
foreclosure 5,391,667
----------- -----------
Grand Total $14,410,060 $17,366,929
=========== ===========
(A) This loan was repaid in the amount of $2,160,797 in December 1993.
(B) In April 1993, the Partnership completed the refinancing of this loan. The
refinancing resulted in the Partnership obtaining a new $3,465,000 first
mortgage loan from an unaffiliated lender. The Partnership used $1,829,202 of
the proceeds from the new mortgage loan to repay the prior loan. The
Partnership also paid refinancing costs of $81,693 which will be amortized over
the life of the loan.
(C) In May 1993, the Partnership completed the refinancing of this loan. The
refinancing resulted in the Partnership obtaining a new $2,866,013 first
mortgage loan from an unaffiliated lender. The Partnership used $2,749,909 of
the proceeds from the new mortgage loan to repay the prior loan. The
Partnership also paid refinancing costs of $101,000 which will be amortized
over the life of the loan.
(D) In April 1993, the Partnership sold this property in an all cash sale.
(See Note 10 of Notes to Financial Statements for additional information.)
(E) This loan was repaid in the amount of $2,838,473 in January 1994.
(F) In June 1993, the Partnership sold this property in an all cash sale. (See
Note 10 of Notes in Financial Statements for additional information.)
(G) In October 1992, the Bankruptcy Court ruled that the Partnership is
entitled to receive $50,000 per month from the operations of the property
beginning November 1, 1992, from which the Partnership was required to pay a
minimum of $7,852 per month to the underlying lender. In January 1993, the
Bankruptcy Court ruled that the underlying lender is entitled to receive
monthly interest-only payments at the rate of 9% per annum. In March 1994, the
Partnership acquired this property through foreclosure. (See Note 7 of Notes
to Financial Statements for additional information.)
(H) In June 1992, the borrower of this loan filed for bankruptcy protection and
in December, a plan was approved by the Bankruptcy Court. In accordance with
this plan, in January 1993, the underlying lender increased the loan balance by
$75,638 which represented foreclosure costs incurred by the lender.
Accordingly, the Partnership increased the basis of its loan receivable by this
amount. In January 1994, the Partnership acquired this property pursuant to a
deed in lieu of foreclosure. (See Note 7 of Notes to Financial Statements for
additional information.)
Approximate maturities of the above mortgage notes payable during each of the
next five years are as follows:
1994 $ 3,092,000
1995 897,000
1996 2,228,000
1997 86,000
1998 2,813,000
During the years ended December 31, 1993, 1992 and 1991, the Partnership
incurred interest expense on the mortgage notes payable of $1,684,374,
$1,814,165 and $1,170,205, respectively, and paid interest of $1,662,500,
$1,781,277 and $1,170,205, respectively.
6. Investment in Joint Venture with Affiliates:
In February 1991, the Partnership and three affiliated partnerships (the
"Participants") acquired title to the Perimeter 400 Center Office Building,
located in Fulton County, Georgia. Profits and losses, and all capital
contributions and distributions are allocated in accordance with the
Participants' original funding percentages. The Partnership's sharing
percentage is 15.37%. During 1993, 1992 and 1991, the Partnership recognized a
loss of $102,211, $1,173,961 and $400,000, respectively, as its share of the
reduction in the carrying value of the property. These amounts are included in
the Partnership's participation in loss of joint venture with affiliates. In
addition, during 1993, 1992 and 1991, the Partnership received distributions
from this joint venture totaling $24,271, $314,195 and $259,340, respectively.
The Partnership also made contributions of $127,990 to this joint venture in
1993.
7. Real Estate Held For Sale:
The Partnership acquired the following properties through foreclosure: the
North Kent Mall and Glendale Fashion Center, which were acquired by the
Partnership through foreclosure in January and March 1994, respectively, and
are classified as real estate held for sale at December 31, 1993; the 240 E.
Ontario Office Building in 1992; and the Pelican Pointe and Shadows apartment
complexes in 1991. The Partnership recorded the costs of the properties at
$15,849,638, $9,864,354 and $10,236,506 in 1993, 1992 and 1991, respectively,
which was equal to the outstanding loan balances plus any accrued interest
receivable. In addition, the Partnership reduced the bases of the properties
by $45,552 in 1993 and increased the bases by $672,092 and $174,757 in 1992 and
1991, respectively, which represented certain other receivables, liabilities,
escrows and costs recognized or incurred in connection with the foreclosures.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/93 12/31/92 12/31/91
Paid Payable Paid Payable Paid Payable
Mortgage servicing fees $51,587 $3,308 $70,251 $4,786 $93,971 $7,793
Property management fees 373,246 30,443 386,859 30,746 305,261 30,297
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 74,940 6,193 96,153 7,352 71,682 15,945
Data processing 117,237 32,116 125,958 10,196 142,411 11,307
Investor communica-
tion 20,027 1,655 38,230 2,924 21,256 4,728
Legal 17,258 1,426 17,455 1,335 21,754 4,839
Portfolio management 112,764 10,458 98,759 13,483 39,657 21,839
Other 13,867 1,146 13,934 1,066 11,582 2,576
9. Management Agreements:
Seven of the properties classified as real estate held for sale by the
Partnership at December 31, 1993 are under management agreements with
Allegiance Realty Group, Inc. (formerly Balcor Property Management, Inc.), an
affiliate of the General Partner. These management agreements provide for
annual fees of 5% of gross operating receipts for residential properties and 3%
to 6% of gross operating receipts for commercial properties.
The North Kent Mall is currently under a management agreement with a third-
party management company.
10. Real Estate Sales:
(a) In February 1991, the Partnership sold the Fridley Office Buildings located
in Fridley, Minnesota in an all cash sale for $2,200,000. The basis of the
property sold was $2,849,725 and the Partnership incurred selling expenses of
$156,384. A portion of the proceeds from the sale was used to prepay in full
the existing first mortgage loans on the property in the amount of $1,666,112.
For financial statement purposes, the Partnership incurred a loss of $806,109
which was written off against the allowance for losses previously established.
(b) In August 1992, the Partnership sold the Haystack Apartments located in
Shreveport, Louisiana in an all cash sale for $3,300,000. The basis of the
property sold was $4,509,644 and the Partnership incurred selling expenses of
$135,971. A portion of the proceeds from the sale was used to prepay in full
the existing first mortgage loan on the property in the amount of $2,023,049.
For financial statement purposes, the Partnership incurred a loss of $1,345,615
which was written off against the allowance for losses previously established.
(c) In April 1993, the Partnership sold the Shadows Apartments located in
Phoenix, Arizona in an all cash sale for $1,770,000. The carrying value of the
property sold was $1,391,000 and the Partnership incurred selling expenses of
$81,298. A portion of the proceeds from the sale was used to prepay in full
the existing first mortgage loan on the property in the amount of $976,572.
For financial statement purposes, the Partnership recognized a gain of $297,702
on the sale of the property.
(d) In June 1993, the Partnership sold the 240 E. Ontario Office Building
located in Chicago, Illinois in an all cash sale for $4,000,000. The carrying
value of the property sold was $3,983,000 and the Partnership incurred selling
expenses of $290,436. A portion of the proceeds from the sale was used to
prepay in full the existing first mortgage loan on the property in the amount
of $1,247,224. For financial statement purposes, the Partnership recognized a
loss of $273,435 on the sale of the property.
(e) In December 1993, the Partnership sold the land related to the University
Office Building located in Denver, Colorado in an all cash sale for $100,000.
The Partnership had not recognized any value for the land in its financial
statements. In addition, the Partnership incurred selling expenses of $228.
For financial statement purposes, the Partnership recognized a gain of $99,772
on the sale of the land.
(f) In February 1994, the Partnership sold the Republic Park Office Building
located in Aurora, Colorado in an all cash sale for $3,250,000. The carrying
value of the property sold was $1,835,094 and the Partnership incurred selling
expenses of $244,360. For financial statement purposes, the Partnership will
recognize a gain of $1,170,546 on the sale of the property during the first
quarter of 1994.
11. Real Estate Relinquished Through Foreclosure:
In April 1991, the Partnership and the lender executed an agreement pursuant to
which the Partnership conveyed to the lender its leasehold interest in the
University Building in June 1991. The lender paid ground rent of $1,000 per
month to the Partnership for the land retained by the Partnership until the
land was sold in December 1993. For financial statement purposes, the
Partnership recognized a loss of $4,184,404 resulting from the conveyance of
this property, which was written off against the allowance for losses
previously established. This loss consisted of the write-off of the property
basis of $7,074,264, net of the mortgage payable balance of $2,453,732 and net
liabilities of $436,128. In addition, the Partnership incurred foreclosure
costs totaling $127,659.
12. Interest in Loan Receivable Relinquished Through Foreclosure:
During May 1993, the borrower of the loan collateralized by the Oakwood Village
Apartments, for which the Partnership held a wrap-around mortgage loan,
relinquished title to the property to the first mortgage holder through
foreclosure. Due to the significantly diminished value of the property, the
Partnership did not contest this action. For financial statement purposes, the
Partnership had previously fully reserved this loan.
13. Sale of Note Receivable:
During 1991, the borrower of the loan collateralized by the Stonegate Arlington
Mobile Home Park did not have sufficient funds to repay the underlying mortgage
loan which matured in November. The Partnership accepted a proposal from the
borrower to purchase the Partnership's loan for $425,000 in February 1992 due
to the diminished value of the property collateralizing the loan and received
this amount in installments during the first quarter of 1992. For financial
statement purposes, the Partnership recognized a loss of $963,041, which was
written off against the allowance for losses previously established. This
write-off consisted of the wrap-around loan receivable balance of $1,379,427
after application of the $425,000 and related receivables of $3,552, net of the
underlying mortgage payable balance of $413,591 and escrow liabilities of
$6,347.
14. Contingencies:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
this action. Although the outcome of these matters is not presently
determinable, it is management's opinion that the ultimate outcome should not
have a material adverse affect on the financial position of the Partnership.
Management of the defendants believes they have meritorious defenses to contest
the claims.
15. Subsequent Event:
In January 1994, the Partnership made a distribution of $2,148,030 ($5.00 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of available Cash Flow of $1.00 per Interest for
the fourth quarter of 1993, and $4.00 per Interest representing a portion of
the Mortgage Reductions received from the repayment of the Lantana Cascades
Mobile Home Park loan.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
as of December 31, 1993
Col. A Col. B Col. C Col. D Col. E
Amount at
Which Each
Number Portfolio of
of Shares Equity Security
or Units - Market Issues and Each
Principal Value of Other Security
Name of Issuer and Amounts Cost Each Issue Issue Carried
Title of Each Issue of Bonds of Each at Balance in the
and Notes Issue Sheet Date Balance Sheet
Marketable Securities(A)
Commercial Paper:
American Cyanamid
Company
3.20% due 01/05/94 $ 1,000,000 $ 997,956 $ 997,956 $ 997,956
American General
Investment
Corporation
3.22% due 01/10/94 3,000,000 2,986,046 2,986,046 2,986,046
Banque Nationale De
Paris DTD
3.15% due 01/10/94 350,000 350,000 350,000 350,000
American Cyanamid
Company
3.30% due 01/12/94 1,000,000 996,242 996,242 996,242
A.I. Credit
Corporation
3.25% due 01/14/94 3,000,000 2,984,291 2,984,291 2,984,291
American Cyanamid
Company
3.30% due 01/18/94 1,000,000 995,417 995,417 995,417
American Cyanamid
Company
3.20% due 01/31/94 3,000,000 2,986,933 2,986,933 2,986,933
Consolidated Natural
Gas Company
3.22% due 02/11/94 2,000,000 1,991,950 1,991,950 1,991,950
----------- ----------- ----------- -----------
Total $14,350,000 $14,288,835 $14,288,835 $14,288,835
=========== =========== =========== ===========
(A) Marketable securities are included in cash and cash equivalents on the
balance sheet. Cash of $628,251 is also included in this category.
BALCOR PENSION INVESTORS - IV
(An Illinois Limited Partnership)
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the years ended December 31, 1993, 1992 and 1991
Column A Column B
Item Charged to Costs and Expenses
1993 1992 1991
Maintenance and repairs $1,928,785 $1,864,406 $1,619,284
Real estate taxes 876,723 1,122,798 824,655
Notes
(a) There was no depreciation of buildings or royalty payments.