SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11699
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BALCOR PENSION INVESTORS-IV
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(Exact name of registrant as specified in its charter)
Illinois 36-3202727
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 11,176,619 $ 11,860,415
Cash and cash equivalents - Early Investment
Incentive Fund 221,708 157,547
Escrow deposits 818,230 771,879
Accounts and accrued interest receivable 190,548 119,016
Deferred expenses, net of accumulated
amortization of $41,690 in 1995 and
$36,058 in 1994 141,003 146,635
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12,548,108 13,055,492
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Investment in loans receivable:
Loans receivable - first mortgages 3,005,985 3,037,096
Less:
Allowance for potential loan loss 250,000 250,000
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Net investment in loans receivable 2,755,985 2,787,096
Real estate held for sale (net of
allowance of $1,277,805) 41,992,254 41,518,106
Investment in joint venture with affiliates 4,188,074 4,109,895
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48,936,313 48,415,097
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$ 61,484,421 $ 61,470,589
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued real estate
taxes payable $ 700,278 $ 747,113
Due to affiliates 178,994 124,148
Other liabilities (principally security
deposits) 288,286 289,249
Mortgage notes payable 11,249,006 11,316,222
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Total liabilities 12,416,564 12,476,732
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Partners' capital (429,606 Limited
Partnership Interests issued) 56,949,278 56,875,278
Less Interests held by Early Investment
Incentive Fund (28,983 in 1995 and 1994) (7,881,421) (7,881,421)
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49,067,857 48,993,857
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$ 61,484,421 $ 61,470,589
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 49,142 $ 70,377
Income from operations of
real estate held for sale 661,907 514,412
Participation in income of
joint venture with affiliates 78,179 101,622
Interest on short-term investments 181,250 142,104
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Total income 970,478 828,515
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Expenses:
Administrative 241,843 361,984
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Total expenses 241,843 361,984
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Income before gain on sale
of real estate 728,635 466,531
Gain on sale of real estate 1,170,546
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Net income $ 728,635 $ 1,637,077
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Net income allocated to
General Partner $ 54,648 $ 122,781
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Net income allocated to
Limited Partners $ 673,987 $ 1,514,296
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Net income per average number of
Limited Partnership interests outstanding
(400,623 in 1995 and 403,829 in 1994) $ 1.68 $ 3.75
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Distribution to General Partner $ 53,701 $ 35,801
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Distribution to Limited Partners $ 600,934 $ 2,019,145
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Distribution per Limited Partnership Interest $ 1.50 $ 5.00
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 728,635 $ 1,637,077
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of real estate (1,170,546)
Participation in income of joint
venture with affiliates (78,179) (101,622)
Amortization of deferred expenses 5,632 5,632
Net change in:
Escrow deposits (69,411) 80,951
Escrow deposits-restricted 232,452
Accounts and accrued interest
receivable (71,532) 406,897
Other assets 78,538
Accounts and accrued real estate taxes
payable (46,835) (30,949)
Due to affiliates 54,846 92,187
Other liabilities (963) (290,573)
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Net cash provided by operating activities 522,193 940,044
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Investing activities:
Capital contribution to joint
venture with affiliates (19,473)
Collection of principal payments on loan
receivable 31,111 26,364
Additions to real estate (99,148)
Proceeds from sale of real estate 3,250,000
Costs incurred in connection
with sale of real estate (244,360)
Costs incurred in connection
with real estate acquired
through foreclosure (375,000) (350,174)
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Net cash (used in) or provided by
investing activities (443,037) 2,662,357
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Financing activities:
Distribution to Limited Partners (600,934) (2,019,145)
Distribution to General Partner (53,701) (35,801)
Change in cash and cash equivalents -
Early Investment Incentive Fund (64,161) (14,834)
Principal payments on mortgage notes payable (67,216) (61,185)
Repayment of mortgage note payable (2,838,473)
Release of capital improvement escrow 23,060
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Net cash used in financing activities (762,952) (4,969,438)
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Net change in cash and
cash equivalents (683,796) (1,367,037)
Cash and cash equivalents at
beginning of year 11,860,415 14,917,086
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Cash and cash equivalents at
end of period $ 11,176,619 $ 13,550,049
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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 Policy:
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has been made to the
previously reported 1994 financial statements to conform with the
classification used in 1995. This reclassification has not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1995, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the quarters ended March 31, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable of $250,089 and $281,403 and paid
interest expense of $250,089 and $253,646, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1995 are:
Paid Payable
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Mortgage servicing fees $ 1,686 $ 843
Reimbursement of expenses to
the General Partner, at cost: None 178,151
4. Subsequent Event:
In April 1995, the Partnership made a distribution of $644,409 to the holders
of Limited Partnership Interests which represents a regular quarterly
distribution of available Cash Flow of $1.50 per Interest for the first quarter
of 1995.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 thirty-eight loans. As of March 31, 1995, there are two
loans outstanding in the Partnership's portfolio. In addition, the Partnership
is operating seven properties held for sale and holds a minority joint venture
interest in one property.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership recognized a gain on the sale of the Republic Park Office
Building during the first quarter of 1994, which was the primary reason for the
decrease in net income during the quarter ended March 31, 1995 as compared to
the same period in 1994. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
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Interest income received during 1994 on the residual note related to the
Independence Green prepayment was the primary reason for the decrease in
interest income on loans receivable during the quarter ended March 31, 1995 as
compared to the same period in 1994.
The Partnership has one non-accrual loan at March 31, 1995 which is
collateralized by the Stonehaven South Apartments. The funds advanced by the
Partnership for this non-accrual loan are approximately $2,800,000. For
non-accrual loans, income is recorded only as cash payments are received from
the borrowers. During the quarter ended March 31, 1995, the Partnership
received cash payments of interest income of approximately $27,000 on this
loan. Under the terms of the original loan agreement, the Partnership would
have received approximately $94,000 of interest income.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership did not
recognize a provision for potential losses on its loans and real estate held
for sale during the quarters ended March 31, 1995 and 1994.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At March 31, 1995,
the Partnership was operating seven properties. Original funds advanced by the
Partnership total approximately $30,200,000 for these seven real estate
investments. The Republic Park Office Building, which was generating a loss
prior to its sale, was sold in February 1994. Rental income increased at the
Colony Apartments due to increased rental rates while property operating
expense decreased slightly. The combined effect of these events resulted in an
increase in income during the quarter ended March 31, 1995 as compared to the
same period in 1994. Also, during 1995, North Kent Mall incurred expenditures
for leasing costs which partially offset the increase in income.
Participation in income of joint venture with affiliates represents the
Partnership's 15.37% share of the operations of the Perimeter 400 Center Office
Building. Decreased average occupancy levels at this property during 1995 was
the primary reason for the decrease in income during the quarter ended March
31, 1995 as compared to the same period in 1994.
As a result of higher interest rates earned on short-term investments, interest
income on short-term investments increased during the quarter ended March 31,
1995 as compared to the same period in 1994.
Decreased legal and professional fees incurred in connection with the 1994
foreclosures was the primary reason administrative expenses decreased during
the quarter ended March 31, 1995 as compared to the same period in 1994.
During the quarter ended March 31, 1994, the Partnership recognized a gain of
$1,170,546 on the sale of the Republic Park Office Building.
Liquidity and Capital Resources
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The cash position of the Partnership decreased as of March 31, 1995 when
compared to December 31, 1994. The Partnership received cash flow from its
operating activities, which consisted of 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, partially
offset by the payment of administrative expenses. The Partnership used cash to
fund its investing activities relating primarily to additional costs incurred
in connection with the foreclosure of Glendale Fashion Center. The Partnership
also used cash to fund its financing activities which consisted primarily of
the payment of distributions to the Limited Partners and General Partner and
the payment of principal on the mortgage notes payable.
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. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. The Del Lago, Pelican Pointe and Regency Club apartment complexes do
not have underlying debt. During the quarters ended March 31, 1995 and 1994,
six of the Partnership's properties generated positive cash flow. The Glendale
Fashion Center operated at a significant cash flow deficit during 1995 and a
marginal cash flow deficit during 1994. The Partnership acquired the Center
through foreclosure in March 1994. The current occupancy is 12% as management
has terminated certain tenants' leases to prepare the property for
redevelopment. The Partnership is currently in the process of signing letters
of intent for new tenants at the Center. The Partnership continues to evaluate
its options with respect to the redevelopment process for the Center which
includes the potential of marketing the property for sale. The Partnership
acquired North Kent Mall through foreclosure in January 1994 and is evaluating
alternative strategies to upgrade and reposition the property in its market.
The current occupancy of the Mall is 64%. As of March 31, 1995, the occupancy
rates of the Partnership's residential properties ranged from 95% to 98% except
for the Del Lago Apartments which had an occupancy rate of 91%.
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.
In April 1995, the Partnership made a distribution of $644,409 to the holders
of Limited Partnership Interests which represents a regular quarterly
distribution of available Cash Flow of $1.50 per Interest for the first quarter
of 1995. The quarterly distribution level is consistent with the amount
distributed for the fourth quarter of 1994. The Partnership also paid $53,701
to the General Partner as its distributive share of the Cash Flow distributed
for the first quarter of 1995 and $17,900 as its contribution to the Early
Investment Incentive Fund. To date, the Partnership has distributed $554.10 per
$500 Interest, of which $319.10 represents Cash Flow from operations and
$235.00 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, less administrative expenses. The
General Partner believes the Partnership has retained an appropriate amount of
working capital to meet current cash or liquidity requirements which may occur.
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.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) (3) Exhibits:
(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.
(27) Financial Data Schedule of the Registrant for the quarter ended March 31,
1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-IV
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-III, the General Partner
By: /s/Brian Parker
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Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-III,
the General Partner
Date: May 10, 1995
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