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 June 30, 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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 11,502,501 $ 11,860,415
Cash and cash equivalents - Early Investment
Incentive Fund 149,804 157,547
Escrow deposits 946,730 771,879
Accounts and accrued interest receivable 99,933 99,115
Prepaid expenses 181,233 19,901
Deferred expenses, net of accumulated
amortization of $47,322 in 1995 and
$36,058 in 1994 135,371 146,635
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13,015,572 13,055,492
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Investment in loans receivable:
Loans receivable - first mortgages 2,972,736 3,037,096
Less:
Allowance for potential loan loss 250,000 250,000
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Net investment in loans receivable 2,722,736 2,787,096
Real estate held for sale (net of allowance
of $1,277,805) 41,323,539 41,518,106
Investment in joint venture with affiliates 4,249,838 4,109,895
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48,296,113 48,415,097
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$ 61,311,685 $ 61,470,589
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued real estate
taxes payable $ 1,005,762 $ 747,113
Due to affiliates 17,428 124,148
Other liabilities (principally security
deposits) 296,152 289,249
Mortgage notes payable 11,180,205 11,316,222
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Total liabilities 12,499,547 12,476,732
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Partners' capital (429,606 Limited
Partnership Interests issued) 56,829,776 56,875,278
Less Interests held by Early Investment
Incentive Fund (30,003 in 1995 and
28,983 in 1994) (8,017,638) (7,881,421)
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48,812,138 48,993,857
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$ 61,311,685 $ 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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 99,331 $ 555,686
Income from operations of real estate
held for sale 1,123,185 1,232,082
Participation in income of
joint venture with affiliates 224,451 198,804
Interest on short-term investments 354,225 264,944
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Total income 1,801,192 2,251,516
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Expenses:
Administrative 537,424 675,777
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Total expenses 537,424 675,777
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Income before gain on sale
of real estate 1,263,768 1,575,739
Gain on sale of real estate 1,170,546
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Net income $ 1,263,768 $ 2,746,285
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Net income allocated to General Partner $ 94,783 $ 205,971
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Net income allocated to Limited Partners $ 1,168,985 $ 2,540,314
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Net income per average number of
Limited Partnership interests outstanding
(400,617 in 1995 and 403,798 in 1994) $ 2.92 $ 6.29
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Distributions to General Partner $ 107,402 $ 89,502
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Distributions to Limited Partners $ 1,201,868 $ 4,462,310
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Distributions per Limited Partnership
Interest $ 3.00 $ 11.05
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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 June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 50,189 $ 485,309
Income from operations of real
estate held for sale 461,278 717,670
Participation in income of joint
venture with affiliates 146,272 97,182
Interest on short-term investments 172,975 122,840
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Total income 830,714 1,423,001
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Expenses:
Administrative 295,581 313,793
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Total expenses 295,581 313,793
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Net income $ 535,133 $ 1,109,208
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Net income allocated to General Partner $ 40,135 $ 83,190
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Net income allocated to Limited Partners $ 494,998 $ 1,026,018
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Net income per average number of
Limited Partnership interests outstanding
(400,612 in 1995 and 403,767 in 1994) $ 1.24 $ 2.54
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Distribution to General Partner $ 53,701 $ 53,701
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Distribution to Limited Partners $ 600,934 $ 2,443,165
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Distribution per Limited Partnership Interest $ 1.50 $ 6.05
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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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,263,768 $ 2,746,285
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 (224,451) (198,804)
Amortization of deferred expenses 11,264 11,264
Net change in:
Escrow deposits (197,911) (34,722)
Escrow deposits - restricted 232,452
Accounts and accrued interest
receivable (818) 467,643
Prepaid expenses (161,332)
Other assets 78,538
Accounts and accrued real estate taxes
payable 258,649 117,939
Due to affiliates (106,720) 160,134
Other liabilities 6,903 (279,707)
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Net cash provided by operating activities 849,352 2,130,476
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Investing activities:
Capital contribution to joint
venture with affiliates (19,473)
Distributions from joint venture with
affiliates 84,508 119,202
Collection of principal payments on loan
receivable 64,360 53,017
Insurance proceeds 710,155
Additions to real estate (140,588)
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 provided by investing activities 343,435 2,808,212
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Financing activities:
Distributions to Limited Partners (1,201,868) (4,462,310)
Distributions to General Partner (107,402) (89,502)
Change in cash and cash equivalents -
Early Investment Incentive Fund 7,743 63,338
Repurchase of Limited Partnership Interests (136,217) (257,935)
Principal payments on mortgage notes payable (136,017) (123,811)
Repayment of mortgage note payable (2,838,473)
Release of capital improvement escrow 23,060 283,981
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Net cash used in financing activities (1,550,701) (7,424,712)
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Net change in cash and cash
equivalents (357,914) (2,486,024)
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 $ 11,502,501 $ 12,431,062
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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 six months
and quarter ended June 30, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the six months ended June 30, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable of $498,589 and $535,394 and paid
interest expense of $498,589 and $535,488, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the six
months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Mortgage servicing fees $ 5,059 $ 3,373 $ 843
Reimbursement of expenses to
the General Partner, at cost 240,282 240,282 16,585
4. Subsequent Event:
In July 1995, the Partnership made a distribution of $5,687,983 to the holders
of Limited Partnership Interests which represents a regular quarterly
distribution of available Cash Flow of $1.00 per Interest for the second
quarter of 1995 and a special distribution of $12.24 per Interest which
represents Mortgage Reductions received from prior loan repayments and property
sales.
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 June 30, 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 six months ended June 30, 1995 as compared to
the same period in 1994. A reduction in interest income earned by the
Partnership on its investment in loans receivable contributed to the above
decrease and resulted in the decrease in net income for the quarter ended June
30, 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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Amounts received from the discounted repayment of a residual note related to
the Independence Green loan prepayment were recognized as interest income
during 1994. This was the primary reason for the decrease in interest income
on loans receivable during the six months and quarter ended June 30, 1995 as
compared to the same periods in 1994.
The Partnership has one non-accrual loan at June 30, 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 six months ended June 30, 1995, the Partnership
received cash payments of interest income of approximately $56,000 on this
loan. Under the terms of the original loan agreement, the Partnership would
have received approximately $187,000 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 six months ended June 30, 1995 and 1994.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At June 30, 1995,
the Partnership was operating seven properties. Original funds advanced by the
Partnership total approximately $30,200,000 for these seven real estate
investments. During 1995, increased leasing costs were incurred at the North
Kent Mall in an effort to upgrade and reposition the property in its market.
In addition, rental and service income decreased at the Glendale Fashion Center
due to the termination of tenants' leases in an effort to prepare the property
for sale. These events resulted in a decrease in income during the six months
and quarter ended June 30, 1995 as compared to the same periods in 1994. The
1994 sale of the Republic Park Office Building, which was generating a loss
prior to its sale, and increased rental income at the Colony and Pelican Pointe
apartment complexes which resulted from higher rental rates partially offset
the decrease 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 property operating expenses at this property during 1995
was the primary reason for the increase in income during the six months and
quarter ended June 30, 1995 as compared to the same periods in 1994
As a result of higher interest rates earned on short-term investments, interest
income on short-term investments increased during the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994.
Decreased legal and professional fees incurred in connection with the 1994
foreclosures were the primary reasons administrative expenses decreased during
the six months and quarter ended June 30, 1995 as compared to the same periods
in 1994.
During the six months ended June 30, 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 June 30, 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 also received
cash from its investing activities relating primarily to insurance proceeds
received during the second quarter of 1995 related to the 1994 earthquake
damage at Glendale Fashion Center. This was partially offset by additional
costs incurred in connection with the foreclosure of Glendale Fashion Center
and improvements made at the North Kent Mall. The Partnership 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 made a special
distribution from Mortgage Reductions in July 1995 as described below.
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 six months ended June 30, 1995 and 1994,
six of the Partnership's seven properties generated positive cash flow. The
Glendale Fashion Center operated at a significant cash flow deficit during 1995
and a positive cash flow during 1994. The Partnership acquired the Center
through foreclosure in March 1994. The current occupancy level is 6% as
management has terminated certain tenants' leases to prepare 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 level of this Mall is 58%. As of
June 30, 1995, the occupancy rates of the Partnership's residential properties
ranged from 93% to 99% except for the Del Lago and Colony apartment complexes
which had occupancy rates of 87% and 89%, respectively. The Perimeter 400
Office Building, a property in which the Partnership holds a minority joint
venture interest, generated cash flow during the six months ended June 30, 1995
and 1994.
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 July 1995, the Partnership made a distribution of $5,687,983 to the holders
of Limited Partnership Interests which represents a regular quarterly
distribution of available Cash Flow of $1.00 per Interest for the second
quarter of 1995 and a special distribution of $12.24 per Interest which
represents Mortgage Reductions received from prior loan repayments and property
sales. The quarterly distribution level decreased slightly from the amount
distributed for the first quarter of 1995. The reduction can be attributed to
the decrease in funds available for distribution due to the prior loan
repayments and property sales. The Partnership also paid $35,801 to the
General Partner as its share of the Cash Flow distributed for the second
quarter of 1995 and $11,934 as its contribution to the Early Investment
Incentive Fund. To date, the Partnership has distributed $567.34 per $500
Interest, of which $320.10 represents Cash Flow from operations and $247.24
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.
During the six months ended June 30, 1995, the General Partner, on behalf of
the Partnership, used amounts placed in the Early Investment Incentive Fund to
repurchase 1,020 Interests from Limited Partners at a total cost of $136,217.
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 six months period ended
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended June 30, 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 D. Parker
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Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-III,
the General Partner
Date: August 10, 1995
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