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 0-13233
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BALCOR PENSION INVESTORS-V
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(Exact name of registrant as specified in its charter)
Illinois 36-3254673
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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-V
(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 $ 19,065,206 $ 16,045,584
Escrow deposits - restricted 504,919 384,625
Accounts and accrued interest receivable 504,008 604,189
Deferred expenses, net of accumulated
amortization of $458,147 in 1995
and $302,661 in 1994 193,568 349,054
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20,267,701 17,383,452
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Investment in loans receivable:
Loans receivable - wrap-around, first
and junior mortgages 46,154,030 45,975,827
Investment in acquisition loan 8,499,909 8,517,335
Less:
Loans payable - underlying mortgages 3,876,956 3,998,692
Allowance for potential loan losses 5,957,614 5,957,614
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Net investment in loans receivable 44,819,369 44,536,856
Real estate held for sale (net of allowance
of $5,737,890 in 1995 and $6,055,000 in
1994) 48,795,845 51,051,376
Investment in joint ventures - affiliates 5,125,004 5,004,625
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98,740,218 100,592,857
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$119,007,919 $117,976,309
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 211,611 $ 229,664
Due to affiliates 190,498 136,543
Other liabilities, principally escrow
deposits and accrued real estate taxes 1,002,632 998,713
Security deposits 367,963 356,629
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Total liabilities 1,772,704 1,721,549
Partners' capital (439,305 Limited Partnership
Interests issued and outstanding) 117,235,215 116,254,760
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$119,007,919 $117,976,309
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(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,
and from investment in
acquisition loan $ 1,590,255 $ 2,000,329
Less interest on loans payable -
underlying mortgages 84,251 205,501
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Net interest income on loans receivable 1,506,004 1,794,828
Income from operations of real estate
held for sale 1,385,176 1,123,129
Interest on short-term investments 425,804 179,611
Participation in income of joint ventures -
affiliates 62,223 128,259
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Total income 3,379,207 3,225,827
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Expenses:
Amortization of deferred expenses 155,486 84,519
Administrative 273,373 330,606
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Total expenses 428,859 415,125
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Income before equity in loss from
investment in acquisition loan 2,950,348 2,810,702
Equity in loss from investment in
acquisition loan (17,426) (19,261)
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Net income $ 2,932,922 $ 2,791,441
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Net income allocated to General Partner $ 293,292 $ 279,144
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Net income allocated to Limited Partners $ 2,639,630 $ 2,512,297
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Net income per Limited Partnership Interest
(439,305 issued and outstanding) $ 6.01 $ 5.72
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Distribution to General Partner $ 195,247 $ 439,305
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Distribution to Limited Partners $ 1,757,220 $ 3,953,745
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Distribution per Limited Partnership Interest $ 4.00 $ 9.00
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(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 $ 2,932,922 $ 2,791,441
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss from investment in
acquisition loan 17,426 19,261
Participation in income of joint
ventures - affiliates (62,223) (128,259)
Amortization of deferred expenses 155,486 84,519
Accrued interest income due at maturity (253,587) (210,616)
Net change in:
Escrow deposits - restricted (120,294) (58,864)
Accounts and accrued interest
receivable (39,001) 624,589
Accounts and accrued interest payable (18,053) (97,242)
Due to affiliates 53,955 81,037
Other liabilities 3,919 474,076
Security deposits 11,334 (15,991)
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Net cash provided by operating activities 2,681,884 3,563,951
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Investing activities:
Capital contributions to joint venture - (58,156)
affiliate
Distributions from joint venture - affiliate 125,632
Collection of principal payments on loans
receivable 75,384 140,254
Improvements to real estate (200,000)
Proceeds from sale of real estate 2,570,208
Costs incured in connection with the
sale of real estate (175,495)
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Net cash provided by investing activities 2,411,941 65,886
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Financing activities:
Distribution to Limited Partners (1,757,220) (3,953,745)
Distribution to General Partner (195,247) (439,305)
Principal payments on loans payable -
underlying mortgages (121,736) (152,465)
Repayment of loans payable - underlying
mortgages (4,689,871)
Principal payments on mortgage notes payable (4,004)
Repayment of mortgage note payable (2,241,349)
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Net cash used in financing activities (2,074,203) (11,480,739)
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Net change in cash and cash equivalents 3,019,622 (7,850,902)
Cash and cash equivalents at beginning
of period 16,045,584 23,623,906
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Cash and cash equivalents at end of period $ 19,065,206 $ 15,773,004
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Several reclassifications have been made to the previously reported 1994
statements to conform with the classifications used in 1995, including mortgage
servicing fees which have been reclassified and are included in administrative
expenses during 1995. These reclassifications have 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 quarter ended March 31, 1994, the Partnership incurred and paid
interest expense on mortgage notes payable for properties held for sale of
$34,585.
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 $31,452 $ 9,430
Reimbursement of expenses to
the General Partner, at cost: None 181,068
4. Sale of Real Estate:
In March 1995, the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208, net of a $379,792 credit against the sale price for tenant
improvements to be completed by the purchaser. The carrying value of the
property was $2,711,823. From the proceeds of the sale, the Partnership paid
$147,500 to an unaffiliated party as a sales commission and $27,995 in other
closing costs. The Partnership recognized a loss of $317,110, which was
written-off against the Partnership's previously established allowance for
potential losses.
5. Real Estate Held for Sale:
The Partnership acquired the Villa Medici Apartments through foreclosure in
March 1995. The property was classified as real estate held for sale as of
December 31, 1994. The Partnership recorded the fair value of the property at
$9,383,507. In addition, the Partnership reduced the basis of the property by
$115,493 for certain receivables, escrows, and costs recognized in connection
with the foreclosure. The property was transferred to real estate held for sale
at its fair value.
6. Investment in Joint Venture - Affiliates:
The Partnership and three affiliates previously funded a $23,000,000 loan on
the 45 West 45th Street Office Building. In February 1995, the participants
received title to the property through foreclosure. The Partnership owns a
21.74% joint venture interest in the property.
7. Subsequent Event:
In April 1995, the Partnership made a distribution of $2,196,525 ($5.00 per
Interest) to the holders of Limited Partnership Interests which represented the
quarterly distribution for the first quarter of 1995.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-V (the "Partnership") is a limited partnership formed
in 1983 to invest in wrap-around mortgage loans and first mortgage loans and,
to a lesser extent, other junior mortgage loans. The Partnership raised
$219,652,500 from sales of Limited Partnership Interests and utilized these
proceeds to fund thirty-four loans. Currently, there are eight loans
outstanding in the Partnership's portfolio, and the Partnership is operating
eight properties acquired through foreclosure and two investments in joint
ventures with affiliates.
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 Net Income
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Net income increased for the quarter ended March 31, 1995 as compared to the
same period in 1994 primarily due to an increase in interest income on short-
term investments. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
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Interest income on loans receivable decreased during the quarter ended March
31, 1995 as compared to the same period in 1994 due to the foreclosure of the
Villa Medici Apartments in 1995.
Interest expense on loans payable decreased during the quarter ended March 31,
1995 as compared to the same period in 1994 due to the purchase of the Seven
Trails West Apartments underlying loan in March 1994.
The Partnership currently has two non-accrual loans which are collateralized by
Fairview Plaza I and II and the Seven Trails West Apartments. For non-accrual
loans, income is recorded only as cash payments are received from the
borrowers. Original funds advanced by the Partnership for these non-accrual
loans total approximately $15,080,000. During the quarter ended March 31, 1995,
the Partnership received cash payments totaling approximately $487,000 of net
interest income on these two loans. Under the terms of the original loan
agreements, the Partnership would have received approximately $758,000 of net
interest income during the quarter ended March 31, 1995.
Income from operations of real estate held for sale represents net property
operations generated on nine of the properties the Partnership has acquired
through foreclosure. As mentioned below, the Partnership sold the Comerica
Office Building in March 1995. The original funds advanced by the Partnership
total approximately $69,545,000 for the eight remaining real estate
investments. The Partnership foreclosed on the Villa Medici Apartments in 1995.
As a result, income from operations of real estate held for sale increased for
the quarter ended March 31, 1995 as compared to the same period in 1994. See
Liquidity and Capital Resources below for further information.
Due to higher interest rates and Partnership cash balances during 1995,
interest income on short-term investments increased for the quarter ended March
31, 1995 as compared to the same period in 1994.
Participation in joint ventures with affiliates represents the Partnership's
share of the property operations at the Whispering Hills Apartments and the 45
West 45th Street Office Building. Primarily as a result of lower revenues at
the 45 West 45th Street Office Building, the participation in income of joint
ventures was lower during the quarter ended March 31, 1995 as compared to the
same period in 1994.
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 or real estate held for
sale during the quarter ended March 31, 1995 or 1994.
As a result of the sale of the Comerica Office Building and the full
amortization of the related deferred expenses, amortization expense increased
during the quarter ended March 31, 1995 as compared to the same period in 1994.
This increase was partially offset by a decrease in the amortization of
deferred expenses relating to the Glades on Ulmerton Apartments due to the 1994
prepayment of the underlying mortgage loan and the amortization of the related
deferred expenses in 1994.
Decreased legal fees resulted in a decrease in administrative expenses during
the quarter ended March 31, 1995 as compared to the same period in 1994.
Liquidity and Capital Resources
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The cash position of the Partnership increased as of March 31, 1995 when
compared to December 31, 1994. The Partnership's cash flow provided by
operating activities during 1995 was generated by net interest income received
from the Partnership's loans receivable and short-term investments, and cash
flow from the operation of the Partnership's properties held for sale. This
cash flow was partially offset by the payment of administrative expenses. The
Partnership also generated cash from its investing activities primarily as a
result of the sale of the Comerica Office Building. A portion of the cash
provided by operating activities and investing activities was utilized for
financing activities primarily consisting of distributions to Limited Partners
and the General Partner.
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 once 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. During the quarters ended March 31, 1995 and 1994 all of the
Partnership's properties generated positive cash flow. In addition, the
Partnership also holds two minority joint venture interests. The Whispering
Hills Apartments generated positive cash flow for the quarters ended March 31,
1995 and 1994 and the 45 West 45th Street Office Building operated at a
marginal deficit during the quarters ended March 31, 1995 and 1994. Significant
leasing costs were incurred in 1995 at the 45 West 45th Street Office Building
to lease vacant space and renew existing tenant leases. These non-recurring
expenditures were not included in classifying the cash flow performance of the
property. Had these costs been included, this property would have generated a
significant deficit during the first quarter of 1995. As of March 31, 1995, the
occupancy rates of the Partnership's residential properties ranged from 90% to
95%, and the occupancy rates of the commercial properties ranged from 88% to
98%. 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.
Because of the weak real estate markets in certain 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 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
General Partner evaluates the request for prepayment along with the market
conditions on a case by case basis, and in some cases the Partnership collects
substantial prepayment premiums.
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.
In March 1995 the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208. See Note 4 of Notes to Financial Statements for additional
information.
During March 1995, the Partnership was the successful bidder for the Villa
Medici Apartments at a foreclosure sale. See Note 5 of Notes to Financial
Statements and Item 1. Legal Proceedings for additional information.
The Partnership and three affiliates funded the $23,000,000 45 West 45th Street
Office Building mortgage loan. The Partnership funded $5,000,000 of the total
loan amount for a participating percentage of approximately 22%. In February
1995, the participants received title to the property through foreclosure.
The Noland Fashion Square Shopping Center loan is recorded by the Partnership
as an investment in an acquisition loan. The Partnership has recorded its share
of the property's operations as equity in loss from investment in acquisition
loan. The Partnership's share of operations has no effect on the cash flow of
the Partnership. Amounts representing contractually required debt service are
recorded as interest income.
In April 1995, the Partnership made a distribution of $2,196,525 ($5.00 per
Interest) to the holders of Limited Partnership Interests which represented the
quarterly distribution for the first quarter of 1995. To date including the
distribution in April 1995, Limited Partners have received cumulative cash
distributions of $462.25 per $500 Interest. Of this amount, $354.25 has been
Cash Flow from operations and $108.00 represents a return of Original Capital.
The level of the regular quarterly distribution increased from the fourth
quarter of 1994. In addition, during April 1995, the Partnership paid $183,044
to the General Partner as its distributive share of the Cash Flow distributed
for the first quarter of 1995 and made a contribution of $61,015 to the Early
Investment Incentive Fund.
The General Partner presently expects to continue making cash distributions
from the cash flow generated from property operations and by the receipt of
mortgage payments, less payments on the underlying loans, fees to the General
Partner and administrative expenses. The General Partner believes it has
retained, on behalf of the Partnership, 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-V
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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(a) Villa Medici Apartments
Upon the dismissal by the U.S. Court of Appeals for the 10th Circuit Court of
the appeal filed by the borrower of the loan collateralized by the Villa Medici
Apartments (Wiston XXIV Limited Partnership vs. Balcor Pension Investors-V,
Case No.: 94-3281), the Partnership resumed its foreclosure proceedings in the
District Court of Johnson County, Kansas, (Balcor Pension Investors-V vs.
Wiston XXIV Limited Partnership, et al., Case No. 92-C-11570), and received
title to the property in March 1995. On April 27, 1995 the borrower filed a
petition for a writ of certiorari asking the U.S. Supreme Court to review the
appelate court's decision. The Partnership will continue to own the property
while the petition is pending.
(b) Comerica Plaza
In 1984, the Partnership funded a $9,250,000 loan collateralized by a first
mortgage on Comerica Plaza I & II, Dallas, Texas. The Partnership obtained
title to the property through foreclosure in 1987.
On March 31, 1995, the Partnership sold the property for a sale price of
$2,950,000 to an unaffiliated entity, Vortisch Holdings, L.P., a Texas limited
partnership. The Purchaser received a $379,792 credit against the sale price
for tenant leasing improvements at the property, and assumed the obligation to
pay such tenant improvements. The Partnership paid from the proceeds of the
sale $147,500 to an unaffiliated party as a sales commission and $27,995 in
closing costs. The General Partner will be reimbursed by the Partnership for
its actual expenses incurred in connection with the sale.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
dated January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-13233) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1995 is attached hereto.
(99) Agreement of Sale relating to the sale of the Comerica Plaza I & II,
Dallas, Texas.
(b) Reports on Form 8-K: No reports were 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-V
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-V, 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-V, the
General Partner
Date: May 15, 1995
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