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 0-14332
BALCOR PENSION INVESTORS-VI
(Exact name of registrant as specified in its charter)
Illinois 36-3319330
(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-VI (the "Registrant") is a limited partnership formed
in 1984 under the laws of the State of Illinois. The Registrant raised
$345,640,500 from sales of Limited Partnership Interests. The Registrant's
operations consist of investment in first mortgage loans and, to a lesser
extent, wrap-around mortgage loans and junior mortgage loans. The Registrant
is also currently operating thirteen properties and holds minority joint
venture interests with affiliates in one property acquired through foreclosure
and in another property purchased from an unaffiliated party. All financial
information in this report relates to this industry segment.
The Registrant funded a total of thirty-one loans. Nine of these loans have
been repaid, including three during 1993. A portion of the Mortgage Reductions
generated by the loan prepayments has been distributed to Limited Partners, and
the remainder has been retained while the Registrant analyzes future working
capital requirements. During prior years, one loan was also written off. The
Registrant acquired thirteen properties and a minority joint venture interest
with an affiliate, and sold one property in 1992 and one in 1993. The
Registrant also purchased a minority joint venture interest with an affiliate
in the Sand Pebble Village II Apartments (formerly Sand Dune Apartments) during
October 1993. In addition, during October 1993, an affiliate of the Registrant
assumed management of the properties which collateralize the loans on the
Northgate and Gatewood apartment complexes, and these investments have been
classified as real estate held for sale at December 31, 1993. As of December
31, 1993, the Registrant has five outstanding loans 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, attributable to local and regional market conditions,
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 45 West 45th Street loan had been placed on non-
accrual status and is classified in substantive foreclosure. The funds
advanced by the Registrant for this loan total approximately $9,500,000,
representing approximately 3% of original funds advanced.
Mortgage loans are subject to the risk of default, in which event the
Registrant has the responsibility of foreclosing and protecting its
investments. As of December 31, 1993, the Registrant owns eleven properties
and also holds minority joint venture interests with affiliates in two
additional properties. In addition, the Registrant assumed management of the
Northgate and Gatewood apartment complexes in October 1993 and these
investments are classified as real estate held for sale. 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. These properties, including the minority joint
venture interests, comprise approximately 53% of the Registrant's original
funds advanced at December 31, 1993.
In March 1992, the loan collateralized by Shoal Run Apartments was placed in
default and the borrower filed for bankruptcy protection. The Registrant was
the successful bidder at a foreclosure sale and received title to the property
in February 1993.
In September 1993, the Registrant sold the Winchester Mall located in Rochester
Hills, Michigan for an all-cash sale price of $9,000,000. The carrying value of
the property was $5,500,000 and the Registrant incurred closing costs of
$28,269. For financial statement purposes, the Registrant recognized a gain of
$3,471,731 on the sale of the property.
In October 1993, a joint venture consisting of the Registrant and an affiliated
partnership acquired the Sand Pebble Village II Apartments (formerly Sand Dune
Apartments) from an unaffiliated party for a purchase price of $9,300,000. The
joint venture paid $4,300,000 in cash, of which the Registrant's share was
$1,932,909. The remainder of the purchase price was paid with the proceeds of
a $5,000,000 first mortgage loan. See Item 7. Liquidity and Capital Resources
for further information.
During 1993, the borrowers of the following loans prepaid the loans in full:
the Pinellas Cascade, Land of Lakes Pinellas Park, and the Skyway, Mariwood and
Hickory Knoll mobile home parks and the Miami Free Zone Warehouse Facility.
See Item 7. Liquidity and Capital Resources for further information.
During 1992, the Registrant commenced foreclosure proceedings against the
borrower of the loans collateralized by the Northgate and Gatewood apartment
complexes. The borrower subsequently filed for protection under the U.S.
Bankruptcy Code which stayed the foreclosure proceedings. In September 1993, a
bankruptcy plan of reorganization was confirmed by the Bankruptcy Court, and
the plan was made effective in December 1993. See Item 3. Legal Proceedings for
further information.
The Registrant and three affiliated partnerships (together, the
"Participants"), previously funded a $23,000,000 loan to 45 West 45th Street
Office Building, New York, New York (the "Property"), of which the Registrant's
share is $9,500,000 (approximately 41%). In September 1991, the loan was
placed in default. Pursuant to a cash management agreement entered into
between the Participants and the borrower, cash flow from property operations
is received by the Participants and recognized as interest income. In May
1993, the Participants cashed a letter of credit which provided partial
collateral for the loan, of which the Partnership's share was $199,800. The
Participants intend to file foreclosure proceedings during 1994.
In February 1994, the borrower of the loans collateralized by the Breckenridge
Apartments and Highland Green Apartments prepaid the loans in full. See Item 7.
Liquidity and Capital Resources for further information.
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 properties are located, the
Registrant has established allowances for potential losses on loans, loans in
substantive foreclosure and real estate held for sale in the amounts of
$1,308,594, $2,400,000 and $4,065,000, respectively. Such allowances may be
adjusted from time to time based on prevailing economic conditions and the
General Partner's analysis of specific loans and real estate in the
Registrant's portfolio.
The officers and employees of Balcor Mortgage Advisors-VI, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has 51 full time and 7 part time employees engaged in its
operations.
Other Information
In January 1986, the Registrant funded a $22,000,000 loan collateralized by a
first mortgage on the Hammond Aire Plaza shopping center, Baton Rouge,
Louisiana (the "Property"). The borrower defaulted on its obligations under
the loan and, in September 1987, the Registrant obtained title to the Property
through foreclosure. The Registrant's cash investment in the Property as of
December 31, 1993 was approximately $21,910,219. However, in accordance with
its accounting policies, the Registrant has previously reduced the carrying
value of the Property in its financial statements to approximately $15,396,500.
On February 24, 1994, the Registrant contracted to sell the Property to an
unaffiliated party, Maurin-Ogden Limited Partnership, a Massachusetts limited
partnership ("Purchaser"), for a sale price of $16,300,000. The Purchaser has
deposited $25,000 and the remaining $16,275,000, plus or minus prorations, is
payable upon closing scheduled to occur prior to the end of July 1994. If the
sale does not close due to the default of the Purchaser, the Registrant will
retain the $25,000 deposit plus interest accrued thereon.
Neither the General Partner nor any of its affiliates will receive a commission
in connection with the sale of the Property.
The closing of the sale of the Property is subject to the satisfaction of
numerous terms and conditions. There can be no assurance that all of the terms
and conditions will be complied with and, therefore, it is possible that the
sale of the Property may not occur.
Item 2. Properties
As of December 31, 1993, the Registrant acquired the thirteen properties and
two minority joint venture interests described below:
Location Description of Property
Baton Rouge, Louisiana Hammond Aire Plaza Shopping Center: a regional
shopping center containing approximately 276,000
square feet located on approximately 34 acres.
DeKalb County, Georgia Park Central Office Building: a ten story office
building containing approximately 210,000 square
feet.
Dallas, Texas * Brookhollow/Stemmons Center Office Complex: an 11
story office building containing approximately
221,000 square feet.
Indianapolis, Indiana Hawthorne Heights Apartments: a 241 unit
apartment complex located on approximately 15
acres.
Pembroke Pines, Florida Flamingo Pines Shopping Center: a regional
shopping center containing approximately 124,500
square feet located on approximately 16 acres.
Fulton County, Georgia ** Perimeter 400 Center: a ten story office building
and six story building connected at the first 3
levels which combined contain approximately
358,000 square feet.
Columbia, Maryland Symphony Woods Office Center: a 6 story office
building containing approximately 93,000 square
feet.
Lake Mary, Florida * Sun Lake Apartments: a 600 unit apartment complex
located on approximately 46 acres.
Chicago, Illinois 420 North Wabash Office Building: a 7-story
office building containing approximately 120,000
square feet.
Raleigh, North Carolina Woodscape Apartments: a 240-unit garden apartment
complex located on approximately 27 acres.
Birmingham, Alabama Shoal Run Apartments: a 276-unit garden apartment
complex located on approximately 24 acres.
Albuquerque, New Mexico Northgate Apartments: a 160-unit apartment
complex located on approximately 4 acres.
Albuquerque, New Mexico Gatewood Apartments: a 168-unit apartment
complex located on approximately 4 acres.
* Owned by the Registrant through a joint venture with an affiliated
partnership.
** Owned by the Registrant through a joint venture with three affiliated
partnerships.
In addition, the Registrant also holds minority joint venture interests in the
Sand Pebble Village and Sand Pebble Village II (formerly Sand Dune) apartment
complexes, located in Riverside (Los Angeles), California.
Certain of the above properties are held subject to various mortgages.
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) Northgate Apartments and Gatewood Apartments
Hall Elktree Associates Limited Partnership, a Texas limited partnership
("Hall"), which is the borrower of the loans collateralized by wrap-around
mortgages on the Northgate and Gatewood apartment complexes, Albuquerque, New
Mexico, previously commenced proceedings under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court, District of New Mexico, Case No.
11-92-11964 RA (In re Hall Elktree Associates Limited Partnership). These
proceedings had stayed foreclosure proceedings relating to the properties filed
by the Registrant (Balcor Pension Investors-VI vs. Hall Elktree Associates,
Second Judicial District Court, Bernalillo County, New Mexico, Case No. CV-92-
04375). The plan of reorganization confirmed by the Bankruptcy Court in
September 1993, as previously reported, was made effective as of December 14,
1993. As a result, the foreclosure proceedings were dismissed.
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, 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 67,413.
Item 6. Selected Financial Data
Year ended December 31,
1993 1992 1991 1990 1989
Net interest income
on loans $7,522,815 $9,526,285 $11,839,992 $17,751,930 $23,387,869
Income from
operations of
real estate held
for sale 8,241,518 8,249,017 8,259,386 3,016,378 824,921
Interest on short-
term investments 692,015 615,234 1,206,265 3,260,837 4,043,328
Provision for
potential losses
on loans, real
estate and
accrued interest
receivable 7,065,000 18,500,000 16,086,000 9,000,000 12,500,000
Net income 11,817,474 730,590 3,860,085 14,044,732 14,075,407
Net income per
Limited Partner-
ship Interest 7.69 .48 2.51 9.14 9.16
Cash and cash
equivalents 48,820,877 14,279,189 18,205,599 22,094,701 53,307,386
Net investment in
loans receivable 34,470,940 62,471,935 70,010,108 101,907,116 185,601,593
Loans in substan-
tive foreclosure 3,652,250 13,649,621 32,716,961 35,234,147 4,649,794
Real estate held
for sale 139,802,469 138,512,995 135,610,614 97,021,713 30,821,352
Total assets 240,813,287 242,357,773 259,605,790 259,080,824 277,559,613
Distributions to
Limited Partners 11,060,496 15,208,182 19,355,868 54,569,722 32,421,079
Distributions per
Limited Partner-
ship Interest 8.00 11.00 14.00 39.47 23.45
Number of loans
outstanding 5 10 15 19 24
Properties owned 13 12 10 6 2
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Balcor Pension Investors - VI (the "Partnership") is a limited partnership
formed in 1984 to invest in first mortgage loans and, to a lesser extent,
wrap-around loans and junior mortgage loans. The Partnership raised
$345,640,500 through the sale of Limited Partnership Interests and utilized
these proceeds to fund a total of thirty-one loans. As of December 31, 1993,
there were five loans outstanding in the Partnership's portfolio. In addition,
the Partnership was operating eleven properties acquired through foreclosure
and held minority joint venture interests with affiliates in two additional
properties. In addition, the Northgate and Gatewood Apartments loans were
classified as real estate held for sale in 1993.
Operations
Summary of Operations
During 1993, the provision for potential losses on loans and real estate
decreased significantly. This was the primary reason for the increase in net
income during 1993 as compared to 1992. The Partnership acquired title to six
properties in 1992 and the latter half of 1991, one of which was sold in 1992.
The decrease in net interest income on loans receivable resulting from these
acquisitions, along with an increase in the provision for potential losses on
loans and real estate during 1992, were the primary reasons for the decrease in
net income in 1992 compared to 1991. Further discussion of the Partnership's
operations is summarized below.
1993 Compared to 1992
The following events resulted in a decrease in net interest income on loans
receivable, and consequently mortgage servicing fees, during 1993 as compared
to 1992: the acquisition through foreclosure of the Shoal Run Apartments during
the first quarter of 1993, the 420 North Wabash Office Building and Woodscape
Apartments during the latter half of 1992, and the Sand Pebble Village
Apartments during July 1992, in which the Partnership holds a minority joint
venture interest. This decrease was partially offset by additional income
received on the 45 West 45th Street loan during 1993 as well as additional
interest received in connection with the August 1993 prepayment of the Skyway,
Mariwood and Hickory Knoll loan.
The loan collateralized by the 45 West 45th Street Office Building located in
New York, New York, is currently on non-accrual status and interest is recorded
only as cash payments are received from the borrower. The funds advanced by
the Partnership for the loan total approximately $9,500,000 representing
approximately 3% of original funds advanced. During 1993, the Partnership
received cash payments on the loan of approximately $748,000, while under the
terms of the original loan agreement, the Partnership was entitled to receive
approximately $903,000 of interest income during this period. The loan is
classified as a loan in substantive foreclosure at December 31, 1993. 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 its 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 loan losses and is
based upon loan loss experience for similar loans and for the industry, upon
prevailing economic conditions 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 loan portfolio at
December 31, 1993.
The Partnership recognized a provision for potential losses of $7,065,000 for
its loans and real estate in 1993. In addition, an allowance of $4,065,000 was
established related to the Partnership's real estate held for sale to provide
for further declines in the fair value of certain properties in the
Partnership's portfolio, and an allowance of $2,400,000 was established to
provide for a further decline in the fair value of the 45 West 45th Street loan
which is classified in substantive foreclosure. Allowances related to the Miami
Free Zone loan in the amount of $2,106,906 were written off in connection with
the prepayment of the loan at its net carrying value.
Income from operations of real estate held for sale in 1993 represents the net
property operations of the following properties:
Occupancy
Date of Percent at
Property Acquisition* December 31, 1993
Hammond Aire Plaza Shopping Center December 1987 92%
Park Central Office Building April 1988 95%
Brookhollow/Stemmons Center Office
Complex August 1990 94%
Hawthorne Heights Apartments September 1990 97%
Flamingo Pines Shopping Center October 1990 94%
Perimeter 400 Center Office Complex December 1990 98%
Symphony Woods Office Center September 1991 86%
Sun Lake Apartments December 1991 97%
420 North Wabash Office Building October 1992 85%
Woodscape Apartments December 1992 96%
Shoal Run Apartments December 1992 99%
Northgate Apartments October 1993 95%
Gatewood Apartments October 1993 95%
Winchester Mall (sold September 1993)
* For financial statement purposes
The properties owned by the Partnership at December 31, 1993 comprise
approximately 53% of the Partnership's portfolio based on original funds
advanced. Income from operations of real estate held for sale remained
relatively unchanged during 1993 as compared to 1992. Rental income increased
during 1993 at the Park Central Office Building due to leasing activity during
the latter part of 1992 which resulted in increased average occupancy levels.
Rental income also increased during 1993 at the Sun Lake Apartments due to
increased occupancy levels and rental rates. Income was generated during 1993
from the acquisition through foreclosure of the 420 N. Wabash Office Building
and Shoal Run Apartments which were acquired through foreclosure in the latter
part of 1992. These increases were substantially offset by significant leasing
costs incurred during 1993 to lease vacant space and renew existing leases at
the Perimeter 400 Office Complex. See Liquidity and Capital Resources for
additional information regarding these properties.
The 1993 loan prepayments and the sale of Winchester Mall resulted in an
increase in cash available for investment and correspondingly, an increase in
interest income on short-term investments during 1993 as compared to 1992.
Participation income is recognized from participations in cash flow from
properties securing certain of the Partnership's loans. 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 securing the Partnership's loan and/or a share in the increase of
gross income of the property above a certain level. The Partnership received
substantial participation income in connection with the August 1993 prepayments
of the Skyway, Mariwood and Hickory Knoll and Pinellas Cascade, Land of Lakes
Pinellas Park loans.
A prepayment premium of $210,000 was received in August 1993 in connection with
the prepayment of the loan collateralized by the Pinellas Cascade, Land of
Lakes Pinellas Park mobile home parks.
The Partnership incurred higher legal fees during 1992 in connection with non-
accrual loans, foreclosures and loan defaults, resulting in a decrease in
administrative expenses during 1993 as compared to 1992.
During 1993, the Partnership incurred leasing commissions in connection with
leases signed at the Perimeter 400 Center and Brookhollow/Stemmons Center
office complexes and the Park Central and 420 N. Wabash office buildings which
resulted in an increase in amortization of deferred expenses during 1993 as
compared to 1992.
Investment in participation of joint venture with affiliate represents the
Partnership's 44.63% share of the operations of the Sand Pebble Village and
Sand Pebble Village II (formerly Sand Dune) apartment complexes. The
Partnership recognized its share of a further decline in the fair value of Sand
Pebble Village Apartments during 1993. As a result, the Partnership's
participation in loss of joint venture with affiliate increased during 1993 as
compared to 1992. The joint venture received title to Sand Pebble Village
Apartments through foreclosure in July 1992 and purchased the Sand Pebble
Village II Apartments in October 1993.
Affiliates' participation in joint ventures represents the affiliates' shares
of income or loss at the Sun Lake Apartments, Perimeter 400 Center Office
Complex, and Brookhollow/Stemmons Center Office Complex. Participation in loss
of joint ventures decreased during 1993 as compared to 1992 due to a provision
for potential losses recognized for the Perimeter 400 Center during 1992.
The Partnership recognized a gain on sale of property in 1993 in the amount of
$3,471,731 in connection with the sale of Winchester Mall in September 1993.
1992 Compared to 1991
The acquisition of six properties through foreclosure during 1992 and the
latter half of 1991, as well as decreased collections on non-accrual loans,
resulted in a decrease in net interest income on loans receivable and mortgage
servicing fees during 1992 as compared to 1991. The Partnership's three loans
on non-accrual status as of December 31, 1992, were collateralized by the 45
West 45th Street Office Building and the Northgate and Gatewood apartment
complexes. These loans were also classified in substantive foreclosure at
December 31, 1992. During 1992, the Partnership received cash payments of net
interest income totaling approximately $668,000 on these loans. Under the
terms of the original loan agreements, the Partnership was entitled to receive
approximately $1,749,000 of net interest income on the three non-accrual loans
during 1992. In addition, in June 1992, the Partnership and an affiliated
partnership negotiated a modification of the Jonathan's Landing Apartments
loan.
The Partnership recognized a provision for potential losses of $18,500,000 for
its loans and real estate during 1992. In addition, the Partnership wrote-off
its remaining investment in the Three Fountains Apartments loan in the amount
of $1,056,761 after receiving a discounted payoff in October 1992, and wrote-
off its investment in the Ansonia Mall in the amount of $7,852,747 after
applying proceeds received from the sale of the property in December 1992.
These losses had previously been reserved for in the Partnership's allowance
for potential losses.
Income from operations of real estate held for sale in 1992 represented the net
property operations of the following properties:
Occupancy
Percent at
Date of December 31,
Property Acquisition* 1992
Hammond Aire Plaza Shopping Center December 1987 94%
Park Central Office Building April 1988 97%
Brookhollow/Stemmons Center Office
Complex August 1990 85%
Hawthorne Heights Apartments September 1990 97%
Flamingo Pines Shopping Center October 1990 94%
Perimeter 400 Center Office Complex December 1990 91%
Ansonia Mall September 1991 Sold
Symphony Woods Office Center September 1991 96%
Sun Lake Apartments December 1991 99%
Winchester Mall December 1991 66%
420 North Wabash Office Building October 1992 71%
Woodscape Apartments December 1992 96%
* For financial statement purposes
The twelve properties shown above comprised approximately 54% of the
Partnership's portfolio based on the original funds advanced during 1992.
Income from property operations decreased slightly during 1992 as compared to
1991 due to decreased revenue at Park Central Office Building resulting from
the loss of a major tenant in October 1991, and a loss from operations at Sun
Lake Apartments due to improvements made at the property during the year. In
addition, operating expenses increased at Perimeter 400 Center due to
significant leasing activity in 1992. The decrease in income was substantially
offset by income from operations at Symphony Woods and Winchester Mall and
improved operations at Brookhollow/Stemmons Center resulting primarily from
increased occupancy levels.
Due to a decrease in the average cash balances available for investment in
short-term interest-bearing instruments and a decrease in interest rates earned
on these investments, interest income on short-term investments decreased
during 1992 as compared to 1991.
As a result of significant increases in legal, accounting and portfolio
management fees incurred relating to non-accrual loans, loan defaults and
foreclosure actions, administrative expenses increased during 1992 as compared
to 1991.
During 1992, participation in loss of joint venture with affiliate represented
the Partnership's 44.63% share of the loss of the Sand Pebble Village
Apartments. A joint venture consisting of the Partnership and an affiliate
received title to the property through a non-judicial foreclosure in July 1992.
Affiliates' participation in joint ventures represents the affiliates' share of
income or loss at the Sun Lake Apartments, Perimeter 400 Center and
Brookhollow/Stemmons Center office complexes. Affiliates' participation in
loss of joint ventures increased significantly in 1992 as compared to 1991
primarily due to an increased provision for potential losses related to the
Perimeter 400 Center Office Complex in 1992. The affiliate's share of this
provision increased from $1,250,000 in 1991 to $3,819,000 in 1992.
Liquidity and Capital Resources
The cash or near cash position of the Partnership increased as of December 31,
1993 when compared to December 31, 1992. The Partnership's operating
activities include cash flow from the operations of the Partnership's real
estate held for sale, additional income from the loan prepayments and interest
income from the Partnership's remaining loans. This cash, along with interest
earned on short-term investments, was used to pay Partnership administrative
expenses and mortgage servicing fees. The Partnership received funds from
investing activities relating primarily to three loan prepayments in the latter
half of 1993 and from the sale of Winchester Mall in September 1993 and used
funds for improvements to certain properties. The Partnership also used
approximately $1,933,000 to acquire its share of the Sand Pebble Village II
Apartments in October 1993. The cash flow provided by operating and investing
activities was used for financing activities which included regular quarterly
distributions of Cash Flow to Partners, and, additionally, the repayment of the
underlying mortgage loan on Miami Free Zone. As of December 31, 1993, the
Partnership holds approximately $30,700,000 of Mortgage Reductions from loan
prepayments and the sale of Winchester Mall. The Partnership made a special
distribution of Mortgage Reductions of approximately $11,337,000 in January
1994. The remaining Mortgage Reductions have been retained while the
Partnership analyzes future working capital requirements.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income, each after consideration of debt service. During
1993 and 1992, ten of the Partnership's eleven remaining properties acquired
prior to 1993 generated positive cash flow. Sun Lake Apartments, which has
underlying debt, generated positive cash flow during 1993 as compared to a
marginal deficit during 1992 primarily due to increased rental rates and
occupancy levels. The Woodscape Apartments, which has underlying debt and was
acquired in December 1992, generated a marginal deficit during 1993. Winchester
Mall, which was sold in September 1993, generated positive cash flow during
1993 and 1992, and Shoal Run Apartments which was acquired in February 1993,
generated positive cash flow during 1993. The Partnership assumed management of
the Northgate and Gatewood Apartments in October 1993, and these properties
generated positive cash flow during the fourth quarter of 1993.
Significant leasing costs were incurred in 1993 at the Perimeter 400 Center and
Brookhollow/Stemmons Center office complexes of approximately $2,063,000 and
$1,744,000, respectively, to lease vacant space and renew existing tenant
leases which were scheduled to expire during 1993. These non-recurring
expenditures were not included in classifying the cash flow performance of the
properties. Had these costs been included, these properties would have each
been classified as generating significant deficits during 1993. Sand Pebble
Village Apartments, a property in which the Partnership holds a minority joint
venture interest, generated positive cash flow during 1993 and 1992. Sand
Pebble Village II Apartments, a property in which the Partnership holds a
minority joint venture interest, generated positive cash flow since it was
purchased in October 1993. 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.
Because of the current 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 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
prepayments would ultimately prove detrimental to the Partnership because of
the likelihood that the properties would not 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.
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.
The Partnership and three affiliated partnerships (together, the
"Participants"), previously funded a $23,000,000 loan to 45 West 45th Street
Office Building, New York, New York (the "Property"), of which the
Partnership's share is $9,500,000 (approximately 41%). In September 1991, the
loan was placed in default. Pursuant to a cash management agreement entered
into between the Participants and the borrower, cash flow from property
operations is received by the Participants and recognized as interest income.
In May 1993, the Participants cashed a letter of credit which provided partial
collateral for the loan, of which the Partnership's share was $199,800. The
Participants intend to file foreclosure proceedings during 1994.
In August 1993, the borrower of the loan collateralized by the Pinellas
Cascade, Land of Lakes Pinellas Park mobile home parks located in Orange City,
Florida prepaid the loan in full in the amount of $6,372,000, comprised of the
original funds advanced on the loan ($6,000,000), additional interest
($144,000) participation income ($18,000) and a prepayment premium ($210,000).
In August 1993, the borrower of the loan collateralized by the Skyway, Mariwood
and Hickory Knoll mobile home parks located in Indianapolis, Indiana prepaid
the loan in full in the amount of $7,333,400, comprised of the original funds
advanced on the loan ($6,000,000), additional interest ($533,360) and
participation income ($800,040).
In December 1993, the borrower of the loan collateralized by the Miami Free
Zone Warehouse Facility located in Miami, Florida prepaid the loan at its net
carrying value in the amount of $14,513,339 consisting of the principal
outstanding ($12,732,468), unpaid interest thereon ($60,504) and the amount
representing the difference between the funds advanced by the Partnership and
the outstanding principal balance on the underlying loan ($1,830,942), reduced
by amounts held in escrow ($110,575). The underlying mortgage note payable
which had a balance of $7,851,022 was also repaid.
In February 1994, the borrower of the loan collateralized by the Breckenridge
Apartments located in Richmond, Virginia prepaid the loan in full in the amount
of $15,782,123, comprised of the original funds advanced on the loan
($13,737,000), unpaid interest thereon ($140,423), and additional interest
($1,904,700). In August 1993, the Partnership applied $263,000 which had been
held in an operating reserve account against the principal balance of the loan.
In February 1994, the borrower of the loan collateralized by the Highland Green
Apartments located in Raleigh, North Carolina prepaid the loan in full in the
amount of $9,023,389, comprised of the original funds advanced on the loan
($7,900,000), unpaid interest thereon ($28,089), and additional interest
($1,095,300).
The Partnership funded a $7,750,000 loan collateralized by a first mortgage on
Winchester Mall located in Rochester Hills, Michigan, and subsequently acquired
the property through foreclosure in February 1992. In September 1993, the
Partnership sold the property in an all-cash sale for $9,000,000. The carrying
value of the property sold was $5,500,000 and the Partnership incurred selling
expenses of $28,269. For financial statement purposes, the Partnership
recognized a gain of $3,471,731 on the sale of the property.
In March 1992, the loan collateralized by Shoal Run Apartments was placed in
default and the borrower filed for bankruptcy protection. The Partnership was
the successful bidder at a foreclosure sale and received title to the property
in February 1993.
During 1992, the Partnership commenced foreclosure proceedings against the
borrower of the wrap-around mortgage loans collateralized by the Northgate and
Gatewood apartment complexes. The borrower subsequently filed for protection
under the U.S. Bankruptcy Code which stayed the foreclosure proceedings. A
plan of reorganization was confirmed by the Bankruptcy Court in September 1993
and was made effective in December 1993. An affiliate of the General Partner
was retained in October 1993 to manage the properties. See Item 3. Legal
Proceedings for additional information.
In July 1992, a joint venture consisting of the Partnership and an affiliated
partnership foreclosed on the Sand Pebble Village Apartments. In March 1992,
the Resolution Trust Company acquired the Sand Dune Apartments (now known as
Sand Pebble Village II Apartments) through foreclosure, which is adjacent to
Sand Pebble Village Apartments. The Sand Pebble and Sand Pebble II Apartments
had been operated jointly prior to the respective foreclosures. The
Partnership and the affiliated partnership concluded that it would be in their
best interests to acquire the Sand Pebble Village II Apartments in order to
obtain efficiencies in the management of this property and Sand Pebble Village
and, consequently, to enhance the sale potential of Sand Pebble Village
Apartments. In October 1993 a joint venture consisting of the Partnership and
the affiliated partnership acquired the Sand Pebble Village II Apartments, for
a purchase price of $9,300,000. The joint venture paid $4,300,000 in cash, of
which the Partnership's share was $1,932,909. The remainder of the purchase
price was paid with the proceeds of a $5,000,000 first mortgage loan.
In February 1994, the Partnership entered into a contract for the sale of the
Hammond Aire Plaza Shopping Center to an unaffiliated party for $16,300,000,
the closing of which is expected to occur in 1994. See Item 1. Other
Information.
The loan collateralized by the Noland Fashion Square Shopping Center has been
recorded by the Partnership as an investment in acquisition loan. The
Partnership has recorded its share of the collateral property operations as
equity in loss from investment in acquisition loan. The Partnership's share of
the loss has no effect on the cash flow of the Partnership, and amounts
representing contractually required debt service are recorded as interest
income.
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.
The Partnership made four distributions totaling $8.00, $11.00 and $14.00 per
Interest in 1993, 1992 and 1991, respectively. See Statement of Partners'
Capital, for additional information. Distributions were comprised of $8.00 of
Cash Flow in 1993, $10.25 of Cash Flow and $.75 of Mortgage Reductions in 1992
and $14.00 of Cash Flow in 1991. Cash Flow distributions decreased during 1993
as compared to 1992 and during 1992 as compared to 1991 primarily due to the
reduction of Cash Flow resulting from loan defaults and the Partnership's need
to maintain adequate reserves in light of continuing working capital
requirements at the foreclosed properties.
In January 1994, the Partnership paid a distribution of $16,867,256 ($12.20 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1993. This distribution includes a regular quarterly distribution
of $2.00 per Interest from Cash Flow and special distributions of $8.20 per
Interest from Mortgage Reductions received from loan prepayments and $2.00 per
Interest from Cash Flow received in connection with the Miami Free Zone loan
prepayment. To date, Limited Partners have received cash distributions
totaling $156.92. Of this amount, $111.92 represents cash flow from operations
and $45.00 represents a return of original capital. During the quarter ended
December 31, 1993 the Partnership also paid $460,854 to the General Partner as
its distributive share of the Cash Flow distributed for the third quarter of
1993 and made a contribution to the Early Investment Incentive Fund in the
amount of $153,618.
During 1993 the General Partner used amounts placed in the Early Investment
Incentive Fund to repurchase 4,335 Interests from Limited Partners for a total
cost of $655,811.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments and property operations less
payments on the underlying loans, fees to the General Partner and
administrative expenses. The level of future distributions is dependent on
cash flow from property operations and the receipt of interest income from
mortgage loans. The General Partner, on behalf of the Partnership, has
retained what it believes is an appropriate amount of working capital to meet
current cash or liquidity requirements which may occur.
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. The Partnership's use of
equity participations for loans receivable is intended to provide a hedge
against the impact of inflation; sharing in cash flow or rental income and/or
the capital appreciation of the properties collateralizing the loans should
result in increases in the total yields on the loans as inflation rates rise.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements 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-VI, 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:
Name Title
Chairman Marvin H. Chudnoff
President and Chief
Operating Officer Thomas E. Meador
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer Allan Wood
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-VI and its officers and partners own as a group
through the Early Investment Incentive Fund and otherwise the following Limited
Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
Limited Partnership
Interests 30,546 Interests 2.2%
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
(a & b) See Note 10 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14. Exhibits and Reports on Form 8-K
(a)
(1 & 2) See Index to Financial Statements and Schedules in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
previously filed as Exhibit 3 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 dated January 14, 1985 (Registration No.
2-93840), is incorporated herein by reference.
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated January 14,
1985 (Registration No. 2-93840) 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. 0-14332) are
incorporated herein by reference.
(28) Copy of Agreement of Sale relating to the sale of Hammond Aire Plaza,
Baton Rouge, Louisiana.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VI
By: /s/ Allan Wood
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VI,
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
/s/Thomas E. Meador Advisors-VI, the General 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-VI, 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-VI:
We have audited the accompanying balance sheets of Balcor Pension Investors-VI
(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 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-VI
(An Illinois Limited Partnership) 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 15, 1994
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1993 and 1992
ASSETS
1993 1992
------------- -------------
Cash and cash equivalents $ 48,820,877 $ 14,279,189
Restricted investment 700,000 700,000
Escrow deposits - restricted 238,983 829,534
Accounts and accrued interest receivable 1,798,891 1,476,653
Prepaid expenses 131,352 82,890
Deferred expenses, net of accumulated
amortization of $516,617 in 1993
and $314,373 in 1992 1,194,206 910,056
------------- -------------
52,884,309 18,278,322
------------- -------------
Investment in loans receivable:
Loans receivable - first and wrap-around
mortgages 31,272,000 68,579,125
Investment in acquisition loan 4,507,534 4,559,332
Less:
Loans payable - underlying mortgage 7,851,022
Allowance for potential loan losses 1,308,594 2,815,500
------------- -------------
Net investment in loans receivable 34,470,940 62,471,935
Loans in substantive foreclosure (net of
allowance of $2,400,000 in 1993) 3,652,250 13,649,621
Real estate held for sale (net of allowance
of $4,065,000 in 1993) 139,802,469 138,512,995
Investment in joint ventures with affiliate 10,003,319 9,444,900
------------- -------------
187,928,978 224,079,451
------------- -------------
$ 240,813,287 $ 242,357,773
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 428,576 $ 384,307
Due to affiliates 154,415 148,455
Other liabilities, principally escrow
liabilities and accrued real estate taxes 1,090,697 2,066,939
Security deposits 666,823 612,120
Mortgage notes payable 21,257,668 21,572,650
------------- -------------
Total liabilities 23,598,179 24,784,471
------------- -------------
Affiliates' participation in joint ventures 19,636,325 19,522,553
Partners' capital (1,382,562 Limited
Partnership Interests issued and outstanding) 197,578,783 198,050,749
------------- -------------
$ 240,813,287 $ 242,357,773
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(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 $ 231,749,359 $ (3,274,891)$ 235,024,250
Cash distributions to:
Limited Partners (A) (19,355,868) (19,355,868)
General Partner (2,150,652) (2,150,652)
Net income for the year
ended December 31, 1991 3,860,085 386,008 3,474,077
-------------- ------------- -------------
Balance at December 31, 1991 214,102,924 (5,039,535) 219,142,459
Cash distributions to:
Limited Partners (A) (15,208,182) (15,208,182)
General Partner (1,574,583) (1,574,583)
Net income for the year
ended December 31, 1992 730,590 73,059 657,531
-------------- ------------- -------------
Balance at December 31, 1992 198,050,749 (6,541,059) 204,591,808
Cash distributions to:
Limited Partners (A) (11,060,496) (11,060,496)
General Partner (1,228,944) (1,228,944)
Net income for the year
ended December 31, 1993 11,817,474 1,181,747 10,635,727
-------------- ------------- -------------
Balance at December 31, 1993 $ 197,578,783 $ (6,588,256)$ 204,167,039
============== ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1993 1992 1991
-------------- ------------- -------------
First Quarter $ 2.00 $ 3.50 $ 3.50
Second Quarter 2.00 2.75 3.50
Third Quarter 2.00 2.75 3.50
Fourth Quarter 2.00 2.00 3.50
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(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,
loans in substantive
foreclosure and from
investment in acquisition
loans $ 8,458,583 $ 10,951,092 $ 13,244,944
Less interest on loans
payable - underlying
mortgages 935,768 1,424,807 1,404,952
-------------- ------------- -------------
Net interest income on
loans receivable 7,522,815 9,526,285 11,839,992
Income from operations of
real estate held
for sale 8,241,518 8,249,017 8,259,386
Interest on short-term
investments 692,015 615,234 1,206,265
Participation income 932,553 47,631 34,464
Prepayment income 210,000
-------------- ------------- -------------
Total income 17,598,901 18,438,167 21,340,107
-------------- ------------- -------------
Expenses:
Provision for potential
losses on loans, real
estate and accrued
interest receivable 7,065,000 18,500,000 16,086,000
Administrative 1,511,351 1,710,994 1,396,278
Mortgage servicing fees 178,782 260,645 353,413
Amortization of deferred
expenses 202,244 25,954 32,507
-------------- ------------- -------------
Total expenses 8,957,377 20,497,593 17,868,198
-------------- ------------- -------------
Income (loss) before joint
venture participations,
equity in loss from investment
in acquisition loans and
gain on sale of property 8,641,524 (2,059,426) 3,471,909
Participation in loss of
joint ventures - affiliate (739,919) (30,386)
Affiliates'participation in loss
of joint ventures 495,936 2,856,402 424,206
Equity in loss from investment
in acquisition loans (51,798) (36,000) (36,030)
Gain on sale of property 3,471,731
-------------- ------------- -------------
Net income $ 11,817,474 $ 730,590 $ 3,860,085
============== ============= =============
Net income allocated
to General Partner $ 1,181,747 $ 73,059 $ 386,008
============== ============= =============
Net income allocated
to Limited Partners $ 10,635,727 $ 657,531 $ 3,474,077
============== ============= =============
Net income per Limited
Partnership Interest
(1,382,562 issued and
outstanding) $ 7.69 $ 0.48 $ 2.51
============== ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(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 $ 11,817,474 $ 730,590 $ 3,860,085
Adjustments to reconcile net
income to net cash provided
by operating activities:
Gain on sale of property (3,471,731)
Participation in loss of
joint ventures - 739,919 30,386
affiliate
Equity in loss from
investment in
acquisition loans 51,798 36,000 36,030
Affiliates'participation
in loss of joint venture (495,936) (2,856,402) (424,206)
Amortization of deferred
expenses 202,244 68,800 32,507
Provision for potential
losses on loans, real
estate and accrued
interest receivable 7,065,000 18,500,000 16,086,000
Net change in:
Escrow deposits -
restricted 590,551 178,671 490,468
Accounts and accrued
interest receivable (322,238) 380,168 (698,293)
Accounts and accrued
interest payable 44,269 (237,057) 396,813
Prepaid expenses (48,462) (18,847) (64,043)
Due to affiliates 5,960 20,141 9,419
Other liabilities (976,242) (526,673) 65,682
Security deposits 54,703 87,436 124,577
-------------- ------------- -------------
Net cash provided by
operating activities 15,257,309 16,393,213 19,915,039
-------------- ------------- -------------
Investing activities:
Purchase of restricted
investment (700,000)
Distribution from joint
venture partner - affiliate 634,571 136,235
Payment of expenses on real
estate held for sale (777,651) (1,553,823)
Payment of expenses on loans in
substantive foreclosure (35,044)
Collection of principal
payments on loans receivable
and loans in substantive
foreclosure 35,290,969 284,598 1,173,825
Collection of principal payment
on investment in acquisition
loan 202,552
Improvements to properties (3,347,853) (1,473,345) (552,771)
Payment of deferred expenses (486,394) (898,040)
Proceeds from property sale 9,000,000 714,450
Costs incurred in connection
with the sale of real estate (28,269)
Purchase of joint venture
interest in property with
affiliate (1,932,909)
-------------- ------------- -------------
Net cash provided by or used
in investing activities 39,130,115 (2,546,245) (932,769)
-------------- ------------- -------------
Financing activities:
Distributions to
Limited Partners (11,060,496) (15,208,182) (19,355,868)
Distributions to
General Partner (1,228,944) (1,574,583) (2,150,652)
Distributions to joint
venture partners -
affiliates (160,988) (1,182,789) (971,899)
Capital contributions by joint
venture partners - affiliates 770,696 670,948
Repayment of underlying loan
payable (7,851,022)
Principal payments on
underlying loans and
mortgage notes payable (314,982) (478,772) (392,953)
-------------- ------------- -------------
Net cash used in
financing activities (19,845,736) (17,773,378) (22,871,372)
-------------- ------------- -------------
Net change in cash and
cash equivalents 34,541,688 (3,926,410) (3,889,102)
Cash and cash equivalents at
beginning of year 14,279,189 18,205,599 22,094,701
-------------- ------------- -------------
Cash and cash equivalents at
end of year $ 48,820,877 $ 14,279,189 $ 18,205,599
============== ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-VI
(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.
(b) Net interest income on the Partnership's wrap-around mortgage loans is
primarily comprised of the difference 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 to 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 for ninety days or more unless the loan is in the process of
collection. Once a loan has been placed on 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 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 prevailing economic conditions in the
geographic area in which the collateral is located, delinquencies with respect
to repayment terms, and the valuation of specific loans in the Partnership's
portfolio.
(d) Deferred expenses consist of mortgage brokerage fees which are amortized
over the term of the loans and leasing commissions paid to outside brokers
which are amortized over the term of the leases to which they apply.
(e) Income from operating leases with significant abatements and/or scheduled
rent increases is recognized on a straight-line basis over the respective lease
terms.
(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 its 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) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, may not
be realized in immediate settlement of the instrument. Statement 107 excludes
certain financial instruments and all non-financial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Partnership.
(j) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(k) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership's income or loss in his
tax return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(l) Investment in acquisition loan represents a first mortgage loan which,
because the loan agreement includes certain specified terms, must be accounted
for under generally accepted accounting principles as an investment in a real
estate joint venture. The investment is therefore reflected in the
accompanying financial statements using the equity method of accounting. Under
this method, the Partnership records its investment at cost (representing total
loan funding) and subsequently adjusts its investment for its share of property
income or loss.
Amounts representing contractually-required debt service are recorded in the
accompanying statements of income and expenses as interest income. Equity in
investment in acquisition loan represents the Partnership's share of the
collateral property's operations, including depreciation and interest expense.
The Partnership's share of income (loss) has no effect on cash flow of the
Partnership.
(m) Investment in joint venture - affiliate represents the Partnership's 44.63%
interest, under the equity method of accounting, in joint ventures with an
affiliated partnership. 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.
2. Partnership Agreement:
The Partnership was organized in October 1984. The Partnership Agreement
provides for Balcor Mortgage Advisors-VI to be the General Partner and for the
admission of Limited Partners through the sale of up to 1,450,000 Limited
Partnership Interests at $250 per Interest, 1,382,562 of which were sold on or
prior to October 31, 1985, the termination date of the offering.
For financial statement purposes, the Partnership's results of operations are
allocated 90% to Limited Partners and 10% to the General Partner, of which 2.5%
relates to the Early Investment Incentive Fund.
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) an additional 2.5% of such Cash Flow will be distributed to the General
Partner and shall constitute the Early Investment Incentive Fund (the "Fund").
An amount not to exceed such 2.5% share originally allocated will be returned
to the Partnership by the General Partner at the dissolution of the Partnership
to the extent necessary to enable Early Investors to receive upon dissolution
of the Partnership a return of their Original Capital plus a Cumulative Return
of 15% for Interests purchased on or before June 30, 1985, and 14% for
Interests purchased between July 1, 1985 and October 31, 1985.
Amounts placed in the Fund are used to repurchase Interests from existing
Limited Partners, at the sole discretion of the General Partner and subject to
certain limitations. During 1993, the Fund repurchased 4,335 Interests at a
total cost of $655,811. The amounts of the repurchases are as follows:
Date Number of
Repurchased Interests Cost
First Quarter 1993 840 $125,941
Second Quarter 1993 861 129,262
Third Quarter 1993 1,762 265,012
Fourth Quarter 1993 872 135,596
All repurchases of Interests have been made at 90% of the 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 and are available to repurchase
additional Interests.
3. Investment in Loans Receivable:
Loans receivable at December 31, 1993 consisted of the following:
Loans Receivable
Current Current Original Due
Mortgage Monthly Interest Funding Date Of
Property Balances(A) Payment Rate % Date Loan
Apartment Complexes:
Breckenridge
Richmond, VA (B)$13,737,000
Highland Green
Raleigh, NC (C) 7,900,000
Jonathans Landing
Kent, WA (D) 9,635,000 $71,603 8.75% 07-87 5-97
-----------
Total $31,272,000
===========
(A) All the loans are first mortgage loans.
(B) In February 1994, the borrower prepaid this loan in full in the amount of
$15,782,123, comprised of the original funds advanced on the loan
($13,737,000), unpaid interest thereon ($140,423) and additional interest
($1,904,700). In August 1993, the Partnership applied $263,000 which had been
held in an operating reserve account against the principal balance of this
loan.
(C) In February 1994, the borrower prepaid this loan in full in the amount of
$9,023,389, comprised of the original funds advanced on the loan ($7,900,000),
unpaid interest thereon ($28,089) and additional interest ($1,095,300).
(D) The Partnership and an affiliated partnership entered into a participation
agreement to fund the first mortgage loan collateralized by this property.
Interest rates will range from 8.75% to 10.25% through the maturity date of the
loan. The Partnership participates ratably in 47% of the loan amount and
related interest income.
Allowances for potential loan losses related to the Miami Free Zone loan in the
amount of $2,106,906 were written off during 1993 in connection with the
repayment of the loan at its net carrying value.
4. Investment in Acquisition Loan:
In January 1989, the Partnership and two affiliated partnerships (together the
"Participants") entered into a participation agreement to fund a $23,300,000
first mortgage loan on the Noland Fashion Square, located in Independence,
Missouri. The Partnership participates ratably in approximately 21% of the
loan amount, interest income and participation income. At December 31, 1993,
the loan had a balance of $4,507,534, and current monthly interest-only
payments of $38,979 are due through maturity in December 1999. The loan
provides for several types of additional interest which include, but are not
limited to, a percentage of the adjusted gross cash flow of the underlying
property, a percentage of the sale price over certain stated amounts and a
percentage of the increase in the appraised value at maturity over the
appraised value at funding. Additional interest amounts payable to the
Partnership upon maturity of the loan or sale of the property are generally
contingent upon certain conditions, as stated in the note and, therefore, no
interest has been accrued. The loan balance includes the Partnership's share of
the cumulative net loss of the property after the loan was funded.
5. Loan in Substantive Foreclosure:
Loan in substantive foreclosure was collateralized by the 45 West 45th Street
Office Building located in New York, New York and had a carrying value of
$3,652,250 at December 31, 1993. The Partnership and three affiliated
partnerships entered into a participation agreement to fund the first mortgage
loan on this property. The Partnership participates ratably in approximately
41% of the original loan amount and related interest income.
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1993 and 1992 consisted of the
following:
Balance Balance Current Current Due Approx.
at at Monthly Interest Date of Balloon
Property 12/31/93 12/31/92 Payments Rate % Loan Payment
Real estate held
for sale
Sun Lake Apts.
(carrying value
$24,685,000)(A) $15,700,000 $15,700,000 $101,788 7.625% 11-97 $15,700,000
Woodscape Apts.
(carrying value
$6,629,000) 3,416,256 3,497,106 35,572 10.00 4-95 3,311,000
Gatewood Apts.
(carrying value
$3,795,855)(B) 1,188,414 1,287,384 14,188 8.50 8-95 1,074,000
Northgate Apts.
(carrying value
$3,710,766)(B) 952,998 1,088,160 14,128 9.00 8-95 827,000
----------- -----------
Grand Total $21,257,668 $21,572,650
=========== ===========
(A) This mortgage loan is financed with underlying revenue bonds. Principal
and interest payments due on the mortgage loan reflect payments due to the
bondholders. The interest rate will remain constant until November 1, 1994,
the next re-marketing date of the bonds. The bonds may be redeemed, at par
plus accrued interest, on this date and on subsequent dates prior to maturity
pursuant to the terms of the bond indenture. The bonds are secured by an
irrevocable letter of credit in the amount of approximately $16,443,700 which
expires on the re-marketing date. The Partnership will need to replace the
letter of credit or find an alternate credit facility for the bonds as of such
date. Unless there is a prior redemption of all or part of the bonds, the
entire principal balance of the loan will be due on November 1, 1997.
(B) See Note 7 of Notes to Financial Statements for additional information
regarding these properties.
Future maturities of the above mortgage notes payable are approximately as
follows:
1994 $ 249,000
1995 5,309,000
1996 None
1997 15,700,000
During the years ended December 31, 1993, 1992 and 1991, the Partnership
incurred interest expense on the mortgage notes payable of $1,855,630,
$1,929,879 and $713,262, respectively, and paid interest expense of $1,855,630,
$1,654,442 and $352,661, respectively.
7. Real Estate Held for Sale:
During 1993, 1992 and 1991, the Partnership acquired the following properties
through foreclosure: the Shoal Run Apartments in 1993, the Woodscape and Sun
Lake apartment complexes, 420 North Wabash Office Building and Winchester Mall
in 1992, and the Symphony Woods Office Center, Ansonia Mall and Perimeter 400
Center Office Building in 1991. In October 1993, an affiliate of the General
Partner assumed management of the Northgate and Gatewood apartment complexes.
These investments are classified as real estate held for sale at December 31,
1993. The Partnership recorded the cost of the properties at $7,506,621,
$62,137,388, and $57,138,760 in 1993, 1992 and 1991, respectively, which was
equal to the outstanding loan balance plus any accrued interest receivable. In
addition, the Partnership increased (reduced) the bases of the properties by
$1,209,857 and $(2,499,396) in 1992 and 1991, respectively, which represented
certain other receivables, liabilities, escrows and costs recognized or
incurred in connection with the foreclosures.
8. Affiliates' Participation in Joint Ventures:
(a) The Brookhollow/Stemmons Center Office Complex is owned by a joint venture
between the Partnership and an affiliated partnership. Profits and losses are
allocated 72.5% to the Partnership and 27.5% to the affiliate.
(b) The Perimeter 400 Center Office Building is owned by the Partnership and
three affiliated partnerships. Profits and losses are allocated 50% to the
Partnership and 50% to the three affiliates.
(c) The Sun Lake Apartment Complex is owned by the Partnership and an
affiliated partnership. Profits and losses are allocated 61.95% to the
Partnership and 38.05% to the affiliate.
All assets, liabilities, income and expenses of the joint ventures are included
in the financial statements of the Partnership with the appropriate adjustment
of profit or loss for each affiliate's participation.
Net contributions (distributions) of $609,708, $(511,841), and $(971,899) were
made to joint venture partners during 1993, 1992 and 1991, respectively. In
addition, joint venture partners were allocated the appropriate percentage of
the provision for potential losses in the amount of $1,020,000, $4,194,726 and
$2,086,500 during 1993, 1992 and 1991, respectively.
9. Investment in Joint Venture with Affiliate:
The Partnership and an affiliated partnership (together, the "Participants")
acquired title to the Sand Pebble Village Apartments, located in Riverside,
California at a foreclosure sale in July 1992. The Participants acquired the
adjacent property, the Sand Dune Apartments (now known as the Sand Pebble
Village II Apartments), for a purchase price of $9,300,000 in October 1993. The
Participants paid $4,300,000 in cash, of which the Partnership's share was
$1,932,909. The remainder of the purchase price was paid with the proceeds of a
$5,000,000 first mortgage loan. The Partnership's investment in each of these
properties has been classified as investment in joint ventures with affiliate.
Profits and losses and all capital contributions and distributions are
allocated 44.63% to the Partnership and 55.37% to the affiliate.
10. 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 $186,190 $10,678 $268,928 $18,086 $361,626 $26,369
Property management fees1,053,447 84,481 971,875 86,437 455,591 49,693
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 119,308 9,444 103,592 8,191 76,045 13,975
Data processing 243,662 21,660 257,867 20,756 280,950 22,471
Investor communica-
tions 21,334 1,688 41,188 3,257 23,339 4,289
Legal 37,335 2,955 29,267 2,314 17,162 3,154
Portfolio management 126,791 21,782 100,049 7,912 34,023 6,253
Other 21,812 1,727 19,000 1,502 11,483 2,110
11. Restricted Investment:
In April 1992, the Partnership and an affiliated partnership (together, the
"Participants") established a debt service reserve account of $700,000 as
additional collateral for their obligations related to the mortgage loan on Sun
Lake Apartments, pursuant to the settlement agreement reached in December 1991.
The Partnership contributed $433,650 as its share of the account. The
remaining portion is included in the affiliate's investment in the joint
venture. The funds are invested in short-term interest bearing instruments and
interest earned on the investments is payable to the Participants. The funds
will be released to the Participants once certain terms and conditions of the
agreement are met.
12. Property Sales:
a) In September 1993, the Partnership sold the Winchester Mall located in
Rochester Hills, Michigan in an all-cash sale for $9,000,000. The carrying
value of the property sold was $5,500,000 and the Partnership incurred selling
expenses of $28,269. For financial statement purposes, the Partnership
recognized a gain of $3,471,731 on the sale of the property.
b) In December 1992, the Partnership sold Ansonia Mall, located in Ansonia,
Connecticut, for a sale price of $750,000. The basis of the property at the
date of sale was $8,567,167. The Partnership received cash proceeds of
$714,450, net of selling costs of $35,550. The Partnership recognized a loss
on the sale of the property of $7,852,747, which was written-off against the
Partnership's previously established allowance for potential losses.
13. Management Agreements:
Twelve of the Partnership's properties are currently 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 a range of 3% to 6% of gross operating receipts for
commercial properties. The 420 North Wabash Office Building is managed by an
unaffiliated party for annual fees pursuant to the management agreement.
14. Fair Values of Financial Instruments:
The following methods and assumptions were used by the Partnership in
estimating its fair value disclosures for financial instruments.
Cash and cash equivalents: the carrying amount of cash and cash equivalents
reported in the balance sheet for cash and short-term investments approximates
those assets' fair values.
Net investment in loans receivable and mortgage notes payable: the fair values
for the Partnership's net investment in loans receivable and mortgage notes
payable are estimated using discounted cash flow analyses, using discount rates
based upon rates of return currently received in the lending and real estate
markets on instruments that are comparable to the Partnership's investments and
similar debt instruments.
The carrying amount of accrued interest approximates fair value.
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1993 and December 31, 1992 are as follows:
1993
Carrying Fair
Amount Value
Cash and cash equivalents $ 48,820,877 $ 48,820,877
Restricted investment 700,000 700,000
Restricted escrow deposits 238,983 238,983
Accounts and accrued interest
receivable 1,798,891 1,798,891
Net investment in loans
receivable 34,470,940 36,044,540
Mortgage notes payable 21,257,668 19,843,109
Accounts and accrued interest
payable 428,576 428,576
1992
Carrying Fair
Amount Value
Cash and cash equivalents $ 14,279,189 $ 14,279,189
Restricted investment 700,000 700,000
Restricted escrow deposits 829,534 829,534
Accounts and accrued interest
receivable 1,476,653 1,476,653
Net investment in loans
receivable 62,471,935 63,385,002
Mortgage notes payable 21,572,650 19,887,482
Accounts and accrued interest
payable 384,307 384,307
15. 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.
16. Subsequent Event:
In January 1994, the Partnership paid a distribution of $16,867,256 ($12.20 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1993. This distribution includes a regular quarterly distribution
of $2.00 per Interest from Cash Flow and special distributions of $8.20 per
Interest from Mortgage Reductions received from loan repayments during 1993 and
$2.00 per Interest from Cash Flow received in connection with the Miami Free
Zone loan prepayment.
BALCOR PENSION INVESTORS - VI
(An Illinois Limited Partnership)
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
as of December 31, 1993
Col. A Col. B Col. C Col. D Col. E
Amount at
Which Each
Number Portfolio of
of Shares Equity Security
or Units - Market Issue and Each
Principal Value of Other Security
Name of Issuer and Amounts Cost Each Issue Issue Carried
Title of Each Issue of Bonds of Each at Balance in the
and Notes Issue Sheet Date Balance Sheet
Marketable Securities(A)
Commercial Paper:
Canadian Wheat Board
3.30% due 01/05/1994$ 2,000,000 $1,991,383 $1,991,383 $1,991,383
Chevron Oil Finance Company
3.08% due 01/05/1994 3,000,000 2,987,680 2,987,680 2,987,680
Ameritech Corporation
3.37% due 01/06/1994 4,000,000 3,996,630 3,996,630 3,996,630
Paccar Financial Corporation
3.20% due 01/07/1994 4,000,000 3,991,466 3,991,466 3,991,466
Delaware Funding Corporation
3.28% due 01/12/1994 2,800,000 2,790,561 2,790,561 2,790,561
A I CR Corporation
3.25% due 01/14/1994 1,000,000 994,854 994,854 994,854
AIG Funding Incorporated
3.20% due 01/14/1994 4,000,000 3,986,844 3,986,844 3,986,844
Hewlett-Packard Company
3.18% due 01/18/1994 4,500,000 4,486,883 4,486,883 4,486,883
Kellogg Company
3.15% due 01/18/1994 10,000,000 9,971,125 9,971,125 9,971,125
Cincinnati Bell Incorporated
3.20% due 01/20/1994 4,000,000 3,989,689 3,989,689 3,989,689
Canadian Wheat Board
3.08% due 01/21/1994 1,000,000 997,006 997,006 997,006
Cargill Financial Service
Corporation
3.17% due 01/21/1994 1,000,000 997,182 997,182 997,182
Delaware Funding Corporation
3.27% due 01/25/1994 2,862,000 2,849,262 2,849,262 2,849,262
AIG Funding Corporation
3.27% due 02/04/1994 2,000,000 1,989,282 1,989,282 1,989,282
Metropolitan Life
Funding Corporation
3.30% due 02/07/1994 1,000,000 992,483 992,483 992,483
----------- ----------- ----------- -----------
Total $47,162,000 $47,012,330 $47,012,330 $47,012,330
=========== =========== =========== ===========
(a) Marketable securities are included in cash and cash equivalents on the
balance sheet. Cash of $1,808,547 is also included in this category.
BALCOR PENSION INVESTORS - VI
(An Illinois Limited Partnership)
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the years ended December 31, 1993, 1992 and 1991
Col. A Col. B
Item Charged to Costs and Expenses
1993 1992 1991
Maintenance and Repairs $4,228,338 $1,919,318 $ 917,794
Real Estate Taxes 2,441,109 2,262,250 1,636,239