SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14332
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BALCOR PENSION INVESTORS-VI
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(Exact name of registrant as specified in its charter)
Illinois 36-3319330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 31,353,801 $ 31,007,746
Restricted investment 700,000 700,000
Accounts and accrued interest receivable 2,470,405 2,554,367
Prepaid expenses 109,858 106,824
Deferred expenses, net of accumulated
amortization of $786,398 in 1995 and
$713,230 in 1994 1,123,505 1,196,673
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35,757,569 35,565,610
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Investment in loans receivable:
Loan receivable - first mortgage 9,635,000 9,635,000
Investment in acquisition loan 4,461,831 4,467,124
Less:
Allowance for potential loan losses 1,308,594 1,308,594
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Net investment in loans receivable 12,788,237 12,793,530
Real estate held for sale (net of allowance
of $7,965,000 in 1995 and 1994) 129,077,928 128,963,046
Investment in joint ventures with affiliates 13,045,908 12,667,486
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154,912,073 154,424,062
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$190,669,642 $189,989,672
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 485,548 $ 505,648
Due to affiliates 231,348 174,178
Other liabilities, principally escrow
liabilities and real estate taxes 991,453 905,270
Security deposits 628,486 645,604
Mortgage note payable 15,700,000 15,700,000
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Total liabilities 18,036,835 17,930,700
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Affiliates' participation in joint ventures 19,565,723 19,172,172
Partners' capital (1,382,562 Limited
Partnership Interests issued and
outstanding) 153,067,084 152,886,800
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$190,669,642 $189,989,672
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable and from
investment in acquisition loan $ 187,767 $ 654,417
Income from operations of real estate
held for sale 3,129,972 2,711,080
Interest on short-term investments 465,142 417,851
Participation income 3,000,000
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Total income 3,782,881 6,783,348
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Expenses:
Amortization of deferred expenses 73,168 53,273
Administrative 297,748 488,528
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Total expenses 370,916 541,801
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Income before joint venture participations 3,411,965 6,241,547
Participation in income of joint ventures -
affiliates 239,523 312,062
Equity in loss from investment in
acquisition loan (5,293) (10,103)
Affiliates'participation in income of
joint ventures (393,551) (421,854)
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Net income $ 3,252,644 $ 6,121,652
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Net income allocated to General Partner $ 325,264 $ 612,165
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Net income allocated to Limited Partners $ 2,927,380 $ 5,509,487
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Net income per Limited Partnership Interest
(1,382,562 issued and outstanding) $ 2.12 $ 3.98
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Distribution to General Partner $ 307,236 $ 614,472
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Distribution to Limited Partners $ 2,765,124 $ 16,867,256
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Distribution per Limited Partnership Interest $ 2.00 $ 12.20
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 3,252,644 $ 6,121,652
Adjustments to reconcile net income to net
cash provided by operating activities:
Participation in income of joint
ventures - affiliates (239,523) (312,062)
Equity in loss from investment in
acquisition loan 5,293 10,103
Affiliates' participation in income
of joint ventures 393,551 421,854
Amortization of deferred expenses 73,168 53,273
Net change in:
Escrow deposits - restricted 238,983
Accounts and accrued interest
receivable 83,962 563,808
Prepaid expenses (3,034) 65,676
Accounts payable (20,100) (56,485)
Due to affiliates 57,170 133,558
Other liabilities 86,183 (61,126)
Security deposits (17,118) 107
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Net cash provided by operating activities 3,672,196 7,179,341
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Investing activities:
Distribution from joint venture -
affiliates 177,679
Captial contribution to joint venture -
affiliates (138,899)
Collection of principal payments
on loans receivable 21,637,000
Improvements to properties (114,882) (358,501)
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Net cash used in or provided by investing
activites (253,781) 21,456,178
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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 quarters ended March 31, 1995 and 1994
(Unaudited)
(Continued)
1995 1994
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Financing activities:
Distribution to Limited Partners $ (2,765,124) $(16,867,256)
Distribution to General Partner (307,236) (614,472)
Distributions to joint venture partners -
affiliates (30,167)
Capital contributions by joint venture
partners - affilates 123,715
Principal payments on mortgage note
payable (59,957)
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Net cash used in financing activities (3,072,360) (17,448,137)
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Net change in cash and cash equivalents 346,055 11,187,382
Cash and cash equivalents at beginning
of period 31,007,746 48,820,877
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Cash and cash equivalents at end of period $ 31,353,801 $ 60,008,259
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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 Policy:
Several reclassifications have been made to the previously reported 1994
statements to conform with the classifications used in 1995, including mortgage
servicing fees which have been reclassified and are included in administrative
expenses during 1995. These reclassifications have not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1995, and all such adjustments are of a normal and recurring
nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1995 are:
Paid Payable
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Mortgage servicing fees $ 12,923 $ 2,964
Reimbursement of expenses to
the General Partner, at cost None 228,384
3. Investment in Joint Venture with Affiliates:
The Partnership and three affiliates previously funded a $23,000,000 loan on
the 45 West 45th Street office building. In February 1995, the participants
received title to the property through foreclosure. The Partnership owns a
41.3% joint venture interest in the property.
4. Subsequent Event:
In April 1995, the Partnership made a distribution of $6,221,529 ($4.50 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1995. This distribution includes a regular quarterly distribution of $2.00
per Interest from Cash Flow, and a special distribution of $2.50 per Interest
from Mortgage Reductions.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 thirty-one loans. Currently, the Partnership has two
loans outstanding in its portfolio, owns eleven properties acquired through
foreclosure and holds minority joint venture interests with affiliates in three
other properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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In February 1994, the Partnership received significant participation income in
connection with prepayments on the Breckenridge and Highland Green loans, which
resulted in a decrease in net income during the quarter ended March 31, 1995 as
compared to the same period in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
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As a result of the prepayment of the Breckenridge and Highland Green loans in
1994, interest income on loans receivable decreased during the quarter ended
March 31, 1995 as compared to the same period in 1994. As of March 31, 1995,
the Jonathan's Landing Apartments loan was on non-accrual status. The funds
advanced by the Partnership for this non-accrual loan total approximately
$11,045,000. For non-accrual loans, income is recorded only as cash payments
are received from the borrowers. During the quarter ended March 31, 1995, the
Partnership received cash payments of interest income totaling approximately
$226,000 on this loan, as required under the terms of the loan agreement.
Income from operations of real estate held for sale represents the net property
operations generated by the eleven remaining properties the Partnership has
acquired through foreclosure. Original funds advanced by the Partnership total
approximately $145,000,000 for these eleven real estate investments. Income
from operations of real estate held for sale increased during the quarter ended
March 31, 1995 as compared to the same period in 1994 due to improved
operations at nine of the properties, but in particular at the Flamingo Pines
Shopping Center due to an increase in occupancy, and the Woodscape Apartments
as the payment of interest expense ceased due to the repayment of the
property's underlying mortgage loan in May 1994.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership recognized no
provisions for potential losses during the quarters ended March 31, 1995 and
1994.
As a result of increased cash available for investment due to the 1994 loan
prepayments, and higher interest rates earned on short-term investments,
interest income on short-term investments increased during the quarter ended
March 31, 1995 as compared to the same period in 1994.
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 participation
income totaling $3,000,000 in connection with the 1994 loan prepayments.
In November 1994, the Partnership incurred fees in connection with the re-
marketing of the Sun Lake Apartments underlying revenue bonds which are being
amortized over the life of the loan. As a result, amortization of deferred
expenses increased during the quarter ended March 31, 1995 as compared to the
same period in 1994.
As a result of lower legal fees, administrative expenses decreased during the
quarter ended March 31, 1995 as compared to the same period in 1994.
Participation in income of joint ventures with affiliates represents the
Partnership's share of the operations of the Sand Pebble Village and Sand
Pebble Village II apartment complexes and the 45 West 45th Street office
building. Lower revenues at the 45 West 45th Street office building was the
primary reason for the decrease in participation in income of joint ventures
with affiliates during the quarter ended March 31, 1995 as compared to the same
period in 1994. The property had been classified as real estate held for sale
by the participants effective January 1, 1993.
Liquidity and Capital Resources
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The cash position of the Partnership increased as of March 31, 1995 when
compared to December 31, 1994. Operating activities included cash flow from the
operations of the Partnership's real estate held for sale, and interest income
from the Partnership's remaining loans and short-term investments, which were
partially offset by the payment of administrative expenses. Investing
activities consisted of funds used for additions to the Brookhollow/Stemmons
Center office complex and capital contributions to the joint ventures with
affiliates. Financing activities consisted of distributions to the General
Partner and Limited Partners. Mortgage Reductions of approximately $18,554,000
from previous loan prepayments have been retained for working capital
requirements.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit
is considered significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. The Sun Lake Apartments is the Partnership's only property with
underlying debt. During the quarters ended March 31, 1995 and 1994, all eleven
of the Partnership's properties, and two of the three properties in which the
Partnership holds minority joint venture interests with affiliates, generated
positive cash flow. The Northgate and Gatewood apartment complexes also
generated positive cash flow during the first quarter of 1994. The Partnership
disposed of its investment in these properties in August 1994. The remaining
property in which the Partnership holds a minority joint venture interest, the
45 West 45th Street office building, generated a marginal deficit during the
quarters ended March 31, 1995 and 1994. Significant leasing costs were incurred
in 1995 at the 45 West 45th Street office building to lease vacant space and
renew existing tenant leases. These non-recurring expenditures were not
included in classifying the cash flow performance of the property. Had these
costs been included, this property would have generated a significant deficit
during the first quarter of 1995. As of March 31, 1995, the occupancy rates of
the Partnership's commercial properties ranged from 89% to 97% and the
occupancy rates of the residential properties also ranged from 89% to 97%. 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 Partnership and three affiliates, previously funded a $23,000,000 loan on
the 45 West 45th Street office building. In February 1995, the participants
received title to the property through foreclosure. The Partnership owns a
41.3% joint venture interest in the property.
In January 1995, the Partnership and an affiliate placed the Jonathan's Landing
Apartments loan in default and accelerated the loan due to the sale of the
property by the borrower without the required consent from the Partnership and
its affiliate. See Part II Item 1. Legal Proceedings for additional
information.
The Noland Fashion Square shopping center loan has been recorded by the
Partnership as an investment in acquisition loan. The Partnership has recorded
its share of the collateral property's operations as equity in loss from
investment in acquisition loan. The Partnership's share of operations has no
effect on the cash flow of the Partnership, and amounts representing
contractually required debt service are recorded as interest income.
In April 1995, the Partnership paid a distribution of $6,221,529 ($4.50 per
Interest) to the holders of Limited Partnership Interests. This distribution
includes a regular quarterly distribution of $2.00 per Interest from Cash Flow
and a special distribution of $2.50 per Interest from Mortgage Reductions
received from previous loan prepayments. The level of the regular quarterly
distribution is consistent with the amount distributed for the fourth quarter
of 1994. To date, Limited Partners have received cash distributions totaling
$190.42 per $250 Interest. Of this amount, $121.92 represents Cash Flow from
operations and $68.50 represents a return of Original Capital. In April 1995,
the Partnership also paid $230,427 to the General Partner as its distributive
share of the Cash Flow distributed for the first quarter of 1995 and made a
contribution to the Early Investment Incentive Fund of $76,809.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments on the loan receivable and
property operations less payments on the underlying loan, 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 the remaining mortgage loan. 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.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Jonathan's Landing Apartments
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As previously reported, the $23,000,000 loan collateralized by a first mortgage
on Jonathan's Landing Apartments was placed in default and accelerated in
January 1995 due to the sale of the property by the borrower without consent.
Negotiations with the new owner were not successful and the property was posted
for a foreclosure sale to occur on July 14, 1995. On May 10, 1995, the owner
commenced proceedings in the Circuit Court of Cook County, Illinois (Chandler's
Bay II Vistas, Inc. vs. Balcor Mortgage Advisors, Inc. and Balcor Management
Services, Inc., Case No. 95 CH04392) requesting a determination that the loan
is not default and that the foreclosure should not proceed. The Partnership and
the affiliate which is a participant in the loan are reviewing the complaint in
order to prepare a response.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(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 4,
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.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VI
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VI, the General Partner
By: /s/Brian Parker
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Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VI, the
General Partner
Date: May 15, 1995
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