SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14332
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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.)
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
--------------- ---------------
Cash and cash equivalents $ 28,646,905 $ 31,007,746
Restricted investment 700,000 700,000
Accounts and accrued interest receivable 2,493,321 2,554,367
Prepaid expenses 556,613 106,824
Deferred expenses, net of accumulated
amortization of $859,565 in 1995 and
$713,230 in 1994 1,050,338 1,196,673
--------------- ---------------
33,447,177 35,565,610
--------------- ---------------
Investment in loans receivable:
Loan receivable - first mortgage 9,635,000
Investment in acquisition loan 4,452,691 4,467,124
Less:
Allowance for potential loan losses 274,594 1,308,594
--------------- ---------------
Net investment in loan receivable 4,178,097 12,793,530
Real estate held for sale (net of
allowance of $7,965,000 in 1995 and
1994) 128,637,940 128,278,146
Investment in joint ventures with
affiliates 22,004,642 13,352,386
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154,820,679 154,424,062
--------------- ---------------
$ 188,267,856 $ 189,989,672
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 806,007 $ 505,648
Due to affiliates 15,750 174,178
Other liabilities, principally
real estate taxes 1,476,352 905,270
Security deposits 627,989 645,604
Mortgage note payable 15,700,000 15,700,000
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Total liabilities 18,626,098 17,930,700
--------------- ---------------
Affiliates' participation in joint
ventures 19,799,005 19,172,172
Partners' capital (1,382,562 Limited
Partnership Interests issued and
outstanding) 149,842,753 152,886,800
--------------- ---------------
$ 188,267,856 $ 189,989,672
=============== ===============
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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
--------------- ---------------
Income:
Interest on loans receivable and from
investment in acquisition loan $ 555,082 $ 1,160,483
Income from operations of real estate
held for sale 6,432,428 5,730,775
Interest on short-term investments 885,054 886,119
Participation income 3,000,000
--------------- ---------------
Total income 7,872,564 10,777,377
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Expenses:
Amortization of deferred expenses 146,335 108,107
Administrative 657,943 902,797
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Total expenses 804,278 1,010,904
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Income before joint venture participations 7,068,286 9,766,473
Participation in income of joint
ventures - affiliates 459,349 647,398
Equity in loss from investment in
acquisition loan (14,433) (20,200)
Affiliates' participation in income of
joint ventures (956,124) (794,592)
--------------- ---------------
Net income $ 6,557,078 $ 9,599,079
=============== ===============
Net income allocated to General Partner $ 655,708 $ 959,908
=============== ===============
Net income allocated to Limited Partners $ 5,901,370 $ 8,639,171
=============== ===============
Net income per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ 4.27 $ 6.25
=============== ===============
Distributions to General Partner $ 614,472 $ 921,708
=============== ===============
Distributions to Limited Partners $ 8,986,653 $ 33,458,000
=============== ===============
Distributions per Limited Partnership
Interest $ 6.50 $ 24.20
=============== ===============
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 June 30, 1995 and 1994
(Unaudited)
1995 1994
--------------- ---------------
Income:
Interest on loans receivable and from
investment in acquisition loan $ 367,315 $ 506,066
Income from operations of real estate
held for sale 3,302,456 3,019,695
Interest on short-term investments 419,912 468,268
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Total income 4,089,683 3,994,029
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Expenses:
Amortization of deferred expenses 73,167 54,834
Administrative 360,195 414,269
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Total expenses 433,362 469,103
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Income before joint venture
participations 3,656,321 3,524,926
Participation in income of joint
ventures - affiliates 219,826 335,336
Equity in loss from investment in
acquisition loan (9,140) (10,097)
Affiliates' participation in income of
joint ventures (562,573) (372,738)
--------------- ---------------
Net income $ 3,304,434 $ 3,477,427
=============== ===============
Net income allocated to General Partner $ 330,444 $ 347,743
=============== ===============
Net income allocated to Limited Partners $ 2,973,990 $ 3,129,684
=============== ===============
Net income per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ 2.15 $ 2.27
=============== ===============
Distribution to General Partner $ 307,236 $ 307,236
=============== ===============
Distribution to Limited Partners $ 6,221,529 $ 16,590,744
=============== ===============
Distribution per Limited Partnership
Interest $ 4.50 $ 12.00
=============== ===============
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 six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 6,557,078 $ 9,599,079
Adjustments to reconcile net income to
net cash provided by operating
activities:
Participation in income of joint
ventures - affiliates (459,349) (647,398)
Equity in loss from investment in
acquisition loan 14,433 20,200
Affiliates' participation in income
of joint ventures 956,124 794,592
Amortization of deferred expenses 146,335 108,107
Net change in:
Escrow deposits - restricted 238,983
Accounts and accrued interest
receivable 61,046 (597,793)
Prepaid expenses (449,789) 131,352
Accounts payable 300,359 231,134
Due to affiliates (158,428) 272,944
Other liabilities 571,082 373,479
Security deposits (17,615) (5,969)
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Net cash provided by operating
activities 7,521,276 10,518,710
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Investing activities:
Distribution from joint ventures -
affiliates 546,992 450,527
Distribution to joint ventures -
affiliates (138,899)
Collection of principal payments on
loans receivable 21,637,000
Improvements to properties (359,794) (727,348)
Payment of deferred expenses (65,580)
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Net cash provided by investing
activities 48,299 21,294,599
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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 six months ended June 30, 1995 and 1994
(Unaudited)
(Continued)
1995 1994
--------------- ---------------
Financing activities:
Distributions to Limited Partners $ (8,986,653) $ (33,458,000)
Distributions to General Partner (614,472) (921,708)
Distributions to joint venture
partners - affiliates (329,291) (413,943)
Capital contributions by joint venture
partners - affiliates 138,984
Repayment of underlying loan payable (3,386,956)
Principal payments on mortgage
notes payable (106,086)
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Net cash used in financing activities (9,930,416) (38,147,709)
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Net change in cash and cash equivalents (2,360,841) (6,334,400)
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 $ 28,646,905 $ 42,486,477
=============== ===============
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 six months
and quarter ended June 30, 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 six
months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Mortgage servicing fees $ 21,816 $ 8,893 $ 2,965
Reimbursement of expenses to
the General Partner, at cost 307,604 307,604 12,785
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 Partnership and
three affiliates received title to the property through foreclosure. The
Partnership owns a 41.3% joint venture interest in the property.
4. Subsequent Event:
(a) In July 1995, the Partnership made a distribution of $9,014,304 ($6.52 per
Interest) to the holders of Limited Partnership Interests for the second
quarter of 1995. This distribution includes a regular quarterly distribution
of $2.00 per Interest from Cash Flow, a special distribution of $3.92 per
Interest from Mortgage Reductions received from previous loan prepayments and
$.60 per Interest from Cash Flow reserves.
(b) The Partnership and an affiliate previously funded a $23,500,000 loan on
the Jonathan's Landing Apartments of which the Partnership's share of the loan
was $11,045,000. In July 1995, the participants made a successful bid at a
foreclosure sale and received title to the property. The Partnership owns a
47% joint venture interest in the property. The property was transferred to
investment in joint ventures with affiliates at June 30, 1995 at its fair value
of $8,601,000, net of allowances previously recorded.
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 one
loan outstanding in its portfolio, owns eleven properties acquired through
foreclosure and holds minority joint venture interests with affiliates in four
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 six months ended June 30, 1995
as compared to the same period in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
---------------------
As a result of the prepayment of the Breckenridge and Highland Green loans and
the receipt of interest income from two of the Partnership's loans on
non-accrual status in 1994, interest income on loans receivable decreased
during the six months and quarter ended June 30, 1995 as compared to the same
periods in 1994. For non-accrual loans, income is recorded only as cash
payments are received from the borrowers.
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 six months
and quarter ended June 30, 1995 as compared to the same periods in 1994 due to
improved operations at nine of the properties, but in particular at the
Brookhollow/Stemmons Center Office Complex due to an increase in construction
cost reimbursements from tenants and at the Woodscape Apartments as the payment
of interest expense ceased due to the repayment of the property's underlying
mortgage loan in May 1994. This increase was partially offset by lower
revenues at the 420 North Wabash Office Building and the August 1994
disposition of the Partnership's interest in the Northgate and Gatewood
apartment complexes, which had generated income.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership recognized no
provisions for potential losses during the six months ended June 30, 1995 and
1994.
As a result of less cash available for investment due to special distributions
to the Limited Partners in April 1995, interest income on short-term
investments decreased for the quarter ended June 30, 1995 as compared to the
same period in 1994.
Participation income was recognized from participations in cash flow from
properties which secured certain of the Partnership's loans. The Partnership's
loans generally bore interest at contractually fixed interest rates. Some loans
also provided 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 of $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 six months and quarter ended June 30,
1995 as compared to the same periods in 1994.
As a result of lower legal fees and bank charges, administrative expenses
decreased during the six months and quarter ended June 30, 1995 as compared to
the same periods 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 six months and quarter ended June 30, 1995 as
compared to the same periods in 1994. The property had been classified as real
estate held for sale by the participants effective January 1, 1993.
Affiliates' participation in joint ventures represents the affiliates' share of
income at the Sun Lake Apartments, Perimeter 400 Office Complex and
Brookhollow/Stemmons Center Office Complex. As a result of increased
construction cost reimbursements from tenants at the Brookhollow/Stemmons
Center Office Complex and decreased common area expenditures at the Perimeter
400 Office Complex, affiliates' participation in joint ventures increased
during the six months and quarter ended June 30, 1995 as compared to the same
periods in 1995.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of June 30, 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 primarily of funds received from the joint ventures with
affiliates and funds used for improvements to certain properties. Financing
activities consisted primarily of distributions to the Limited and General
Partners. The Partnership has retained cash reserves for anticipated capital
requirements at certain Partnership properties.
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 six months ended June 30, 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. Significant leasing costs were incurred in 1995 at the 420
North Wabash Office Building to lease vacant space and renew existing tenant
leases which were scheduled to expire. Had these non-recurring expenditures
been included in classifying the cash flow performance, this property would
have generated a marginal deficit during 1995. The Brookhollow/Stemmons Office
Building incurred significant leasing costs in 1994. Had these costs been
included in classifying the cash flow performance, the property would have
generated a significant deficit during 1994. The Northgate and Gatewood
apartment complexes also generated positive cash flow during 1994. The
Partnership disposed of its investment in these properties in August 1994. The
45 West 45th Street Office Building, in which the Partnership holds a minority
joint venture interest, generated a significant cash flow deficit during the
six months ended June 30, 1995 as compared to positive cash flow during the
same period in 1994 due to lower rental rates in 1995. In addition,
significant leasing costs were incurred in 1995 at the property. These costs
were not included in classifying the cash flow performance of the property. As
of June 30, 1995, the occupancy rates of the Partnership's commercial
properties ranged from 88% to 97% and the occupancy rates of the residential
properties ranged from 89% to 98%. 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
the affiliate. The property was posted for a foreclosure sale to occur in July
1995, at which time the Partnership and the affiliate received title to the
property.
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 July 1995, the Partnership paid a distribution of $9,014,304 ($6.52 per
Interest) to the holders of Limited Partnership Interests. This distribution
includes a regular quarterly distribution of $2.00 per Interest from Cash Flow,
a special distribution of $3.92 per Interest from Mortgage Reductions received
from previous loan prepayments and $.60 per Interest from Cash Flow reserves.
The level of the regular quarterly distribution is consistent with the amount
distributed for the first quarter of 1995. Including the July 1995
distribution, Limited Partners have received cash distributions totaling
$196.94 per $250 Interest. Of this amount, $124.52 represents Cash Flow from
operations and $72.42 represents a return of Original Capital. In July 1995,
the Partnership also paid $299,555 to the General Partner as its distributive
share of the Cash Flow distributed for the second quarter of 1995 and made a
contribution to the Early Investment Incentive Fund of $99,852.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments on the acquisition loan 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 acquisition 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.
During the six months ended June 30, 1995, the General Partner on behalf of the
Partnership used amounts placed in the Early Investment Incentive Fund to
repurchase 3,603 Interests from Limited Partners at a cost of $437,713.
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, Jonathan's Landing Apartments was posted for a
foreclosure sale to occur on July 14, 1995. The owner had commenced
proceedings in the Circuit Court of Cook County, Illinois (Chandler's Bay II
Vistas, Inc. vs. Balcor Mortgage Advisors, Inc., et al, Case No. 95 CH 04392)
to enjoin the foreclosure, which suit was dismissed upon the motion of the
owner on July 12, 1995. The foreclosure sale proceeded on July 14, 1995 at
which time the Partnership and an affiliate acquired title to the property.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(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 six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VI
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VI, the General Partner
By: /s/Brian D. Parker
-----------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VI, the
General Partner
Date: August 14, 1995
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