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 September 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11699
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BALCOR PENSION INVESTORS-IV
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(Exact name of registrant as specified in its charter)
Illinois 36-3202727
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 7,253,595 $ 11,860,415
Cash and cash equivalents - Early Investment
Incentive Fund 162,993 157,547
Escrow deposits 932,924 771,879
Accounts and accrued interest receivable 55,757 99,115
Prepaid expenses 233,537 19,901
Deferred expenses, net of accumulated
amortization of $52,955 in 1995 and
$36,058 in 1994 129,738 146,635
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8,768,544 13,055,492
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Investment in loans receivable:
Loans receivable - first mortgages 1,691,771 3,037,096
Less:
Allowance for potential loan loss 250,000
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Net investment in loans receivable 1,691,771 2,787,096
Real estate held for sale (net of allowance
of $1,277,805) 41,323,539 41,518,106
Investment in joint venture with affiliates 4,136,780 4,109,895
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47,152,090 48,415,097
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$ 55,920,634 $ 61,470,589
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued real estate taxes
payable $ 1,123,806 $ 747,113
Due to affiliates 44,367 124,148
Other liabilities (principally security
deposits) 297,588 289,249
Mortgage notes payable 11,109,780 11,316,222
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Total liabilities 12,575,541 12,476,732
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Partners' capital (429,606 Limited
Partnership Interests issued) 51,763,670 56,875,278
Less Interests held by Early Investment
Incentive Fund (33,296 in 1995 and
28,983 in 1994) (8,418,577) (7,881,421)
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43,345,093 48,993,857
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$ 55,920,634 $ 61,470,589
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 175,664 $ 606,700
Income from operations of real estate
held for sale 1,467,738 1,599,821
Participation in income of joint
venture with affiliates 283,738 288,026
Interest on short-term investments 463,387 409,205
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Total income 2,390,527 2,903,752
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Expenses:
Provision for potential losses on
loans, real estate and accrued interest
receivable 70,270
Administrative 796,057 878,709
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Total expenses 866,327 878,709
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Income before gain on sale
of real estate 1,524,200 2,025,043
Gain on sale of real estate 1,170,546
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Net income $ 1,524,200 $ 3,195,589
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Net income allocated to General Partner $ 114,315 $ 239,669
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Net income allocated to Limited Partners $ 1,409,885 $ 2,955,920
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Net income per average number of
Limited Partnership interests outstanding
(400,251 in 1995 and 403,172 in 1994) $ 3.52 $ 7.33
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Distributions to General Partner $ 143,203 $ 143,203
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Distributions to Limited Partners $ 6,492,605 $ 5,065,230
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Distributions per Limited Partnership
Interest $ 16.24 $ 12.55
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable $ 76,333 $ 51,014
Income from operations of real estate
held for sale 344,553 367,739
Participation in income of joint
venture with affiliates 59,287 89,222
Interest on short-term investments 109,162 144,261
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Total income 589,335 652,236
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Expenses:
Provision for potential losses on
loans, real estate and accrued interest
receivable 70,270
Administrative 258,633 202,932
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Total expenses 328,903 202,932
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Net income $ 260,432 $ 449,304
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Net income allocated to General Partner $ 19,532 $ 33,698
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Net income allocated to Limited Partners $ 240,900 $ 415,606
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Net income per average number of
Limited Partnership interests outstanding
(399,531 in 1995 and 401,942 in 1994) $ 0.60 $ 1.04
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Distribution to General Partner $ 35,801 $ 53,701
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Distribution to Limited Partners $ 5,290,737 $ 602,920
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Distribution per Limited Partnership
Interest $ 13.24 $ 1.50
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,524,200 $ 3,195,589
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of real estate (1,170,546)
Participation in income of joint
venture with affiliates (283,738) (288,026)
Provision for potential losses on loans,
real estate and accrued interest
receivable 70,270
Amortization of deferred expenses 16,897 16,896
Net change in:
Escrow deposits (184,105) (102,877)
Escrow deposits - restricted 232,452
Accounts and accrued interest
receivable 43,358 427,400
Prepaid expenses (213,636)
Other assets 78,538
Accounts and accrued real estate 376,693 371,973
taxes payable
Due to affiliates (79,781) 96,296
Other liabilities 8,339 (274,929)
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Net cash provided by operating activities 1,278,497 2,582,766
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Investing activities:
Capital contribution to joint venture
with affiliates (19,473)
Distributions from joint venture with
affiliates 256,853 231,305
Collection of principal payments on loans
receivable 1,025,055 79,964
Insurance proceeds 710,155
Additions to real estate (140,588)
Proceeds from sale of real estate 3,250,000
Costs incurred in connection with sale
of real estate (244,360)
Costs incurred in connection with real
estate acquired through foreclosure (375,000) (350,174)
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Net cash provided by investing activities 1,476,475 2,947,262
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
(Continued)
1995 1994
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Financing activities:
Distributions to Limited Partners (6,492,605) (5,065,230)
Distributions to General Partner (143,203) (143,203)
Change in cash and cash equivalents -
Early Investment Incentive Fund (5,446) 65,697
Repurchase of Limited Partnership Interests (537,156) (321,327)
Principal payments on mortgage notes
payable (206,442) (187,914)
Repayment of mortgage note payable (2,838,474)
Release of capital improvement escrow 23,060 283,981
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Net cash used in financing activities (7,361,792) (8,206,470)
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Net change in cash and cash equivalents (4,606,820) (2,676,442)
Cash and cash equivalents at beginning of year 11,860,415 14,917,086
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Cash and cash equivalents at end of period $ 7,253,595 $ 12,240,644
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Mortgage servicing fees have been reclassified and are included in
administrative expenses during 1995. This reclassification has been made to
the previously reported 1994 financial statements to conform with the
classification used in 1995. This reclassification has not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine
months and quarter ended September 30, 1995 and all such adjustments are of
a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred interest expense on mortgage notes payable of $745,468 and
$787,906 and paid interest expense of $745,468 and $788,047, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
nine months and quarter ended are:
Paid
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Nine Months Quarter Payable
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Mortgage servicing fees $ 7,589 $ 2,530 $ 627
Reimbursement of expenses to
the General Partner, at cost 282,717 42,435 43,740
4. Subsequent Event:
In October 1995, the Partnership made a distribution of $2,100,773 to the
holders of Limited Partnership Interests which represents a regular
quarterly distribution of available Cash Flow of $1.00 per Interest for the
third quarter of 1995 and a special distribution of $3.89 per Interest
which represents Mortgage Reductions received from prior loan repayments
and property sales.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-IV (the "Partnership") is a limited partnership
formed in 1982 to invest in wrap-around mortgage loans and, to a lesser
extent, make other junior mortgage loans and first mortgage loans. The
Partnership raised $214,803,000 through the sale of Limited Partnership
Interests and utilized these proceeds to fund thirty-eight loans. As of
September 30, 1995 there is one loan outstanding in the Partnership's
portfolio. In addition, the Partnership is operating seven properties held
for sale and holds a minority joint venture interest in one property.
Inasmuch as the management's discussion and analysis below relates
primarily to the time period since the end of the last fiscal year,
investors are encouraged to review the financial statements and the
management's discussion and analysis contained in the annual report for
1994 for a more complete understanding of the Partnership's financial
position.
Operations
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Summary of Operations
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The Partnership recognized a gain on the sale of the Republic Park Office
Building during the first quarter of 1994, which was the primary reason for
the decrease in net income during the nine months ended September 30, 1995
as compared to the same period in 1994. The Partnership also recognized a
provision for losses related to the Colonial Coach Mobile Home Park loan
prepayment in September 1995, which was the primary reason for the decrease
in net income during the quarter ended September 30, 1995 as compared to
the same period in 1994. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
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Unless otherwise noted, discussions of fluctuations between 1995 and 1994
refer both to the nine months and quarters ended September 30, 1995 and
1994.
Amounts received from the discounted repayment of a residual note related
to the Independence Green loan prepayment and from the settlement of the
remaining balance of the Briarwood Apartments loan receivable were
recognized as interest income during 1994 and 1995, respectively. The
timing of these transactions was the primary reason for the decrease in
interest income on loans receivable during the nine months and the increase
during the quarter ended September 30, 1995 as compared to the same periods
in 1994.
The Partnership has one non-accrual loan at September 30, 1995 which is
collateralized by the Stonehaven South Apartments. The funds advanced by
the Partnership for this non-accrual loan are approximately $2,800,000. For
non-accrual loans, income is recorded only as cash payments are received
from the borrowers. During the nine months ended September 30, 1995, the
Partnership received cash payments of interest income of approximately
$84,000 on this loan. Under the terms of the original loan agreement, the
Partnership would have received approximately $281,000 of interest income.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan
or in the value of the collateral property. Determinations of fair value
are made periodically on the basis of performance under the terms of the
loan agreement and assessments of property operations. Determinations of
fair value represent estimations based on many variables which affect the
value of real estate, including economic and demographic conditions. The
Partnership recognized a provision of $70,270 related to the Colonial Coach
loan during 1995 and wrote-off allowances of $320,270 in connection with
the prepayment of the loan at a discount.
Participation in income of joint venture with affiliates represents the
Partnership's 15.37% share of the operations of the Perimeter 400 Center
Office Building. Increased leasing costs at this property during the third
quarter of 1995 was the primary reason for the decrease in income during
1995 as compared to 1994.
As a result of higher interest rates earned on short-term investments,
interest income on short-term investments increased during the nine months
ended September 30, 1995 as compared to the same period in 1994. However,
interest income decreased during the quarter ended September 30, 1995 as
compared to the same period in 1994 due to the special distribution to
Limited Partners in July 1995, which resulted in lower average cash
available for investment.
Increased third party professional fees was the primary reason
administrative expenses increased during the quarter ended September 30,
1995 as compared to the same period in 1994.
During the nine months ended September 30, 1994, the Partnership recognized
a gain of $1,170,546 on the sale of the Republic Park Office Building.
Liquidity and Capital Resources
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The cash position of the Partnership decreased as of September 30, 1995 as
compared to December 31, 1994. The Partnership generated cash flow from the
operation of its properties and also received proceeds from the prepayment
of the Colonial Coach Mobile Home Park loan. The Partnership used these
proceeds, along with cash reserves, to fund the payment of distributions to
Limited Partners and the General Partner. The Partnership also made a
special distribution to Limited Partners from Mortgage Reductions in
October 1995 as described below.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A
deficit is considered to be significant if it exceeds $250,000 annually or
20% of the property's rental and service income. The Partnership defines
cash flow generated from its properties as an amount equal to the
property's revenue receipts less property related expenditures, which
include debt service payments. The Del Lago, Pelican Pointe and Regency
Club apartment complexes do not have underlying debt. During 1995 and 1994,
six of the Partnership's seven properties generated positive cash flow.
The Glendale Fashion Center operated at a significant cash flow deficit
during 1995 and at a positive cash flow during 1994. The Partnership
acquired the Center through foreclosure in March 1994. The current
occupancy level is 6% as management has terminated certain tenants' leases
to position the property for redevelopment and future sale. The Partnership
acquired North Kent Mall through foreclosure in January 1994 and is in the
process of completing upgrading and repositioning the property in its
market for future sale. The current occupancy level of this Mall is 58%. As
of September 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 96% to 100%. The Perimeter 400 Office Building, a
property in which the Partnership holds a minority joint venture interest,
also generated positive cash flow during 1995 and 1994.
The General Partner is continuing its efforts to maintain high occupancy
levels while increasing rents where possible, and to monitor and control
operating expenses and capital improvement requirements at the properties.
The General Partner will also examine the terms of any mortgage loans
collateralized by its properties and may refinance or, in certain
instances, use Partnership reserves to repay such loans.
In September 1995, the borrower of the $1,247,350 Colonial Coach Mobile
Home Park first mortgage loan prepaid the loan at a discount due to the
diminished value of the property. The Partnership received proceeds of
$927,080 which represented a portion of the funds advanced on the loan.
The Partnership wrote-off the remaining balance of the loan.
In October 1995, the Partnership made a distribution of $2,100,773 to the
holders of Limited Partnership Interests which represents a regular
quarterly distribution of available Cash Flow of $1.00 per Interest for the
third quarter of 1995 and a special distribution of $3.89 per Interest
which represents Mortgage Reductions received from prior loan repayments
and property sales. The quarterly distribution level is consistent with the
amount distributed for the second quarter of 1995. The Partnership also
paid $35,801 to the General Partner as its share of the Cash Flow
distributed for the third quarter of 1995 and $11,934 as its contribution
to the Early Investment Incentive Fund. To date, the Partnership has
distributed $572.23 per $500 Interest, of which $321.10 represents Cash
Flow from operations and $251.13 represents a return of Original Capital.
The Partnership expects to continue making quarterly cash distributions;
however, the level of such future distributions will be dependent upon the
cash flow generated by the receipt of mortgage payments and improved
operations of the Partnership's properties held for sale, less
administrative expenses. The General Partner believes the Partnership has
retained an appropriate amount of working capital to meet current cash or
liquidity requirements which may occur.
During the nine months ended September 30, 1995 the General Partner, on
behalf of the Partnership, used amounts placed in the Early Investment
Incentive Fund to repurchase 4,313 Interests from Limited Partners at a
total cost of $537,156.
Inflation has several types of potentially conflicting impacts on real
estate investments. Short-term inflation can increase real estate operating
costs which may or may not be recovered through increased rents and/or
sales prices depending on general or local economic conditions. In the
long-term, inflation can be expected to increase operating costs and
replacement costs and may lead to increased rental revenues and real estate
values.
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) (3) Exhibits:
(4) Form of Confirmation regarding Interests in the Registrant set forth as
Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1992 (Commission File No. 0-11699) is incorporated herein by
reference.
(10) Agreement of Sale relating to the sale of Republic Park One Office
Building, Aurora, Colorado, previously filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K dated February 2, 1994 is
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months period
ended September 30, 1995 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated September 14,
1995, as amended by Form 8-K/A dated October 27, 1995, was filed reporting
a change in the Registrant's certifying public accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-IV
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-III, the General
Partner
By: /s/Brian D. Parker
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Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor
Mortgage Advisors-III, the General
Partner
Date: November 13, 1995
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