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
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-11128
-------
BALCOR PENSION INVESTORS-III
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3164211
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
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
----- -----
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
------------- -------------
Cash and cash equivalents $ 21,691,767 $ 19,044,458
Cash and cash equivalents - Early
Investment Incentive Fund 2,671,554 1,156,294
Escrow deposits 126,507
Accounts and accrued interest receivable 517,877 98,863
Prepaid expenses 33,582
Deferred expenses, net of accumulated
amortization of $53,115 in 1996 9,373
------------- -------------
24,881,198 20,469,077
------------- -------------
Real estate held for sale 14,214,705
Investment in joint ventures with affiliates 290,650 3,251,208
------------- -------------
290,650 17,465,913
------------- -------------
$ 25,171,848 $ 37,934,990
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 30,426 $ 310,198
Due to affiliates 89,025 74,164
Other liablilities, principally real
estate taxes and escrow deposits 384,433
Security deposits 83,571
Mortgage notes payable 1,622,593
------------- -------------
Total liabilities 119,451 2,474,959
------------- -------------
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
(Continued)
Commitments and contingencies
Limited Partners' capital (237,476
Interests issued) 31,423,701 41,613,648
Less Interests held by Early Investment
Incentive Fund (21,249 at June 30, 1997
and December 31, 1996) (7,024,362) (7,024,362)
------------- -------------
24,399,339 34,589,286
General Partner's capital 653,058 870,745
------------- -------------
Total partners' capital 25,052,397 35,460,031
------------- -------------
$ 25,171,848 $ 37,934,990
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
------------- -------------
Income:
Interest on loans receivable $ 2,783,314
Less interest on loans
payable - underlying mortgages 1,604,819
-------------
Net interest income on loans receivable 1,178,495
Income from operations of
real estate held for sale $ 627,611 787,327
Participation in income
of joint ventures with affiliates 441,062 264,908
Interest on short-term investments 410,431 181,179
------------- -------------
Total income 1,479,104 2,411,909
------------- -------------
Expenses:
Administrative 224,321 400,051
------------- -------------
Total expenses 224,321 400,051
------------- -------------
Income before gain on sales of real
estate and extraordinary item 1,254,783 2,011,858
Gain on sales of real estate 2,503,098
------------- -------------
Income before extraordinary item 3,757,881 2,011,858
Extraordinary item:
Debt extinguishment expenses (35,392)
------------- -------------
Net income $ 3,722,489 $ 2,011,858
============= =============
Income before extraordinary item
allocated to General Partner None $ 150,889
============= =============
Income before extraordinary item
allocated to Limited Partners $ 3,757,881 $ 1,860,969
============= =============
Income before extraordinary item per
average number of Limited Partnership
Interests outstanding (216,227 in 1997
and 221,381 in 1996) $ 17.38 $ 8.41
============= =============
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1997 and 1996
(Unaudited)
(Continued)
Extraordinary item allocated to
General Partner None None
============= =============
Extraordinary item allocated to
Limited Partners $ (35,392) None
============= =============
Extraordinary item per average number
of Limited Partnership Interests
outstanding (216,227 in 1997
and 221,381 in 1996) $ (0.16) None
============= =============
Net income allocated to General Partner None $ 150,889
============= =============
Net income allocated to Limited Partners $ 3,722,489 $ 1,860,969
============= =============
Net income per average number of Limited
Partnership Interests outstanding
(216,227 in 1997 and 221,381 in 1996) $ 17.22 $ 8.41
============= =============
Distributions to General Partner $ 296,846 $ 158,318
============= =============
Settlement Distribution to Limited Partners $ 30,670 None
============= =============
Distributions to Limited Partners $ 13,881,766 $ 6,854,080
============= =============
Distributions per Limited Partnership
Interest outstanding $ 64.20 $ 30.96
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1997 and 1996
(Unaudited)
1997 1996
------------- -------------
Income:
Interest on loans receivable $ 1,415,883
Less interest on loans
payable - underlying mortgages 785,638
-------------
Net interest income on loans receivable 630,245
Income from operations of
real estate held for sale $ 242,349 406,593
Participation in income
of joint ventures with affiliates 448,996 128,260
Interest on short-term investments 243,197 80,529
------------- -------------
Total income 934,542 1,245,627
------------- -------------
Expenses:
Administrative 96,374 310,493
------------- -------------
Total expenses 96,374 310,493
------------- -------------
Income before gain on sales of real
estate and extraordinary item 838,168 935,134
Gain on sales of real estate 2,503,098
------------- -------------
Income before extraordinary item 3,341,266 935,134
Extraordinary item:
Debt extinguishment expenses (35,392)
------------- -------------
Net income $ 3,305,874 $ 935,134
============= =============
(Loss) income before extraordinary item
allocated to General Partner $ (31,246) $ 70,135
============= =============
Income before extraordinary item
allocated to Limited Partners $ 3,372,512 $ 864,999
============= =============
Income before extraordinary item per
average number of Limited Partnership
Interests outstanding (216,227 in 1997
and 221,377 in 1996) $ 15.60 $ 3.91
============= =============
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1997 and 1996
(Unaudited)
(Continued)
Extraordinary item allocated to
General Partner None None
============= =============
Extraordinary item allocated to
Limited Partners $ (35,392) None
============= =============
Extraordinary item per average number
of Limited Partnership Interests
outstanding (216,227 in 1997
and 221,377 in 1996) $ (0.16) None
============= =============
Net (loss) income allocated to General Partner $ (31,246) $ 70,135
============= =============
Net income allocated to Limited Partners $ 3,337,120 $ 864,999
============= =============
Net income per average number of Limited
Partnership Interests outstanding
(216,227 in 1997 and 221,377 in 1996) $ 15.44 $ 3.91
============= =============
Distribution to General Partner $ 217,687 $ 79,159
============= =============
Distribution to Limited Partners $ 4,367,784 $ 885,540
============= =============
Distribution per Limited Partnership
Interest outstanding $ 20.20 $ 4.00
============= =============
The accompanying notes are an integral part of the financial statements.
Balcor Pension Investors-III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
------------- -------------
Operating activities:
Net income $ 3,722,489 $ 2,011,858
Adjustments to reconcile net income to net
cash (used in) or provided by
operating activities:
Gain on sales of real estate (2,503,098)
Debt extinguishment expense 3,329
Participation in income of
joint ventures with affiliates (441,062) (264,908)
Amortization of deferred expenses 6,044 6,248
Net change in:
Escrow deposits 126,507 69,311
Accounts and accrued
interest receivable (419,014) 91,406
Prepaid expenses 33,582 (48,236)
Accounts payable (279,772) (6,830)
Due to affiliates 14,861 9,964
Other liabilities (384,433) (119,768)
Security deposits (83,571) 6
------------- -------------
Net cash (used in) or provided by operating
activities (204,138) 1,749,051
------------- -------------
Investing activities:
Distributions from joint
venture partners - affiliates 3,469,211 153,264
Capital contribution to joint venture
partners - affiliate (67,591)
Collection of principal payments
on loans receivable 1,507,535
Proceeds from sales of real estate 17,200,000
Costs incurred in connection
with sales of real estate (482,197)
------------- -------------
Net cash provided by investing activities 20,119,423 1,660,799
------------- -------------
Balcor Pension Investors-III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1997 and 1996
(Unaudited)
(Continued)
Financing activities:
Distributions to Limited Partners (13,912,436) (6,854,080)
Distributions to General Partner (296,846) (158,318)
Contribution by General Partner 79,159
Increase in cash and cash equivalents -
Early Investment Incentive Fund (1,515,260) (393,614)
Repurchase of Limited Partnership
Interests (177,345)
Principal payments on underlying
loans payable (435,570)
Principal payments on mortgage
notes payable (19,461) (21,346)
Repayment of mortgage notes payable (1,603,132)
------------- -------------
Net cash used in financing activities (17,267,976) (8,040,273)
------------- -------------
Net change in cash and cash equivalents 2,647,309 (4,630,423)
Cash and cash equivalents at beginning
of period 19,044,458 11,344,948
------------- -------------
Cash and cash equivalents at end of period $ 21,691,767 $ 6,714,525
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General Partner
and Limited Partners to appropriately reflect their respective remaining
economic interests as provided for in the Partnership Agreement, the General
Partner was not allocated any income or loss during the six months ended June
30, 1997 for financial statement purposes.
(b) 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, 1997 and all such adjustments are of a normal and
recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership received a repayment of the Pepper
Square Apartments loan receivable, a discounted prepayment of the Corporate
Campus I Office Building loan receivable and sold its interest in the Seafirst
Financial Center, Bannockburn Executive Plaza and Carmel on Providence
Apartments loans receivable. In addition, during December 1996, the General
Partner sold the Perimeter 400 Center Office Building, a property in which the
Partnership held a minority joint venture interest. During April 1997, the
Partnership sold the Woods Apartments and the General Partner sold the
Brookhollow/Stemmons Office Building, a property in which the Partnership held
a minority joint venture interest. During June 1997, the Partnership sold the
Orchards Shopping Center, the remaining property in its portfolio. The timing
of the termination of the Partnership and final distribution of cash will
depend upon the nature and extent of liabilities and contingencies which exist
or may arise. The Partnership has retained a portion of the cash from property
sales to satisfy obligations of the Partnership as well as establish a reserve
for contingencies. Such contingencies may include legal and other fees stemming
from litigation involving the Partnership including, but not limited to, the
lawsuit discussed in Note 9 of Notes to Financial Statements. In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
3. Interest Expense:
During the six months ended June 30, 1997 and 1996, the Partnership incurred
and paid interest expense on mortgage notes payable on properties owned by the
Partnership of $69,212 and $76,658, respectively.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1997 are:
Paid
----------------------
Six Months Quarter Payable
------------ --------- ----------
Mortgage servicing fees $ 192 None None
Reimbursement of expenses to
the General Partner, at cost 56,967 $33,990 $89,025
The General Partner made a contribution of $79,159 to the Partnership in
connection with the settlement of certain litigation as further discussed in
Note 8 of Notes to Financial Statements.
5. Investment in Joint Ventures with Affiliates:
(a) The Partnership owned a 27.5% joint venture interest in the
Brookhollow/Stemmons Office Building. During April 1997, the General Partner
sold the property in an all cash sale for $12,724,000. From the proceeds of the
sale, the joint venture paid $340,293 in selling costs. In connection with the
sale, the joint venture wrote off $903,384 of accounts receivable related to
rental abatements and scheduled rent increases, which has been recorded as a
reduction of the gain. The basis of the property was $11,074,128. For financial
statement purposes, the joint venture recognized a gain of $406,195, all of
which was allocated to the Partnership. Pursuant to the sale agreement,
$250,000 of the sale proceeds has been placed in an escrow and will not be
disbursed to the joint venture until earlier of the settlement of any claims
presented by the purchaser or October 1997. The Partnership's share is $68,750.
For financial statement purposes, in previous years joint venture partners were
allocated income and loss in accordance with the profit and loss percentages in
the joint venture agreement. In order for the capital accounts of the joint
venture partners to appropriately reflect their respective remaining economic
interests, the Partnership received an adjusted income allocation during 1997.
The following information has been summarized from the financial statements of
the joint venture for the six months ended June 30, 1997:
Total income $ 745,420
Loss before gain on sale 158,411
Gain on sale 406,195
Net income 247,784
(b) The Perimeter 400 Center Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. During December 1996, the
General Partner sold the property. Pursuant to the sale agreement, $1,750,000
of the sale proceeds was retained by the joint venture and is unavailable for
distribution until September 1997. The Partnership's share of the proceeds is
$221,900.
6. Sales of Real Estate:
(a) In April 1997, the Partnership sold the Woods Apartments in an all cash
sale for $10,000,000. From the proceeds of the sale, the Partnership paid
$230,158 in selling costs. The basis of the property was $7,523,705. For
financial statement purposes, the Partnership recognized a gain of $2,246,137
from the sale of this property.
(b) In June 1997, the Partnership sold the Orchards Shopping Center in an all
cash sale for $7,200,000. From the proceeds of the sale, the Partnership paid
$1,603,132 to the third party mortgage holder in full satisfaction of the first
mortgage loan, $252,039 in selling costs and $32,063 in prepayment penalties.
The basis of the property was $6,691,000. For financial statement purposes, the
Partnership recognized a gain of $256,961 from the sale of this property.
7. Extraordinary Item:
In June 1997, the Partnership sold the Orchards Shopping Center. In connection
with the sale, the Partnership paid $32,063 of prepayment penalties and wrote
off the remaining unamortized deferred expenses in the amount of $3,329. These
amounts were recognized as debt extinguishment expense.
8. Settlement of Litigation:
A settlement received final approval by the court in November 1996 in the class
action, Paul Williams and Beverly Kennedy et. al. v. Balcor Pension Investors,
et. al. upon the terms described in the notice to class members in September
1996. The General Partner made a contribution of $79,159 to the Partnership, of
which the plaintiffs' counsel received $7,916 pursuant to the settlement
agreement. In February 1997, the General Partner made a settlement payment of
the remaining amount of $71,243 ($.33 per Interest) to members of the class
pursuant to the settlement. Of the settlement amount, $30,670 was paid to
original investors who held their Limited Partnership Interests at the date of
the settlement and was recorded as a distribution to Limited Partners in the
Financial Statements. The remaining portion of the settlement of $40,573 was
paid to original investors who previously sold their Interests in the
Partnership. This amount was recorded as an administrative expense in the
Financial Statements. The settlement had no material financial impact on the
Partnership.
9. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations and
liquidity of the Partnership. The Partnership believes it has meritorious
defenses to contest the claims.
10. Subsequent Event:
In July 1997, the Partnership paid $18,523,132 ($78.00 per Interest)
representing the regular quarterly distribution of available Cash Flow of $4.00
per Interest, a special distribution of $9.00 per Interest from Cash Flow from
the sales of the Woods Apartments and the Orchards Shopping Center and $65.00
per Interest from Mortgage Reductions from proceeds received in connection with
these sales and the sale of the Brookhollow/Stemmons Office Building.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-III (the "Partnership") is a limited partnership
formed in 1982 to invest in wrap-around mortgage loans and, to a lesser extent,
other junior mortgage loans and first mortgage loans. The Partnership raised
$118,738,000 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-two loans. In addition, proceeds from prior loan
repayments were used to fund five additional loans. The Partnership received
repayments on two loans and sold its interest in three loans during 1996. In
addition, in April 1997 the Partnership sold the Woods Apartments and the
General Partner sold the Brookhollow/Stemmons Office Building, a property in
which the Partnership held a minority joint venture interest. The Partnership
sold the Orchards Shopping Center, its remaining property, in June 1997.
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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
During the second quarter of 1997, the Partnership sold the Woods Apartments
and the Orchards Shopping Center and recognized gains on the sales. In
addition, in April 1997 the Partnership recognized its share of the gain on the
sale of the Brookhollow/Stemmons Office Building. During 1996, the Partnership
received repayments on two loans and sold three loans, which resulted in the
cessation of net interest income on loans receivable and partially offset the
1997 gains on sales of real estate. The net effect of these events resulted in
an increase in net income for the six months and quarter ended June 30, 1997 as
compared to the same periods in 1996. Further discussion of the Partnership's
operations is summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to both the six months and quarters ended June 30, 1997 and 1996.
The repayments and sales of the Partnership's remaining five loans during 1996
caused net interest income on loans receivable to cease during 1996.
Operations of real estate held for sale represent the net operations of the
properties acquired by the Partnership through foreclosure. The Partnership
sold the Woods Apartments and Orchards Shopping Center in April and June 1997,
respectively. The timing of these sales resulted in a decrease in income from
operations of real estate held for sale during 1997 as compared to 1996.
Participation in income of joint ventures with affiliates represents the
Partnership's 27.5% and 12.68% shares of income from the Brookhollow/Stemmons
and Perimeter 400 office buildings, respectively. In April 1997, the General
Partner sold the Brookhollow/Stemmons Center Office Building and the
Partnership recognized its share of the gain on the sale. In December 1996, the
General Partner sold the Perimeter 400 Center Office Building which was
generating income prior to its sale. The net effect resulted in increased
participation in income of joint ventures with affiliates during 1997 as
compared to 1996.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a 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, assessments of property operations and
the property's estimated sales prices less closing costs. Determinations of
fair value represent estimations based on many variables which affect the value
of real estate, including economic and demographic conditions. The Partnership
did not recognize any provisions for potential losses related to its loans or
real estate held for sale during 1997 and 1996.
Due to higher average cash balances during 1997 as a result of the timing of
the distribution of the proceeds received in connection with the 1996 sale of
the Carmel on Providence loan and 1997 sales of the Woods Apartments, the
Orchards Shopping Center and the Brookhollow/Stemmons Office Building, interest
income on short-term investments increased during 1997 as compared to 1996.
Consulting and postage costs incurred in connection with a response to a tender
offer during the second quarter of 1996 resulted in a decrease in
administrative expenses during 1997 as compared to 1996. This decrease was
partially offset by a payment made during 1997 by the General Partner relating
to the settlement of certain litigation to original investors who previously
sold their Interests in the Partnership which was recognized as an
administrative expense.
During 1997, the Partnership recognized gains of $2,246,137 and $256,961 in
connection with the sales of the Woods Apartments and the Orchards Shopping
Center, respectively.
In connection with the June 1997 sale of the Orchards Shopping Center, the
Partnership paid a prepayment penalty of $32,063 and wrote off the remaining
unamortized deferred expenses of $3,329. These amounts were recognized as an
extraordinary item and classified as debt extinguishment expense.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $2,647,000 as
of June 30, 1997 when compared to December 31, 1996 primarily due to the net
proceeds received from the 1997 sales of the Woods Apartments, the Orchards
Shopping Center and the Brookhollow/Stemmons Office Building, which was
partially offset by the payment of special distributions from the remaining
available 1996 sales proceeds to Limited Partners. The Partnership used cash
totaling approximately $204,000 in its operating activities. The payment of
administrative expenses and expenses related to certain of the Partnership's
loans sold during 1996 were partially offset by the revenue generated from
property operations and interest income received on short-term investments. The
Partnership generated approximately $20,119,000 from investing activities
consisting of net proceeds received in connection with the sales of the
Partnership's remaining properties and net distributions from joint ventures
with affiliates. The Partnership used cash of approximately $17,268,000 to fund
its financing activities which consisted primarily of the payment of
distributions to the Limited Partners of approximately $13,912,000, an increase
in restricted cash and cash equivalents in the Early Investment Incentive Fund
of approximately $1,515,000 and the repayment of mortgage notes payable of
approximately $1,603,000. In addition, in July 1997 the Partnership made a
special distribution of $17,573,228 to the Limited Partners as discussed below.
In April 1997, the Partnership sold the Woods Apartments in an all cash sale
for $10,000,000. From the proceeds of the sale, the Partnership paid $230,158
in selling costs. Pursuant to the terms of the sale, $200,000 of the proceeds
were retained by the Partnership until June 1997, at which time the full amount
of the holdback was released. The available proceeds were distributed to the
Limited Partners in July 1997. See Note 6 of Notes to the Financial Statements
for additional information.
In June 1997, the Partnership sold the Orchards Shopping Center in an all cash
sale for $7,200,000. From the proceeds of the sale, the Partnership paid
$1,603,132 to the third party mortgage holder in full satisfaction of the first
mortgage loan, $252,039 in selling costs and $32,063 in prepayment penalties.
The remainder of the available proceeds were distributed to the Limited
Partners in July 1997. See Note 6 of Notes to the Financial Statements for
additional information.
The Brookhollow/Stemmons Office Building was owned by a joint venture
consisting of the Partnership and an affiliate. In April 1997, the General
Partner sold the property in an all cash sale for $12,724,000. From the
proceeds of the sale, the joint venture paid $340,293 in selling costs. The net
proceeds of the sale were $12,383,707 of which $3,405,519 was the Partnership's
share. Pursuant to the terms of the sale, $250,000 of the sales proceeds has
been placed in an escrow and will not be disbursed to the joint venture until
the earlier of the settlement of any claims presented by the purchaser or
October 1997. The Partnership's share is $68,750. The remainder of the
available proceeds received by the Partnership were distributed to the Limited
Partners in July 1997. See Note 5 of Notes to Financial Statements for
additional information.
During 1996, the Partnership received a repayment of the Pepper Square
Apartments loan receivable, a discounted prepayment of the Corporate Campus I
Office Building loan receivable and sold its interest in the Seafirst Financial
Center, Bannockburn Executive Plaza and Carmel on Providence Apartments loans
receivable. In addition, during December 1996, the General Partner sold the
Perimeter 400 Center Office Building, a property in which the Partnership held
a minority joint venture interest. During April 1997, the Partnership sold the
Woods Apartments and the General Partner sold the Brookhollow/Stemmons Office
Building, a property in which the Partnership held a minority joint venture
interest. The Partnership sold the Orchards Shopping Center, the remaining
property in its portfolio, during June 1997. The timing of the termination of
the Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. The
Partnership has retained a portion of the cash from property sales to satisfy
obligations of the Partnership as well as establish a reserve for
contingencies. Such contingencies may include legal and other fees stemming
from litigation involving the Partnership including, but not limited to, the
lawsuit discussed in Note 9 of Notes to Financial Statements. In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
In February 1997, the General Partner made a settlement payment of $71,243
($.33 per Interest) to members of the class pursuant to the settlement approved
by the court in November 1996 in the Paul Williams and Beverly Kennedy et. al.
v. Balcor Pension Investors, et. al. class action lawsuit. The General Partner
made a contribution of $79,159 to the Partnership, of which the plaintiffs'
attorney received $7,916 pursuant to the settlement agreement. Of the remaining
settlement amount, $30,670 was paid to original investors who held their
Limited Partnership Interests at the date of the settlement and was recorded as
a distribution to Limited Partners in the Financial Statements. The remaining
portion of the settlement of $40,573 was paid to original investors who
previously had sold their Interests in the Partnership. This amount was
recorded as an administrative expense in the Financial Statements.
In July 1997, the Partnership paid a distribution of $18,523,132 ($78.00 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution for the second quarter of 1997 of $4.00 of Cash
Flow per Interest, a special distribution of $9.00 per Interest from Cash Flow
from the sale of the Woods Apartments and the Orchards Shopping Center and
$65.00 per Interest from Mortgage Reductions received in connection with the
sale of these properties and the sale of the Brookhollow/Stemmons Office
Building. Including the July 1997 distribution, Limited Partners have received
cash distributions totaling $870.46 per $500 Interest. Of this amount, $503.30
represents Cash Flow from operations and $367.16 represents a return of
Original Capital. In July 1997, the Partnership also paid $257,266 to the
General Partner as its distributive share of Cash Flow distributed for the
second quarter of 1997 and made a contribution to the Early Investment
Incentive Fund in the amount of $85,755. Since all of the Partnership's
properties have been sold, no additional quarterly distributions are expected.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
BALCOR PENSION INVESTORS - III
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
- --------------------------
Orchards Shopping Center
- ------------------------
As previously reported, on April 14, 1997, the Partnership contracted to sell
the Orchards Shopping Center, Loveland, Colorado, to an unaffiliated party,
29th Street Investments, LLC, a Colorado limited liability company, for a sale
price of $7,200,000. The closing was extended and the sale closed on June 16,
1997. From the proceeds of the sale, the Partnership repaid the outstanding
principal balance of the first mortgage loan of $1,603,132, paid a prepayment
penalty of $32,063 and $252,000 as a brokerage commission to two unaffiliated
parties, one of which is an affiliate of the third party providing property
management services for the property. The purchaser paid all closing costs
relating to the sale, including title charges. The Partnership received the
remaining sale proceeds of approximately $5,313,000.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement, previously filed as Exhibit 4(a) to
Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration Statement No. 2-75938) and as previously filed as
Exhibit 4(a) to Registrant's Registration Statement on Form S-11 dated
November 2, 1982 (Registration No. 2-80123), 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 are incorporated herein by
reference.
(10)(i)(a) Purchase and Sale Agreement regarding the sale of the Registrant's
interest in the Bannockburn Executive Plaza loan, previously filed as Exhibit
(10)(i) to the Registrant's Report on Form 10-Q for the quarter ended June 30,
1996, is incorporated herein by reference.
(i)(b) First Amendment to Sale Agreement regarding the sale of the Registrant's
interest in the Bannockburn Executive Plaza loan previously reported as Exhibit
(10)(i)(b) to the Registrant's Report on Form 10-Q for the quarter ended
September 30, 1996, is hereby incorporated herein by reference.
(ii) Purchase and Sale Agreement regarding the sale of the Registrant's
interest in the Seafirst Financial Center loan, previously filed as Exhibit
(10)(ii) to the Registrant's Report on Form 10-Q for the quarter ended June 30,
1996, is incorporated herein by reference.
(iii)(a) Agreement of Sale dated March 12, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated March 12, 1997 is incorporated
herein by reference.
(iii)(b) Letter Agreement dated March 20, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (2)(c) to the
Registrant's Current Report on Form 8-K dated December 18, 1996 is incorporated
herein by reference.
(iii)(c) Letter of Agreement dated March 14, 1997 relating to the sale of the
Woods Apartments, Austin, Texas, previously filed as Exhibit (99)(i) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iii)(d) Letter Agreement dated June 30, 1997 relating to the sale of the Woods
Apartments, Austin, Texas, previously filed as Exhibit (99)(ii) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iii)(e) Letter Agreement dated April 3, 1997 relating to the sale of the Woods
Apartments, Austin, Texas, previously filed as Exhibit (99)(iii) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iv)(a) Agreement of Sale relating to the sale of the Brookhollow/Stemmons
Center Office Building, Dallas, Texas previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated March 14, 1997 is incorporated
herein by reference.
(iv)(b) Amendment No. 1 to Agreement of Sale relating to the sale of
Brookhollow/Stemmons Center Office Building, Dallas, Texas, previously filed as
Exhibit (10)(iv)(b) to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 1997, is incorporated herein by reference.
(v) Agreement of Sale relating to the sale of Orchards Shopping Center,
Loveland, Colorado, previously filed as Exhibit (2) to the Registrant's Current
Report on Form 8-K dated April 14, 1997 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six months ended June
30, 1997 is attached hereto.
(b) Reports on Form 8-K:
(i) Current Report on Form 8-K dated March 14, 1997 was filed on April 11,
1997 reporting the contract to sell the Brookhollow/Stemmons Center office
complex, Dallas, Texas and letter agreements relating to the contract to sell
The Woods Apartments, Austin, Texas.
(ii) A Current Report on Form 8-K dated April 14, 1997 was filed on April 28,
1997, reporting the contract to sell the Orchards Shopping Center, Loveland,
Colorado.
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-III
By: /s/ Thomas E. Meador
-------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-II, the General Partner
By: /s/ Jayne A. Kosik
------------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors-II, the General
Partner
Date: August 14, 1997
--------------------