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, 1997
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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 0-11128
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BALCOR PENSION INVESTORS-III
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(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
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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 III
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 3,512,982 $ 19,044,458
Cash and cash equivalents - Early
Investment Incentive Fund 4,462,268 1,156,294
Escrow deposits 126,507
Accounts and accrued interest receivable 57,518 98,863
Prepaid expenses 33,582
Deferred expenses, net of accumulated
amortization of $53,115 in 1996 9,373
-------------- --------------
8,032,768 20,469,077
-------------- --------------
Real estate held for sale 14,214,705
Investment in joint ventures with
affiliates 68,750 3,251,208
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68,750 17,465,913
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$ 8,101,518 $ 37,934,990
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 28,202 $ 310,198
Due to affiliates 72,565 74,164
Other liablilities, principally real
estate taxes and escrow deposits 384,433
Security deposits 83,571
Mortgage notes payable 1,622,593
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Total liabilities 100,767 2,474,959
-------------- --------------
Commitments and contingencies
Limited Partners' capital (237,476
Interests issued) 14,629,321 41,613,648
Less Interests held by Early Investment
Incentive Fund (21,249 at
September 30, 1997 and December 31, 1996) (7,024,362) (7,024,362)
-------------- --------------
BALCOR PENSION INVESTORS III
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
(Continued)
ASSETS
1997 1996
-------------- --------------
7,604,959 34,589,286
General Partner's capital 395,792 870,745
-------------- --------------
Total partners' capital 8,000,751 35,460,031
-------------- --------------
$ 8,101,518 $ 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 nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Interest on loans receivable $ 4,407,482
Less interest on loans
payable - underlying mortgages 2,137,926
--------------
Net interest income on loans receivable 2,269,556
Income from operations of
real estate held for sale $ 619,335 1,191,597
Participation in income
of joint ventures with affiliates 441,062 434,971
Interest on short-term investments 564,733 324,075
Recovery of losses on loans 2,787,817
-------------- --------------
Total income 1,625,130 7,008,016
-------------- --------------
Expenses:
Administrative 299,031 563,093
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Total expenses 299,031 563,093
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Income before gains on sales of real
estate and extraordinary item 1,326,099 6,444,923
Gains on sales of real estate 2,503,098
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Income before extraordinary item 3,829,197 6,444,923
Extraordinary item:
Debt extinguishment expenses (35,392)
-------------- --------------
Net income $ 3,793,805 $ 6,444,923
============== ==============
Income before extraordinary item
allocated to General Partner None $ 483,369
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 3,829,197 $ 5,961,554
============== ==============
BALCOR PENSION INVESTORS III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Income before extraordinary item per
average number of Limited Partnership
Interests outstanding (216,227 in 1997
and 221,088 in 1996) $ 17.71 $ 26.96
============== ==============
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 221,088 in 1996) $ (0.16) None
============== ==============
Net income allocated to General Partner None $ 483,369
============== ==============
Net income allocated to Limited Partners $ 3,793,805 $ 5,961,554
============== ==============
Net income per average number of Limited
Partnership Interests outstanding
(216,227 in 1997 and 221,088 in 1996) $ 17.55 $ 26.96
============== ==============
Distributions to General Partner $ 554,112 $ 286,951
============== ==============
Settlement Distribution to Limited Partners $ 30,670 None
============== ==============
Distributions to Limited Partners $ 30,747,462 $ 9,142,775
============== ==============
Distributions per Limited Partnership
Interest outstanding $ 142.20 $ 41.34
============== ==============
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 September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Interest on loans receivable $ 1,624,168
Less interest on loans
payable - underlying mortgages 533,107
--------------
Net interest income on loans receivable 1,091,061
(Loss) income from operations of
real estate held for sale $ (8,276) 404,270
Participation in income
of joint ventures with affiliates 170,063
Interest on short-term investments 154,302 142,896
Recovery of losses on loans 2,787,817
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Total income 146,026 4,596,107
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Expenses:
Administrative 74,710 163,042
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Total expenses 74,710 163,042
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Net income $ 71,316 $ 4,433,065
============== ==============
Net income allocated to General Partner None $ 332,480
============== ==============
Net income allocated to Limited Partners $ 71,316 $ 4,100,585
============== ==============
Net income per average number of Limited
Partnership Interests outstanding
(216,227 in 1997 and 220,508 in 1996) $ 0.33 $ 18.60
============== ==============
Distribution to General Partner $ 257,266 $ 128,633
============== ==============
Distribution to Limited Partners $ 16,865,696 $ 2,288,695
============== ==============
Distribution per Limited Partnership
Interest outstanding $ 78.00 $ 10.38
============== ==============
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 nine months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Operating activities:
Net income $ 3,793,805 $ 6,444,923
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gains on sales of real estate (2,503,098)
Debt extinguishment expense 3,329
Participation in income of
joint ventures with affiliates (441,062) (434,971)
Recovery of losses on loans (2,787,817)
Amortization of deferred expenses 6,044 9,373
Net change in:
Escrow deposits 126,507 34,904
Escrow deposits - restricted (250,000)
Accounts and accrued
interest receivable 41,345 56,228
Prepaid expenses 33,582 (25,504)
Accounts payable (281,996) 55,619
Due to affiliates (1,599) 27,994
Other liabilities (384,433) (219,778)
Security deposits (83,571) (1,464)
-------------- -------------
Net cash provided by operating activities 308,853 2,909,507
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Investing activities:
Distributions from joint
venture partners - affiliates 3,691,111 278,828
Capital contribution to joint venture
partners - affiliate (67,591)
Collection of principal payments
on loans receivable 4,362,969
Proceeds from sales of real estate 17,200,000
Proceeds from sale of note receivable 8,344,608
Costs incurred in connection
with sales of real estate (482,197)
Costs incurred in connection with
sale of note receivable (296,500)
-------------- --------------
Net cash provided by investing activities 20,341,323 12,689,905
-------------- --------------
Financing activities:
Distributions to Limited Partners (30,778,132) (9,142,775)
Distributions to General Partner (554,112) (286,951)
BALCOR PENSION INVESTORS III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
-------------- --------------
Contribution by General Partner 79,159
(Increase) decrease in cash and cash
and cash equivalents - Early
Investment Incentive Fund (3,305,974) 44,957
Repurchase of Limited Partnership
Interests (846,051)
Principal payments on underlying
loans payable (577,686)
Principal payments on mortgage
notes payable (19,461) (32,393)
Repayment of mortgage notes payable (1,603,132)
-------------- --------------
Net cash used in financing activities (36,181,652) (10,840,899)
-------------- --------------
Net change in cash and cash equivalents (15,531,476) 4,758,513
Cash and cash equivalents at beginning
of period 19,044,458 11,344,948
-------------- --------------
Cash and cash equivalents at end of period $ 3,512,982 $ 16,103,461
============== ==============
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 income
allocation between the partners has been adjusted for financial statement
purposes in 1997.
(b) 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, 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 and
costs 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 continues to
exist or arises, reserves may be held by the Partnership for a longer period of
time.
3. Interest Expense:
During the nine months ended September 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 $114,613, respectively.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1997 are:
Paid
----------------------
Nine Months Quarter Payable
------------ --------- ----------
Mortgage servicing fees $ 192 None None
Reimbursement of expenses to
the General Partner, at cost 84,623 $27,656 $72,565
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 were placed in an escrow and were not to be
disbursed to the joint venture until the earlier of the settlement of any
claims presented by the purchaser or October 1997. The funds were released in
full and the Partnership's share was $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 remaining economic interests,
the Partnership received an adjusted income allocation in 1997.
The following information has been summarized from the financial statements of
the joint venture for the nine months ended September 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 was unavailable for
distribution until September 1997, at which time the funds were released in
full. The Partnership's share of the proceeds was $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 an extraordinary item and classified 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. Similar contributions and payments were made on the seven
other partnerships included in the lawsuit in addition to those payments
described above. The Balcor Company paid an additional $635,000 to the
plaintiffs' class counsel and The Balcor Company received approximately
$946,000 from the eight partnerships as a reimbursement of its legal expenses,
of which $93,636 was the Partnership's share. 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.
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. As a
result of these sales, income from operations of real estate held for sale
decreased during the nine months and quarter ended September 30, 1997. 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 in 1997 of net interest income on loans receivable which offset the
1997 gains on sales of real estate. In addition, during the third quarter of
1996 the Partnership recognized recoveries of losses related to certain of the
Partnership's loans. The net effect of these events resulted in a decrease in
net income for the nine months and quarter ended September 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 nine months and quarters ended September 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 the nine months ended September
30, 1997 as compared to the same period in 1996. The payment of expenses in
1997 related to properties sold in 1996 resulted in a loss during the quarter
ended September 30, 1997 as compared to income during the same period in 1996.
Participation in income of joint ventures with affiliates represented 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 slightly higher
participation in income of joint ventures with affiliates during the nine
months ended September 30, 1997 as compared to the same period in 1996 and the
cessation of participation in income of joint ventures with affiliates during
the quarter ended September 30, 1997.
Provisions were charged to income when the General Partner believed 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 were 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 represented estimations based on many variables which affected 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 or 1996. During the nine
months ended September 30, 1996 the Partnership recognized recoveries of
$2,787,817 related to the Corporate Campus I Office Building and Seafirst
Financial Center loans to provide for changes in the estimates of their fair
value.
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, postage and printing 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. Lower accounting and
legal fees in 1997 also contributed to the decrease. The 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 decreased by approximately $15,531,000 as
of September 30, 1997 when compared to December 31, 1996 primarily due to the
payment of special distributions from the remaining available 1996 property and
loan sale proceeds and from the 1997 property sales proceeds, which was
partially offset by the receipt of proceeds from the April 1997 sales of the
Woods Apartments and Brookhollow/Stemmons Office Building and June 1997 sale of
the Orchards Shopping Center. The Partnership generated cash totaling
approximately $309,000 from its operating activities primarily from the revenue
generated from property operations and interest income received on short-term
investments, which was partially offset by the payment of administrative
expenses and expenses related to certain of the Partnership's loans sold during
1996. The Partnership generated cash of approximately $20,341,000 from
investing activities consisting of net proceeds received in connection with the
sales of the Woods Apartments and the Orchards Shopping Center and net
distributions from joint ventures with affiliates primarily representing the
Partnership's share of the proceeds received from the sale of the
Brookhollow/Stemmons Office Building. The Partnership used cash of
approximately $36,181,000 to fund its financing activities which consisted
primarily of the payment of distributions to the Limited Partners of
approximately $30,778,000, the repayment of mortgage notes payable of
approximately $1,603,000 and an increase in restricted cash and cash
equivalents in the Early Investment Incentive Fund of approximately $3,306,000.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
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 were placed in an escrow and were not to be disbursed to the joint
venture until the earlier of the settlement of any claims presented by the
purchaser or October 1997. The funds were released in full and the
Partnership's share was $68,750. The remainder of the available proceeds
received by the Partnership was distributed to the Limited Partners in July
1997. See Note 5 of Notes to Financial Statements for additional information.
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 terms of the sale, the joint
venture was required to retain $1,750,000 of the sale proceeds until September
1997, at which time the funds were released in full. The Partnership's share of
the proceeds was $221,900.
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. 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 and
costs 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 continues to
exist or arises, 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. Similar
contributions and payments were made on the seven other partnerships included
in the lawsuit in addition to those payments described above. The Balcor
Company paid an additional $635,000 to the plaintiffs' class counsel and The
Balcor Company received approximately $946,000 from the eight partnerships as a
reimbursement of its legal expenses, of which $93,636 was the Partnership's
share.
To date, 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. Since all of the Partnership's
properties have been sold, no additional quarterly distributions are expected.
BALCOR PENSION INVESTORS - III
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
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(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 nine months ended
September 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1997.
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
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-II, the General Partner
By: /s/ Jayne A. Kosik
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Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors-II, the General
Partner
Date: November 10, 1997
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