UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-13233
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BALCOR PENSION INVESTORS-V
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(Exact name of registrant as specified in its charter)
Illinois 36-3254673
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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 (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
PART I
Item 1. Business
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Balcor Pension Investors-V (the "Registrant") is a limited partnership formed
in 1983 under the laws of the State of Illinois. The Registrant raised
$219,652,500 from sales of Limited Partnership Interests. The Registrant has
retained cash reserves from the sale of its real estate investments and the
sale and repayment of its loans receivable for contingencies which exist or may
arise. The Registrant's operations currently consist of interest income earned
on short-term investments and the payment of administrative expenses.
The Registrant originally funded thirty-five loans. A portion of the Mortgage
Reductions generated by loan repayments was reinvested in five additional loans
and a second funding on an existing loan. Ten properties were acquired through
foreclosure and two loans were reclassified as investments in joint ventures
with affiliates. The Registrant has since disposed of all of these investments.
The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Registrant sold seven properties and one loan
receivable and had one loan receivable repaid. In addition, the property and
the acquisition loan, in which the Registrant held minority joint venture
interests, were sold by the joint ventures during 1996. During January 1997,
the Registrant sold the Harbor Bay office building and during May 1997, the
Meadow Run Apartments loan receivable was repaid. In addition, the
Registrant's remaining investment, the loan collateralized by the Whispering
Hills Apartments, in which the Registrant held a minority joint venture
interest, was sold during June 1997. The Registrant has retained a portion of
the cash from the sales to satisfy obligations of the Registrant, as well as
establish a reserve for contingencies. The timing of the termination of the
Registrant and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Registrant including, but not limited to, the lawsuit
discussed in "Item 3, Legal Proceedings". In the absence of any such
contingency, the reserves will be paid within twelve months of the last
investment being sold. In the event a contingency continues to exist or arises,
reserves may be held by the Registrant for a longer period of time.
In January 1997, the Registrant sold the Harbor Bay office building in an all
cash sale for $6,900,000. During May 1997, the Meadow Run Apartments $3,900,000
first mortgage loan receivable was repaid in full. In addition, in June 1997,
the loan collateralized by the Whispering Hills Apartments, in which the
Registrant held a minority joint venture interest, was sold in an all cash sale
for $17,200,000. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources".
The Registrant no longer has an ownership interest in any real estate. The
General Partner is not aware of any material potential liability relating to
environmental issues or conditions affecting real estate formerly owned by the
Registrant.
The officers and employees of Balcor Mortgage Advisors-V, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
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As of December 31, 1997, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage.
See Notes to Financial Statements for other information regarding former real
property investments.
Item 3. Legal Proceedings
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Dee vs. Walton Street Capital Acquisition II, LLC
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On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims against the Walton
and Insignia Defendants and alleges that, in connection with the tender offers,
the Walton and Insignia Defendants misused the Balcor Defendants' and
Insignia's fiduciary positions and knowledge in breach of the Walton and
Insignia Defendants' fiduciary duty and in violation of the Illinois Securities
and Consumer Fraud Acts. The plaintiffs amended their complaint on October 8,
1996, adding additional claims. The plaintiffs requested certification as a
class and derivative action, unspecified compensatory damages and rescission of
the tender offers. Each of the defendants filed motions to dismiss the
complaint for failure to state a cause of action. On January 7, 1997, the
Chancery Court denied the plaintiffs' motion for leave to amend the complaint
and dismissed the matter for failure to state a cause of action, with
prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois. Plaintiff's brief was filed
with the Appellate Court in September 1997. Defendants filed their reply briefs
in January 1998. Oral arguments before the Appellate Court were held on March
18, 1998. The Appellate Court is expected to issue its opinion in the spring of
1998, although there can be no assurances on such date.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources".
As of December 31, 1997, the number of record holders of Limited Partnership
Interests of the Registrant was 37,748.
Item 6. Selected Financial Data
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Year ended December 31,
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1997 1996 1995 1994 1993
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Total income $4,786,726 $9,139,235 $9,205,295 $8,776,074 $17,001,542
Recovery of
losses on loans,
real estate and
accrued inter-
est receivable 2,102,000 3,672,819 1,600,000 None None
Provision for
losses on loans,
real estate and
accrued inter-
est receivable None 1,499,518 1,117,110 None 6,755,000
Income before gains
on sales of
assets 3,798,337 10,373,926 12,145,083 10,835,098 10,335,746
Net income 3,798,337 20,049,845 12,145,083 10,835,098 10,335,746
Net income per
Limited Partner-
ship Interest -
Basic and Diluted 8.34 32.10 24.88 22.20 21.17
Total assets 4,073,673 82,215,052 99,679,564 117,976,309 120,700,542
Mortgage notes
payable None None None None 2,245,353
Distributions per
Limited Partner-
ship Interest (A) 182.20(B) 82.15 64.50 23.65 65.25
(A) These amounts include distributions of Original Capital of $167.20,
$54.28, $27.50, $2.65 and $23.25 per Limited Partnership Interest for the years
1997, 1996, 1995, 1994 and 1993, respectively.
(B) In addition to these amounts, a special distribution of $0.38 per Interest
was paid to class members including certain current investors in the
Partnership pursuant to the settlement of a class action lawsuit.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Operations
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Summary of Operations
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Balcor Pension Investors-V (the "Partnership") recognized gains related to four
of the seven properties sold in 1996. This was the primary reason net income
decreased in 1997 as compared to 1996 and increased during 1996 as compared to
1995. The Partnership also recognized provisions for losses on loans, real
estate and accrued interest receivable during 1996 and 1995 and recoveries of
losses on loans, real estate and accrued interest receivable during 1997, 1996
and 1995. The Partnership's properties and loans generated income prior to sale
or repayment which contributed to the decrease in net income during 1997.
Further discussion of the Partnership's operations is summarized below.
1997 Compared to 1996
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Net interest income on loans receivable decreased in 1997 as compared to 1996
due to the repayments of the Meadow Run Apartments loan receivable in May 1997
and the Seven Trails Apartments wrap-around loan receivable in April 1996, and
the sales of the Noland Fashion Square acquisition loan and The Glen Apartments
loan receivable in August and December 1996, respectively.
The Partnership had higher average cash balances in 1996 as compared to 1997 as
a result of the proceeds received in connection with the 1996 property sales,
loan repayment and loan sales which were invested prior to being distributed to
Limited Partners in 1997. This resulted in a decrease in interest income on
short-term investments during 1997 as compared to 1996.
The Partnership's loans generally bore interest at contractually-fixed interest
rates. Some loans also provided for additional interest in the form of
participations, which usually consisted of either a share in the capital
appreciation of the property collateralizing the Partnership's loan and/or a
share in the increase of the gross income of the property above a certain
level. Participation income totaling $40,146 was recognized during 1996 in
connection with The Glen Apartments and Meadow Run Apartments loan receivables.
The Whispering Hills Apartments loan was owned by a joint venture consisting of
the Partnership and an affiliate. The loan collateralized by Whispering Hills
Apartments was accounted for as real estate held for sale. The 45th West 45th
Street Office Building was owned by a joint venture consisting of the
Partnership and affiliates. The joint venture that owned the Whispering Hills
Apartments loan sold the loan in June 1997 and recognized a gain of $1,793,261.
The Partnership's share was $1,130,640 which includes a recovery for losses of
$631,500. The joint venture that owned the 45th West 45th Street Office
Building sold the property in November 1996 and recognized a gain of $2,934,185
of which $637,892 was the Partnership's share. Primarily as a result of the
higher gain on sale recognized in 1997 in connection with the Whispering Hills
Apartments sale, the Partnership recognized higher participation in income of
joint ventures with affiliates during 1997 as compared to 1996.
Provisions on loans, real estate and accrued interest receivable were charged
to income when the General Partner believed an impairment had 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 price
less closing costs. Determinations of fair value represented estimations based
on many variables which affect the value of real estate, including economic and
demographic conditions. See Note 3(d) of Notes to Financial Statements for
further information regarding the Partnership's accounting policies related to
the determination of the fair value of its loans and real estate held for sale.
The Partnership recognized a provision of $511,415 related to the Noland
Fashion Square acquisition loan and a provision of $988,103 related to its real
estate held for sale to provide for a change in the estimate of the fair value
of certain properties during 1996. The Partnership also recognized a recovery
of $2,102,000 related to the Meadow Run Apartments in 1997. The Partnership
also recognized recoveries in 1996 of $2,478,000 and $341,382 related to the
Seven Trails Apartments loan and the Glen Apartments loan, respectively, and
$853,437 related to its real estate held for sale. In addition, an allowance of
$2,711,056 related to the Harbor Bay office building was written off in
connection with the sale of the property during 1997.
The Partnership recognized other income primarily from insurance proceeds of
$342,000 received during 1997 in connection with fire damage incurred at the
Huntington Meadows Apartments during February 1996. Additionally, the
Partnership recognized other income of $172,053 primarily relating to prior
years' real estate tax refunds received in 1997 for the Harbor Bay office
building, which was sold in 1997.
Income or loss from operations of real estate held for sale represented net
property operations generated by the properties the Partnership acquired
through foreclosure. Due to the sales of seven properties in 1996 and the sale
of the Harbor Bay office building in January 1997, a loss was generated in 1997
as compared to income during 1996. The loss in 1997 resulted primarily from the
payment of expenses related to properties sold during 1996 and expenses related
to the Harbor Bay office building.
In connection with the sale of the Harbor Bay office building in January 1997,
the Partnership wrote off the remaining unamortized leasing commissions related
to the property, which resulted in an increase in amortization expense during
1997 as compared to 1996.
The Partnership incurred higher consulting, legal, postage and printing costs
in connection with a response to a tender offer in 1996. In addition, portfolio
management fees decreased in 1997 due to the 1996 property sales. As a result,
administrative expenses decreased during 1997 as compared to 1996.
The Partnership recognized equity in loss from investment in acquisition loan
during 1996 in connection with the Noland Fashion Square acquisition loan,
which was sold in August 1996.
The Partnership recognized gains on sales of real estate of $9,675,919 in
connection with the sales of the Huntington Meadows, The Glades on Ulmerton and
the Villa Medici apartment complexes and the Union Tower office building in
1996.
1996 Compared to 1995
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Net interest income on loans receivable decreased in 1996 as compared to 1995
due primarily to the 1995 repayments of the Club Wildwood, Four Seasons and
Point West mobile home parks and the Fairview Plaza I and II loans.
Additionally the Seven Trails loan receivable was repaid in 1996.
Income from operations of real estate held for sale represents net property
operations generated by the properties the Partnership has acquired through
foreclosure. At December 31, 1996, the Partnership was operating one property.
Original funds advanced by the Partnership were approximately $14,000,000 for
this property. Income from operations of real estate held for sale decreased in
1996 as compared to 1995 due to lower occupancy at the Harbor Bay Office
Building and increased tenant related expenditures at the Union Tower Office
Building.
The Partnership had higher average cash balances in 1996 as a result of the
proceeds received in connection with the 1996 property sales, loan repayment
and loan sales which were invested prior to being distributed to Limited
Partners. This resulted in an increase in interest income on short-term
investments during 1996 as compared to 1995.
Participation income was recognized during 1995 in connection with the
prepayment of the Club Wildwood, Four Seasons and Point West mobile home parks
loans. Additionally, participation income was recognized on the Glen and Meadow
Run Apartments loans during 1995.
Prepayment premiums totaling $315,000 were received in 1995 in connection with
the prepayments on the Club Wildwood, Four Seasons and Point West mobile home
park loans.
Primarily as a result of the recognition of a gain in connection with the sale
of the 45 West 45th Street Office Building in 1996 and a provision for losses
related to a change in the estimate of the fair value of the 45 West 45 Street
Office Building in 1995, the Partnership recognized participation in income of
joint ventures with affiliates during 1996 as compared to participation in loss
during 1995.
The Partnership recognized a recovery of $1,600,000 and a provision of $817,110
in 1995 related to its real estate held for sale and an additional provision of
$300,000 related to the Meadow Run loan. During 1995, allowances of $397,881
related to the Fairview I and II loan receivable prepayment and $317,110
related to the Comerica Office Building sale were written off.
As a result of the sale of the Comerica Office Building in 1995 and the
write-off of the unamortized deferred expenses, amortization expense decreased
during 1996 as compared to 1995.
The Partnership incurred higher legal, consulting, postage and printing costs
in connection with a response to a tender offer during 1996. As a result,
administrative expenses increased during 1996 as compared to 1995.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $63,622,000 as
of December 31, 1997 when compared to December 31, 1996 primarily due to a
distribution made to Limited Partners in January 1997 from proceeds received
from the 1996 property sales. Cash flow of approximately $2,228,000 was
provided by the Partnership's operating activities consisting primarily of
interest income from the Partnership's loans receivable and short-term
investments, real estate tax refunds and insurance proceeds, which were
partially offset by the payment of expenses on sold properties and
administrative expenses. The Partnership's investing activities generated cash
of approximately $14,840,000, primarily from the sale of the Harbor Bay office
building, the repayment of the Meadow Run Apartments loan receivable and the
receipt of distributions from joint ventures - affiliates primarily in
connection with the sale of the Whispering Hills Apartments loan. Cash of
approximately $80,690,000 was used in financing activities consisting primarily
of distributions to Partners. In January 1998, the Partnership made a
distribution to Limited Partners of $1,243,233 as discussed below.
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 sold seven properties and one loan
receivable and had one loan receivable repaid. In addition, the property and
the acquisition loan, in which the Partnership held minority joint venture
interests, were sold by the joint ventures during 1996. During January 1997,
the Partnership sold the Harbor Bay office building and during May 1997, the
Meadow Run Apartments loan receivable was repaid. In addition, the
Partnership's remaining investment, the loan collateralized by the Whispering
Hills Apartments, in which the Partnership held a minority joint venture
interest, was sold during June 1997. The Partnership has retained a portion of
the cash from the sales to satisfy obligations of the Partnership, as well as
establish a reserve for contingencies. 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. 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 "Item 3, Legal Proceedings". In the absence of any contingencies,
the reserves will be paid within twelve months of the last investment 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 January 1997, the Partnership sold the Harbor Bay office building in an all
cash sale for $6,900,000. From the proceeds of the sale the Partnership paid
$293,276 in selling costs. The net proceeds were distributed to the Limited
Partners in April 1997. See Note 12 of Notes to Financial Statements for
additional information.
The Meadow Run Apartments first mortgage loan receivable was repaid in full in
May 1997. The loan matured in July 1996 and was extended until December 1996.
The borrower continued to make monthly payments on the loan until it was
repaid. The Partnership received proceeds of $6,015,968 consisting of funds
advanced of $3,900,000 and additional interest income of $2,115,968. The
proceeds were distributed to the Limited Partners in July 1997. See Note 5 of
Notes to Financial Statements for additional information.
The loan collateralized by the Whispering Hills Apartments, which was accounted
for as an investment in joint venture, was owned by a joint venture consisting
of the Partnership and an affiliate. In June 1997, the joint venture sold the
loan in an all cash sale for $17,200,000. From the proceeds of the sale, the
joint venture paid $750,000 to the borrower in accordance with an amendment to
the modified loan agreement and $393,305 in selling costs. The net proceeds of
the sale were $16,056,695, of which $4,014,174 was the Partnership's share
which was received in July 1997. The proceeds were distributed to the Limited
Partners in October 1997. See Note 10 of Notes to Financial Statements for
additional information.
Pursuant to the sale agreement for the Huntington Meadows Apartments, $200,000
was retained by the Partnership and was unavailable for distribution until
February 1997, at which time the funds were released in full. Also, pursuant to
the sale agreement for the 45 West 45th Street Office Building, in which the
Partnership held a minority joint venture interest, $500,000 was retained by
the joint venture and was unavailable for distribution until April 1997, at
which time the funds were released in full. The Partnership's share of the
funds was $108,701.
In February 1997, the General Partner made a settlement payment of $164,739
($0.38 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-V, et. al. class action lawsuit. The
General Partner made a contribution of $183,043 to the Partnership, of which
the plaintiff's counsel received $18,304 pursuant to the settlement agreement.
Of the remaining settlement amount, $99,534 was paid to the 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 $65,205 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 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 $173,217 was the Partnership's
share. See Note 14 of Notes to Financial Statements for additional information.
The Partnership made four distributions totaling $182.20, $82.15 and $64.50 per
Interest in 1997, 1996 and 1995, respectively. See Statement of Partners'
Capital (Deficit) for additional information. Distributions were comprised of
$15.00 of Cash Flow and $167.20 of Mortgage Reductions in 1997, $27.87 of Cash
Flow and $54.28 of Mortgage Reductions in 1996 and $37.00 of Cash Flow and
$27.50 of Mortgage Reductions in 1995.
In January 1998, the Partnership paid a distribution of $1,243,233 ($2.83 per
Interest) to the holders of Limited Partnership Interests representing a
distribution from available Cash Flow reserves. Including the January 1998
distribution, Limited Partners have received cash distributions totaling
$784.93 per $500 Interest. Of this amount, $427.95 has been Cash Flow from
operations and $356.98 represents a return of Original Capital. In January
1998, the Partnership also paid $138,137 to the General Partner as its
distributive share of Cash Flow for the fourth quarter of 1997. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of December 31, 1997, there were 28,466 Interests and cash
of $5,213,613 in the Early Investment Incentive Fund.
Item 8. Financial Statements and Supplementary Data
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See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
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There have been no changes in or disagreements with accountants on any matters
of accounting principles, practices or financial statement disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) Neither the Registrant nor Balcor Mortgage Advisors-V, its General Partner,
has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President John K. Powell, Jr.
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 50) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a member of the board of directors of
The Balcor Company. He is also Senior Vice President of American Express
Company and is responsible for its real estate operations worldwide. Prior to
joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in
the commercial real estate division where he was involved in various lending
activities. Mr. Meador received his M.B.A. degree from the Indiana University
Graduate School of Business.
Alexander J. Darragh (age 43) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
John K. Powell Jr. (age 47) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function. He is a member of the board of directors of The Balcor Company. He
received a Master of Planning degree from the University of Virginia. Mr.
Powell has been designated a Certified Real Estate Financier by the National
Society for Real Estate Finance and is a full member of the Urban Land
Institute.
Jayne A. Kosik (age 40) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1997.
Item 11. Executive Compensation
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The Registrant paid $6,345 in 1997 with respect to one of the executive
officers and directors of the General Partner. The Registrant has not paid and
does not propose to pay any remuneration to the remaining executive officers
and directors of the General Partner. The other officers receive compensation
from The Balcor Company (but not from the Registrant) for services performed
for various affiliated entities, which may include services performed for the
Registrant. However, the General Partner believes that any such compensation
attributable to services performed for the Registrant is immaterial to the
Registrant. See Note 11 of Notes to Financial Statements for information
relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Mortgage Advisors-V (principally through the Early Investment
Incentive Fund) and its officers and partners own as a group the following
Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ---------------- ----------------
Limited Partnership
Interests 28,476 6.5%
Relatives of the officers and affiliates of the partners of the General Partner
do not own any additional Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
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(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 11 of Notes to Financial Statements for information relating to
transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
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(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and
Restated Certificate of Limited Partnership of Balcor Pension Investors-V
previously filed as Exhibit 3 and 4.1, respectively, to Amendment No. 1 dated
January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) are incorporated herein by reference.
(4) 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 is incorporated herein by reference.
(10) Material Contracts:
(a)(i) Agreement of Sale and attachments thereto relating to the sale of the
Granada Apartments, Tampa, Florida previously filed as Exhibit (2)(a)(i) to the
Registrants Current Report on Form 8-K dated September 17, 1996 is incorporated
herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the Granada
Apartments, Tampa, Florida previously filed as Exhibit (2)(a)(ii) to the
Registrant's Current Report on Form 8-K dated September 17, 1996 is
incorporated herein by reference.
(iii) Letter Agreement dated October 7, 1996, relating to the sale of the
Granada Apartments, Tampa, Florida previously filed as Exhibit (99)(b) to the
Registrant's Current Report on Form 8-K dated October 3, 1996 is incorporated
herein by reference.
(iv) Second Amendment to Agreement of Sale relating to the sale of Granada
Apartments, Tampa, Florida previously filed as Exhibit (10)(a)(iv) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, is incorporated herein by reference.
(b)(i) Agreement of Sale and attachments thereto relating to the sale of the
Plantation Apartments, Tampa, Florida previously filed as Exhibit (2)(b)(i) to
the Registrant's Current Report on Form 8-K dated September 17, 1996 is
incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the
Plantation Apartments, Tampa, Florida previously filed as Exhibit (2)(b)(ii) to
the Registrant's Current Report on Form 8-K dated September 17, 1996 is
incorporated herein by reference.
(iii) Letter Agreement dated October 7, 1996, relating to the sale of the
Plantation Apartments, Tampa, Florida previously filed as Exhibit (99)(c) to
the Registrant's Current Report on Form 8-K dated October 3, 1996 is
incorporated herein by reference.
(iv) Second Amendment to Agreement of Sale relating to the sale of Plantation
Apartments, Tampa, Florida previously filed as Exhibit (10)(b)(iv) to the
Registrant's Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated herein by reference.
(c)(i) Agreement of Sale and attachments thereto relating to the sale of the
The Glades on Ulmerton Apartments, Largo, Florida previously filed as Exhibit
(2)(c)(i) to the Registrant's Current Report on Form 8-K dated September 17,
1996 is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the The
Glades on Ulmerton Apartments, Largo, Florida previously filed as Exhibit
(2)(c)(ii) to the Registrant's Current Report on Form 8-K dated September 17,
1996 is incorporated herein by reference.
(iii) Letter Agreement dated October 7, 1996, relating to the sale of the The
Glades on Ulmerton Apartments, Largo, Florida previously filed as Exhibit
(99)(d) to the Registrant's Current Report on Form 8-K dated October 3, 1996 is
incorporated herein by reference.
(d)(i) Agreement of Sale and attachments thereto relating to the sale of the
Union Tower office building, Lakewood, Colorado previously filed as Exhibit (2)
to the Registrant's Current Report on Form 8-K dated October 10, 1996 is
incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the Union
Tower office building, Lakewood, Colorado previously filed as Exhibit
(10)(d)(ii) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, is incorporated herein by reference.
(e) Purchase and Sale Agreement relating to the sale of first mortgage loan
secured by The Glen Apartments, Fairfax County, Virginia previously filed as
Exhibit (10)(e) to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, is incorporated herein by reference.
(f)(i) Agreement of Sale and attachments thereto relating to the sale of the
1420 Harbor Bay Parkway, Alameda, California previously filed as Exhibit (2)(a)
to the Registrant's Current Report on Form 8-K dated December 6, 1996 is
incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the 1420
Harbor Bay Parkway, Alameda, California previously filed as Exhibit (2)(b) to
the Registrant's Current Report on Form 8-K dated December 6, 1996 is
incorporated herein by reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of the 1420
Harbor Bay Parkway, Alameda, California previously filed as Exhibit
(10)(f)(iii) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(iv) Third Amendment to Agreement of Sale relating to the sale of the 1420
Harbor Bay Parkway, Alameda, California previously filed as Exhibit (10)(f)(iv)
to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1996, is incorporated herein by reference.
(g)(i) Agreement to Purchase Loan Documents relating to the sale of the first
mortgage loan secured by the Whispering Hills Apartments, Overland Park, Kansas
previously filed as Exhibit (10)(g)(i) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.
(ii) First Amendment to Agreement to Purchase Loan Documents related to the
sale of the first mortgage loan secured by the Whispering Hills Apartments,
Overland Park, Kansas previously filed as Exhibit (10)(g)(ii) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K were filed during
the quarter ended December 31, 1997.
(c) Exhibits: See Item 14(a)(3) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-V
By:/s/Jayne A. Kosik
-----------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
and Financial Officer) of Balcor Mortgage
Advisors-V, the General Partner
Date: March 26, 1998
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- --------------------------------------------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Mortgage
Advisors-V, the General Partner
/s/Thomas E. Meador March 26, 1998
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Mortgage
Advisors-V, the General Partner
/s/Jayne A. Kosik March 26, 1998
- -------------------- --------------
Jayne A. Kosik
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1997 and 1996
Statements of Partners' Capital, for the years ended December 31, 1997, 1996
and 1995
Statements of Income and Expenses, for the years ended December 31, 1997, 1996
and 1995
Statements of Cash Flows, for the years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Pension Investors-V
We have audited the accompanying financial statements of Balcor Pension
Investors-V (An Illinois Limited Partnership) as listed in the Index of this
Form 10-K. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-V at
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon disposition of all its
real estate interests. As of December 31, 1997, the Partnership has disposed
of all of its remaining real estate interests. Upon resolution of the
litigation described in Note 15 to the financial statements, the Partnership
intends to cease operations and dissolve.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 25, 1998
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
--------------- ---------------
Cash and cash equivalents $ 4,034,425 $ 67,655,936
Escrow deposits - restricted 95,243
Accounts and accrued interest receivable 39,248 665,695
Prepaid expenses 38,651
Deferred expenses, net of accumulated
amortization of $133,699 in 1996 196,549
--------------- ---------------
4,073,673 68,652,074
--------------- ---------------
Investment in first mortgage loan
receivable: 6,015,968
Less:
Allowance for potential loan losses 2,102,000
---------------
Net investment in loans receivable 3,913,968
Real estate held for sale (net of
allowance of $2,711,056 in 1996) 6,606,724
Investment in joint ventures-affiliates 3,042,286
---------------
13,562,978
--------------- ---------------
$ 4,073,673 $ 82,215,052
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 43,862 $ 978,110
Due to affiliates 62,317 150,580
Other liabilities, principally escrow
deposits and accrued real estate taxes 145,394
Security deposits 81,774
--------------- ---------------
Total liabilities 106,179 1,355,858
--------------- ---------------
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
(Continued)
1997 1996
--------------- ---------------
Commitments and contingencies
Limited Partners' capital
(439,305 Interests issued
and outstanding) 3,844,492 80,322,266
General Partner's capital 123,002 536,928
--------------- ---------------
Total Partners' capital 3,967,494 80,859,194
--------------- ---------------
$ 4,073,673 $ 82,215,052
=============== ===============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1997, 1996 and 1995
Partners' Capital (Deficit) Accounts
-------------- ------------- --------------
General Limited
Total Partner Partners
-------------- ------------- --------------
Balance at December 31, 1994 $ 116,254,760 $ (3,460,627) $ 119,715,387
Cash distributions (A) (30,141,205) (1,806,033) (28,335,172)
Net income for the year
ended December 31, 1995 12,145,083 1,214,508 10,930,575
-------------- ------------- --------------
Balance at December 31, 1995 98,258,638 (4,052,152) 102,310,790
Cash distributions (A) (37,449,289) (1,360,384) (36,088,905)
Net income for the year
ended December 31, 1996 20,049,845 5,949,464 14,100,381
-------------- ------------- --------------
Balance at December 31, 1996 80,859,194 536,928 80,322,266
Cash distributions (A) (80,873,080) (732,174) (80,140,906)
Cash contribution 183,043 183,043
Net income for the year
ended December 31, 1997 3,798,337 135,205 3,663,132
-------------- ------------- --------------
Balance at December 31, 1997 $ 3,967,494 $ 123,002 $ 3,844,492
============== ============= ==============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1997 1996 1995
-------------- ------------- --------------
First quarter $ 126.00 (B) $ 5.00 $ 4.00
Second quarter 32.95 14.78 5.00
Third quarter 14.10 41.72 31.82
Fourth quarter 9.15 20.65 23.68
(B) In addition to this distribution, a special distribution of $0.38 per
Interest was paid to class members including certain current investors in
the Partnership pursuant to the settlement of a class action lawsuit.
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------------- ------------- --------------
Income:
Interest on loans receivable,
and from investment in
acquisition loan $ 236,661 $ 3,575,255 $ 5,834,417
Less interest on loans
payable - underlying
mortgages 185,693 273,184
-------------- ------------- --------------
Net interest income on
loans receivable 236,661 3,389,562 5,561,233
Interest on short-term
investments 642,720 1,141,900 1,007,008
Participation income 40,146 926,139
Prepayment premiums 315,000
Recovery of losses on loans,
real estate and accrued
interest receivable 2,102,000 3,672,819 1,600,000
Participation in income
(loss) of joint ventures-
affiliates 1,291,292 894,808 (204,085)
Other income 514,053
-------------- ------------- --------------
Total income 4,786,726 9,139,235 9,205,295
-------------- ------------- --------------
Expenses:
Loss (income) from
operations of real estate
held for sale 168,214 (4,160,232) (5,366,016)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 1,499,518 1,117,110
Amortization of deferred
expenses 196,549 55,455 199,150
Administrative 623,626 1,318,547 1,031,937
-------------- ------------- --------------
Total expenses 988,389 (1,286,712) (3,017,819)
-------------- ------------- --------------
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------------- ------------- --------------
Income before equity in
loss from investment
in acquisition loan 3,798,337 10,425,947 12,223,114
Equity in loss from investment
in acquisition loan (52,021) (78,031)
-------------- ------------- --------------
Income before gains on sales
of real estate 3,798,337 10,373,926 12,145,083
Gains on sales of real estate 9,675,919
-------------- ------------- --------------
Net income $ 3,798,337 $ 20,049,845 $ 12,145,083
============== ============= ==============
Net income allocated to
General Partner $ 135,205 $ 5,949,464 $ 1,214,508
============== ============= ==============
Net income allocated to
Limited Partners $ 3,663,132 $ 14,100,381 $ 10,930,575
============== ============= ==============
Net income per Limited
Partnership Interest
(439,305 issued and
outstanding) - Basic
and Diluted $ 8.34 $ 32.10 $ 24.88
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------------- ------------ -------------
Operating activities:
Net income $ 3,798,337 $ 20,049,845 $ 12,145,083
Adjustments to reconcile net
income to net cash provided
by operating activities:
Gains on sales
of real estate (9,675,919)
Equity in loss from invest-
ment in acquisition loan 52,021 78,031
Participation in (income)
loss of joint
ventures - affiliates (1,291,292) (894,808) 204,085
Recovery of losses on loans,
real estate and accrued
interest receivable (2,102,000) (3,672,819) (1,600,000)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 1,499,518 1,117,110
Amortization of deferred
expenses 196,549 55,455 199,150
Payment of leasing
commissions (102,100)
Accrued interest income
due at maturity (610,927)
Collection of interest
income due at maturity 2,115,968 452,768 2,591,071
Net change in:
Escrow deposits
- restricted 95,243 (53,140) 342,522
Accounts and accrued
interest receivable 626,447 (89,317) (111,371)
Prepaid expenses 38,651 106,376 (145,027)
Accounts and accrued
interest payable (934,248) 712,641 35,805
Due to affiliates (88,263) 100,731 (86,694)
Other liabilities (145,394) (466,481) (386,838)
Security deposits (81,774) (411,959) 137,104
-------------- ------------ -------------
Net cash provided by
operating activities 2,228,224 7,662,812 13,909,104
-------------- ------------ -------------
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
(Continued)
1997 1996 1995
-------------- ------------ -------------
Investing activities:
Proceeds from sale of
acquisition loan 7,226,945
Costs incurred in connection
with the sale of
acquisition loan (100,810)
Procceeds from sale of loan
receivable 2,674,362
Costs incurred in connection
with sale of loan receivable (107,806)
Capital contributions to joint
ventures - affiliates (22,759) (204,116)
Distributions from joint
ventures - affiliates 4,333,578 2,481,317 398,620
Collection of principal
payments on loans receivable 3,900,000 14,700,000 16,060,889
Improvements to real estate (628,831) (439,382)
Proceeds from sales
of real estate 6,900,000 55,506,000 2,570,208
Costs incurred in
connection with the
sales of real estate (293,276) (1,924,522) (175,495)
-------------- ------------ -------------
Net cash provided by
investing activities $ 14,840,302 $ 79,803,896 $ 18,210,724
-------------- ------------ -------------
Financing activities:
Distributions to Limited
Partners $ (80,140,906) $(36,088,905) $ (28,335,172)
Distributions to General
Partner (732,174) (1,360,384) (1,806,033)
Contribution from General
Partner 183,043
Principal payments on loans
payable - underlying
mortgages (41,745) (343,945)
-------------- ------------ -------------
Net cash used in financing
activities (80,690,037) (37,491,034) (30,485,150)
-------------- ------------ -------------
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
(Continued)
1997 1996 1995
-------------- ------------ -------------
Net change in cash and
cash equivalents (63,621,511) 49,975,674 1,634,678
Cash and cash equivalents at
beginning of period 67,655,936 17,680,262 16,045,584
-------------- ------------ -------------
Cash and cash equivalents
at end of period $ 4,034,425 $ 67,655,936 $ 17,680,262
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of Partnership's Business:
Balcor Pension Investors-V (the "Partnership") has retained cash reserves from
the sale of its real estate investments and the sale and repayment of its loans
receivable for contingencies which exist or may arise. The Partnership's
operations currently consist of interest income earned on short-term
investments and the payment of administrative expenses.
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 sold seven properties and one loan
receivable and had one loan receivable repaid. In addition, the property and
the acquisition loan, in which the Partnership held minority joint venture
interests, were sold by the joint ventures during 1996. During January 1997,
the Partnership sold the Harbor Bay office building and during May 1997, the
Meadow Run Apartments loan receivable was repaid. In addition, the
Partnership's remaining investment, the loan collateralized by the Whispering
Hills Apartments, in which the Partnership held a minority joint venture
interest, was sold during June 1997. The Partnership has retained a portion of
the cash from the sales to satisfy obligations of the Partnership, as well as
establish a reserve for contingencies. 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. 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 15 of Notes to Financial Statements. In the absence of any
such contingency, the reserves will be paid within twelve months of the last
investment 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. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) The Partnership recorded wrap-around mortgage loans at the face amount of
the mortgage instruments which included the outstanding indebtedness of the
borrowers under the terms of the underlying mortgage obligations. The
underlying mortgage obligations were recorded as a reduction of the wrap-around
mortgage loans and the resulting balance represented the Partnership's net
advance to the borrowers. The Partnership was responsible for making periodic
payments to the underlying mortgage lenders only to the extent that payments as
required by the wrap-around mortgage agreements were received by the
Partnership from the borrowers.
(c) Income on loans was recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest was discontinued when a loan
became ninety days contractually delinquent or sooner when, in the opinion of
the General Partner, an impairment had occurred in the value of the collateral
property securing the loan. Income on nonaccrual loans or loans which were
otherwise not performing in accordance with their terms was recorded on a cash
basis.
Various loan agreements provided for participation by the Partnership in
increases in value of the collateral property when the loan was repaid or
refinanced. In addition, certain loan agreements allowed the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income was reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate held for sale is reflected in the
accompanying Statements of Income and Expenses net of related direct operating
expenses.
(d) Loan losses on mortgage notes receivable were charged to income and an
allowance account was established when the General Partner believed the loan
balance would not be recovered. The General Partner assessed the
collectibility of each loan on a periodic basis through a review of the
collateral property operations, the property value and the borrower's ability
to repay the loan. Upon foreclosure, the loan net of the allowance was
transferred to real estate held for sale after the fair value of the property,
less costs of disposal was assessed. Upon the transfer to real estate held for
sale, a new basis in the property was established.
Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership recorded its investments in real estate at the lower of cost or
fair value, and periodically assessed, but not less than on an annual basis,
fair value of its real estate properties held for sale. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. Changes in the property's fair value were
recorded by an adjustment to the property allowance account and were recognized
in the income statement as an increase or decrease through recovery income or a
provision for loss in the period the change in fair value was determined. The
General Partner considered the methods referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicated otherwise.
(e) Under certain circumstances, the Partnership accepted promissory notes in
satisfaction of a borrower's obligations for certain fees upon prepayment of a
loan as required by the loan agreement. These fees included, among other
things, prepayment penalties and participations in the borrower's appreciation
in the collateral property. The Partnership's policy was to record such income
on a cash basis as payments, which were required under the terms of the
promissory notes, were received.
(f) Investment in the acquisition loan represented a first mortgage loan which,
because the loan agreement included certain specified terms, was accounted for
as an investment in a real estate venture. Amounts which represented
contractually required debt service were recorded in the accompanying
statements of income and expenses as interest income and participation income.
Equity from investment in acquisition loan represented the Partnership's share
of the collateral properties' operations, including depreciation and interest
expense. The Partnership's share of operations had no effect on cash flow of
the Partnership.
(g) Investment in joint ventures-affiliates represented the Partnership's
interest in joint ventures which were recorded under the equity method of
accounting. Under the equity method of accounting, the Partnership recorded its
initial investment at cost and adjusted its investment account for additional
capital contributions, distributions and its share of joint venture income or
loss.
(h) Deferred expenses consisted of loan application and processing fees and
mortgage brokerage fees which were amortized over the terms of the respective
agreements, and leasing commissions which were amortized over the life of each
respective lease. Upon sale, any unamortized balance was written off.
(i) Revenue was recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases was recognized on a straight line
basis over the respective lease term. Service income included reimbursements
from operating costs such as real estate taxes maintenance and insurance and
was recognized as revenue in the period the applicable costs were incurred.
(j) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(k) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash or cash
equivalents are held or invested in one financial institution.
(l) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(m) For financial statement purposes, prior to 1996 partners were allocated
income and loss in accordance with the provisions in the Partnership Agreement.
In order for the capital accounts of the General Partner and Limited Partners
to appropriately reflect their remaining economic interests as provided for in
the Partnership Agreement, the income allocations between the partners have
been adjusted for financial statement purposes in 1997 and 1996.
(n) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership for the year-ended December 31, 1997 and has
been applied to all prior earnings periods presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income per Limited Partnership
Interest.
4. Partnership Agreement:
The Partnership was organized in October 1983. The Partnership Agreement
provides for Balcor Mortgage Advisors-V to be the General Partner and for the
admission of Limited Partners through the sale of Limited Partnership Interests
at $500 per Interest, 439,305 of which were sold on or prior to August 31,
1984, the termination date of the offering.
Pursuant to the Partnership Agreement, all income of the Partnership was
allocated 90% to the Limited Partners and 10% to the General Partner and all
losses were allocated 99% to the Limited Partners and 1% to the General
Partner. For financial statement purposes, prior to 1996, partners were
allocated income and loss in accordance with the provisions in the Partnership
Agreement. In order for the capital accounts of the General Partner and
Limited Partners to appropriately reflect their remaining economic interests as
provided for in the Partnership Agreement, the income allocations between the
partners have been adjusted for financial statement purposes in 1997 and 1996.
To the extent that Cash Flow was generated, distributions were made as follows:
(i) 90% of such Cash Flow was distributed to the Limited Partners, (ii) 7.5% of
such Cash Flow was distributed to the General Partner, and (iii) an additional
2.5% of such Cash Flow was distributed to the General Partner and constituted
the Early Investment Incentive Fund (the "Fund"). Upon the liquidation of the
Partnership, the General Partner will return to the Partnership for
distribution to Early Investors an amount not to exceed the 2.5% share
originally allocated.
Amounts placed in the Fund were, at the sole discretion of the General Partner
and subject to certain limitations as set forth in the Partnership Agreement,
used to repurchase Interests from existing Limited Partners. All repurchases
of Interests were made at 90% of the then current valuation of such Limited
Partnership Interests at the previous quarter end less any distributions made
after the previous quarter end. Distributions of Cash Flow and Mortgage
Reductions pertaining to such repurchased Interests were paid to the Fund. In
February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of December 31, 1997, there were 28,466 Interests and cash
of $5,213,613 in the Early Investment Incentive Fund.
5. Investment in Loans Receivable:
(a) The Meadow Run Apartments $3,900,000 first mortgage loan matured in July
1996. The Partnership extended the loan until December 1996 to allow the
borrower additional time to secure alternate financing. The borrower was unable
to obtain alternate financing by December 1996 but continued to make monthly
interest payments through May 1997. The loan was repaid in May 1997 and the
Partnership received $6,015,968 including accrued interest of $2,115,968 which
was included in the loan balance. The Partnership recognized a recovery of
$2,102,000 upon repayment of the loan.
(b) The Seven Trails West Apartments loan matured in February 1996. The
Partnership extended the loan until April 1996 to allow the borrower additional
time to secure alternate financing. The loan was repaid in April 1996. The
Partnership recognized a recovery of $2,478,000 upon the repayment of the loan.
Nonaccrual loans and loans which have been restructured are hereinafter
referred to as impaired loans. Net interest income relating to impaired loans
would have been $3,040,000 in 1995. Net interest income received from impaired
loans included in the accompanying Statements of Income and Expenses amounted
to $2,227,000 (cash basis and accrual basis) in 1995.
There were no impaired loans at December 31, 1996. The average recorded
investment in impaired loans during the year ended December 31, 1996 was
approximately $7,576,384.
6. Sale of Loan Receivable:
In December 1996 the Partnership sold The Glen Apartments which was a
wrap-around mortgage loan for a sale price of $2,674,362. Prior to the sale,
the note receivable balance was $5,253,261 which included $303,261 of accrued
interest. The underlying mortgage loan was $2,498,088. From the proceeds of the
sale the Partnership paid $107,806 in selling costs. The carrying value of the
loan was $2,755,173. The Partnership did not recognize a gain or loss in
connection with the sale of this loan. During 1996, the Partnership recognized
a recovery of $341,382 and wrote off the previously established allowance for
losses of $530,000.
7. Sale of Acquisition Loan Receivable:
The Partnership and two affiliates entered into a participation agreement to
fund a $23,300,000 first mortgage loan collateralized by the Noland Fashion
Square Shopping Center. The Partnership participated ratably in approximately
41% of the loan amount, interest income and participation income. The balance
of the loan included the Partnership's share of the cumulative net loss of the
property after the loan was funded. The loan was sold in August 1996 in an all
cash sale for $17,725,000 of which $7,226,945 was the Partnership's share. From
the proceeds of the sale the Partnership paid $100,810 as its share of selling
costs. The carrying value of the loan was $8,387,283. The Partnership did not
recognize a gain or loss in connection with the sale of this loan. During
1996, the Partnership recognized an additional provision for losses of $511,415
and wrote off $749,733 against the previously established loss allowance
related to this loan.
8. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1997 is described in the
table below:
1997 1996 1995
----------- ----------- -----------
Loans:
Balance at beginning
of year $2,102,000 $5,859,733 $5,957,614
Provision charged to
income 511,415 300,000
Recovery of provision
previously charged
to income (2,102,000) (2,819,382)
Direct write-off
of loans against
allowance (1,449,766) (397,881)
----------- ----------- ----------
Balance at the end of
the year None $2,102,000 $5,859,733
=========== =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $2,711,056 $4,955,000 $6,055,000
Provision charged to
income 988,103 817,110
Recovery of provision
previously charged to
income (853,437) (1,600,000)
Direct write-off
of real estate
held for sale
against allowance (2,711,056) (2,378,610) (317,110)
----------- ----------- ------------
Balance at the end of
the year None $2,711,056 $4,955,000
=========== =========== ===========
9. Management Agreement:
The Partnership's properties were under management agreements with a third
party management company prior to the sale of the properties. These management
agreements provided for annual fees of 3% to 6% of gross operating receipts.
10. Investment in Joint Ventures - Affiliates:
(a) The Partnership had classified the Whispering Hills Apartments first
mortgage loan investment as an investment in joint venture - affiliate. This
investment represented a joint venture between the Partnership and an
affiliate. Profits and losses were allocated 25% to the Partnership and 75% to
the affiliate. During June 1997, the joint venture sold the loan for
$17,200,000. From the proceeds of the sale, the joint venture paid $750,000 to
the borrower in accordance with an amendment to the modified loan agreement and
$393,305 in selling costs. For financial statement purposes, the joint venture
recognized a gain of $1,793,261. The Partnership's share was $1,130,640 which
includes a recovery for losses of $631,500. This amount was included in the
Partnership's participation in income (loss) of joint ventures with affiliates.
The following information has been summarized from the financial statements of
the joint venture for the year ended December 31, 1997:
Total income $1,237,046
Net income before gain on sale 642,612
Gain on sale 1,793,261
Net income 2,435,873
(b) The Partnership and three affiliates (together, the "Participants"),
previously funded a $23,000,000 loan on the 45 West 45th Street Office
Building. In February 1995, the Participants received title to the property
through foreclosure, and the Partnership owned a 21.74% joint venture interest
in the property. During 1995, the Partnership recognized $537,630 as its share
of the provision related to the change in the estimate of the fair value of the
property. In November 1996, the joint venture sold the property in an all cash
sale for $10,300,000. From the proceeds of the sale, the joint venture paid
$579,075 in selling costs. The basis of the property was $6,786,740. For
financial statement purposes, the joint venture recognized a gain of
$2,934,185, of which $637,892 represented the Partnership's share. This amount
was included in the Partnership's participation in income (loss) of joint
ventures with affiliates. Pursuant to the sale agreement, $500,000 of the sale
proceeds was retained by the joint venture and was unavailable for distribution
until April 1997, at which time the funds were released in full. The
Partnership's share of the funds was $108,701.
During 1997, 1996, and 1995 the Partnership received distributions from these
joint ventures totaling $4,333,578, $2,481,317 and $398,620, respectively, and
made contributions of $22,759 and $204,116 in 1996 and 1995, respectively.
11. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $10,927 None $ 54,285 $ 1,959 $91,569 $ 5,481
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 47,251 $18,395 27,291 23,720 82,348 9,881
Data processing 7,778 3,889 8,406 3,308 49,177 4,775
Investor communica-
tions None None None None 11,014 None
Legal 20,946 18,383 15,436 13,416 24,592 3,681
Portfolio management 93,823 21,650 103,642 90,082 154,618 25,969
Other 18,095 None 20,819 18,095 6,028 62
The Partnership participated in an insurance deductible program with other
affiliated partnerships in which the program paid claims up to the amount of
the deductible under the master insurance policies for its properties. The
program was administered by an affiliate of the General Partner (the Balcor
Company) which received no fee for administering the program; however, the
General Partner was reimbursed for program expenses. The Partnership paid
premiums to the deductible insurance program of $17,633 and $63,806 for 1996
and 1995, respectively.
The General Partner made a contribution of $183,043 in connection with the
settlement of certain litigation as further discussed in Note 14 of Notes to
Financial Statements.
12. Disposition of Properties Acquired Through Foreclosure:
(a) In January 1997, the Partnership sold the Harbor Bay office building in an
all cash sale for $6,900,000. From the proceeds of the sale, the Partnership
paid $293,276 in selling costs. The basis of the property was $9,317,780. For
financial statement purposes, the Partnership did not recognize a gain or loss
on the sale of this property. The Partnership wrote off $2,711,056 against the
previously established allowance.
(b) In December 1996, the Partnership sold The Glades on Ulmerton Apartments in
an all cash sale for $6,500,000. From the proceeds of the sale, the Partnership
paid $275,210 in selling costs. The basis of the property was $5,643,466. For
financial statement purposes the Partnership recognized a gain of $581,324 from
the sale of this property and a recovery of a previously established allowance
of $600,000.
(c) In December 1996, the Partnership sold the Granada Apartments in an all
cash sale for $2,300,000. From the proceeds of the sale, the Partnership paid
$139,738 in selling costs. The basis of the property was $3,348,979. For
financial statement purposes the Partnership did not recognize a gain or loss
on the sale of this property. The Partnership recognized an additional
provision of $488,717 and wrote off $700,000 against the previously established
allowance.
(d) In December 1996, the Partnership sold the Plantation Apartments in an all
cash sale for $3,000,000. From the proceeds of the sale, the Partnership paid
$173,592 in selling costs. The basis of the property was $3,769,738. For
financial statement purposes the Partnership did not recognize a gain or loss
on the sale of this property. The Partnership recognized an additional
provision of $488,330 and wrote off $455,000 against the previously established
allowance.
(e) In December 1996, the Partnership sold the Huntington Meadows Apartments in
an all cash sale for $9,300,000. From the proceeds of the sale, the Partnership
paid $341,832 in selling costs. In addition, the purchaser received a $342,000
credit against the purchase price for certain repairs required at the property.
The basis of the property was $7,228,111. For financial statement purposes the
Partnership recognized a gain of $1,388,057 from the sale of this property.
(f) In December 1996, the Partnership sold the Villa Medici Apartments in an
all cash sale for $12,808,000. From the proceeds of the sale, the Partnership
paid $362,595 in selling costs. The basis of the property was $9,487,780. For
financial statement purposes the Partnership recognized a gain of $2,957,625
from the sale of this property.
(g) In December 1996, the Partnership sold the Waldengreen Apartments in an all
cash sale for $6,590,000. From the proceeds of the sale, the Partnership paid
$270,325 in selling costs. The basis of the property was $6,566,238. For
financial statement purposes the Partnership did not recognize a gain or loss
on the sale of this property. The Partnership recognized a recovery of $253,437
and wrote off $500,000 against the previously established allowance.
(h) In December 1996, the Partnership sold the Union Tower office building in
an all cash sale for $15,350,000. From the proceeds of the sale, the
Partnership paid $361,230 in selling costs. The basis of the property was
$10,239,857. For financial statement purposes the Partnership recognized a gain
of $4,748,913 from the sale of this property.
13. Other Income:
The Partnership recognized other income primarily from insurance proceeds of
$342,000 received during 1997 in connection with fire damage incurred at the
Huntington Meadows Apartments during February 1996. Additionally, the
Partnership recognized other income of $172,053 primarily relating to prior
year real estate tax refunds received in 1997 for the Harbor Bay office
building, which was sold in 1997.
14. 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-V, et. al. upon the terms described in the notice to class members in
September 1996. The General Partner made a contribution of $183,043 to the
Partnership from which the plaintiffs' counsel received $18,304 pursuant to the
settlement agreement. In February 1997, the General Partner made a settlement
payment of $164,739 ($0.38 per $500 Interest) to members of the class pursuant
to the settlement. Of the remaining settlement amount, $99,534 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 $65,205 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 $173,217 was the Partnership's share. The settlement had no material
impact on the Partnership.
15. 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. This 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 these
actions 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.
16. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1997 and 1996 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts and accrued interest payable approximates fair value.
17. Subsequent Event:
In January 1998, the Partnership made a distribution of $1,243,233 ($2.83 per
Interest) to the holders of Limited Partnership Interests representing a
distribution from available Cash Flow reserves.