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 March 31, 1998
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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 0-10225
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BALCOR PENSION INVESTORS-II
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(Exact name of registrant as specified in its charter)
Illinois 36-3114027
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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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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-II
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
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Cash and cash equivalents $ 1,314,672 $ 2,007,987
Cash and cash equivalents - Early
Investment Incentive Fund 3,783,534 3,659,687
Accounts and accrued interest receivable 22,849 37,089
Prepaid expenses 389
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$ 5,121,444 $ 5,704,763
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 15,473 $ 24,414
Due to affiliates 31,467 27,638
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Total liabilities 46,940 52,052
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Commitments and contingencies
Limited Partners' capital (85,010
Interests issued) 10,090,111 10,617,808
Less Interests held by Early Investment
Incentive Fund (8,136 in 1998 and 1997) (5,015,607) (5,015,607)
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5,074,504 5,602,201
General Partner's capital None 50,510
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Total partners' capital 5,074,504 5,652,711
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$ 5,121,444 $ 5,704,763
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1998 and 1997
(Unaudited)
1998 1997
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Income:
Interest on short-term investments $ 69,458 $ 151,207
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Total income 69,458 151,207
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Expenses:
Loss from operations of real
estate held for sale 104,614
Administrative 49,049 106,268
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49,049 210,882
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Net income (loss) $ 20,409 $ (59,675)
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Net income (loss) allocated to
General Partner None $ (4,476)
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Net income (loss) allocated to
Limited Partners $ 20,409 $ (55,199)
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Net income (loss) per average number of
Limited Partnership Interests
outstanding (76,874 in 1998 and 1997)
- Basic and Diluted $ 0.27 $ (0.72)
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Distribution to General Partner $ 50,510 $ 38,963
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Settlement Distribution to Limited Partners None $ 13,828
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Distribution to Limited Partners $ 548,106 $ 9,263,325
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Distribution per Limited Partnership
Interest outstanding $ 7.13 $ 120.50
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1998 and 1997
(Unaudited)
1998 1997
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Operating activities:
Net income (loss) $ 20,409 $ (59,675)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Net change in:
Accounts and accrued interest
receivable 14,240 352,796
Prepaid expenses (389)
Accounts payable (8,941) (91,649)
Due to affiliates 3,829 (5,323)
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Net cash provided by operating activities 29,148 196,149
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Financing activities:
Distribution to Limited Partners (548,106) (9,277,153)
Distribution to General Partner (50,510) (38,963)
Contribution by General Partner 38,963
Increase in cash and cash equivalents -
Early Investment Incentive Fund (123,847) (1,023,707)
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Net cash used in financing activities (722,463) (10,300,860)
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Net change in cash and cash equivalents (693,315) (10,104,711)
Cash and cash equivalents
at beginning of year 2,007,987 16,852,472
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Cash and cash equivalents at end of period $ 1,314,672 $ 6,747,761
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1998, and all such adjustments are of a normal and recurring
nature.
(b) For financial statement purposes, the capital accounts of the General
Partner and Limited Partners have been adjusted to appropriately reflect their
remaining economic interests as provided for in the Partnership Agreement.
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. The Partnership sold its remaining five properties and loan
receivable during 1996. The Partnership has retained a portion of the cash from
the property 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 4 of Notes to Financial Statements. Due to this litigation,
the Partnership will not be dissolved and reserves will be held by the
Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
3. Transactions with Affiliates:
Fees and expenses, paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1998 were:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $8,102 $31,467
The General Partner made a contribution of $38,963 during 1997 in connection
with the settlement of certain litigation.
4. 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, which is pending.
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 or liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-II (the "Partnership") is a limited partnership formed
in 1981 to invest in wrap-around mortgage loans and, to a lesser extent, in
other junior mortgage loans and first mortgage loans. The Partnership raised
$85,010,000 through the sale of Limited Partnership Interests and used these
proceeds to originally fund thirty-three loans. Proceeds from the loan
repayments were used to fund three additional mortgage loans. As of March 31,
1998, the Partnership has no loans outstanding or properties remaining in its
portfolio.
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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership recognized net income during the quarter ended March 31, 1998
as compared to a net loss for the same period in 1997 primarily due to the
payment in 1997 of additional expenditures related to certain of the properties
sold in 1996. The Partnership also recognized lower interest income on
short-term investments and lower administrative expenses during the quarter
ended March 31, 1998 as compared to the same period in 1997. Further discussion
of the Partnership's operations is summarized below.
1998 Compared to 1997
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Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.
During 1997, the Partnership paid additional expenditures related to certain of
the properties sold during 1996 which resulted in a loss from operations of
real estate held for sale.
Due to higher average cash balances in 1997 as a result of the investment of
proceeds received in connection with the 1996 property and loan sales prior to
distribution to Limited Partners in 1997, interest income on short-term
investments was higher during 1997 as compared to 1998.
During February 1997, the General Partner made a payment relating to the
settlement of certain litigation to original investors who previously sold
their Interests in the Partnership which was accounted for as an administrative
expense. This was the primary reason for the decrease in administrative
expenses during 1998 as compared to 1997. In addition, lower accounting,
professional and legal fees incurred during 1998 contributed to this decrease.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $693,000 as of
March 31, 1998 when compared to December 31, 1997 primarily due to the
distribution made in January 1998 from remaining available Cash Flow reserves.
The Partnership generated cash flow totaling approximately $29,000 from its
operating activities primarily as a result of the interest income earned on its
short-term investments, net of the payment of administrative expenses. The
Partnership used cash of approximately $722,000 to fund its financing
activities which consisted of the payment of distributions to the Partners and
an increase in cash in the Early Investment Incentive Fund.
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. The Partnership sold its remaining five properties and loan
receivable during 1996. The Partnership has retained a portion of the cash from
the property 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 4 of Notes to the Financial Statements. Due to this
litigation, the Partnership will not be dissolved and the reserves will be held
by the Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of March 31, 1998, there was 8,136 Interests and cash of
$3,783,534 held in the Early Investment Incentive Fund.
To date, Limited Partners have received distributions totaling $1,750.21 per
$1,000 Interest. Of this amount, $1,101.08 represents Cash Flow from operations
and $649.13 represents a return of Original Capital. 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.
BALCOR PENSION INVESTORS-II
(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. 1 to the Registrant's Registration Statement on Form S-11 dated
May 7, 1981 (Registration No. 2-70841) 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 September 30, 1992 (Commission File No.
0-10225) is incorporated herein by reference.
(10)(a)(i) Agreement of Sale and attachment thereto relating to the sale of
Cumberland Pines Apartments, Atlanta, Georgia, previously filed as Exhibit (10)
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, is incorporated herein by reference.
(ii) First, Second and Third Amendments to Agreement of Sale and Escrow Trust
Instructions relating to the sale of Cumberland Pines Apartments, Atlanta,
Georgia, previously filed as Exhibits (99)(a)(b) and (c) to the Registrant's
Current Report on Form 8-K dated June 28, 1996, is incorporated herein by
reference.
(b)(i) Purchase and Sale Agreement regarding the sale of the Partnership's
interest in the Alzina Office Building loan, previously filed as Exhibit (10)
(iii) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, is incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto and Amendment to Agreement of
Sale and Escrow Agreement relating to the sale of Parkway Commerce Center, Fort
Lauderdale, Florida, previously filed as Exhibits 2(a) and 2(b) to the
Registrant's Current Report on Form 8-K dated August 13, 1996, is incorporated
herein by reference.
(ii) Second Amendment to Agreement of Sale and Escrow Agreement relating to the
sale of Parkway Commerce Center, Fort Lauderdale, Florida, previously filed as
Exhibit (99) to the Registrant's Current Report on Form 8-K dated September 17,
1996, is incorporated herein by reference.
(d)(i) Agreement of Sale and attachment thereto and First Amendment to
Agreement of Sale relating to the sale of Hollowbrook Apartments, Orlando,
Florida, previously filed as Exhibits 2(a) and 2(b) to the Registrant's Current
Report on Form 8-K dated September 17, 1996, are incorporated herein by
reference.
(ii) Letter Agreement relating to the sale of Hollowbrook Apartments, Orlando,
Florida, previously filed as Exhibit (99) to the Registrant's Current Report on
Form 8-K dated October 14, 1996, is incorporated herein by reference.
(e)(i) Agreement of Sale and attachment thereto relating to the sale of
Sherwood Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously
filed as Exhibit (2) to the Registrant's Current Report on Form 8-K dated
October 14, 1996, is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Sherwood
Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously filed as
Exhibit (10)(v)(b) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of Sherwood
Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously filed as
Exhibit (10)(v)(c) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1998.
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-II
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors, the General Partner
By: /s/Jayne A. Kosik
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Jayne A. Kosik
Senior Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors, the General
Partner
Date: April 24, 1998
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