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, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-10225
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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, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
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Cash and cash equivalents $ 6,747,761 $ 16,852,472
Cash and cash equivalents - Early Investment
Incentive Fund 2,993,534 1,969,827
Accounts and accrued interest receivable 358,662 711,458
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$ 10,099,957 $ 19,533,757
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 19,299 $ 110,948
Due to affiliates 74,226 79,549
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Total liabilities 93,525 190,497
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Commitments and contingencies
Limited Partners' capital (85,010
Interests issued) 14,630,274 23,962,626
Less Interests held by Early Investment
Incentive Fund (8,136 in 1997
and 1996) (5,015,607) (5,015,607)
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9,614,667 18,947,019
General Partner's capital 391,765 396,241
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Total partners' capital 10,006,432 19,343,260
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$ 10,099,957 $ 19,533,757
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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, 1997 and 1996
(Unaudited)
1997 1996
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Income:
Interest on loan receivable $ 368,030
Less interest on loan payable -
underlying mortgage 69,115
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Net interest income on loan 298,915
(Loss) income from operations of real
estate held for sale $ (104,614) 514,975
Interest on short-term investments 151,207 33,871
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Total income 46,593 847,761
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Expenses:
Administrative 106,268 83,983
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106,268 83,983
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Net (loss) income $ (59,675) $ 763,778
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Net (loss) income allocated to
General Partner $ (4,476) $ 57,283
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Net (loss) income allocated to
Limited Partners $ (55,199) $ 706,495
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Net (loss) income per average number of
Limited Partnership Interests
outstanding (76,874 in 1997 and
77,700 in 1996) $ (0.72) $ 9.09
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Distribution to General Partner $ 38,963 $ 42,505
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Settlement Distribution to Limited Partners $ 13,828 None
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Distribution to Limited Partners $ 9,263,325 $ 466,202
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Distribution per Limited Partnership
Interest outstanding $ 120.50 $ 6.00
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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, 1997 and 1996
(Unaudited)
1997 1996
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Operating activities:
Net (loss) income $ (59,675) $ 763,778
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Amortization of deferred expenses 10,152
Net change in:
Escrow deposits (78,405)
Accounts and accrued interest
receivable 352,796 96,089
Prepaid expenses 58,324
Accounts payable (91,649) (89,960)
Due to affiliates (5,323) 12,391
Other liabilities 84,559
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Net cash provided by operating activities 196,149 856,928
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Investing activities:
Improvements to real estate (129,800)
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Cash used in investing activities (129,800)
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Financing activities:
Distribution to Limited Partners (9,277,153) (466,202)
Distribution to General Partner (38,963) (42,505)
Contribution by General Partner 38,963
Increase in cash and cash equivalents -
Early Investment Incentive Fund (1,023,707) (62,806)
Principal payments on underlying
loan payable (142,840)
Principal payments on mortgage
notes payable (41,955)
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Net cash used in financing activities (10,300,860) (756,308)
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Net change in cash and cash equivalents (10,104,711) (29,180)
Cash and cash equivalents
at beginning of year 16,852,472 2,901,014
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Cash and cash equivalents at end of period $ 6,747,761 $ 2,871,834
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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 Policy:
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,
1997, and all such adjustments are of a normal and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold all of its remaining properties during 1996.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. The Partnership has retained a portion of the cash from
property sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuit as discussed in Note 6 of Notes to Financial Statements. In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency exists, reserves may
be held by the Partnership for a longer period of time.
3. Interest Expense:
During the quarter ended March 31, 1996, the Partnership incurred and paid
interest expense on mortgage notes payable on properties owned by the
Partnership of $283,106.
4. Transactions with Affiliates:
Fees and expenses, paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1997 were:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $12,867 $74,226
The General Partner made a contribution of $38,963 in connection with the
settlement of certain litigation as further discussed in Note 5 of Notes to
Financial Statements.
5. Settlement of Litigation:
A settlement received final approval by the court in November 1996 in the class
action, Paul Williams and Beverly Kennedy et. al. v. Balcor Pension Investors,
et. al. upon the terms described in the notice to class members in September
1996. The General Partner made a contribution of $38,963 to the Partnership, of
which the plaintiffs' counsel received $3,896 pursuant to the settlement
agreement. In February 1997, the General Partner made a settlement payment of
$35,067 ($0.42 per Interest) to members of the class pursuant to the
settlement. Of the total settlement amount, $13,828 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 $21,239 was
paid to original investors who previously sold their Interests in the
Partnership. This amount was recorded as an administrative expense in the
Financial Statements. The settlement had no material impact on the Partnership.
6. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations and
liquidity of the Partnership. The Partnership believes it has meritorious
defenses to contest the claims.
7. Subsequent Event:
In April 1997, the Partnership made a distribution of $4,497,032 ($52.90 per
Interest) to the holders of Limited Partnership Interests, representing the
quarterly distribution of Cash Flow of $5.50 per Interest for the first quarter
of 1997, $36.45 per Interest primarily from Cash Flow from the sale of the
Sherwood Acres - Phases I and II apartment complexes and a special distribution
of $10.95 per Interest primarily from the remaining proceeds received in
connection with the sale of the Sherwood Acres - Phases I and II apartment
complexes.
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, 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 prior loan
repayments were used to fund three additional mortgage loans. As of March 31,
1997, 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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership recognized a net loss during the quarter ended March 31, 1997
as compared to net income during the same period in 1996 primarily due to the
sales of the Partnership's five remaining properties and the Alzina Office
Building loan in 1996. Further discussion of the Partnership's operations is
summarized below.
1997 Compared to 1996
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Discussions of fluctuations between 1997 and 1996 refer to the quarters ended
March 31, 1997 and 1996.
Due to the sale of the Partnership's interest in the Alzina Office Building
loan in 1996, net interest income on loans receivable ceased during 1997 as
compared to 1996.
During 1996, the Partnership sold the Parkway Distribution Center and
Cumberland Pines, Hollowbrook and Sherwood Acres - Phases I and II apartment
complexes which had been generating income. 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 as a result of the proceeds received in
connection with the 1996 property sales prior to their distribution to Limited
Partners, interest income on short-term investments increased during 1997 as
compared to the 1996.
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. See Note 5 of Notes to Financial Statements for
additional information. This was the primary reason for the increase in
administrative expenses during 1997 as compared to 1996.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $10,105,000 as
of March 31, 1997 when compared to December 31, 1996 due to a special
distribution made from proceeds received in connection with the sale of the
Sherwood Acres - Phases I and II and Hollowbrook apartment complexes and the
Parkway Distribution Center. The Partnership generated cash flow totaling
approximately $196,000 from its operating activities primarily as a result of
the interest income earned on its short-term investments, net of the payment of
administrative and certain property related expenses. The Partnership also used
cash of $10,301,000 to fund its financing activities which consisted primarily
of the payment of distributions to the Partners.
Pursuant to the sale agreement for the Sherwood Acres - Phase I and II
apartment complexes, $250,000 of the sale proceeds was retained by the
Partnership and was unavailable for distribution until February 1997, at which
time the funds were released to the Partnership.
In February 1997, the General Partner made a settlement payment of $35,067
($0.42 per $1,000 Interest) to members of the class pursuant to the settlement
approved by the court in November 1996 in the Paul Williams and Beverly
Kennedy, et. al., v. Balcor Pension Investors, et. al. class action lawsuit.
The General Partner made a contribution of $38,963 to the Partnership, of which
the plaintiffs' counsel received $3,896 pursuant to the settlement agreement.
Of the total settlement amount, $13,828 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 $21,239 was paid to original investors
who previously had sold their Interests in the Partnership. This amount was
recorded as an administrative expense in the Financial Statements.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
In April 1997, the Partnership paid $4,497,032 ($52.90 per Interest) to the
holders of Limited Partnership Interests representing the quarterly
distribution of Cash Flow of $5.50 per Interest for the first quarter of 1997,
$36.45 per Interest primarily from Cash Flow from the sale of the Sherwood
Acres - Phases I and II apartment complexes and a special distribution of
$10.95 per Interest primarily from the remaining proceeds received in
connection with the sale of the Sherwood Acres - Phases I and II apartment
complexes. The level of the regular quarterly distribution was consistent with
the amount distributed to Limited Partners for the fourth quarter of 1996.
Including the April 1997 distribution, Limited Partners have received
distributions totaling $1,743.08 per $1,000 Interest. Of this amount $1,093.95
represents Cash Flow from operations and $649.13 represents a return of
Original Capital. In April 1997, the Partnership also paid $297,181 to the
General Partner as its distributive share of Cash Flow distributed for the
first quarter of 1997 and made a contribution to the Early Investment Incentive
Fund in the amount of $99,060. Since all of the Partnership's properties have
been sold, no additional quarterly distributions are expected.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. The Partnership has retained a portion of the cash from
property sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuit discussed in Note 6 of Notes to Financial Statements. In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency continues to exist,
reserves may be held by the Partnership for a longer period of time.
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) (i)(a) 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 Report on Form 10-Q for the quarter ended March 31, 1996,
is incorporated herein by reference.
(b) 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
Report on Form 8-K dated June 28, 1996, is incorporated herein by reference.
(ii) 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 Report on Form 10-Q for the quarter ended June 30,
1996, is incorporated herein by reference.
(iii)(a) 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.
(b) 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 Report on Form 8-K dated September 17, 1996,
is incorporated herein by reference.
(iv)(a) 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, is incorporated herein by
reference.
(b) 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.
(v)(a) 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.
(b) 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 Report on Form 10-Q for the quarter
ended September 30, 1996, is incorporated herein by reference.
(c) 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 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,
1997 is incorporated herein by reference.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-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
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors, the General
Partner
Date: May 9, 1997
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