Item 1. Business ----------------
Balcor Equity Pension Investors-IV A Real Estate Limited Partnership (the "Registrant") is a limited partnership formed in 1986 under the laws of the State of Illinois. The Registrant raised $46,371,500 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of the operation of income-producing real property, and all financial information included in this report relates to this industry segment.
The Registrant originally funded one acquisition loan and acquired two real property investments. The Registrant has two properties and an investment in joint venture with affiliates in its portfolio as of December 31, 1994. See Item 2.
Item 2. Properties ------------------
As of December 31, 1994, the Registrant owns the two properties described below:
Location Description of Property -------- -----------------------
Evanston, Illinois Evanston Plaza Shopping Center: a neighborhood shopping center containing approximately 170,000 square feet located on approximately 13 acres.
Dade County, Florida Gleneagles Apartments: a 292-unit apartment complex located on approximately 14 acres.
The Registrant also holds a minority joint venture interest with affiliates in the 45 West 45th Street Office Building in New York, New York.
See Notes to Financial Statements for other information regarding real property investments.
In the opinion of the General Partner, the Registrant has provided for adequate insurance coverage for its real estate investment properties.
Item 3.
Item 3. Legal Proceedings -------------------------
45 West 45th Street Office Building -----------------------------------
In 1988 and 1989, the Registrant and three affiliates (together, the "Participants"), funded a $23,000,000 loan to 45 West 45th Street Associates collateralized by a first priority lien on the 45 West 45th Street Office Building, New York City, New York. The Registrant's share of the loan is $3,500,000, for a participating percentage of approximately 15%.
In 1991, the loan was placed in default due to the failure of the borrower to make payments due under the loan. After modification negotiations were unsuccessful, the borrower agreed to an uncontested foreclosure (Balcor Mortgage Advisors, Inc. vs. 45 W. 45th Street Associates, Supreme Court of the State of New York, City of New York Case No.: 128631/94). The Participants were the successful bidder at the foreclosure sale and, on February 2, 1995, a limited partnership in which each of the Participants holds an interest equal to its participating percentage in the loan obtained title to the property.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant during 1994.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder ------------------------------------------------------------------------- Matters -------
There has not been an established public market for Limited Partnership Interests and it is not anticipated that one will develop. For information regarding distributions, see Financial Statements, Statements of Partners' Capital and Item 7. Liquidity and Capital Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 6,680.
Item 6.
Item 6. Selected Financial Data -------------------------------
Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Total income $5,088,403 $ 4,602,316 $4,728,736 $4,603,781 $4,653,325 Net income (loss) 1,144,130 339,089 698,621 (1,923,708) 877,104 Net income (loss) per Limited Partnership Interests outstanding 5.14 .81 2.67 (11.28) 3.61 Total assets 28,010,591 28,709,441 30,454,887 31,846,219 35,754,484 Distributions per taxable Limited Partner- ship Interest 11.28 10.08 10.83 9.87 8.90 Distributions per tax-exempt Limited Partner- ship Interest 10.09 10.53 10.00 10.00 9.59
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------------- Results of Operations ---------------------
Summary of Operations ---------------------
During 1993, Balcor Equity Pension Investors - IV A Real Estate Limited Partnership (the "Partnership") recognized a provision for a writedown on its investment in the 45 West 45th Street Office Building due to a determination that an impairment in the value of the property had occurred. As a result, net income increased during 1994 as compared to 1993, and decreased during 1993 as compared to 1992. Further discussion of the Partnership's operations is summarized below.
Operations ----------
1994 Compared to 1993 ---------------------
Due to increased rental rates at the Gleneagles Apartments and Evanston Plaza Shopping Center, rental income increased during 1994 as compared to 1993.
Increased real estate tax and common area maintenance reimbursements from tenants at the Evanston Plaza Shopping Center resulted in higher service income during 1994 as compared to 1993. Property management fees, which are earned as a percentage of rental and service income collected, also increased for this
period.
As a result of higher interest rates earned on short-term investments and higher average cash balances available for investment, interest income on short-term investments increased during 1994 as compared to 1993.
Due to increased insurance and payroll costs at both the Gleneagles Apartments and Evanston Plaza Shopping Center, property operating expenses increased during 1994 as compared to 1993.
Increased expenditures for roof repairs, painting and appliances at the Gleneagles Apartments resulted in an increase in maintenance and repairs expenses during 1994 as compared to 1993.
As a result of higher accounting, legal and portfolio management fees, administrative expenses increased during 1994 as compared to 1993.
The Partnership recognized a provision for a writedown of $900,000 during 1993 due to a determination that an impairment in the value of the 45 West 45th Street Office Building had occurred. No provision was recognized in 1994. As a result, the Partnership recognized participation in income of joint venture with affiliates during 1994 as compared to participation in loss during 1993.
1993 Compared to 1992 ---------------------
Rental rates increased at the Gleneagles Apartments due to improved market conditions where the property is located. As a result, rental income increased during 1993 as compared to 1992.
Lower interest rates earned on short-term investments and lower average funds available for investment resulted in a decrease in interest income on short- term investments during 1993 as compared to 1992.
Personal property at the Gleneagles Apartments became fully depreciated during the second quarter of 1992. As a result, depreciation expense decreased during 1993 as compared to 1992.
Increased expenditures for grounds maintenance were incurred at the Evanston Plaza Shopping Center during 1993. This was the primary reason for the increase in maintenance and repair expenses during 1993 as compared to 1992.
The property valuation assessment received from taxing authorities increased on the Evanston Plaza Shopping Center resulting in an increase in real estate taxes during 1993 as compared to 1992.
During 1993, the Partnership incurred higher accounting and portfolio management fees which resulted in an increase in administrative expenses during 1993 as compared to 1992.
The Partnership reclassified its investment in the 45 West 45th Street Office Building loan to an investment in joint venture with affiliates and recognized a participation in loss of joint venture with affiliates in 1993. This represents the Partnership's share of the property's operations as well as the amortization of loan application and processing fees which related to the loan. In addition, the Partnership recognized a provision for a writedown of $900,000 and $438,100 in 1993 and 1992, respectively, due to the determination that an impairment of the value of the property had occurred.
Liquidity and Capital Resources -------------------------------
The cash position of the Partnership at December 31, 1994 increased when compared to December 31, 1993. Operating activities included cash flow from the operations of the Partnership's properties and short-term investments, which were partially offset by the payment of administrative expenses. Financing
activities consisted of distributions to the Partners and leasing commissions at the Evanston Plaza Shopping Center.
During 1994 and 1993, all of the Partnership's properties, including the property in which the Partnership holds a minority joint venture interest with affiliates, generated positive cash flow. The Partnership defines cash flow generated from its properties as an amount equal to the property's revenue receipts less property related expenditures. As of December 31, 1994, the Gleneagles Apartments and Evanston Plaza Shopping Center had occupancy rates of 99% and 94%, respectively. Many rental markets continue to remain extremely competitive; therefore, the General Partner's goals are to maintain high occupancy levels while increasing rents where possible and to monitor and control operating expenses and capital improvement requirements at both of the properties.
In September 1992, Phar Mor, a major tenant at the Evanston Plaza Shopping Center, filed for reorganization under the U.S. Bankruptcy Code. The Bankruptcy Court assigned Phar Mor's lease, with all the same terms, to Office Depot, a national office supply and equipment retailer, effective December 1994. Revenues related to this lease accounted for 11% of the Partnership's rental income in 1994.
The Partnership and three affiliates (the "Participants") funded a $23,000,000 first mortgage loan on the 45 West 45th Street Office Building. The Partnership funded $3,500,000 of the loan for a participating percentage of approximately 15%. In February 1995, the Participants received title to the property through foreclosure. The Partnership's investment in this loan was reclassified from loan in substantive foreclosure to an investment in joint venture with affiliates effective January 1993. It is the General Partner's opinion that the borrower had effectively surrendered control of the property. See Item 3. Legal Proceedings for additional information.
The Partnership made four distributions totaling $11.28 per Taxable Interest and $10.09 per Tax-exempt Interest during 1994 as compared to $10.08 per Taxable Interest and $10.53 per Tax-exempt Interest during 1993 and $10.83 per Taxable Interest and $10.00 per Tax-exempt Interest in 1992. See Statements of Partners' Capital for additional information. Average quarterly distributions to Limited Partners remained relatively unchanged during 1994 as compared to 1993 and during 1993 as compared to 1992. Including the January 1995 distribution, Limited Partners have received cumulative distributions of $73.80 per $250 Taxable Interest and $72.70 per $250 Tax-exempt Interest. It should be noted that distributions to Taxable Limited Partners and Tax-exempt Limited Partners are computed by different formulas as set forth in the Prospectus; therefore, the amount of distributions to Taxable Limited Partners when compared to the amount of distributions to Tax-exempt Limited Partners will fluctuate from quarter to quarter.
During 1994, the General Partner, on behalf of the Partnership, used amounts placed in the Repurchase Fund to repurchase 327 Interests from Limited Partners at a total cost of $59,561.
In February 1995, the Partnership made a cash distribution of $476,897 ($3.24 per Taxable Interest and $2.50 per Tax-exempt Interest) to Limited Partners, representing the quarterly distribution for the fourth quarter of 1994. In addition, during February 1995, the Partnership paid $39,740 to the General Partner as its share of the fourth quarter of 1994 distribution, and made a $13,247 contribution to the Repurchase Fund.
The General Partner expects that the cash flow from property operations should enable the Partnership to continue making quarterly distributions to Limited Partners. However, the level of future distributions will be dependent on the amount of cash flow generated from property operations as to which there can be no assurances.
The General Partner has recently completed the outsourcing of the financial reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that provided services to the Partnership. All of these functions are now being provided by independent third parties. Additionally, Allegiance Realty Group, Inc., which has provided property management services to all of the Partnership's properties, was sold to a third party. Each of these transactions occurred after extensive due diligence and competitive bidding processes. The General Partner does not believe that the cost of providing these services to the Partnership, in the aggregate, will be materially different to the Partnership during 1995 when compared to 1994.
Inflation has several types of potentially conflicting impacts on real estate investments. Short-term inflation can increase real estate operating costs which may or may not be recovered through increased rents and/or sales prices, depending on general or local economic conditions. In the long-term, inflation can be expected to increase operating costs and replacement costs and may lead to increased rental revenues and real estate values.
Item 8.
Item 8. Financial Statements and Supplementary Data ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K is not applicable.
The net effect of the differences between the financial statements and the tax returns is summarized as follows:
December 31, 1994 December 31, 1993 ----------------------- ------------------------- Financial Tax Financial Tax Statements Returns Statements Returns ---------- --------- ---------- -------
Total assets $28,010,591 $42,181,782 $28,709,441 $42,874,087 Partners' capital accounts (deficit): General Partner (109,380) 251,855 (90,704) 257,977 Limited Partners 26,736,406 40,725,852 27,676,658 41,492,611 Net income: General Partner 191,630 204,184 188,500 219,649 Limited Partners 952,500 1,125,994 150,589 1,135,987 Per Limited Part- nership Interest 5.14 (A) .81 (A)
(A) The net income is $5.94 per Tax-exempt Interest and $7.34 per Taxable Interest for 1994 and $6.16 per Tax-exempt Interest and $5.82 per Taxable Interest for 1993.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and ----------------------------------------------------------------------- Financial Disclosure --------------------
There have been no changes in or disagreements with accountants on any matter of accounting principles, practices or financial statement disclosure.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-IV, 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 Executive Vice President, Allan Wood Chief Financial Officer and Chief Accounting Officer Senior Vice President Alexander J. Darragh First Vice President Daniel A. Duhig First Vice President Josette V. Goldberg First Vice President Alan G. Lieberman First Vice President Brian D. Parker and Assistant Secretary First Vice President John K. Powell, Jr. First Vice President Reid A. Reynolds First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) 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 Director of The Balcor Company. 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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief Financial Officer and Chief Accounting Officer, is responsible for the financial and administrative functions. He is also a Director of The Balcor Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor, he was employed by Price Waterhouse where he was involved in auditing public and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has primary responsibility for the Portfolio Advisory Group. He is responsible for due diligence analysis and real estate advisory services in support of asset management, institutional advisory and capital markets functions. Mr. Darragh has supervisory responsibility of Balcor's Investor Services, Investment Administration, Fund Management and Land Management departments. Mr. Darragh received masters' degrees in Urban Geography from Queens's University and in Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is responsible for the Asset Management Department relating to real estate investments made by Balcor and its affiliated partnerships, including negotiations for modifications or refinancings of real estate mortgage investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary responsibility for all human resources matters. In addition, she has supervisory responsibility for Balcor's administrative and MIS departments. Ms. Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for Balcor's corporate and property accounting, treasury and budget activities. Mr. Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is responsible for the administration of the investment portfolios of Balcor's partnerships and for Balcor's risk management functions. Mr. Powell received a Master of Planning degree from the University of Virginia. He 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.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with the asset management of residential properties for Balcor. Mr. Reynolds is a licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has responsibility for various Asset Management functions, including oversight of the residential portfolio. From January 1986 through September 1994, Mr. Selby was Regional Vice President and then Senior Vice President of Allegiance Realty Group, Inc., an affiliate of Balcor providing property management services. Mr. Selby was responsible for supervising the management of residential properties in the western United States.
(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 1994.
Item 11.
Item 11. Executive Compensation -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the executive officers and directors of Balcor Equity Partners - IV, the general partner. Certain of these 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 6 of Notes to Financial Statements for the information relating to transactions with affiliates.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially more than 5% of the outstanding Limited Partnership Interests of the Registrant:
Name and Amount and Address of Nature of Percent Beneficial Beneficial of Title of Class Owner Ownership Class -------------- ----------- ----------- --------- Limited Engineers Joint 12,780 6.89% Partnership Pension Fund Interests Interests Syracuse, New York
(b) Balcor Equity Partners-IV 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 2,073 Interests 1.12% Partnership Interests
Relatives and affiliates of the officers and partners of the General Partner own an additional twenty 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.
Item 13. Certain Relationships and Related Transactions -------------------------------------------------------
(a & b) See Note 6 of Notes to Financial Statements for additional information relating to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K ------------------------------------------------------------------------
(a) (1 & 2) See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership of Balcor Equity Pension Investors-IV A Real Estate Limited Partnership, previously filed as Exhibit 3 to Amendment No. 1 dated November 28, 1986 to the Registrant's Registration Statement on Form S-11 (Registration No. 33-7133), is hereby incorporated herein by reference.
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1 to Registrant's Registration Statement on Form S-11 dated November 28, 1986 (Registration No. 33-7133) and Form of Confirmation regarding Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-15648) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and Financial Statement Schedule attached hereto in this Form 10-K.
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 EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Allan Wood ------------------------------ Allan Wood Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Equity Partners-IV, the General Partner
Date: March 30, 1995 ------------------
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 Equity /s/Thomas E. Meador Partners-IV, the General Partner March 30, 1995 -------------------- -------------- Thomas E. Meador Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Equity /s/Allan Wood Partners-IV, the General Partner March 30, 1995 -------------------- -------------- Allan Wood
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT AUDITORS
To the Partners of Balcor Equity Pension Investors-IV A Real Estate Limited Partnership:
We have audited the accompanying balance sheets of Balcor Equity Pension Investors-IV A Real Estate Limited Partnership (An Illinois Limited Partnership) as of December 31, 1994 and 1993, and the related statements of partners' capital, income and expenses and cash flows for each of the three years in the period ended December 31, 1994. Our audits also include the financial statement schedule listed in the Index at Item 14(a). The financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and schedule 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 Equity Pension Investors-IV A Real Estate Limited Partnership (An Illinois Limited Partnership) at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois March 20, 1995
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 -------------- --------------
Cash and cash equivalents $ 3,612,180 $ 2,733,081 Accounts and accrued interest receivable 70,246 911,277 Deferred expenses, net of accumulated amortization of $4,191 in 1994 51,693 -------------- -------------- 3,734,119 3,644,358 -------------- --------------
Investment in real estate: Land 6,958,341 6,958,341 Buildings and improvements 24,248,600 24,248,600 -------------- -------------- 31,206,941 31,206,941 Less accumulated depreciation 8,363,940 7,555,891 -------------- -------------- Investment in real estate, net of accumulated depreciation 22,843,001 23,651,050 -------------- -------------- Investment in joint venture with affiliates 1,433,471 1,414,033 -------------- -------------- $ 28,010,591 $ 28,709,441 ============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 44,724 $ 39,144 Due to affiliates 54,646 32,433 Accrued liabilities, principally real estate taxes 1,176,087 936,173 Security deposits 108,108 115,737 -------------- -------------- Total liabilities 1,383,565 1,123,487
Partners' capital (185,486 Limited Partnership Interests issued and outstanding) 26,627,026 27,585,954 -------------- -------------- $ 28,010,591 $ 28,709,441 ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts ---------------------------------------------- General Limited Total Partner Partners -------------- -------------- --------------
Balance at December 31, 1991 $ 30,786,907 $ (59,235) $ 30,846,142
Cash distributions to: Limited Partners (A) (1,869,644) (1,869,644) General Partner (207,739) (207,739) Net income for the year ended December 31, 1992 698,621 203,898 494,723 -------------- -------------- -------------- Balance at December 31, 1992 29,408,145 (63,076) 29,471,221
Cash distributions to: Limited Partners (A) (1,945,152) (1,945,152) General Partner (216,128) (216,128) Net income for the year ended December 31, 1993 339,089 188,500 150,589 -------------- -------------- -------------- Balance at December 31, 1993 27,585,954 (90,704) 27,676,658
Cash distributions to: Limited Partners (A) (1,892,752) (1,892,752) General Partner (210,306) (210,306) Net income for the year ended December 31, 1994 1,144,130 191,630 952,500 -------------- -------------- -------------- Balance at December 31, 1994 $ 26,627,026 $ (109,380) $ 26,736,406 ============== ============== ==============
(A) Summary of cash distributions paid per Interest:
1994 1993 1992 -------------- -------------- -------------- Taxable ------- First Quarter $ 2.50 $ 2.57 $ 2.74 Second Quarter 2.94 2.45 2.75 Third Quarter 3.08 2.56 2.77 Fourth Quarter 2.76 2.50 2.57
Tax-exempt ---------- First Quarter 2.59 2.50 2.50 Second Quarter 2.50 2.50 2.50 Third Quarter 2.50 2.50 2.50 Fourth Quarter 2.50 3.03 2.50
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 -------------- -------------- -------------- Income: Rental $ 3,677,124 $ 3,433,321 $ 3,372,415 Service 1,278,641 1,034,957 1,073,793 Interest income from investment in acquistion loan 162,618 Interest on short-term investments 132,638 88,276 119,910 -------------- -------------- -------------- Total income 5,088,403 4,556,554 4,728,736 -------------- -------------- --------------
Expenses: Depreciation 808,049 808,049 1,041,549 Property operating 861,392 685,008 669,095 Maintenance and repairs 356,428 309,014 195,807 Real estate taxes 1,290,821 1,255,764 1,147,628 Property management fees 296,144 233,191 241,546 Administrative 350,877 292,533 255,998 Provision for acquistion loan writedown 438,100 -------------- -------------- -------------- Total expenses 3,963,711 3,583,559 3,989,723 -------------- -------------- --------------
Income before equity in loss from investment in acquisition loan and participation in income (loss) of joint venture with affiliates 1,124,692 972,995 739,013 Equity in loss from investment in acquistion loan (40,392) Participation in income (loss) of joint venture with affiliates 19,438 (633,906) -------------- -------------- -------------- Net income $ 1,144,130 $ 339,089 $ 698,621 ============== ============== ============== Net income allocated to General Partner $ 191,630 $ 188,500 $ 203,898 ============== ============== ============== Net income allocated to Limited Partners $ 952,500 $ 150,589 $ 494,723 ============== ============== ============== Net income per Limited Partnership Interest (185,486 issued and outstanding) $ 5.14 $ .81 $ 2.67 ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 -------------- -------------- -------------- Operating activities: Net income $ 1,144,130 $ 339,089 $ 698,621 Adjustments to reconcile net income to net cash provided by operating activities: Equity in loss from investment in acquisition loan 40,392 Participation in (income) loss of joint venture with affiliate (19,438) 633,906 Depreciation of properties 808,049 808,049 1,041,549 Amortization of deferred expenses and loan application and processing fees 4,191 9,626 Provision for acquisition loan writedown 438,100 Net change in: Accounts and accrued interest receivable 841,031 (82,785) (242,562) Accounts payable 5,580 (18,489) (36,183) Due to affiliates 22,213 4,378 (9,663) Accrued liabilities 239,914 72,360 41,095 Security deposits (7,629) 18,496 (7,819) -------------- -------------- -------------- Net cash provided by operating activities 3,038,041 1,775,004 1,973,156 -------------- -------------- --------------
Investing activity:
Distribution from joint venture - affiliate 275,720 -------------- Cash provided by investing activity 275,720 -------------- Financing activities:
Distributions to Limited Partners (1,892,752) (1,945,152) (1,869,644) Distributions to General Partner (210,306) (216,128) (207,739) Payment of deferred expenses (55,884) -------------- -------------- -------------- Cash used in financing activities (2,158,942) (2,161,280) (2,077,383) -------------- -------------- --------------
Net change in cash and cash equivalents 879,099 (110,556) (104,227) Cash and cash equivalents at begining of year 2,733,081 2,843,637 2,947,864 -------------- -------------- -------------- Cash and cash equivalents at end of year $ 3,612,180 $ 2,733,081 $ 2,843,637 ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years -----
Buildings and improvements 25 to 30 Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
The Partnership records its investments in real estate at cost, and periodically assesses possible impairment to the value of its properties. In the event that the General Partner determines that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
(b) Deferred expenses consist of leasing commissions paid to unaffiliated brokers which are being amortized on a straight-line basis over the respective lease terms.
(c) Income from operating leases with abatements and scheduled rent increases is recognized on a straight-line basis over the respective lease terms.
(d) Income which represents reimbursements for operating costs such as taxes, maintenance and insurance is recognized as revenue in the period the applicable costs are incurred.
(e) Investment in joint venture with affiliates represents the Partnership's 15.22% interest, under the equity method of accounting, in a joint venture with affiliated partnerships. Under the equity method of accounting, the Partnership records its initial investment at cost and adjusts its investment account for additional capital contributions, distributions and its share of joint venture income or loss.
(f) Cash equivalents include all highly liquid investments with a maturity of three months or less when purchased.
(g) 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.
(h) Several reclassifications have been made in the previously reported 1993 financial statements to conform with the classification used in 1994, including the reclassification of "loan in substantive foreclosure" to real estate to conform with the provisions of Statement of Financial Accounting Standards No. 114 which was adopted as of January 1, 1994. These reclassifications have not changed the 1993 results.
2. Partnership Agreement:
The Partnership was organized on June 20, 1986; however, operations did not commence until 1987. The Partnership Agreement provides for Balcor Equity Partners-IV to be the General Partner and for the admission of Limited Partners through the sale of up to 1,000,000 Limited Partnership Interests at $250 per
Interest, 185,486 of which were sold through December 14, 1987, the termination date of the offering.
Pursuant to the terms set forth in the Partnership Agreement, "Operating Income from Real Properties" of the Partnership will be allocated 10% to the General Partner and 90% to the Limited Partners; and "Operating Losses from Real Properties" and other certain components will be allocated 1% to the General Partner and 99% to the Limited Partners; and "Other 'Operating Income' or 'Operating Losses'" will be allocated 10% to the General Partner and 90% to the Limited Partners.
The Partnership Agreement provides for different allocations of profits and losses and cash distributions to Limited Partners depending on whether the investor originally acquiring the Limited Partnership interest was a taxable or tax-exempt entity.
Ninety percent of Net Cash Receipts available for distribution will be distributed to Limited Partners. To the extent possible, Taxable Limited Partners will receive an allocation of such available Net Cash Receipts generated by the operation of the Partnership's two properties in the same manner as if their investment in the Partnership had been attributable solely to the properties. Taxable Limited Partners will commence sharing in such available Net Cash Receipts generated by the Partnership's investment in the 45 West 45th Street office building at such time as the Taxable Limited Partners' investment in the Partnership is not then solely attributable to the two properties (which time is anticipated to be upon the sale of both properties). The Tax-exempt Limited Partners will be allocated all other Net Cash Receipts to be allocated to the Limited Partners, consisting of (i) 100% of such available Net Cash Receipts generated by the investment in the 45 West 45th Street Office Building (until such time as both of the properties are sold, as described above) plus (ii) the Net Cash Receipts generated by the operation of the two properties, to the extent not allocated to the Taxable Limited Partners as described above. Of the remaining 10% of Net Cash Receipts, 7 1/2% will be paid to the General Partner as its distributive share from Partnership operations and an additional 2 1/2% will be paid to the General Partner for allocation to the Repurchase Fund, which may be utilized to repurchase Interests from Limited Partners pursuant to the terms set forth in the Partnership Agreement.
At the sole discretion of the General Partner and subject to certain limitations, amounts placed in the Repurchase Fund have become available to be used to repurchase Interests from existing Limited Partners. During 1994, the General Partner used amounts placed in the Repurchase Fund to repurchase 327 Interests from Limited Partners at a cost of $59,561. An amount not to exceed that originally allocated to the Repurchase Fund will be returned to the Partnership at liquidation if necessary to permit payment to the Limited Partners of their "Original Capital" plus any deficiency in their "Liquidation Preference," as defined in the Partnership Agreement.
Subject to the provisions of the Partnership Agreement, "Net Cash Proceeds" which are available for distribution will be distributed only to the Limited Partners until such time as the Limited Partners have received a return of their "Original Capital" and their "Liquidation Preference"; thereafter, the remaining "Net Cash Proceeds" will be distributed 90% to the Limited Partners and 10% to the General Partner. The General Partner's share shall be returned to the Partnership if necessary to permit payment to the Limited Partners of any deficiency in the return of their Original Capital and their Preferential Cumulative Distribution on Adjusted Original Capital of 10% per annum.
3. Management Agreements:
As of December 31, 1994, both of the properties owned by the Partnership are under management agreements with a third-party management company. These management agreements provide for annual fees ranging from 3% to 6% of gross operating receipts on the commercial property and of 5% on the residential property.
4. Investment in Joint Venture with Affiliates:
The Partnership and three affiliates (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 owns a 15.22% joint venture interest in the property. The Partnership's investment was reclassified from loan in substantive foreclosure to an investment in joint venture with affiliates effective January 1993. It is the General Partner's opinion that the borrower had effectively surrendered control of the property. During 1993, the Partnership received distributions of $275,720 from the joint venture. In 1993, the joint venture recognized a loss relating to the decline in the fair value of the property. The Partnership's participation in joint venture with affiliates for 1993 includes the Partnership's share of the loss of $900,000.
5. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code, rules and regulations promulgated thereunder and existing interpretations thereof. The accompanying financial statements, which are prepared in accordance with generally accepted accounting principles, will differ from the tax returns due to the different treatment of various items as specified in the Internal Revenue Code. The net effect of these accounting differences is that the net income for 1994 in the financial statements is $186,048 less than the net taxable income for the same period. The Partnership's aggregate cost of land and buildings and improvements for Federal income tax purposes is $33,778,659 at December 31, 1994.
6. Transactions with Affiliates:
Commissions, fees and expenses paid and payable by the Partnership to affiliates are: Year Ended Year Ended Year Ended 12/31/94 12/31/93 12/31/92 -------------- -------------- -------------- Paid Payable Paid Payable Paid Payable ------ ------- ------ ------- ------ -------
Mortgage servicing fees $ 8,750 $ 729 $ 8,750 $ 729 $ 8,813 $ 729 Property management fees 281,422 None 234,845 16,670 245,702 18,324 Reimbursement of expenses to the General Partner, at cost: Accounting 48,642 20,809 40,999 3,391 37,877 2,982 Data processing 26,543 5,752 29,295 6,725 36,335 2,824 Investor communica- tions 18,961 6,461 19,128 1,582 13,936 1,098 Legal 8,311 3,497 3,978 329 3,720 293 Portfolio management 27,917 12,020 25,055 2,072 18,793 1,479 Other 11,434 5,378 11,302 935 4,143 326
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed both of the Partnership's properties until the affiliate was sold to a third party in November 1994.
The Partnership participates in an insurance deductible program with other affiliated partnerships in which the program pays claims up to the amount of the deductible under the master insurance policies for its properties. The program is administered by an affiliate of the General Partner who receives no fee for administering the program. The Partnership's premiums to the deductible insurance program were $26,864, $17,378 and $16,221 for 1994, 1993 and 1992, respectively.
7. Rentals under Operating Leases:
The Partnership receives rental income from the leasing of space at the Evanston Plaza Shopping Center under operating leases. The minimum future rentals (excluding amounts representing executory costs such as taxes, maintenance and insurance) based on operating leases held at December 31, 1994 are approximately as follows:
1995 $ 1,542,000 1996 1,523,000 1997 1,436,000 1998 1,369,000 1999 1,376,000 Thereafter 8,765,000 ----------- $16,011,000 ===========
These rentals include amounts relating to land leases which the Partnership entered into with certain tenants of the shopping center.
Minimum future rentals do not include amounts which may be received from certain tenants based upon a percentage of their gross sales in excess of stipulated minimums. Percentage rentals were not significant during 1994, 1993 and 1992.
The Partnership is subject to the usual business risks regarding the collection of the rentals.
8. Subsequent Event:
In February 1995, the Partnership made a distribution of $476,897 ($3.24 per Taxable Interest and $2.50 per Tax-exempt Interest) to the holders of Limited Partnership Interests, representing the quarterly distribution for the fourth quarter of 1994.
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR EQUITY PENSION INVESTORS-IV A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of acquisition fees, legal fees, appraisal fees, title costs and other related professional fees.
(b) The carrying basis of the Evanston Plaza Shopping Center was reduced due to a permanent impairment in the value of the property. In addition, any payments to and receipts from the seller under a master lease agreement were treated as adjustments to the basis of the property.
(c) The aggregate cost of land for Federal income tax purposes is $7,487,141 and the aggregate cost of buildings and improvements for Federal income tax purposes is $26,291,518. The total of these assets is $33,778,659.
(d) Reconciliation of Real Estate -----------------------------
1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $31,206,941 $31,206,941 $31,206,941
----------- ----------- ----------- Balance at end of year $31,206,941 $31,206,941 $31,206,941 =========== =========== ===========
Reconciliation of Accumulated Depreciation ------------------------------------------
1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $7,555,891 $6,747,842 $5,706,293
Depreciation expense for the year 808,049 808,049 1,041,549 ---------- ---------- ----------
Balance at end of year $8,363,940 $7,555,891 $6,747,842 ========== ========== ==========
(e) Depreciation expense is computed based upon the following estimated useful lives: Years -----
Buildings and improvements 25 to 30 Furniture and fixtures 5