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, 1996
                          -----------------
                                      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 
                               -------------    -------------            
Commission file number 0-9198
                       ------

                           BALCOR PENSION INVESTORS
            ------------------------------------------------------          
            (Exact name of registrant as specified in its charter)

           Illinois                                      36-2943462
-------------------------------                      ------------------- 
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

2355 Waukegan Road
Bannockburn, Illinois                                      60015
------------------------------------------           -------------------
(Address of principal executive offices)                 (Zip Code)    

Registrant's telephone number, including area code (847) 267-1600
                                                   --------------

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----
Securities registered pursuant to Section 12(g) of the Act:

                         Limited Partnership Interests
                         -----------------------------
                               (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 ]
<PAGE>
                                    PART I

Item 1. Business
----------------

Balcor Pension Investors (the "Registrant") is a limited partnership formed in
1977 under the laws of the State of Illinois. The Registrant raised $71,675,000
from sales of Limited Partnership Interests. The Registrant's operations
consisted exclusively of investment in one wrap-around mortgage loan. The
Registrant also operated two properties acquired through foreclosure, and all
financial information included in this report relates to this industry segment.

The Registrant originally funded thirty-six loans. A portion of the Mortgage
Reductions generated by loan repayments was distributed to the holders of
Limited Partnership Interests and the remainder was added to the Registrant's
working capital reserves. As a result of the repayments, foreclosures and
write-offs of thirty-five loans, the Registrant has one loan in its portfolio
as of December 31, 1996. Six properties were acquired through foreclosure, of
which five have been sold and one has been relinquished to the underlying
lender through foreclosure. 

The Registrant's loan receivable is collateralized by the North Capital Office
Building located in Washington, D.C., which is subject to certain competitive
conditions in the market in which it is located.  See "Item 7. Liquidity and
Capital Resources" for additional information. The North Capitol Office
Building wrap-around loan matured in December 1995.  The borrower failed to
make the payment due and in March 1996 filed for bankruptcy protection.  See
"Item 3. Legal Proceedings" and "Item 7. Liquidity and Capital Resources" for
additional information.

In May 1996, the Registrant sold the Huntington Plaza Shopping Center for
$2,400,000, consisting of cash of $2,093,800 and $306,200 in the form of a
purchase money note collateralized by a junior mortgage on the property.  See
"Item 7. Liquidity and Capital Resources" for additional information. 

In July 1996, the Registrant sold the Nob Hill Apartments - Phase I for
$4,775,000, consisting of cash of $4,510,820 and $264,180 in the form of a
promissory note.  See "Item 7. Liquidity and Capital Resources" for additional
information. 

Activity for the purchase of limited partnership interests ("tender offers")
has increased in real estate limited partnerships generally.  Many of these
tender offers have been made by investors seeking to make a profit from the
purchase of interests.  In the event a tender offer is made for interests in
the Registrant, the General Partner will issue a response to Limited Partners
expressing the General Partner's opinion regarding the offer.  Certain
administrative costs will be incurred to respond to a tender offer.  The
General Partner cannot predict with any certainty what impact a tender offer
will have on the operations or management of the Registrant.

The Registrant, by virtue of its investment in a loan receivable which is
collateralized by real estate, is subject to Federal and state laws and
regulations covering various environmental issues.
<PAGE>
 Management of the Registrant utilizes the services of environmental
consultants to assess a wide range of environmental issues and to conduct tests
for environmental contamination as appropriate. The General Partner is not
aware of any potential liability due to environmental issues or conditions that
would be material to the Registrant.  

While it is the Registrant's intent to complete the disposition of its
remaining asset, the bankruptcy of the borrower on the North Capitol Office
Building loan may prevent the loan from being repaid. The timing of the
termination of the Registrant and final distribution of cash will also depend
upon the nature and extent of liabilities and contingencies which exist or may
arise.  Such contingencies may include legal and other fees stemming from
litigation involving the Registrant. In the absence of any contingency, the
reserves will be paid within twelve months of the disposition of the
Registrant's interest in the North Capitol Office Building.  In the event a
contingency arises, reserves may be held by the Registrant for a longer period
of time.

The officers and employees of Balcor Mortgage Advisors, 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
------------------

As of December 31, 1996, the Registrant no longer owns any physical properties.

See Notes to Financial Statements for other information regarding prior real
property investments.

Item 3. Legal Proceedings
-------------------------

Proposed Class Action
---------------------

In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case
No.:90-C-0726, U.S. District Court, Northern District of Illinois).  The
Registrant, the General Partner, seven affiliated limited partnerships
(together with the Registrant, the "Related Partnerships") and other affiliates
were the defendants.  The complaint alleged violations of Federal securities
laws as to the adequacy and accuracy of disclosure of information in the
offering of limited partnership interests in the Related Partnerships and
alleged breach of fiduciary duty, fraud, negligence and violations under the
Racketeer Influenced and Corrupt Organizations Act.  The complaint sought
compensatory and punitive damages.

A settlement of these proceedings was approved by the District Court on
November 20, 1996 on the terms previously described in the form of settlement
agreement attached as Exhibit 99 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1996.  Distributions to be paid pursuant to the
settlement were paid in February 1997.  All proceedings relating to this matter
are now dismissed.
<PAGE>
North Capitol Building
----------------------

In May 1981, the Registrant funded a $4,140,000 loan to North Capitol, Ltd., a
Washington, D.C. limited partnership, evidenced by a promissory note in the
amount of $30,520,000 and collateralized by a wrap-around mortgage on the North
Capitol Building, Washington, D.C.  In December 1995, the loan matured and the
borrower failed to make the principal payment due.  Pursuant to a forbearance
agreement dated January 24, 1996, the Registrant agreed not to exercise its
rights against the borrower through March 1, 1996.  The borrower continued to
make monthly interest only payments through February 1996 while negotiations
with the Registrant for a repayment of the loan continued.  The borrower did
not make the March 1996 monthly interest payment and the loan was placed in
default on March 7, 1996.  On March 22, 1996, the borrower commenced
proceedings under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court, Southern District of New York, In re North Capitol Limited Partnership,
Case No. 96B41523.  The General Partner will take such actions as are necessary
to protect the Registrant's interests.

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 1996.

                                    PART II

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 previous distributions, see Item 7.  Liquidity and Capital Resources.

As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 3,523.

Item 6. Selected Financial Data
-------------------------------

                                      Year ended December 31,                 
                   ---------------------------------------------------------
                     1996        1995        1994         1993       1992
                   ---------- ----------- ----------- ----------- ----------

Total income        $777,868  $ 2,627,452 $ 2,055,694 $ 2,633,494 $ 2,662,072
Provision for 
 losses on 
 loans, real 
 estate and 
 accrued interest 
 receivable        4,617,973    4,200,000        None   1,988,000  2,750,000
<PAGE>
Net (loss) income 
  before gain on 
  foreclosure of 
  property, gains on
  sales of real estate
  and extraordinary
  item             (4,931,881) (2,324,001)  1,465,209      92,635  (862,690)
Net (loss) income  (2,885,380) (2,324,001)  1,465,209     182,117  (862,690)
Net (loss) income
  per Limited
  Partnership
  Interest             (40.26)    (32.10)       20.24        2.52    (11.92)
Total assets         3,917,770 15,210,655  20,512,471  22,374,872 32,538,628
Mortgage notes 
  payable                         575,301     575,301   3,057,594  9,247,419
Distributions per
  Limited
  Partnership
  Interest (A)          106.27      37.15       13.00       53.76      43.16


(A) These amounts include distributions of original capital of $56.27, $12.40,
$40.76, and $5.41 per Limited Partnership Interest for the years 1996, 1995,
1993, and 1992, respectively.


Item 7. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------
Results of Operations
---------------------

Operations
----------

Summary of Operations
---------------------

Balcor Pension Investors (the "Partnership") recorded provisions for potential
loan losses related to the North Capitol Office Building loan in 1996 and 1995,
respectively, resulting in the recognition of a net loss during each of 1996
and 1995 as compared to net income for 1994.  The loss during 1996 was
partially offset by gains recognized on the sales of the Nob Hill Apartments -
Phase I and the Huntington Plaza Shopping Center during 1996.  Further
discussion of the Partnership's operations is summarized below.    

1996 Compared to 1995
---------------------

The borrower on the North Capitol Office Building loan failed to make the
payment due upon maturity of the wrap-around loan in December 1995 and the loan
was placed on non-accrual status.  In March 1996, the borrower discontinued the
monthly payments required on the loan pursuant to a forbearance agreement and
subsequently filed for bankruptcy protection.
<PAGE>
This resulted in a decrease in net interest income on the loan receivable
during 1996 when compared to 1995. Due to the timing of the recognition of
interest expense on the underlying mortgage loan, additional interest expense
was recognized by the Partnership in 1996 which resulted in the recognition
of net interest expense on loans receivable during 1996.
   
The Partnership's wrap-around loan is on non-accrual status at December 31,
1996 and is collateralized by the North Capitol Office Building. For nonaccrual
loans, income is recorded only as cash payments are received from the borrower.
The funds advanced by the Partnership for this loan totaled approximately
$4,100,000, representing approximately 6.4% of original funds advanced. This
loan has been fully reserved as of December 31, 1996.  See Liquidity and
Capital Resources, below, for additional information.
 
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. The Partnership
sold its remaining properties, the Huntington Plaza Shopping Center and the Nob
Hill Apartments - Phase I in May 1996 and July 1996, respectively. The timing
of the sales resulted in a decrease in income from real estate held for sale
during 1996 as compared to 1995.

Interest income on short-term investments decreased primarily as a result of
lower interest rates in 1996 as compared to 1995.

Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties, a borrower's ability to
repay a loan, or in the value of the collateral property. Determinations of
fair value are made periodically on the basis of performance under the terms of
the loan agreement and assessments of property operations. Determinations of
fair value represent estimations based on many variables which affect the value
of real estate, including economic and demographic conditions. The Partnership
recognized loan loss provisions of $4,042,672 and $3,900,000 in 1996 and 1995,
respectively, related to the North Capitol Office Building loan. The
Partnership also recognized a provision of $575,301 in 1996 in connection with
the foreclosure of the remaining building to which the Partnership held title
in the Normandy Mall.  In addition, during 1996, the Partnership recognized a
recovery of the  $300,000 provision recorded by the Partnership in 1995 related
to Huntington Plaza Shopping Center to provide for a change in the estimate of
the fair value of the property. During 1995 an allowance of $1,269,445 was
written off related to the Waterford/Ferndale Centers wrap-around loan.

During 1996, the Partnership recognized participation expense of $473,394 in
connection with the sale of Huntington Plaza Shopping Center.  See Liquidity
and Capital Resources below for additional information. 

As a result of a special distribution of Cash Flow made in October 1996,
General Partner management fees increased during 1996 when compared to 1995.

Legal fees and other expenses incurred in 1995 relating to litigation for the
Normandy Mall resulted in a decrease in administrative expenses during 1996
when compared to 1995.
<PAGE>
During 1996, the Partnership recognized gains of $70,769 and $1,400,431 in
connection with the sales of the Huntington Plaza Shopping Center and the Nob
Hill Apartments - Phase I, respectively.

During 1996, the Partnership recognized a $575,301 extraordinary gain on
forgiveness of debt in connection with the foreclosure of the remaining
building to which it held title in the Normandy Mall. See Liquidity and Capital
Resources below for additional information.

1995 Compared to 1994
---------------------

The Partnership received $600,000 from the guarantors of the loan
collateralized by Normandy Mall and Norwood Plaza as settlement of a lawsuit
which resulted in an increase in net interest income on loans receivable during
1995 as compared to 1994. 

No provisions related to loans or real estate were recognized by the
Partnership in 1994.

Primarily as a result of higher interest rates, interest income on short-term
investments increased during 1995 as compared to 1994.

General Partner management fees increased in 1995 as compared to 1994 due to a
special distribution to Limited Partners of Cash Flow in 1995.

Administrative expenses increased in 1995 as compared to 1994 as a result of
higher legal fees relating to litigation involving Normandy Mall

Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership as of December 31, 1996 decreased by
approximately $1,576,000  when compared to December 31, 1995. The Partnership
used cash of approximately $143,000 to fund operating activities. The revenue
generated primarily by property operations and interest income on short-term
investments was offset by the payment of administrative expenses. The timing of
the sale of the Partnership's properties in 1996 and the default by the
borrower under the forbearance agreement on the remaining loan investment in
1996 resulted in a significant decrease in operating cash flow.  Cash flow of
approximately $6,221,000 from investing activities was generated by the sales
of the Huntington Plaza Shopping Center and Nob Hill Apartments - Phase I. The
Partnership's financing activities consisted primarily of the payment of
distributions to the Partners totaling approximately $7,655,000.     

The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property-related expenditures.
The Huntington Plaza Shopping Center, which was sold in May 1996, and the Nob
Hill Apartments - Phase I, which was sold in July 1996, both generated positive
cash flow prior to their sales in 1996 and for 1995.

In December 1995, the North Capitol Office Building wrap-around loan matured
and the borrower failed to make the principal payment due. Pursuant to a
forbearance agreement dated January 24, 1996, the Partnership agreed not to
exercise its rights against the borrower through March 1, 1996.
<PAGE>
The borrower continued to make monthly interest-only payments on the loan while
negotiations with the Partnership for repayment continued. The borrower did not
make the March 1996 payment, and the loan was placed in default on March 7,
1996. On March 22, 1996, the borrower commenced proceedings under Chapter 11 of
the U.S. Bankruptcy Code. The General Partner will take such actions as are
necessary to protect the Partnership's interests.

The North Capitol buildings are comprised of two nine-story class "B" office
buildings each with approximately 290,000 square feet of rental space.  The
buildings are located in the Capitol Hill sub-market in Washington, D.C. This
sub-market contains approximately 8.3 million square feet of office space in 81
Class "A" and Class "B" buildings.  The sub-market currently has a nine percent
vacancy.  Prospective tenants in this sub-market encounter a shortage of large
available blocks, but new options are emerging because of tenant move-outs as
well as renovations and some new development.  Many buildings with available
blocks over 100,000 square feet were built in the 1960's and 1970's and, in
most cases, owners are waiting for pre-lease agreements from large tenants
before going ahead with the necessary renovations.

In 1991, the Partnership obtained title to the Normandy Mall and Norwood Plaza
shopping centers and in 1993, title to the properties, with the exception of
one building (the "Building") in Normandy Mall, was relinquished to the first
mortgage holder pursuant to a settlement agreement. The first mortgage loan
collateralized by the Building was held by a different third party lender, Gulf
Life Insurance Company ("Gulf Life"), which commenced foreclosure proceedings
in January 1995. Gulf Life subsequently sold the loan to American Mortgage
Acquisition Corporation ("American"). A foreclosure sale of the Building took
place in March 1996 pursuant to which American made a successful bid and
subsequently obtained title to the Building in April 1996. The Partnership has
no further interest in the Building or the remainder of Normandy Mall. See Note
9 of Notes to Financial Statements for additional information.

In 1993, the Partnership acquired title to the Huntington Plaza Shopping Center
through foreclosure. Prior to the foreclosure, this property had been
encumbered by a second mortgage loan which was subordinate to the Partnership's
loan. The Partnership and the holder of the second mortgage executed an
agreement providing that the holder of the second mortgage would not contest
the Partnership's foreclosure action and that any net proceeds from the sale of
the property would be distributed to both the Partnership and the second
mortgage holder pursuant to an agreed-upon formula. In May 1996, the
Partnership sold the Huntington Plaza Shopping Center for $2,400,000,
consisting of $306,200 in the form of a purchase money note collateralized by a
junior mortgage on the property and cash totaling $2,093,800. From the
proceeds, $167,194 was paid to the second mortgage holder. In addition, the
second mortgage holder agreed to accept the $306,200 purchase money note as
full settlement of the agreement. These amounts totaling $473,394, represent
the second mortgage holder's participation pursuant to the 1993 agreement. From
the proceeds of the sale, the Partnership paid $3,088 of selling costs.  Net
proceeds received by the Partnership from this transaction were $1,923,518,
which were distributed to the Partners in July 1996. See Note 10 of Notes to
Financial Statements for additional information.

In July 1996, the Partnership sold the Nob Hill Apartments - Phase I for
$4,775,000, consisting of cash totaling $4,510,820 and $264,180 in the form of
a promissory note which matured in December 1996.
<PAGE>
From the proceeds of the sale the Partnership paid $212,988 of selling costs.
Net proceeds of $4,297,832 were received by the Partnership of which the cash
portion was distributed to Limited Partners in October 1996. Full payment of
the promissory note was received by the Partnership in January 1997. See Note
10 of Notes to Financial Statements for additional information.

The Partnership made four distributions totaling $106.27, $37.15 and $13.00 per
Interest in 1996, 1995 and 1994, respectively.  See Statement of Partner's
Capital for additional information.  Distributions were comprised of $50.00 per
Interest of Cash Flow and $56.27 per Interest of Mortgage Reductions in 1996;
$24.75 per Interest of Cash Flow and $12.40 per Interest of Mortgage Reductions
in 1995; and $13.00 per Interest of Cash Flow in 1994. The level of Cash Flow
distributions in 1996 increased from the amounts distributed in 1995 due
primarily to proceeds received from the sales of the Huntington Plaza Office
Building and Nob Hill Apartments - Phase I in excess of the original funds
advanced for the loans collateralized by the properties, which is classified as
Cash Flow. The level of Cash Flow distributions in 1995 increased from the
amounts distributed in 1994 due primarily to the Cash Flow received from the
settlement of the Normandy Mall lawsuit.

In January 1997, the Partnership paid a distribution of $358,375 to the holders
of Limited Partnership Interests representing the regular quarterly
distribution of available Cash Flow of $5.00 per Interest for the fourth
quarter of 1996. The level of the regular quarterly distribution remained
unchanged from the amounts distributed to Limited Partners during 1996. The
Partnership will issue a distribution in 1997 from cash reserves.  This will be
the final distribution to the Limited Partners prior to the termination of the
Partnership. To date, Limited Partners have received cumulative distributions
of $1,820.08 per $1,000 Interest, of which $1,216.41 represents Cash Flow from
operations and $603.67 represents a return of Original Capital.  

In February 1997, the General Partner made a settlement payment of $16,976
($.27 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. vs. Balcor Pension Investors, et. al. class action lawsuit.

While it is the Partnership's intent to complete the disposition of its
remaining asset, the bankruptcy of the borrower on the North Capitol Office
Building loan may prevent the loan from being repaid. The timing of the
termination of the Partnership and final distribution of cash will also depend
upon the nature and extent of liabilities and contingencies which exist or may
arise.  Such contingencies may include legal and other fees stemming from
litigation involving the Partnership. In the absence of any contingency, the
reserves will be paid within twelve months of the disposition of the
Partnership's interest in the North Capitol Office Building.  In the event a
contingency arises, reserves may be held by the Partnership for a longer period
of time.

The General Partner believes it has retained, on behalf of the Partnership, an
appropriate amount of working capital to meet cash or liquidity requirements
which may occur.  

Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
<PAGE>
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. Financial Statements and Supplementary Data
---------------------------------------------------

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
-----------------------------------------------------------------------
Financial Disclosure
--------------------

On September 14, 1995, the Registrant approved the engagement of Coopers &
Lybrand L.L.P. as its independent auditors for the fiscal year ending December
31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed as
auditors of the Registrant effective September 14, 1995.  The General Partner
of the Registrant approved the change in auditors.

The reports of Ernst & Young LLP on the Registrant's financial statements for
each of the two fiscal years ended December 31, 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.

In connection with the audits of the Registrant's financial statements for each
of the two fiscal years ended December 31, 1994, and in the subsequent interim
period, there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst &
Young LLP would have caused Ernst & Young LLP to make reference to the matter
in their report.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

(a) Neither the Registrant nor Balcor Mortgage Advisors, its General Partner,
has a Board of Directors.

(b, c & e) The names, ages and business experiences 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                 James E. Mendelson
         Senior Vice President                 John K. Powell, Jr.
         Managing Director, Chief              Jayne A. Kosik
            Financial Officer, Treasurer
            and Assistant Secretary                            


      Thomas E. Meador (age 49) 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. 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 42) joined Balcor in September 1988 and is
       responsible for due diligence analysis and real estate advisory
       services for Balcor and American Express Company. He also has
       supervisory responsibility for Balcor's environmental matters. Mr.
       Darragh received masters' degrees in Urban Geography from Queen's
       University and in Urban Planning from Northwestern University.

       James E. Mendelson (age 34) joined Balcor in July 1984 and is
       responsible for Balcor's property sales activities. He also has
       supervisory responsibility for Balcor's accounting, financial,
       treasury, investor services and investment administration functions.
       From 1989 to 1995, Mr. Mendelson was Vice President - Transaction
       Management and Vice President - Senior Transaction Manager and had
       responsibility for various asset management matters relating to real
       estate investments made by Balcor, including negotiations for the
       restructuring of mortgage loan investments. Mr. Mendelson received his
       M.B.A. degree from the University of Chicago. 

       John K. Powell, Jr. (age 46) 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 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 39) joined Balcor in August 1982 and, as Chief
       Financial Officer, is responsible for Balcor's financial, human
       resources and treasury functions.
<PAGE>
        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 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 1996.

Item 11. Executive Compensation
-------------------------------

The Registrant paid $3,309 in 1996 to one of the executive officers and
directors of Balcor Mortgage Advisors, 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.  Certain of the
remaining 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 8 of Notes to Financial
Statements for the information relating to transactions with affiliates.

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             Mellon Bank NA        5,200        7.18%
Partnership         Custodian for
Interests           Sherwin-Williams      Limited 
                    Collective            Partnership
                    Investment Trust      Interests
                    Pittsburgh, 
                    Pennsylvania

(b) Neither Balcor Mortgage Advisors nor its officers own any Limited
Partnership Interests of the Registrant.

Relatives and affiliates of the officers and partners of the General Partner do
not own any additional Interests.
<PAGE>
(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
-------------------------------------------------------

(a & b) See Note 8 of Notes to Financial Statements for information relating to
transactions with affiliates.

See Note 3 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. Exhibits and Reports on Form 8-K
-----------------------------------------

(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 the Amended
and Restated Certificate of Limited Partnership of Balcor Pension Investors,
previously filed as Exhibits 3(a) and 3(b), respectively, to Amendment No. 2 to
the Registrant's Registration Statement on Form S-11 dated December 15, 1977
(Registration No. 2-60478) are hereby incorporated herein by reference.

(4) Form of Subscription Agreement set forth as Exhibit 3(c) to Amendment No. 2
to the Registrant's Registration Statement on Form S-11 dated December 15, 1977
(Registration No. 2-60478) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 are incorporated herein by reference.

(10) Material Contracts:

(a)(i) Agreement of Sale and attachment thereto; First Amendment to Agreement
of Sale; Form of Junior Mortgage and Security Agreement; Form of Principal
Note; and Satisfaction and Release, relating to the sale of Huntington Plaza,
Huntington, Indiana, previously filed as Exhibits (2)(a), (b), (c), (d) and (e)
to the Registrant's Current Report on Form 8-K dated April 26, 1996 are
incorporated herein by reference.

(a)(ii) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of Huntington Plaza, Huntington, Indiana, previously filed as Exhibit
(10)(b) to the Registrant's Report on Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.
<PAGE>
(b) Agreement of Sale and attachment thereto relating to the sale of Nob Hill
Apartments - Phase I, previously filed as Exhibit 2(a) to the Registrant's
Current Report on Form 8-K dated June 4, 1996, is incorporated herein by
reference.

(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 is hereby
incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.

(99) Form of Notice of Proposed Class Action Settlement and Hearing relating
to Paul Williams and Beverly Kennedy, et al. vs. Balcor Pension Investors, 
et al. previously filed as Exhibit (99)(i) to the Registrant's Report on
Form 10-Q for the quarter ended June 30, 1996 is incorporated herein by
reference.

(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended December 31, 1996.

(c) Exhibits: See Item 14(a)(3) above.

(d) Financial Statement Schedules: None
<PAGE>

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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


                         By:  /s/ Jayne A. Kosik         
                             ----------------------------------
                             Jayne A. Kosik
                             Managing Director and  
                             Chief Financial Officer 
                             (Principal Accounting and Financial 
                             Officer) of Balcor Mortgage Advisors,
                             the General Partner

Date:  March 27, 1997             
       --------------

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
/s/ Thomas E. Meador     Advisors, the General Partner       March 27,1997     
----------------------                                       -------------
    Thomas E. Meador
                         Managing Director and
                         Chief Financial Officer 
                         (Principal Accounting and Financial
                         Officer) of Balcor Mortgage
/s/ Jayne A. Kosik       Advisors, the General Partner       March 27, 1997   
----------------------                                       --------------
    Jayne A. Kosik
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS 



Report of Independent Accountants

Report of Independent Auditors

Financial Statements:

Balance Sheets, December 31, 1996 and 1995

Statements of Partners' Capital,  for the years ended  December 31, 1996,  1995
and 1994

Statements of Income and Expenses, for the years ended December 31, 1996,  1995
and 1994

Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994

Notes to Financial Statements

Financial Statement  Schedules  are  omitted  for  the  reason  that  they  are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
                     REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of
Balcor Pension Investors:

We have audited the accompanying balance sheets of Balcor Pension Investors
(An Illinois Limited Partnership) as of December 31, 1996 and 1995 and the
related statements of partners' capital, income and expenses and cash flows
for each of the two years in the period ended December 31, 1996.  These 
financial statements are the responsibility of the Partnership's management.  
Our responsibility is to express an opinion on these financial statments 
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 stamements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors at
December 31, 1996 and 1995, and results of its operations and its cash flows
for each of the two years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

As described in Note 1 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon disposition of all its
real estate interests.  As described in Note 4 to the financial statments, the
Partnership's remaining real estate interest is an investment in a note 
receivable collateralized by the commercial office building owned by an
unrelated entity.  The owner of the office building has filed for Chapter 11
bankruptcy protection.  At December 31, 1996 the Partnership has provided an
allowance equal to their equity in the note receivable.  The Partnership will
continue to operate until the bankruptcy proceedings are resolved and the
Partnership can dispose of its remaining real estate interest at which time
the Partnership will commence liquidation and dissolve.



                                     /s/ Coopers & Lybrand, L.L.P.
                                    
                                     COOPERS & LYBRAND, L.L.P.

Chicago, Illinois
March 24, 1997









                        REPORT OF INDEPENDENT AUDITORS

To the Partners of
Balcor Pension Investors:

We have audited the accompanying statments of partners' capital, income and
expenses and cash flows of Balcor Pension Investors (An Illinois Limited
Partnership) for the year ended December 31, 1994.  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 audit.

We conducted our audit 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 statments.  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 audit provides a reasonable basis 
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Balcor
Pension Investors for the year ended December 31, 1994, in conformity with 
generally accepted accounting principles.




                                    /s/ Ernst & Young LLP

                                    ERNST & YOUNG LLP


Chicago, Illinois
March 21, 1995
























                           BALCOR PENSION INVESTORS
                       (An Illinois Limited Partnership)

                                BALANCE SHEETS
                          December 31, 1996 and 1995
                                               
                                    ASSETS

                                                  1996            1995
                                             -------------   -------------
Cash and cash equivalents                    $  3,583,628    $  5,159,556
Accounts and accrued interest receivable           69,962         245,402
                                             -------------   -------------
                                                3,653,590       5,404,958
                                             -------------   -------------
Investment in loans receivable:
   Loans receivable - wrap-around mortgages    30,708,107      30,443,927
Less:                                           
   Loans payable - underlying mortgages        21,547,919      21,547,919
   Allowance for potential loan losses          8,896,008       4,853,336
                                             -------------   -------------
Net investment in loans receivable                264,180       4,042,672

Real estate held for sale (net of allowance
  of $300,000 in 1995)                                          5,763,025
                                             -------------   -------------
                                                  264,180       9,805,697
                                             -------------   -------------
                                             $  3,917,770    $ 15,210,655
                                             =============   =============

                      LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                             $      9,100    $     69,002
Due to affiliates                                  72,488          42,885
Other liabilities, principally real estate      
   taxes and security deposits                                    147,277
Mortgage note payable                                             575,301
                                             -------------   -------------
     Total liabilities                             81,588         834,465
                                             -------------   -------------
Commitments and contingencies

Limited Partners' capital (71,675 
  Partnership Interests issued
  and outstanding)                              4,059,555      14,561,840

General Partner's deficit                        (223,373)       (185,650)
                                             -------------   -------------
     Total partners' capital                    3,836,182      14,376,190
                                             -------------   -------------
                                             $  3,917,770    $ 15,210,655
                                             =============   =============

The accompanying notes are an integral part of the financial statements.
<PAGE>
            
                           BALCOR PENSION INVESTORS
                       (An Illinois Limited Partnership)

                        STATEMENTS OF PARTNERS' CAPITAL
             for the years ended December 31, 1996, 1995 and 1994


                                 Partners' Capital (Deficit) Accounts
                                 -----------------------------------------
                                                  General       Limited
                                    Total         Partner       Partners
                                 ------------- ------------- -------------

Balance at December 31, 1993     $ 18,857,965  $   (148,582) $ 19,006,547

Cash distributions (A)               (941,584)       (9,808)     (931,776)

Net income for the year
  ended December 31, 1994           1,465,209        14,652     1,450,557
                                 ------------- ------------- -------------
Balance at December 31, 1994       19,381,590      (143,738)   19,525,328

Cash distributions (A)             (2,681,399)      (18,672)   (2,662,727)

Net loss for the year
  ended December 31, 1995          (2,324,001)      (23,240)   (2,300,761)
                                 ------------- ------------- -------------
Balance at December 31, 1995       14,376,190      (185,650)   14,561,840

Cash distributions (A)             (7,654,628)      (37,723)   (7,616,905)

Net loss for the year
  ended December 31, 1996          (2,885,380)                 (2,885,380)
                                 ------------- ------------- -------------
Balance at December 31, 1996     $  3,836,182  $   (223,373) $  4,059,555
                                 ============= ============= =============


(A)  Summary of cash distributions paid per Limited Partnership 
     Interest:

                                      1996          1995          1994
                                 ------------- ------------- -------------
              First Quarter      $      17.33  $       3.25  $       3.25
              Second Quarter             5.00          5.00          3.25
              Third Quarter             29.94         23.90          3.25
              Fourth Quarter            54.00          5.00          3.25

The accompanying notes are an integral part of the financial statements.
<PAGE>


                           BALCOR PENSION INVESTORS
                       (An Illinois Limited Partnership)

                       STATEMENTS OF INCOME AND EXPENSES
             for the years ended December 31, 1996, 1995 and 1994

                                       1996          1995          1994
                                 ------------- ------------- -------------
Income:
  Interest on loans receivable   $    171,861  $  3,266,914  $  2,740,650
  Less interest on loans                          
    payable - underlying 
    mortgages                         247,334     1,635,396     1,696,371
                                 ------------- ------------- -------------
  Net interest (expense) income
    on loans receivable               (75,473)    1,631,518     1,044,279
  Income from operations of 
    real estate held for sale         286,949       697,288       740,966
  Interest on short-term 
    investments                       266,392       298,646       270,449
  Recovery of loss on
    real estate                       300,000
                                 ------------- ------------- -------------
      Total income                    777,868     2,627,452     2,055,694
                                 ------------- ------------- -------------
Expenses:
  Provision for potential 
    losses on loans 
    and accrued   
    interest receivable             4,617,973     4,200,000
  Participation expense related 
    to sale of real estate            473,394
  General Partner management 
    fees                              135,806        79,975        39,232
  Administrative                      482,576       671,478       551,253
                                 ------------- ------------- -------------
      Total expenses                5,709,749     4,951,453       590,485
                                 ------------- ------------- -------------
Net (loss) income before gain  
  on sales of real estate
  and extraordinary item           (4,931,881)   (2,324,001)    1,465,209
                                                              
Gain on sales of real estate        1,471,200
                                 ------------- ------------- -------------
Net (loss) income before
  extraordinary item             $ (3,460,681) $ (2,324,001) $  1,465,209

Extraordinary item:
   Gain on forgiveness of debt        575,301
                                 ------------- ------------- -------------
Net (loss) income                $ (2,885,380) $ (2,324,001) $  1,465,209
                                 ============= ============= =============
<PAGE>
                              BALCOR PENSION INVESTORS
                          (An Illinois Limited Partnership)

                           STATEMENTS OF INCOME AND EXPENSES
                 for the years ended December 32, 1996, 1995, and 1994
                                      (Continued)

Loss before extaordinary 
  item allocated
  to Limited Partners            $ (3,460,681)         None          None
                                 ============= ============= =============
Loss before extaordinary 
  item per Limited
  Partnership Interest
  (71,675 issued and 
  outstanding)                   $     (48.29)         None          None
                                 ============= ============= =============
Extraordinary item allocated 
 to Limited Partners             $    575,301          None          None
                                 ============= ============= =============
Extraordinary item per Limited 
  Partnership Interest (71,675 
  issued and outstanding)        $       8.03          None          None
                                 ============= ============= =============
Net (loss) income allocated
  to General Partner             $       None       (23,240)       14,652
                                 ============= ============= =============
Net (loss) income allocated  
  to Limited Partners            $ (2,885,380) $ (2,300,761) $  1,450,557
                                 ============= ============= =============
Net (loss) income per Limited 
  Partnership Interest 
  (71,675 issued and
  outstanding)                   $     (40.26) $     (32.10) $      20.24
                                 ============= ============= =============

The accompanying notes are an integral part of the financial statements.
<PAGE>

                           BALCOR PENSION INVESTORS
                       (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
             for the years ended December 31, 1996, 1995 and 1994


                                     1996          1995          1994
                                 ------------- ------------- -------------
Operating activities:
  Net (loss) income              $ (2,885,380) $ (2,324,001) $  1,465,209
  Adjustments to reconcile                        
    net (loss) income to net                      
    cash provided by operating      
    activities:
      Gain on forgiveness of debt    (575,301)
      Participation expense 
       related to sale of
         real estate                  473,394
      Gain on sales of
        real estate                (1,471,200)
      Provision for potential
        losses on loans, 
        real estate and accrued     
        interest receivable         4,617,973     4,200,000
      Recovery of loss on
        real estate                  (300,000)
      Net change in:
        Accounts and accrued                                  
          interest receivable         175,440       502,622      (527,099)
        Accounts and accrued                      
          interest payable            (59,902)     (254,428)       96,895
        Due to affiliates              29,603       (42,347)       45,954
        Other liabilities            (147,277)          359       (46,582)
                                 ------------- ------------- -------------
  Net cash (used in) provided
    by operating activities          (142,650)    2,082,205     1,034,377
                                 ------------- ------------- -------------
Investing activities:
  Proceeds from sales of
    real estate                     6,604,620                   4,050,000
  Distribution of proceeds to
    second mortgagee                 (167,194)
  Costs incurred in connection 
    with sales of real estate        (216,076)                   (121,500)
  Improvements to property                                        (20,000)
                                 -------------               -------------
  Net cash provided by 
    investing activities            6,221,350                   3,908,500
                                 -------------               -------------
<PAGE>
Financing activities:
  Distributions to Limited          
    Partners                       (7,616,905)   (2,662,727)     (931,776)
  Distributions to General          
    Partner                           (37,723)      (18,672)       (9,808)
  Principal payments on                           
    underlying loans and            
    mortgage notes payable                         (467,442)     (505,908)
  Repayment of underlying loans     
    and mortgage notes payable                                 (2,453,858)
                                 ------------- ------------- -------------
  Net cash used in financing 
    activities                     (7,654,628)   (3,148,841)   (3,901,350)
                                 ------------- ------------- -------------

Net change in cash and cash 
  equivalents                      (1,575,928)   (1,066,636)    1,041,527
Cash and cash equivalents at 
  beginning of period               5,159,556     6,226,192     5,184,665
                                 ------------- ------------- -------------
Cash and cash equivalents at 
  end of period                  $  3,583,628  $  5,159,556  $  6,226,192
                                 ============= ============= =============
                                                              
The accompanying notes are an integral part of the financial statements.
<PAGE>
                           BALCOR PENSION INVESTORS
                       (An Illinois Limited Partnership)

                         NOTES TO FINANCIAL STATEMENTS

1. Nature of Partnership's Business:

Balcor Pension Investors (the "Partnership") has an investment in a wrap-around
loan receivable collateralized by a property located in Washington, D.C. 

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. While it is the  Partnership's intent to complete the  disposition
of its remaining  asset, the bankruptcy  of the borrower  on the North  Capitol
Office Building loan may prevent the loan from being repaid. The timing of  the
termination of the Partnership and final distribution of cash will also  depend
upon the nature and extent of liabilities and contingencies which exist or  may
arise.   Such contingencies  may include  legal and  other fees  stemming  from
litigation involving the Partnership.  In the absence  of any contingency,  the
reserves  will  be  paid  within  twelve  months  of  the  disposition  of  the
Partnership's interest in the  North Capitol Office Building.   In the event  a
contingency arises, reserves may be held by the Partnership for a longer period
of time.

2. 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) 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  terms. Service income includes  reimbursements
of operating costs such as real estate taxes, maintenance and insurance and was
recognized as revenue in the period the applicable costs were incurred.

(c) The Partnership records  wrap-around mortgage loans at  the face amount  of
the mortgage  instrument which  includes the  outstanding indebtedness  of  the
borrower under the terms of the underlying mortgage obligations. The underlying
mortgage obligations are recorded  as a reduction  of the wrap-around  mortgage
loan and the resulting balance represents the Partnership's net advance to  the
borrower. The Partnership is  responsible for making  periodic payments to  the
underlying mortgage lender only to the extent that payments as required by  the
wrap-around mortgage  agreement  are  received  by  the  Partnership  from  the
borrower.
<PAGE>
(d) Income on loans is recorded as  earned in accordance with the terms of  the
related loan agreements. The  accrual of interest is  discontinued when a  loan
becomes ninety days contractually delinquent or sooner when, in the opinion  of
the General Partner, an  impairment has occurred in  the value of the  property
collateralizing the  loan.  Income  on  nonaccrual loans  or  loans  which  are
otherwise not performing in accordance with  their terms is recorded on a  cash
basis.

Various loan  agreements  provide  for  participation  by  the  Partnership  in
increases in  value of  the collateral  property  when the  loan is  repaid  or
refinanced. In  addition,  certain loan  agreements  allow the  Partnership  to
receive a  percentage of  rental income  exceeding base  amount.  Participation
income is reflected in the accompanying Statements of Income and Expenses  when
received.

Income from operations of  real estate owned is  reflected in the  accompanying
Statements of Income and Expenses net of related direct operating expenses.

(e) Loan  losses on  mortgage notes  receivable are  charged to  income and  an
allowance account is  established when  the General Partner  believes the  loan
balance will not be recovered.  The General Partner assesses 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 is transferred to real  estate
held for sale after the fair value of the property, less costs of disposal,  is
assessed.  Upon the transfer to real estate  held for sale, a new basis in  the
property is 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 General  Partner periodically  assessed, but  not less  than on  an  annual
basis, the 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 a property's  fair value  were
recorded by an adjustment to the property allowance account and was  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  considers  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 indicate otherwise. 

(f) The Financial  Accounting Standard Board's  Statement No. 107,  "Disclosure
About Fair Value of Financial  Instruments", requires disclosure of fair  value
information about financial instruments for which it is practicable to estimate
that value.  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  may 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.
<PAGE>
(g)  Cash  and  cash  equivalents  include  all  unrestricted,  highly   liquid
investments with an original maturity of three months or less. Cash is held  or
invested in one financial institution.

(h) For financial statement purposes, in previous years partners were allocated
income and  loss in  accordance with  the profit  and loss  percentages in  the
Partnership Agreement. In order for the capital accounts of the General Partner
and Limited  Partners  to  appropriately  reflect  their  respective  remaining
economic interests as provided  for in the  Partnership Agreement, the  General
Partner was allocated no loss in 1996 for financial statement purposes.

(i) 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.

3. Partnership Agreement:

The Partnership  was  organized  in October  1977.  The  Partnership  Agreement
provides for Balcor  Mortgage Advisors to  be the General  Partner and for  the
admission of Limited Partners through the sale of Limited Partnership Interests
at $1,000 per Interest up  to a maximum of  100,000 Interests, 71,675 of  which
were sold prior to January 9, 1981, the termination date of the offering.

The Partnership Agreement provides that the General Partner or an affiliate  of
the General  Partner will  service  the Partnership's  loans and  will  receive
mortgage servicing fees at  an annual rate  equal to 1/4 of  1% of the  amounts
advanced by the  Partnership and  outstanding from  time to  time. The  General
Partner will receive a management fee equal to 4% of the Cash Flow  distributed
when and as cash  distributions are made to  the Limited Partners. The  General
Partner is  also reimbursed  for certain  expenses incurred  in the  day-to-day
operations of the Partnership. In addition, the General Partner may receive  an
incentive  partnership  management  fee  of   10%  of  distributed  Cash   Flow
subordinated on an annual basis to a 14% per annum Non-Cumulative  Distribution
to Limited  Partners on  Adjusted Original  Capital.  See Note  8 of  Notes  to
Financial Statements for  amounts paid or  payable to the  General Partner  for
these fees and services.

All profits and  losses of  the Partnership are  allocated 99%  to the  capital
accounts of the Limited Partners and 1%  to the capital account of the  General
Partner. The General Partner also receives a 1% distributive share of Cash Flow
distributed when and as distributions are made to Limited Partners.

4. Investment in Loans Receivable:

(a)  The  North  Capitol  Office  Building  wrap-around  loan  receivable   and
underlying  loan  payable   had  balances  of   $30,443,927  and   $21,547,919,
respectively, at December 31, 1996.  The loan receivable bore an interest  rate
of 8.14% and matured on December 1,  1995, and the borrower failed to make  the
principal payment due. Pursuant  to a forbearance  agreement dated January  24,
1996, the Partnership agreed  not to exercise its  rights against the  borrower
through March 1, 1996.
<PAGE>
The borrower continued to make monthly interest-only payments on the loan while
negotiations with the Partnership  for repayment continued.   The borrower  did
not make the March 1996  monthly interest payment, and  the loan was placed  in
default in March 1996.  On March 22, 1996,  the borrower commenced  proceedings
under Chapter 11 of the U.S. Bankruptcy Code.  The General Partner is reviewing
the borrower's bankruptcy filing and will take such actions as are necessary to
protect the Partnership's interests.

At December 31, 1996  and 1995 the  North Capitol Office  Building loan in  the
amount of $30,443,927  was   classified as  nonaccrual ("impaired  loan") as  a
result of delinquency with the terms of loan agreement. The loan has a  related
allowance for  losses of  $8,896,008 at  December 31,  1996 and  $4,853,336  at
December 31, 1995. Net interest income relating to the impaired loan would have
been $118,164 in  1996, $245,466  in 1995 and  $247,284 in  1994. Net  interest
(expense) income from the impaired loan included in the accompanying Statements
of Income and  Expenses amounted  to $(84,279) in  1996, $135,389  in 1995  and
$90,605 in 1994. 

(b) In  connection  with  the sale  of  Nob  Hill Apartments  -  Phase  I,  the
Partnership received a $264,180 promissory note as a portion of the sale price.
The note bore interest at a rate of 8% and was payable in monthly  installments
of interest  only through  maturity in  December  1996.   Full payment  of  the
promissory note was received by the Partnership in January 1997.  See Note 10 of
Notes to Financial Statements for additional information.

5. Management Agreement:

The properties owned by the Partnership were under management agreements with a
third-party management company.  The agreements provided for annual fees of  5%
of gross operating receipts for the residential property, and a range of 3%  to
6% of gross operating receipts for the commercial property.

6. Mortgage Note Payable:

Mortgage note payable had  a balance of  $575,301 at December  31, 1995.   This
first mortgage loan related to one of the buildings within Normandy Mall.  Real
estate held for sale with an  aggregate carrying value of $575,301 at  December
31, 1995 was pledged as collateral for repayment of the mortgage loan. Title to
the property was relinquished through foreclosure in 1996.  See Note 9 of Notes
to Financial Statements for additional information.

During the year  ended December  31, 1994,  the Partnership  incurred and  paid
interest expense of $72,493 on the mortgage note payable.  No interest  expense
was incurred or paid in 1995.

7. 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, 1996  is described in  the
table below:
<PAGE>
                                    1996          1995          1994
                                ------------  -----------    -----------
   Loans:
    Balance at beginning of
     year                      $  4,853,336   $ 2,222,781    $ 2,222,781
    
    Provision charged to
     income                       4,042,672     3,900,000
    Direct write-off of loans
     against allowance                        (1,269,445)
                                ------------  -----------    -----------
    Balance at the end of
     the year                  $  8,896,008   $ 4,853,336    $ 2,222,781
                                ============  ===========    =========== 

   Real Estate Held for Sale:
    Balance at beginning of
     year                      $    300,000         None    $ 1,288,000
    Recovery charged to
     income                        (300,000)   
    Provision charged to
     income                         575,301  $   300,000
    Direct write-off of real
     estate held for sale          (575,301)   
     against allowance                                       (1,288,000)
                                -----------   ------------   ----------- 
    Balance at the end of
     the year                  $      None   $   300,000    $      None
                                ============  ============   =========== 

8. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates are:

                            Year Ended         Year Ended         Year Ended
                             12/31/96           12/31/95           12/31/94   
                          --------------    ---------------    ---------------
                           Paid  Payable     Paid   Payable     Paid   Payable
                          ------ -------    ------  -------    ------  -------

Mortgage servicing fees  $ 10,160 $   847   $13,759  $   847  $17,477    $1,161
Property management fees     None    None      None     None   84,507      None
General Partner manage-
  ment fees               150,896    None    74,693   15,090   39,232     9,808
Reimbursement of expenses
  to the General Partner,
  at cost:
<PAGE>
    Accounting             12,456  10,710    53,162    4,536   64,966    27,448
    Data processing         2,841   1,095    10,457    1,468   21,334     3,097
    Investor communica-
      tions                  None    None     9,864     None   23,761     8,320
    Legal                   8,262   7,020    11,235    1,618    7,586     3,252
    Portfolio management   34,484  38,807    99,019   14,586   44,197    25,227
    Property sales
     administration        17,688  14,009    16,516    4,716      137     4,262
    Other                    None    None     3,047       24    9,870     2,657

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;  however, the General Partner is  reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $3,529, $25,764 and $27,195 in 1996, 1995 and 1994, respectively.

Allegiance Realty Group, Inc., an affiliate of the General Partner, managed the
Partnership's properties  until the  affiliate was  sold to  a third  party  in
November 1994. 

9. Disposition of Property Acquired through Foreclosure and Extraordinary Item:

In February  1991, the  Partnership acquired  title to  the Normandy  Mall  and
Norwood Plaza shopping  centers through foreclosure.  These properties had  two
underlying mortgage loans from separate lenders. One loan related to one of the
buildings within Normandy  Mall and the  other underlying loan  related to  the
remainder of the property.  In July 1993, title  to these properties, with  the
exception of the one building  (the "Building") within Normandy Mall  discussed
above in Note 4, was conveyed to the lender pursuant to a settlement agreement.
The first mortgage loan collateralized by the Building was held by a  different
third party lender, Gulf  Life Insurance Company  ("Gulf Life"), who  commenced
foreclosure proceedings in January 1995.  Gulf Life subsequently sold the  loan
to American Mortgage Acquisition  Corporation ("American"). A foreclosure  sale
of the Building took place in March 1996 and American made a successful bid and
obtained title to the Building in April 1996. 

In connection  with  the foreclosure,  the  Partnership recognized  a  $575,301
extraordinary gain  on  forgiveness of  debt.   In  addition,  the  Partnership
recognized a $575,301 provision for losses  equal to the carrying value of  the
building. The  Partnership has  no  further interest  in  the Building  or  the
remainder of Normandy Mall and Norwood Plaza.

10. Sales of Real Estate:

(a) During May 1996, the Partnership sold the Huntington Plaza Shopping  Center
for $2,400,000, consisting of cash of $2,093,800 and $306,200 in the form of  a
purchase money note collateralized  by a junior mortgage  on the property.  The
Partnership assigned the  $306,200 note and  paid $167,194 to  the holder of  a
second mortgage  on the  property as  part of  an agreement  which allowed  the
Partnership to take title to the property in 1993.
<PAGE>
These expenses,  which total  $473,394 have  been classified  as  participation
expense on the income  statement. The Partnership also  paid $3,088 of  selling
costs related  to the  sale. The  basis  of the  property was  $2,326,143.  For
financial statement purposes, the Partnership recognized a gain of $70,769 from
the sale of the property.

(b) During July 1996, the  Partnership sold the Nob  Hill Apartments - Phase  I
for $4,775,000, consisting of cash of $4,510,820 and $264,180 in the form of  a
promissory note. From the proceeds of  the sale, the Partnership paid  $212,988
in selling  costs. The  basis of  the property  was $3,161,581.  For  financial
statement purposes, the Partnership  recognized a gain  of $1,400,431 from  the
sale of the property. 

11. Settlement of Litigation:

A settlement has 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 settlement had no material impact on the Partnership.

12. Fair Values of Financial Instruments:

The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 and 1995 are as follows:

The carrying value of cash and cash equivalents, accounts and accrued  interest
receivable, accounts payable and loan receivable approximates fair value.

Based on borrowing rates available  to the Partnership at  the end of 1996  and
1995 for mortgage loans  with similar terms and  maturities, the fair value  of
the mortgage note payable approximates the carrying value.

13. Subsequent Events:
(a) In  January  1997,  the  Partnership  paid  $358,375  to  Limited  Partners
representing the quarterly  distribution of  available Cash Flow  of $5.00  per
Interest for the fourth quarter of 1996.

(b) In February 1997, the General Partner made a settlement payment of  $16,976
($.27 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. vs. Balcor Pension Investors, et. al. class action lawsuit.
<PAGE>