ITEM 1.     FINANCIAL STATEMENTS

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENTS OF NET ASSETS IN LIQUIDATION

(Liquidation Basis)
(Unaudited)

(In thousands)

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

(Liquidation Basis – Unaudited)

(In thousands)

For the Three Months Ended March 31, 2012

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENT OF DISCONTINUED OPERATIONS

(Unaudited)

(In thousands, except per unit data)

Three Months Ended March 30, 2011

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended March 31, 2011

See Accompanying Notes to Financial Statements

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note A – Basis of Presentation

As of December 31, 2011, HCW Pension Real Estate Fund Limited Partnership (the “Partnership” or “Registrant”) adopted the liquidation basis of accounting due to the sale of its remaining investment property (as discussed in “Note D – Disposition of Investment Property“).

As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 2011 to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation of the Partnership. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the managing general partner’s estimates as of the date of the financial statements.

The Partnership’s general partner is HCW General Partner, Ltd. (the “General Partner”). Its sole general partner is IH, Inc., (the “Managing General Partner”), which is an affiliate of Apartment Investment and Management Company ("Aimco"), a publicly traded real estate investment trust. The Managing General Partner estimates that the liquidation process will be completed by December 31, 2012. Because the success in realization of assets and the settlement of liabilities is based on the Managing General Partner’s best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period.

The accompanying unaudited financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The statement of net assets in liquidation at December 31, 2011 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The accompanying statement of discontinued operations for the three months ended March 31, 2011 reflects the operations of Lewis Park Apartments as loss from discontinued operations as a result of the sale of the property on December 15, 2011 (as discussed in “Note D – Disposition of Investment Property”).

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Note B – Adjustments to Liquidation Basis of Accounting

At December 31, 2011, in accordance with the liquidation basis of accounting, assets were adjusted to their estimated net realizable value and liabilities were adjusted to their estimated settlement amount. The net adjustment required to convert to the liquidation basis of accounting was a decrease in net assets of approximately $60,000.

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. 

Affiliates of the Managing General Partner received 5% of gross receipts from the Partnership's sole property as compensation for providing property management services. The Partnership paid to such affiliates approximately $31,000 for the three months ended March 31, 2011, which is included in operating expenses. At December 31, 2011, the Partnership was owed approximately $9,000 for overpayment of property management fees, which is included in due from affiliates at December 31, 2011. The Partnership was reimbursed for the overpayment during the three months ended March 31, 2012.

An affiliate of the Managing General Partner earned asset management fees amounting to approximately $12,000 for the three months ended March 31, 2011, which is included in general and administrative expenses. The asset management fees are calculated based on a percentage of the tangible asset value of the Partnership as defined in the Partnership Agreement. The percentage as stipulated in the Partnership Agreement was 0.50% for 2011. At both March 31, 2012 and December 31, 2011, the Partnership was owed approximately $10,000 for overpayment of asset management fees which is included in due from affiliates. The Partnership was reimbursed for the overpayment subsequent to March 31, 2012.

Affiliates of the Managing General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $9,000 for the three months ended March 31, 2011, which is included in general and administrative expenses.

Prior to 2011, in accordance with the Partnership Agreement, AIMCO Properties, L.P., an affiliate of the Managing General Partner advanced the Partnership approximately $2,046,000 to assist with capital expenditures and operating expenses at Lewis Park Apartments. There were no advances received during the three months ended March 31, 2011. During the three months ended March 31, 2011, the Partnership repaid advances and associated accrued interest of approximately $30,000 with cash from operations. There were no outstanding advances or associated accrued interest at March 31, 2012 or December 31, 2011. The interest rates charged on the outstanding advances made to the Partnership were based on the prime rate plus a market rate adjustment for similar type loans. Affiliates of the Managing General Partner reviewed the market rate adjustment quarterly. Interest expense was approximately $63,000 for the three months ended March 31, 2011.

During the three months ended March 31, 2012, the Partnership paid approximately $63,000 of Illinois withholding taxes on behalf of certain limited partners, which is included in receivables – limited partners at March 31, 2012.

The Partnership insured its property up to certain limits through coverage provided by Aimco which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insured its former property above the Aimco limits through insurance policies obtained by Aimco from insurers unaffiliated with the Managing General Partner. The Partnership was charged by Aimco and its affiliates approximately $62,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2011.

Note D – Disposition of Investment Property

Note E – Distribution Payable

The distribution payable of approximately $37,000 at March 31, 2012 and December 31, 2011 represents the estimated Illinois withholding taxes to be paid by the Partnership on behalf of certain limited partners in connection with the sale of Lewis Park Apartments.

Note F – Contingencies

The Partnership is unaware of any pending or outstanding litigation matters involving it or its former investment property that are not of a routine nature arising in the ordinary course of business.

Environmental

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials present on a property, including lead-based paint, asbestos, polychlorinated biphenyls, petroleum-based fuels, and other miscellaneous materials. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such materials. The presence of, or the failure to manage or remedy properly, these materials may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the improper management of these materials on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of these materials through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of these materials is potentially liable under such laws for the proper operation of the disposal facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its former property, the Partnership could potentially be responsible for environmental liabilities or costs associated with its former property.

Results of Operations

As of December 31, 2011, the Partnership adopted the liquidation basis of accounting, due to the sale of its remaining investment property, Lewis Park Apartments, during December 2011.

On December 15, 2011, the Partnership sold Lewis Park Apartments to a third party for a gross sales price of $11,200,000. The net proceeds realized by the Partnership were approximately $10,117,000 after payment of closing costs of approximately $183,000 and payment of prepayment penalties of $900,000 by the purchaser. The Partnership used approximately $3,476,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership recognized a gain of approximately $8,602,000 as a result of the sale during the year ended December 31, 2011. In addition, the Partnership recognized a loss on extinguishment of debt of approximately $999,000 as a result of the write off of the unamortized balance of loan costs of approximately $38,000 and prepayment penalties of approximately $961,000, of which approximately $61,000 was paid by the Partnership and approximately $900,000 was paid by the purchaser. While the Partnership is not subject to Federal income tax, it is subject to tax related to its Illinois activities. During the year ended December 31, 2011, as a result of the sale of Lewis Park Apartments, the Partnership recognized current tax expense of approximately $6,000, which was reflected as a reduction of gain from sale of discontinued operations during 2011. The corresponding liability is included in other liabilities at December 31, 2011 and was paid during the three months ended March 31, 2012.

As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 2011 to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation of the Partnership. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the Managing General Partner’s estimates as of the date of the financial statements.

During the three months ended March 31, 2012, net assets in liquidation increased by approximately $66,000. The increase in net assets in liquidation is due to a decrease in the estimated settlement amount of liabilities.

The Partnership made no distributions to its partners during the three months ended March 31, 2012 or 2011. The Partnership’s cash available for distribution will be reviewed on a quarterly basis. Future cash distributions will depend on the amount of cash remaining after fully liquidating the Partnership. The distribution payable of approximately $37,000 at March 31, 2012 and December 31, 2011 represents the estimated Illinois withholding taxes to be paid by the Partnership on behalf of certain limited partners in connection with the sale of Lewis Park Apartments.

Other

In addition to its indirect ownership of the general partner interest in the Partnership, Aimco and its affiliates owned 6,227 limited partnership units (the "Units") in the Partnership representing 39.70% of the outstanding Units as of March 31, 2012. A number of these Units were acquired pursuant to tender offers made by Aimco or its affiliates. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to Aimco as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to Aimco as its sole stockholder.

Critical Accounting Policies and Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Impairment of Long-Lived Asset

Investment property was recorded at cost, less accumulated depreciation, unless the carrying amount of the asset was not recoverable.  If events or circumstances indicated that the carrying amount of the property would not be recoverable, the Partnership made an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeded the estimated aggregate undiscounted future cash flows, the Partnership recognized an impairment loss to the extent the carrying amount exceeded the estimated fair value of the property.

Real property investment is subject to varying degrees of risk.  Several factors may have adversely affected the economic performance and value of the Partnership’s investment property. These factors included, but were not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might have adversely affected apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not have been offset by increased rents; changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could have caused an impairment of the Partnership’s asset.

Revenue Recognition

The Partnership generally leased apartment units for twelve-month terms or less.  The Partnership offered rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, was recognized on a straight-line basis over the term of the lease. The Partnership evaluated all accounts receivable from residents and established an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.     CONTROLS AND PROCEDURES

(a)   Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

ITEM 6.     EXHIBITS

See Exhibit Index.

The agreements included as exhibits to this Form 10-Q contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

• were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit

3 & 4             Limited Partnership Agreement (Incorporated by reference to Registration Statement No. 2-91006 on Form S-11 filed by Registrant).

10.7              Purchase and Sale Contract, dated September 13, 2011, between HCW Pension Real Estate Fund Limited Partnership, a Massachusetts limited partnership, and Capstone Development Corp., an Alabama corporation, incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 13, 2011.

10.8              First Amendment to Purchase and Sale Contract between HCW Pension Real Estate Fund Limited Partnership, a Massachusetts limited partnership and CDC-Carbondale, LLC, an Alabama limited liability company, dated November 29, 2011, incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 29, 2011.

31.1              Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2              Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1              Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101               XBRL (Extensible Business Reporting Language). The following materials from HCW Pension Real Estate Fund Limited Partnership’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012, formatted in XBRL: (i) statements of net assets in liquidation (ii) statement of changes in net assets in liquidation, (iii) statement of discontinued operations, (iv) statement of cash flows, and (v) notes to financial statements. (1)

(1)               As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.