SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended June 30, 1996 Commission File Number 0-11884
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2774875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
399 Boylston Street, 13th Fl.
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
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Former name, former address and former fiscal year if changed since last
report
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 twelve (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 ___
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1996
PART I
FINANCIAL INFORMATION
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BALANCE SHEET
(Unaudited)
June 30, 1996 December 31, 1995
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ASSETS
Real estate investments:
Ground leases and mortgage loans,
net $ 11,333,875 $ 11,508,875
Property, net 5,102,024 5,117,318
Deferred leasing costs and
other assets, net 219,738 176,007
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16,655,637 16,802,200
Cash and cash equivalents 1,473,364 1,204,043
Short-term investments 762,263 1,109,814
Interest, rent and other
receivables 41,977 123,928
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$ 18,933,241 $ 19,239,985
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 81,057 $ 239,062
Unearned revenue 51,225 -
Accrued management fee 28,681 24,575
Deferred disposition fees 457,768 457,768
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Total liabilities 618,731 721,405
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Partners' capital:
Limited partners ($546.66 per
unit; 30,000 units authorized,
issued and outstanding) 18,265,677 18,467,706
General partner 48,833 50,874
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Total partners' capital 18,314,510 18,518,580
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$ 18,933,241 $ 19,239,985
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<FN>
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
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INVESTMENT ACTIVITY
Property rentals $ 184,452 $ 375,814 $ 232,472 $ 426,582
Property operating expenses (76,679) (162,683) (73,742) (144,991)
Depreciation and amortization (57,939) (110,056) (46,861) (95,065)
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49,834 103,075 111,869 186,526
Credit from (provision for)
impaird mortgage loans (175,000) (175,000) 30,000 30,000
Ground rentals and interest on
mortgage loans 158,325 464,950 276,860 554,270
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Total real estate activity 33,159 393,025 418,729 770,796
Interest on cash equivalents
and short term investments 27,692 55,267 33,838 67,243
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Total investment activity 60,851 448,292 452,567 838,039
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Portfolio Expenses
Management fee 28,682 57,363 24,576 49,151
General and administrative 29,249 56,514 31,783 57,779
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57,931 113,877 56,359 106,930
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Net Income $ 2,920 $ 334,415 $ 396,208 $ 731,109
========== ========== =========== ==========
Net income per limited
partnership unit $ 0.10 $ 11.04 $ 13.08 $ 24.13
========== ========== =========== ==========
Cash distributions per
limited partnership unit $ 9.57 $ 17.77 $ 8.20 $ 16.40
========== ========== =========== ==========
Number of limited partnership
units outstanding during the
period 30,000 30,000 30,000 30,000
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<FN>
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------------- ---------------------- --------------------- ----------------------
General Limited General Limited General Limited General Limited
Partner Partners Partner Partners Partner Partners Partner Partners
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Balance at
beginning of
period $ 51,704 $18,549,886 $50,874 $18,467,706 $ 45,985 $17,983,683 $ 45,121 $17,898,131
Cash
distributions (2,900) (287,100) (5,385) (533,100) (2,485) (246,000) (4,970) (492,000)
Net income 29 2,891 3,344 331,071 3,962 392,246 7,311 723,798
-------- ---------- --------- ----------- ---------- ------------ ----------- ------------
Balance at
end of period $ 48,833 $18,265,677 $48,833 $18,256,677 $ 47,462 $18,129,929 $ 47,462 $18,129,929
======== ========== ========= =========== ========== ============ =========== ============
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------------
1996 1995
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Net cash provided by operating
activities $ 542,433 $ 671,878
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Cash flows from investing activities:
Capital expenditures on owned property (82,178) (164,053)
Decrease (increase) in short-term
investments, net 347,551 (996,365)
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Net cash provided by (used in)
investing activities 265,373 (1,160,418)
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Cash flows from financing activity:
Distributions to partners (538,485) (496,970)
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Net increase (decrease) in
cash and cash equivalents 269,321 (985,510)
Cash and cash equivalents:
Beginning of period 1,204,043 2,431,089
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End of period $ 1,473,364 $ 1,445,579
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<FN>
(See accompanying notes to financial statements)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Partnership's financial position as of June 30, 1996 and December 31, 1995
and the results of its operations, its cash flows and changes in partners'
capital for the interim periods ended June 30, 1996 and 1995. These
adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1995
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
New England Life Pension Properties; A Real Estate Limited
Partnership (the "Partnership") is a Massachusetts limited partnership
organized for the purpose of investing primarily in newly constructed and
existing income producing real properties. It primarily serves as an
investment for qualified pension and profit sharing plans and other
entities intended to be exempt from Federal income tax. The Partnership
commenced operations in June, 1983 and acquired several investments
through 1985. It intends to dispose of its investments within twelve
years of their acquisition, and then liquidate; however, the general
partner could extend the investment period if it is in the best interest
of the limited partners.
NOTE 2 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
- --------------------------------------------------------
The mortgage loan on Decatur TownCenter is impaired. Accordingly, a
valuation allowance has been established to adjust the carrying value of
the loan to its estimated fair market value less anticipated costs of
sale. The activity in the valuation allowance during 1995 and 1996,
together with the related recorded and carrying values of the impaired
mortgage loan at the beginning and end of the respective periods, are as
follows:
Recorded Valuation Carrying
Value Allowance Value
----------- ----------- ----------
Balance at January 1, 1995 $6,646,927 $(2,600,000) $ 4,046,927
========== ==========
Increase in estimated fair
market value of collateral 30,000
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Balance at June 30, 1995 $6,848,933 (2,570,000) $ 4,278,933
========== ==========
Increase in estimated fair
market value of collateral 230,000
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Balance at December 31, 1995 $6,781,928 (2,340,000) $ 4,441,928
========== ==========
Reduction in estimated fair
market value of collateral (175,000)
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Balance at June 30, 1996 $6,781,928 $(2,515,000) $ 4,266,928
=========== ============ ===========
<FN>
The average recorded value of the impaired mortgage loan did not differ
materially from the balance at the end of the period.
NOTE 3 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended June
30, 1996 were made on July 25, 1996 in the aggregate amount of $290,000
($9.57 per limited partnership unit).
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited
partnership interest in June, 1983. A total of 30,000 units were sold.
The Partnership received proceeds of $27,253,251, net of selling
commissions and other offering costs, which were invested in real estate,
used to pay related acquisition costs, or retained as working capital
reserves. The Partnership made six real estate investments; one was sold
in 1985, one in 1991 and another in 1994. As a result of these sales and
similar transactions, capital of $13,600,200 has been returned to the
limited partners as of June 30, 1996. One of the Partnership's mortgage
loan investments matured in 1994. Renewal discussions are ongoing;
however, the Partnership intends to extend the maturity until the
underlying property can be sold at terms which are in the best interest of
the limited partners.
At June 30, 1996, the Partnership had $2,235,627 in cash, cash
equivalents and short-term investments, $290,000 of which was used for
cash distributions to partners on July 25, 1996; the remainder will be
used to fund the rehabilitation of the Willows Shopping Center or retained
as working capital reserves. The source of future liquidity and cash
distributions to partners is expected to be cash generated by the
Partnership's real estate investments and proceeds from the sale of such
investments. Distributions of cash from operations for the first and
second quarters of 1996 were made at the annualized rate of 7% on the
adjusted capital contribution. The cash distribution rate for the
comparative prior year quarters was 6%. The cash distribution rate was
increased with the attainment of appropriate cash reserve levels and the
stabilization of property operations.
The carrying value of real estate investments in the financial
statements, other than impaired mortgage loans (Decatur TownCenter), is at
depreciated cost or, if the investment's carrying value is determined not
to be recoverable through expected undiscounted future cash flows, the
carrying value is reduced to estimated fair market value. The fair market
value of such investments is further reduced by the estimated cost of sale
for properties held for sale. Carrying value may be greater or less than
current appraised value. At June 30, 1996, the carrying value of the
Willows Shopping Center exceeded its appraised value by approximately
$272,000 and the appraised value of Rivers Corporate Park exceeded its
related carrying value by approximately $77,000. The current appraised
value of real estate investments has been estimated by the general partner
and is generally based on a combination of traditional appraisal
approaches performed by the Partnership's advisor and independent
appraisers. Because of the subjectivity inherent in the valuation
process, the estimated current appraised value may differ significantly
from that which could be realized if the real estate were actually offered
for sale in the marketplace.
Results of Operations
- ---------------------
Operating Factors
Occupancy at the Willows Shopping Center decreased slightly to 90%
from 91%, where it had been since the end of 1994. A fifteen-year lease
was recently signed by a significant new anchor tenant. The ground
lessee/borrower is in the process of complete renovation and
reconfiguration of the Center. The general partner determined that it is
in the best interest for the Partnership, together with its affiliate
which owns a share of the Center, to provide funding for the
rehabilitation costs. The Partnership's share of the remaining estimated
rehabilitation cost is approximately $500,000 at June 30, 1996.
Decatur TownCenter occupancy remained at 97% in the second quarter of
1996. (The property was 93% leased at June 30, 1995.) In the third
quarter of 1995, the ground lease was restructured to provide the
Partnership with the sole right to cause a sale. The Partnership is
currently negotiating the sale of the property to the ground lessee. An
agreement is contingent on the buyer's obtaining suitable financing.
Investment Results
The credit from (provision for) impaired mortgage loans relates to
changes in the estimated net fair market value of the collateral
underlying the Decatur TownCenter mortgage loan. Exclusive of the credit
from (provision for) impaired mortgage loans, real estate investment
results were $568,025 and $740,796 for the first six months of 1996 and
1995, respectively. The change was caused by decreased operating results
at Willows and a decline in the amount of interest received on the
impaired Decatur TownCenter mortgage loan.
Interest on cash equivalents and short-term investments decreased by
$11,976, or 18%, between the first six month periods due to lower average
investment balances and lower average yields.
Cash flow from operations decreased by $129,445 between the
respective six month periods. This change is less than the aforementioned
change in operating results primarily because of revenue received in
advance from Rivers Corporate Park.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the general partner. General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting
and investor servicing fees.
The Partnership management fee for the first six months of 1996
increased as compared to the respective prior year period due to the
increase in distributable cash flow. General and administrative expenses
were relatively unchanged between the comparative six month periods.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1996
PART II
OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
June 30, 1996.
SIGNATURES
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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.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 9, 1996
/s/ Peter P. Twining
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Peter P. Twining
Managing Director and General Counsel
of General Partner,
Copley Properties Company, Inc.
August 9, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of General Partner,
Copley Properties Company, Inc.