SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended MARCH 31, 1995 COMMISSION FILE NUMBER 0-14052
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2847256
(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
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 III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1995
PART I
FINANCIAL INFORMATION
Page(s)
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
March 31, 1995 December 31, 1994
--------------- ------------------
ASSETS
Real estate investments:
Joint ventures $ 18,605,125 $ 18,674,563
Property, net 1,203,330 1,189,011
------------ ------------
19,808,455 19,863,574
Cash and cash equivalents 2,189,758 2,423,836
Short-term investments 1,224,758 996,814
------------- ---------------
$ 23,222,971 $ 23,284,224
============= ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 75,961 $ 86,049
Accrued management fee 42,101 42,101
------------ ---------------
Total liabilities 118,062 128,150
------------ ---------------
Partners' capital (deficit):
Limited partners ($493.14 per unit;
75,000 units authorized,
68,414 units issued and outstanding) 23,144,587 23,195,240
General partners (39,678) (39,166)
------------- ---------------
Total partners' capital 23,104,909 23,156,074
------------- ---------------
$ 23,222,971 $ 23,284,224
============= ================
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
Quarter ended March 31,
-----------------------
1995 1994
---- -----
INVESTMENT ACTIVITY
Property rentals $ 48,346 $ -
Property operations expense (32,751) -
Depreciation and amortization (9,797) -
--------- ---------
5,798 -
Joint venture earnings 431,795 387,507
Ground rentals and interest on mortgage
loans - 13,757
Amortization (2,366) (3,812)
--------- ---------
Total real estate operations 435,227 397,452
Interest on cash equivalents and
short-term investments 49,083 28,183
--------- ---------
Total investment activity 484,310 425,635
--------- ---------
PORTFOLIO EXPENSES
General and administrative 67,687 47,465
Management fee 42,101 31,371
--------- ---------
109,788 78,836
-------- ----------
NET INCOME $374,522 $ 346,799
========== ==========
Net income per limited partnership unit $ 5.42 $ 5.02
========== ==========
Cash distributions per limited
partnership unit $ 6.16 $ 35.59
========== ==========
Number of limited partnership
units outstanding during the period 68,414 68,414
=========== ==========
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Deficit)
(Unaudited)
Quarter ended March 31,
------------------------
1995 1994
---- ----
General Limited General Limited
Partners Partners Partners Partners
-------- -------- -------- --------
Balance at beginning
of period $(39,166) $23,195,240 $(38,934) $25,339,093
Cash distributions (4,257) (421,430) (3,172) (2,434,854)
Net income 3,745 370,777 3,468 343,331
-------- ----------- --------- -----------
Balance at end of
period $(39,678) $23,144,587 $(38,638) $23,247,570
======== =========== ========= =============
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
-----------------------
1995 1994
---- ----
Net cash provided by operating activities $468,888 $ 338,014
-------- ----------
Cash flows from investing activities:
Capital expenditures on owned property (39,459) -
Decrease (increase) in short-term
investments, net (237,820) 494,541
--------- ----------
Net cash provided by (used in)
investing activities (277,279) 494,541
--------- ----------
Cash flows from financing activity:
Distributions to partners (425,687) (2,438,026)
--------- -----------
Net cash used in financing activity (425,687) (2,438,026)
--------- -----------
Net decrease in cash and
cash equivalents (234,078) (1,605,471)
Cash and cash equivalents:
Beginning of period 2,423,836 3,252,535
--------- -----------
End of period $ 2,189,758 $ 1,647,064
============ ==============
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
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 March 31, 1995 and December 31, 1994 and the results of
its operations, its cash flows and changes in partners' capital (deficit) for
the interim periods ended March 31, 1995 and 1994. These adjustments are of a
normal recurring nature.
See notes to financial statements included in the Partnership's 1994 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 III; 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. The Partnership commenced operations in July 1985
and made several investments through 1988. It intends to dispose of its
investments within twelve years of their acquisition, and then liquidate;
however, the managing general partner could extend the investment period if it
is in the best interest of the limited partners.
NOTE 2 - REAL ESTATE JOINT VENTURES
- - - - - -----------------------------------
The following summarized financial information is presented in the
aggregate for the joint ventures:
ASSETS AND LIABILITIES
----------------------
March 31, 1995 December 31, 1994
--------------- ------------------
Assets
- - - - - ------
Real property, net of
accumulated depreciation of
$3,833,718 and $3,697,894,
respectively $ 16,101,248 $ 16,188,586
Other assets 558,465 664,906
------------ -------------
16,659,713 16,853,492
Liabilities (98,517) (198,804)
- - - - - ----------- ------------ -------------
Net Assets $16,561,196 $ 16,654,688
============ ==============
RESULTS OF OPERATIONS
----------------------
Quarter ended March 31,
-----------------------
1995 1994
---- ----
Revenue
Rental income $803,968 $762,258
Other 3,162 856
--------- --------
807,130 763,114
--------- --------
Expenses
Operating expenses 239,511 236,687
Depreciation and amortization 135,824 138,920
--------- -------
375,335 375,607
--------- -------
Net income $ 431,795 $387,507
========== =========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership on behalf of its various financing arrangements with the joint
ventures.
NOTE 3 - PROPERTY
- - - - - -----------------
On November 15, 1994, the Partnership restructured its ground
lease/mortgage loan investment into a wholly-owned property, due to the
inability of the ground lessee/mortgagee to meet its financial obligations. The
following is a summary of the Partnership's investment in property:
March 31, 1995 December 31, 1994
-------------- -----------------
Land $ 347,772 $ 347,772
Buildings and improvements 885,643 846,184
Accumulated depreciation` (12,599) (2,802)
Net operating liabilities (17,486) (2,143)
---------- ------------
$1,203,330 $ 1,189,011
========== ============
The buildings are being depreciated over a 25 year period.
NOTE 4 - SUBSEQUENT EVENT
- - - - - -------------------------
Distributions of cash from operations relating to the quarter ended March
31, 1995 were made on April 27, 1995 in the aggregate amount of $425,687 ($6.16
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 December, 1985. A total of 68,414 units were sold. The Partnership
received proceeds of $61,950,285, 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 nine real
estate investments, six of which were sold prior to 1994. As a result of the
sales, capital of $34,676,320 has been returned to the limited partners through
March 31, 1995.
At March 31, 1995, the Partnership had $3,414,516 in cash, cash equivalents
and short-term investments, of which $425,687 was distributed to partners on
April 27, 1995; the remainder is being retained as working capital reserves.
The source of future liquidity and cash distributions to partners will be cash
generated by the Partnership's investments and proceeds from the sale of
investments. Distributions of cash from operations were made at the annualized
rate of 5% for the first quarter of 1995 on the adjusted capital contribution.
Distributions of cash from operations relating to the first quarter of 1994 were
made at the annualized rate of 3.5% on a weighted average adjusted capital
contribution. On January 27, 1994, the Partnership made a capital distribution
of $31 per limited partnership unit from the proceeds of the Heritage Green
Plaza sale in December 1993. The adjusted capital contribution after this
distribution is $493.14 per unit. The increase in the distribution rate results
from the attainment of appropriate cash reserve levels and the stabilization of
property operations.
The carrying value of real estate investments in the financial statements
is at cost or is reduced to its lower net realizable value if the investment's
carrying value is determined not to be recoverable through expected undiscounted
future cash flows. At March 31, 1995, the appraised value of each real estate
investment exceeded its related carrying value; the aggregate excess was
approximately $4,800,000. The current appraised value of real estate
investments has been estimated by the managing 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
- - - - - ---------------------
FORM OF REAL ESTATE INVESTMENTS
Effective November 15, 1994, North Cabot Industrial Park (formerly
Marathon/Hayward) was converted to a wholly-owned property; it was previously
structured as a ground lease with a mortgage loan to the ground lessee.
Bayberry Apartments and 270 Technology Center are structured as joint ventures
with real estate management/development firms.
OPERATING FACTORS
Occupancy at North Cabot Industrial Park remained at 58% during the first
quarter of 1995, relatively unchanged from the first quarter 1994 occupancy
level. Subsequent to the first quarter a new tenant occupied 4,000 square feet
for a lease term of three years. The managing general partner does not expect
this investment to achieve the Partnership's investment objectives.
Occupancy at Bayberry Apartments declined from 94% to 92% during the first
quarter of 1995 (occupancy was also 92% at March 31, 1994). Rental rates in the
Gaithersburg market have increased over the past year.
Occupancy at 270 Technology Park remained at 95% during the first quarter
of 1995, down from 97% a year ago.
INVESTMENT ACTIVITY
Interest on cash equivalents and short-term investments increased due to
higher short-term interest rates.
Real estate operating results were $435,227 for the first quarter of 1995
as compared to $397,452 for the comparable quarter of 1994. The increase was
primarily due to an increase in net operating income at Bayberry Apartments
($61,000) which was partially offset by a decrease in net operating income at
270 Technology Park ($16,000). The increase at Bayberry Apartments results from
an increase in rental rates, while the decrease at 270 Technology Park results
from an increase in operating expenses.
Operating cash flow increased $130,874 or 39% between 1994 and 1995. Cash
flow from Bayberry Apartments increased approximately $156,000, primarily from
the distribution of amounts which had been previously retained as working
capital reserves. This increase was partially offset by the timing of
distributions from 270 Technology 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 managing general partner. General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
The Partnership management fee increased between the first quarter of 1995
and 1994 due to an increase in distributable cash flow. General and
administrative expenses increased by $20,222 or 43%, between the respective
quarters. This increase was due to the professional fees associated with the
restructuring of North Cabot Industrial Park and the final settlement of
administrative expense reimbursements for 1993 during the first quarter of 1994.
INFLATION
By their nature, real estate investments tend not to be adversely affected
by inflation. Inflation may result in appreciation in the value of the
Partnership's real estate investments over time if rental rates and replacement
costs increase. Recently, declines in real property values, due to market and
economic conditions, have overshadowed the overall positive effect inflation may
have on the value of the Partnership's investments.
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1995
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: NONE.
b. Reports on Form 8-K: No reports on Form 8-K were filed
during the quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL
ESTATE LIMITED PARTNERSHIP
(Registrant)
May 10, 1995 Peter P. Twining
Managing Director and General Counsel of Managing
General Partner,
Copley Properties Company III, Inc.
May 10, 1995 Marie A. Welch
Investment Officer and Chief Accounting Officer of
Managing General Partner,
Copley Properties Company III, Inc.