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 0-14052
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
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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 III;
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:
Joint ventures $ 17,865,238 $ 18,116,002
Property, net 1,288,995 1,243,499
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19,154,233 19,359,501
Cash and cash equivalents 2,466,744 1,399,905
Short-term investments 1,009,451 2,111,608
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$ 22,630,428 $ 22,871,014
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 54,733 $ 88,184
Accrued management fee 46,338 42,101
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Total liabilities 101,071 130,285
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Partners' capital (deficit):
Limited partners ($493.14 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 22,574,789 22,784,048
General partners (45,432) (43,319)
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Total partners' capital 22,529,357 22,740,729
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$ 22,630,428 $ 22,871,014
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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
-------------- ---------------- ------------- ----------------
INVESTMENT ACTIVITY
Property rentals $ 45,232 $ 90,608 $ 44,368 $ 92,714
Property operating expenses (33,673) (66,114) (18,350) (51,101)
Depreciation and amortization (28,571) (37,033) (9,143) (18,940)
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(17,012) (12,539) 16,875 22,673
Joint venture earnings 431,805 819,552 363,912 795,707
Amortization (2,366) (4,732) (2,366) (4,732)
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Total real estate operations 412,427 802,281 378,421 813,648
Interest on cash equivalents
and short-term investments 43,959 87,503 51,757 100,840
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Total investment activity 456,386 889,784 430,178 914,488
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Portfolio Expenses
General and administrative 62,311 114,261 61,313 129,000
Management fee 46,339 92,677 42,101 84,202
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108,650 206,938 103,414 213,202
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Net Income $ 347,736 $ 682,846 $ 326,764 $ 701,286
============ ============= ============= =============
Net income per limited partnership
unit $ 5.03 $ 9.88 $ 4.73 $ 10.15
============ ============= ============= =============
Cash distributions per
limited partnership unit $ 6.78 $ 12.94 $ 6.16 $ 12.32
============ ============= ============= =============
Number of limited partnership
units outstanding during the period 68,414 68,414 68,414 68,414
============= ============= ============= =============
<FN>
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(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
Partners Partners Partners Partners Partners Partners Partners Partners
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at
beginning of
period $(44,225) $22,694,377 $ (43,319) $ 22,784,048 $ (39,678) $ 23,144,587 $ (39,166) $23,195,240
Cash
distributions (4,684) (463,847) (8,941) (885,277) (4,257) (421,430) (8,514) (842,860)
Net income 3,477 344,259 6,828 676,018 3,268 323,496 7,013 694,273
-------- ---------- --------- ----------- ---------- ----------- --------- ----------
Balance at
end of period $(45,432) $22,574,789 $ (45,432) $ 22,574,789 $ (40,667) $ 23,046,653 $ (40,667) $23,046,653
======== =========== ========= ============ ========== =========== ========= ===========
<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 $ 894,465 $1,087,890
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Cash flows from investing activities:
Capital expenditures on owned property (9,404) (54,826)
Decrease (increase) in short-term
investments, net 1,075,996 (678,282)
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Net cash provided by (used in)
investing activities 1,066,592 (733,108)
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Cash flows from financing activity:
Distributions to partners (894,218) (851,374)
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Net increase (decrease) in
cash and cash equivalents 1,066,839 (496,592)
Cash and cash equivalents:
Beginning of period 1,399,905 2,423,836
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End of period $2,466,744 $1,927,244
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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 (deficit) 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
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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. 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 July, 1985 and acquired several investments
through 1988. The Partnership 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
----------------------
June 30, 1996 December 31, 1995
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Assets
Real property, at cost less
accumulated depreciation
of $4,543,137 and $4,273,114,
respectively $ 15,490,411 $ 15,753,539
Other assets 603,914 660,423
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16,094,325 16,413,962
Liabilities 152,093 280,372
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Net Assets $ 15,942,232 $ 16,133,590
============ ============
Results of Operations
Six Months Ended June 30,
--------------------------------
1996 1995
---- ----
Revenue
Rental income $ 1,601,362 $ 1,549,707
Other 1,600 3,901
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1,602,962 1,553,608
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Expenses
Operating expenses 513,388 480,460
Depreciation and amortization 270,022 277,441
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783,410 757,901
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Net income $ 819,552 $ 795,707
============ ============
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
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The following is a summary of the Partnership's investment in
property:
June 30, 1996 December 31, 1995
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Land $ 347,772 $ 347,772
Buildings and improvements 1,030,522 1,021,118
Accumulated depreciation
and amortization (87,689) (58,041)
Net operating liabilities (1,610) (67,350)
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$ 1,288,995 $ 1,243,499
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<FN>
The buildings are being depreciated over a 25 year period.
NOTE 4 - 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
$468,532 ($6.78 per limited partnership unit).
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
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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 June 30, 1996.
At June 30, 1996, the Partnership had $3,476,195 in cash, cash
equivalents and short-term investments, of which $468,532 was distributed
to partners on July 25, 1996; 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 for the first two quarters of 1996 and 1995 were made at the
annualized rate of 5.5% and 5%, respectively, on the adjusted capital
contribution. The increase in the distribution rate during 1996 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 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
appraised value of each real estate investment exceeded its related
carrying value; the aggregate excess was approximately $5,600,000. 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
North Cabot Industrial Park is a wholly-owned property. 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 increased from 72% to 87%
during the second quarter of 1996, as two new leases were signed during
the quarter. (Occupancy was 66% at June 30, 1995 and had increased to 94%
at December 31, 1995.) The rental market has been improving and the
Partnership's objective is to stabilize the tenancy by offering renovated,
turn-key space.
Occupancy at Bayberry Apartments remained at 95% as of June 30, 1996.
(Occupancy was 93% at June 30, 1995.) Market conditions remain
competitive; however, supply and demand remain in equilibrium.
Occupancy at 270 Technology Park remained at 98% during the second
quarter of 1996. (Occupancy was also 98% at June 30, 1995.) However, a
tenant occupying 12% of the building intends to vacate in July.
Investment Activity
Interest on cash equivalents and short-term investments decreased
$13,000, or 13% between the first six months of 1996 and 1995 primarily
due to lower short-term interest rates.
Real estate operating results were $802,281 for the first six months
of 1996 as compared to $813,648 for the comparable period of 1995. This
decrease was due to lower operating results from North Cabot, where
expenses increased due to tenant turnover, partially offset by an increase
in operating income at 270 Technology Park.
Operating cash flow decreased $193,425 or 18% between the first two
quarters of 1995 and 1996. The decrease in cash flow primarily resulted
from the timing of cash distributions from Bayberry, together with an
increase in working capital items.
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 six months
of 1995 and 1996 due to an increase in distributable cash flow. General
and administrative expenses decreased by $14,739 or 11% between the
respective periods. The 1995 amount includes the final payment of
professional fees associated with the ownership restructuring of the North
Cabot Industrial Park investment.
NEW ENGLAND LIFE PENSION PROPERTIES III;
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 III;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 13, 1996
/s/ Peter P. Twining
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Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
August 13, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.