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 0-15429
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2893298
(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 IV;
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 $ 29,941,659 $ 40,466,827
Property, net 22,172,897 12,108,290
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52,114,556 52,575,117
Cash and cash equivalents 4,357,886 4,051,999
Short-term investments 2,938,849 3,364,539
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$ 59,411,291 $ 59,991,655
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 86,152 $ 129,043
Accrued management fee 61,449 61,449
Deferred management and
disposition fees 2,929,802 2,806,904
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Total liabilities 3,077,403 2,997,396
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Partners' capital (deficit):
Limited partners ($863
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 56,495,193 57,148,961
General partners (161,305) (154,702)
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Total partners' capital 56,333,888 56,994,259
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$ 59,411,291 $ 59,991,655
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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 $ 1,087,901 $ 1,664,832 $ 621,520 $ 1,178,860
Property operating expenses (398,418) (533,439) (166,147) (292,467)
Depreciation and amortization (211,296) (334,957) (97,291) (250,208)
------------ ------------ ------------ ------------
478,187 796,436 358,082 636,185
Joint venture earnings 534,164 1,286,767 753,011 1,688,294
Amortization (3,294) (8,138) (4,844) (9,689)
------------ ------------ ----------- ------------
Total real estate operations 1,009,057 2,075,065 1,106,249 2,314,790
Interest on cash equivalents
and short term investments 85,749 171,040 104,775 236,602
------------ ------------ ----------- ------------
Total investment activity 1,094,806 2,246,105 1,211,024 2,551,392
------------ ------------ ----------- ------------
Portfolio Expenses
Management fee 122,898 245,796 122,898 324,755
General and administrative 86,799 175,406 87,059 172,291
------------ ------------ ----------- ------------
209,697 421,202 209,957 497,046
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Net Income $ 885,109 $ 1,824,903 $ 1,001,067 $ 2,054,346
============ ============ =========== ============
Net income per limited
partnership unit $ 9.23 $ 19.02 $ 10.43 $ 21.41
============ ============ =========== ============
Cash distributions per
limited partnership unit $ 12.95 $ 25.90 $ 21.27 90.04
============ ============ =========== ============
Number of limited partnership
units outstanding during
the period 94,997 94,997 94,997 94,997
============ ============ =========== ============
<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 $(157,730) $56,849,146 $(154,702) $ 57,148,961 $(138,036) $58,798,948 $(135,355) $ 64,289,145
Cash
distributions (12,426) (1,230,211) (24,852) (2,460,422) (20,410) (2,020,586) (33,623) (8,553,530)
Net income 8,851 876,258 18,249 1,806,654 10,011 991,056 20,543 2,033,803
--------- --------- -------- ---------- -------- ---------- --------- ----------
Balance at
end of period $(161,305) $56,495,193 $(161,305) $ 56,495,193 $(148,435) $57,769,418 $(148,435) $ 57,769,418
========= ========== ======== =========== ========= ========== ========= ==========
<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 $ 2,380,583 $ 2,667,029
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Cash flows from investing activities:
Investment in property - (52,406)
Decrease in short-term
investments, net 410,578 328,063
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Net cash provided by
investing activities 410,578 275,657
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Cash flows from financing activity:
Distributions to partners (2,485,274) (8,587,153)
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Net increase (decrease) in
cash and cash equivalents 305,887 (5,644,467)
Cash and cash equivalents:
Beginning of period 4,051,999 12,370,267
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End of period $ 4,357,886 $ 6,725,800
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<FN>
Non-cash transactions:
Effective January 1, 1995, the Partnership's joint venture investment in
Palms Business Center was converted to a wholly-owned property. The
carrying value of this investment at conversion was $12,519,961.
Effective April 1, 1996, the Partnership's joint venture investment in
Reflections Apartments was converted to a wholly-owned property. The
carrying value of this investment at conversion was $10,469,514.
(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
- ----------------------------------
New England Life Pension Properties IV; 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
organizations intended to be exempt from federal income tax. The
Partnership commenced operations in May, 1986 and acquired the six real
estate investments it currently owns prior to the end of 1987. It intends
to dispose of the investments within twelve years of their acquisition,
and then liquidate; however, the managing general partner could extend the
investment period if it is considered to be in the best interest of the
limited partners.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The Palms Business Center investment was converted to a wholly-owned
property for financial reporting purposes effective January 1, 1995.
The Reflections Apartments joint venture was restructured to a wholly-
owned property for financial reporting purposes effective April 1, 1996.
The following summarized financial information is presented in the
aggregate for the Partnership's joint ventures:
Assets and Liabilities
----------------------
June 30, 1996 December 31, 1995
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Assets
Real property, at cost less
accumulated depreciation
of $7,918,974 and
$10,623,335, respectively $ 31,719,958 $ 41,201,074
Other 1,465,564 1,224,883
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33,185,522 42,425,957
Liabilities 385,035 314,534
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Net Assets $ 32,800,487 $ 42,111,423
=========== ============
Results of Operations
Six Months ended June 30,
-----------------------
1996 1995
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Revenue
Rental income $ 3,181,622 $ 3,871,198
Other income 27,411 72,941
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3,209,033 3,944,139
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Expenses
Operating expenses 1,157,832 1,201,327
Depreciation and amortization 584,122 874,597
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1,741,954 2,075,924
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Net income $ 1,467,079 $ 1,868,215
============= =============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on
behalf of their various financing arrangements with the joint ventures.
NOTE 3 - PROPERTY
- -----------------
In the second quarter of 1995, the Palms Business Center joint
venture was restructured, giving the Partnership control over management
decisions. Since January 1, 1995, the investment has been accounted for
as a wholly-owned property. The carrying value of the joint venture
investment at conversion was allocated to land, building and improvements,
amount payable to venture partner and other net operating liabilities.
The venture partner will receive 40% of the excess cash flow above a
specified level until the initial obligation of $360,000 is repaid in
full.
In the second quarter of 1996, the Reflections Apartments joint
venture was restructured, giving the Partnership control over management
decisions. Since April 1, 1996, the investment has been accounted for as
a wholly-owned property. At the time of restructuring, the carrying value
of the joint venture investment was allocated to land, building and other
net operating assets. As part of the restructuring, the Partnership
received $250,000 from its joint venture partner. Upon the Partnership's
receipt of an additional $400,000 from the joint venture partner, an
affiliate of the joint venture partner will be released from its guarantee
of a loan from the Partnership to the joint venture partner. The
guarantee payment has been accounted for as a reduction of previously
accrued investment income.
The following is a summary of the Partnership's investments in
property:
June 30, 1996 December 31, 1995
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Land $ 4,643,506 $ 3,072,333
Buildings and improvements
and other capitalized costs 18,434,136 9,780,823
Accumulated depreciation and
amortization (728,405) (444,790)
Payable to venture partner (230,000) (230,000)
Net operating assets
(liabilities) 53,660 (70,076)
----------- ------------
$ 22,172,897 $ 12,108,290
=========== ============
The buildings and improvements are being depreciated over 25 years,
beginning January 1, 1995 for Palms Business Center and April 1, 1996 for
Reflections Apartments.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
June 30, 1996 were made on July 25, 1996 in the aggregate amount of
$1,242,638 ($12.95 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, 1986. A total of 94,997 units were
sold. The Partnership received proceeds of $85,677,259, net of selling
commissions and other offering costs, which have been invested in real
estate, used to pay related acquisition costs, or retained as working
capital reserves. The Partnership made nine real estate investments.
Three investments have been sold; one each in 1988, 1993 and 1994. As a
result of the sales, capital of $13,014,589 has been returned to the
limited partners through June 30, 1996.
At June 30, 1996, the Partnership had $7,296,735 in cash, cash
equivalents and short-term investments, of which $1,242,638 was used for
cash distributions to partners on July 25, 1996; the remainder will
primarily be used for working capital reserves. The source of future
liquidity and cash distributions to partners will be cash generated by the
Partnership's real estate and short-term investments. On January 26, 1995,
the Partnership made a capital distribution of $55 per limited partnership
unit ($5,224,835) from the proceeds of the Rancho Cucamonga sale in 1994
which reduced the adjusted capital contribution from $918 to $863 per
unit. Distributions of cash from operations for the first and second
quarters of 1996 were at the annualized rate of 6% on the adjusted capital
contribution. Distributions of cash from operations relating to the first
and second quarters of 1995 were made at the annualized rate of 6% on the
weighted average adjusted capital contribution. In addition to the
operating distribution made for the first quarter of 1995, a special
distribution totaling $776,289 ($8.09 per limited partnership unit) was
made which was attributable to a discretionary reduction of cash reserves
which had previously accumulated from operating activities. Since the
total quarterly distribution exceeded the rate of 2%, previously deferred
management fees to the advisor in the amount of $175,374 or 50% of the
excess distribution became currently payable. The managing general
partner will continue to evaluate reserve levels in the context of the
Partnership's investment objectives.
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,
certain appraised values exceeded the related carrying values by an
aggregate of $10,600,000 and certain appraised values were less than their
related carrying values by an aggregate of $1,300,000. 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
- ---------------------
Four of the investments currently in the portfolio are structured as
joint ventures with real estate development/management firms. Effective
January 1, 1995, and April 1, 1996, respectively, the Palms Business
Center and Reflections Apartments joint ventures were restructured and the
investments have been accounted for as wholly-owned properties since these
dates. The Partnership now has control over management decisions for
these properties. Effective January 1, 1996, the Metro Business Center
joint venture agreement was amended to grant the Partnership greater
control over management decisions, except that it did not have the
authority to unilaterally offer the property for sale prior to July 1,
1996.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park remained at 92%
during the second quarter of 1996, consistent with June 30, 1995. The
carrying value of this investment was reduced to estimated net realizable
value in 1993.
Occupancy at Reflections Apartments ended the second quarter of 1996
at 93%, and has been in the mid-90% range since June 30, 1995. Although
the Fort Myers apartment market remains competitive, rental rates have
improved.
Occupancy at Metro Business Center at June 30, 1996 was at 91%, down
from 98% at June 30, 1995. Leases for 17% of the space are due to expire
during the remainder of 1996. This area of Phoenix is experiencing slow
leasing activity.
Leasing at Decatur TownCenter II remained at 98% at June 30, 1996,
consistent with June 30, 1995. The Partnership is currently negotiating
the sale of the property, which is contingent on the buyer's obtaining
suitable financing.
Occupancy at Palms Business Center was 97% at June 30, 1996, up from
95% at March 31, 1996 but down from 99% at June 30, 1995. Rental rates in
Las Vegas have increased over the past year and further increases are
anticipated as the market remains strong.
Leasing at 270 Technology Center decreased to 90% at June 30, 1996,
down from 98% at March 31, 1996 and down from 100% at June 30, 1995. Over
the remainder of 1996, leases for approximately 17% of the space are due
to expire. Leases for half of the space are due to expire in 1997.
Investment Activity
Interest on cash equivalents and short-term investments decreased
between the first six-month periods of 1995 and 1996 due to the temporary
investment of proceeds from the Rancho Cucamonga sale in 1995.
Real estate operating activity for the first six months of 1996 was
$2,075,065 and $2,314,790 for the comparable six months of 1995. The 1996
amount includes $90,000 of income which was received by 270 Technology
Center from a former tenant in bankruptcy. The 1995 amount includes a
lease termination fee $205,000 from a tenant at Decatur TownCenter II.
Real estate operating activity otherwise decreased approximately 6% due
primarily to operating results at Reflections due to higher maintenance
expenses and at 270 Technology Center due to vacancy.
Operating cash flow in 1996 includes $250,000 received pursuant to a
loan guarantee from one of the Partnership's joint venture partners,
relating to previously accrued investment income. Operating cash flow in
1995 was reduced by the payment of previously deferred management fees of
$74,000. Exclusive of these items, operating cash flow decreased $611,000
between the first six-month periods of 1996 and 1995. The change
primarily stems from the change in Partnership operating results, together
with the timing of cash distributions from certain joint ventures and
increases in property working capital.
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 management fee decreased between the first six-month periods of
1996 and 1995 due to a decrease in distributable cash flow from
operations. This decrease is primarily attributable to the discretionary
reduction in the Partnership's cash reserves in 1995 noted previously.
General and administrative expenses did not change significantly between
the respective six-month periods.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1996
PART II
OTHER INFORMATION
-------------------
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 IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 13, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Fourth Copley Corp.
August 13, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.