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 September 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 SEPTEMBER 30, 1996
PART I
FINANCIAL INFORMATION
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BALANCE SHEET
(Unaudited)
September 30, 1996 December 31, 1995
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ASSETS
Real estate investments:
Joint ventures $ 17,727,341 $ 18,116,002
Property, net 1,264,689 1,243,499
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18,992,030 19,359,501
Cash and cash equivalents 2,376,927 1,399,905
Short-term investments 1,138,837 2,111,608
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$ 22,507,794 $ 22,871,014
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 82,443 $ 88,184
Accrued management fee 82,356 42,101
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Total liabilities 164,799 130,285
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Partners' capital (deficit):
Limited partners ($493.14 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 22,390,289 22,784,048
General partners (47,294) (43,319)
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Total partners' capital 22,342,995 22,740,729
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$ 22,507,794 $ 22,871,014
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<FN>
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1996 September 30, 1996 September 30, 1995 September 30, 1995
------------------ ------------------ ------------------- ------------------
INVESTMENT ACTIVITY
Property rentals $ 50,686 $ 141,294 $ 59,044 $ 151,758
Property operating expenses (22,076) (88,190) (24,194) (75,295)
Depreciation and amortization (24,277) (61,310) (8,462) (27,402)
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4,333 (8,206) 26,388 49,061
Joint venture earnings 377,008 1,196,560 320,560 1,116,267
Amortization (2,366) (7,098) (2,366) (7,098)
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Total real estate operations 378,975 1,181,256 344,582 1,158,230
Interest on cash equivalents
and short-term investments 44,653 132,156 51,422 152,262
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Total investment activity 423,628 1,313,412 396,004 1,310,492
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Portfolio Expenses
General and administrative 59,103 173,364 59,970 188,970
Management fee 82,356 175,033 42,101 126,303
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141,459 348,397 102,071 315,273
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Net Income $ 282,169 $ 965,015 $ 293,933 $ 995,219
============ ============ ============= ============
Net income per limited partnership
unit $ 4.08 $ 13.96 $ 4.25 $ 14.40
============ ============ ============= ============
Cash distributions per
limited partnership unit $ 6.78 $ 19.72 $ 6.16 $ 18.48
============ ============ ============= ============
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 Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1996 September 30, 1996 September 30, 1995 September 30, 1995
------------------- ------------------- ------------------- ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at
beginning of
period $ (45,432) $22,574,789 $ (43,319) $22,784,048 $ (40,667) $23,046,653 $ (39,166) $23,195,240
Cash
distributions (4,684) (463,847) (13,625) (1,349,124) (4,257) (421,430) (12,771) (1,264,290)
Net income 2,822 279,347 9,650 955,365 2,939 290,994 9,952 985,267
--------- ---------- --------- ----------- --------- ---------- ---------- ----------
Balance at
end of period $ (47,294) $22,390,289 $ (47,294) $22,390,289 $ (41,985) $22,916,217 $ (41,985) $22,916,217
========== =========== ======== ============ ========== =========== ========== ===========
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1996 1995
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Net cash provided by operating
activities $ 1,394,121 $ 1,415,963
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Cash flows from investing activities:
Capital expenditures on owned property (10,394) (84,856)
Decrease (increase) in short-term
investments, net 956,044 (920,683)
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Net cash provided by (used in)
investing activities 945,650 (1,005,539)
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Cash flows from financing activity:
Distributions to partners (1,362,749) (1,277,061)
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Net increase (decrease) in
cash and cash equivalents 977,022 (866,637)
Cash and cash equivalents:
Beginning of period 1,399,905 2,423,836
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End of period $ 2,376,927 $ 1,557,199
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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 September 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 September 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 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
----------------------
September 30, 1996 December 31, 1995
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Assets
Real property, at cost less
accumulated depreciation
of $4,678,149 and $4,273,114,
respectively $ 15,364,068 $ 15,753,539
Other assets 594,226 660,423
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15,958,294 16,413,962
Liabilities 103,094 280,372
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Net Assets $ 15,855,200 $ 16,133,590
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Results of Operations
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Nine Months Ended September 30,
--------------------------------
1996 1995
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Revenue
Rental income $ 2,402,361 $ 2,320,006
Other 3,433 10,774
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2,405,794 2,330,780
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Expenses
Operating expenses 804,201 795,455
Depreciation and amortization 405,033 419,058
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1,209,234 1,214,513
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Net income $ 1,195,560 $ 1,116,267
============= ==============
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:
September 30, 1996 December 31, 1995
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Land $ 347,772 $ 347,772
Buildings and improvements 1,031,512 1,021,118
Accumulated depreciation
and amortization (108,817) (58,041)
Net operating liabilities (5,778) (67,350)
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$ 1,264,689 $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 September 30, 1996 were made on October 24, 1996 in the
aggregate amount of $468,532 ($6.78 per limited partnership unit).
On that date, the Partnership made two other distributions: an
additional distribution of cash from operations in the aggregate
amount of $364,184 ($5.27 per limited partnership unit), which was
being held in working capital reserves; and a capital distribution
of $519,946 ($7.60 per limited partnership unit), representing
proceeds from the sale of various properties, which were also being
held in working capital reserves.
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 September 30, 1996.
At September 30, 1996, the Partnership had $3,515,764 in cash,
cash equivalents and short-term investments, of which $832,716 was
used for operating cash distributions, and $519,946 for capital
distributions to the partners on October 24, 1996; the remainder is
being retained as working capital reserves. The operating
distribution includes $364,184 attributable to a discretionary
reduction of cash reserves which had previously accumulated from
activities. The capital distribution amount had also been held as
part of the Partnership's working capital reserves. The managing
general partner will continue to evaluate reserve levels in the
context of the Partnership's investment objectives. The source of
future liquidity and cash distributions to partners will primarily
be cash generated by the Partnership's investments and proceeds from
the sale of investments. Distributions of cash from operations for
the first three 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 September 30, 1996, the appraised
value of each real estate investment exceeded its related carrying
value; the aggregate excess was approximately $5,800,000. 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
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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 87% to
100% during the third quarter of 1996, with the signing of two new
leases. (Occupancy was 87% at September 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 declined slightly to 90%
during the quarter. (Occupancy was 95% at September 30, 1995.)
Market conditions are competitive; however, supply and demand remain
in equilibrium.
Occupancy at 270 Technology Park remained at 98% during the
third quarter of 1996. (Occupancy was also 98% at September 30,
1995.)
Investment Activity
Interest on cash equivalents and short-term investments
decreased $20,000, or 13%, between the first nine months of 1995 and
1996 primarily due to lower short-term interest rates.
Real estate operating results were $1,181,256 for the first
nine months of 1996 as compared to $1,158,230 for the comparable
period of 1995. The improvement was due to an increase in operating
income at Bayberry, partially offset by lower operating results from
North Cabot, where expenses increased due to tenant turnover.
Operating cash flow decreased $22,000 or 2% between the first
nine months of 1995 and 1996. Cash flow decreased despite the
increase in real estate operations primarily as a result of the
timing of cash distributions from Bayberry.
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 nine
months of 1995 and 1996 due to an increase in distributable cash
flow, primarily stemming from the discretionary reduction in working
capital reserves. General and administrative expenses decreased by
$16,000 or 8% 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 SEPTEMBER 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 reports on Form 8-K
were filed during the quarter ended September 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)
November 12, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining.
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
November 12, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.