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, 1995 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 SEPTEMBER 30, 1995
PART I
FINANCIAL INFORMATION
----------------------
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
September 30, 1995 December 31, 1994
------------------ -----------------
ASSETS
Real estate investments:
Joint ventures $ 40,861,157 $ 53,837,786
Property, net 12,153,060 --
--------------- ---------------
53,014,217 53,837,786
Cash and cash equivalents 4,127,348 12,370,267
Short-term investments 3,108,386 922,981
Other receivables -- 13,976
--------------- ---------------
$ 60,249,951 $ 67,145,010
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (Deficit)
Accounts payable $ 117,985 $ 127,950
Accrued management fee 61,449 65,340
Deferred management and disposition
fees 2,745,455 2,797,930
--------------- ---------------
Total liabilities 2,924,889 2,991,220
--------------- ---------------
Partners' capital (deficit):
Limited partners ($863 and $918
per unit, respectively;
120,000 units authorized,
94,997 units issued and
outstanding) 57,476,456 64,289,145
General partners (151,394) (135,355)
--------------- ---------------
Total partners' capital 57,325,062 64,153,790
--------------- ---------------
$ 60,249,951 $ 67,145,010
=============== ===============
<FN>
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------ ------------------ ------------------- ------------------
INVESTMENT ACTIVITY
Property rentals $ 599,703 $ 1,778,563 $ -- $ --
Property operations expense (132,005) (424,472) -- --
Depreciation and amortization (97,291) (347,499) -- --
--------------- --------------- ---------------- ---------------
370,407 1,006,592 -- --
Joint venture earnings 694,903 2,383,197 1,081,321 2,864,406
Amortization (4,844) (14,533) (6,633) (19,898)
--------------- --------------- ---------------- ---------------
Total real estate operations 1,060,466 3,375,256 1,074,688 2,844,508
Interest on cash equivalents
and short term investments 100,151 336,753 89,361 245,157
--------------- --------------- ---------------- ---------------
Total investment activity 1,160,617 3,712,009 1,164,049 3,089,665
--------------- --------------- ---------------- ---------------
Portfolio Expenses
Management fee 122,898 447,653 119,766 348,480
General and administrative 91,002 263,293 81,316 238,501
--------------- --------------- ---------------- ---------------
213,900 710,946 201,082 586,981
--------------- --------------- ---------------- ----------------
Net Income $ 946,717 $ 3,001,063 $ 962,967 $ 2,502,684
=============== =============== ================ ===============
Net income per limited partnership
unit $ 9.87 $ 31.28 $ 10.04 $ 26.08
=============== =============== ================ ===============
Cash distributions per
limited partnership unit $ 12.95 $ 102.99 $ 12.62 $ 34.57
=============== =============== ================ ===============
Number of limited partnership
units outstanding during the
period 94,997 94,997 94,997 94,997
=============== =============== ================ ===============
<FN>
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Deficit)
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------- ------------------- ------------------- ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at
beginning of
period $(148,435) $57,769,418 $(135,355) $64,289,145 $(133,259) $64,496,609 $(127,594) $65,057,473
Cash
distributions (12,426) (1,230,212) (46,049) (9,783,742) (12,110) (1,198,862) (33,172) (3,284,046)
Net income 9,467 937,250 30,010 2,971,053 9,630 953,337 25,027 2,477,657
--------- ---------- --------- ---------- --------- ---------- ---------- ----------
Balance at
end of period $(151,394) $57,476,456 $(151,394) $57,476,456 $(135,739) $64,251,084 $(135,739) $64,251,084
========== ============ ========== =========== ========== =========== ========== ===========
<FN>
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
--------------------------------
1995 1994
--------------------------------
Net cash provided by operating activities $ 3,823,109 $ 4,432,091
-------------- -------------
Cash flows from investing activities:
Investment in joint venture -- (1,753,549)
Investment in property (73,175) --
Decrease (increase) in short-term
investments, net (2,163,062) 4,843,672
------------ ------------
Net cash provided by (used in)
investing activities (2,236,237) 3,090,123
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Cash flows from financing activity:
Distributions to partners (9,829,791) (3,317,218)
------------ ------------
Net increase (decrease) in
cash and cash equivalents (8,242,919) 4,204,996
Cash and cash equivalents:
Beginning of period 12,370,267 2,146,673
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End of period $ 4,127,348 $ 6,351,669
============== ==============
<FN>
Non-cash transaction:
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.
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES IV;
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 September 30, 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 September 30, 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 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 eight to twelve years of
their acquisition, and then liquidate.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
In the second quarter of 1995, the Palms Business Center investment was
converted to a wholly-owned property effective January 1, 1995. Accordingly,
amounts previously reported as joint venture earnings in the first quarter of
1995 have been reclassified in the Statement of Operations. This
reclassification had no effect on the Partnership's operating results.
The following summarized financial information is presented in the
aggregate for the Partnership's joint ventures:
Assets and Liabilities
----------------------
September 30, 1995 December 31, 1994
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation
of $11,042,578 and
$12,483,694, respectively $ 41,037,536 $ 52,351,990
Other 1,077,489 1,881,118
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42,115,025 54,233,108
Liabilities 426,224 644,808
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Net Assets $ 41,688,801 $ 53,588,300
============ ============
Results of Operations
Nine months ended September 30,
--------------------------------
1995 1994
---- ----
Revenue
Rental income $ 5,652,509 $ 6,907,087
Other income 108,881 184,290
------------ -------------
5,761,390 7,091,377
------------ -------------
Expenses
Operating expenses 1,846,720 2,242,723
Depreciation and amortization 1,262,573 1,925,172
------------ -------------
3,109,293 4,167,895
------------ -------------
Net income $ 2,652,097 $ 2,923,482
============= ==============
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.
The Partnership's Rancho Cucamonga investment was sold on December 30,
1994. The above 1994 amounts include the results of operations for this
investment. A capital distribution of $55 per limited partnership unit was made
in January 1995 from the proceeds of this sale.
NOTE 3 - PROPERTY
- -----------------
Effective January 1, 1995, the Palms Business Center joint venture was
restructured and the venture partner's ownership interest assigned to the
Partnership. Accordingly, as of this date, the investment is being 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 developer and other net operating liabilities. The former
venture partner will receive 40% of the excess cash flow above a specified level
until its cash investment of $360,000 is repaid in full.
The following is a summary of the Partnership's investment at September 30,
1995:
Land $ 3,072,333
Buildings and improvements
and other capitalized costs 9,802,230
Accumulated depreciation and
amortization (347,499)
Payable to developer (280,000)
Net operating liabilities (94,004)
------------
$ 12,153,060
=============
The buildings and improvements are being depreciated over 25 years,
beginning January 1, 1995.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1995 were made on October 26, 1995 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 in 1988 and one each
in 1993 and 1994.
On December 30, 1994, the Partnership's Rancho Cucamonga joint venture sold
its property and the Partnership received net sale proceeds of $5,261,275. On
January 26, 1995, the Partnership made a capital distribution of $55 per limited
partnership unit ($5,224,835) from the proceeds of the sale. The adjusted
capital contribution after this distribution is $863 per unit.
At September 30, 1995, the Partnership had $7,235,734 in cash, cash
equivalents and short-term investments, of which $1,242,638 was used for cash
distributions to partners on October 26, 1995; the remainder will primarily be
used to complete the funding of investment commitments and 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. Distributions of cash from operations for the second and third
quarters of 1995 were at the annualized rate of 6% on the adjusted capital
contribution noted above. Distributions of cash from operations relating to the
first quarter of 1995 were made at the annualized rate of 6% on a weighted
average adjusted capital contribution; in addition at this time, 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
been previously accumulated through operating activities. Since the total
quarterly distribution exceeded the rate of 2%, previously deferred management
fees to the advisor were paid in the amount of $175,000 or 50% of the excess
distribution. The managing general partner will continue to evaluate reserve
levels in the context of the Partnership's investment objectives. Distributions
of cash from operations relating to the first, second and third quarters of 1994
were at the annualized rates of 5%, 5.5% and 5.5%, respectively, on an adjusted
capital contribution of $918 per unit.
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. Carrying value may be greater or less than current appraised
value. At September 30, 1995, certain appraised values exceeded the related
carrying values by an aggregate of $8,200,000 and certain appraised values were
less than their related carrying values by an aggregate of $1,900,000. 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 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
- ---------------------
Five of the investments currently in the portfolio are structured as joint
ventures with real estate development/management firms. The Rancho Cucamonga
investment, which property was sold in December 1994, was also structured as a
joint venture. Effective January 1, 1995, the Palms Business Center joint
venture was restructured and converted to a wholly-owned property.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park remained at 92% during
the first nine months of 1995. Occupancy was 86% one year prior.
Occupancy at Reflections Apartments ended the third quarter of 1995 at 94%.
Although the Fort Myers apartment market remains competitive, rental rates have
improved. Occupancy has ranged from 92% to 95% during the first nine months of
1995; occupancy during the comparable period in 1994 was in this same range.
Occupancy at Metro Business Center at September 30, 1995 was at 98%; down
slightly from 100% one year ago. Rental rates have begun to increase as the
Phoenix market appears to have stabilized. However, this property faces leasing
exposure during the remainder of 1995 as 15% of the leases are due to expire.
Two of the leases, representing 11% of the space are not expected to renew.
Leasing at Decatur TownCenter II remained at 98% at September 30, 1995
(occupancy was 100% one year prior). Late in the third quarter, the Partnership
reached an agreement with the venture partner to restructure the joint venture,
thereby allowing the Partnership the sole right to cause a sale on or after
January 1, 1996.
Occupancy at Palms Business Center remained at 99% at September 30, 1995.
Over the past year, occupancy at this property has been maintained in the high
90% range. The overall health of the Las Vegas market has improved and there
has been some upward movement in rental rates. Discussions were concluded with
the venture partner to restructure this joint venture during the second quarter
of 1995, and effective January 1, 1995, the venture partner's ownership interest
was assigned to the Partnership, thereby giving sole control of the property to
the Partnership.
Leasing at 270 Technology Center was 70% at June 30, 1994 and increased to
100% during the third quarter of 1994 where it had remained through the second
quarter of 1995. Leasing declined to 92% during the third quarter of 1995.
Over the remainder of 1995, the leases for 14% of the space at this property are
due to expire.
Investment Activity
Interest on cash equivalents and short-term investments increased during
the first nine months of 1995 as compared to the same period of 1994 as a result
of larger invested balances, as well as an increase in interest rates. Invested
balances were higher due to the temporary investment of proceeds from the Rancho
Cucamonga sale.
Exclusive of the operating results from Rancho Cucamonga in 1994, real
estate operating activity for the first nine months of 1995 and 1994 was
$3,375,256 and $2,615,165, respectively. This 29% increase was due to improved
operating results at most of the Partnership's investments. Improvement was
most notable at Columbia Gateway Corporate Park, at which results increased by
approximately $436,000 due to improvements in occupancy. Improved occupancy
also resulted in a $77,000 increase in net operating income at 270 Technology
Center. Net operating income at Metro Business Center and Palms Business Center
improved by $135,000 and $154,000, respectively, primarily due to increases in
rental rates. These improvements were partially offset by a decrease in net
operating income at Decatur TownCenter II of $47,000. During the first quarter
of 1995, a lease termination fee of $205,000 was received at Decatur TownCenter
II, which was offset by a decrease in other rental revenue and an increase in
operating expenses.
Notwithstanding the improved real estate operating results and excluding
$342,738 in cash flow from Rancho Cucamonga in 1994, operating cash flow for the
first nine months of 1995 decreased $266,244 or 7% as compared to the comparable
period in 1994. This decrease was due to 270 Technology Park retaining working
capital reserves at the joint venture level during the first nine months of
1995. Between the respective nine month periods, cash distributions from this
property decreased by $225,000. In addition, although net operating income
increased by $436,000 at Columbia Gateway Corporate Park, cash distributed from
this venture only increased by $25,000 due to the venture's distributing excess
cash reserves during 1994. Operating cash flow from the remainder of the
Partnership's investments was consistent with the change in operating results.
The decrease in operating cash flow was also due to the payment of previously
accrued, but deferred management fees to the advisor of $175,000.
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 increased between the nine months ended September 30,
1994 and 1995 due to an increase in distributable cash flow from operations.
The increase is primarily attributable to the discretionary reduction in cash
reserves noted previously. General and administrative expenses increased
approximately $25,000 between these respective periods primarily due to
increased legal fees associated with the various investment restructurings.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 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 September 30,
1995.
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)
November 9, 1995 -----------------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Fourth Copley Corp.
November 9, 1995 -----------------------------------------
Marie A. Welch
Investment Officer and Chief Accounting
Officer of Managing General Partner,
Fourth Copley Corp.