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 March 31, 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 MARCH 31, 1996
PART I
FINANCIAL INFORMATION
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BALANCE SHEET
(Unaudited)
March 31, 1996 December 31, 1995
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ASSETS
Real estate investments:
Joint ventures $40,897,802 $40,466,827
Property, net 12,021,848 12,108,290
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52,919,650 52,575,117
Cash and cash equivalents 3,222,859 4,051,999
Short-term investments 3,556,520 3,364,539
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$59,699,029 $59,991,655
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 77,812 $ 129,043
Accrued management fee 61,449 61,449
Deferred management and
disposition fees 2,868,353 2,806,904
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Total liabilities 3,007,614 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) 56,849,145 57,148,961
General partners (157,730) (154,702)
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Total partners' capital 56,691,415 56,994,259
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$59,699,029 $59,991,655
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<FN>
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
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1996 1995
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INVESTMENT ACTIVITY
Property rentals $ 576,931 $ 557,340
Property operating expenses (135,021) (126,320)
Depreciation and amortization (123,661) (148,985)
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318,249 282,035
Joint venture earnings 752,603 935,283
Amortization (4,844) (4,845)
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Total real estate operations 1,066,008 1,212,473
Interest on cash equivalents
and short term investments 85,291 131,827
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Total investment activity 1,151,299 1,344,300
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Portfolio Expenses
Management fee 122,898 201,857
General and administrative 88,607 85,232
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211,505 287,089
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Net Income $ 939,794 $ 1,057,211
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Net income per limited
partnership unit $ 9.79 $ 11.02
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Cash distributions per
limited partnership unit $ 12.95 $ 68.77
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Number of limited partnership
units outstanding during
the period 94,997 94,997
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<FN>
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended March 31,
---------------------------------------
1996 1995
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General Limited General Limited
Partners Partners Partners Partners
--------- --------- --------- ---------
Balance at
beginning of
period $(154,702) $ 57,148,961 $(135,355) $64,289,145
Cash
distributions (12,426) (1,230,212) (13,213) (6,532,944)
Net income 9,398 930,396 10,572 1,046,639
--------- ---------- --------- ----------
Balance at
end of period $(157,730) $56,849,145 $(137,996) $58,802,840
========= ========== ========== ===========
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
------------------------
1996 1995
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Net cash provided by operating
activities $ 617,192 $ 924,822
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Cash flows from investing activity:
Decrease (increase) in short-term
investments, net (203,694) 408,847
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Net cash provided by (used in)
investing activities (203,694) 408,847
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Cash flows from financing activity:
Distributions to partners (1,242,638) (6,546,157)
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Net decrease in
cash and cash equivalents (829,140) (5,212,488)
Cash and cash equivalents:
Beginning of period 4,051,999 12,370,267
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End of period $ 3,222,859 $ 7,157,779
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<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)
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, 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 March 31, 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 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
- -----------------------------------
In the second quarter of 1995, the Palms Business Center investment
was converted to a wholly-owned property for financial reporting purposes
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 impact 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
----------------------
March 31, 1996 December 31, 1995
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Assets
Real property, at cost less
accumulated depreciation
of $10,988,812 and
$10,623,335, respectively $41,127,635 $41,201,074
Other 1,833,190 1,224,883
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42,960,825 42,425,957
Liabilities 507,439 314,534
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Net Assets $42,453,386 $42,111,423
========== ==========
Results of Operations
Quarter ended March 31,
-----------------------
1996 1995
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Revenue
Rental income $ 1,884,860 $ 2,033,342
Other income 25,271 25,963
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1,910,131 2,059,305
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Expenses
Operating expenses 699,287 597,409
Depreciation and amortization 371,053 437,296
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1,070,340 1,034,705
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Net income $ 839,791 $ 1,024,600
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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
- -----------------
Effective January 1, 1995, the Palms Business Center joint venture
was restructured, giving the Partnership control over management
decisions. Since that 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 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.
The following is a summary of the Partnership's investment:
March 31, 1996 December 31, 1995
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Land $ 3,072,333 $ 3,072,333
Buildings and improvements
and other capitalized costs 9,763,524 9,780,823
Accumulated depreciation and
amortization (542,081) (444,790)
Payable to venture partner (230,000) (230,000)
Net operating liabilities (41,928) (70,076)
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$12,021,848 $ 12,108,290
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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
March 31, 1996 were made on April 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
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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 March 31, 1996.
At March 31, 1996, the Partnership had $6,779,379 in cash, cash
equivalents and short-term investments, of which $1,242,638 was used for
cash distributions to partners on April 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 quarter of 1996
were at the annualized rate of 6% on the adjusted capital contribution.
Distributions of cash from operations relating to the first quarter 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 were paid in the amount of $175,374 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.
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 March 31, 1996,
certain appraised values exceeded the related carrying values by an
aggregate of $9,200,000 and certain appraised values were less than their
related carrying values by an aggregate of $1,600,000. 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
- ---------------------
Five of the investments currently in the portfolio are structured as
joint ventures with real estate development/management firms. Effective
January 1, 1995, the Palms Business Center joint venture was restructured
to grant the Partnership control over management decisions and the
investment has been accounted for as a wholly-owned property since that
date. Discussions to restructure the Reflections Apartments joint venture
to gain control over management decisions are in process; however, there
can be no assurance that this transaction will be completed. 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 does 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 first quarter of 1996, consistent with March 31, 1995. The
carrying value of this investment was reduced to estimated net realizable
value in 1993.
Occupancy at Reflections Apartments ended the first quarter of 1996
at 96%, and has been in the mid-90% range since March 31, 1995. Although
the Fort Myers apartment market remains competitive, rental rates have
improved.
Occupancy at Metro Business Center at March 31, 1996 was at 91%, down
from 98% at March 31, 1995. Rental rates in Phoenix continue to increase
as the market remains strong. However, this property faces leasing
exposure during the remainder of 1996 as leases for 28% of the space are
due to expire.
Leasing at Decatur TownCenter II remained at 98% at March 31, 1996,
down from 100% at March 31, 1995.
Occupancy at Palms Business Center was 95% at March 31, 1996, down
from 96% and 97% at December 31, 1995 and March 31, 1995, respectively.
Rental rates in Las Vegas have increased significantly over the past 12
months and further increases are anticipated as the market remains strong.
Leasing at 270 Technology Center remained at 98% at March 31, 1996,
down slightly from 100% at March 31, 1995. Over the remainder of 1996,
leases for approximately one-third of the space are due to expire, and
leases for 53% of the space are due to expire in 1997.
Investment Activity
Interest on cash equivalents and short-term investments decreased
between the first quarter of 1995 and 1996 due to the temporary investment
of proceeds from the Rancho Cucamonga sale.
Real estate operating activity for the first quarter of 1996 was
$1,066,008 and $1,212,473 for the comparable quarter of 1995. The 1995
amount includes a lease termination fee of $204,813 from a tenant at
Decatur TownCenter II. Real estate operating activity otherwise increased
approximately 6% due primarily to an increase in net operating income from
270 Technology Center of approximately $66,000 as a result of receipt of
past due rent from a former tenant. Net operating income at Decatur
TownCenter II declined due to occupancy, and the remainder of the
Partnership properties was relatively unchanged.
Operating cash flow decreased $307,630 or 33% between the first
quarter of 1996 and 1995. The change primarily stems from discretionary
adjustments to cash reserve levels made by joint ventures. Subsequent to
the first quarter of 1996, Decatur TownCenter II distributed $100,000 of
these excess reserves. Both Metro Business Center and Reflections
Apartments reduced cash reserves during 1995 and, therefore, increased
cash flow during the first quarter of 1995. Operating cash flow from the
remainder of the Partnership's investments was consistent with the change
in operating results.
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 quarters ended March 31,
1995 and 1996 due to an decrease in distributable cash flow from
operations. The decrease is primarily attributable to the discretionary
reduction in the Partnership's cash reserves noted previously. General
and administrative expenses did not change significantly between the
respective quarters.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 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
March 31, 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)
May 13, 1996
/s/ Peter P. Twining
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Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Fourth Copley Corp.
May 13, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.