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 0-15429
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, 1996
PART I
FINANCIAL INFORMATION
----------------------
BALANCE SHEET
(Unaudited)
September 30, 1996 December 31, 1995
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ASSETS
Real estate investments:
Joint ventures $ 23,939,663 $ 40,466,827
Property, net 27,200,552 12,108,290
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51,140,215 52,575,117
Cash and cash equivalents 5,035,422 4,051,999
Short-term investments 3,137,492 3,364,539
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$ 59,313,129 $ 59,991,655
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Deposit from property sale $ 59,000 --
Accounts payable 59,363 $ 129,043
Accrued management fee 61,449 61,449
Deferred management and disposition
fees 3,052,700 2,806,904
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Total liabilities 3,232,512 2,997,396
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Partners' capital (deficit):
Limited partners ($863
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 56,244,454 57,148,961
General partners (163,837) (154,702)
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Total partners' capital 56,080,617 56,994,259
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$ 59,313,129 $ 59,991,655
============ ============
<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 $ 1,316,886 $ 2,981,718 $ 599,703 $ 1,778,563
Property operating expenses (506,798) (1,040,237) (132,005) (424,472)
Depreciation and amortization (240,429) (575,386) (97,291) (347,499)
--------------- --------------- ---------------- ---------------
569,659 1,366,095 370,407 1,006,592
Joint venture earnings 536,560 1,823,327 694,903 2,383,197
Amortization (2,292) (10,430) (4,844) (14,533)
--------------- --------------- ---------------- ---------------
Total real estate operations 1,103,927 3,178,992 1,060,466 3,375,256
Interest on cash equivalents
and short term investments 90,990 262,030 100,151 336,753
--------------- --------------- ---------------- ---------------
Total investment activity 1,194,917 3,441,022 1,160,617 3,712,009
--------------- --------------- ---------------- ---------------
Portfolio Expenses
Management fee 122,899 368,695 122,898 447,653
General and administrative 82,649 258,055 91,002 263,293
--------------- --------------- ---------------- ---------------
205,548 626,750 213,900 710,946
--------------- --------------- ---------------- ----------------
Net Income $ 989,369 $ 2,814,272 $ 946,717 $ 3,001,063
=============== =============== ================ ===============
Net income per limited partnership
unit $ 10.31 $ 29.33 $ 9.87 $ 31.28
=============== =============== ================ ===============
Cash distributions per
limited partnership unit $ 12.95 $ 38.85 $ 12.95 $ 102.99
=============== =============== ================ ===============
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 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 $ (161,305) $ 56,495,191 $ (154,702) $ 57,148,961 $ (148,435) $ 57,769,418 $ (135,355) $ 64,289,145
Cash
distributions (12,426) (1,230,212) (37,278) (3,690,636) (12,426) (1,230,212) (46,049) (9,783,742)
Net income 9,894 979,475 28,143 2,786,129 9,467 937,250 30,010 2,971,053
--------- ---------- --------- ----------- --------- ---------- ---------- -----------
Balance at
end of period $ (163,837) $ 56,244,454 $ (163,837) $ 56,244,454 $ (151,394) $ 57,476,456 $ (151,394) $ 57,476,456
========== =========== ======== ============ ========== ============ ========== ===========
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
--------------------------------
1996 1995
--------------------------------
Net cash provided by operating
activities $ 3,972,317 $ 3,823,109
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Cash flows from investing activities:
Deposit from property sale 59,000 --
Loan repayment by joint
venture partner 263,000 --
Investment in property -- (73,175)
Decrease (increase) in short-term
investments, net 417,020 (2,163,062)
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Net cash provided by (used in)
investing activities 739,020 (2,236,237)
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Cash flows from financing activity:
Distributions to partners (3,727,914) (9,829,791)
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Net increase (decrease) in
cash and cash equivalents 983,423 (8,242,919)
Cash and cash equivalents:
Beginning of period 4,051,999 12,370,267
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End of period $ 5,035,422 $ 4,127,348
============ ============
<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. Effective July 1, 1996, the
Partnership's joint venture investment in Metro Business Center was
converted to a wholly-owned property. The carrying value of this
investment at conversion was $5,889,265.
(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 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 Metro Business Center joint venture was restructured to a
wholly-owned property for financial reporting purposes effective
July 1, 1996.
The following summarized financial information is presented in
the aggregate for the Partnership's joint ventures:
Assets and Liabilities
----------------------
September 30, 1996 December 31, 1995
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Assets
Real property, at cost less
accumulated depreciation
of $4,949,589 and
$10,623,335, respectively $ 26,778,590 $ 41,201,074
Other 1,167,516 1,224,883
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27,946,106 42,425,957
Liabilities 372,076 314,534
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Net Assets $ 27,574,030 $ 42,111,423
=========== ===========
Results of Operations
---------------------
Nine Months ended September 30,
--------------------------------
1996 1995
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Revenue
Rental income $ 4,227,017 $ 5,652,509
Other income 28,815 108,881
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4,255,832 5,761,390
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Expenses
Operating expenses 1,402,629 1,846,720
Depreciation and amortization 756,995 1,262,573
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2,159,624 3,109,293
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Net income $ 2,096,208 $ 2,652,097
=========== ===========
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.
On October 10, 1996, the Partnership sold its interest in the
Decatur TownCenter II joint venture to its venture partner for a
price which exceeded the carrying value of the Partnership's
investment. The gain will be recognized in the fourth quarter of
1996.
NOTE 3 - PROPERTY
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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
partner has received an aggregate of $360,000.
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. In
connection with the restructuring, the Partnership received $250,000
from its joint venture partner. During the third quarter of 1996,
the Partnership received an additional $263,000. Upon the
Partnership's receipt of an additional $137,000 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 first payment was accounted for as a
reduction of previously accrued investment income. The second
payment has been accounted for as a reduction of the Partnership's
investment in the property.
In the third quarter of 1996, the Partnership completed the
process of obtaining control over management decisions for the Metro
Business Center property. Accordingly, since July 1, 1996, the
investment has been accounted for as a wholly-owned property. At
the time of the restructuring, the carrying value of the joint
venture was allocated to land, building, and other net operating
assets.
The following is a summary of the Partnership's investments in
property:
September 30, 1996 December 31, 1995
------------------- -----------------
Land $ 6,523,605 $ 3,072,333
Buildings and improvements
and other capitalized costs 22,053,797 9,780,823
Accumulated depreciation and
amortization (942,211) (444,790)
Payable to venture partner (230,000) (230,000)
Net operating assets
(liabilities) (204,639) (70,076)
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$ 27,200,552 $ 12,108,290
=========== ============
The buildings and improvements are being depreciated over 25
years, beginning January 1, 1995 for Palms Business Center, April 1,
1996 for Reflections Apartments and July 1, 1996 for Metro Business
Center.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter
ended September 30, 1996 were made on October 24, 1996 in the
aggregate amount of $1,242,638 ($12.95 per limited partnership
unit). Additionally, a capital distribution of $9,214,709 ($97 per
limited partnership unit) was made from proceeds received from the
sale of Decatur TownCenter II.
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
September 30, 1996. On October 24, 1996, the Partnership
distributed capital of $9,214,709 ($97 per limited partnership unit)
which represented proceeds from the sale of Decatur TownCenter II on
October 10, 1996. This capital distribution reduces the adjusted
capital contribution to $766 per unit.
At September 30, 1996, the Partnership had $7,998,826 in cash,
cash equivalents and short-term investments, of which $1,242,638 was
used for cash distributions to partners on October 24, 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 three quarters
of 1996 were at the annualized rate of 6% on the adjusted capital
contribution. Distributions of cash from operations relating to the
first three 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 September 30, 1996, certain
appraised values exceeded the related carrying values by an
aggregate of $11,900,000 and certain appraised values were less than
their related carrying values by an aggregate of $1,400,000. 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
- ---------------------
Three 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, and as of July 1, 1996, the Partnership has the authority
to unilaterally offer the property for sale. Accordingly, beginning
with the third quarter of 1996, the investment is being accounted
for as a wholly-owned property.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park remained
at 92% during the third quarter of 1996, consistent with September
30, 1995. The carrying value of this investment was reduced to
estimated net realizable value in 1993.
Occupancy at Reflections Apartments ended the third quarter of
1996 at 91%, down from 93% at June 30, 1996. Occupancy has been in
the mid-90% range since January 1, 1995. Although the Fort Myers
apartment market remains competitive, rental rates have increased.
Occupancy at Metro Business Center at September 30, 1996 was at
91%, down from 98% at September 30, 1995. This area of Phoenix has
been experiencing slow leasing activity, although most of the space
subject to leases expiring in 1996 has been re-leased.
Leasing at Decatur TownCenter II remained at 98% at September
30, 1996, consistent with September 30, 1995. This property was
sold on October 10, 1996.
Occupancy at Palms Business Center was 97% at September 30,
1996, an increase from earlier in the year, but down from 99% at
September 30, 1995. Rental rates in Las Vegas have increased over
the past year.
Leasing at 270 Technology Center remained at 90% at September
30, 1996, down from 98% earlier in the year and from 92% at
September 30, 1995. 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 nine-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 nine months of
1996 and 1995 was $3,178,992 and $3,375,256, respectively. 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 3% due primarily to higher maintenance
expenses at Reflections.
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 $175,000. Exclusive of these items,
operating cash flow decreased $276,000 between the first nine-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.
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 nine-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 nine-month periods.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 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 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 IV;
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,
Fourth Copley Corp.
November 12, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.