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 0-17808
NEW ENGLAND PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2940131
(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 PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1996
PART I
FINANCIAL INFORMATION
----------------------
BALANCE SHEET
(Unaudited)
June 30, 1996 December 31, 1995
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ASSETS
Real estate investments:
Property, net $ 43,382,241 $ 37,058,053
Joint ventures 4,699,069 11,821,773
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48,081,310 48,879,826
Cash and cash equivalents 7,276,955 3,790,598
Short-term investments 4,705,547 7,864,807
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$ 60,063,812 $ 60,535,231
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 81,037 $ 120,505
Accrued management fee 57,109 50,008
Deferred management and
disposition fees 482,410 368,161
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Total liabilities 620,556 538,674
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Commitments to fund real estate
investments
Partners' capital (deficit):
Limited partners ($924 per
unit; 160,000 units
authorized, 82,514 and 82,536
units issued and outstanding,
respectively) 59,525,337 60,073,461
General partners (82,081) (76,904)
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Total partners' capital 59,443,256 59,996,557
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$ 60,063,812 $ 60,535,231
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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 $ 1,583,118 $ 3,199,983 $ 708,114 $ 1,309,053
Interest income on loan to
ground lessor 37,321 74,970 - -
Property operating expenses (347,160) (758,029) (153,512) (290,612)
Ground rent expense (97,500) (195,000) - -
Depreciation and amortization (381,958) (759,202) (160,190) (341,716)
------------ ------------ ------------ ------------
793,821 1,562,722 394,412 676,725
Joint venture earnings 94,794 183,651 426,936 865,563
Investment valuation allowance - - (600,000) (600,000)
------------ ------------ ------------ ------------
Total real estate operations 888,615 1,746,373 221,348 942,288
Interest on cash equivalents
and short-term investments 148,517 296,533 209,772 415,129
------------ ------------ ------------ ------------
Total investment activity 1,037,132 2,042,906 431,120 1,357,417
------------ ------------ ------------ ------------
Portfolio Expenses
Management fee 114,218 228,499 103,163 206,326
General and administrative 80,494 165,463 80,299 163,116
------------ ------------ ----------- ------------
194,712 393,962 183,462 369,442
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Net Income $ 842,420 $ 1,648,944 247,658 987,975
============ ============ ============ ============
Net income per weighted average
limited partnership unit $ 10.11 $ 19.78 2.97 11.84
============ ============ ============ ============
Cash distributions per
limited partnership unit
outstanding for the entire
period $ 13.86 $ 25.99 $ 12.50 $ 22.02
============ ============ ============ ============
Weighted average number of limited
partnership units outstanding
during the period 82,491 82,514 82,613 82,613
============ ============ ============ ============
<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 $ (78,951) $59,835,289 $(76,903) $60,073,460 $ (60,926) $64,031,311 $ (60,383) $64,086,525
Repurchase of
limited partnership
units - - - (35,468) - (40,359) - (41,801)
Cash
distributions (11,554) (1,143,948) (21,667) (2,145,110) (10,431) (1,032,663) (18,377) (1,819,349)
Net income 8,424 833,996 16,489 1,632,455 2,477 245,181 9,880 978,095
-------- --------- -------- ---------- --------- ----------- ---------- -----------
Balance at
end of period $ (82,081) $59,525,337 $(82,081) $59,525,337 $ (68,880) $63,203,470 $ (68,880) $63,203,470
======== ========== ======== ========== ========== =========== ========== ===========
<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 $ 2,529,387 $ 2,509,259
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Cash flows from investing activities:
Investment in property (20,547) (6,994)
Decrease in short-term investments, net 3,149,790 1,503,593
Repayment of loan to ground lessor 29,972 -
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Net cash provided by
investing activities 3,159,215 1,496,599
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Cash flows from financing activities:
Distributions to partners (2,166,777) (1,837,726)
Repurchase of limited partnership
units (35,468) (41,801)
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Net cash used in financing
activities (2,202,245) (1,879,527)
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Net increase in cash and
cash equivalents 3,486,357 2,126,331
Cash and cash equivalents:
Beginning of period 3,790,598 8,975,244
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End of period $ 7,276,955 $11,101,575
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<FN>
Non-cash transactions:
Effective January 1, 1996 and January 1, 1995, the Partnership's joint
venture investments in University Business Park and Palms Business Center,
respectively, were converted to wholly-owned properties. The carrying
values of these investments at conversion were $5,630,581 and $10,308,265,
respectively. Effective April 1, 1996, for financial reporting purposes,
the Partnership's joint venture investment in Waters Landing II was
converted to a wholly-owned property. The carrying value of this
investment at conversion was $1,491,742.
(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 Pension Properties V; 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 May, 1987 and acquired the seven real estate investments it
currently owns prior to the end of 1989. The Partnership intends to
dispose of its investments within eight to twelve years of their
acquisition, and then liquidate.
The Partnership maintains a repurchase fund for the purpose of
repurchasing limited partnership units. Two percent of cash flow, as
defined, is designated for this fund which had a balance of $46,742 and
$32,572 at June 30, 1996 and December 31, 1995, respectively.
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.
Effective January 1, 1996, the University Business Park investment
was dissolved and the venture partner's ownership interest was assigned to
the Partnership. Accordingly, this investment is now a wholly-owned
property.
The Waters Landing II 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 $1,748,098 and $4,019,677,
respectively $ 15,641,858 $ 22,312,780
Other 391,508 484,715
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16,033,366 22,797,495
Liabilities 126,172 187,308
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Net Assets $ 15,907,194 $ 22,610,187
=========== ===========
Results of Operations
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Six Months Ended June 30,
------------------------
1996 1995
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Revenue
Rental income $ 979,813 $ 2,697,992
Other - 49,295
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979,813 2,747,287
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Expenses
Operating expenses 248,728 875,167
Depreciation and amortization 128,950 591,065
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377,678 1,466,232
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Net income $ 602,135 $ 1,281,055
============ ============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on
behalf of their financing arrangements with the joint ventures.
The Santa Rita Plaza and Dahlia investments were converted to wholly-
owned properties in the third quarter of 1995. The above amounts include
joint venture results of operations through their respective conversion
dates.
NOTE 3 - PROPERTY
- -----------------
In the second quarter of 1995, the Palms Business Center joint
venture was restructured and the venture partner's ownership interest was
assigned to the Partnership. Since January 1, 1995, the investment is
being accounted for as a wholly-owned property. The carrying value of the
joint venture investment at conversion ($10,308,265) was allocated to
land, building and improvements and other net operating assets.
Effective August 1, 1995, the Santa Rita Plaza joint venture was
restructured into a limited partnership, whereby the Partnership was
granted control over management decisions. Accordingly, as of such date,
the investment is being accounted for as a wholly-owned property. The
carrying value of the joint venture investment at conversion ($10,216,659)
was allocated to building and improvements, mortgage loan receivable from
the ground lessor and other net operating assets. On this same date, the
Partnership made a fifteen-year loan in the amount of $1,750,000 to the
ground lessor, which used a portion of the proceeds to repay a loan from
the Santa Rita venture which, in turn, paid approximately $1,300,000 to
the Partnership as a partial return of its capital investment in the
venture.
Effective September 1, 1995, the Dahlia joint venture was
restructured into a limited partnership, whereby the Partnership was
granted control over management decisions. Accordingly, as of this date,
the investment is being accounted for as a wholly-owned property. The
carrying value at conversion ($7,413,175) was allocated to land, building
and improvements, and other net operating assets. During 1993, the joint
venture agreed to a settlement with a former tenant for past due rent.
This settlement was secured by an attachment on 36 acres of land in
Scottsdale, Arizona. During the first quarter of 1996, the land was sold.
The Partnership received $332,489 in net proceeds, which exceeded the
carrying value of the receivable by approximately $32,000.
Effective January 1, 1996, the University Business Park joint venture
was dissolved and the venture partner's ownership interest was assigned to
the Partnership. Accordingly, as of such date, the investment is being
accounted for as a wholly-owned property. The carrying value of the joint
venture investment at conversion ($5,630,581) was allocated to land,
building and improvements and other net operating assets.
In the second quarter of 1996, the Waters Landing II joint venture
was restructured and the venture partner's ownership interest was assigned
to the Partnership and a subsidiary of the Partnership. Since April 1,
1996, the investment has been accounted for as a wholly-owned property.
The carrying value of the joint venture investment at conversion
($1,491,742) was allocated to land.
The following is a summary of the Partnership's investment in
property (six in 1996 and four in 1995):
June 30, 1996 December 31, 1995
--------------- -----------------
Land $10,575,045 $ 7,548,949
Building and improvements 34,068,830 30,323,985
Accumulated depreciation (2,196,959) (1,596,044)
Investment valuation allowance (2,900,000) (2,900,000)
Loan to ground lessor 1,687,424 1,726,003
Lease commissions and other
assets, net 1,657,070 1,576,781
Accounts receivable 1,032,797 900,017
Accounts payable (541,966) (521,638)
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$43,382,241 $ 37,058,053
=========== ===========
The buildings and improvements are being depreciated over 25 years.
The loan to ground lessor bears interest at 8.75%, with payments to be
made monthly based on a 15 year amortization schedule, and is secured by
the ground lessor's interest in the Santa Rita Plaza land.
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
$1,154,874 ($13.86 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 limited partnership units
in December 1988. A total of 83,291 units were sold. The Partnership
received proceeds of $74,895,253, net of selling commissions and other
offering costs, which have been used for investment in real estate, for
the payment of related acquisition costs and for working capital reserves.
The Partnership made nine real estate investments, two of which were sold
in 1994.
As a result of the sales, capital of $6,281,804 has been returned to
the limited partners through June 30, 1996. The adjusted capital
contribution was reduced to $952 from $1,000 per unit in 1994, and then to
$924 in July 1995. In addition, a portion of the sales proceeds was used
to pay previously accrued, but deferred management fees to the advisor
($183,426 in July 1995).
At June 30, 1996, the Partnership had $11,982,502 in cash, cash
equivalents and short-term investments, of which $1,154,874 was used for
cash distributions to partners on July 25, 1996; the remainder will be
used to complete the funding of real estate investments or be retained as
working capital reserves. The source of future liquidity and cash
distributions to partners will be cash generated by the Partnership's
short-term and real estate investments. Distributions of cash from
operations relating to the first and second quarters of 1996 were made 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 5.25% on the adjusted
capital contribution. The distribution rate was increased due to the
stabilization of property operations and the attainment of appropriate
cash reserve levels.
The Partnership maintains a fund for the purpose of repurchasing
limited partnership units pursuant to the terms and conditions set forth
in the Partnership Agreement. Two percent of cash flow, as defined, is
designated for this fund which had a balance of $46,742 and $32,572 at
June 30, 1996, and December 31, 1995, respectively. Through June 30,
1996, the Partnership repurchased and retired 800 limited partnership
units for an aggregate cost of $764,601.
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, the
appraised values of certain investments exceeded their related carrying
values by an aggregate of $5,410,000, and the appraised values of the
remaining investments were less than their related carrying values by an
aggregate of $2,250,000. 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
- ---------------------
Effective January 1, 1995, the Palms Business Center joint venture
was restructured and the venture partner's ownership interest was assigned
to the Partnership. Effective August 1, 1995 and September 1, 1995,
respectively, the Santa Rita Plaza and Dahlia joint venture investments
were restructured to grant the Partnership control over management
decisions. Effective January 1, 1996, the University Business Park joint
venture was dissolved and the venture partner's ownership interest was
assigned to the Partnership. Effective April 1, 1996, the Waters Landing
II joint venture was restructured to grant the Partnership control over
management decisions. Accordingly, these investments have been accounted
for as wholly-owned properties since their respective conversion dates.
The Puente Street investment is also a wholly-owned property. The other
investment in the portfolio is structured as a joint venture with a real
estate development/management firm.
Operating Factors
Occupancy at University Business Park increased from 98% at March 31,
1996 to 100% at June 30, 1996, with the addition of a short-term tenant.
Occupancy was 96% at March 31, 1995, and 99% at June 30, 1995. Rental
rates in Phoenix have continued to increase as the market remained strong.
Overall occupancy at Columbia Gateway Corporate Park remained at 92%
during the first two quarters of 1996, consistent with March 31, 1995 and
June 30, 1995. The carrying value of this investment was reduced to
estimated net realizable value in 1993.
Occupancy at Puente Street remained at 100% at March 31, 1996 and
June 30, 1996. As a result of depressed market conditions, the carrying
value of this investment was reduced to estimated net realizable value in
1993 and 1994.
During 1995, the Partnership undertook feasibility studies of
alternative development plans for the Waters Landing II site. Based on
the results, it was determined that development of the site was not in the
best interest of the limited partners. Accordingly, the carrying value
was reduced in 1995 to estimated fair market value less cost of sale.
Occupancy at the Palms Business Center III and IV was at 95% and 98%
at March 31 and June 30, 1995, respectively. During 1996, occupancy
increased from 95% at March 31, 1996 to 100% at June 30, 1996. Rental
rates in Las Vegas have been increasing over the past 12 months.
Occupancy at the Dahlia property remained at 100% during the first
two quarters of 1996, where it was at March 31, 1995 and June 30, 1995.
The market conditions for industrial space in this area of California have
improved. The Partnership had previously received land as a settlement
from a former tenant which had defaulted on its lease obligations. The
land in Arizona was sold during the first quarter of 1996 and the
Partnership received net sale proceeds of approximately $332,000.
Occupancy at Santa Rita Plaza was at 91% at March 31 and 90% at June
30, 1996. Occupancy was 94% at March 31, 1995 and June 30, 1995.
Performance at the Plaza has been affected by tenant delinquencies and
turnover due to business failures.
Investment Activity
Interest on cash equivalents and short-term investments for the first
six months of 1996 decreased compared to the same period of 1995 as a
result of lower average investment balances and lower average yields. The
average investment balance decreased as a result of the distribution
during the third quarter of 1995 of a portion of the sale proceeds from
the sale of two investments in 1994.
Exclusive of the investment valuation allowance of $600,000 on Waters
Landing II in 1995, real estate operations increased approximately
$204,000 between the first six months of 1996 and the comparable six
months of 1995. This increase resulted from improved operating results at
University Business Park ($194,000) and Palms Business Center III and IV
($52,000). These improvements were primarily attributable to increased
rental income due to higher rental rates at both properties, as well as a
decrease in amortization expense at University Business Park. Operating
results at Santa Rita Plaza declined by $68,000. Operating income at the
remainder of the Partnership's investments was relatively stable.
Cash flow from operations was relatively unchanged between the first
six months of 1995 and 1996, which is consistent with net income levels in
the respective years exclusive of the non-cash investment valuation
allowance in 1995.
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 consist primarily of real estate appraisal, printing, legal,
accounting and investor servicing fees.
The Partnership management fee increased between the first six months
of 1996 and 1995 due to an increase in distributable cash flow. General
and administrative expenses were relatively unchanged between the
respective six-month periods.
NEW ENGLAND PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 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 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 PENSION PROPERTIES V;
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,
Fifth Copley Corp.
August 13, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fifth Copley Corp.