SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------------------------------------------------ For Quarter Ended September 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 - ------------------------------------------------------------------- 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 SEPTEMBER 30, 1996 PART I FINANCIAL INFORMATION ---------------------- BALANCE SHEET (Unaudited) September 30, 1996 December 31, 1995 ------------------ ----------------- ASSETS Real estate investments: Property, net $ 42,946,565 $ 37,058,053 Joint ventures 4,731,791 11,821,773 ------------- ------------- 47,678,356 48,879,826 Cash and cash equivalents 7,817,539 3,790,598 Short-term investments 4,412,663 7,864,807 ------------- ------------- $ 59,908,558 $ 60,535,231 ============= ============= LIABILITIES AND PARTNERS' CAPITAL (Deficit) Accounts payable $ 116,267 $ 120,505 Accrued management fee 57,109 50,008 Deferred management and disposition fees 539,519 368,161 ------------- ------------- Total liabilities 712,895 538,674 ------------- ------------- Partners' capital (deficit): Limited partners ($924 per unit; 160,000 units authorized, 82,491 and 82,536 units issued and outstanding, respectively) 59,279,735 60,073,461 General partners (84,072) (76,904) ------------- ------------- Total partners' capital 59,195,663 59,996,557 ------------- ------------- $ 59,908,558 $ 60,535,231 ============= ============= <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 $ 1,675,701 $ 4,875,684 $ 879,440 $ 2,188,493 Interest income from note receivable 36,989 111,959 30,280 30,280 Property operating expenses (377,692) (1,135,721) (230,103) (520,715) Ground rent expense (97,500) (292,500) (65,000) (65,000) Depreciation and amortization (348,345) (1,107,547) (223,767) (565,483) ------------- ------------- ------------- ------------- 889,153 2,451,875 390,850 1,067,575 Joint venture earnings 94,238 277,889 275,467 1,141,030 Investment valuation allowance - - -- (600,000) ------------- ------------- ------------- ------------- Total real estate operations 983,391 2,729,764 666,317 1,608,605 Interest on cash equivalents and short term investments 154,268 450,801 175,890 591,019 ------------- ------------- ------------- ------------- Total investment activity 1,137,659 3,180,565 842,207 2,199,624 ------------- ------------- ------------- ------------- Portfolio Expenses Management fee 114,218 342,717 100,875 307,201 General and administrative 67,523 232,986 91,596 254,712 ------------- ------------- -------------- ------------- 181,741 575,703 192,471 561,913 ------------- ------------- ------------- ------------- Net Income $ 955,918 $ 2,604,862 $ 649,736 $ 1,637,711 ============= ============= ============= ============= Net income per weighted average limited partnership unit $ 11.47 $ 31.26 $ 7.79 $ 19.63 ============= ============= ============= ============= Cash distributions per limited partnership unit outstanding for the entire period $ 13.86 $ 39.86 $ 40.52 $ 62.53 ============= ============= ============= ============= Weighted average number of limited partnership units outstanding during the period 82,491 82,506 82,564 82,597 ============= ============= ============= ============= <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 $ (82,083) $ 59,525,338 $ (76,904) $ 60,073,461 $ (68,880) $ 63,203,470 $ (60,383) $ 64,086,525 Repurchase of limited partnership units - (48,636) - (84,104) -- (22,624) -- (64,425) Cash distributions (11,549) (1,143,325) (33,217) (3,288,435) (10,431) (3,345,826) (28,808) (5,165,175) Net income 9,560 946,358 26,049 2,578,813 6,497 643,239 16,377 1,621,334 ---------- ---------- --------- ---------- --------- ---------- ---------- ---------- Balance at end of period $ (84,072) $ 59,279,735 $ (84,072) $ 59,279,735 $ (72,814) $ 60,478,259 $ (72,814) $ 60,478,259 ========== ============ ========= ============ ========== ============ ========== ============ <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 $ 3,965,675 $ 3,655,100 ------------ ------------ Cash flows from investing activities: Investment in note receivable - (1,750,000) Return of capital from joint venture - 1,305,765 Investment in joint ventures - (18,241) Investment in property (36,588) (123,599) Decrease in short-term investments, net 3,458,156 1,413,781 Repayment of loan to ground lessor 45,454 - ---------- ----------- Net cash provided by investing activities 3,467,022 827,706 ---------- ----------- Cash flows from financing activities: Distributions to partners (3,321,652) (5,193,983) Repurchase of limited partnership units (84,104) (64,425) ---------- ----------- Net cash used in financing activities (3,405,756) (5,258,408) ---------- ----------- Net increase (decrease) in cash and cash equivalents 4,026,941 (775,602) Cash and cash equivalents: Beginning of period 3,790,598 8,975,244 ---------- ----------- End of period $ 7,817,539 $ 8,199,642 ============ ============ <FN> Non-cash transactions: Effective January 1, 1996 and April 1, 1996, the Partnership's joint venture investments in University Business Park and Waters Landing II, respectively, were converted to wholly-owned properties. The carrying values of these investments at conversion were $5,630,581 and $1,491,742, respectively. The Palms Business Center, Santa Rita Plaza and Dahlia joint venture investments were converted to wholly- owned properties effective January 1, 1995, August 1, 1995 and September 1, 1995, respectively. The carrying value of these investments at conversion were $10,308,265, $10,216,659 and $7,413,176, respectively. (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 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 $31,520 and $32,572 at September 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. In the third quarter of 1995, the Santa Rita Plaza and Dahlia investments were converted to wholly-owned properties effective August 1, 1995 and September 1, 1995, respectively. 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 ---------------------- September 30, 1996 December 31, 1995 ------------------- ----------------- Assets Real property, at cost less accumulated depreciation of $1,812,573 and $4,019,677, respectively $ 15,638,704 $ 22,312,780 Other 347,886 484,715 ------------- ------------- 15,986,590 22,797,495 Liabilities 70,420 187,308 ------------- ------------- Net Assets $ 15,916,170 $ 22,610,187 ============ ============ Results of Operations --------------------- Nine Months Ended September 30, ------------------------------- 1996 1995 ---- ---- Revenue Rental income $ 1,375,498 $ 3,758,354 Other - 111,857 ------------ -------------- 1,375,498 3,870,211 ------------- ------------- Expenses Operating expenses 270,962 1,201,038 Depreciation and amortization 193,425 906,291 ------------- ------------- 464,387 2,107,329 ------------- ------------- Net income $ 911,111 $ 1,762,882 ============= ============== 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. 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. Since that date, the investment has been 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. Since that date, the investment has been 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 properties (six in 1996 and four in 1995): September 30, 1996 December 31, 1995 ----------------- ----------------- Land $ 10,575,045 $ 7,548,949 Building and improvements 34,077,654 30,323,985 Accumulated depreciation (2,497,418) (1,596,044) Investment valuation allowance (2,900,000) (2,900,000) Loan to ground lessor 1,680,549 1,726,003 Lease commissions and other assets, net 1,663,959 1,576,781 Accounts receivable 1,009,188 900,017 Accounts payable (662,412) (521,638) ------------ ------------- $ 42,946,565 $ 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 September 30, 1996 were made on October 24, 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 September 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 September 30, 1996, the Partnership had $12,230,202 in cash, cash equivalents and short-term investments, of which $1,154,874 was used for cash distributions to partners on October 24, 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 three 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 three quarters of 1995 were made at the annualized rate of 5.25% on the weighted average 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 $31,520 and $32,572 at September 30, 1996 and December 31, 1995, respectively. Through September 30, 1996, the Partnership repurchased and retired 865 limited partnership units for an aggregate cost of $813,237. 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 values of certain investments exceeded their related carrying values by an aggregate of $5,740,000, and the appraised values of the other investments were less than their related carrying values by an aggregate of $2,190,000. 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 remained at 100% at September 30, 1996. It increased from 98% earlier in the year, with the addition of a short-term tenant. Occupancy was 96% at March 31, 1995, 99% at June 30, 1995 and 96% at September 30, 1995. Rental rates in Phoenix have continued to increase. Overall occupancy at Columbia Gateway Corporate Park remained at 92% during the first three quarters of 1996, consistent with the comparable prior year period. The carrying value of this investment was reduced to estimated net realizable value in 1993. Occupancy at Puente Street remained at 100% during the first three quarters of 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. During 1996, occupancy at the Palms Business Center III and IV increased from 95% at March 31 to 100% at June 30 where it remained at September 30, 1996. Occupancy was at 95%, 98% and 97% at March 31, June 30, and September 30, 1995, respectively. Rental rates in Las Vegas have been increasing over the past several months. Occupancy at the Dahlia property remained at 100% during the first three quarters of 1996, where it has been since the first quarter of 1994. 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 increased to 98% at September 30, 1996, up from the low 90% range earlier in the year. Occupancy was 91% at September 30, 1995. Performance at the Plaza has been affected by tenant delinquencies and turnover due to business failures. Current rental rates are below expectations, but new tenants appear financially stable. Investment Activity Interest on cash equivalents and short-term investments for the first nine 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 $521,000 between the first nine months of 1996 and the comparable nine months of 1995. This increase resulted from improved operating results at University Business Park ($420,000) and Palms Business Center III and IV ($193,000). These improvements were primarily attributable to increased rental income due to higher rental rates and occupancies at both properties, as well as a decrease in amortization expense at University Business Park. Operating results at Santa Rita Plaza and Puente Street declined by $41,000 and $76,000, respectively. The decline at Puente Street was primarily caused by non-recurring revenue recognized in 1995. Operating income at the remainder of the Partnership's investments was relatively stable. Exclusive of the proceeds from the settlement of past due tenant receivables at Dahlia in 1996, and the payment of deferred management fees in 1995, cash flow from operations decreased by $205,000 for the first nine months of 1996 compared to the respective prior year period. This change is inconsistent with the increase in operating results between the respective years primarily due to the timing of cash distributions from 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 consist primarily of real estate appraisal, printing, legal, accounting and investor servicing fees. The Partnership management fee increased between the first nine months of 1996 and 1995 due to an increase in distributable cash flow. General and administrative expenses decreased $22,000 or 9% between the respective nine-month periods primarily due to lower legal costs incurred during the nine months ended September 30, 1996. NEW ENGLAND PENSION PROPERTIES V; 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 ---------- 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) November 12, 1996 /s/ Peter P. Twining ------------------------------- Peter P. Twining. Managing Director and General Counsel of Managing General Partner, Fifth Copley Corp. November 12, 1996 /s/ Daniel C. Mackowiak -------------------------------- Daniel C. Mackowiak Principal Financial and Accounting Officer of Managing General Partner, Fifth Copley Corp.