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, 1997 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)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
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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, 1997
PART I
FINANCIAL INFORMATION
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BALANCE SHEET
(Unaudited)
March 31, 1997 December 31, 1996
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ASSETS
Real estate investments:
Joint ventures $15,909,291 $15,733,520
Property, net 27,088,603 27,204,871
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42,997,894 42,938,391
Cash and cash equivalents 5,369,816 5,045,964
Short-term investments 2,082,673 2,726,532
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$50,450,383 $50,710,887
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 124,477 $ 119,344
Accrued management fee 45,458 56,277
Deferred management and
disposition fees 3,379,214 3,333,754
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Total liabilities 3,549,149 3,509,375
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Partners' capital (deficit):
Limited partners ($766
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 47,064,727 47,361,993
General partners (163,493) (160,481)
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Total partners' capital 46,901,234 47,201,512
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$50,450,383 $50,710,887
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(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
-------------------------
1997 1996
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INVESTMENT ACTIVITY
Property rentals $1,368,832 $ 576,931
Property operating expenses (494,471) (135,021)
Depreciation and amortization (253,704) (123,661)
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620,657 318,249
Joint venture earnings 307,036 752,603
Amortization (1,327) (4,844)
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Total real estate operations 926,366 1,066,008
Interest on cash equivalents
and short term investments 90,380 85,291
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Total investment activity 1,016,746 1,151,299
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PORTFOLIO EXPENSES
Management fee 90,916 122,898
General and administrative 89,063 88,607
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179,979 211,505
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Net Income $ 836,767 $ 939,794
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Net income per limited
partnership unit $ 8.72 $ 9.79
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Cash distributions per
limited partnership unit $ 11.86 $ 12.95
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Number of limited partnership
units outstanding during
the period 94,997 94,997
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(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended March 31,
------------------------------------
1997 1996
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General Limited General Limited
Partners Partners Partners Partners
-------- -------- -------- --------
Balance at
beginning of
period $(160,481) $47,361,993 $ (154,702) $57,148,961
Cash
distributions (11,380) (1,126,665) (12,426) (1,230,212)
Net income 8,368 829,399 9,398 930,396
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Balance at
end of period $(163,493) $47,064,727 $ (157,730) $56,849,145
========= =========== ========== ===========
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
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1997 1996
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Net cash provided by operating activities $ 910,335 $ 617,192
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Cash flows from investing activities:
Investment in property (85,606) --
Decrease (increase) in short-term
investments, net 637,168 (203,694)
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Net cash provided by (used in)
investing activities 551,562 (203,694)
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Cash flows from financing activity:
Distributions to partners (1,138,045) (1,242,638)
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Net increase (decrease) in
cash and cash equivalents 323,852 (829,140)
Cash and cash equivalents:
Beginning of period 5,045,964 4,051,999
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End of period $ 5,369,816 $ 3,222,859
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(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, 1997 and December 31, 1996 and the results of its
operations, its cash flows and changes in partners' capital (deficit) for the
interim periods ended March 31, 1997 and 1996. These adjustments are of a
normal recurring nature.
See notes to financial statements included in the Partnership's 1996 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 five 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
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The Reflections Apartments joint venture was restructured to a wholly-owned
property for financial statement purposes effective April 1, 1996.
The Metro Business Center joint venture was restructured to a wholly-owned
property for financial statement purposes effective July 1, 1996.
The Decatur TownCenter II joint venture was sold on October 10, 1996.
The following summarized financial information is presented in the aggregate
for the Partnership's joint ventures (two as of March 31, 1997; five as of March
31, 1996):
Assets and Liabilities
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March 31, 1997 December 31, 1996
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Assets
Real property, at cost less
accumulated depreciation
of $2,904,656 and
$2,820,980, respectively $20,437,276 $19,919,292
Other 369,495 466,934
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20,806,771 20,386,226
Liabilities 291,292 76,032
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Net Assets $20,515,479 $20,310,194
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Results of Operations
Quarter ended March 31,
-----------------------
1997 1996
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Revenue
Rental income $603,450 $1,884,860
Other income 3,119 25,271
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606,569 1,910,131
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Expenses
Operating expenses 120,653 699,287
Depreciation and amortization 93,659 371,053
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214,312 1,070,340
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Net income $392,257 $ 839,791
======== ==========
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
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Effective April 1, 1996, the Reflections joint venture was restructured,
whereby the Partnership's venture partner became an indirect limited partner.
Accordingly, the investment has been accounted for as a wholly-owned property
since that date. The carrying value of the joint venture investment at
conversion was allocated to land, building and improvements and other net
operating assets.
Effective January 1, 1996, the Metro Business Center joint venture
agreement was amended to grant the Partnership full control over management
decisions, beginning July 1, 1996. Since that date, 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, buildings and
improvements, and other net operating assets. Effective December 30, 1996, the
property owned by the joint venture was distributed to the venture partners as
tenants-in-common. The Partnership, however, retained its overall decision-
making authority.
In connection with the restructuring of the Palms Business Center joint
venture, effective January 1, 1995, the venture partner is entitled to 40% of
the excess cash flow above a specified level up to $360,000. As of March 31,
1997, $130,000 of the initial obligation remains unpaid.
The following is a summary of the Partnership's three wholly-owned
investments:
March 31, 1997 December 31, 1996
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Land $ 6,523,605 $ 6,523,605
Buildings and improvements
and other capitalized costs 22,207,860 22,122,254
Accumulated depreciation and
amortization (1,398,461) (1,171,576)
Payable to venture partner (130,000) (130,000)
Net operating liabilities (114,401) (139,412)
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$27,088,603 $27,204,871
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NOTE 4 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended March
31, 1997 were made on April 24, 1997 in the aggregate amount of $919,264 ($9.58
per limited partnership unit).
Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Liquidity and Capital Resources
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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. Four investments have been sold; one each in 1988, 1993,
1994 and 1996. As a result of the sales, capital of $22,229,298 has been
returned to the limited partners through March 31, 1997.
At March 31, 1997, the Partnership had $7,452,489 in cash, cash equivalents
and short-term investments, of which $919,264 was used for cash distributions to
partners on April 24, 1997; 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 October 24, 1996, the Partnership made a capital distribution of
$97 per limited partnership unit from the proceeds of the Decatur TownCenter II
sale, which reduced the adjusted capital contribution from $863 to $766 per
unit. Distributions of cash from operations for the first quarter of 1997 were
at the annualized rate of 5% on the adjusted capital contribution. Distributions
of cash from operations relating to the first quarter of 1996 were made at the
annualized rate of 6% on the adjusted capital contribution. The distribution
rate was reduced for 1997 in anticipation of cash requirements related to lease
rollovers.
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, 1997, certain appraised values exceeded the related carrying values
by an aggregate of $10,100,000 and certain appraised values were less than their
related carrying values by an aggregate of $1,300,000. 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
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At March 31, 1997, two of the investments in the portfolio are structured
as joint ventures with real estate development/management firms, and in one
case, with an affiliate of the Partnership. The Decatur TownCenter II property
which was sold in October 1996 was owned by a joint venture. The Palms Business
Center, Reflections Apartments and Metro Business Center investments were
structured as joint ventures. However, effective January 1, 1995, April 1, 1996
and July 1, 1996, respectively, the Partnership was granted full control over
management decisions and the investments have been accounted for as wholly-owned
properties since those dates.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park increased to 95%
during the first quarter of 1997 compared to 92% at March 31, 1996. No leases
are due to expire until December 1997.
Occupancy at Reflections Apartments ended the first quarter of 1997 at 96%,
up from 88% at December 31, 1996 and consistent with the quarter ended March 31,
1996. Current rental rates are at the high end of the market range.
Occupancy at Metro Business Center at March 31, 1997 was at 87%, down from
91% at March 31, 1996. Leases for 14% of the space are due to expire during the
remainder of 1997.
Occupancy at Palms Business Center was 98% at March 31, 1997, up from 95%
at March 31, 1996. However, leases for approximately 35% of the space are due
to expire over the remainder of 1997. Rental rates in Las Vegas have increased
over the past 12 months.
Leasing at 270 Technology Center was at 97% at March 31, 1997, up from 89%
at December 31, 1996 and down slightly from 98% at March 31, 1996. Over the
remainder of 1997, one lease for 30% of the space is due to expire, and the
tenant is not expected to renew.
Investment Activity
Interest on cash equivalents and short-term investments increased by 6%
between the first quarter of 1996 and 1997 due to higher investment balances.
Real estate operating activity for the first quarter of 1997 was $926,366,
compared to $1,066,008 for the prior year quarter. The 1996 amount includes
$90,000 of income which was received by 270 Technology Center from a former
tenant in bankruptcy and income of $72,000 from Decatur TownCenter II which was
sold during the third quarter of 1996. Income from the remainder of the
properties was relatively unchanged.
Operating cash flow, however, increased $293,143 between the first quarter
of 1996 and 1997, due to the timing of 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
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
The management fee decreased between the quarters ended March 31, 1996 and
1997 due to a decrease in distributable cash flow from operations. 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, 1997
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: The Partnership filed one current
report on Form 8-K dated January 30, 1997 reporting on
Item No. 4 (change in Registrant's Certifying
Accountant).
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 12, 1997
/s/ James J. Finnegan
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James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Fourth Copley Corp.
May 12, 1997
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.