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 March 31, 1997 Commission File Number 0-14052
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2847256
(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
________________________________________________________________________________
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 III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART I
FINANCIAL INFORMATION
---------------------
BALANCE SHEET
(Unaudited)
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS
Real estate investments:
Joint ventures $17,759,249 $17,762,647
Property, net 1,227,330 1,265,968
----------- -----------
18,986,579 19,028,615
Cash and cash equivalents 1,423,240 1,260,892
Short-term investments 942,075 1,169,666
----------- -----------
$21,351,894 $21,459,173
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 72,838 $ 74,172
Accrued management fee 45,655 45,792
----------- -----------
Total liabilities 118,493 119,964
----------- -----------
Partners' capital (deficit):
Limited partners ($485.54 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 21,286,594 21,391,344
General partners (53,193) (52,135)
----------- -----------
Total partners' capital 21,233,401 21,339,209
----------- -----------
$21,351,894 $21,459,173
=========== ===========
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
-------------------------
1997 1996
------------ -----------
Investment Activity
Property rentals $ 62,785 $ 45,376
Property operating expenses (17,298) (32,441)
Depreciation and amortization (33,425) (8,462)
-------- --------
12,062 4,473
Joint venture earnings 421,261 387,747
Amortization (2,366) (2,366)
-------- --------
Total real estate operations 430,957 389,854
Interest on cash equivalents
and short-term investments 26,251 43,544
-------- --------
Total investment activity 457,208 433,398
-------- --------
Portfolio Expenses
General and administrative 54,357 51,950
Management fee 45,655 46,338
-------- --------
100,012 98,288
-------- --------
Net Income $357,196 $335,110
======== ========
Net income per limited partnership
unit $ 5.17 $ 4.85
======== ========
Cash distributions per
limited partnership unit $ 6.70 $ 6.16
======== ========
Number of limited partnership
units outstanding during the period 68,414 68,414
======== ========
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended March 31,
---------------------------------
1997 1996
-------- -------
General Limited General Limited
Partners Partners Partners Partners
-------- -------- -------- --------
Balance at
beginning of
period $(52,135) $21,391,344 $(43,319) $22,784,048
Cash
distributions (4,630) (458,374) (4,257) (421,430)
Net income 3,572 353,624 3,351 331,759
-------- ----------- -------- -----------
Balance at
end of period $(53,193) $21,286,594 $(44,225) $22,694,377
======== =========== ======== ===========
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
-----------------------
1997 1996
------- -------
Net cash provided by operating activities $ 407,915 $ 384,305
---------- ----------
Cash flows from investing activities:
Capital expenditures on owned property - (901)
Decrease in short-term
investments, net 217,437 762,916
---------- ----------
Net cash provided by
investing activities 217,437 762,015
---------- ----------
Cash flows from financing activity:
Distributions to partners (463,004) (425,687)
---------- ----------
Net increase in
cash and cash equivalents 162,348 720,633
Cash and cash equivalents:
Beginning of period 1,260,892 1,399,905
---------- ----------
End of period $1,423,240 $2,120,538
========== ==========
(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
- ----------------------------------
New England Life Pension Properties III; 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 July, 1985 and
acquired the three investments it currently owns prior to the end of 1988. The
Partnership intends to dispose of its investments within twelve years of their
acquisition, and then liquidate; however, the managing general partner could
extend the investment period if it is in the best interest of the limited
partners.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The following summarized financial information is presented in the aggregate
for the two joint ventures:
Assets and Liabilities
----------------------
March 31, 1997 December 31, 1996
-------------- -----------------
Assets
Real property, at cost less
accumulated depreciation
of $4,938,809 and $4,812,441 $15,204,834 $15,325,895
Other assets 776,320 659,368
----------- -----------
15,981,154 15,985,263
Liabilities 112,813 115,892
----------- -----------
Net Assets $15,868,341 $15,869,371
=========== ===========
Results of Operations
Quarter ended March 31,
--------------------------
1997 1996
---- ----
Revenue
Rental income $789,405 $771,631
Other 647 480
-------- --------
790,052 772,111
-------- --------
Expenses
Operating expenses 242,422 249,353
Depreciation and amortization 126,369 135,011
-------- --------
368,791 384,364
-------- --------
Net income $421,261 $387,747
======== ========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership on behalf of its various financing arrangements with the joint
ventures.
NOTE 3 - PROPERTY
- -----------------
The following is a summary of the Partnership's investment in one wholly-
owned property:
March 31, 1997 December 31, 1996
-------------- -----------------
Land $ 347,772 $ 347,772
Buildings and improvements 1,031,512 1,031,512
Accumulated depreciation
and amortization (168,190) (138,503)
Net operating assets (liabilities) 16,236 25,187
---------- ----------
$1,227,330 $1,265,968
========== ==========
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended March
31, 1997 were made on April 24, 1997 in the aggregate amount of $461,622 ($6.68
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 units of limited partnership
interest in December, 1985 and a total of 68,414 units were sold. The
Partnership received proceeds of $61,950,285, net of selling commissions and
other offering costs, which were invested in real estate, used to pay related
acquisition costs, or retained as working capital reserves. The Partnership
made nine real estate investments, six of which were sold prior to 1994. As a
result of the sales, capital of $35,196,266 has been returned to the limited
partners through March 31, 1997.
At March 31, 1997, the Partnership had $2,365,315 in cash, cash equivalents
and short-term investments, of which $461,622 was used for operating cash
distributions to partners on April 24, 1997; the remainder is being retained as
working capital reserves. On October 24, 1996, the Partnership made a capital
distribution of $519,946 ($7.60 per limited partnership unit) representing
undistributed proceeds from the sales of various properties prior to 1994. The
adjusted capital contribution after this distribution was $485.54 per unit.
Also on October 24, 1996, the Partnership made a special operating cash
distribution of $364,186 ($5.27 per limited partnership unit) attributable to a
discretionary reduction of previously accumulated cash reserves. The source of
future liquidity and cash distributions to partners will primarily be cash
generated by the Partnership's investments and proceeds from the sale of
investments. Distributions of cash from operations for the first quarter of
1997 and 1996 were made at the annualized rate of 5.5% on the adjusted capital
contribution.
The carrying value of real estate investments in the financial statements
at March 31, 1997 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, the appraised value of each real
estate investment exceeded its related carrying value; the aggregate excess was
approximately $6,100,000. The current appraised value of real estate
investments has been determined 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 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
- ---------------------
Form of Real Estate Investments
North Cabot Industrial Park is a wholly-owned property. Bayberry
Apartments and 270 Technology Center are structured as joint ventures with real
estate management/development firms.
Operating Factors
Occupancy at North Cabot Industrial Park remained at 100% during the first
quarter of 1997. (Occupancy was 72% at March 31, 1996.)
Occupancy at Bayberry Apartments increased slightly to 90% during the first
quarter. (Occupancy was 89% at December 31, 1996 and 95% at March 31, 1996.)
Occupancy at 270 Technology Park improved from 98% to 99% during the first
quarter of 1997; however, a tenant representing 18% of the space vacated upon
expiration of their lease on March 31, 1997. (Occupancy was 98% at March 31,
1996.)
Investment Results
Interest on cash equivalents and short-term investments decreased by
approximately $17,000, or 40%, between the first three months of 1996 and 1997,
primarily due to lower invested balances as a result of additional distributions
from reserves in October 1996.
Real estate operating results were $430,957 for the first three months of
1997 as compared to $389,854 for the comparable period of 1996. The improvement
was primarily due to an increase in rental revenue at 270 Technology Park. At
North Cabot, higher revenue attributable to the increase in occupancy was
partially offset by increased amortization expense, commencing in mid-1996,
related to certain tenant improvements.
The increase in cash flow from operations approximated the improvement in
net income between the two three-month periods, as decreases in working capital
were offset by the timing of cash distributions from Bayberry.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
increased by approximately $2,000 or 5%, between the first three months of 1996
and 1997 primarily due to an increase in legal fees, partially offset by
decreased investor servicing fees.
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. Management fees decreased slightly
between the two three-month periods consistent with the decrease in
distributable cash flow.
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
March 31, 1997.
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 LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
May 14, 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
May 14, 1997
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.