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, 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
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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 III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
PART I
FINANCIAL INFORMATION
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BALANCE SHEETS
(Unaudited)
June 30, 1997 December 31, 1996
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ASSETS
Real estate investments:
Joint ventures $ 17,511,060 $ 17,762,647
Property, net 1,177,741 1,265,968
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18,688,801 19,028,615
Cash and cash equivalents 1,481,196 1,260,892
Short-term investments 990,191 1,169,666
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$ 21,160,188 $ 21,459,173
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 87,219 $ 74,172
Accrued management fee 45,655 45,792
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Total liabilities 132,874 119,964
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Partners' capital (deficit):
Limited partners ($485.54 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 21,082,568 21,391,344
General partners (55,254) (52,135)
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Total partners' capital 21,027,314 21,339,209
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$ 21,160,188 $ 21,459,173
=============== ==============
(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
--------------- ------------------ --------------- ------------------
INVESTMENT ACTIVITY
Property rentals $ 74,533 $ 137,318 $ 45,232 $ 90,608
Property operating expenses (20,762) (38,060) (33,673) (66,114)
Depreciation and amortization (33,424) (66,849) (28,571) (37,033)
---------------- ---------------- ---------------- ----------------
20,347 32,409 (17,012) (12,539)
Joint venture earnings 336,469 757,730 431,805 819,552
Amortization (2,366) (4,732) (2,366) (4,732)
---------------- ---------------- ---------------- ----------------
Total real estate operations 354,450 785,407 412,427 802,281
---------------- ---------------- ---------------- ----------------
Interest on cash equivalents
and short-term investments 32,578 58,829 43,959 87,503
---------------- ---------------- ---------------- ----------------
Total investment activity 387,028 844,236 456,386 889,784
---------------- ---------------- ---------------- ----------------
Portfolio Expenses
General and administrative 85,839 140,196 62,311 114,261
Management fee 45,655 91,310 46,339 92,677
---------------- ---------------- ---------------- ----------------
131,494 231,506 108,650 206,938
---------------- ---------------- ---------------- ----------------
Net Income $ 255,534 $ 612,730 $ 347,736 $ 682,846
================ ================ ================ ================
Net income per limited partnership
unit $ 3.70 $ 8.87 $ 5.03 $ 9.88
================ ================ ================ ================
Cash distributions per
limited partnership unit $ 6.68 $ 13.38 $ 6.78 $ 12.94
================ ================ ================ ================
Number of limited partnership
units outstanding during the period 68,414 68,414 68,414 68,414
================ ================ ================ ================
(See accompanying notes to financial statements)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
-------------------- --------------------- ----------------------- ----------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
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Balance at
beginning of
period $ (53,193) $ 21,286,594 $ (52,135) $ 21,391,344 $ (44,225) $ 22,694,377 $ (43,319) $ 22,784,048
Cash
distributions (4,616) (457,005) (9,246) (915,379) (4,684) (463,847) (8,941) (885,277)
Net income 2,555 252,979 6,127 606,603 3,477 344,259 6,828 676,018
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Balance at
end of period $ (55,254) $ 21,082,568 $ (55,254) $ 21,082,568 $ (45,432) $ 22,574,789 $ (45,432) $ 22,574,789
========= ============ ========= ============ ========= ============ ========= ============
(See accompanying notes to financial statements)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1997 1996
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Net cash provided by operating activities $ 974,797 $ 894,465
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Cash flows from investing activities:
Capital expenditures on owned property - (9,404)
Decrease in short-term
investments, net 170,132 1,075,996
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Net cash provided by
investing activities 170,132 1,066,592
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Cash flows from financing activity:
Distributions to partners (924,625) (894,218)
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Net increase in
cash and cash equivalents 220,304 1,066,839
Cash and cash equivalents:
Beginning of period 1,260,892 1,399,905
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End of period $ 1,481,196 $ 2,466,744
=========== ===========
(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, 1997 and December 31, 1996 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 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 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
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The following summarized financial information is presented in the aggregate
for the two joint ventures:
Assets and Liabilities
----------------------
June 30, 1997 December 31, 1996
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Assets
Real property, at cost less
accumulated depreciation
of $5,065,192 and $4,812,441 $ 15,096,758 $ 15,325,895
Other assets 666,293 659,368
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15,763,051 15,985,263
Liabilities 140,532 115,892
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Net Assets $ 15,622,519 $ 15,869,371
=========== ===========
Results of Operations
Six Months ended June 30,
-------------------------
1997 1996
---- ----
Revenue
Rental income $1,555,477 $1,601,362
Other 1,812 1,600
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1,557,289 1,602,962
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Expenses
Operating expenses 546,807 513,388
Depreciation and amortization 252,752 270,022
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799,559 783,410
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Net income $ 757,730 $ 819,552
========== ==========
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:
June 30, 1997 December 31, 1996
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Land $ 347,772 $ 347,772
Buildings and improvements 1,031,512 1,031,512
Accumulated depreciation
and amortization (197,880) (138,503)
Net operating assets (liabilities) (3,663) 25,187
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$1,177,741 $1,265,968
========== ==========
NOTE 4 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended June
30, 1997 were made on July 24, 1997 in the aggregate amount of $461,621 ($6.68
per limited partnership unit).
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
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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 June 30, 1997.
At June 30, 1997, the Partnership had $2,471,387 in cash, cash equivalents
and short-term investments, of which $461,621 was used for operating cash
distributions to partners on July 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 two quarters 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 June 30, 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 June 30, 1997, the appraised value of each real
estate investment exceeded its related carrying value; the aggregate excess was
approximately $5,400,000. 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
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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 second
quarter of 1997. (Occupancy was 87% at June 30, 1996.)
Occupancy at Bayberry Apartments increased to 96% during the second
quarter. (Occupancy was 89% at December 31, 1996 and 95% at June 30, 1996.)
Occupancy at 270 Technology Park declined to 82% during the second quarter
of 1997 as a tenant representing 18% of the space vacated upon expiration of
their lease on March 31, 1997. (Occupancy was 98% at June 30, 1996.)
Investment Results
Interest on cash equivalents and short-term investments decreased by
approximately $29,000, or 33%, between the first six months of 1996 and 1997,
primarily due to lower invested balances as a result of additional distributions
from reserves in October 1996, partially offset by higher short-term yields in
1997.
Real estate operating results were $785,407 for the first six months of
1997 as compared to $802,281 for the comparable period of 1996. The decline is
primarily due to reduced operating income at 270 Technology Park as a result of
the occupancy decrease mentioned above. 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. In addition, there were tenant related write-offs and legal
expenses of approximately $21,000 in 1996 at North Cabot.
Cash from operations increased by approximately $80,000 between the two
six-months periods while net income declined by $70,000 over the comparable
period. The difference is primarily attributable to the funding of approximately
$86,000 of tenant improvements at North Cabot in early 1996 which were accrued
in 1995, along with an increase in Partnership operating liabilities.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
increased by approximately $26,000 or 23%, between the first six months of 1996
and 1997 primarily due to an increase in accounting 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 six 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 JUNE 30, 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: No Current Reports on
Form 8-K were filed during the quarter ended
June 30, 1997.
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 III;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 12, 1997
/s/ James J. Finnegan
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James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
August 12, 1997
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.