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 0-15429
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 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 $ 16,093,720 $ 15,733,520
Property, net 26,954,700 27,204,871
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43,048,420 42,938,391
Cash and cash equivalents 6,570,779 5,045,964
Short-term investments 828,267 2,726,532
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$ 50,447,466 $ 50,710,887
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 139,418 $ 119,344
Accrued management fee 45,458 56,277
Deferred management and
disposition fees 3,424,672 3,333,754
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Total liabilities 3,609,548 3,509,375
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Partners' capital (deficit):
Limited partners ($766
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 47,002,035 47,361,993
General partners (164,117) (160,481)
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Total partners' capital 46,837,918 47,201,512
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$ 50,447,466 $ 50,710,887
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(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 $ 1,405,293 $ 2,774,125 $ 1,087,901 $ 1,664,832
Property operating expenses (563,781) (1,058,252) (398,418) (533,439)
Depreciation and amortization (251,533) (505,237) (211,296) (334,957)
---------- ----------- ---------- ----------
589,979 1,210,636 478,187 796,436
Joint venture earnings 355,692 662,728 534,164 1,286,767
Amortization (1,327) (2,654) (3,294) (8,138)
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Total real estate operations 944,344 1,870,710 1,009,057 2,075,065
Interest on cash equivalents
and short term investments 90,811 181,191 85,749 171,040
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Total investment activity 1,035,155 2,051,901 1,094,806 2,246,105
---------- ----------- ---------- ----------
Portfolio Expenses
Management fee 90,918 181,834 122,898 245,796
General and administrative 87,289 176,352 86,799 175,406
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178,207 358,186 209,697 421,202
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Net Income $ 856,948 $ 1,693,715 $ 885,109 $ 1,824,903
========== =========== ========== ==========
Net income per limited
partnership unit $ 8.93 $ 17.65 $ 9.23 $ 19.02
========== =========== ========== ==========
Cash distributions per
limited partnership unit $ 9.58 $ 21.44 $ 12.95 $ 25.90
========== =========== ========== ==========
Number of limited partnership
units outstanding during
the period 94,997 94,997 94,997 94,997
========== =========== ========== ==========
(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
-------- -------- -------- -------- -------- -------- -------- --------
Balance at
beginning of
period $ (163,493) $ 47,063,727 $ (160,481) $ 47,361,993 $ (157,730) $ 56,849,146 $ (154,702) $ 57,148,961
Cash
distributions (9,193) (910,071) (20,573) (2,036,736) (12,426) (1,230,211) (24,852) (2,460,422)
Net income 8,569 848,379 16,937 1,676,778 8,851 876,258 18,249 1,806,654
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Balance at
end of period $ (164,117) $ 47,002,035 $ (164,117) $ 47,002,035 $ (161,305) $ 56,495,193 $ (161,305) $ 56,495,193
========== ============ ========== ============ ========== ============ ========== ============
(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 $ 1,908,912 $ 2,380,583
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Cash flows from investing activities:
Payment of note payable to venture partner (64,000) -
Investment in property (150,977) -
Decrease in short-term
investments, net 1,888,189 410,578
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Net cash provided by
investing activities 1,673,212 410,578
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Cash flows from financing activity:
Distributions to partners (2,057,309) (2,485,274)
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Net increase in
cash and cash equivalents 1,524,815 305,887
Cash and cash equivalents:
Beginning of period 5,045,964 4,051,999
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End of period $ 6,570,779 $ 4,357,886
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Non-cash transactions:
Effective April 1, 1996, the Partnership's joint venture investment in
Reflections Apartments was converted to a wholly-owned property. The carrying
value of this investment at conversion was $10,469,514.
(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 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
- -----------------------------------
The Reflections Apartments joint venture was restructured to a wholly-owned
property for financial reporting 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.
Ownership of the Columbia Gateway Corporate Park joint venture is being
restructured whereby the Partnership and its affiliate will obtain full control
over the business of the joint venture. Although there can be no assurance that
this restructuring will occur, the restructuring is expected to be completed
during the third quarter.
The following summarized financial information is presented in the aggregate
for the Partnership's joint ventures (two as of June 30, 1997 and December 31,
1996; four as of June 30, 1996):
Assets and Liabilities
----------------------
June 30, 1997 December 31, 1996
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Assets
Real property, at cost less
accumulated depreciation
of $2,994,749 and
$2,820,980, respectively $20,434,703 $19,919,292
Other 570,353 466,934
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21,005,056 20,386,226
Liabilities 271,276 76,032
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Net Assets $20,733,780 $20,310,194
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Results of Operations
Six Months ended June 30,
-------------------------
1997 1996
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Revenue
Rental income $1,318,227 $3,181,622
Other income 8,296 27,411
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1,326,523 3,209,033
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Expenses
Operating expenses 301,690 1,157,832
Depreciation and amortization 187,318 584,122
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489,008 1,741,954
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Net income $ 837,515 $1,467,079
========== ==========
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 June 30,
1997, $66,000 of the initial obligation remains unpaid.
The following is a summary of the Partnership's three wholly-owned
investments:
June 30, 1997 December 31, 1996
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Land $ 6,523,605 $ 6,523,605
Buildings and improvements
and other capitalized costs 22,273,231 22,122,254
Accumulated depreciation and
amortization (1,629,497) (1,171,576)
Payable to venture partner (66,000) (130,000)
Net operating assets
(liabilities) (146,639) (139,412)
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$26,954,700 $27,204,871
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NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended June
30, 1997 were made on July 24, 1997 in the aggregate amount of $919,264 ($9.58
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, 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 June 30, 1997.
At June 30, 1997, the Partnership had $7,399,046 in cash, cash equivalents
and short-term investments, of which $919,264 was used for cash distributions to
partners on July 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 and second quarters
of 1997 were at the annualized rate of 5% on the adjusted capital contribution.
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. 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 June 30, 1997, certain appraised values exceeded the related carrying values
by an aggregate of $10,600,000 and certain appraised values were less than their
related carrying values by an aggregate of $800,000. 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 June 30, 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 remained at 95% during
the second quarter of 1997, consistent with March 31, 1997 and up from 92% at
June 30, 1996. No leases are due to expire until December 1997. Ownership of
the Columbia Gateway Corporate Park joint venture is being restructured whereby
the Partnership and its affiliate will obtain full control over the business of
the joint venture. Although there can be no assurance that this restructuring
will occur, the restructuring is expected to be completed during the third
quarter.
Occupancy at Reflections Apartments ended the second quarter of 1997 at
93%, down from 96% at March 31, 1997 and consistent with June 30, 1996. Current
rental rates are at the high end of the market range.
Occupancy at Metro Business Center at June 30, 1997 was at 87%, down from
91% at June 30, 1996 and consistent with March 31, 1997. Rents at this property
are higher than the average for comparable property types in the surrounding
area.
Occupancy at Palms Business Center was 99% at June 30, 1997, up from 98% at
March 31, 1997 and 97% at June 30, 1996. However, leases for approximately 20%
of the space are due to expire over the remainder of 1997. Rental rates in Las
Vegas have increased over the past twelve months.
Leasing at 270 Technology Center was 97% at June 30, 1997, consistent with
March 31, 1997 and up from 90% at June 30, 1996. During the remainder of 1997,
one lease for approximately 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 six-month periods of 1996 and 1997 due to higher yields.
Real estate operating activity for the first six months of 1997 was
$1,870,710 and $2,075,065 for the comparable six months of 1996. The 1996
amount includes $90,000 of income which was received by 270 Technology Center
from a former tenant in bankruptcy and income of $200,000 from Decatur
TownCenter II, a property that was sold during the fourth quarter of 1996.
These decreases in operating activity were partially offset by improved
operating results at Metro Business Center of $81,000 due to lower maintenance
expenses and higher rents. Income from the remainder of the properties was
relatively unchanged.
Operating cash flow in 1996 includes $250,000 received pursuant to a loan
guarantee from one of the Partnership's joint venture partners, relating to
previously accrued investment income. Exclusive of this item, operating cash
flow decreased $221,671 between the first six-month periods of 1997 and 1996.
The change primarily stems from the change in Partnership operating results
discussed above.
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 first six-month periods of 1997
and 1996 due to a decrease in distributable cash flow from operations. General
and administrative expenses did not change significantly between the respective
six-month periods.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
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 IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 12, 1997
/s/ James J. Finnegan
------------------------------------
James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Fourth Copley Corp.
August 12, 1997
/s/ Karin J. Lagerlund
------------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.