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, 1997 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)
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 PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1997
PART I
FINANCIAL INFORMATION
----------------------
BALANCE SHEETS
(Unaudited)
September 30, 1997 December 31, 1996
------------------ -----------------
ASSETS
Real estate investments:
Property, net $27,409,502 $42,828,754
Joint ventures 4,851,322 4,722,223
----------- -----------------
32,260,824 47,550,977
Property held for disposition 9,222,802 --
Cash and cash equivalents 8,090,601 4,706,279
Short-term investments 3,533,233 7,332,878
----------- -----------------
$53,107,460 $59,590,134
=========== =================
LIABILITIES AND PARTNERS' CAPITAL (Deficit)
Accounts payable $ 102,979 $ 108,026
Accrued management fee 147,137 57,064
Deferred management and
disposition fees 577,640 596,583
----------- -----------
Total liabilities 827,756 761,673
----------- -----------
Partners' capital (deficit):
Limited partners ($832 and $924 per
unit, respectively; 160,000 units
authorized, 82,336 and 82,426
units issued and outstanding,
respectively) 52,356,469 58,916,206
General partners (76,765) (87,745)
----------- -----------
Total partners' capital 52,279,704 58,828,461
----------- -----------
$53,107,460 $59,590,134
=========== ===========
(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996
------------------ ------------------ ------------------ ------------------
INVESTMENT ACTIVITY
Property rentals $1,346,888 $ 4,745,038 $1,675,701 $ 4,875,684
Interest income on loan to ground lessor 37,128 112,205 36,989 111,959
Property operating expenses (337,486) (1,134,628) (377,692) (1,135,721)
Ground rent expense (97,500) (292,500) (97,500) (292,500)
Depreciation and amortization (344,768) (1,106,995) (348,345) (1,107,547)
---------- ----------- ---------- -----------
604,262 2,323,120 889,153 2,451,875
Joint venture earnings 126,831 301,618 94,238 277,889
---------- ----------- ---------- -----------
Total real estate operations 731,093 2,624,738 983,391 2,729,764
Gain on sale of wholly-owned property -- 2,160,404 - -
---------- ----------- ---------- -----------
Total real estate activity 731,093 4,785,142 983,391 2,729,764
Interest on cash equivalents
and short term investments 154,741 492,024 154,268 450,801
---------- ----------- ---------- -----------
Total investment activity 885,834 5,277,166 1,137,659 3,180,565
---------- ----------- ---------- -----------
Portfolio Expenses
Management fee 147,138 384,891 114,218 342,717
General and administrative 80,375 236,242 67,523 232,986
---------- ----------- ---------- -----------
$ 227,513 $ 621,133 181,741 575,703
---------- ----------- ---------- -----------
Net Income 658,321 4,656,033 $955,918 $2,604,862
========== =========== ========== ===========
Net income per weighted average
limited partnership unit 7.91 55.94 $ 11.47 $ 31.26
======= ========= ======== ==========
Cash distributions per
limited partnership unit
outstanding for the entire
period 14.44 134.74 $ 13.86 $ 39.86
======= ========= ======== ==========
Weighted average number of limited
partnership units outstanding during
the period 82,388 82,401 82,491 82,506
======= ========= ======== ==========
(See accompanying notes to financial statements)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996
--------------------- --------------------- --------------------- ---------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- -------- -------- --------
Balance at
beginning of
period $(71,331) $52,931,646 $(87,745) $58,916,206 $(82,083) $59,525,338 $(76,904) $60,073,461
Repurchase of
limited partnership
units -- (37,232) -- (67,176) -- (48,636) -- (84,104)
Cash
distributions (12,017) (1,189,683) (35,580) (11,102,034) (11,549) (1,143,325) (33,217) (3,288,435)
Net income 6,583 651,738 46,560 4,609,473 9,560 946,358 26,049 2,578,813
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Balance at
end of period $(76,765) $52,356,469 $(76,765) $52,356,469 $(84,072) $59,279,735 $(84,072) $59,279,735
======== =========== ======== =========== ======== =========== ======== ===========
(See accompanying notes to financial statements)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
--------------------------------
1997 1996
--------------------------------
Net cash provided by operating activities $ 3,070,076 $ 3,965,675
------------ -----------
Cash flows from investing activities:
Deferred disposition fees 250,500 --
Net proceeds from sale of property 7,743,630 --
Investment in property (251,791) (36,588)
Decrease in short-term investments, net 3,727,102 3,458,156
Repayment of loan to ground lessor 49,595 45,454
------------ -----------
Net cash provided by
investing activities 11,519,036 3,467,022
------------ -----------
Cash flows from financing activities:
Distributions to partners (11,137,614) (3,321,652)
Repurchase of limited partnership
units (67,176) (84,104)
------------ -----------
Net cash used in financing activities (11,204,790) (3,405,756)
------------ -----------
Net increase in
cash and cash equivalents 3,384,322 4,026,941
Cash and cash equivalents:
Beginning of period 4,706,279 3,790,598
------------ -----------
End of period $ 8,090,601 $ 7,817,539
============ ===========
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.
(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, 1997 and December 31, 1996 and the
results of its operations, its cash flows and partners' capital (deficit) for
the interim periods ended September 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
- ----------------------------------
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
six 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 has engaged AEW Real
Estate Advisors, Inc. (the "Advisor") to provide asset management services.
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 $75,569 and $56,736 at September 30, 1997
and December 31, 1996, respectively.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
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 was a wholly-owned property at the
time of sale.
The Waters Landing II joint venture was restructured as a wholly-owned
investment for financial reporting purposes effective April 1, 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 fourth quarter.
The following summarized financial information is presented in the
aggregate for the Partnership's joint venture:
Assets and Liabilities
September 30, 1997 December 31, 1996
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation
of $2,032,857 and $1,852,988,
respectively $15,938,105 $15,670,283
Other 625,986 321,328
----------- -----------
16,564,091 15,991,611
Liabilities 187,964 43,521
----------- -----------
Net Assets $16,376,127 $15,948,090
=========== ===========
Results of Operations
Nine Months Ended September 30,
-------------------------------
1997 1996
--------------- --------------
Revenue
Rental income $1,531,337 $1,375,498
---------- ----------
Expenses
Operating expenses 349,001 270,962
Depreciation and amortization 193,425 193,425
---------- ----------
542,426 464,387
---------- ----------
Net income $ 988,911 $ 911,111
========== ==========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and its affiliate on behalf of their financing arrangements with the
joint ventures.
NOTE 3 - PROPERTY
- -----------------
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. 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 and the investment valuation
adjustment.
A settlement with a former tenant at Dahlia for past due rent 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.
The University Business Park wholly-owned property was sold on May 28,
1997.
The following is a summary of the Partnership's investment in properties
(five in 1997 and six in 1996):
September 30, 1997 December 31, 1996
------------------- ------------------
Land $ 7,445,208 $11,475,045
Building and improvements 22,939,264 34,383,256
Accumulated depreciation (2,631,346) (2,797,876)
Investment valuation allowance (3,500,000) (3,500,000)
Loan to ground lessor 1,615,131 1,664,726
Lease commissions and other
assets, net 1,357,380 1,667,594
Accounts receivable 617,565 576,334
Accounts payable (433,700) (640,325)
Property held for disposition 9,222,802 --
----------- -----------
$36,632,304 $42,828,754
=========== ===========
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1997 were made on October 30, 1997 in the aggregate amount of
$1,081,863 ($13.00 per limited partnership unit.) An additional distribution of
cash from operations was made in the aggregate amount of $405,858 ($4.88 per
limited partnership unit), representing excess cash previously retained in
working capital reserves.
On October 24, 1997, the Partnership sold the Palms Business Center
property to an institutional buyer (the "Buyer"), which is unaffiliated with the
Partnership. The selling price was determined by arm's length negotiations
between the Partnership and the Buyer. The property was sold for $18,000,000.
The Partnership received net proceeds of approximately $17,800,000.
Accordingly, the property has been reclassified on the Balance
Sheet as "Property held for disposition." This transaction will be accounted for
in the fourth quarter of 1997.
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 and one of which was
sold in 1997.
As a result of the sales, capital of $13,861,500 has been returned to the
limited partners through September 30, 1997, including a capital distribution of
$7,579,696 ($92 per limited partnership unit) made on June 30, 1997 from the
proceeds of the sale of University Business Park. This capital distribution
reduced the adjusted capital contribution from $924 to $832 per unit. In
addition, a portion of the sales proceeds was used to pay previously accrued,
but deferred management fees to the Advisor ($388,320 in July 1997). The
Partnership accrued $250,500 of disposition fees in connection with this sale.
At September 30, 1997, the Partnership had $11,623,834 in cash, cash
equivalents and short-term investments, of which $1,487,721 was used for cash
distributions to partners on October 30, 1997; 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 1997 were made at the annualized rate of 6.25% on the adjusted
capital contribution. 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. 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 $75,569 and $56,736 at September 30, 1997 and
December 31, 1996, respectively. Through September 30, 1997, the Partnership
repurchased and retired 955 limited partnership units for an aggregate cost of
$880,412.
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, 1997, the appraised values of certain investments exceeded
their related carrying values by an aggregate of $6,560,000, and the appraised
values of the other investments were less than their related carrying values by
an aggregate of $670,000. 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.
On October 24, 1997, the Partnership sold the Palms Business Center
property to an institutional buyer (the "Buyer"), which is unaffiliated with the
Partnership. The selling price was determined by arm's length negotiations
between the Partnership and the Buyer. The property was sold for $18,000,000.
The Partnership received net proceeds of approximately $17,800,000. Accordingly,
the property has been reclassified on the Balance Sheet as "Property held for
disposition." This transaction will be accounted for in the fourth quarter of
1997.
Results of Operations
- ---------------------
Puente Street, Palms Business Center, Santa Rita Plaza and Dahlia are
wholly-owned properties. Effective April 1, 1996, the Waters Landing II joint
venture was restructured and the venture partner's ownership interest was
assigned to the Partnership. Accordingly, these investments have been accounted
for as wholly-owned properties since their respective conversion dates. The
University Business Park property, which was a wholly-owned property, was sold
on May 28, 1997. The remaining investment in the
portfolio, Columbia Gateway Corporate Park, is structured as a joint venture
with a real estate development/management firm and an affiliate of the
Partnership.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park was 99% during the
third quarter of 1997, an increase from 95% during the second quarter. 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 fourth quarter.
Occupancy at Puente Street has remained at 100% since the first quarter of
1994. Operations are stable and no leases are due to expire until April 1999.
Litigation involving an existing tenant was settled during the second quarter.
The settlement provides for this tenant to assign its lease to the other
existing tenant no later than February 1, 1998. It is expected that there will
be no significant effect on the Partnership's financial position.
The Waters Landing II property is presently zoned and permitted for the
development of 144 apartment units. However, based on studies previously
undertaken by the Partnership, the Partnership has no plans at this time to
develop this site.
Occupancy at the Palms Business Center III and IV remained at 100% during
the quarter, consistent with June 30, 1997. Rental rates in Las Vegas have
increased over the past several months.
Occupancy at the Dahlia property has been 100% since the first quarter of
1994. The lease of a tenant that occupies approximately 30% of the space
expires in May 1998. This tenant is not expected to renew and therefore an
agreement has been executed allowing for the lease to be terminated by the
Partnership any time after February 1, 1998. The marketing process for this
space has been initiated. The Partnership had previously received an interest
in land located in Arizona as a rent settlement from a former tenant. During
the first quarter of 1996, upon liquidation of this interest in land, the
Partnership received cash of approximately $332,000.
Occupancy at Santa Rita Plaza was 97% at September 30, 1997, up slightly
from 96% at June 30, 1997. Although occupancy is strong at this time, past
performance at the Plaza has been affected by tenant delinquencies and turnover
due to business failures.
Investment Activity
Interest on cash equivalents and short-term investments for the first nine
months of 1997 increased compared to the same period of 1996 due to the
temporary investment of proceeds from the sale of University Business Park
during the second quarter and to higher yields.
Real estate operating activity for the first nine months of 1997 was
$2,624,738 compared to $2,729,764 for the same period in 1996. This decrease of
$105,026 is primarily due to the sale of University Business Park at the end of
May 1997 as discussed below. Operating income at the remainder of the
Partnership's investments was relatively stable.
On May 28, 1997, the University Business Park wholly-owned property was
sold and the Partnership received net proceeds of $7,994,130 and recognized a
gain of $2,160,404.
Exclusive of the proceeds from the settlement of past due tenant
receivables at Dahlia in 1996 of $332,000, and the payment of deferred
management fees of $388,320 in 1997, cash flow from operations decreased by
$175,279 for the first nine months of 1997 compared to the respective prior year
period. This change is attributable to the decrease in operating results
between the respective years discussed above and to the timing of cash
distributions from its joint venture.
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
1997 and 1996 due to an increase in distributable cash flow. General and
administrative expenses did not change significantly between the respective
nine-month periods.
NEW ENGLAND PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1997
PART II
OTHER INFORMATION
-------------------
Items 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: (27) Financial Data Schedule
b. Reports on Form 8-K: No reports on Form 8-K
were filed during the quarter ended September 30,
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 PENSION PROPERTIES V;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
November 12 , 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Vice President
of Managing General Partner,
Fifth Copley Corp.
November 12 , 1997
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fifth Copley Corp.