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, 1998 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, 1998
PART I
FINANCIAL INFORMATION
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BALANCE SHEETS
(Unaudited)
March 31, 1998 December 31, 1997
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ASSETS
Real estate investments:
Joint ventures $ 15,952,380 $ 15,879,130
Property, net 14,822,790 15,139,147
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30,775,170 31,018,277
Cash and cash equivalents 6,871,612 4,017,473
Short-term investments -- 2,889,753
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$ 37,646,782 $ 37,925,503
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 126,522 $ 152,095
Accrued management fee 34,212 39,859
Deferred management and
disposition fees 4,240,202 4,205,989
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Total liabilities 4,400,936 4,397,943
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Partners' capital (deficit):
Limited partners ($524
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 33,315,991 33,594,888
General partners (70,145) (67,328)
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Total partners' capital 33,245,846 33,527,560
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$37,646,782 $ 37,925,503
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(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
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1998 1997
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INVESTMENT ACTIVITY
Property rentals $ 818,302 $ 1,368,832
Property operating expenses (373,781) (494,471)
Depreciation and amortization (153,408) (253,704)
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291,113 620,657
Joint venture earnings 303,979 307,036
Amortization (1,327) (1,327)
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Total real estate operations 593,765 926,366
Interest on cash equivalents
and short term investments 87,112 90,380
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Total investment activity 680,877 1,016,746
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PORTFOLIO EXPENSES
MANAGEMENT FEE 68,424 90,916
GENERAL AND ADMINISTRATIVE 88,133 89,063
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156,557 179,979
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NET INCOME $ 524,320 $ 836,767
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NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 5.46 $ 8.72
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CASH DISTRIBUTIONS PER
LIMITED PARTNERSHIP UNIT $ 8.40 $ 11.86
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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)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Quarter Ended March 31,
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1998 1997
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General Limited General Limited
Partners Partners Partners Partners
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Balance at
beginning of
period $ (67,328) $ 33,594,888 $ (160,481) $ 47,361,993
Cash
distributions (8,060) (797,974) (11,380) (1,126,665)
Net income 5,243 519,077 8,368 829,399
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Balance at
end of period $ (70,145) $33,315,991 $(163,493) $47,064,727
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(SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
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1998 1997
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Net cash provided by operating activities $ 703,870 $ 910,335
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Cash flows from investing activities:
Investment in property (18,845) (85,606)
Decrease in short-term investments, net 2,838,711 637,168
Loan Repayment by joint venture partner 136,437 --
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Net cash provided by
investing activities 2,956,303 551,562
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Cash flows from financing activity:
Distributions to partners (806,034) (1,138,045)
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Net increase in
cash and cash equivalents 2,854,139 323,852
Cash and cash equivalents:
Beginning of period 4,017,473 5,045,964
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End of period $ 6,871,612 $ 5,369,816
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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, 1998 and December 31, 1997 and the results of
its operations, its cash flows and partners' capital (deficit) for the interim
periods ended March 31, 1998 and 1997. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1997 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 four 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. The Partnership has engaged AEW Real Estate Advisors,
Inc. (the "Advisor") to provide asset management services.
NOTE 2 - REAL ESTATE JOINT VENTURES
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Ownership of the Columbia Gateway Corporate Park joint venture has been
restructured whereby the Partnership and its affiliate obtained full control
over the business of the joint venture effective January 1, 1998.
The following summarized financial information is presented in the
aggregate for the Partnership's two joint ventures:
Assets and Liabilities
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March 31, 1998 December 31, 1997
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Assets
Real property, at cost less
accumulated depreciation
of $2,385,548 and
$2,321,074, respectively $ 20,094,101 $ 19,858,721
Other 924,853 958,432
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21,018,954 20,817,153
Liabilities 415,592 240,284
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Net Assets $ 20,603,362 $ 20,576,869
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Results of Operations
Quarter ended March 31,
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1998 1997
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Revenue
Rental income $ 640,710 $ 603,450
Other income 2,937 3,119
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643,647 606,569
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Expenses
Operating expenses 159,637 120,653
Depreciation and amortization 93,659 93,659
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253,296 214,312
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Net income $ 390,351 $ 392,257
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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.
In connection with the ownership restructuring, the Partnership agreed to
release the affiliate of the venture partner from its guarantee upon payment to
the Partnership of $650,000. The Partnership received $250,000 at the time the
agreement was executed. During the third quarter of 1996, the Partnership
received an additional $263,563. The final payment of $136,437 was received
during the first quarter of 1998. The first payment was accounted for as a
reduction of previously accrued investment income. The second and third
payments were accounted for as a reduction of the Partnership's investment in
the property.
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.
On February 28, 1998, the Partnership executed a purchase and sale
agreement to purchase the tenancy-in-common interest of the Developer with
regards to Metro Business Center. The Partnership expects to close on the
acquisition by the third quarter of 1998. The purchase price is $6,927,000 and
will be payable by the Partnership as follows: (i) A portion of the purchase
price will be paid through the discharge of all outstanding amounts, including
but not limited to accrued but unpaid interest, owed by the Developer to the
Partnership under the loan made by the Partnership to the Developer in
connection with the original acquisition of the property and (ii) the
Partnership will pay the remainder of the purchase price in cash. The
Partnership expects the cash payment to be nominal.
The following is a summary of the Partnership's two wholly-owned
investments:
March 31, 1998 December 31, 1997
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Land $ 3,451,272 $ 3,451,272
Buildings and improvements
and other capitalized costs 12,530,826 12,648,418
Accumulated depreciation and
amortization (1,032,433) (886,418)
Net operating liabilities (126,875) (74,125)
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$ 14,822,790 $ 15,139,147
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NOTE 4 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended March
31, 1998 were made on April 29, 1998 in the aggregate amount of $691,847 ($7.21
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. Five investments have been sold; one each in 1988, 1993,
1994, 1996 and 1997. As a result of the sales, capital of $45,218,572 ($476 per
limited partnership unit) has been returned to the limited partners through
March 31, 1998.
At March 31, 1998, the Partnership had $6,871,612 in cash and cash
equivalents, of which $691,847 was used for cash distributions to partners on
April 29, 1998; 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 invested cash and
cash equivalents. Distributions of cash from operations for the first quarter
of 1998 were at the annualized rate of 5.5% on the adjusted capital
contribution. Distributions of cash from operations relating to the first
quarter of 1997 were made at the annualized rate of 5% on the adjusted capital
contribution. The distribution rate was lower in 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, 1998, appraised values exceeded the related carrying values by an
aggregate of $7,800,000. 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 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, 1998, 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 Reflections Apartments and Metro
Business Center investments are wholly-owned properties.
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park increased to 100%
during the first quarter of 1998 compared to 95% at March 31, 1997. Ownership of
the Columbia Gateway Corporate Park joint venture has been restructured whereby
the Partnership and its affiliate have obtained full control over the business
of the joint venture. This restructuring was effective January 1, 1998. One
lease is due to expire in October, 1998 but an existing tenant has expressed an
interest in exercising their right of first refusal and expand into this space
upon the lease expiration.
Occupancy at Reflections Apartments ended the first quarter of 1998 at
96%, up from 92% at December 31, 1997 and consistent with the quarter ended
March 31, 1997. Current rental rates are at the high end of the market range.
Occupancy at Metro Business Center at March 31, 1998 was at 100%, up from
87% at March 31, 1997. With low vacancies and steady interest, Metro Business
is expected to command higher rates while retaining a 100% occupancy level.
Occupancy at 270 Technology Center was at 70% at March 31, 1998, compared
to 97% at March 31, 1997. This decrease in occupancy is primarily due to the
expiration of a lease whose tenant occupied 30% of the space. This space is
currently being marketed.
Occupancy at Palms Business Center was 98% at March 31, 1997. This
property was sold on October 24, 1997, and the Partnership recognized a gain of
$10,482,458. At the time of sale, the property was 86% leased.
Investment Activity
Interest on cash equivalents and short-term investments decreased by
approximately $3,300 or 4% between the first quarter of 1997 and 1998 due to
lower investment balances.
Real estate operating activity for the first quarter of 1998 was $593,765
compared to $926,366 for the prior year quarter. The decrease is primarily due
to the sale of Rancho Road in October, 1997, partially offset by increases in
operating performance by Reflections and Metro Business Center due to higher
market rates.
Operating cash flow decreased $206,465 between the first quarter of 1997
and 1998, primarily due to the sale of Rancho Road in 1997.
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, 1997 and
1998 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, 1998
PART II
OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: (27) Financial Data Schedule
b. Reports on Form 8-K: No Current Reports on Form
8-K were filed during the quarter ended March 31, 1998
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 13, 1998
/s/ Wesley M. Gardiner, Jr.
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Wesley M. Gardiner, Jr.
President, Chief Executive Officer
and Director of the Managing General
Partner, Fourth Copley Corp.
May 13, 1998
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.