-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Td1xWVmF/Yyv5qARseJSUtDK34Fc2U/7Ge02SVZsATTkAw+qChVOtDchkashphVl kdl8AbDWTVUxoSPWeEbNLg== 0000728525-96-000003.txt : 19960812 0000728525-96-000003.hdr.sgml : 19960812 ACCESSION NUMBER: 0000728525-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND LIFE PENSION PROPERTIES II CENTRAL INDEX KEY: 0000728525 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042803902 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13323 FILM NUMBER: 96607063 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST 13TH FL CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6175781200 10-Q 1 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 June 30, 1996 Commission File Number 0-13323 NEW ENGLAND LIFE PENSION PROPERTIES II; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2803902 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 399 Boylston Street, 13th Fl. Boston, Massachusetts 02116 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 578-1200 - ------------------------------------------------------------------------ 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 II; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 PART I FINANCIAL INFORMATION ---------------------- BALANCE SHEET (Unaudited)
June 30, 1996 December 31, 1995 --------------- ----------------- ASSETS Real estate investments: Ground leases and mortgage loans, net $ 16,427,468 $17,575,746 Property, net 15,336,027 15,381,902 Deferred leasing costs and other assets, net 659,212 528,022 ------------ ----------- 32,422,707 33,485,670 Cash and cash equivalents 4,458,553 2,731,930 Short-term investments 1,880,258 2,525,926 Interest and rent receivable 114,024 331,174 ------------ ----------- $ 38,875,542 $39,074,700 ============ =========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 182,878 $ 505,813 Unearned revenue 171,084 - Accrued management fee 62,089 62,089 Deferred disposition fees 341,914 314,464 ------------ ----------- Total liabilities 757,965 882,366 ------------ ----------- Partners' capital: Limited partners ($889.89 per unit; 110,000 units authorized, 39,917 units issued and outstanding) 38,053,437 38,127,446 General partner 64,140 64,888 ------------ ----------- Total partners' capital 38,117,577 38,192,334 ------------ ----------- $ 38,875,542 $39,074,700 ============ =========== (See accompanying notes to financial statements)
STATEMENT OF OPERATIONS (Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995 -------------- ---------------- ------------- ---------------- INVESTMENT ACTIVITY Property rentals $ 553,371 $ 1,127,444 $ 697,414 $ 1,279,743 Property operating expenses (230,037) (488,048) (221,225) (434,972) Depreciation and amortization (174,610) (331,754) (143,477) (288,968) ------------ ------------ ------------ ------------ 148,724 307,642 332,712 555,803 Provision for impaired mortgage loans (310,000) (310,000) (205,000) (205,000) Ground rentals and interest on mortgage loans 630,948 1,263,431 715,684 1,346,399 ------------ ------------ ------------ ------------ Total real estate activity 469,672 1,261,073 843,396 1,697,202 Interest on cash equivalents and short term investments 69,026 132,996 75,730 150,611 ------------ ------------ ------------ ------------ Total investment activity 538,698 1,394,069 919,126 1,847,813 ------------ ------------ ------------ ------------ Portfolio Expenses Management fee 62,088 124,177 62,088 124,177 General and administrative 38,869 89,077 42,438 86,188 ------------- ------------- ------------ ------------ 100,957 213,254 104,526 210,365 ------------- ------------- ------------ ------------ Net Income $ 437,741 $ 1,180,815 $ 814,600 $ 1,637,448 ============= ============= ============ ============ Net income per limited partnershipunit $ 10.86 $ 29.29 $ 20.20 $ 40.61 ============= ============= ============ ============ Cash distributions per limited partnership unit $ 15.57 $ 31.14 $ 15.57 $ 30.03 ============= ============= ============ ============ Number of limited partnership units outstanding during the period 39,917 39,917 39,917 39,917 ============= ============= ============ ============ (See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995 -------------------- ------------------- -------------------- -------------------- General Limited General Limited General Limited General Limited Partner Partners Partner Partners Partner Partners Partner Partners ------- -------- ------- -------- -------- -------- -------- -------- Balance at beginning of period $66,041 $38,241,581 $64,888 $38,127,446 $74,842 $39,112,900 $72,444 $38,875,480 Cash distributions (6,278) (621,508) (12,556) (1,243,016) (6,279) (621,508) (12,109) (1,198,708) Net income 4,377 433,364 11,808 1,169,007 8,146 806,454 16,374 1,621,074 --------- ---------- --------- ---------- -------- ---------- --------- --------- Balance at end of period $64,140 $38,053,437 $64,140 $38,053,437 $76,709 $39,297,846 $76,709 $39,297,846 ========= ========== ========= ========== ========= ========== ======== ========== (See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended June 30, -------------------------- 1996 1995 ---------- --------- Net cash provided by operating activities $ 1,718,763 $ 2,008,381 ---------- ----------- Cash flows from investing activities: Net proceeds from sale of investment 836,852 - Capital expenditures on owned property (246,538) (492,159) Decrease (increase) in short-term investments, net 645,668 (373,262) Deferred disposition fee 27,450 - ---------- ----------- Net cash provided by (used in) investing activities 1,263,432 (865,421) ---------- ----------- Cash flows from financing activity: Distributions to partners (1,255,572) (1,210,817) ---------- ----------- Net increase (decrease) in cash and cash equivalents 1,726,623 (67,857) Cash and cash equivalents: Beginning of period 2,731,930 4,101,201 ---------- ----------- End of period $ 4,458,553 $ 4,033,344 ========== =========== (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, 1996 and December 31, 1995 and the results of its operations, its cash flows and changes in partners' capital for the interim periods ended June 30, 1996 and 1995. These adjustments are of a normal recurring nature. See notes to financial statements included in the Partnership's 1995 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 II; 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 June, 1984 and acquired several properties through 1986. It intends to dispose of its investments within twelve years of their acquisition, and then liquidate; however, the general partner could extend the investment period if it is in the best interest of the limited partners. NOTE 2 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS - -------------------------------------------------------- One of the two Elkridge buildings was sold on May 14, 1996. Sales proceeds of $864,302 were received by the Partnership in partial payment of amounts due under its ground lease and mortgage loan investment, which approximated the investment's carrying value as previously adjusted for valuation allowances. A disposition fee of $27,450 was accrued but not paid to the advisor. The Partnership intends to distribute the sales proceeds to the limited partners during the third quarter of 1996, when the second building is expected to be sold. The Susana Corporate Center is under agreement for sale for a price which approximates the Partnership's carrying value, as adjusted for valuation allowances. The transaction is expected to be completed in the third quarter of 1996. The mortgage loans on Elkridge, Susana Corporate Center and Case Communications are impaired. Accordingly, a valuation allowance has been established to adjust the carrying value of each loan to its estimated fair market value less anticipated costs of sale. The activity in the valuation allowance during 1995 and 1996, together with the related recorded and carrying values of the impaired mortgage loans at the beginning and end of the respective periods, are as follows:
Recorded Valuation Carrying Value Allowance Value ----------- ----------- ---------- Balance at January 1, 1995 $ 5,787,874 $(2,470,000) $ 3,317,874 ========= ========= Decrease in estimated fair market value of collateral (205,000) --------- Balance at June 30, 1995 $ 5,585,250 (2,675,000) $ 3,180,250 ========== ========== Decrease in estimated fair market value of collateral (123,000) Additional impaired loan (1,100,000) ---------- Balance at January 1, 1996 $ 15,619,235 (3,898,000) $ 11,721,235 ========== ========== Decrease in estimated fair market value of collateral (310,000) Sale of collateral 155,915 ---------- Balance at June 30, 1996 $14,889,944 $(4,052,085) $10,837,859 =========== =========== =========== The average recorded value of the impaired mortgage loans did not differ materially from the balances at the end of the period.
NOTE 3 - SUBSEQUENT EVENTS - -------------------------- Distributions of cash from operations relating to the quarter ended June 30, 1996 were made on July 25, 1996 in the aggregate amount of $627,786 ($15.57 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 November, 1984. A total of 39,917 units were sold. The Partnership received proceeds of $36,296,995, 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. Capital of $4,395,261 has been returned to the limited partners through June 30, 1996 as a result of sales and similar transactions. Two of the Partnership's mortgage loan investments had a maturity date in 1994; another matured in 1995. One of these matured investments is expected to be settled with the sale of the underlying collateral in the second half of 1996. The Partnership is evaluating alternatives to extending the other two loans. At June 30, 1996, the Partnership had $6,338,811 in cash, cash equivalents and short-term investments, of which $627,786 was used for cash distributions to partners on July 25, 1996. On May 14, 1996, one of the two Elkridge buildings was sold. The Partnership received net proceeds of $864,302, which are expected to be distributed to the limited partners in the third quarter of 1996. The remainder of the cash and short-term investment balances, after these distributions, will be used to fund the rehabilitation of the Willows Shopping Center or retained as working capital reserves. The source of future liquidity and cash distributions to partners is expected to be cash generated by the Partnership's real estate investments and proceeds from the sale of such investments. Distributions of cash from operations for the first and second quarters of 1996 and 1995 were made at the annualized rate of 7% on the adjusted capital contribution. The carrying value of real estate investments in the financial statements, other than impaired mortgage loans, 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, 1996, the carrying value of certain investments exceeded their related appraised values by an aggregate of approximately $1,074,000 and the appraised values of the remaining investments exceeded their related carrying values by an aggregate of approximately $317,000. The current appraised value of real estate investments has been estimated by the 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 - --------------------- Operating Factors Occupancy at the Willows Shopping Center decreased slightly to 90% from 91%, where it had been since the end of 1994. A fifteen year lease was recently signed by a significant new anchor tenant. The ground lessee/borrower is in the process of a complete renovation and reconfiguration of the Center. The general partner determined that it is in the best interest for the Partnership, together with its affiliate which owns a share of the Center, to provide funding for the rehabilitation costs. The Partnership's share of the remaining estimated rehabilitation cost is approximately $1,500,000 at June 30, 1996. The Partnership is negotiating a purchase and sale agreement for the remaining Elkridge building. The sale is anticipated to close in the third quarter. Occupancy at this building was 81% at the end of the second quarter. The Susana Corporate Center is 100% leased to a single tenant. The property is currently under agreement for sale to the ground lessee. The sale is expected to close in the third quarter of 1996. Occupancy at the Oakland property remained at 91% during the second quarter of 1996; however, a lease for 47% of the currently occupied space expires later in 1996. Lease renewal discussions with the tenant are continuing. The Case Communications property is fully occupied by a government agency. The current lease expires in November 1996; however, the tenant has indicated its intention to renew. Investment Results The provision for impaired mortgage loans relates to changes in the estimated net fair market value of the collateral underlying the Elkridge, Susana and Case Communications mortgage loans. The charge in 1996 primarily relates to Susana, caused by a refinement to the previous estimate of net fair market value based on the terms of the pending sales transaction. Exclusive of the provision for impaired mortgage loans, real estate investment results were $1,571,073 and $1,902,202 for the six months ended June 30, 1996 and 1995, respectively. This decrease of $331,129, or 17%, is primarily due to the decrease in net operating income generated by Willows Shopping Center, as a result of lower rentals and higher operating expenses. Revenue from Case Communications also declined due to lower percentage rent payments. Interest on cash equivalents and short-term investments decreased by $17,615, or 12%, due to lower average yields and lower average investment balances during the first four months of the six-month period, slightly offset by higher average balances during the remaining two months as a result of the Elkridge sale proceeds. The decrease in operating cash flow during the first six months of 1996 as compared to the prior year period is consistent with the change in investment results, taken together with changes in net working capital. 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 general partner. General and administrative expenses primarily consist of real estate appraisal, printing, legal, accounting and investor servicing fees and state filing and tax fees. General and administrative expenses for the first six months of 1996 increased as compared to the respective period of the prior year primarily due to an increase in professional fees. NEW ENGLAND PENSION PROPERTIES II; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 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 June 30, 1996. 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 II; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) August 9, 1996 /s/ Peter P. Twining ------------------------------- Peter P. Twining Managing Director and General Counsel of General Partner, Copley Properties Company II, Inc. August 9, 1996 /s/ Daniel C. Mackowiak -------------------------------- Daniel C. Mackowiak Principal Financial and Accounting Officer of General Partner, Copley Properties Company II, Inc. EX-27 2
5 6-MOS DEC-31-1996 JUN-30-1996 4458553 1880258 114024 0 0 6452835 31763495 0 38875542 416051 341914 0 0 0 38117577 38875542 2390875 2523871 488048 488048 545008 310000 0 1180815 0 1180815 0 0 0 1180815 29.29 29.29
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