-----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, R1dDtZMwzXlZ/NhIctBR3cFOLDg730/U2O5U61+tNPTbtCYwAVGKvu0QCDH/v+ZX C+4BMsCB0yG5aU6HJgS+Pw== 0000927016-98-004000.txt : 19981116 0000927016-98-004000.hdr.sgml : 19981116 ACCESSION NUMBER: 0000927016-98-004000 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND LIFE PENSION PROPERTIES III CENTRAL INDEX KEY: 0000757221 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042847256 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14052 FILM NUMBER: 98746719 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN STREET 25TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6172619000 MAIL ADDRESS: STREET 1: 225 FRANKLIN STREET STREET 2: 25TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION 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, 1998 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 - -------------------------------------------------------------------------------- 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 SEPTEMBER 30, 1998 PART I FINANCIAL INFORMATION ---------------------- NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS (Unaudited)
September 30, 1998 December 31, 1997 ------------------ ----------------- ASSETS Real estate investments: Joint ventures $ - $17,184,075 Property, net 7,357,031 1,170,476 ---------- ----------- 7,357,031 18,354,551 Cash and cash equivalents 2,554,120 1,645,244 Short-term investments - 946,836 ---------- ----------- $9,911,151 $20,946,631 ========== =========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 86,139 $ 99,348 Accrued management fee 36,565 45,655 Deferred disposition fee 510,000 - ---------- ----------- Total liabilities 632,704 145,003 ---------- ----------- Partners' capital (deficit): Limited partners ($237.54 and $485.54 per unit, respectively; 75,000 units authorized, 68,414 units issued and outstanding) 9,281,521 20,859,138 General partners (3,074) (57,510) ---------- ----------- Total partners' capital 9,278,447 20,801,628 ---------- ----------- $9,911,151 $20,946,631 ========== ===========
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 1998 September 30, 1998 September 30, 1997 September 30, 1997 ------------------ ------------------ ------------------ ------------------ Investment Activity Property rentals $ 297,369 $ 945,316 $ 62,650 $ 199,968 Property operating expenses (65,705) (205,613) (25,388) (63,448) Depreciation and amortization (73,660) (225,082) (30,074) (96,923) ---------- ---------- -------- ---------- 158,004 514,621 7,188 39,597 Joint venture earnings 45,257 597,936 438,236 1,195,966 Amortization - (3,138) (2,366) (7,098) ---------- ---------- -------- ---------- Total real estate operations 203,261 1,109,419 443,058 1,228,465 Gain on sale of Joint Venture 5,869,421 5,869,421 - - ---------- ---------- -------- ---------- Total real estate activity 6,072,682 6,978,840 443,058 1,228,465 Interest on cash equivalents and short-term investments 74,588 140,698 31,467 90,296 ---------- ---------- -------- ---------- Total investment activity 6,147,270 7,119,538 474,525 1,318,761 ---------- ---------- -------- ---------- Portfolio Expenses General and administrative 55,018 163,306 56,124 196,320 Management fee 36,565 127,875 45,655 136,965 ---------- ---------- -------- ---------- 91,583 291,181 101,779 333,285 ---------- ---------- -------- ---------- Net Income $6,055,687 $6,828,357 $372,746 $ 985,476 ========== ========== ======== ========== Net income per limited partnership unit $ 87.63 $ 98.81 $ 5.39 $ 14.26 ========== ========== ======== ========== Cash distributions per limited partnership unit $ 254.68 $ 268.04 $ 6.68 $ 20.06 ========== ========== ======== ========== Number of limited partnership units outstanding during the period 68,414 68,414 68,414 68,414 ========== ========== ======== ==========
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 1998 September 30, 1998 September 30, 1997 September 30, 1997 ------------------------ ---------------------- ---------------------- ---------------------- General Limited General Limited General Limited General Limited Partners Partners Partners Partners Partners Partners Partners Partners -------- -------- -------- -------- -------- -------- -------- -------- Balance at beginning of period $(59,015) $ 20,710,069 $(57,510) $ 20,859,138 $(55,254) $21,082,568 $(52,135) $21,391,344 Cash distributions (4,616) (17,423,678) (13,848) (18,337,690) (4,616) (457,006) (13,862) (1,372,385) Net income 60,557 5,995,130 68,284 6,760,073 3,728 369,018 9,855 975,621 -------- ------------ -------- ------------ -------- ----------- -------- ----------- Balance at end of period $(3,074) $9,281,521 $ (3,074) $ 9,281,521 $(56,142) $20,994,580 $(56,142) $20,994,580 ======== ============ ======== ============ ======== =========== ======== ===========
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, --------------------------------- 1998 1997 ---- ---- Net cash provided by operating activities $ 1,374,077 $ 1,431,152 ------------ ----------- Cash flows from investing activities: Investment in property (29,788) (4,636) Net proceeds sale of joint venture 16,475,000 -- Deferred disposition fees 510,000 -- Decrease in short-term investments, net 931,125 247,907 ------------ ----------- Net cash provided by investing activities 17,886,337 243,271 ------------ ----------- Cash flows from financing activity: Distributions to partners (18,351,538) (1,386,247) ------------ ----------- Net increase in cash and cash equivalents 908,876 288,176 Cash and cash equivalents: Beginning of period 1,645,244 1,260,892 ------------ ----------- End of period $ 2,554,120 $ 1,549,068 ============ ===========
Non-cash transaction: Effective January 1, 1998, the Partnership's joint venture investment in 270 Technology Park was converted to a wholly-owned property. The carrying value of this investment at conversion was $6,162,959. (See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP 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, 1998 and December 31, 1997 and the results of its operations, its cash flows and partners' capital (deficit) for the three and nine months ended September 30, 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 - ---------------------------------- 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. The Partnership 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 two 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. The Partnership has engaged AEW Real Estate Advisors, Inc. (the "Advisor") to provide asset management advisory services. NOTE 2 - REAL ESTATE JOINT VENTURES - ----------------------------------- On August 7, 1998 the Bayberry Apartments, in Gaithersburg, Maryland, was sold to an institutional buyer which is unaffiliated with the Partnership. The gross sale price was $17,000,000. The Partnership received its share of the net proceeds totaling $16,985,000, after closing costs, and recognized a gain of $5,869,421 ($84.93 per limited partnership unit). A disposition fee of $510,000 was accrued but not paid to the Advisor. On August 26, 1998, the Partnership made a capital distribution of $16,966,672 ($248 per limited partnership unit) from the proceeds of the sale. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP The following summarized financial information is presented in the aggregate for the Partnership joint ventures (none at September 30, 1998 and two at December 31, 1997):
ASSETS AND LIABILITIES ---------------------- September 30, 1998 December 31, 1997 ------------------ ----------------- Assets Real property, at cost less accumulated depreciation of $5,110,304 at December 31, 1997 $ - $14,786,221 Other assets - 639,480 ---------- ----------- - 15,425,701 Liabilities - 125,700 ---------- ----------- Net Assets $ - $15,300,001 ========== =========== RESULTS OF OPERATIONS --------------------- NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1998 1997 ---- ---- Revenue Rental income $1,444,843 $ 2,377,443 Other 3,862 3,563 ---------- ----------- 1,448,705 2,381,006 ---------- ----------- Expenses Operating expenses 638,983 805,920 Depreciation and amortization 198,186 379,120 ---------- ----------- 837,169 1,185,040 ---------- ----------- Net income $ 611,536 $ 1,195,966 ========== ===========
Liabilities and expenses exclude amounts owed and attributable to the Partnership on behalf of its various financing arrangements with the joint ventures. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP NOTE 3 - PROPERTY - ----------------- The following is a summary of the Partnership's investment in property (two at September 30, 1998, and one at December 31, 1997):
September 30, 1998 December 31, 1997 ------------------- ------------------ Land $ 563,176 $ 347,772 Buildings and improvements 6,691,668 1,041,839 Accumulated depreciation and amortization (430,256) (244,868) Net operating assets 532,443 25,733 ---------- ---------- $7,357,031 $1,170,476 ========== ==========
NOTE 4 - SUBSEQUENT EVENT - ------------------------- Distributions of cash from operations relating to the quarter ended September 30, 1998 were made on October 29, 1998 in the aggregate amount of $369,712 ($5.35 per limited partnership unit). In addition, a special capital distribution was also made on October 29, 1998 in the amount of $410,484 ($6.00 per limited partnership unit). This special capital distribution was funded from sales proceeds previously held in reserves. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP 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 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 and one of which was sold in 1998. Capital of $52,162,938 ($762.46 per limited partnership unit) has been returned to the limited partners as a result of these sales and the reduction of cash reserves. On August 7, 1998 the Bayberry Apartments, in Gaithersburg, Maryland, was sold to an institutional buyer which is unaffiliated with the Partnership. The gross sale price was $17,000,000. The Partnership received its share of the net proceeds totaling $16,985,000, after closing costs and recognized a gain of $5,869,421 ($84.93 per limited partnership unit). A disposition fee of $510,000 was accrued but not paid to the Advisor. On August 26, 1998, the Partnership made a capital distribution of $16,966,672 ($248 per limited partnership unit) from the proceeds of the sale. At September 30, 1998, the Partnership had $2,554,120 in cash and cash equivalents, of which $369,712 was used for operating cash distributions and $410,484 for capital distributions to partners on October 29, 1998. The source of future liquidity and cash distributions to partners will primarily be cash flow generated by the Partnership's invested cash and cash equivalents and real estate investments and proceeds from the sale of such investments. The adjusted capital contribution was reduced from $485.54 to $237.54 per limited partnership unit during the third quarter of 1998, with a distribution of the sales proceeds from Bayberry Apartments. Distributions of cash from operations relating to the first and second quarters of 1998 were made at an annualized rate of 5.5% on the adjusted capital contribution. Distributions of cash from operations relating to the third quarter of 1998 were made at an annualized rate of 5.5% on the weighted average adjusted capital contribution which was adjusted due to the mid-quarter sale of Bayberry Apartments. Distributions of cash from operations relating to the first, second and third quarters of 1997 were made at an annualized rate of 5.5% on the adjusted capital contribution. 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, 1998, the appraised NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP value of each real estate investment exceeded its carrying value; the aggregate excess was approximately $2,070,000. The current appraised value of real estate investments has been estimated by the managing general partner and is generally based on a correlation 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. The Year 2000 Issue is a result of computer programs being written using two digits rather than four to define the applicable year. Computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in normal business operations. The Partnership relies on AEW Capital Management L.P. ("AEW Capital Management"), the parent of AEW Real Estate Advisors, Inc., to generate financial information and to provide other services which are dependent on the use of computers. The Partnership has obtained assurances from AEW Capital Management that: . AEW Capital Management has developed a Year 2000 Plan (the "Plan") consisting of five phases: inventory, assessment, testing, remediation/repair and certification. . As of September 30, 1998, AEW Capital Management had completed the inventory and assessment phases of this Plan and had commenced the testing and remediation/repair of internal systems. . AEW Capital Management expects to conclude the internal testing, remediation/repair and certifications of its Plan no later than December 31, 1998. The Partnership also relies on joint venture partners and/or property managers to supply financial and other data with respect to its real properties. The Partnership is in the process of surveying these third party providers and assessing their compliance with Year 2000 requirements. To date, the Partnership is not aware of any problems that would materially impact its results of operations, liquidity or capital resources. However, the Partnership has not yet obtained written assurances that these providers would be Year 2000 compliant. The Partnership currently does not have a contingency plan in the event of a particular provider or system not being Year 2000 compliant. Such a plan will be developed if it becomes clear that a provider (including AEW Capital Management) is not going to achieve its scheduled compliance objectives. The inability of one of these providers to complete its Year 2000 resolution process could materially impact the Partnership. In addition, the Partnership is also subject to external forces that might generally affect industry and commerce, such as utility or transportation company Year 2000 compliance failures and related service interruptions. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations - --------------------- Form of Real Estate Investments North Cabot Industrial Park is a wholly-owned property. Effective January 1, 1998, 270 Technology Park was converted to a wholly-owned property; it was previously structured as a joint venture with a real estate management /development firm. Bayberry is structured as a joint venture with a real estate management/development firm. Operating Factors Occupancy at North Cabot Industrial Park increased to 92% for the quarter ended September 30, 1998, up from 86% during the second quarter of 1998. Previous occupancy was 100%, where it had been since September 30, 1996. Occupancy at 270 Technology Park was at 100% during the third quarter of 1998. For the quarter ended September 30, 1997 occupancy declined to 80% with the lease expiration of a tenant representing 18% of the available space. As previously discussed, the Bayberry Apartments was sold on August 7, 1998, and the Partnership recognized a gain of $5,869,421. At the time of the sale, the Bayberry Apartments was 95% leased. At September 30, 1997 it was 96% leased. Investment Results For the three and nine months ended September 30, 1998, operating results from real estate operations were $203,261 and $1,109,419, respectively, compared to $443,058 and $1,228,465 for the comparable periods in 1997. The decreases of $239,797 and $119,046 for the comparative three and nine month periods are primarily due to lower joint venture earnings due to the sale of Bayberry Apartments. Interest on cash equivalents and short-term investments for the three and nine months ended September 30, 1998, was $74,588 and $140,698, respectively, compared to $31,467 and $90,296 for the same periods in 1997. The increases of approximately $43,000 and $50,000 for the three and nine month periods respectively, are primarily due to higher average investment balances in 1998 as a result of the receipt of the Bayberry Apartments sales proceeds. The decrease in operating cash flow of approximately $57,000 between the first nine months of 1997 and 1998 is primarily due to decreases in working capital and a decrease in distributions from joint ventures. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP 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. For the three and nine months ended September 30, 1998, management fees were $36,565 and $127,875, respectively, compared to $45,655 and $136,965 for the comparable periods in 1997. The decreases in management fees for the respective three and nine month periods are due to less operational cash available for distributions as a result of the sale of Bayberry Apartments on August 7, 1998. General and administrative expenses for the three and nine months ended September 30, 1998 were $55,018 and $163,306, respectively, compared to $56,124 and $196,320 for the same periods in 1997. Expenses remained relatively unchanged for the comparable three month periods while for the comparable nine month periods expenses decreased $33,000 or 17% due to decreases in accounting and appraisal fees. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1998 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: During the quarter ended September 30, 1998, one Current Report on Form 8-K was filed on August 20, 1998 reporting on Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7 (Financial statements and Exhibits), relating in both cases to the August 7, 1998 sale of the Bayberry Apartments. 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 III; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) November 13, 1998 /s/ J. Christopher Meyer III ------------------------------- J. Christopher Meyer III President, Chief Executive Officer and Director of Managing General Partner, Copley Properties Company III, Inc. November 13, 1998 /s/ Karin J. Lagerlund -------------------------------- Karin J. Lagerlund Principal Financial and Accounting Officer of Managing General Partner, Copley Properties Company III, Inc. EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 SEP-30-1998 2,554,120 0 0 0 0 2,554,120 7,357,031 0 9,911,151 122,704 510,000 0 0 0 9,278,447 9,911,151 1,543,252 7,553,371 205,613 205,613 519,401 0 0 6,828,357 0 6,828,357 0 0 0 6,828,357 98.81 98.81
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