-----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, M3PXHoqoE4CKlHGRorZxK6oGW446+u9jbmq7B+LuKQT/fC16W9OCdjimLdKLp+H4 D+6a9ddSpEipBvPzsxDo4w== 0000927016-99-001798.txt : 19990506 0000927016-99-001798.hdr.sgml : 19990506 ACCESSION NUMBER: 0000927016-99-001798 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990505 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: 99610502 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 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 March 31, 1999 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 MARCH 31, 1999 PART I FINANCIAL INFORMATION --------------------- BALANCE SHEETS
March 31, 1999 December 31, 1998 -------------- ----------------- (Unaudited) (Audited) ----------- --------- ASSETS Real estate investments: Property, net $ 6,168,142 $ 6,156,334 Property held for disposition, net - 1,197,305 ---------- ----------- 6,168,142 7,353,639 Cash and cash equivalents 4,549,560 1,952,504 ------------ ----------- $ 10,717,702 $ 9,306,143 ============ =========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 149,547 $ 87,947 Accrued management fee 56,248 21,939 ----------- ----------- Total liabilities 205,795 109,886 ----------- ----------- Partners' capital: Limited partners ($231.54 per unit, respectively; 75,000 units authorized, 68,414 units issued and outstanding) 10,498,541 9,196,048 General partners 13,366 209 ----------- ----------- Total partners' capital 10,511,907 9,196,257 ----------- ----------- $ 10,717,702 $ 9,306,143 ============ ===========
(See accompanying notes to financial statements) STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended March 31, 1999 1998 ----------- ---------- INVESTMENT ACTIVITY Property rentals $ 316,867 $ 324,723 Property operating expenses (102,695) (61,562) Depreciation and amortization (67,652) (76,097) ----------- ---------- 146,520 187,064 Joint venture earnings - 324,873 Amortization - (1,569) ----------- ---------- Total real estate operations 146,520 510,368 Gain on sale of property 1,509,931 - ----------- ---------- Total real estate activity 1,656,451 510,368 Interest on cash equivalents and short term investments 22,255 33,039 ----------- ---------- Total investment activity 1,678,706 543,407 ----------- ---------- PORTFOLIO EXPENSES General and administrative 84,981 56,653 Management fee 56,248 45,655 ----------- ---------- 141,229 102,308 ----------- ---------- Net Income $ 1,537,477 $ 441,099 =========== ========== Net income per limited partnership unit $ 22.25 $ 6.38 =========== ========== Cash distributions per limited partnership unit $ 3.21 $ 6.68 =========== ========== Number of limited partnership units outstanding during the period 68,414 68,414 =========== ==========
(See accompanying notes to financial statements) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Quarter Ended March 31, 1999 1998 ------------------- ---------------------- General Limited General Limited Partner Partners Partner Partners ------- -------- ------- -------- Balance at beginning of period $ 209 $ 9,196,048 $(57,510) $20,859,138 Cash distributions (2,218) (219,609) (4,616) (457,006) Net income 15,375 1,522,102 4,411 436,688 ------- ----------- --------- ----------- Balance at end of period $13,366 $10,498,541 $(57,715) $20,838,820 ======= =========== ========= ===========
(See accompanying notes to financial statements) SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited) Quarter Ended March 31, -------------------------- 1999 1998 ---- ----
Net cash provided by operating activities $ 179,438 $ 772,316 ---------- ---------- Cash flows from investing activities: Net proceeds from sale of property 2,639,445 - Capital expenditures on owned property - 1,806 Decrease in short-term investments, net - 931,125 ---------- ---------- Net cash provided by investing activities 2,639,445 932,931 ---------- ---------- Cash flows from financing activity: Distributions to partners (221,827) (461,622) ---------- ---------- Net increase in cash and cash equivalents 2,597,056 1,243,625 Cash and cash equivalents: Beginning of period 1,952,504 1,645,244 ---------- ---------- End of period $4,549,560 $2,888,869 ========== ==========
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 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, 1999 and December 31, 1998 and the results of its operations, its cash flows and partners' capital for the interim periods ended March 31, 1999 and 1998. These adjustments are of a normal recurring nature. See notes to financial statements included in the Partnership's 1998 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 - ----------------------------------- The 270 Technology Park joint venture was restructured to a wholly-owned property effective January 1, 1998 (See Note 3). On August 7, 1998 the Bayberry Apartments, in Gaithersburg, Maryland, was sold to an institutional buyer which was unaffiliated with the Partnership. The terms of the sale were determined by arm-length negotiation between the buyer and the Partnership. The gross sale price was $17,000,000. The Partnership received its share of the net proceeds totaling $16,985,000 and recognized a gain of $6,391,800 ($92.49 per limited partnership unit). 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. The following summarized financial information is presented in the aggregate for one joint venture: Results of Operations ---------------------
Quarter ended March 31, ----------------------- 1999 1998 ---- ---- Revenue Rental income $ $595,656 Other - 664 -------- -------- - 596,320 -------- -------- Expenses Operating expenses - 186,510 Depreciation and amortization - 84,937 -------- -------- - 271,447 -------- -------- Net income $ - $324,873 ======== ========
Liabilities and expenses exclude amounts owed and attributable to the Partnership on behalf of its various financing arrangements with the joint ventures. Effective January 1, 1998, the 270 Technology Park joint venture was converted to a wholly-owned property. Accordingly, the 1998 amounts relate only to the Bayberry joint venture. NOTE 3 - PROPERTY - ----------------- Effective January 1, 1998, the 270 Technology Park joint venture was restructured and the venture partner's ownership interest was assigned 99% to the Partnership, and 1% to an affiliate of the Partnership. Accordingly, as of this date, the investment is being accounted for as a wholly-owned property. The carrying value of the joint venture investment at conversion ($6,162,959) was allocated to land, building and improvements, and other net operating assets. The building is being depreciated over 30 years, beginning January 1, 1998. North Cabot Industrial Park (formerly Marathon/Hayward) ------------------------------------------------------- In September 1985, the Partnership acquired land in Hayward, California, for $786,130 and leased it back to the seller. The Partnership also made a nonrecourse permanent mortgage loan of $2,663,870 to the ground lessee to finance the two research and development buildings. On November 15, 1994, the Partnership restructured this ground lease/mortgage loan investment into a wholly-owned property, due to the inability of the ground lessee/mortgagor to meet its financial obligations. The Partnership received $85,000 in settlement of the guaranty provided by principals of the ground lessee. The Partnership obtained title to the improvements on the land and to certain other operating assets in full satisfaction of the related mortgage loan and obligations under the ground lease, and in consideration of the assumption by the Partnership of certain operating liabilities. The carrying value of the ground lease/mortgage loan investment as of the date of restructuring was allocated to land, buildings and net operating assets. The buildings and improvements (two industrial buildings in Hayward, California) were being depreciated over 25 years beginning November 15, 1994. Prior to 1994, the Managing General Partner determined that the carrying value of this investment should be reduced to its estimated fair market value. Accordingly, the carrying value was reduced by $2,500,000. On March 18, 1999, the North Cabot Industrial Park investment was sold to an unaffiliated third party (the "Buyer") for gross proceeds of $2,800,000. The terms of the sale were determined by arm's length negotiation between the Buyer and the Partnership. The Partnership received net proceeds of $2,639,445 and recognized a gain of $1,509,931 ($21.85 per limited partnership unit). On April 29, 1999, the Partnership made a capital distribution of $2,539,528 ($37.12 per limited partnership unit) from the proceeds of the sale. The following is a summary of the Partnership's investments in property (one at March 31, 1999, and two at December 31, 1998):
March 31, 1999 December 31, 1998 -------------- ----------------- Land $ 215,404 $ 215,404 Buildings and improvements 5,653,391 5,653,391 Accumulated depreciation and amortization (202,990) (156,156) Net operating assets 502,337 443,695 Property held for disposition - 1,197,305 ---------- ---------- $6,168,142 $7,353,639 ========== ==========
NOTE 4 - SUBSEQUENT EVENT - ------------------------- Distributions of cash from operations relating to the quarter ended March 31, 1999 were made on April 29, 1999 in the aggregate amount of $169,998 ($2.46 per limited partnership unit). In addition, a special operating distribution was made on April 29, 1999 funded from reserve operating cash flow totaling $398,736 ($5.77 per limited partnership unit). As discussed above, the Partnership made a capital distribution of $2,539,528 ($37.12 per limited partnership unit) from the proceeds of the North Cabot sale. 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 each of 1998 and 1999. As a result of the sales and similar transactions, capital of $52,573,422 ($768.46 per limited partnership unit) has been returned to the limited partners through March 31, 1999. At March 31, 1999, the Partnership had $4,549,560 in cash and cash equivalents, of which $3,108,262 was used for cash distributions to partners on April 29, 1999; the remainder is being retained as working capital reserves. The source of future liquidity and cash distributions to partners will primarily be cash generated by the Partnership's remaining real estate investment and invested cash and cash equivalents. Distributions of cash from operations for the first quarter of 1999 were made at the annualized rate of 4.25% on the adjusted capital contribution of $231.54 per limited partnership unit. Distributions of cash from operations for the first quarter of 1998 were made at the annualized rate of 5.5% on the adjusted capital contribution of $485.54 per limited partnership unit. The distribution rate was lower in 1999 primarily due to the sale of investments in 1998 and 1999 and the consequent reduction in cash flow. The carrying value of real estate investments in the financial statements at March 31, 1999 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, 1999, the appraised value of each real estate investment exceeded its related carrying value; the aggregate excess was approximately $1,032,000. The current appraised value of real estate investments has been determined 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 current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. Year 2000 Readiness Disclosure - ------------------------------ 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 the Advisor, 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 June 30, 1999. 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 by June 30, 1999. 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. Given the nature of its operations, the Partnership will not incur any costs associated with Year 2000 compliance. All such costs are borne by AEW Capital Management and the property managers. Results of Operations - --------------------- Form of Real Estate Investments North Cabot Industrial Park investment was 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 was structured as a joint venture with a real estate management/development firm. Operating Factors The North Cabot Industrial Park was sold on March 18, 1999, and the Partnership recognized a gain of $1,509,931. Occupancy at North Cabot Industrial Park was 92% at the time of the sale. At March 31, 1998, the property was fully occupied. Occupancy at 270 Technology Park was 96% during the first quarter of 1999, down from 98% at March 31, 1998. As previously discussed, the Bayberry Apartments was sold on August 7, 1998, and the Partnership recognized a gain of $6,391,800. At the time of the sale, the Bayberry Apartments was 95% leased. At March 31, 1998 it was 97% leased. Investment Results Interest on cash equivalents and short-term investments decreased by approximately $11,000 between the first three months of 1998 and 1999. The decrease is primarily due to lower average invested balances as a result of the sale of Bayberry Apartments in 1998 and the sale of North Cabot Industrial Park in 1999. Real estate operating results were $146,520 for the first three months of 1999, and $510,368 for the comparable period of 1998. The decrease of $363,848 is primarily due to no joint venture earnings as a result of the sale of Bayberry Apartments in August 7, 1998. Cash flow from operations decreased by approximately $593,000 between the two three-month periods. The decrease is primarily due to the decrease in distributions from joint ventures as a result of sales and a decrease in property working capital. Portfolio Expenses General and administrative expenses primarily consist of state taxes, real estate appraisal, legal, accounting, printing and servicing agent fees. These expenses increased by approximately $28,000, or 50% between the first three months of 1998 and 1999 primarily due to an increase in state taxes. 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. The management fee increased by approximately $10,600 between the two three month periods primarily due to a special distribution of excess operating cash flow in 1999. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED MARCH 31, 1999 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 March 31, 1999, a Current Report on Form 8-K was filed on April 2, 1999 reporting on Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7 (Financial statements and Exhibits), relating in both cases to the March 18, 1999 sale of North Cabot Industrial Park. 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) May 5, 1999 /s/ J. Christopher Meyer III ------------------------------- J. Christopher Meyer III President, Chief Executive Officer and Director of Managing General Partner, Copley Properties Company III, Inc. May 5, 1999 /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 3-MOS DEC-31-1999 MAR-31-1999 4,549,560 0 0 0 0 4,549,560 6,168,142 0 10,717,702 205,795 0 0 0 0 10,511,907 10,717,702 316,867 1,849,053 102,695 102,695 208,881 0 0 1,537,477 0 1,537,477 0 0 0 1,537,477 22.25 22.25
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