-----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, Ccms1EJy3u4pPc/0Q8nFaQZmCmgZbbVd/6+GgxBZAlZavdI+aM8gnI1JrHzK5dkY uXqGT3EoqppOnkKHtVa6ag== 0000927016-00-001035.txt : 20000411 0000927016-00-001035.hdr.sgml : 20000411 ACCESSION NUMBER: 0000927016-00-001035 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 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-K SEC ACT: SEC FILE NUMBER: 000-14052 FILM NUMBER: 582067 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission File No. 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 incorporation or organization) Identification No.) 225 Franklin Street Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 261-9000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) 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 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 |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| No voting stock is held by nonaffiliates of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE None 1 PART I Item 1. Business. New England Life Pension Properties III; A Real Estate Limited Partnership (the "Partnership") was organized under the Uniform Limited Partnership Act of the Commonwealth of Massachusetts on November 1, 1984, to invest primarily in newly constructed and existing income-producing real properties. The Partnership was initially capitalized with contributions of $2,000 in the aggregate from Copley Properties Company III, Inc. (the "Managing General Partner") and ACOP Associates Limited Partnership (the "Associate General Partner") (collectively, the "General Partners") and $10,000 from Copley Real Estate Advisors, Inc. (the "Initial Limited Partner"). The Partnership filed a Registration Statement on Form S-11 (the "Registration Statement") with the Securities and Exchange Commission on November 15, 1984, with respect to a public offering of 50,000 units of limited partnership interest at a purchase price of $1,000 per unit (the "Units") with an option to sell up to an additional 25,000 Units (an aggregate of $75,000,000). The Registration Statement was declared effective on January 25, 1985. The first sale of Units occurred on July 15, 1985, at which time the Initial Limited Partner withdrew its contribution from the Partnership. Investors were admitted to the Partnership thereafter at monthly closings; the offering terminated and the last group of initial investors was admitted to the Partnership on December 19, 1985. A total of 68,414 Units had been sold, a total of 11,437 investors had been admitted as limited partners (the "Limited Partners") and a total of $67,748,960 had been contributed to the capital of the Partnership. The remaining 6,586 Units were de-registered on February 18, 1986. The Partnership has no employees. Services are performed for the Partnership by the Managing General Partner and affiliates of the Managing General Partner. As of December 31, 1999, the Partnership held in the real property investment described below. Additionally, the Partnership sold eight other real estate investments between 1987 and 1998. The principal terms of these sales are set forth in the following table:
Investment Month/Year of Sale Net Sale Proceeds Distribution/Unit(1) Distribution Month/Year Investment Four 12/87 $15,771,830 $17.86 1/88 Investment Five 9/88 $3,002,643 $36.00 10/88 Investment Six 3/89 $10,943,495 $150.00 4/89 Investment Seven 2/92 $7,724,589 $102.00 4/92 Investment Eight(2) 12/92 $11,600,183 $170.00 1/93 Investment Nine 12/93 $2,161,552 $31.00 1/94 Investment Ten 8/98 $16,985,000 $248.00 8/98 Investment Eleven 3/99 $2,639,445 $37.12 4/99
In the opinion of the Managing General Partner, the properties are adequately covered by insurance. - ---------- (1) In October 1996, October 1998 and October 1999, additional distributions of $7.60, $6.00 and $10.82 per Unit, respectively, were made, representing proceeds from several prior sales which were being held in working capital reserves. (2)These sale proceeds represent the proceeds received by the Partnership when two mortgage loans made by the Partnership were paid off and the investment was liquidated. 2 A. Light Industrial Facility in Hayward, California ("North Cabot Industrial Park"). The Partnership owned a 3.8-acre parcel of land in Hayward, California, which it acquired in 1985 for $786,130 and leased back to the seller. In addition, the Partnership also made a loan to the ground lessee in the amount of $2,663,870. Two single-story research and development buildings containing an aggregate of approximately 51,089 square feet of space are situated on the land. These buildings were 92% leased at the time of sale, discussed below. The Partnership entered into a ground lease with the seller which had a term of 60 years. On November 15, 1994, the Partnership obtained fee simple title to this property because the ground lessee defaulted on its obligations. The North Cabot Industrial Park was sold on March 18, 1999, and the Partnership received net proceeds totaling $2,639,445. 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. B. Research and Development/Office Buildings in Frederick, Maryland ("270 Technology Park"). In August, 1987, the Partnership exercised its option to purchase for $247,650 an 8.288-acre parcel of land in 270 Technology Park, Frederick, Maryland. Situated on the land are three single-story research and development/office buildings containing an aggregate of 86,169 square feet of space. The Partnership simultaneously leased the land back to the seller for a term of 60 years. The ground lease provided for a fixed annual rent of $26,003 plus additional rent equal to 50% of gross revenues from the rental of the buildings in excess of a base amount. Upon exercising its option, the Partnership also made a non-recourse mortgage loan to the ground lessee of $5,712,350. On January 1, 1988, the Partnership converted this investment to a joint venture in which it has a 50% interest. The Partnership contributed the land and funds to retire the mortgage debt. In addition, the Partnership contributed an additional $260,000 of capital. The Partnership is entitled to receive a 10.5% per annum preferred return on its invested capital payable currently, and 50% of remaining cash flow and of sale and refinancing proceeds after return of its equity. The preferred return may accrue if sufficient cash flow is not available therefor. Effective January 1, 1998, ownership of the joint venture was restructured to give the Partnership full control over the business of the joint venture. As of December 31, 1999, the buildings were 98% leased. 3 Item 2. Properties. The following table sets forth the annual realty taxes for the Partnership's last remaining property and information regarding tenants who occupy 10% or more of gross leasable area (GLA) in the Partnership's properties:
- ---------------------------------------------------------------------------------------------------------------------------------- Annual Estimated Number of Contract 2000 Tenants with 10% Name(s) of Square Feet of Rent Lease Property Realty Taxes or More of GLA Tenant(s) Each Tenant Per Square Foot Expiration - --------------------------------------------------------------------------------------------------------------------------------- R&D Buildings in Frederick, MD $77,756 4 Sac-Tec 15,000 $13.25 March, 2000 Abbie Business 13,209 $10.76 August, 2001 School Bechtel 15,591 $10.76 May, 2001 Horizon Cellular 10,111 $12.13 October, 2001 Telephone - ---------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Renewal Line of Business Property Options of Principal Tenants - -------------------------------------------------------------------------------- R&D Buildings in Frederick, MD Two 3 Year Options Defense Two 5 Year Options Business School None Engineering/Design Two 5 Year Options Cellular Communications - --------------------------------------------------------------------------------
4 The following table sets forth for each of the last five years the gross leasable area, occupancy rates, rental revenue, and net effective rent for the Partnership's last remaining property:
- ------------------------------------------------------------------------------------------ Gross Leasable Year-End Rental Net Effective PROPERTY Area Occupancy Revenue Rent($/sf/yr)* Recognized - ------------------------------------------------------------------------------------------ R&D Buildings in Frederick, MD 1995 86,169 98% $968,980 $11.56 1996 86,169 98% $976,011 $11.56 1997 86,169 98% $924,087 $11.95 1998 86,169 95% $988,950 $11.62 1999 86,169 98% $1,105,848 $13.20 - ------------------------------------------------------------------------------------------
* Net effective rent calculation is based on average occupancy during the respective year. 5 Following is a schedule of lease expirations for each of the next ten years for the Partnership's last remaining property:
- ------------------------------------------------------------------------------------------ TENANT AGING REPORT - ------------------------------------------------------------------------------------------ Property # of Lease Total Total Percentage of Expirations Square Annual Gross Annual Feet Rental Rental* - ------------------------------------------------------------------------------------------ R&D Buildings in Frederick, MD 2000 1 15,000 $198,750 23.3% 2001 7 43,624 $489,092 57.4% 2002 1 2,256 $28,200 3.3% 2003 1 8,511 $100,345 11.8% 2004 0 0 $0 0% 2005 1 2,555 35,540 4.2% 2006 0 0 $0 0% 2007 0 0 $0 0% 2008 0 0 $0 0% 2009 0 0 $0 0% - ------------------------------------------------------------------------------------------
* Does not include expenses paid by tenants. 6 The following information sets forth for the Partnership's last remaining property the: (i) federal tax basis, (ii) rate of depreciation, (iii) method of depreciation, (iv) life claimed and (v) accumulated depreciation, with respect to each property or component thereof for purposes of depreciation:
- --------------------------------------------------------------------------------------------------------- Rate of Life Accumulated Entity / Property Tax Basis Depreciation Method in years Depreciation - --------------------------------------------------------------------------------------------------------- Research and Development/Office Buildings Frederick, Maryland. - ------------------------------------------ Buildings $ 6,080,008 3.18% SL 31.5 $2,280,373 Improvements 428,505 2.56% SL 39 43,983 ------- ------ Total Depreciable Assets $6,508,513 $ 2,324,356 Total Depreciable Assets $6,508,513 $3,324,356 ========== ========== - ---------------------------------------------------------------------------------------------------------
SL= Straight Line 7 Following is information regarding the competitive market conditions for the Partnership's last remaining property. This information has been gathered from sources deemed reliable. However, the Partnership has not independently verified the information and, as such, cannot guarantee its accuracy or completeness: R&D/Office Buildings in Frederick, MD The Frederick R&D market contains approximately 5 million square feet of office and r&d space with a vacancy hovering around 9%. The more competitive and narrower submarket for 270 Technology Park includes approximately 40 buildings in 2.3 million square feet with a reported vacancy of 11%. Current market rents range from $9.50 to $11.25 per square foot NNN for R&D and $10.00 to $13.30 per square foot NNN for office deals. This represents a 5-7% increase over levels one year ago primarily due to the strong absorption of space and land for build to suit projects. By far the project which has had the most significant impact on our asset is the Bechtel 400-500,000 square feet build to suit, as Bechtel vacated over 35,000 square feet in MORF III & MORF VI. Other build to suit projects under development include MCI (50,000 square feet at 270 Technology Park) and First Nationwide (35,000 square feet at MIE). Item 3. Legal Proceedings. The Partnership is not a party to, nor are any of its properties subject to, any material pending legal proceedings. A Joint Venture in which the partnership holds an interest has received judgements against two former tenants for defaults under leases. See Item 1.C. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. There is no active market for the Units. Trading in the Units is sporadic and occurs solely through private transactions. As of December 31, 1999, there were 10,412 holders of Units. 8 The Partnership's Amended and Restated Agreement of Limited Partnership dated July 15, 1985, as amended to date (the "Partnership Agreement"), requires that any Distributable Cash (as defined therein) be distributed quarterly to the partners in specified proportions and priorities. There are no restrictions on the Partnership's present or future ability to make distributions of Distributable Cash. For the year ended December 31, 1999, cash distributions paid in 1999 or distributed after year-end with respect to 1999 to the Limited Partners as a group totaled $4,664,467, including $2,539,528 ($37.12 per Limited Partnership Unit) from the proceeds of a property sale and $740,239 ($10.82 per Limited Partnership Unit) from reserves established from the proceeds of previous sales. Cash distributions exceeded net income in 1999 and, therefore, resulted in a reduction of partners' capital. Reference is made to the Partnership's Statement of Partners' Capital (Deficit) and Statement of Cash Flows in Item 8 hereof. Item 6. Selected Financial Data.
For Year For Year For Year For Year For Year Ended Ended Ended Ended Ended or as of or as of or as of or as of or as of 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 -------- -------- -------- -------- -------- Revenues $ 2,756,215 $ 8,472,836 $ 1,942,159 $ 1,961,564 $ 1,912,590 Net Income $ 1,715,845 $ 7,526,363 $ 1,310,288 $ 1,313,894 $ 1,287,403 Net Income per Limited Partnership Unit $ 24.83 $ 108.91 $ 18.96 $ 19.01 $ 18.63 Total Assets $ 6,243,521 $ 9,306,143 $20,946,631 $21,459,173 $22,871,014 Total Cash Distributions per Limited Partnership Unit, including amounts distributed after year end with respect to such year $ 68.18 $ 275.92 $ 26.72 $ 39.91 $ 24.64 ----------- ----------- ----------- ----------- -----------
See financial statements for description of significant transactions. 9 Item 7. 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 the real estate investments described in Item 1 herein, 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 $55,853,190 ($816.40 per Limited Partnership Unit) has been returned to the limited partners through December 31, 1999. 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 Partnership received net proceeds of $2,639,445, after closing costs 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. This distribution reduced the adjusted capital contribution to $194.42 per Limited Partnership Unit. On October 28, 1999, the Partnership made a special capital distribution from prior sale proceeds held in reserves in the amount of $740,239 ($10.82 per Limited Partnership Unit). This distribution further reduced the adjusted capital contribution to $183.60 per Limited Partnership Unit. At December 31, 1999, the Partnership had $324,989 in cash and cash equivalents, of which $136,828 was used for operating cash distributions to partners on January 27, 2000; 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 real estate and invested cash and cash equivalents. Distributions of cash from operations for the first, second, third and fourth quarters of 1999 were made at the annualized rate of 4.25% on the adjusted capital contribution of $231.54, the weighted average adjusted capital contribution of $205.97 per Limited Partnership Unit, the weighted average adjusted capital contribution of $194.42 per Limited Partnership Unit and the weighted average adjusted capital contribution of $186.78 per Limited Partnership Unit, respectively. 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 of $485.54 per Limited Partnership Unit. Distributions of cash from operations relating to the third and fourth quarters of 1998 were made at an annualized rate of 5.5% on the weighted average adjusted capital contribution per Limited Partnership Unit of $389.10 and $233.41, respectively. 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 December 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 December 31, 1999, the appraised value of the remaining real estate investment exceeded its related carrying value by approximately $1,300,000. 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 AEW Real Estate Advisors, Inc. ("AEW") 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. 10 Results of Operations Form of Real Estate Investments Effective November 15, 1994, North Cabot Industrial Park was converted to a wholly-owned property; it was previously structured as a ground lease with a mortgage loan to the ground lessee. The North Cabot Industrial Park was sold in March 1999. 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. The Bayberry Apartments investment, which was sold in August 1998, 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 and at December 31, 1998. At December 31, 1997 occupancy was 100%. The Bayberry Apartments was sold on August 7, 1998, and the Partnership recognized a gain of $5,881,800. At the time of the sale, the Bayberry Apartments was 95% leased compared to 93% at December 31, 1997. Occupancy at 270 Technology Park was 98% at December 31, 1999 compared to 95% and 98% at December 31, 1998 and 1997, respectively. Investment Results 1999 Compared to 1998 Interest on cash equivalents and short-term investments decreased approximately $87,000 or 52% primarily due to lower average investment balances in 1999 as a result of the sale of Bayberry Apartments in August 1998 and the sale of North Cabot Industrial Park in March 1999. Real estate operating results were $504,297 and $1,321,142 in 1999 and 1998, respectively. The decrease of approximately $817,000 is primarily due to no joint venture earnings as a result of the sale of Bayberry Apartments in August 1998 and lower property operating results as a result of the North Cabot Industrial Park sale in March 1999. At 270 Technology Park, operating results increased, as a result of higher rental rates and an increase in recovery income. Partially offsetting these increases are higher bad debt expense and the subsequent legal costs associated with resolving the tenant issue. Cash from operations decreased by approximately $1,088,000 between 1999 and 1998. The decrease is primarily due to the decrease in operating activity as a result of the sales discussed above. 1998 Compared to 1997 Interest on cash equivalents and short-term investments increased $45,000 or 36% primarily due to higher average investment balances in 1998 as a result of the receipt of the Bayberry Apartments sales proceeds. 11 Real estate operating results were $1,321,142 and $1,608,252 in 1998 and 1997, respectively. The decrease of approximately $287,000 is primarily due to lower joint venture earnings due to the sale of Bayberry Apartments in August 1998. At North Cabot Industrial Park, 1998 operations improved due to increased tenant reimbursements as well as lower operating costs due to decreases in professional fees and repairs and maintenance expenses. At 270 Technology Park, operating results increased, consistent with an increase in occupancy and expense reimbursements from tenants. Partially offsetting these increases are higher utility and repairs and maintenance expenses. Cash from operations decreased by approximately $423,000 between 1997 and 1998. The decrease is primarily due to decreases in working capital and a decrease in distributions from joint ventures due to the sale of Bayberry Apartments and the conversion of 270 Technology Park to a wholly-owned property. 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. 1999 Compared to 1998 The Partnership management fee decreased approximately $11,500 due to less operational cash available for distribution as a result of the sale of Bayberry Apartments in 1998 and North Cabot Industrial Park in 1999. General and administrative expenses increased by approximately $37,000 or 18% between the respective years primarily due to increases in state taxes, accounting fees and investor servicing fees due to sales. 1998 Compared to 1997 The Partnership management fee decreased approximately $33,000 due to less operational cash available for distribution as a result of the sale of Bayberry Apartments on August 7, 1998. General and administrative expenses decreased by approximately $34,000 or 14% between the respective years primarily due to decreased investor servicing fees and accounting fees. Inflation By their nature, real estate investments tend not to be adversely affected by inflation. Inflation may result in appreciation in the value of the real estate investments over time, if rental rates and replacement costs increase. Declines in real property values during the period of Partnership operations, due to market and economic conditions, have overshadowed the overall positive effect inflation may have on the value of the Partnership's investments. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Partnership was not party to derivative financial instruments or derivative commodity instruments at or during the year ended December 31, 1999. The Partnership's only other financial instruments (as defined by Financial Accounting Standards Board Statement No. 107) are its cash and cash equivalents for which cost approximates market value. Item 8. Financial Statements and Supplementary Data. 12 The independent auditor's reports, financial statements and financial statement schedule listed in the accompanying index are filed as part of this report. See Index to the Financial Statements and Financial Statement Schedules on page 19. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. The Partnership has had no disagreements with its accountants on any matters of accounting principles or practices or financial statement disclosure. 13 PART III Item 10. Directors and Executive Officers of the Registrant. (a) and (b) Identification of Directors and Executive Officers. The following table sets forth the names of the directors and executive officers of the Managing General Partner and the age and position held by each of them as of December 31, 1999.
Name Position(s) with the Managing General Partner Age - ---- --------------------------------------------- --- Alison Husid Cutler President, Chief Executive Officer and Director 37 Pamela J. Herbst Vice President and Director 44 J. Grant Monahon Vice President and Director 54 James J. Finnegan Vice President 39 Karin J. Lagerlund Treasurer and Principal Financial and Accounting Officer 35
(c) Identification of Certain Significant Employees. None. (d) Family Relationships. None. (e) Business Experience. The Managing General Partner was incorporated in Massachusetts on November 1, 1984. The background and experience of the executive officers and directors of the Managing General Partner are as follows: Alison Husid Cutler is a Portfolio Manager in AEW Institutional Real Estate Services, with responsibility for several real estate equity portfolios representing approximately $800 million in client capital. She has over 12 years of experience in real estate finance and investment management. Ms. Cutler joined the predecessor of AEW Capital Management, L.P. ("AEW Capital Management") in 1987 as Controller for a portfolio management team responsible for the acquisition, management, restructuring and disposition of client assets in New England and the western U.S. She later served as Asset Manager for a portfolio of assets in Arizona and the West Coast. Prior to joining AEW, Ms. Cutler worked for several years as a Senior Auditor with Peat Marwick, Main & Co. She is a Certified Public Accountant and a graduate of the University of Massachusetts (B.A.). Pamela J. Herbst directs AEW Capital Management L.P.'s ("AEW Capital Management") Institutional Real Estate Services, with oversight responsibility for direct equity investing and the asset and portfolio management of existing core and core-plus commingled funds and separate accounts. Ms. Herbst is a member of AEW Capital Management's Investment Policy Group and Management Committee. She came to AEW Capital Management in December 1996 as a result of the firm's merger with Copley Real Estate Advisors, Inc., where she held various senior level positions in asset and 14 portfolio management, acquisitions, and corporate operations since 1982. Ms. Herbst is a graduate of the University of Massachusetts (B.A.) and Boston University (M.B.A.). J. Grant Monahon is AEW Capital Management's Chief Operating Officer and a member of the firm's Management Committee and Investment Policy Group. He has over 25 years of experience in real estate law and investments. Prior to joining the predecessor of AEW Capital Management in 1987, Mr. Monahon was a partner with a major Boston law firm. As the head of that firm's real estate finance department, he represented a wide variety of institutional clients, both domestic and international, in complex equity and debt transactions. He is the former Chairman of the General Counsel section of the National Association of Real Estate Investment Managers. Mr. Monahon is a graduate of Dartmouth College (B.A.) and Georgetown University Law Center (J.D.). James J. Finnegan is the General Counsel of AEW Capital Management. Mr. Finnegan served as Vice President and Assistant General Counsel of Aldrich, Eastman & Waltch, L.P., a predecessor to AEW Capital Management. Mr. Finnegan has over ten years of experience in real estate law, including seven years of experience in private practice with major New York City and Boston law firms. Mr. Finnegan also serves as AEW's securities and regulatory compliance officer. Mr. Finnegan is a graduate of the University of Vermont (B.A.) and Fordham University School of Law (J.D.). Karin J. Lagerlund directs the Institutional Real Estate Services Portfolio Accounting Group at AEW Capital Management, overseeing portfolio accounting, performance measurement and client financial reporting for AEW's private equity investment portfolios. Ms. Lagerlund is a Certified Public Accountant and has over ten years experience in real estate consulting and accounting. Prior to joining AEW Capital Management in 1994, she was an Audit Manager at EY/Kenneth Leventhal LLP. Ms. Lagerlund is a graduate of Washington State University (B.A.). (f) Involvement in Certain Legal Proceedings. None. Item 11. Executive Compensation. Under the Partnership Agreement, the General Partners and their affiliates are entitled to receive various fees, commissions, cash distributions, allocations of taxable income or loss and expense reimbursements from the Partnership. See Note 1, Note 2 and Note 6 of Notes to Financial Statements. 15 The following table sets forth the amounts of the fees and cash distributions and reimbursements for out-of-pocket expenses which the Partnership paid to or accrued for the account of the General Partners and their affiliates for the year ended December 31, 1999. Cash distributions to General Partners include amounts distributed after year end with respect to 1999. Amount of Compensation and Receiving Entity Type of Compensation Reimbursement - ---------------- -------------------- ------------- AEW Real Estate Advisors, Inc. Management Fees and Reimbursement of Expenses $ 150,332 General Partners Share of Distributable Cash 13,986 New England Securities Corporation Servicing Fees and 21,172 Reimbursement of Expenses ------ TOTAL $ 185,493 ========= For the year ended December 31, 1999, the Partnership allocated $3,130 of taxable income to the General Partners. See Note 1 of Notes to Financial Statements for additional information about transactions between the Partnership and the General Partners and their affiliates. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Security Ownership of Certain Beneficial Owners No person or group is known by the Partnership to be the beneficial owner of more than 5% of the outstanding Units at December 31, 1999. Under the Partnership Agreement, the voting rights of the Limited Partners are limited and, in some circumstances, are subject to the prior receipt of certain opinions of counsel or judicial decisions. Except as expressly provided in the Partnership Agreement, the right to manage the business of the Partnership is vested exclusively in the Managing General Partner. (b) Security Ownership of Management. An affiliate of the Managing General Partner of the Partnership owned 803 Units as of December 31, 1999. (c) Changes in Control. There exists no arrangement known to the Partnership the operation of which may at a subsequent date result in a change in control of the Partnership. Item 13. Certain Relationships and Related Transactions. 16 The Partnership has no relationships or transactions to report other than as reported in Item 11, above. PART IV Item 14. Exhibits, Financial Statements, and Reports on Form 8-K. (a) The following documents are filed as part of this report: (1) Financial Statements--The Financial Statements listed on the accompanying Index to Financial Statements and Schedule, Financial Statements Index No. 2 and Financial Statements are filed as part of this Annual Report. (2) Financial Statement Schedule--The Financial Statement Schedule listed on the accompanying Index to Financial Statements and Schedule is filed as part of this Annual Report. (3) Exhibits--The Exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report and incorporated in this Annual Report as set forth in said Index. (b) Reports on Form 8-K/A. The partnership filed one Current Report on Form 8-K/A dated December 7, 1999 reporting on Items No. 2 (Acquisition or Disposition of Assets) and No. 7 (Financial Statements and Exhibits), relating in both cases to the March 18, 1999 sale of North Cabot Industrial Park. 17 New England Life Pension Properties III; A Real Estate Limited Partnership Financial Statements * * * * * * * December 31, 1999 18 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Report of Independent Accountants Financial Statements: Balance Sheets - December 31, 1999 and 1998 Statements of Operations - Years ended December 31, 1999, 1998 and 1997 Statement of Partners' Capital (Deficit) - Years ended December 31, 1999, 1998 and 1997 Statements of Cash Flows - Years ended December 31, 1999, 1998 and 1997 Notes to Financial Statements Financial Statement Schedule: Schedule III - Real Estate and Accumulated Depreciation at December 31, 1999 All other schedules are omitted because they are not applicable. 19 Report of Independent Accountants To the Partners of New England Life Pension Properties III; A Real Estate Limited Partnership: In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of New England Life Pension Properties III; A Real Estate Limited Partnership (the "Partnership") at December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and the financial statement schedule are the responsibility of Copley Properties Company III, Inc., the Managing General Partner of the Partnership (the "Managing General Partner"); our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Managing General Partner, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP - ------------------------------------ Boston, Massachusetts March 21, 2000 20 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS December 31, --------------------------- 1999 1998 ------------ ------------ Assets Real estate investments: Property, net $ 5,918,532 $ 6,156,334 Property held for disposition, net -- 1,197,305 ------------ ------------ 5,918,532 7,353,639 Cash and cash equivalents 324,989 1,952,504 ------------ ------------ $ 6,243,521 $ 9,306,143 ============ ============ Liabilities and Partners' Capital Accounts payable $ 81,339 $ 87,947 Accrued management fee 13,532 21,939 ------------ ------------ Total liabilities 94,871 109,886 ------------ ------------ Partners' capital: Limited partners ($183.60 and $231.54 per unit, respectively; 75,000 units authorized, 68,414 units issued and outstanding) 6,146,119 9,196,048 General partners 2,531 209 ------------ ------------ Total partners' capital 6,148,650 9,196,257 ------------ ------------ $ 6,243,521 $ 9,306,143 ============ ============ (See accompanying notes to financial statements) 21 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS
Year ended December 31, -------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Investment Activity Property rentals $ 1,165,510 $ 1,294,563 $ 267,791 Property operating expenses (424,157) (295,874) (79,665) Depreciation and amortization (237,056) (293,460) (121,979) ------------ ------------ ------------ 504,297 705,229 66,147 Joint venture earnings -- 619,051 1,551,569 Amortization -- (3,138) (9,464) ------------ ------------ ------------ Total real estate operations 504,297 1,321,142 1,608,252 Gain on sale of investment in joint venture -- 6,391,800 Gain on sale of property 1,509,931 -- -- ------------ ------------ ------------ Total real estate activity 2,014,228 7,712,942 1,608,252 Interest on cash equivalents and short-term investments 80,774 167,422 122,799 ------------ ------------ ------------ Total investment activity 2,095,002 7,880,364 1,731,051 ------------ ------------ ------------ Portfolio Expenses General and administrative 240,825 204,187 238,143 Management fee 138,332 149,814 182,620 ------------ ------------ ------------ 379,157 354,001 420,763 ------------ ------------ ------------ Net Income $ 1,715,845 $ 7,526,363 $ 1,310,288 ============ ============ ============ Net income per limited partnership unit $ 24.83 $ 108.91 $ 18.96 ============ ============ ============ Cash distributions per limited partnership unit $ 69.41 $ 279.39 $ 26.74 ============ ============ ============ Number of limited partnership units outstanding during the year 68,414 68,414 68,414 ============ ============ ============
(See accompanying notes to financial statements) 22 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
Year ended December 31, -------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 1,715,845 $ 7,526,363 $ 1,310,288 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 237,056 296,598 131,443 Equity in joint venture net income -- (619,051) (1,551,569) Cash distributions from joint ventures -- 1,148,092 2,120,676 Gain on sale of investment in joint venture -- (6,391,800) -- Gain on sale of property (1,509,931) -- -- Increase in investment income receivable -- 15,711 1,278 Increase in property deferred leasing costs (38,266) (78,894) (14,794) Increase (decrease) in property working capital 120,538 (263,595) (1,365) Increase (decrease) in liabilities (15,015) (35,117) 25,039 ------------ ------------ ------------ Net cash provided by operating activities 510,227 1,598,307 2,020,996 ------------ ------------ ------------ Cash flows from investing activities: Net proceeds from sale of real estate 2,639,445 16,985,000 -- Capital expenditures on owned property (13,735) (75,438) (10,327) Decrease in short-term investments, net -- 931,125 221,552 ------------ ------------ ------------ Net cash provided by investing activities 2,625,710 17,840,687 211,225 ------------ ------------ ------------ Cash flows from financing activity: Distributions to partners (4,763,452) (19,131,734) (1,847,869) ------------ ------------ ------------ Net cash used in financing activity (4,763,452) (19,131,734) (1,847,869) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (1,627,515) 307,260 384,352 Cash and cash equivalents: Beginning of year 1,952,504 1,645,244 1,260,892 ------------ ------------ ------------ End of year $ 324,989 1,952,504 $ 1,645,244 ============ ============ ============
Supplemental disclosure of 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) 23 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
Year ended December 31, -------------------------------------------------------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ General Limited General Limited General Limited Partners Partners Partners Partners Partners Partners ------------ ------------ ------------ ------------ ------------ ------------ Balance at beginning of year $ 209 $ 9,196,048 $ (57,510) $ 20,859,138 $ (52,135) $ 21,391,344 Cash distributions (14,836) (4,748,616) (17,545) (19,114,189) (18,478) (1,829,391) Net income 17,158 1,698,687 75,264 7,451,099 13,103 1,297,185 ------------ ------------ ------------ ------------ ------------ ------------ Balance at end of year $ 2,531 $ 6,146,119 $ 209 $ 9,196,048 $ (57,510) $ 20,859,138 ============ ============ ============ ============ ============ ============
(See accompanying notes to financial statements) 24 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND BUSINESS General 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. 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 July 1985, and acquired the investment it currently owns prior to the end of 1988. The Partnership intended to dispose of its investments within twelve years of their acquisition, and then liquidate; however, the Managing General Partner extended the holding period, having determined it to be in the best interest of the limited partners. The Managing General Partner of the Partnership is Copley Properties Company III, Inc., a wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"), formerly known as Copley Real Estate Advisors, Inc. ("Copley"). The associate general partner is ACOP Associates Limited Partnership, a Massachusetts limited partnership. Subject to the Managing General Partner's overall authority, the business of the Partnership is managed by AEW pursuant to an advisory contract. On December 10, 1996, Copley's parent, New England Investment Companies, Limited Partnership ("NEIC"), a publicly traded master limited partnership, acquired certain assets subject to then existing liabilities from Aldrich, Eastman & Waltch, Inc. and its affiliates and principals (collectively, "the AEW Operations"). Simultaneously, a new entity, AEW Capital Management, L.P. was formed, into which NEIC contributed its interest in Copley and its affiliates. As a result, the AEW Operations were combined with Copley to form the business operations of AEW Capital Management, L.P. At year end 1997, NEIC completed a restructuring plan under which it contributed all of its operations to a newly formed private partnership, NEIC Operating Partnership, L.P., in exchange for a general partnership interest in the newly formed entity. Accordingly, at December 31, 1997, AEW Capital Management, L.P. is wholly owned by NEIC Operating Partnership, L.P. AEW is a subsidiary of AEW Capital Management, L.P. Effective April 1, 1998, NEIC changed its name to Nvest, L.P. and NEIC Operating Partnership, L.P. changed its name to Nvest Companies, L.P. Prior to August 30, 1996, New England Mutual Life Insurance Company ("The New England") was NEIC's principal unit holder and owner of all the outstanding stock of NEIC's general partner. On August 30, 1996, The New England merged with and into Metropolitan Life Insurance Company ("Met Life"). Met Life is the surviving entity and, therefore, through a wholly-owned subsidiary, became the owner of the units of partnership interest previously owned by The New England and of the stock of NEIC's general partner. At both December 31, 1999 and 1998, an affiliate of the Managing General Partner owned 803 units of limited partnership interest, which were repurchased from certain qualified plans within specified annual limitations provided for in the Partnership Agreement. Management AEW, as advisor, is entitled to receive stipulated fees from the Partnership in consideration of services performed in connection with the management of the Partnership and the acquisition and disposition of Partnership investments in real property. Partnership management fees are 9% of distributable cash flow from operations, as defined, before deducting such fees. AEW is also reimbursed for expenses incurred in connection with administering the Partnership ($12,000 in 1999, $12,000 in 1998, and $13,000 in 1997). Acquisition fees paid were based on 2% of the gross proceeds from the offering. Disposition fees are limited to the lesser of 3% of the selling price of property, or 50% of the standard real estate commission customarily 25 charged by an independent real estate broker. Payment of disposition fees is subject to the prior receipt by the limited partners of their capital contributions plus a stipulated return thereon. See further discussion in Note 2. New England Securities Corporation, an indirect subsidiary of Met Life, is engaged by the Partnership to act as its unit holder servicing agent. Fees and out-of-pocket expenses for such services totaled $21,172, $19,489 and $18,315 in 1999, 1998 and 1997, respectively. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the Managing General Partner to make estimates affecting the reported amounts of assets and liabilities, and of revenues and expenses. In the Partnership's business, certain estimates require an assessment of factors not within management's control, such as the ability of tenants to perform under long-term leases and the ability of the properties to sustain their occupancies in changing markets. Actual results, therefore, could differ from those estimates. Real Estate Joint Ventures Investments in joint ventures, which are in substance real estate investments, are stated at cost plus (minus) equity in undistributed joint venture income (losses). Allocations of joint venture income (losses) were made to the Partnership's venture partners as long as they had substantial economic equity in the project. Economic equity is measured by the excess of the appraised value of the property over the Partnership's total cash investment plus accrued preferential returns thereon. Currently, the Partnership records an amount equal to 100% of the operating results of the property, after the elimination of all inter-entity transactions. Joint ventures are consolidated with the accounts of the Partnership if, and when, the venture partner no longer shares in the control of the business. Property Property includes land and buildings and improvements, which are stated at cost less accumulated depreciation, and other operating net assets (liabilities). The Partnership's initial carrying value of a property previously subject to a ground lease/mortgage loan arrangement equals the Partnership's carrying value of the predecessor investment on the conversion date. Capitalized Costs, Depreciation and Amortization Maintenance and repair costs are expensed as incurred; significant improvements and renewals are capitalized. Depreciation is computed using the straight-line method based on estimated useful lives of the buildings and improvements. Acquisition fees have been capitalized as part of the cost of real estate investments. Amounts not related to land are being amortized using the straight-line method over the estimated useful lives of the underlying real property. Leases Leases are accounted for as operating leases. Leasing commissions are amortized over the terms of the respective leases. Rental income is being recognized on a straight-line basis over the respective lease terms. 26 Realizability of Real Estate Investments The Partnership considers a real estate investment, other than a mortgage loan, to be impaired when it determines the carrying value of the investment is not recoverable through expected undiscounted cash flows generated from the operations and disposal of the property. The impairment loss is based on the excess of the investments' carrying value over its estimated fair market value. For investments being held for sale, the impairment loss also includes estimated costs of sale. Property held for sale is not depreciated during the holding period. Investments are considered to be held for disposition at the time management commits the Partnership to a plan to dispose of the investment. Cash Equivalents Cash equivalents are stated at cost, plus accrued interest. The Partnership considers all highly liquid investments purchased with a maturity of ninety days or less to be cash equivalents; otherwise, they are classified as short-term investments. Deferred Disposition Fees According to the terms of the advisory contract, AEW is entitled to disposition fees related to sales of real estate investments. Payment of these fees, however, is contingent upon the limited partners' first receiving their capital, plus stipulated returns thereon. In light of the current value of the Partnership's remaining investment and the expectations for improvement over the Partnership's investment horizon, the Managing General Partner has determined that the likelihood of payment of these fees is remote. Accordingly, no disposition fees have been accrued in conjunction with the sale of the Partnership's investments. Income Taxes A partnership is not liable for income taxes and, therefore, no provision for income taxes is made in the financial statements of the Partnership. A proportionate share of the Partnership's income is reportable on each partner's tax return. Per Unit Computations Per unit computations are based on the number of units of limited partnership interest outstanding during the year. The actual per unit amount will vary by partner depending on the date of admission to, or withdrawal from, the Partnership. 27 Segment Data Effective January 1, 1998, the Partnership adopted Financial Accounting Standards Board Statement No. 131, "Disclosure about Segments on an Enterprise and Related Information" (FAS 131). Based on the criteria established in FAS 131, the Managing General Partner has determined that the Partnership operates in one operating segment: investing in real estate properties which are domiciled in the United States of America. NOTE 3 - REAL ESTATE JOINT VENTURES The Partnership invested in two real estate joint ventures, each of which was organized as a general partnership with a real estate management/development firm. It made capital contributions to the ventures, which were subject to preferential cash distributions at a specified rate and to priority distributions with respect to sale or refinancing proceeds. The joint venture agreements provided for the funding of cash flow deficits by the venture partners in proportion to ownership interests, and for the dilution of ownership share in the event a venture partner did not contribute proportionately. The respective real estate management/development firms were responsible for day-to-day development and operating activities, although overall authority and responsibility for the businesses was shared by the venturers. The real estate management/development firm, or its affiliates, also provided various services to the respective joint venture for a fee. 270 Technology Park Effective January 1, 1988, one of the Partnership's ground lease/mortgage loan investments was converted to a 50% ownership interest in a joint venture with an affiliate of Manekin Corporation. The venture owns and operates three research and development/office buildings in Frederick, Maryland. The Partnership was credited with a capital contribution of $5,960,000, an amount equal to the cost of the land plus the then outstanding principal on the mortgage loan. In addition, during 1988, the Partnership contributed cash of $260,000. The preferential return rate on the capital contributed is 10.50% per annum. Effective January 1, 1998, ownership of the joint venture was restructured to give the Partnership full control over the business of the joint venture. (See Note 4). Bayberry Apartments On April 4, 1988, the Partnership entered into a joint venture with an affiliate of Bozzuto and Associates to construct and operate a garden apartment community in Gaithersburg, Maryland. The Partnership had a 65% ownership interest and committed to a maximum capital contribution of $14,350,000, and a maximum deficit contribution (characterized as junior capital) of $230,000. The preferential return rate was 10.25% per annum on the capital contributed and the greater of the prime rate plus 2% or 10.25% on the deficit contribution. At December 31, 1997 the Partnership had contributed $14,349,983 of its capital commitment, plus $225,957 as a prorata deficit contribution. Sixty-five percent of the Partnership's capital contribution was characterized as "senior" capital. If senior capital was prepaid, the Partnership was entitled to a special distribution intended to preserve the preferential return yield on senior capital through the ninth anniversary of the venture. No senior capital had been prepaid as of the date of sale of the property discussed below. On August 7, 1998 the joint venture sold its property 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. The Partnership recognized a gain of $6,391,800 ($92.49 per Limited Partnership Unit). On August 26, 1998, the Partnership made a capital distribution to the limited partners of $16,966,672 ($248 per Limited Partnership Unit) from the proceeds of the sale. 28 Summarized Financial Information The following summarized financial information is presented in the aggregate for the joint ventures: Results of Operations Year ended December 31, ------------------------------------------ 1999 1998 1997 ------------ ------------ ------------ Revenue Rental income $ -- $ 1,444,678 $ 3,204,670 Other income -- 3,862 36,252 ------------ ------------ ------------ -- 1,448,540 3,240,922 ------------ ------------ ------------ Expenses Operating expenses -- 650,935 1,126,065 Depreciation and amortization -- 198,187 563,288 ------------ ------------ ------------ -- 849,122 1,689,353 ------------ ------------ ------------ Net income $ -- $ 599,418 $ 1,551,569 ============ ============ ============ 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. 29 NOTE 4 - PROPERTY 270 Technology Park Effective January 1, 1998, the management and control of the business and affairs of the 270 Technology Park joint venture, including the sale of the property, is vested soley in the Partnership through its 98% general partner interest in the joint venture. Accordingly, as of January 1, 1998, the investment has been accounted for as a wholly-owned property. The remaining 2% general partner interest is owned by NELLP III/MORF III Associates Limited Partnership, an entity in which the Partnership owns a 50% interest. 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/mortgagee 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. 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 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 summary of the Partnership's investment in property (one at December 31, 1999; and two at December 31, 1998): December 31, 1999 1998 ------------ ------------ Land $ 215,404 $ 215,404 Buildings and improvements 5,667,126 5,653,391 Accumulated depreciation and amortization (343,490) (156,156) Net operating assets 379,492 443,695 Property held for disposition -- 1,197,305 ------------ ------------ $ 5,918,532 $ 7,353,639 ============ ============ During 1998, the Partnership, recognized $105,653 in net income from North Cabot Industrial Park, which was held for disposition at December 31, 1998. The minimum future rentals under non-cancelable operating leases are: $797,677 in 2000; $461,515 in 2001; $160,290 in 2002; $105,327 in 2003 and $39,391 in 2004. 30 NOTE 5 - INCOME TAXES The Partnership's income (loss) for federal income tax purposes differs from that reported in the accompanying statement of operations as follows: Year ended December 31, -------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Net income per financial statements $ 1,715,845 $ 7,526,363 $ 1,310,288 Timing differences: Joint venture earnings 111,931 (14,989) (154,870) Depreciation and amortization (4,827) 31,269 85,777 Expenses -- 3,139 3,188 Gain (loss) on Sale (194,020) 3,938,614 -- ------------ ------------ ------------ Taxable income $ 1,628,929 $ 11,484,396 $ 1,244,383 ============ ============ ============ NOTE 6 - PARTNERS' CAPITAL Allocation of net income (losses) from operations and distributions of distributable cash from operations, as defined, are in the ratio of 99% to the limited partners and 1% to the general partners. Cash distributions are made quarterly. Net sale proceeds and financing proceeds are allocated first to limited partners to the extent of their contributed capital plus a stipulated return thereon, as defined, second to pay disposition fees, and then 85% to the limited partners and 15% to the general partners. As a result of returns of capital from sale transactions, the adjusted capital contribution per Limited Partnership Unit was reduced from $1,000 to $982.14 during 1987, to $946.14 during 1988, to $796.14 during 1989, to $694.14 during 1992, to $524.14 during 1993, to $493.14 during 1994, to $485.54 during 1996 to $231.54 during 1998 and to $183.60 during 1999. No capital distributions have been made to the general partners. Income from sales will be allocated in proportion to the distribution of related proceeds, provided that the general partners are allocated at least 1%. Income or losses from sales, if there are no residual proceeds after the repayment of the related debt, will be allocated 99% to the limited partners and 1% to the general partners. NOTE 7 - SUBSEOUENT EVENT Distributions of cash from operations relating to the quarter ended December 31, 1999 were made on January 27, 2000 in the aggregate amount of $136,828 ($1.98 per Limited Partnership Unit). 31 NEW ENGLAND LIFE PENSION PROPERTIES III A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31,1999
Initial Cost to Costs Capitalized the Partnership Subsequent to Acquisition ------------------------------ -------------------------------- Buildings & Other Carrying Additions Description Land Improvements (Net) Costs (Dispositions) Other - ----------- ---- ------------ ----- ----- -------------- ----- North Cabot Industrial Park Converted to wholly-owned 11/14/94 An R & D building (51,089 sq. ft) On 3.8 acres of land in $347,772 $0 $0 $0 $1,052,749 $42,859 Hayward, California (See Note A) 270 Technology Park Converted to wholly-owned 1/1/98 $215,404 $5,620,041 $327,514 $0 $78,263 $58,909 Park. Owner of three R&D buildings (86,169 square feet) situated on 8.3 acres of land in Frederick, Maryland. ----------------------------------------------------------------------- Total Wholly-Owned $563,176 $5,620,041 $327,514 $0 $1,131,012 $101,768 ======================================================================= Gross amount at which Carried at Close of Period ---------------------------------------------------------------------- Investment Accumulated Buildings & Valuation Depreciation Description Land Improvements Other Allowances Dispositions Total & Amortization - ----------- ---- ------------ ----- ---------- ------------ ----- -------------- North Cabot Industrial Park Converted to wholly-owned 11/14/94 An R & D building (51,089 sq. ft) On 3.8 acres of land in $347,772 $1,052,749 $42,859 $0 ($1,443,380) $0 N/A Hayward, California (See Note A) 270 Technology Park Converted to wholly-owned 1/1/98 $215,404 $5,698,304 $386,423 $0 $0 $6,300,131 ($381,599) Park. Owner of three R&D buildings (86,169 square feet) situated on 8.3 acres of land in Frederick, Maryland. ----------------------------------------------------------------------------------------- Total Wholly-Owned $563,176 $6,751,053 $429,282 $0 ($1,443,380) $6,300,131 ($381,599) ========================================================================================= Date of Date Depreciable Description Construction Acquired Life - ----------- ------------ -------- ---- North Cabot Industrial Park Converted to wholly-owned 11/14/94 An R & D building (51,089 sq. ft) On 3.8 acres of land in Completed 3/20/89 25 Years Hayward, California (See Note A) 270 Technology Park Converted to wholly-owned 1/1/98 Completed 08/27/1997 30 years Park. Owner of three R&D buildings (86,169 square feet) situated on 8.3 acres of land in Frederick, Maryland. Total Wholly-Owned
32 NEW ENGLAND LIFE PENSION PROPERTIES III NOTE A TO SCHEDULE III
1997 1997 COST CONVERSION TO INVESTMENT INCREASE IN 1997 CHANGE AS OF WHOLLY-OWNED IN DEFERRED IN PROPERTY DESCRIPTION 12/31/96 PROPERTY PROPERTY LEASING COSTS WORKING CAPITAL - ----------------------------------- ----------------------------------------------------------------------------------------------- North Cabot Industrial Park $1,404,471 $10,327 $14,794 ($14,248) ========== ======= ======= ======== 1998 1998 COST CONVERSION TO INVESTMENT INCREASE IN 1998 CHANGE AS OF WHOLLY-OWNED IN DEFERRED IN PROPERTY DESCRIPTION 12/31/97 PROPERTY PROPERTY LEASING COSTS WORKING CAPITAL - ----------------------------------- ----------------------------------------------------------------------------------------------- North Cabot Industrial Park $1,415,344 $10,910 $31,921 $41,381 270 Technology Park 0 6,162,959 64,528 46,973 38,030 - ------------------------------------------------------------------------------------------------------------------------------------ $1,415,344 $6,162,959 $75,438 $78,894 $79,411 ==================================================================================================================================== 1999 1999 COST CONVERSION TO INVESTMENT INCREASE IN 1999 CHANGE AS OF WHOLLY-OWNED IN DEFERRED IN PROPERTY DESCRIPTION 12/31/98 PROPERTY PROPERTY LEASING COSTS WORKING CAPITAL - ----------------------------------- ----------------------------------------------------------------------------------------------- North Cabot Industrial Park $1,499,556 $0 $0 ($56,176) 270 Technology Park 6,312,490 13,735 38,266 (64,360) - ------------------------------------------------------------------------------------------------------------------------------------ 7,812,046 $0 $13,735 $38,266 ($120,536) ====================================================================================================================================
ACCUMULATED 1997 COST AMORTIZATION & T.I. AMORTIZATION & DISPOSAL OF BALANCE AT DEPRECIATION DEPRECIATION DESCRIPTION ASSET 12/31/97 AS OF 12/31/96 EXPENSE - ----------------------------------- ----------------------------------------------------------------------------------- North Cabot Industrial Park $1,415,344 $138,503 $106,365 ========== ======== ======== ACCUMULATED 1998 COST AMORTIZATION & T.I. AMORTIZATION & DISPOSAL OF BALANCE AT DEPRECIATION DEPRECIATION DESCRIPTION ASSET 12/31/98 AS OF 12/31/97 EXPENSE - ----------------------------------- ----------------------------------------------------------------------------------- North Cabot Industrial Park $1,499,556 $244,868 $57,383 270 Technology Park 6,312,490 0 187,336 - ------------------------------------------------------------------------------------------------------------------------ $7,812,046 $244,868 $244,719 ======================================================================================================================== ACCUMULATED 1999 COST AMORTIZATION & T.I. AMORTIZATION & DISPOSAL OF BALANCE AT DEPRECIATION DEPRECIATION DESCRIPTION ASSET 12/31/99 AS OF 12/31/98 EXPENSE - ----------------------------------- ----------------------------------------------------------------------------------- North Cabot Industrial Park ($1,443,380) $0 $302,251 $8,333 270 Technology Park 6,300,131 156,156 225,443 - ------------------------------------------------------------------------------------------------------------------------ $6,300,131 $458,407 $233,776 ========================================================================================================================
ACCUMULATED AMORTIZATION & 12/31/97 DEPRECIATION DISPOSAL OF PROPERTY DESCRIPTION AS OF 12/31/97 ASSET NET - ----------------------------------- ------------------------------------------------------------- North Cabot Industrial Park $244,868 $1,170,476 ======== ========== ACCUMULATED AMORTIZATION & 12/31/98 DEPRECIATION DISPOSAL OF PROPERTY DESCRIPTION AS OF 12/31/98 ASSET NET - ----------------------------------- ------------------------------------------------------------- North Cabot Industrial Park $302,251 $1,197,305 270 Technology Park 156,156 6,156,334 - -------------------------------------------------------------------------------------------------- $458,407 $7,353,639 ================================================================================================== ACCUMULATED AMORTIZATION & 1999 12/31/99 DEPRECIATION DISPOSAL OF PROPERTY DESCRIPTION AS OF 12/31/99 ASSET NET - ----------------------------------- ------------------------------------------------------------- North Cabot Industrial Park $310,584 ($310,584) $0 270 Technology Park 381,599 5,918,532 - -------------------------------------------------------------------------------------------------- $692,183 $5,918,532 ==================================================================================================
33 NEW ENGLAND LIFE PENSION PROPERTIES III NOTE B TO SCHEDULE III
BALANCE 1996 PERCENT OF AS OF INVESTMENT 1996 EQUITY IN DESCRIPTION OWNERSHIP 12/31/95 IN PROPERTY INCOME (LOSS) - --------------------------------------------------------------------------------------------------------------------------- 270 Technology Park 50% $6,327,493 $0 $619,367 Bayberry Associates 65% 11,788,509 0 967,882 ----------- ---------- ---------- $18,116,002 $0 $1,587,249 =========== ========== ========== BALANCE 1997 PERCENT OF AS OF INVESTMENT 1997 EQUITY IN DESCRIPTION OWNERSHIP 12/31/96 IN PROPERTY INCOME (LOSS) - --------------------------------------------------------------------------------------------------------------------------- 270 Technology Park 50% $6,402,272 $0 $531,484 Bayberry Associates 65% 11,360,375 0 1,020,085 ----------- ---------- ---------- $17,762,647 $0 $1,551,569 =========== ========== ========== BALANCE 1998 PERCENT OF AS OF INVESTMENT 1998 EQUITY IN DESCRIPTION OWNERSHIP 12/31/97 IN PROPERTY INCOME (LOSS) - --------------------------------------------------------------------------------------------------------------------------- 270 Technology Park 50% $6,162,959 $0 $0 Bayberry Associates 65% 11,021,116 0 619,051 - ------------------------------------------------------------------------------------------------------------------------ $17,184,075 $0 $619,051 ======================================================================================================================== 1996 1996 CASH AMORTIZATION RECEIVED OF CONVERSION TO BALANCE FROM ACQUISITION WHOLLY-OWNED DISPOSALS AS OF DESCRIPTION JOINT VENTURES FEES PROPERTY 12/31/96 - ----------------------------------------------------------------------------------------------------------------------------------- 270 Technology Park ($541,400) ($3,188) $0 $0 $6,402,272 Bayberry Associates (1,389,740) (6,276) 0 0 11,360,375 ----------- ------- ------------ ------------ ----------- ($1,931,140) ($9,464) $0 $0 $17,762,647 =========== ======= ============ ============ =========== 1997 1997 CASH AMORTIZATION RECEIVED OF CONVERSION TO BALANCE FROM ACQUISITION WHOLLY-OWNED DISPOSALS AS OF DESCRIPTION JOINT VENTURES FEES PROPERTY 12/31/97 - ----------------------------------------------------------------------------------------------------------------------------------- 270 Technology Park ($767,609) ($3,188) $0 $0 $6,162,959 Bayberry Associates (1,353,067) (6,277) 0 0 11,021,116 ----------- ------- ------------ ------------ ----------- ($2,120,676) ($9,465) $0 $0 $17,184,075 =========== ======= ============ ============ =========== 1998 1998 CASH AMORTIZATION RECEIVED OF CONVERSION TO 1998 BALANCE FROM ACQUISITION WHOLLY-OWNED DISPOSALS AS OF DESCRIPTION JOINT VENTURES FEES PROPERTY 12/31/98 - ----------------------------------------------------------------------------------------------------------------------------------- 270 Technology Park $0 $0 ($6,162,959) $0 $0 Bayberry Associates (1,043,829) (3,138) 0 (10,593,200) (0) - ----------------------------------------------------------------------------------------------------------------------------------- ($1,043,829) ($3,138) ($6,162,959) ($10,593,200) ($0) ===================================================================================================================================
34 FINANCIAL STATEMENTS INDEX NO. 2 Independent Auditor's Report and Financial Statements of Bayberry Associates Independent Auditor Report of Reznick Fedder and Silverman Balance Sheets - August 6, 1998 and December 31, 1997 Statements of Operations - For the Period ended January 1, 1998 through August 6, 1998 and For the Years ended December 31, 1997 and 1996 Statements of Partners' Equity - For the Period ended January 1, 1998 through August 6, 1998 and For the Years ended December 31, 1997 and 1996 Statements of Cash Flows - For the Period ended January 1, 1998 through August 6, 1998 and For the Years ended December 31, 1997 and 1996 Notes to Financial Statements 35 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT BAYBERRY ASSOCIATES AUGUST 6, 1998 AND DECEMBER 31, 1997 36 Bayberry Associates TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS BALANCE SHEETS STATEMENTS OF OPERATIONS STATEMENTS OF PARTNERS' EQUITY STATEMENTS OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS 37 [LOGO] Reznick Fedder & Silverman Certified Public Accountants o A Professional Corporation Two Hopkins Plaza o Suite 2100 o Baltimore, Maryland 21201-2911 o Phone (410) 783-4900 o Fax (410) 727-0460 INDEPENDENT AUDITORS' REPORT To the Partners Bayberry Associates We have audited the accompanying balance sheets of Bayberry Associates as of August 6, 1998 and December 31, 1997, and the related statements of operations, partners' equity and cash flows for the period January 1, 1998 through August 6, 1998, and for the two years ended December 31, 1997 and 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bayberry Associates as of August 6, 1998 and December 31, 1997 and 1996, and the results of its operations, the changes in partners' equity and its cash flows for the period January 1, 1998 through August 6, 1998, and for the two years ended December 31, 1997 and 1996, in conformity with generally accepted accounting principles. /s/ Resnick Fedder & Silverman Baltimore, Maryland January 5, 1999 4520 East West Highway 212 S. Tryon Street 745 Atlantic Avenue Two Premier Plaza, Suite 500 Suite 300 Suite 1180 Suite 800 5605 Glenridge Drive Bethesda, MD 20814-3319 Charlotte, NC 28281-8100 Boston, MA 02111-2735 Atlanta, GA 31150-1298 Phone (301) 652-9100 Phone (704) 332-9100 Phone(617)423-5855 Phone (770) 844-0644
38 Bayberry Associates BALANCE SHEETS August 6, 1998 and December 31, 1997
1998 1997 ----------- ----------- ASSETS INVESTMENT IN REAL ESTATE Land $ 3,754,558 $ 3,754,558 Building and improvements 8,503,711 8,503,711 Personal property 778,494 778,494 ----------- ----------- 13,036,763 13,036,763 Less accumulated depreciation 3,991,404 3,788,765 ----------- ----------- 9,045,359 9,247,998 OTHER ASSETS Cash -- 149,528 Tenants' security deposits -- 27,006 Tenants' accounts receivable -- 21,306 Prepaid expenses 194,125 112,238 ----------- ----------- $ 9,239,484 $ 9,558,076 =========== =========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES Accounts payable and accrued expenses $ 57,203 $ 22,936 Deferred rental income 120,307 12,304 Accrued preferred return 2,891,573 2,846,924 Accrued guaranteed payments 1,557,000 1,532,960 Tenants' security deposits 30,479 27,006 Due to affiliates -- 8,830 ----------- ----------- 4,656,562 4,450,960 PARTNERS' EQUITY 4,582,922 5,107,116 ----------- ----------- $ 9,239,484 $ 9,558,076 =========== ===========
See notes to financial statements 39 Bayberry Associates STATEMENTS OF OPERATIONS For the period January 1, 1998 through August 6, 1998 and the years ended December 31, 1997 and 1996 1998 1997 1996 ------------ ------------ ------------ Revenue Rent $ 1,382,056 $ 2,221,106 $ 2,168,867 Other lease related income 62,680 59,477 59,355 Interest 3,863 4,500 4,148 ------------ ------------ ------------ 1,448,599 2,285,083 2,232,370 ------------ ------------ ------------ Expenses Furnished apartment expense 57 14,080 17,384 Advertising and promotion 28,521 45,076 52,631 Salaries 170,087 218,230 203,722 Administrative 47,757 54,985 49,218 Management fee 50,288 79,485 77,525 Maintenance 139,551 169,586 158,702 Utilities 39,298 53,926 72,901 Real estate taxes 124,645 213,150 190,670 Insurance 10,040 18,084 20,338 Dues and fees 41,113 57,802 46,305 Depreciation 202,612 340,594 375,092 Guaranteed payments 410,197 671,616 651,048 ------------ ------------ ------------ 1,264,166 1,936,614 1,915,536 ------------ ------------ ------------ EXCESS OF REVENUE OVER EXPENSES $ 184,433 $ 348,469 $ 316,834 ============ ============ ============ See notes to financial statements 40 Bayberry Associates STATEMENTS OF PARTNERS' EQUITY For the period January 1, 1998 through August 6, 1998 and the years ended December 31, 1997 and 1996
Christopher Bozzuto New England Limited Life Pension Partnership Properties III Total ------------ ------------ ------------ Partners' equity (deficit), December 31, 1995 $ (345,536) $ 7,243,238 $ 6,897,702 Distributions (24,136) (1,184,953) (1,209,089) Excess of revenue over expenses 24,136 292,698 316,834 ------------ ------------ ------------ Partners' equity (deficit), December 31, 1996 (345,536) 6,350,983 6,005,447 Distributions (26,730) (1,220,070) (1,246,800) Excess of revenue over expenses 26,730 321,739 348,469 ------------ ------------ ------------ Partners' equity (deficit), December 31, 1997 (345,536) 5,452,652 5,107,116 Contributions 169,881 -- 169,881 Distributions (16,899) (861,609) (878,508) Excess of revenue over expenses 16,899 167,534 184,433 ------------ ------------ ------------ Partners' equity (deficit), August 6, 1998 $ (175,655) $ 4,758,577 $ 4,582,922 ============ ============ ============
See notes to financial statements 41 Bayberry Associates STATEMENTS OF CASH FLOWS For the period January 1, 1998 through August 6, 1998 and the years ended December 31, 1997 and 1996
1998 1997 1996 ------------ ------------ ------------ Cash flow from operating activities Excess of revenue over expenses $ 184,433 $ 348,469 $ 316,834 Adjustments to reconcile excess of revenue over expenses to net cash provided by operating activities Depreciation 202,612 340,594 375,092 Changes in assets and liabilities Decrease (increase) in tenants' accounts receivable 21,306 (13,853) (42) (Increase) decrease in prepaid expenses (81,887) 7,315 (13,882) Increase (decrease) in accounts payable 34,293 5,187 (36,066) Increase (decrease) in deferred rental income 108,003 (655) (103,044) Increase in accrued guaranteed payments 83,499 197,781 192,524 (Decrease) increase in due to affiliate (8,830) 2,710 (25,211) Net security deposits received (paid) 30,479 937 (373) ------------ ------------ ------------ Net cash provided by operating activities 573,908 888,485 705,832 ------------ ------------ ------------ Cash flows from financing activities Distributions to general partner (723,436) (879,495) (851,543) ------------ ------------ ------------ Net cash used in financing activities (723,436) (879,495) (851,543) ------------ ------------ ------------ NET (DECREASE) INCREASE IN CASH (149,528) 8,990 (145,711) Cash, beginning 149,528 140,538 286,249 ------------ ------------ ------------ Cash, ending $ -- $ 149,528 $ 140,538 ============ ============ ============ Supplemental disclosure of cash flow information Cash paid during the year for guaranteed payments $ 326,698 $ 473,835 $ 458,524 ============ ============ ============
Supplemental disclosure of non-cash activities During 1998, $110,422 of accrued preferred return and $59,459 of accrued guaranteed payments was converted to capital. See notes to financial statements 42 Bayberry Associates NOTES TO FINANCIAL STATEMENTS August 6, 1998 and December 31, 1997 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Bayberry Associates (the Partnership) was formed as a general partnership under the laws of the State of Maryland on April 4, 1988, for the purpose of constructing, owning and operating a rental housing project. The project consists of 230 units located in Montgomery County, Maryland, and is operating as Bayberry Apartments. On August 6, 1998, New England Life Pension Properties III (NELP) sold their entire interest in the Partnership and Christopher Bozzuto Limited Partnership (CBLP) sold 34% of their 35% interest in the Partnership and distributed the remaining 1% to an affiliate. Prior to such sale, all leases between the Partnership and tenants of the property were operating leases. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Investment in Real Estate Investment in real estate is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using accelerated methods. Rental Income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. Income Taxes No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually. 43 Bayberry Associates NOTES TO FINANCIAL STATEMENTS - CONTINUED August 6, 1998 and December 31, 1997 NOTE B - SALE OF PARTNERSHIP INTEREST At the close of business on August 6, 1998, NELP sold their entire interest in the Partnership and CBLP sold 34% of their 35% interest in the Partnership and distributed the remaining 1% to an affiliate. The contract sales price for this transaction was $17,000,000. Property and equipment transferred had a net book value of $9,045,359. In addition, assets totaling $194,125 and liabilities totaling $207,989 which includes tenant security deposits of $30,479 were transferred in the sale to the new partners. The additional liabilities of $4,448,573 were assumed by the selling partners. NOTE C - RELATED PARTY TRANSACTIONS Management Fee The Partnership is required to pay a management fee to Bozzuto Management Company, an affiliate of Christopher Bozzuto Limited Partnership, a general partner, in an amount equal to 3.5% of gross receipts collected. Management fees of $50,288 and $79,485, $77,525, were expensed in 1998, 1997 and 1996, respectively. At December 31, 1997, $8,830 remained unpaid. Expenses Incurred and Reimbursed to Affiliates The Partnership reimburses payroll and other costs incurred by Bozzuto & Associates, Inc. and Subsidiaries, affiliates of Christopher Bozzuto Limited Partnership, a general partner, for various administrative and operating costs relating to the project. During 1998, 1997 and 1996, $186,272, $236,313, and $224,059, were incurred and paid, respectively. NOTE D - PARTNERS' EQUITY The acquisition and development of the project was funded by capital contributions from NELP, a general partner, in the cumulative amount of $14,350,000, which consisted of senior and junior capital of $9,327,500 and $5,022,500, respectively. The Partnership agreement provides for both a "Senior and Junior Priority Return," on the outstanding capital, on a monthly basis, which is calculated at the rate of 10.25% per annum on the outstanding capital. The Priority Returns are payable monthly from Operating Cash Flow as defined in the Partnership agreement, however, (a) to the extent the full amount of the Senior Priority Return cannot be made from such sources on a monthly basis, an amount thereof equal to a 10.25% per annum cumulative return on the Senior Invested Capital may accrue, and such accruals shall bear interest at the rate of 10.25% 44 Bayberry Associates NOTES TO FINANCIAL STATEMENTS - CONTINUED August 6, 1998 and December 31, 1997 NOTE D - PARTNERS' EQUITY (Continued) per annum compounded monthly and (b) to the extent the full amount of the Junior Priority Return cannot be made from such sources on a monthly basis, the amount of the Junior Priority Return may accrue and such accruals shall bear interest at the rate of 10.25% per annum compounded monthly. To the extent the Senior Priority Return is required to be paid currently (and may not be accrued), it will be funded, if necessary, out of the proceeds of Deficit Contributions and Default Capital Contributions. These Deficit Contributions and Default Capital Contributions accrue a return (Deficit Preferred Return) equal to the greater of NationsBank's prime rate plus 2% (10.25% at August 6, 1998) or 10.25% per annum. As of August 6, 1998 and December 31, 1997, NELP and Christopher Bozzuto Limited Partnership had made deficit capital contributions in the amounts of $225,956 and $122,500, respectively. At August 6, 1998 and December31, 1997, the accrued Junior Priority Return (including accrued interest of $1,622,839 and $1,372,467, respectively) due totaled $4,210,068 and $4,011,869. The Senior Priority Return was paid in full on an annual basis. The accrued Deficit Preferred Return payable to NELP and CBLP at August 6, 1998, was $238,505 and $- 0 -, respectively, and at December 31, 1997, was $215,034 and $152,981, respectively. On August 6, 1998, the accrued deficit preferred return payable to CBLP in the amount of $169,881 was converted to capital. Effective August 7, 1998, the Partnership is no longer subject to this agreement. Subsequent to the financial statement date and in connection with the August 6, 1998, sale of its partnership interest, NELP received $16,986,136 out of the sales proceeds and applied it to the repayment of the following accounts: Accrued preferred return $ 2,653,068 Accrued guaranteed payments 1,557,000 Deficit capital contributions 225,956 Deficit preferred return payable 238,505 Return of initial capital contribution 12,311,607 ------------ $ 16,986,136 ============ Additionally, the Partnership distributed the remaining operating proceeds in the amount of $115,821 to NELP. 45 Bayberry Associates NOTES TO FINANCIAL STATEMENTS - CONTINUED August 6, 1998 and December 31, 1997 NOTE E - RECONCILIATION OF FINANCIAL STATEMENTS TO TAX RETURN The following is a reconciliation of the excess of revenue over expenses and partners' equity per the financial statements to the tax basis excess of revenue over expenses and partners' equity for the period January 1, 1998 through August 6, 1998, and the years ended December 31, 1997 and 1996.
1998 1997 1996 ------------ ------------ ------------ Excess of revenue over expenses (financial statement basis) $ 184,433 $ 348,469 $ 316,834 Deferred rental income (12,304) (655) (103,044) Real estate tax deduction under IRS Code Section 461 102,905 5,965 (14,787) ------------ ------------ ------------ Tax basis $ 275,034 $ 353,779 $ 199,003 ============ ============ ============ Partners' equity (financial statement basis) $ 4,582,922 $ 5,107,116 $ 6,005,447 Deferred rental income -- 12,304 12,959 Real estate tax deduction under IRS Code Section 461 (103,871) (109,836) Net adjustment for technical termination (4,582,922) -- -- ------------ ------------ ------------ Tax basis $ -- $ 5,015,549 $ 5,908,570 ============ ============ ============
46 FINANCIAL STATEMENTS INDEX NO. 3 Independent Auditor's Report and Financial Statements of MORF Associates III (referred to elsewhere herein as 270 Technology Park) Independent Auditor's Report of Wolpoff and Company, LLP Balance Sheet - December 31, 1997 and 1996 Statement of Income - For the Years ended December 31, 1997, 1996 and 1995 Statement of Partners' Capital - For the Years ended December 31, 1997, 1996 and 1995 Statement of Cash Flows - For the Years ended December 31, 1997, 1996 and 1995 Notes to Financial Statements 47 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) FINANCIAL REPORT DECEMBER 31, 1997 48 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) CONTENTS DECEMBER 31, 1997 INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS FINANCIAL STATEMENTS Balance Sheet Statement of Income Statement of Partners Capital Statement of Cash Flows Notes to Financial Statements INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION SUPPLEMENTARY INFORMATION Schedule of Partners' Capital Schedule of Changes in Partners' Capital - Income Tax Basis 49 [LETTERHEAD OF WOLPOFF & COMPANY,LLP] To the Partners MORF Associates III (A Maryland General Partnership) Columbia, Maryland INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS We have audited the balance sheet of MORF Associates III (A Maryland General Partnership) as of December 31, 1997 and 1996, and the related statements of income, partners' capital, and cash flows for each of the three years ended December 31, 1997, 1996, and 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MORF Associates III (A Maryland General Partnership) as of December 31, 1997 and 1996, and the results of its operations and cash flows for each of the three years ended December 31, 1997, 1996, and 1995, in conformity with generally accepted accounting principles. /s/ Wolpoff & Company, LLP WOLPOFF & COMPANY, LLP Baltimore, Maryland January 8,1998 50 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) BALANCE SHEET ASSETS December 31, ---------------------------- 1997 1996 ------------ ------------ PROPERTY, AT COST - Note 1 Buildings and Improvements $ 6,461,425 $ 6,505,771 Land 247,652 247,652 Deferred Leasing Costs 150,685 348,150 ------------ ------------ 6,859,762 7,101,573 Less Accumulated Depreciation and Amortization 1,321,539 1,364,270 ------------ ------------ PROPERTY, NET 5,538,223 5,737,303 ------------ ------------ OTHER ASSETS Cash and Cash Equivalents - Note 1 104,265 166,474 ------------ ------------ Receivable From Tenants 79,133 90,782 Deferred Rent Receivable - Note 1 119,406 144,262 Less Allowance for Doubtful Accounts (14,000) (50,000) ------------ ------------ 184,539 185,044 ------------ ------------ Prepaid Expenses 40,598 11,944 ------------ ------------ TOTAL OTHER ASSETS 329,402 363,462 ------------ ------------ $ 5,867,625 $ 6,100,765 ============ ============ LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Accounts Payable and Accrued Expenses $ 10,419 $ 8,022 Tenant Security Deposits 44,205 43,617 ------------ ------------ TOTAL LIABILITIES 54,624 51,639 PARTNERS' CAPITAL - Note 2 5,813,001 6,049,126 ------------ ------------ $ 5,867,625 $ 6,100,765 ============ ============ - ---------- The notes to financial statements are an integral part of this statement. 51 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF INCOME
Year Ended December 31, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ REVENUE Gross Rent Potential - Notes 1 and 5 $ 921,387 $ 884,222 $ 876,371 Less Vacancies 96,279 42,955 22,445 ------------ ------------ ------------ Net Rental Income 825,108 841,267 853,926 Expense Reimbursements From Tenants 98,979 134,744 115,054 Other Income 31,752 3,489 2,592 ------------ ------------ ------------ TOTAL REVENUE 955,839 979,500 971,572 ------------ ------------ ------------ OPERATING EXPENSES Property Taxes 75,769 64,048 70,700 Building and Grounds Maintenance 45,579 48,679 32,535 Utilities 15,444 21,120 12,049 Management Fees - Note 3 27,096 29,445 25,718 General and Administrative 17,758 9,779 10,161 Insurance 4,925 5,560 5,796 Bad Debt Expense 15,090 17,268 25,000 ------------ ------------ ------------ TOTAL OPERATING EXPENSES 201,661 195,899 181,959 ------------ ------------ ------------ NET OPERATING INCOME 754,178 783,601 789,613 ------------ ------------ ------------ ADJUSTMENTS TO ARRIVE AT NET INCOME Depreciation and Amortization (166,844) (164,234) (165,592) Abandonment of Tenant Improvements - Note 1 (55,850) -0- -0- ------------ ------------ ------------ (222,694) (164,234) (165,592) ------------ ------------ ------------ NET INCOME - Note 4 $ 531,484 $ 619,367 $ 624,021 ============ ============ ============
- ---------- The notes to financial statements are an integral part of this statement. 52 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF PARTNERS' CAPITAL Year Ended December 31, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ CAPITAL CONTRIBUTIONS $ 6,220,001 $ 6,220,001 $ 6,220,001 CAPITAL PLACEMENT FEE - Note 1 (50,515) (50,515) (50,515) ------------ ------------ ------------ 6,169,486 6,169,486 6,169,486 ------------ ------------ ------------ ACCUMULATED INCOME Prior Years 5,483,632 4,864,265 4,240,244 Current Year 531,484 619,367 624,021 ------------ ------------ ------------ 6,015,116 5,483,632 4,864,265 ------------ ------------ ------------ DISTRIBUTIONS - Note 2 Prior Years (5,603,992) (5,062,591) (4,363,915) Current Year (767,609) (541,401) (698,676) ------------ ------------ ------------ (6,371,601) (5,603,992) (5,062,591) ------------ ------------ ------------ TOTAL PARTNERS' CAPITAL $ 5,813,001 S 6,049,126 $ 5,971,160 ============ ============ ============ - ---------- The notes to financial statements are an integral part of this statement. 53 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF CASH FLOWS
Year Ended December 31, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 531,484 $ 619,367 $ 624,021 ------------ ------------ ------------ Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 166,844 164,234 165,592 Abandonment of Tenant Improvements 55,850 -0- -0- Change in Tenant Receivables, Net of Allowance 506 16,366 (74,654) Change in Prepaid Expenses (28,654) (9,631) 1,542 Change in Accounts Payable and Accrued Expenses 2,397 6,171 (7,600) ------------ ------------ ------------ Total Adjustments 196,943 177,140 84,880 ------------ ------------ ------------ Net Cash Provided by Operating Activities 728,427 796,507 708,901 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Increase in Tenant Security Deposits 588 2,726 10,430 Additions to Property (21,441) (76,617) (79,117) Leasing Commissions (2,174) (35,066) (41,300) ------------ ------------ ------------ Net Cash Used by Investing Activities (23,027) (108,957) (109,987) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to Partners (767,609) (541,401) (698,676) ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (62,209) 146,149 (99,762) CASH AND CASH EQUIVALENTS, BEGINNING 166,474 20,325 120,087 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, ENDING $ 104,265 $ 166,474 $ 20,325 ============ ============ ============
- ---------- The notes to financial statements are an integral part of this statement. 54 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization MORF Associates III (A Maryland General Partnership) (the Partnership) was formed on January 1, 1988, under the Maryland Uniform Partnership Act. The land and buildings were conveyed to the Partnership by M.O.R.F. III Associates Limited Partnership, a general partner. The buildings were in service and partially leased on the date conveyed. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of 3 months or less to be cash equivalents. The majority of the Partnership's cash is held in financial institutions with insurance provided by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. Periodically during the year, the balance may have exceeded the FDIC limitation. Rental Income Rental income for the major leases is being recognized on a straight-line basis over the terms of the leases. The excess of the rental income recognized over the amount stipulated in the lease is shown as deferred rent receivable. Property The Partnership owns and operates 3 office buildings in Frederick, Maryland, containing approximately 86,300 square feet of leasable area. In 1996, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that real estate assets be evaluated for impairment if impairment indicators are present. An impairment write-down to fair value would occur only if the estimated undiscounted cash flows from the asset were less than the carrying amount of the asset. At December 31, 1997, the Partnership does not hold any assets that meet the impairment criteria of SFAS No. 121. All property is recorded at cost. Information regarding the buildings is as follows:
Occupancy at ------------------------------------------- Square Building Feet Tenants 12/31/97 12/31/96 12/31/95 - ------------- ------------ ------------ ------------ ------------ ------------- C 45,800 Multiple 100% 100% 100% D 11,700 Multiple 86% 86% 88% E 28,800 Multiple 100% 100% 100% ---------- ------------ ------------ ------------ 86,300 98% 98% 98% ========== ============ ============ ============
55 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1997 Note 1 - (Cont.) During 1997, tenant improvements completed in prior years were demolished in order to build out the space for the new tenant. The loss on abandonment of tenant improvements is calculated as follows: Acquired Value $ 65,787 Accumulated Depreciation (9,937) --------- Abandonment of Tenant Improvements $ 55,850 ========= Depreciation Building costs and tenant improvements are being depreciated using the straight-line method over the estimated useful lives of 50 years. Amortization Deferred leasing costs are being amortized over the lease periods. Income Taxes Partnerships, as such, are not subject to income taxes. The partners are required to report their respective share of partnership income or loss and other tax items on their respective income tax returns. Capital Placement Costs Costs incurred for arranging the Partnership's equity have been treated as a reduction of partners' capital. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Note 2 - PARTNERS' CAPITAL Capital Investment New England Life Pension Properties III (NELPP III) has invested equity of $6,220,000 in the Partnership. NELPP III is entitled to a cumulative priority return of 10.5% compounded monthly on its investment. During 1997, 1996, and 1995, NELPP III was paid $767,609, $541,401, and $698,676, respectively, under this agreement. As of December 31, 1997, 1996, and 1995, unpaid priority returns amounted to $682,372, $732,013, and $560,857, respectively. Note 3 - RELATED PARTY TRANSACTIONS Management Fees The Partnership has entered into an agreement with Manekin Corporation, an affiliated entity, to act as management agent for the property. The management agreement provides for fees equal to 3% of rent and tenant expense billings. 56 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1997 Note 3 - Leasing Commissions (Cont.) Leasing commissions of $2,174 and $35,961 were paid to Manekin Corporation during 1997 and 1995. No leasing commissions were paid to Manekin Corporation during 1996. Note 4 - TAX ACCOUNTING Tax accounting differs from financial accounting as follows:
Current Prior Year Years Total ------------ ------------ ------------ Financial Statement Income $531,484 $5,483,632 $6,015,116 Additional Depreciation (69,586) (623,009) (692,595) Deferred Rental Income Not Subject to Tax 24,856 (144,262) (119,406) Prepaid Property Taxes (29,310) (9,631) (38,941) Allowance for Doubtful Accounts (36,000) 41,500 5,500 ------------ ------------ ------------ Taxable Income $421,444 $4,748,230 $5,169,674 ============ ============ ============
Note 5 - LEASES The following is a schedule of future minimum lease payments to be received under noncancelable operating leases at December 31, 1997: Year Ending December 31, 1998 $ 710,292 1999 528,045 2000 315,774 2001 199,350 ------------ $1,753,461 ============ 57 To the Partners MORF Associates III (A Maryland General Partnership) Columbia, Maryland INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information contained on pages 10 and 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the basic financial statements, and accordingly, we express no opinion on it. /s/ Wolpoff & Company, LLP WOLPOFF & COMPANY, LLP Baltimore, Maryland January 8, 1998 58 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) SCHEDULE OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1997 M.O.R.F. III New England Associates Life Pension Limited Properties III Partnership Total -------------- ----------- ----------- OWNERSHIP PERCENTAGE 50% 50% 100% =========== =========== =========== CAPITAL CONTRIBUTIONS $ 6,220,000 $ 1 $ 6,220,001 CAPITAL PLACEMENT FEE (50,515) -0- (50,515) ----------- ----------- ----------- 6,169,485 1 6,169,486 ----------- ----------- ----------- ACCUMULATED INCOME Prior Years 5,348,632 135,000 5,483,632 Current Year 531,484 -0- 531,484 ----------- ----------- ----------- 5,880,116 135,000 6,015,116 ----------- ----------- ----------- DISTRIBUTIONS - Note 2 Prior Years (5,468,992) (135,000) (5,603,992) Current Year (767,609) -0- (767,609) ----------- ----------- ----------- (6,236,601) (135,000) (6,371,601) ----------- ----------- ----------- TOTAL PARTNERS' CAPITAL $ 5,813,000 $ 1 $ 5,813,001 =========== =========== =========== - ----------- See Independent Auditor's Report on Supplementary Information. 59 MORF ASSOCIATES III (A MARYLAND GENERAL PARTNERSHIP) SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS YEAR ENDED DECEMBER 31, 1997 M.O.R.F. III New England Associates Life Pension Limited Properties III Partnership Total ---------------- ------------------ -------------- OWNERSHIP PERCENTAGE 50% 50% 100% ============ ============ ============ CAPITAL CONTRIBUTIONS $ 6,220000 $ 1 $ 6,220,001 CAPITAL PLACEMENT FEE (50,515) -0- (50,515) ------------ ------------ ------------ 6,169,485 1 6,169,486 ------------ ------------ ------------ ACCUMULATED INCOME Prior Years 4,613,230 135,000 4,748,230 Current Year 421,444 -0- 421,444 ------------ ------------ ------------ 5,034,674 135,000 5,169,674 ------------ ------------ ------------ DISTRIBUTIONS - Note 2 Prior Years (5,468,992) (135,000) (5,603,992) Current Year (767,609) -0- (767,609) ------------ ------------ ------------ (6,236,601) (135,000) (6,371,601) ------------ ------------ ------------ TOTAL PARTNERS' CAPITAL $ 4,967,558 $ 1 $ 4,967,559 ============ ============ ============ - ---------- See Independent Auditor's Report on Supplementary Information. 60 EXHIBIT INDEX
Exhibit Page Number Number - ------- ------ 4. Amended and Restated Agreement of Limited Partnership of New England Life Pension Properties III; A Real Estate Limited Partnership (filed as Exhibit 28A to Form 8-K dated July 15, 1985, as filed with the Commission on July 16, 1985). * 10A. Form of Escrow Deposit Agreement among the Registrant, NEL Equity Services Corporation and The Bank of Boston (filed as Exhibit 10A to the Registrant's Registration Statement on Form S-11, file no. 2-94351 (the "Registration Statement"). * 10B. Form of Advisory Contract between the Registrant and Copley Real Estate Advisors, Inc. (filed as Exhibit 10B to the Registration Statement). * 10DD MORF Associates III General Partnership Agreement dated as of January 1, 1988 between M.O.R.F. III Associates Limited Partnership and the Registrant. * 27. Financial Data Schedule
*Previously filed and incorporated herein by reference 61 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 Date: March 29, 2000 By: /s/ Alison Husid Cutler ----------------------- Alison Husid Cutler President of the Managing General Partner Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- President, Chief /s/ Alison Husid Cutler Executive Officer and - --------------------------- Director of the March 29, 2000 Alison Husid Cutler Managing General Partner /s/ Pamela J. Herbst Vice President and - --------------------------- Director of the March 29, 2000 Pamela J. Herbst Managing General Partner /s/ J. Grant Monahon Vice President and - --------------------------- Director of the March 29, 2000 J. Grant Monahon Managing General Partner /s/ James J. Finnegan Vice President of the - --------------------------- Managing General Partner March 29, 2000 James J. Finnegan /s/ Karin J. Lagerlund Treasurer and Principal - --------------------------- Financial and Accounting Karin J. Lagerlund Officer of the March 29, 2000 Managing General Partner 62 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 DEC-31-1999 324,989 0 0 0 0 324,989 5,918,532 0 6,243,521 94,871 0 0 0 0 6,148,650 6,243,521 1,165,510 2,756,215 424,157 424,157 616,213 0 0 1,715,845 0 1,715,845 0 0 0 1,715,845 24.83 24.83
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