-----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, NKgm8VI9kuQ5idQeoLSFA0nWhlOPHXbzoKraYfH+94FIuqpZzTZf9Z+PKfQV0bVG 00XimC7H/+hII9ECQFEfzw== 0000927016-99-003668.txt : 19991115 0000927016-99-003668.hdr.sgml : 19991115 ACCESSION NUMBER: 0000927016-99-003668 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND LIFE PENSION PROPERTIES III CENTRAL INDEX KEY: 0000757221 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042847256 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14052 FILM NUMBER: 99747080 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN STREET 25TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6172619000 MAIL ADDRESS: STREET 1: 225 FRANKLIN STREET STREET 2: 25TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------------------------------------------------------- For Quarter Ended September 30, 1999 Commission File Number 0-14052 NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2847256 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 225 Franklin Street, 25th Fl. Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 261-9000 - ------------------------------------------------------------------------------- Former name, former address and former fiscal year if changed since last report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 PART I FINANCIAL INFORMATION --------------------- NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS
September 30, 1999 December 31, 1998 (Unaudited) (Audited) ------------------ ----------------- ASSETS Real estate investments: Property, net 6,108,389 6,156,334 Property held for disposition, net -- 1,197,305 ---------- ---------- 6,108,389 7,353,639 Cash and cash equivalents 1,556,725 1,952,504 ---------- ---------- $7,665,114 $9,306,143 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 114,614 $ 87,947 Accrued management fee 53,583 21,939 ---------- ---------- Total liabilities 168,197 109,886 ---------- ---------- Partners' capital: Limited partners ($194.42 and $231.54 per unit, respectively; 75,000 units authorized, 68,414 units issued and outstanding) 7,488,305 9,196,048 General partners 8,612 209 ---------- ---------- Total partners' capital 7,496,917 9,196,257 ---------- ---------- $7,665,114 $9,306,143 ========== ==========
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998 ------------------ ------------------ ------------------ ------------------ Investment Activity Property rentals $299,269 $ 893,709 $ 297,369 $ 945,316 Property operating expenses (42,444) (205,828) (65,705) (205,613) Depreciation and amortization (56,037) (179,727) (73,660) (225,082) -------- ---------- ---------- ---------- 200,788 508,154 158,004 514,621 Joint venture earnings -- -- 45,257 597,936 Amortization -- -- -- (3,138) -------- ---------- ---------- ---------- Total real estate operations 200,788 508,154 203,261 1,109,419 Gain on sale of Joint Venture -- 1,509,931 5,869,421 5,869,421 -------- ---------- ---------- ---------- Total real estate activity 200,788 2,018,085 6,072,682 6,978,840 Interest on cash equivalents and short-term investments 10,256 72,221 74,588 140,698 -------- ---------- ---------- ---------- Total investment activity 211,044 2,090,306 6,147,270 7,119,538 -------- ---------- ---------- ---------- Portfolio Expenses General and administrative 38,166 183,418 55,018 163,306 Management fee 53,583 124,799 36,565 127,875 -------- ---------- ---------- ---------- 91,749 308,217 91,583 291,181 -------- ---------- ---------- ----------
NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Net Income $119,295 $1,782,089 $6,055,687 $6,828,357 ======== ========== ========== ========== Net income per limited partnership unit $ 1.73 $ 25.79 $ 87.63 $ 98.81 ======== ========== ========== ========== Cash distributions per limited partnership unit $ 2.19 $ 50.75 $ 254.68 $ 268.04 ======== ========== ========== ========== Number of limited partnership units outstanding during the period 68,414 68,414 68,414 68,414 ======== ========== ========== ==========
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998 ------------------ ------------------ ------------------ ------------------ General Limited General Limited General Limited General Limited Partners Partners Partners Partners Partners Partners Partners Partners -------- ---------- -------- ----------- -------- ------------ -------- ----------- Balance at beginning of period $ 8,932 $7,520,030 $ 209 $ 9,196,048 $(59,015) $ 20,710,069 $(57,510) $ 20,859,138 Cash distributions (1,513) (149,827) (9,418) (3,472,011) (4,616) (17,423,678) (13,848) (18,337,690) Net income 1,193 118,102 17,821 1,764,268 60,557 5,995,130 68,284 6,760,073 ------- ---------- ------- ----------- -------- ------------ -------- ------------ Balance at end of period $ 8,612 $7,488,305 $ 8,612 $ 7,488,305 $ (3,074) $ 9,281,521 $ (3,074) $ 9,281,521 ======= ========== ======= =========== ======== ============ ======== ============
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------------------------- 1999 1998 ----------- ----------- Net cash provided by operating activities $ 451,026 $ 1,374,077 ----------- ------------ Cash flows from investing activities: Investment in property (4,821) (29,788) Net proceeds from sale of joint venture 2,639,445 16,475,000 Deferred disposition fees -- 510,000 Decrease in short-term investments, net -- 931,125 ----------- ------------ Net cash provided by investing activities 2,634,624 17,886,337 ----------- ------------ Cash flows from financing activity: Distributions to partners (3,481,429) (18,351,538) ----------- ------------ Net increase (decrease) in cash and cash equivalents (395,779) 908,876 Cash and cash equivalents: Beginning of period 1,952,504 1,645,244 ----------- ------------ End of period $ 1,556,725 $ 2,554,120 =========== ============
(See accompanying notes to unaudited financial statements) NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Partnership's financial position as of September 30, 1999 and December 31, 1998 and the results of its operations, its cash flows and partners' capital (deficit) for the three and nine months ended September 30, 1999 and 1998. These adjustments are of a normal recurring nature. See notes to audited financial statements included in the Partnership's 1998 Annual Report on Form 10-K for additional information relating to the Partnership's financial statements. NOTE 1 - ORGANIZATION AND BUSINESS - ---------------------------------- New England Life Pension Properties III; A Real Estate Limited Partnership (the "Partnership") is a Massachusetts limited partnership organized for the purpose of investing primarily in newly constructed and existing income producing real properties. The Partnership primarily serves as an investment for qualified pension and profit sharing plans and other entities intended to be exempt from federal income tax. The Partnership commenced operations in July 1985 and acquired the one investment it currently owns prior to the end of 1988. The Partnership intends to dispose of its investments within twelve years of their acquisition, and then liquidate; however, the managing general partner could extend the investment period if it is in the best interest of the limited partners. The Partnership has engaged AEW Real Estate Advisors, Inc. ("AEW") to provide asset management advisory services. NOTE 2 - REAL ESTATE JOINT VENTURES - ----------------------------------- The following summarized financial information is presented for the Bayberry joint venture whose property was sold on August 7, 1998. Results of Operations ---------------------------
Nine Months ended September 30, ------------------------------- 1999 1998 ------------ ------------ Revenue Rental income $ - $1,444,843 Other - 3,862 ------------ ---------- - 1,448,705 ------------ ---------- Expenses Operating expenses - 638,983 Depreciation and amortization - 198,186 ------------ ---------- - 837,169 ------------ ---------- Net income $ - $ 611,536 ============ ==========
NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Expenses exclude amounts owed and attributable to the Partnership on behalf of its various financing arrangements with the joint venture. NOTE 3 - PROPERTY - ----------------- 270 Technology Park ------------------- Effective January 1, 1998, the 270 Technology Park joint venture was restructured and the venture partner's ownership interest was assigned 99% to the Partnership, and 1% to an affiliate of the Partnership. Accordingly, as of this date, the investment is being accounted for as a wholly-owned property. The carrying value of the joint venture investment at conversion ($6,162,959) was allocated to land, building and improvements, and other net operating assets. The building is being depreciated over 30 years, beginning January 1, 1998. North Cabot Industrial Park (formerly Marathon/Hayward) ------------------------------------------------------- In September 1985, the Partnership acquired land in Hayward, California, for $786,130 and leased it back to the seller. The Partnership also made a nonrecourse permanent mortgage loan of $2,663,870 to the ground lessee to finance the two research and development buildings located on the land. On November 15, 1994, the Partnership restructured this ground lease/mortgage loan investment into a wholly-owned property, due to the inability of the ground lessee/mortgagor to meet its financial obligations. The Partnership received $85,000 in settlement of the guaranty that had been provided by principals of the ground lessee. The Partnership obtained title to the improvements on the land and to certain other operating assets in full satisfaction of the related mortgage loan and obligations under the ground lease, and in consideration of the assumption by the Partnership of certain operating liabilities. The carrying value of the ground lease/mortgage loan investment as of the date of restructuring was allocated to land, buildings and net operating assets. The buildings and improvements (two industrial buildings in Hayward, California) were being depreciated over 25 years beginning November 15, 1994. Prior to 1994, the managing general partner determined that the carrying value of this investment should be reduced to its estimated fair market value. Accordingly, the carrying value was reduced by $2,500,000. On March 18, 1999, the North Cabot Industrial Park investment was sold to an unaffiliated third party (the "Buyer") for gross proceeds of $2,800,000. The terms of the sale were determined by arm's length negotiation between the Buyer and the Partnership. The Partnership received net proceeds of $2,639,445 and recognized a gain of $1,509,931 ($21.85 per limited partnership unit). On April 29, 1999, the Partnership made a capital distribution of $2,539,528 ($37.12 per limited partnership unit) from the proceeds of the sale. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP The following is a summary of the Partnership's investment in property (one at September 30, 1999, and two at December 31, 1998):
September 30, 1999 December 31, 1998 ------------------ ------------------ Land $ 215,404 $ 215,404 Buildings and improvements 5,658,212 5,653,391 Accumulated depreciation and amortization (296,657) (156,156) Net operating assets 531,430 443,695 Property held for disposition - 1,197,305 ---------- ---------- $6,108,389 $7,353,639 ========== ==========
NOTE 4 - SUBSEQUENT EVENT - ------------------------- Distributions of cash from operations relating to the quarter ended September 30, 1999 were made on October 28, 1999 in the aggregate amount of $143,047 ($2.07 per limited partnership unit). In addition, two special distributions were also made on October 28, 1999: a distribution from operating cash flow previously held in reserves totaling $398,736 ($5.77 per limited partnership unit) and a special capital distribution, from unallocated sales reserves, in the amount of $740,239 ($10.82 per limited partnership unit). NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------- Results of Operations - --------------------- Liquidity and Capital Resources - ------------------------------- The Partnership completed its offering of units of limited partnership interest in December 1985 and a total of 68,414 units were sold. The Partnership received proceeds of $61,950,285, net of selling commissions and other offering costs, which were invested in real estate, used to pay related acquisition costs, or retained as working capital reserves. The Partnership made nine real estate investments, six of which were sold prior to 1994, and one of which was sold in each of 1998 and 1999. As a result of the sales and similar transactions, capital of $55,112,950 ($805.58 per limited partnership unit) has been returned to the limited partners through September 30, 1999. At September 30, 1999, the Partnership had $1,556,725 in cash and cash equivalents, of which $541,783 was used for operating cash distributions, and $740,239 was used for capital distributions to partners on October 28, 1999; the remainder is being retained as working capital reserves. The source of future liquidity and cash distributions to partners will primarily be cash generated by the Partnership's last remaining real estate investment and invested cash and cash equivalents. Distributions of cash from operations for the first, second and third 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 and the adjusted capital contribution of $194.42 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. Distributions of cash from operations relating to the third quarter of 1998 were made at an annualized rate of 5.5% on the weighted average adjusted capital contribution of $389.10. 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 September 30, 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 September 30, 1999, the appraised value of the Partnership's remaining real estate investment exceeded its related carrying value by approximately $650,000. The current appraised value of the real estate investment has been determined by the managing general partner and is generally based on a combination of traditional appraisal approaches performed by 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. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Year 2000 Readiness Disclosure - ------------------------------ The Year 2000 Issue is a result of computer programs being written using two digits rather than four to define the applicable year. Computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in normal business operations. The Partnership relies on AEW Capital Management L.P. ("AEW Capital Management"), the parent of the Advisor, to generate financial information and to provide other services, which are dependent on the use of computers. The Partnership has obtained assurances from AEW Capital Management that: . AEW Capital Management has developed a Year 2000 Plan (the "Plan") consisting of five phases: inventory, assessment, testing, remediation/repair and certification. . As of September 30, 1998, AEW Capital Management had completed the inventory and assessment phases of this Plan and had commenced the testing and remediation/repair of internal systems. . AEW Capital Management concluded the internal testing, remediation/repair and certifications of its Plan in June 1999. . AEW Capital Management successfully participated in industry-wide testing in August 1999. . AEW Capital Management believes it is ready for Year 2000. AEW Capital Management has advised the Partnership that being ready means that AEW Capital Management has tested its internal mission critical systems and software applications, and based upon testing conducted, AEW Capital Management believes that such systems and applications are prepared to process dates correctly through the Year 2000. Based upon these assurances, the Partnership has determined that it is not necessary for it to develop a Year 2000 contingency plan. The Partnership also relies on joint venture partners and/or property managers to supply financial and other data with respect to its real properties. The Partnership is in the process of surveying these third party providers and assessing their compliance with Year 2000 requirements. To date, the Partnership is not aware of any problems that would materially impact its results of operations, liquidity or capital resources. However, the Partnership has not yet obtained written assurances that these providers would be Year 2000 compliant. The inability of one of these providers to complete its Year 2000 resolution process could materially impact the Partnership. In addition, the Partnership is also subject to external forces that might generally affect industry and commerce, such as utility or transportation company Year 2000 compliance failures and related service interruptions. Given the nature of its operations, the Partnership will not incur any costs associated with Year 2000 compliance. All such costs are borne by AEW Capital Management and the property managers. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations - --------------------- Form of Real Estate Investments North Cabot Industrial Park, which was sold in March 1999, was a wholly- owned property. Effective January 1, 1998, 270 Technology Park was converted to a wholly-owned property; it was previously structured as a joint venture with a real estate management/development firm. 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. At September 30, 1998, the property was also 92% occupied. Occupancy at 270 Technology Park decreased to 95% during the third quarter of 1999, down from 100% during the third quarter of 1998. The Bayberry Apartments investment was sold on August 7, 1998, and the Partnership recognized a gain of $6,391,800. At the time of the sale, the Bayberry Apartments was 95% leased. Investment Results Interest on cash equivalents and short-term investments for the three and nine months ended September 30, 1999, was $10,256 and $72,221, respectively, compared to $74,588 and $140,698 for the same periods in 1998. The decreases of approximately $64,000 or 86% and $68,000 or 49% for the respective three and nine month periods are 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. For the three and nine months ended September 30, 1999, operating results from real estate operations were $200,788 and $508,154, respectively, compared to $203,261 and $1,109,419 for the comparable periods in 1998. The decreases of $2,473 and $601,265 for the comparative three and nine month periods are 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. Partially offsetting this decrease is improved operating performance at 270 Technology Park for the three months ended September 30, 1999 as a result of higher rental rates and higher recovery income. Cash flow from operations decreased by approximately $923,000 between the respective nine-month periods. The decrease is primarily due to the decrease in operating activity as a result of the sales discussed above. 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, legal, accounting, printing and servicing agent fees. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP For the three and nine months ended September 30, 1999, management fees were $53,583 and $124,799, respectively, compared to $36,565 and $127,875 for the comparable periods in 1998. The increase in management fees between the three month periods is due to a special operational cash distribution from cash previously held in reserves which was made on October 28, 1999. The decrease in management fees for the nine month periods is due to lower operational cash distributions as a result of the sales of Bayberry Apartments in 1998 and North Cabot Industrial Park in 1999. General and administrative expenses for the three and nine months ended September 30, 1999 were $38,166 and $183,418, respectively, compared to $55,018 and $163,306 for the same periods in 1998. The decrease of approximately $17,000 or 31% for the respective three month periods is primarily due to higher servicing agent fees and out of pocket expenses incurred during the third quarter of 1998. The increase of approximately $20,000 or 12% for the respective nine month periods is primarily due to increases in state taxes, accounting fees and investor servicing fees due to sales. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 PART II OTHER INFORMATION ------------------- Items 1-5 Not Applicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits: (27) Financial Data Schedule b. Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended September 30, 1999. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEW ENGLAND LIFE PENSION PROPERTIES III; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) November 11, 1999 /s/ Alison Husid Cutler ------------------------------- Alison Husid Cutler President, Chief Executive Officer and Director of Managing General Partner, Copley Properties Company III, Inc. November 11, 1999 /s/ Karin J. Lagerlund -------------------------------- Karin J. Lagerlund Principal Financial and Accounting Officer of Managing General Partner, Copley Properties Company III, Inc. EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 SEP-30-1999 1,556,725 0 0 0 0 1,556,725 6,108,389 0 7,665,114 168,197 0 0 0 0 7,496,917 7,665,114 893,709 2,475,861 205,828 205,828 487,944 0 0 1,782,089 0 1,782,089 0 0 0 1,782,089 25.79 25.79
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