-----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, RbCx3f5DSWh46/cWkDgt5J+V5ZoxZS2GuqWdK9U0UFFf0qIQzNexNShHjWBT2g+f 1vt/z4UXipcKP061xBS48A== 0000927016-00-001028.txt : 20000329 0000927016-00-001028.hdr.sgml : 20000329 ACCESSION NUMBER: 0000927016-00-001028 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND PENSION PROPERTIES V CENTRAL INDEX KEY: 0000806028 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042940131 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-17808 FILM NUMBER: 581502 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN ST 25TH FL CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6175781200 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. 0-17808 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2940131 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No) 225 Franklin Street, 25th FL. Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrants 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 registrant's 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 Pension Properties V; A Real Estate Limited Partnership (the "Partnership") was organized under the Uniform Limited Partnership Act of the Commonwealth of Massachusetts on October 23, 1986, to invest primarily in to-be-developed, newly-constructed and existing income-producing real properties. The Partnership was initially capitalized with contributions of $2,000 in the aggregate from Fifth Copley Corp. (the "Managing General Partner") and ECOP 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 12, 1986, with respect to a public offering of 60,000 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 60,000 Units (an aggregate of $120,000,000). The Registration Statement was declared effective on January 9, 1987. The first sale of Units occurred on July 23, 1987, 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 subscription agreements was accepted by the Partnership on December 31, 1987. As of January 31, 1988, a total of 83,291 Units had been sold, a total of 12,900 investors had been admitted as limited partners (the "Limited Partners") and a total of $82,761,530 had been contributed to the capital of the Partnership. The remaining 36,709 Units were de-registered on March 17, 1988. At December 31, 1999, the Partnership owned the two real property investments described in A. and F. below. Two investments were sold in 1994, two investments were sold in 1997 (see C. & G. below) and three investments were sold in 1999 (see B., D. and E. below). Sales proceeds were distributed in the amount of $48 per Unit in 1994, $28 per Unit in 1995, $308 per Unit in 1997 and $249 per Unit in 1999, after the Partnership made certain strategic decisions on projects yet to be developed. The Partnership has no current plan to renovate, improve or further develop any of its real property. In the opinion of the Managing General Partner, the properties are adequately covered by insurance. The Partnership has no employees. Services are performed for the Partnership by the Managing General Partner and affiliates of the Managing General Partner. A. Land in Germantown, Maryland ("Waters Landing II"). On May 26, 1987, the Partnership acquired a 60% interest in a joint venture with Waters Landing Two - Oxford Limited Partnership ("Oxford"). As of April 1, 1996, the Partnership had contributed $1,403,112 to the capital of the joint venture out of a maximum commitment of $4,682,400. The joint venture agreement entitled the Partnership to receive a monthly preferred return on its invested capital at the rate of 10.5% per annum. Prior to December 1, 1994, such monthly preferred return was permitted to accrue to the extent that the joint venture did not have sufficient cash to pay it. The joint venture agreement also entitled the Partnership to receive 60% of all remaining cash flow from operations and 60% of net sale and refinancing proceeds following the return of the Partnership's equity. The Partnership also committed to make a loan of up to $3,121,600 to Oxford for investment in the venture of which $935,408 had been funded as of April 1, 1996. Interest only on the loan was payable monthly at the rate of 10.5% per annum. The loan was due upon the sale of the joint venture's assets or the sale of Oxford's interest in the joint venture. Oxford was required to apply any cash flow received from operations of the joint venture to interest payments on the loan and to apply proceeds of financings or sales received from the joint venture to payments of the interest on and principal of the loan. The loan was secured by Oxford's interest in the joint venture. Effective April 1, 1996, Oxford's ownership interest was transferred and assigned to the Partnership and a wholly-owned affiliate of the Partnership. The joint venture owns approximately 8.5 acres of land in Germantown, Maryland and originally intended to construct a 144-unit apartment complex thereon. Development had been 2 postponed due to the excess supply of apartment units in the Germantown area. During 1995, after receiving a number of feasibility studies of alternative development proposals for the site, the Managing General Partner determined development would not yield a sufficient return to justify the investment risk. In early November, 1998, a Purchase and Sale Agreement was executed by the Partnership to sell the Waters Landing II investment. This sale was concluded during the first quarter of 2000. B. Warehouse Building in Fontana, California ("Dahlia"). On September 21, 1987, the Partnership acquired a 60% interest in a joint venture formed with an affiliate of Investment Building Group. As of December 31, 1998, the Partnership had contributed $7,081,593 to the capital of the joint venture out of a maximum commitment of $7,250,000. The joint venture agreement entitled the Partnership to receive a monthly preferred return on its invested capital at the rate of 10% per annum. The joint venture agreement also entitled the Partnership to receive 60% of the remaining cash flow and 60% of sale and refinancing proceeds following the return of the Partnership's equity. On September 1, 1995, the joint venture was converted into a limited partnership with the Partnership as the general partner and the affiliate of Investment Building Group as the limited partner. The limited partnership owned approximately 12.9 acres of land in Fontana, California and completed construction thereon of a one-story warehouse building containing approximately 278,220 square feet of space. As of December 31, 1998, the building was 100% leased. On August 27, 1999, the property was sold at which time the Partnership received net proceeds of $9,723,207. On September 21, 1999, the Partnership made a capital distribution of $9,456,220 ($115 per Limited Partnership Unit) from sale proceeds. C. Office/Warehouse Buildings in Phoenix, Arizona (" University Business Park"). On September 30, 1987, the Partnership acquired a 60% interest in a joint venture formed with an affiliate of The Hewson Company. The Partnership contributed $7,976,784 to the capital of the joint venture out of a maximum commitment of $9,450,000. The joint venture agreement entitled the Partnership to receive a monthly preferred return on its invested capital at the rate of 10% per annum. The joint venture agreement also entitled the Partnership to receive 60% of the remaining cash flow and 60% of sale and refinancing proceeds following return of the Partnership's equity. Effective January 1, 1996, the joint venture was dissolved and ownership of the joint venture assets consisting of approximately 8.5 acres of land in Phoenix, Arizona improved with five warehouse buildings containing approximately 109,930 square feet of space, was assigned to the Partnership. On May 28, 1997, the property was sold, at which time the Partnership received net proceeds of $7,994,130. On June 30, 1997, the Partnership made a capital distribution of $7,579,696 ($92 per Limited Partnership Unit) from sale proceeds. D. Office/Research and Development Buildings in Columbia, Maryland ("Columbia Gateway Corporate Park"). On December 21, 1987, the Partnership acquired a 33% interest in a joint venture formed with New England Life Pension Properties IV; A Real Estate Limited Partnership, an affiliate of the Partnership (the "Affiliate"), which had a 17% interest, and M.O.R. Gateway 51 Associates Limited Partnership. As of April 20, 1989, the joint venture agreement was amended and restated to reflect a decrease in the Partnership's interest in the joint venture to 15.25% and an increase in the Affiliate's interest in the joint venture to 34.75%. In addition, the amended and restated joint venture agreement increased the Affiliate's maximum obligation to contribute capital to the joint venture and reallocated the capital contributed to the joint venture by the Partnership and the Affiliate. As of December 31, 1998, the Partnership had contributed $6,181,690 to the capital of the joint venture out of a maximum commitment of $6,402,000. The joint venture agreement entitled the Partnership and the Affiliate to receive a preferred return on their respective invested capital at the rate of 10.5% per annum. Such preferred return would be payable currently until the Partnership and the Affiliate received an aggregate of $8,865,000; 3 thereafter, if sufficient cash flow is not available therefor, the preferred return will accrue and bear interest at the rate of 10.5% per annum, compounded monthly. The joint venture agreement also entitled the Partnership to receive 15.25% of cash flow following payment of the preferred return and 15.25% of the net proceeds of sales and refinancings following return of the Partnership's and the Affiliate's equity. Ownership of the joint venture was restructured to give the Partnership and the Affiliate full control over the business of the joint venture effective January 1, 1998. The joint venture owned approximately 20.85 acres of land in the Columbia Gateway Corporate Park in Columbia, Maryland. The intended development plan for this land was for a two-stage development of seven office and research and development buildings. The first phase of this development was completed in 1992 and included the construction of four, one-story office and research and development buildings containing 142,545 square feet. The second phase of this development commenced in the spring of 1994; a 46,000 square-foot building was constructed and leased to a single tenant for a lease term of ten years. As of December 31, 1998 the property was 100% leased. On December 20, 1999 the Columbia Gateway Corporate Park joint venture investment in which the Partnership and an affiliate own a 29.89% and 68.11% interest, respectively, sold its property to an unaffiliated third party for gross proceeds of $19,850,000, of which the Partnership's share was $6,054,250. The Partnership received its 30.5% share of the net proceeds of $5,891,032. On January 27, 2000 the Partnership made a capital distribution of $5,755,960 ($70.00 per Limited Partnership Unit) from the proceeds of the sale. E. Industrial Building in Brea, California ("Puente Street"). On April 28, 1988, the Partnership acquired a 60% interest in a joint venture formed with an affiliate of The Muller Company. In April, 1990, the Partnership increased its commitment to the joint venture by $625,000 to $13,725,000 of which $13,475,000 had been contributed as of June 1, 1991. The joint venture agreement entitled the Partnership to receive a monthly preferred return on its invested capital at the rate of 10.5% per annum. The joint venture agreement also entitled the Partnership to receive 60% of the remaining cash flow and 60% of sale and refinancing proceeds following the return of the Partnership's equity. As of June 1, 1991, because of the developer partner's inability to fund its share of capital contributions, the Partnership assumed 100% ownership of the joint venture's assets. The Partnership owned approximately 16.75 acres of land in Brea, California and completed renovation of an existing building thereon containing 181,200 square feet. Construction of an approximately 37,320 square foot addition was completed during the first quarter of 1989. During the last quarter of 1998, a 53,000 square-foot build-to-suit facility was completed on Partnership land. A 10-year lease for this facility commenced in November 1998. As of December 31, 1998, the other existing building was also 100% leased to two tenants. On June 25, 1999, the Partnership sold the property and received net proceeds of $11,211,554. On July 28, 1999, the Partnership made a capital distribution of $11,018,552 ($134 per Limited Partnership Unit) from sale proceeds. F. Shopping Center in Salinas, California ("Santa Rita Plaza"). On February 1, 1989, the Partnership acquired a 60% interest in a joint venture formed with Rodde McNellis/Salinas. On July 20, 1990, the Partnership committed to increase its maximum contribution from $9,500,000 to $11,350,000, of which $6,500,000 is characterized as Senior Capital and $4,850,000 is characterized as Junior Capital. As of December 31, 1999, the Partnership had contributed $11,263,539 to the capital of the joint venture. The Partnership agreement entitles the Partnership to receive a monthly preferred return on its Senior Capital at the rate of 10.5% per annum during months 1-24 of the joint venture's operations and a monthly preferred return to reduce its outstanding Senior Capital, together with a return at the rate of 10.5% per annum, based on a 27-year amortization schedule, during months 25-120 of the joint venture's operations. The entire outstanding Senior Capital is due and payable ten years after the date of the Partnership's first investment of Senior Capital. The Partnership agreement also entitles the Partnership to receive a priority return payment on its Junior Capital at the rate of 10.5% per annum. Such junior priority return payment will accrue and 4 bear interest at the rate of 10.5% per annum, if sufficient cash is not available therefor. At such time as the aggregate of accrued junior priority return payments total $1,000,000, all junior priority return payments and the return on the accrued junior priority return payments will thereafter be paid currently; provided, however, that the $1,000,000 threshold will be increased by each dollar of Junior Capital which the Partnership elects not to contribute to fund its return. The Junior Capital will be due and payable after the fifteenth year of the joint venture's operations. On August 1, 1995 the joint venture was converted into a California limited partnership with the Partnership as the general partner with a 63% ownership interest and an affiliate of Rodde/McNellis Salinas as the limited partner with a 37% interest. The Partnership agreement also entitles the Partnership to receive 63% of cash flow remaining after payment of the preferred return and 63% of sale and refinancing proceeds following the return of the Partnership's equity. The limited partnership has a leasehold interest in approximately 10.56 acres of land in Salinas, California (the "Land") and had completed construction thereon of five one-story retail buildings containing a total of approximately 125,247 square feet. The ground lease has a term of 75 years with two options to extend, for ten years each. Under the ground lease, fixed rent of $390,000 per annum is payable. A percentage rent equal to 11.55% of rents in excess of $1,400,000 received by the ground lessee from subtenants, excluding expense reimbursements, is also payable. As of December 31, 1999, the buildings were 98% leased. On August 1, 1995 the Partnership made a $1,750,000 loan to Nielsen Properties, Ltd., which is the ground lessor, for a term of 15 years. The loan earns interest at the rate of 8.75% per annum and the Partnership can require full payment of the note on or after August 1, 2000. The note is secured by a deed of trust on the Land. In conjunction with this loan, Nielsen Properties, Ltd. repaid the limited partnership $1,299,052, representing full payment of two outstanding notes receivable. G. Office/Retail/Industrial Buildings in Las Vegas, Nevada ("Palms Business Center III and IV"). On March 7, 1988, the Partnership acquired a 60% interest in a joint venture formed with an affiliate of B.H. Miller Companies. As of January 1, 1995, the Partnership had contributed $11,589,888 to the capital of the joint venture out of a maximum commitment of $11,700,000. The joint venture agreement entitled the Partnership to receive a monthly preferred return at the rate of 11% per annum on the daily balance of its invested capital during each month, of which 9.5% per annum was to be paid currently and up to 1.5% per annum was to be deferred if sufficient cash was not available therefor. All invested capital, monthly payments of preferred return and deferred monthly payments of preferred return were due and payable at the end of the tenth year of the joint venture's operations. The joint venture agreement also entitled the Partnership to receive 60% of net cash flow and 60% of sale and refinancing proceeds following the return of the Partnership's equity capital. Effective January 1, 1995, the joint venture partner's ownership interest was transferred and assigned to the Partnership. The Partnership owned approximately 11.75 acres of land in Las Vegas, Nevada improved with twelve single-story office/industrial buildings and one single-story retail building containing a total of approximately 173,574 square feet. On October 24, 1997, the Partnership sold the Palms Business Center property for $18,000,000. The Partnership received net proceeds of $17,823,259. On November 25, 1997, the Partnership made a capital distribution of $17,784,576 ($216 per Limited Partnership Unit) from the sale proceeds. 5 Item 2. Properties The following table sets forth the annual realty taxes for the Partnership's properties and information regarding tenants who occupy 10% or more of gross leasable area (GLA) in the Partnership's properties.
- --------------------------------------------------------------------------------------------------------------------------- Estimated 1999 Number of Annual Annual Tenants with Square Feet Contract Realty 10% or More Name(s) of of Each Rent Lease Property Taxes of GLA Tenant(s) Tenant Per Square Expiration Foot - --------------------------------------------------------------------------------------------------------------------------- Land in Germantown, MD $ 2,495* N/A N/A N/A N/A N/A Shopping Ctr in Salinas, CA $145,584 2 Food Maxx 51,008 $7.22 8/2010 Ross Dress for Less 17,068 $11.03 1/200 1 - --------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------- Renewal Line of Business Property Options of Principal Tenants - ------------------------------------------------------------------------- Land in Germantown, MD N/A N/A Shopping Ctr in Salinas, CA Three for 5 Supermarket Years Three for 5 Apparel Retailer Years - -------------------------------------------------------------------------
* Estimate includes portion up to date of sale of February 17, 2000. 6 The following table sets forth for each of the last five years the gross leasable area, occupancy rates, rental revenue, and net effective rent for the Partnership's properties:
- --------------------------------------------------------------------------------------------------- Property Gross Leasable Year-End Rental Net Effective Area Occupancy Revenue Rent Recognized ($/sf/yr)* - --------------------------------------------------------------------------------------------------- Land in Germantown, MD 1995 N/A N/A N/A N/A 1996 N/A N/A N/A N/A 1997 N/A N/A N/A N/A 1998 N/A N/A N/A N/A 1999 N/A N/A N/A N/A Shopping Center in Salinas, CA 1995 125,247 91% $1,657,425 $14.31 1996 125,247 98% $1,718,737 $14.56 1997 125,247 95% $1,759,594 $14.60 1998 125,247 98% $1,818,936 $14.97 1999 125,247 98% $1,717,471 $14.28 - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
Note: N/A for commercial properties indicates property was not constructed as of this date. * Net Effective Rent calculation is based on average occupancy during the respective years. 7 Following is a schedule of lease expirations for each of the next ten years for the Partnership's properties based on the annual contract rent in effect at December 31, 1999:
- ------------------------------------------------------------------------------------------------------ TENANT AGING REPORT - ------------------------------------------------------------------------------------------------------ Property # of Lease Total Total Percentage of Expirations Square Feet Annual Contract Gross Annual Rent Rental* - ------------------------------------------------------------------------------------------------------ Land in Germantown, MD 2000 N/A N/A N/A N/A 2001 N/A N/A N/A N/A 2002 N/A N/A N/A N/A 2003 N/A N/A N/A N/A 2004 N/A N/A N/A N/A 2005 N/A N/A N/A N/A 2006 N/A N/A N/A N/A 2007 N/A N/A N/A N/A 2008 N/A N/A N/A N/A 2009 N/A N/A N/A N/A Shopping Center in Salinas, CA 2000 6 16,276 $316,232 32% 2001 7 30,779 $390,477 40% 2002 2 1,760 $27,984 3% 2003 3 5,162 $93,597 9% 2004 1 5,651 $67,812 7% 2005 0 0 $0 0% 2006 1 4,999 $89,982 9% 2007 0 0 $0 0% 2008 0 0 $0 0% 2009 0 0 $0 0% - ------------------------------------------------------------------------------------------------------
* Does not include expenses paid by tenants. Note: N/A denotes that the disclosure is not applicable based on the nature of the property. 8 The following table sets forth for each of the Partnership's properties 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 - -------------------------------------------------------------------------------------------------------------- Land, Germantown, MD No Depreciable Property 0 0.00% 0 ---- ---- Total Depreciable Assets 0 0 Shopping Center, Salinas, CA Building & Improvements 544,266 2.5% SL 40 45,308 Building & Improvements 8,988,874 3.18% SL 31.5 2,966,825 --------- --------- Total Depreciable Assets 9,533,140 3,012,133 Total Depreciable Assets $9,533,140 $3,012,133 ========== ========== - --------------------------------------------------------------------------------------------------------------
SL= Straight Line 9 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. Shopping Center in Salinas. California The city of Salinas has a population of approximately 120,000 people. Due to the fact that most of the city's growth is occurring in north Salinas, the north end of the city is the focus of most major retailers. Santa Rita Plaza is in the heart of the Salinas retail core, however, it must compete for tenants with power centers such as the Northridge Mall (1.2 million square feet), the Harden Ranch Plaza (680,000 square feet) and the recently constructed Westridge Center (652,000 square feet). Item 3. Legal Proceedings. The Partnership is not a party to, nor are any of its properties subject to, any material pending legal proceedings. 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 12,055 holders of Units. The Partnership's Amended and Restated Agreement of Limited Partnership dated July 23, 1987, 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. Cash distributions paid in 1999 or distributed after year end with respect to 1999 to the Limited Partners as a group totaled $29,867,676, including $26,230,732 of returned capital from the proceeds of property sales. Cash distributions paid in 1998 or distributed after year end with respect to 1998 to the Limited Partners as a group totaled $4,0156,393. Cash distributions exceeded net income in 1999 and, therefore, resulted in a reduction of partners' capital. Operating cash distributions exceeded net cash provided by operating activities. Reference is made to the Partnership's Statement of Partners' Capital (Deficit) and Statement of Cash Flows in Item 8 hereof. 10 Item 6. Selected Financial Data
For Year For Year For Year For Year For Year Ended or Ended or Ended or Ended or Ended or as of as of as of as of as of 12/31/99(1) 12/31/98 12/31/97(2) 12/31/96 12/31/95(3) ----------- -------- ----------- -------- ----------- Revenues $ 3,709,675 $ 5,174,753 $17,197,366 $ 7,716,609 $ 5,522,086 Net Income $ 5,540,881 $ 2,175,480 $13,153,920 $ 3,392,534 $ 2,248,715 Net Income per Weighted Average Limited Partnership Unit $ 66.71 $ 26.17 $ 158.07 $ 40.72 $ 26.96 Total Assets $22,367,036 $40,737,607 $42,788,822 $59,590,134 $60,535,231 Total Cash Distributions per Limited Partnership Unit outstanding for the entire period, including amounts distributed after year end with respect to such year $ 363.23 $ 48.78 $ 366.45 $ 55.44 $ 77.36
(1) During 1999, net income includes gains of $4,429,391 recognized on the sale of three investments. Cash distributions include a return of capital of $319 per Unit. (2) During 1997, net income includes a gain of $10,176,990 recognized on the sale of two investments. Cash distributions include a return of capital of $308 per Unit. (3) During 1995, the Partnership recorded a valuation provision on one property totaling $600,000 ($7.19 per Weighted Average Limited Partnership Unit). Cash distributions include a return of capital of $28 per Unit. 11 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 1988. A total of 83,291 units were sold. The Partnership received proceeds of $74,895,253, net of selling commissions and other offering costs, which have been used for investment in real estate, for the payment of related acquisition costs and for working capital reserves. The Partnership made the real estate investments described in Item 1 herein. Seven investments have been sold, one in each of June 1994, August 1994, May 1997, October 1997, June 1999, August 1999, and December 1999. As a result of the sales, capital of $52,120,848 has been returned to the limited partners through December 31, 1999. The adjusted capital contribution was reduced to $952 from $1,000 per Unit in 1994, then to $924 in July 1995, then to $616 in 1997 and then to $367 in 1999. A portion of the sales proceeds was used to pay previously accrued, but deferred, management fees to the advisor ($234,897 in 1999, $447,745 in 1997, $183,426 in 1995 and $1,259,988 in 1994). At December 31, 1999, the Partnership had $12,026,888 in cash and cash equivalents, of which $339,602 was used for operating cash distributions to partners and $5,755,960 for a capital distribution to partners on January 27, 2000; the remainder will be used to complete the funding of real estate investments or be retained as working capital reserves. The source of future liquidity or cash distributions to partners will be cash generated by the Partnership's invested cash and cash equivalents and real estate investments. Distributions of cash from operations relating to the first two quarters of 1999 were made at the annualized rate of 6.50% on the adjusted capital contribution of $616. Distributions of cash from operations relating to the third quarter of 1999 were made at the annualized rate of 4.50% on the weighted average adjusted capital contribution of $511.53. Fourth quarter 1999 distributions of cash from operations were made at the annualized rate of 4.50% on the weighted average adjusted capital contribution of $367. The third and fourth quarter rate decreases were a result of the sales of Puente Street and Dahlia and the consequent reduction in cash flow. The distribution rate increased for the first and second quarters of 1999 due to the increase in operational cash flow from properties during such quarters. Quarterly distributions of cash from operations relating to 1998 were made at the annualized rate of 5.75% on the adjusted capital contribution of $616. A special distribution from operating reserves of $1,109,457 was also made in 1998. Quarterly distributions of cash from operations relating to 1997 were made at the annualized rate of 6.25% on the adjusted capital contribution of $924 for the first and second quarters, of $832 for the third quarters, and on the weighted average adjusted contribution of $748 for the fourth quarter. The Partnership maintained a fund for the purpose of repurchasing limited partnership units pursuant to the terms and conditions set forth in the Partnership Agreement. Two percent of cash flow, as defined, was designated for this fund which had a balance of $124,302 at December 31, 1998. In accordance with the Partnership Agreement, any amounts in this fund after December 31, 1998 were placed in Partnership reserves. 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 certain investments exceeded the related carrying values by an aggregate of approximately $575,000. The current appraised value of real estate investments has been estimated by the Managing General Partner and is generally based on a combination of traditional appraisal approaches performed by the Partnership's advisor and independent appraisers. Because of the 12 subjectivity inherent in the valuation process, the estimated current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. Results of Operations Form of Real Estate Investments Effective January 1, 1996, the University Business Park joint venture was dissolved and ownership of the joint venture assets was assigned to the Partnership. This property was sold during 1997. Effective April 1, 1996, the Waters Landing II joint venture was restructured and the venture partner's ownership interest was assigned to the Partnership. Effective January 1, 1995, the Palms Business Center joint venture was restructured and the venture partner's ownership interest was assigned to the Partnership. This property was also sold during 1997. Effective August 1, 1995 and September 1, 1995, respectively, the Santa Rita Plaza and Dahlia joint venture investments were restructured to grant the Partnership control over management decisions. Accordingly, these investments have been accounted for as wholly-owned properties since those dates. The Dahlia investment was sold during 1999. The Puente Street investment was a wholly-owned property and was also sold during 1999. The Columbia Gateway Corporate Park investment, which was originally structured as a joint venture with a real estate development/management firm and an affiliate of the Partnership, was restructured to give the Partnership and the affiliate of the Partnership full control over the business of joint venture effective January 1, 1998. This investment was also sold during 1999. Operating Factors As mentioned above, the University Business Park was sold on May 28, 1997 and the Partnership recognized a gain of $2,160,404. The property was 100% leased at the time of sale, consistent with December 31, 1996. As mentioned above, the Columbia Gateway Corporate Park joint venture investment in which the Partnership and an affiliate own a 30.5% and 69.5% interest, respectively, sold its property on December 20,1999. The Partnership recognized its 30.5% share of the gain of $957,057. The property was 100% leased at the time of sale, consistent with December 31, 1998. As mentioned above, the Puente Street property was sold on June 25,1999 and the Partnership recognized a gain of $104,974. The property was 100% leased at the time of sale, consistent with December 1998. In early November, 1998, a Purchase and Sale agreement was executed by the Partnership to sell the Waters Landing II investment. The sale has been completed during the first quarter of 2000. As mentioned above, the Palms Business Center was sold on October 24, 1997 and the Partnership recognized a gain of $8,016,586. At the time of the sale, the property was 100% leased compared to 98% at December 31, 1996. As mentioned above, the Dahlia property was sold on August 27, 1999 and the Partnership recognized a gain of $3,367,359. The property was 100% leased at the time of sale, consistent with December 1998. Occupancy at Santa Rita Plaza was 98% at December 31, 1999 and 1998, and increase from 95% at December 31, 1997. Although occupancy is strong at this time, leases for another 25% of the space will expire during 2000. Renewals for these leases are being actively pursued at this time. 13 Investment Results Interest on short-term investments and cash equivalents decreased by approximately $58,000 in 1999 as compared to 1998 as a result of lower investment balances due to the sale of Puente Street in June 1999 and Dahlia in August 1999. Interest on short-term investments and cash equivalents decreased by approximately $231,000 in 1998 as compared to 1997 as a result of lower average investment balances due to the distribution of the sales proceeds from University Business Park and the Palms Business Center that were received in May 1997 and October 1997, respectively. 1999 Compared to 1998 Real estate operations decreased overall by approximately $1,022,105 between 1999 and 1998. This decrease is primarily due to lower operating results from both Puente Street and Dahlia due to the sale of these assets during 1999 (partial year operations in 1999 versus full operations in 1998). Operating results at Santa Rita Plaza also decreased due to lower interest income and higher depreciation expense. Exclusive of payment of deferred management fees in 1999 ($153,203) cash flow from operations decreased by approximately $650,000 between 1999 and 1998. This decrease is primarily due to the decrease in operating results as well as a decrease in working capital. 1998 Compared to 1997 Real estate operations decreased overall by approximately $692,000 between 1998 and 1997. This decrease is due to the fact that there are no 1998 operating results from both University Business Park and the Palms Business Center because they were sold during 1997. 1997 operating results included approximately $317,000 and $789,000 of partial-year operations from University Business Parks and Palms Business Center. These decreases were offset by increases in operating results during 1998 at all four operating investments of the portfolio. Operations at Puente Street increased by approximately $113,000 as a result of a new lease at the property that commenced in early November, coupled with lower litigation expenses and lower parking lot repairs. Operating results at the Dahlia property increased by approximately $186,000, due primarily to the receipt of $175,000 (including interest) from a bankrupt tenant. Operating results at the Columbia Gateway Corporate Park increased by approximately $97,000 due to higher occupancy, higher tenant reimbursements (due to a 1997 adjustment), an increase in straight-line rental income as a result of a new lease at the property, and also due to the 1997 abandonment of tenant improvements. Operating results at Santa Rita Plaza also increased slightly by approximately $66,000, primarily due to higher occupancy and late charges at the property, off set by lower interest income and higher depreciation expense. Cash flow from operations decreased by approximately $560,000 between 1998 and 1997. This decrease is primarily due to the decrease in operating results 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 consist primarily of real estate appraisal, printing, legal, accounting and investor servicing fees. 14 1999 Compared to 1998 The Partnership management fee decreased due to a decrease in distributable cash flow from operations as a result of the sale of two assets in 1999. General and administrative expenses increased by approximately $22,000 or 9%, primarily due to state taxes which was partially offset by a decrease in appraisal fees due to three fewer assets in 1999 compared to 1998. 1998 Compared to 1997 The Partnership management fee decreased due to a decrease in distributable cash flow from operations as a result of the sale of two assets in 1997. General and administrative expenses decreased by approximately $43,000 or 14%, primarily due to lower legal expenses and lower out-of-pocket expenses (expenses incurred due to special investor letters and mailings). Inflation By their nature, real estate investments tend not to be adversely affected by inflation. Inflation may result in appreciation in the value of 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 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. 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 Statement Schedules on page 20. 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. 15 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 October 23, 1986. 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") 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 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 16 estate law and investments. Prior to joining AEW the predecessor of 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. 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 - ---------------- -------------------- ------------- General Partners Share of Distributable Cash $ 36,736 AEW Real Estate Advisors, Inc. Management Fees and 380,331 (formerly known as Copley Real Reimbursement of Expenses Estate Advisors, Inc.) New England Securities Servicing Fees plus out-of- Corporation pocket reimbursements 22,679 ---------- TOTAL $ 439,746 ==========
For the year ended December 31, 1999 the Partnership allocated $67,395 of taxable income to the General Partners. 17 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. The General Partners of the Partnership owned no Units at 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. 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 and Financial Statements Index No. 2 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 are 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. No current reports on Form 8-K were filed during the fourth quarter ended December 31, 1999. (c) Reports on Form 8-K/A. The Partnership filed two current reports on Form 8-K/A dated December 7, 1999. One reporting on Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7 (Financial Statements and Exhibits), relating in both cases to the June 25, 1999 sale of Puente Street, the other reporting on Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7 (Financial Statements and Exhibits), relating in both cases to the August 27, 1999 sale of Dahlia. 18 New England Pension Properties V; A Real Estate Limited Partnership Financial Statements ******************** December 31, 1999 19 NEW ENGLAND PENSION PROPERTIES V; 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 Statements 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. 20 Report of Independent Accountants To the Partners of New England Pension Properties V; 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 Pension Properties V; 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 Fifth Copley Corp., 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 21 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS December 31, ---------------------------- 1999 1998 ------------ ------------ Assets Real estate investments: Property, net $ 8,695,906 $ 27,181,777 Joint ventures 152,500 4,843,933 ------------ ------------ 8,848,406 32,025,710 Property held for disposition, net 1,491,742 1,491,742 Cash and cash equivalents 12,026,888 7,220,155 ------------ ------------ $ 22,367,036 $ 40,737,607 ============ ============ Liabilities and Partners' Capital Accounts payable $ 93,275 $ 122,505 Accrued management fees 16,963 36,391 Deferred management and disposition fees 1,930,523 1,251,998 ------------ ------------ Total liabilities 2,040,761 1,410,894 ------------ ------------ Partners' capital (deficit): Limited partners ($367 and $616 per unit; respectively, 160,000 units authorized, 82,228 issued and outstanding,) 20,339,363 39,354,545 General partners (13,088) (27,832) ------------ ------------ Total partners' capital 20,326,275 39,326,713 ------------ ------------ $ 22,367,036 $ 40,737,607 ============ ============ (See accompanying notes to financial statements) 22 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS
Year ended December 31, -------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Investment Activity Property rentals $ 2,707,017 $ 4,103,360 $ 5,775,821 Interest income on loan to ground lessor 135,330 142,492 180,821 Property operating expenses (828,020) (949,126) (1,559,211) Ground rent expense (390,000) (390,000) (390,000) Depreciation and amortization (739,415) (1,003,722) (1,315,384) ------------ ------------ ------------ 884,912 1,903,004 2,692,047 Equity in joint venture earnings 436,427 440,440 343,841 ------------ ------------ ------------ Total real estate operations 1,321,339 2,343,444 3,035,888 Gain on sale of investment in joint venture 957,057 -- -- Gain on sales of property 3,472,334 -- 10,176,990 ------------ ------------ ------------ Total real estate activity 5,750,730 2,343,444 13,212,878 Interest on cash equivalents and short-term investments 430,901 488,461 719,893 ------------ ------------ ------------ Total investment activity 6,181,631 2,831,905 13,932,771 ------------ ------------ ------------ Portfolio Expenses Management fee 363,331 401,138 481,045 General and administrative 277,419 255,287 297,806 ------------ ------------ ------------ 640,750 656,425 778,851 ------------ ------------ ------------ Net Income $ 5,540,881 $ 2,175,480 $ 13,153,920 ============ ============ ============ Net income per weighted average limited partnership unit $ 66.71 $ 26.17 $ 158.07 ============ ============ ============ Cash distributions per limited partnership unit outstanding for the entire year $ 297.96 51.61 $ 368.62 ============ ============ ============ Weighted average number of limited partnership units outstanding during the year 82,228 82,309 82,385 ============ ============ ============
(See accompanying notes to financial statements) 23 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS 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 $ (27,832) $ 39,354,545 $ (6,663) $ 41,511,957 $ (87,745) $ 58,916,206 Repurchase of limited partnership units -- -- -- (61,776) -- (67,176) Cash distributions (40,665) (24,500,654) (42,924) (4,249,361) (50,457) (30,359,454) Net income 55,409 5,485,472 21,755 2,153,725 131,539 13,022,381 ------------ ------------ ------------ ------------ ------------ ------------ Balance at end of year $ (13,088) $ 20,339,363 $ (27,832) $ 39,354,545 $ (6,663) $ 41,511,957 ============ ============ ============ ============ ============ ============
(See accompanying notes to financial statements) 24 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
Year ended December 31, -------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 5,540,881 $ 2,175,480 $ 13,153,920 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 739,415 1,003,722 1,315,384 Gain on sale of investment in joint venture (957,057) -- -- Gain on sales of property (3,472,334) -- (10,176,990) Increase in property deferred lease commissions (67,465) (224,692) (106,319) Equity in joint venture earnings (436,427) (440,440) (343,841) Cash distributions from joint ventures 374,058 430,606 228,086 Decrease in investment income receivable -- 64,217 19,093 Decrease (increase) in property working capital 598,955 (208,803) (333,224) Payment of deferred management fee (153,203) -- (447,745) Increase (decrease) in operating liabilities (48,658) 127,366 179,100 ------------ ------------ ------------ Net cash provided by operating activities 2,118,165 2,927,456 3,487,464 ------------ ------------ ------------ Cash flows from investing activities: Net proceeds from sale of investments 26,347,165 -- 25,026,889 Deferred disposition fees 831,728 -- 790,500 Investments in property (28,602) (2,027,390) (249,274) Repayments received on loan to ground lessor 79,596 72,951 66,860 Decrease in short-term investments, net 4,297,813 2,951,755 ------------ ------------ ------------ Net cash provided by investing activities 27,229,887 2,343,374 28,586,730 ------------ ------------ ------------ Cash flows from financing activities: Distributions to partners (24,541,319) (4,292,285) (30,409,911) Repurchase of limited partnership units -- (61,776) (67,176) ------------ ------------ ------------ Net cash used in financing activities (24,541,319) (4,354,061) (30,477,087) ------------ ------------ ------------ Net increase in cash and cash equivalents 4,806,733 916,769 1,597,107 Cash and cash equivalents: Beginning of year 7,220,155 6,303,386 4,706,279 ------------ ------------ ------------ End of year $ 12,026,888 $ 7,220,155 $ 6,303,386 ============ ============ ============
(See accompanying notes to financial statements) 25 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND BUSINESS General New England Pension Properties V; A Real Estate Limited Partnership (the "Partnership") is a Massachusetts limited partnership organized for the purpose of investing primarily in to-be-developed, 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 May 1987 and acquired the two real estate investments it currently owns prior to the end of 1989. It intends to dispose of its investments within twelve years of their acquisition, and then liquidate. The Managing General Partner of the Partnership is Fifth Copley Corp., 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 ECOP 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. was 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. The Partnership maintained a fund for the purpose of repurchasing limited partnership units pursuant to the terms and conditions set forth in the Partnership Agreement. Two percent of cash flow, as defined, was designated for this fund which had a balance of $124,302 at December 31, 1998. In accordance with the Partnership Agreement, any amounts in this fund after December 31, 1998 were placed in Partnership reserves. 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. Payment of 50% of management fees is deferred until cash distributions to limited partners exceed a specified rate or until payable from sales proceeds. AEW is also reimbursed for expenses incurred in connection with administering the Partnership ($17,000 in 1999, $17,000 in 1998, and $17,004 in 1997). Acquisition 26 fees were based on 2% of 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 charged by an independent real estate broker. Payment of disposition fees are subject to the prior receipt by the limited partners of their capital contributions plus a stipulated return thereon. Deferred disposition fees were $1,889,943 and $1,058,215 at December 31, 1999 and 1998, respectively. 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 $22,679, $20,852 and $19,601, 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, including loans made to venture partners, 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 and interest thereon. Currently, the Partnership has one joint venture jointly owned with an affiliate of the Partnership which has substantial economic equity in the project. 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 initial carrying value of a property previously owned by a joint venture 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. Leasing costs are also capitalized and amortized over the related lease terms. Acquisition fees have been capitalized as part of the cost of real estate investments. Amounts not related to land are amortized using the straight-line method over the estimated useful lives of the underlying property. Tenant leases at the properties provide for rental increases over the respective lease terms. Rental revenue is being recognized on a straight-line basis over the lease terms. Realizability of Real Estate Investments The Partnership considers a real estate investment 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 disposition of property. The impairment loss is based on the excess of the investment's 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 27 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 debt 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 As discussed in Note 1, disposition fees due to AEW related to sales of investments are included in the determination of gains or losses resulting from such transactions. According to the terms of the advisory contract, payment of such fees has been deferred until the limited partners first receive their capital contributions, plus a stipulated return thereon. 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 Net income per unit is computed based on the weighted average 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. 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 had invested in nine real estate joint ventures, each organized as general partnerships with a real estate development/management firm and, in two cases, with an affiliate of the Partnership. Two joint venture projects were sold in 1994, one joint venture was sold in 1999, three joint ventures were converted to wholly-owned investments in 1995 and two joint ventures were converted to wholly-owned investments in 1996. Joint venture investments are in either of two forms. In one form, the Partnership makes an equity contribution which is subject to preferential cash distributions at a specified rate and to priority distributions with respect to sale or refinancing transactions. In the second form of joint venture, the Partnership makes an equity contribution to the venture, subject to preferential returns, and also makes a loan to its venture partner which, in turn, contributes the proceeds to the venture. The loans bear interest at a specified rate, mature in full in ten years, and are secured by the venture partner's interest in the venture. These loans have been accounted for as a real estate investment due to the attendant risks of ownership. The joint venture agreements provide for the funding of cash flow deficits in proportion to ownership interests and for the dilution of ownership share in the event a venture partner does not contribute proportionately. The respective real estate management/development firm is responsible for day-to-day development and operating activities, although overall authority and responsibility for the business is shared by the venturers. The real estate development/management firms or their affiliates also provide various services to the respective joint ventures for a fee. 28 The following is a summary of cash invested in the Partnership's remaining joint venture, net of returns of capital and excluding acquisition fees: Original December 31, Investment/ Rate of Ownership -------------------------- Location Return/Interest Interest 1999 1998 - -------- --------------- -------- ---------- ------------ Columbia Gateway Corporate Park Columbia, MD 10.5% 29.89% $ 152,500 $ 5,517,497 Waters Landing II On May 26, 1987, the Partnership entered into a joint venture with an affiliate of Oxford Development Corporation to acquire land and develop an apartment complex. The Waters Landing II joint venture was restructured, and the investment is being accounted for as a wholly-owned property effective April 1, 1996. (See Note 4.) University Business Park On September 30, 1987, the Partnership entered into a joint venture agreement with an affiliate of The Hewson Company. Effective January 1, 1996, the joint venture was dissolved and the venture partner's ownership interest was assigned to the Partnership. (See Note 4.) Columbia Gateway Corporate Park On December 21, 1987, the Partnership entered into a joint venture agreement with an affiliate of the Partnership and an affiliate of Manekin Corporation to construct and operate seven research and development /office buildings, of which six have been constructed to date. The Partnership committed to make a $6,402,000 equity contribution to the joint venture. The Partnership and New England Life Pension Properties IV (the "Affiliate") collectively had a 50% ownership interest in the joint venture. Ownership of the Columbia Gateway Corporate Park joint venture was restructured to give the Partnership and its Affiliate additional control over the business of the joint venture effective January 1, 1998 and are entitled to 30.5% and 69.5%, respectively, of the operating activity of the joint venture. On December 20, 1999, the Columbia Gateway Corporate Park joint venture investment in which the Partnership and an affiliate own a 29.89% and 68.11% interest, respectively, sold its property to an unaffiliated third party for gross proceeds of $19,850,000, of which the Partnership's share was $6,054,250. The Partnership received its 30.5% share of the net proceeds, $5,891,032 after closing costs, and recognized a gain of $957,057 ($11.52 per Limited Partnership Unit) on the sale. On January 27, 2000 the Partnership made a capital distribution of $5,755,960 ($70.00 per Limited Partnership Unit) from the proceeds of the sale. In addition, a portion of the proceeds was used to pay previously accrued but deferred management fees to AEW Real Estate Advisors, Inc. of $23,617. At December 31, 1999, $152,500 remained in the joint venture pending distribution. 29 Summarized Financial Information The following summarized financial information is presented in the aggregate for Columbia Gateway Corporate Park joint venture: Assets and Liabilities December 31, -------------------------- 1999 1998 --------- ------------ Assets Real property, at cost less accumulated depreciation of $1,829,627 $ -- $ 15,881,624 Other 539,968 742,813 --------- ------------ 539,968 16,624,437 Liabilities (8,425) (264,579) --------- ------------ Net assets 531,543 $ 16,359,858 ========= ============ Result of Operations Year ended December 31, -------------------------------------- 1999 1998 1997 ---------- ---------- ---------- Revenue Rental income $1,994,186 $2,312,692 $1,953,704 Other income 115,948 15,809 20 ---------- ---------- ---------- 2,110,134 2,328,501 1,953,724 ---------- ---------- ---------- Expenses Operating expenses 485,802 560,829 461,780 Depreciation and amortization 193,425 323,605 364,595 ---------- ---------- ---------- 679,227 884,434 826,375 ---------- ---------- ---------- Net Income $1,430,907 $1,444,067 $1,127,349 ========== ========== ========== Liabilities and expenses exclude amounts owed and attributable to the Partnership and its affiliate on behalf of its various financing arrangements with the joint venture. NOTE 4 - PROPERTY Palms Business Center III and IV Effective January 1, 1995, the Palms Business Center joint venture was restructured and the venture partner's ownership interest was assigned to the Partnership. The carrying value at conversion ($10,308,265) was allocated to land, building and improvements and other net operating assets. The buildings and improvements (thirteen commercial buildings in Las Vegas, Nevada) were being depreciated over 25 years, beginning January 1, 1995. On October 24, 1997, the Partnership sold the Palm Business Center III & IV property for $18,000,000. The Partnership received net proceeds of $17,823,259 and recognized a gain of $8,016,586 ($96.39 per Limited Partnership Unit at December 31, 1997). A disposition fee of $540,000 was accrued but not paid to AEW. On November 25, 1997, the Partnership made a capital distribution of $17,784,576 ($216 per Limited Partnership Unit) from the sale proceeds. In addition, a portion of the 30 proceeds was used to pay previously accrued but deferred management fees to AEW Real Estate Advisors, Inc. of $59,424. Santa Rita Plaza Effective August 1, 1995, the Santa Rita Plaza joint venture was restructured into a limited partnership, giving the Partnership control over management decisions. Accordingly, the investment is being accounted for as a wholly-owned property as of that date. The carrying value of the joint venture investment at conversion ($10,216,659) was allocated to building and improvements, mortgage loan receivable from the ground lessor and other net operating assets. On this same date, the Partnership made a fifteen-year loan in the amount of $1,750,000 to the ground lessor, which used a portion of the proceeds to repay a loan from the Santa Rita venture which, in turn, paid approximately $1,300,000 to the Partnership as a partial return of its capital investment in the venture. The Partnership can require full payment of the loan after August 1, 2000. The ground lease requires an annual base payment of $390,000 per year through 2063, plus 11.55% of rents, as defined. The buildings and improvements (a shopping center in Salinas, California) are being depreciated over 25 years beginning August 1, 1995. The loan to the ground lessor bears interest at 8.75%, with payments to be made monthly based on a 15 year amortization schedule, and is collateralized by the ground lessor's interest in the Santa Rita Plaza land. Dahlia Effective September 1, 1995, the Dahlia joint venture was restructured into a limited partnership, giving the Partnership control over management decisions. Accordingly, the investment is being accounted for as a wholly-owned property as of that date. The carrying value at conversion ($7,413,175) was allocated to land, building and improvements, and other net operating assets. The buildings and improvements (a warehouse facility in Fontana, California) were being depreciated over 25 years beginning September 1, 1995. On August 27, 1999, the Partnership sold the Dahlia property for $9,900,000. The Partnership received net proceeds of $9,723,207 and recognized a gain of $3,367,359 ($40.54 per Limited Partnership Unit). A disposition fee of $297,000 was accrued but not paid to AEW Real Estate Advisors, Inc. On September 21, 1999, the Partnership made a capital distribution of $9,456,220 ($115 per Limited Partnership Unit) from the sale proceeds. Puente Street Effective June 1, 1991, the Partnership assumed total ownership of this property due to the venture partner's inability to fund its proportionate share of operating deficits. The property originally included an industrial building, together with a parking lot and storage area, in Brea, California. During the fourth quarter of 1998, a 53,000 square-foot build-to-suit facility was completed on Partnership land. The original building and improvements were being depreciated over 30 years beginning June 1, 1991. The depreciation of the new building was also over a 30-year period, commencing during the fourth quarter of 1998. On June 25, 1999, the Partnership sold the Puente Street property for $11,770,000. The Partnership received net proceeds of $11,211,554 and recognized a gain of $104,975 ($1.26 per Limited Partnership Unit). A disposition fee of $353,100 was accrued but not paid to AEW Real Estate Advisors, Inc. On July 28, 1999, the Partnership made a capital distribution of $11,018,552 ($134 per Limited Partnership Unit) from the sale proceeds. In addition, a portion of the proceeds was used to pay deferred management fees to AEW Real Estate Advisors, Inc. of $234,897. 31 University Business Park Effective January 1, 1996, the University Business Park joint venture was dissolved and the venture partner's ownership interest was assigned to the Partnership. The carrying value of the joint venture investment at conversion ($5,630,581) was allocated to land, building and improvements and other net operating assets. The building and improvements (five industrial buildings in Phoenix, Arizona) were being depreciated over 25 years, beginning January 1, 1996. The University Business Park property was sold on May 28, 1997. The Partnership received net proceeds of $7,994,130 and recognized a gain of $2,160,404 ($25.96 per Limited Partnership Unit at June 30, 1997). A disposition fee of $250,500 was accrued but not paid to AEW Real Estate Advisors, Inc. On June 30, 1997, the Partnership made a capital distribution of $7,579,696 ($92 per Limited Partnership Unit) from the proceeds. In addition, a portion of the proceeds was used to pay previously accrued but deferred management fees to AEW Real Estate Advisors, Inc. of $388,320. Waters Landing II In the second quarter of 1996, the Waters Landing II joint venture was restructured and the venture partner's ownership interest was assigned to the Partnership. Since April 1, 1996, the investment has been accounted for as a wholly-owned property. The carrying value of the joint venture investment at conversion ($1,491,742) was allocated to land and the investment valuation allowance. In early November, 1998, a Purchase and Sale agreement was executed by the Partnership to sell the Waters Landing II investment. During the first quarter of 2000 the Partnership sold this investment at a gain of approximately $561,000. The following is a summary of the Partnership's investments in property (two at December 31, 1999 and four at December 31, 1998): December 31, -------------------------------- 1999 1998 ------------ ------------ Land $ -- $ 5,953,466 Buildings and improvements 8,480,975 24,964,136 Accumulated depreciation (1,665,207) (3,664,791) Impairment provision -- (3,500,000) Loan to ground lessor 1,445,320 1,524,916 Lease commissions and other assets, net 249,698 1,576,883 Accounts receivable 311,195 551,538 Accounts payable (126,075) (224,371) Property held for disposition 1,491,742 1,491,742 ------------ ------------ $ 10,187,648 $ 28,673,519 ============ ============ The Partnership recognized a net loss of $22,217 and net income of $12,500 for the years ended 1998 and 1999, respectively, from the Waters Landing investment which was held for disposition at December 31, 1998 and 1999. Tenant leases provide for minimum rents, subject to periodic adjustment. Tenants are also generally obligated to reimburse their pro-rata share of operating expenses. The minimum rents due under non-cancelable operating leases at all of the Partnership's properties are as follows: $1,340,115 in 2000; $905,504 in 2001; $757,484 in 2002; $753,673 in 2003; $598,269 in 2004, and $3,064,825 thereafter. 32 NOTE 5 - INCOME TAXES The Partnership's income 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 $ 5,540,881 $ 2,175,480 $ 13,153,920 Timing differences: Joint venture earnings 409,810 77,713 48,147 Property rentals (44,057) 34,398 (11,223) Expenses (151,748) 147,427 (258,142) Depreciation and amortization (33,681) (64,957) (51,506) Investment valuation allowances -- -- -- Gain on sale 396,197 -- (614,595) ------------ ------------ ------------ Taxable income $ 6,117,402 $ 2,370,061 $ 12,266,601 ============ ============ ============
NOTE 6 - PARTNERS' CAPITAL Allocation of net income 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. The adjusted capital contribution per limited partnership unit was reduced from $1,000 to $952 in 1994, then to $924 in 1995, then to $616 in 1997, and further reduced to $367 in 1999 as a result of the return of capital from the sale of seven investments. No capital distributions have been made to the general partners. Income from a sale is allocated in proportion to the distribution of related proceeds, provided that the general partners are allocated at least 1%. Income or losses from a sale, 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 - SUBSEQUENT 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 $343,032 ($4.13 per Limited Partnership Unit), as well as a capital distribution of $5,755,960 ($70 per Limited Partnership Unit) from the net sale proceeds of Columbia Gateway Corporate Park. See Note 4 for discussion of investment sale on February 17, 2000. 33 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III AT DECEMBER 31, 1999
Initial Cost to the Partnership ------------------------------------------------------------------- Lease Comm. Buildings & & Other Other Net Description Land Improvements Capital Costs Assets (Liabilities) - -------------------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street (See Note A) $3,985,498 $8,542,701 $1,273,000 ($619) Las Vegas, NV. - - Palms Business Center III and IV (See Note A) 2,195,482 7,783,981 115,493 213,309 Fontana, CA. - - Dahlia (See Note A) 1,367,969 5,471,878 227,625 345,703 Salinas, CA - - Santa Rita Plaza (See Note A) 0 8,056,722 196,574 1,963,363 Germantown, MD - - Waters Landing II (See Note A) 2,091,742 0 0 0 Phoeniz, AZ - - University Business Park 1,834,355 3,724,297 86,200 (14,271) ------------------------------------------------------------------------ Total Wholly-Owned Property 11,475,046 $33,579,579 $1,898,892 $2,507,485 ======================================================================== (1) Represents remaining working capital at 12/31/99 29.89% interest in Columbia Gateway Corporate Park ---------------------------- See Note B ------------------------------- Partnership. Develop and operate office/ R&D bldgs. in Columbia, MD ----------------------------------------------------------------------- Total Joint Ventures ======================================================================= Costs Subsequent to Acquisition ------------------------------------------------------------------------------------- Write off of Lease Buildings Write off of Commissions Change in and Tenant & Other Write down Other Net Description Improvements Improvements Cap. Costs Of Property Assets (Liabilities) - -------------------------------------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street (See Note A) $2,711,872 ($409,228) ($1,273,000) ($2,900,000) $1,255,687 Las Vegas, NV. - - Palms Business Center III and IV (See Note A) 65,573 0 0 0 (75,052) Fontana, CA. - - Dahlia (See Note A) 194,540 0 0 0 (493,348) Salinas, CA - - Santa Rita Plaza (See Note A) 424,253 0 0 0 18,220 Germantown, MD - - Waters Landing II (See Note A) 0 0 0 (600,000) 0 Phoeniz, AZ - - University Business Park 121,932 0 0 0 100,462 --------------------------------------------------------------------------------------- Total Wholly-Owned Property $3,518,170 ($409,228) ($1,273,000) ($3,500,000) $805,969 ======================================================================================= (1) Represents remaining working capital at 12/31/99 29.89% interest in Columbia Gateway Corporate Park ------------------------------------- See Note B -------------------------------------- Partnership. Develop and operate office/ R&D bldgs. in Columbia, MD --------------------------------------------------------------------------------------- Total Joint Ventures =======================================================================================
Balance at end of year ------------------------------------------------------------------------------------------- Accumulated Buildings & Other Disposal Depreciation Description Land Improvements Net Assets of Assets Total and Amortization - ------------------------------------------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street (See Note A) $ 3,985,498 $7,945,345 $1,255,068 ($13,229,807) ($43,896)(1) $0 Las Vegas, NV. - - Palms Business Center III and IV (See Note A) 2,195,482 7,849,554 253,750 (10,298,786) 0 $0 Fontana, CA. - - Dahlia (See Note A) 1,367,969 5,666,418 79,980 (7,072,049) 42,318(1) $0 Salinas, CA - - Santa Rita Plaza (See Note A) 0 8,480,975 2,178,157 0 10,659,132 ($1,960,418) Germantown, MD - - Waters Landing II (See Note A) 1,491,742 0 0 0 1,491,742 $0 Phoeniz, AZ - - University Business Park 1,834,355 3,846,229 172,391 (5,854,205) (1,230)(1) $0 --------------------------------------------------------------------------------------------- Total Wholly-Owned Property $10,875,046 $33,788,521 $3,939,346 ($36,454,847) $12,148,066 ($1,960,418) ============================================================================================= (1) Represents remaining working capital at 12/31/99 29.89% interest in Columbia Gateway Corporate Park -------------- See Note B ------------- $152,500 N/A Partnership. Develop and operate office/ R&D bldgs. in Columbia, MD --------------------------------------------------------------------- Total Joint Ventures $152,500 ===================================================================== Date of Date Depreciable Description Construction Acquired Life - -------------------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street (See Note A) 1989 6/1/91 30 Years Las Vegas, NV. - - Dahlia (See Note A) Lease-up 03/07/1988 25 Years Fontana, CA. - - Santa Rita Plaza (See Note A) 1990 09/21/1987 25 Years Salinas, CA - - Santa Rita Plaza (See Note A) 1990 02/01/1989 25 Years Germantown, MD To be - - Waters Landing II (See Note A) Constructed 05/26/1987 Land Phoeniz, AZ - - University Business Park 1991 09/30/1987 30 Years Total Wholly-Owned Property (1) Represents remaining working capital at 12/31/99 29.89% interest in Columbia Gateway Corporate Park Phase I - 1990 12/21/87 50 Years Partnership. Develop and operate office/ R&D bldgs. in Columbia, MD Phase II - Under Construction Total Joint Ventures
34 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE III AT DECEMBER 31, 1999
Balance Conversion to Additions to Additions/ Change in as of Wholly-Owned Lease Deletions to Write Down Property Working Description 12/31/1996 Property Commissions Property of Property Capital - ---------------------------------- ----------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street $11,093,924 $0 $88,482 $261,312 $0 ($19,065) Las Vegas, NV. - - Palms Business Center III and IV 10,312,355 0 5,011 0 0 (23,572) Fontana, CA. - - Dahlia 7,087,978 0 0 6,727 0 30,597 Salinas, CA - - Santa Rita Plaza 10,546,354 0 5,273 (76,000) 0 94,266 Germantown, MD - - Waters Landing II 1,491,742 0 0 0 0 0 Phoenix, AZ - - University Business Park 5,643,154 0 7,553 57,235 0 184,137 ----------------------------------------------------------------------------------------------- Total Wholly-Owned Property $46,175,507 $0 $106,319 $249,274 $0 $266,363 =============================================================================================== 12/31/1996 1997 1997 Balance Accumulated Depreciation Depreciation Disposal As of Depreciation and and Amortization and Amortization Description Of Asset 12/31/1997 Amortization Expense Subtotal - ---------------------------------- ----------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street $0 $11,424,653 $1,516,146 ($248,140) $1,764,286 Las Vegas, NV. - - Palms Business Center III and IV (10,298,786) (4,992) (1) 741,484 (290,629) $1,032,113 Fontana, CA. - - Dahlia 0 7,125,302 301,593 (258,789) $560,382 Salinas, CA - - Santa Rita Plaza 0 10,569,893 604,074 (428,362) $1,032,436 Germantown, MD - - Waters Landing II 0 1,491,742 0 0 $0 Phoenix, AZ - - University Business Park (5,854,206) 37,873 (1) 183,456 (87,524) $270,980 ----------------------------------------------------------------------------------------------- Total Wholly-Owned Property ($16,152,992) $30,644,471 $3,346,753 ($1,313,444) $4,660,197 =============================================================================================== 12/31/1997 Accumulated Disposal Depreciation Description of Asset and Amortization - ---------------------------------- --------------------------------- Brea, CA. - - Puente Street $1,764,286 Las Vegas, NV. - - Palms Business Center III and IV (1,032,113) 0 Fontana, CA. - - Dahlia 560,382 Salinas, CA - - Santa Rita Plaza 1,032,436 Germantown, MD - - Waters Landing II 0 Phoenix, AZ - - University Business Park (270,980) 0 --------------------------------- Total Wholly-Owned Property ($1,303,093) $3,357,104 =================================
(1) Represents remaining working capital at 12/31/97
Balance Conversion to Additions to Additions/ Change in as of Wholly-Owned Lease Deletions to Write Down Property Working Description 12/31/1997 Property Commissions Property of Property Capital - ---------------------------------- ---------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street $11,424,653 $0 $73,988 $1,671,440 $0 $2,785 Las Vegas, NV. - - Palms Business Center III and IV (4,992) 0 0 0 0 4,992 Fontana, CA. - - Dahlia 7,125,302 0 129,939 187,813 0 89,160 Salinas, CA - - Santa Rita Plaza 10,569,893 0 20,765 168,137 0 65,440 Germantown, MD - - Waters Landing II 1,491,742 0 0 0 0 0 Phoenix, AZ - - University Business Park 37,873 0 0 0 0 (26,525) ---------------------------------------------------------------------------------------------- Total Wholly-Owned Property $30,644,471 $0 $224,692 $2,027,390 $0 $135,852 ============================================================================================== 12/31/1997 1998 1998 Balance Accumulated Depreciation Depreciation Disposal As of Depreciation and and Amortization and Amortization Description Of Asset 12/31/1998 Amortization Expense Subtotal - ---------------------------------- ----------------------------------------------------------------------------------------- Brea, CA. - - Puente Street $0 $13,172,866 $1,764,286 ($267,350) $2,031,636 Las Vegas, NV. - - Palms Business Center III and IV 0 0 0 0 $0 Fontana, CA. - - Dahlia 0 7,532,214 560,382 (291,033) $851,415 Salinas, CA - - Santa Rita Plaza 0 10,824,235 1,032,436 (443,399) $1,475,835 Germantown, MD - - Waters Landing II 0 1,491,742 0 0 $0 Phoenix, AZ - - University Business Park 0 11,348 (1) 0 0 $0 ----------------------------------------------------------------------------------------- Total Wholly-Owned Property $0 $33,032,405 $3,357,104 ($1,001,782) $4,358,886 ========================================================================================= 12/31/1998 Accumulated Disposal Depreciation Description of Asset and Amortization - ----------------------------------- -------------------------------- Brea, CA. - - Puente Street $2,031,636 Las Vegas, NV. - - Palms Business Center III and IV 0 Fontana, CA. - - Dahlia 851,415 Salinas, CA - - Santa Rita Plaza 1,475,835 Germantown, MD - - Waters Landing II 0 Phoenix, AZ - - University Business Park 0 -------------------------------- Total Wholly-Owned Property $0 $4,358,886 ================================
(1) Represents remaining working capital at 12/31/98
Balance Conversion to Additions to Additions/ Change in as of Wholly-Owned Lease Deletions to Write Down Property Working Description 12/31/1998 Property Commissions Property of Property Capital - ---------------------------------- -------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street $13,172,866 $0 $11,131 $2,354 $0 ($440) Las Vegas, NV. - - Palms Business Center III and IV 0 0 0 0 0 0 Fontana, CA. - - Dahlia 7,532,214 0 0 0 0 (417,847) Salinas, CA - - Santa Rita Plaza 10,824,235 0 56,334 26,248 0 (247,685) Germantown, MD - - Waters Landing II 1,491,742 0 0 0 0 0 Phoenix, AZ - - University Business Park 11,348 0 0 0 0 (12,578) -------------------------------------------------------------------------------------------- Total Wholly-Owned Property $33,032,405 $0 $67,465 $28,602 $0 ($678,550) ============================================================================================ 12/31/1998 1998 1998 Balance Accumulated Depreciation Depreciation Disposal As of Depreciation and and Amortization and Amortization Description Of Asset 12/31/1999 Amortization Expense Subtotal - ---------------------------------- ----------------------------------------------------------------------------------------------- Brea, CA. - - Puente Street ($13,229,807) ($43,896) (1) $2,031,636 ($91,591) $2,123,227 Las Vegas, NV. - - Palms Business Center III and IV 0 0 0 0 $0 Fontana, CA. - - Dahlia (7,072,049) 42,318 (1) 851,415 (161,786) $1,013,201 Salinas, CA - - Santa Rita Plaza 0 10,659,132 1,475,835 (484,583) $1,960,418 Germantown, MD - - Waters Landing II 0 1,491,742 0 0 $0 Phoenix, AZ - - University Business Park 0 (1,230) (1) 0 0 $0 ----------------------------------------------------------------------------------------------- Total Wholly-Owned Property (20,301,856) $12,148,066 $4,358,886 ($737,960) $5,096,846 =============================================================================================== 12/31/1999 Accumulated Disposal Depreciation Description of Asset and Amortization - ---------------------------------- ----------------------------------- Brea, CA. - - Puente Street ($2,123,227) $0 Las Vegas, NV. - - Palms Business Center III and IV 0 Fontana, CA. - - Dahlia (1,013,201) 0 Salinas, CA - - Santa Rita Plaza 1,960,418 Germantown, MD - - Waters Landing II 0 Phoenix, AZ - - University Business Park 0 ----------------------------------- Total Wholly-Owned Property ($3,136,428) $1,960,418 ===================================
(1) Represents remaining working capital at 12/31/99 35 NEW ENGLAND PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE III - NOTE B AT DECEMBER 31, 1999
CASH BALANCE CASH EQUITY IN 1997 AMORTIZATION DISTRIBUTED PERCENT OF AS OF INVESTMENTS IN INCOME/ OF DEFERRED FROM DESCRIPTION OWNERSHIP 12/31/1996 JOINT VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE - ------------------------------------------------------------------------------------------------------------------------------------ Columbia Gateway Corporate Park 15.25% 4,722,223 0 343,841 (1,939) (228,086) ------------------------------------------------------------------------------------ $4,722,223 $0 $343,841 ($1,939) ($228,086) ==================================================================================== CONVERSION TO BALANCE WRITE-DOWN DISPOSAL WHOLLY-OWNED AS OF DESCRIPTION OF PROPERTY OF PROPERTY PROPERTY 12/31/1997 - -------------------------------------------------------------------------------------------------------- Columbia Gateway Corporate Park 0 0 0 4,836,039 -------------------------------------------------------------------- $0 $0 $0 $4,836,039 ====================================================================
CASH BALANCE CASH EQUITY IN 1998 AMORTIZATION DISTRIBUTED PERCENT OF AS OF INVESTMENTS IN INCOME/ OF DEFERRED FROM DESCRIPTION OWNERSHIP 12/31/1997 JOINT VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE - ----------------------------------------------------------------------------------------------------------------------------------- Columbia Gateway Corporate Park 15.25% 4,836,039 0 440,440 (1,940) (430,606) ----------------------------------------------------------------------------------- $4,836,039 $0 $440,440 ($1,940) ($430,606) =================================================================================== CONVERSION TO BALANCE WRITE-DOWN DISPOSAL WHOLLY-OWNED AS OF DESCRIPTION OF PROPERTY OF PROPERTY PROPERTY 12/31/1998 - -------------------------------------------------------------------------------------------------------- Columbia Gateway Corporate Park 0 0 0 4,843,933 -------------------------------------------------------------------- $0 $0 $0 $4,843,933 ====================================================================
CASH BALANCE CASH EQUITY IN 1998 AMORTIZATION DISTRIBUTED PERCENT OF AS OF INVESTMENTS IN INCOME/ OF DEFERRED FROM DESCRIPTION OWNERSHIP 12/31/1998 JOINT VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE - ------------------------------------------------------------------------------------------------------------------------------------ Columbia Gateway Corporate Park 29.89% 4,843,933 0 436,427 (1,455) (374,058) ------------------------------------------------------------------------------------ $4,843,933 $0 $436,427 ($1,455) ($374,058) ==================================================================================== CONVERSION TO BALANCE WRITE-DOWN DISPOSAL WHOLLY-OWNED AS OF DESCRIPTION OF PROPERTY OF PROPERTY PROPERTY 12/31/1999 - -------------------------------------------------------------------------------------------------------- Columbia Gateway Corporate Park (4,752,347) 0 152,500 -------------------------------------------------------------------- $0 ($4,752,347) $0 $152,500 ====================================================================
36 FINANCIAL STATEMENTS INDEX NO. 2 Auditor's Report and Financial Statements of Gateway 51 Partnership Independent Auditor's Report of Wolpoff and Company, LLP Balance Sheet - December 31, 1998 and 1997 Statement of Income - For the Years ended December 31, 1998, 1997 and 1996 Statement of Partners' Capital - For the Years ended December 31, 1998, 1997 and 1996 Statement of Cash Flows - For the Years ended December 31, 1998, 1997 and 1996 Notes to Financial Statements 37 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) CONTENTS DECEMBER 31, 1998 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 38 [LETTERHEAD OF WOLPOFF & COMPANY, LLP] To the Partners Gateway 51 Partnership (A Maryland General Partnership) Columbia, Maryland INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS We have audited the balance sheet of Gateway 51 Partnership (A Maryland General Partnership) as of December 31, 1998 and 1997, and the related statements of income, partners' capital, and cash flows for each of the three years in the period ended December 31,1998, 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 Gateway 51 Partnership (A Maryland General Partnership) as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, 1997, and 1996, in conformity with generally accepted accounting principles. /s/ Wolpoff & Company, LLP WOLPOFF & COMPANY, LLP Baltimore, Maryland January 13, 1999 39 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) BALANCE SHEET ASSETS
December 31, ------------------------------ 1998 1997 ------------ ------------ PROPERTY, AT COST - Note 1 Land $ 4,966,738 $ 4,966,738 Building and Improvements 11,892,943 11,614,717 Preliminary Development Costs 42,247 42,247 Deferred Costs - Note 3 809,323 663,719 ------------ ------------ 17,711,251 17,287,421 Less Accumulated Depreciation and Amortization 1,984,627 1,630,022 ------------ ------------ PROPERTY, NET 15,726,624 15,657,399 ------------ ------------ OTHER ASSETS Cash and Cash Equivalents-Note 1 421,833 558,136 ------------ ------------ Receivables From Tenants Rents and Expense Billings 106,282 -0- Deferred Rent Receivable - Note 1 202,228 73,447 Allowance for Doubtful Accounts (95,174) -0- ------------ ------------ 213,336 73,447 ------------ ------------ Prepaid Expenses 107,644 107,442 ------------ ------------ TOTAL OTHER ASSETS 742,813 739,025 ------------ ------------ $ 16,469,437 $ 16,396,424 ============ ============
- ---------- The notes to financial statements are an integral part of this statement. 40 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) BALANCE SHEET LIABILITIES AND PARTNERS' CAPITAL December 31, --------------------------- 1998 1997 ----------- ----------- LIABILITIES Accounts Payable and Accrued Expenses $ 67,398 $ 34,935 Tenant Security Deposits 150,000 15,193 Prepaid Tenant Reimbursements 47,181 142,688 ----------- ----------- TOTAL LIABILITIES 264,579 192,816 PARTNERS' CAPITAL - Notes 1 and 2 16,204,858 16,203,608 ----------- ----------- $16,469,437 $16,396,424 =========== =========== - ---------- The notes to financial statements are an integral part of this statement. 41 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF INCOME
Year Ended December 31, --------------------------------------------- 1998 1997 1996 ----------- ----------- ----------- REVENUE - Notes 1 and 5 Gross Rent Potential $ 1,943,734 $ 1,775,359 $ 1,684,997 Less Vacancies and Free Rent 72,135 80,444 108,412 ----------- ----------- ----------- Net Rental Income 1,871,599 1,694,915 1,576,585 Expense Reimbursements From Tenants 441,093 258,789 364,873 Other Income 15,809 20 18,163 ----------- ----------- ----------- TOTAL REVENUE 2,328,501 1,953,724 1,959,621 ----------- ----------- ----------- OPERATING EXPENSES Real Property Taxes 211,009 211,967 207,855 Building and Grounds Maintenance 144,004 142,678 157,314 Bad Debts 95,174 -0- -0- Management Fees - Note 3 62,338 61,036 57,542 Utilities 26,165 27,297 24,890 General and Administrative 17,966 12,229 25,856 Insurance 4,173 6,573 9,292 ----------- ----------- ----------- TOTAL OPERATING EXPENSES 560,829 461,780 482,749 ----------- ----------- ----------- OPERATING INCOME 1,767,672 1,491,944 1,476,872 ----------- ----------- ----------- ADJUSTMENTS TO ARRIVE AT NET INCOME Depreciation and Amortization (354,605) (315,417) (302,585) Abandonment of Tenant Improvements - Note 1 -0- (80,178) (24,256) ----------- ----------- ----------- (354,605) (395,595) (326,841) ----------- ----------- ----------- NET INCOME- Note 4 $ 1,413,067 $ 1,096,349 $ 1,150,031 =========== =========== ===========
- ---------- The notes to financial statements are an integral part of this statement. 42 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF PARTNERS' CAPITAL
Year Ended December 31, ------------------------------------------------ 1998 1997 1996 ------------ ------------ ------------ CAPITAL CONTRIBUTIONS - Note 2 Prior Years $ 20,267,826 $ 20,267,826 $ 20,267,826 ------------ ------------ ------------ CAPITAL PLACEMENT FEE - Notes 1 and 2 Prior Years (202,678) (202,678) (202,678) ------------ ------------ ------------ DISTRIBUTIONS Prior Years (8,796,724) (8,048,893) (6,948,893) Current Year (1,411,817) (747,831) (1,100,000) ------------ ------------ ------------ (10,208,541) (8,796,724) (8,048,893) ------------ ------------ ------------ ACCUMULATED INCOME Prior Years 4,935,184 3,838,835 2,688,804 Current Year 1,413,067 1,096,349 1,150,031 ------------ ------------ ------------ 6,348,251 4,935,184 3,838,835 ------------ ------------ ------------ TOTAL PARTNERS' CAPITAL $ 16,204,858 $ 16,203,608 $ 15,855,090 ============ ============ ============
- ---------- The notes to financial statements are an integral part of this statement. 43 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) STATEMENT OF CASH FLOWS
Year Ended December 31, --------------------------------------------- 1998 1997 1996 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,413,067 $ 1,096,349 $ 1,150,031 ----------- ----------- ----------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation and Amortization 354,605 315,417 302,585 Abandonment of Tenant Improvements -0- 80,178 24,256 Change in Receivables From Tenants (139,889) 8,667 (41,033) Increase in Prepaid Expenses (202) (64,870) (6,302) Change in Accounts Payable and Accrued Expenses 32,463 (6,176) 16,526 Change in Prepaid Tenant Reimbursements (95,507) 142,688 -0- ----------- ----------- ----------- Total Adjustments 151,470 475,904 296,032 ----------- ----------- ----------- Net Cash Provided by Operating Activities 1,564,537 1,572,253 1,446,063 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Building and Improvement Costs (278,227) (359,189) (258,309) Leasing Costs (145,603) (116,524) (80,786) Increase in Tenant Security Deposits 134,807 12,784 -0- Decrease in Tenant Improvement Loans -0- 688 32,057 ----------- ----------- ----------- Net Cash Used by Investing Activities (289,023) (462,241) (307,038) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to Partners (1,411,817) (747,831) (1,100,000) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (136,303) 362,181 39,025 CASH AND CASH EQUIVALENTS, BEGINNING 558,136 195,955 156,930 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, ENDING $ 421,833 $ 558,136 $ 195,955 =========== =========== ===========
- ---------- The notes to financial statements are an integral part of this statement. 44 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Gateway 51 Partnership (A Maryland General Partnership) (the Partnership) was formed on December 21, 1987, under the Maryland Uniform Partnership Act. The agreement was amended and restated in 1989 to reflect changes in partner ownership percentages. The partnership agreement was amended and restated effective January 1, 1998, whereby M.O.R. Gateway 51, Limited Partnership (M.O.R.) transferred 34.055% and 14.945% to New England Life Pension Properties IV (NELPP IV) and New England Pension Properties V (NEPP V), respectively. Subsequently, NELPP IV transferred a 0.695% partnership interest, NEPP V transferred a 0.305% partnership interest, and M.O.R. transferred a 1% partnership interest to NE/Gateway 51 Limited Partnership (NE/Gateway), bringing the ownership as of January 1, 1998, to the following: NELPP IV 68.11% NEPP V 29.89% NE/Gateway 2.00% Property The Partnership owns 21 acres of land in Howard County, Maryland. The property has been developed with six office/research buildings. Plans call for a seventh building with approximately 15,000 square feet of space. All property is recorded at cost. Information regarding the buildings is as follows:
Occupancy Square Date Placed -------------------------------------- Building Footage Into Service Tenants 12/31/98 12/31/97 12/31/96 -------- ------- ------------ ------- -------- -------- -------- A 46,840 3/1/91 Multiple 100% 92% 92% B 21,991 9/1/90 AVNET 100% 100% 100% C 38,225 7/15/91 EVI, Inc. 100% 100% 100% F 35,812 2/1/92 Multiple 100% 100% 82% D-E 45,951 8/8/94 Columbia National 100% 100% 100% ------- 188,819 100% 98% 94% =======
Carrying costs, operating expenses, and depreciation begin as a charge against operations on the date the buildings were placed into service. 45 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1998 Note 1 - During 1997, tenant improvements completed in prior years were (Cont.) demolished in order to build out the space for new tenants. The loss on abandonment of tenant improvements is calculated as follows: Cost $ 127,688 Accumulated Depreciation (47,510) --------- Abandonment of Tenant Improvements $ 80,178 ========= 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. 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 insurance limitation. Depreciation Building costs are being depreciated using the straight-line method over the estimated useful lives of 50 years. Beginning in January 1998, the Partnership changed depreciation methods for tenant improvements. Tenant improvements are being depreciated using the straight-line method over the life of the tenants' lease; in prior years, the improvements were depreciated over 50 years. Rental Income Rental income for 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. Amortization Deferred costs are amortized as follows: Amortization Amount Period ------ ------ Organization Costs $ 13,555 Complete Leasing Costs and Commissions 795,767 Lease Terms -------- $809,322 ======== 46 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1998 Note 1 - Income Taxes (Cont.) Partnerships, as such, are not subject to income taxes. The partners are required to report their respective shares of partnership income and other tax items on their income tax returns (see Note 4). Capital Placement Fee Costs incurred for arranging the Partnership's equity have been treated as a reduction of partners' capital (see Note 2). Note 2 - PARTNERS' CAPITAL Capital Investment NELPP IV and NEPP V have agreed to provide equity of $14,598,000 and $6,402,000, respectively, totaling $21,000,000. As of December 31, 1998, 1997, and 1996, total capital contributions amounted to $20,267,826. Cumulative Priority Return NELPP IV and NEPP V are entitled to cumulative priority returns of 10.5%, compounded monthly on capital invested. The Partnership paid priority returns totaling $1,411,817, $747,831, and $1,100,000 during 1998, 1997, and 1996, respectively. As of December 31, 1998, 1997, and 1996, unpaid priority returns amounted to $10,855,114, $9,127,936, and $6,888,115, respectively. Capital Placement Fee The Partnership incurred fees of $202,678 with Paine Webber Mortgage Finance, Inc. with respect to capital raised by the Partnership. This amount has been charged against partners' capital. Note 3 - RELATED PARTY TRANSACTIONS Management Fees The Partnership has entered into an agreement with Manekin Corporation, a related entity, to act as management agent for the property. The management agreement provides for a management fee equal to 3% of rent and tenant expense billings. Leasing Commissions Leasing commissions in the amount of $145,603, $105,387, and $80,786 were paid to related parties during 1998, 1997, and 1996, respectively. 47 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1998 Note 4 - TAX ACCOUNTING Tax accounting differs from financial accounting as follows:
Current Year Prior Years Total ------------ ----------- ----------- Financial Income $ 1,413,067 $ 4,935,184 $ 6,348,251 Additional Depreciation (87,820) (757,466) (845,286) Lease-Up Period Items Capitalized for GAAP -0- 4,264 4,264 Allowance for Doubtful Accounts 95,174 -0- 95,174 Deferred Rent Receivable (128,781) (73,447) (202,228) Prepaid Property Taxes (956) (105,026) (105,982) Prepaid Tenant Reimbursements (95,507) 142,688 47,181 ----------- ----------- ----------- Taxable Income $ 1,195,177 $ 4,146,197 $ 5,341,374 =========== =========== ===========
Note 5 - LEASES The following is a schedule of future minimum lease payments to be received under noncancelable operating leases at December 31, 1998: Year Ending December 31, 1999 $ 1,524,603 2000 827,454 2001 726,557 2002 736,016 2003 745,758 ----------- $ 3,814,630 =========== 48 To the Partners Gateway 51 Partnership (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 12 and 13 is presented for the purpose 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 13, 1999 49 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) SCHEDULE OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1998
NE/ M.O.R. 51 New England New England Gateway 51 Gateway Life Pension Pension Limited Limited Properties IV Properties V Partnership Partnership Total ------------- ------------ ----------- ----------- ------------ OWNERSHIP PERCENTAGE Through December 31, 1997 34.75% 15.25% 0.00% 50.00% 100.00% ============ ============ ===== ====== ============ As of January 1, 1998 68.11% 29.89% 2.00% 0.00% 100.00% ============ ============ ===== ====== ============ CAPITAL CONTRIBUTIONS Prior Years $ 14,086,139 $ 6,181,687 $ -0- $ -0- $ 20,267,826 ------------ ------------ ----- ------ ------------ CAPITAL PLACEMENT FEE Prior Years (106,427) (96,251) -0- -0- (202,678) ------------ ------------ ----- ------ ------------ DISTRIBUTIONS - Note 2 Prior Years (5,969,698) (2,827,026) -0- -0- (8,796,724) Current Year (981,211) (430,606) -0- -0- (1,411,817) ------------ ------------ ----- ------ ------------ (6,950,909) (3,257,632) -0- -0- (10,208,541) ------------ ------------ ----- ------ ------------ ACCUMULATED INCOME Prior Years 3,429,956 1,505,228 -0- -0- 4,935,184 Current Year 982,082 430,985 -0- -0- 1,413,067 ------------ ------------ ----- ------ ------------ 4,412,038 1,936,213 -0- -0- 6,348,251 ------------ ------------ ----- ------ ------------ PARTNERS' CAPITAL, 12/31/98 $ 11,440,841 $ 4,764,017 $ -0- $ -0- $ 16,204,858 ============ ============ ===== ====== ============
- ---------- See Independent Auditors Report on Supplementary Information. 50 GATEWAY 51 PARTNERSHIP (A MARYLAND GENERAL PARTNERSHIP) SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS YEAR ENDED DECEMBER 31, 1998
NE/ M.O.R. 51 New England New England Gateway 51 Gateway Life Pension Pension Limited Limited Properties IV Properties V Partnership Partnership Total ------------- ------------ ----------- ----------- ----- OWNERSHIP PERCENTAGE Through December 31, 1997 34.75% 15.25% 0.00% 50.00% 100.00% ============ =========== ===== ====== ============ As of January 1, 1998 68.11% 29.89% 2.00% 0.00% 100.00% ============ =========== ===== ====== ============ CAPITAL CONTRIBUTIONS Prior Years $ 14,086,139 $ 6,181,687 $ -0- $ -0- $ 20,267,826 ------------ ----------- ----- ------ ------------ CAPITAL PLACEMENT FEE Prior Years (106,427) (96,251) -0- -0- (202,678) ------------ ----------- ----- ------ ------------ DISTRIBUTIONS - Note 2 Prior Years (5,969,698) (2,827,026) -0- -0- (8,796,724) Current Year (981,211) (430,606) -0- -0- (1,411,817) ------------ ----------- ----- ------ ------------ (6,950,909) (3,257,632) -0- -0- (10,208,541) ------------ ----------- ----- ------ ------------ ACCUMULATED INCOME Prior Years 2,883,779 1,262,418 -0- -0- 4,146,197 Current Year 830,648 364,529 -0- -0- 1,195,177 ------------ ----------- ----- ------ ------------ 3,714,427 1,626,947 -0- -0- 5,341,374 ------------ ----------- ----- ------ ------------ PARTNERS CAPITAL, 12/31/98 $ 10,743,230 $ 4,454,751 $ -0- $ -0- $ 15,197,981 ============ =========== ===== ====== ============
- ---------- See Independent Auditor's Report on Supplementary Information. 51 EXHIBIT INDEX Exhibit Page Number Number - ------ ------ 10CC. $1,750,000 note secured by Deed of Trust between * the Partnership, as Lender, and Nielsen Properties, Ltd, as Borrower dated August 1, 1995. 10DD. Third Amendment to Agreement of Lease dated August * 1, 1995 by and between Nielsen Properties, Ltd., a California limited partnership, R/M Salinas Venture, a California general partnership, and R/M Salinas, L.P., a California limited partnership. 10EE. R/M Salinas L.P. Limited Partnership Agreement dated * August 1, 1995 between Rodde McNellis/Salinas, a California general partnership and Registrant. 27. Financial Data Schedule - ------------------------------------------------------------- * Previously filed and incorporated herein by reference. 52 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 PENSION PROPERTIES V; A REAL ESTATE LIMITED PARTNERSHIP Date: March 28, 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 /s/ Alison Husid Cutler Chief Executive Officer March 28, 2000 - ------------------------ and Director of the Managing Alison Husid Cutler General Partner Vice President /s/ Pamela J. Herbst and Director of the Managing March 28, 2000 - ------------------------ General Partner Pamela J. Herbst Vice President /s/ J. Grant Monahon and Director of the Managing March 28, 2000 - ------------------------ General Partner J. Grant Monahon /s/ James J. Finnegan Vice President of the Managing March 28, 2000 - ------------------------ General Partner James J. Finnegan Treasurer and Principal Financial and /s/ Karin J. Lagerlund Accounting Officer of the Managing March 28, 2000 - ------------------------ General Partner Karin J. Lagerlund 53 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 DEC-31-1999 12,026,888 0 0 0 0 12,026,888 10,340,148 0 22,367,036 110,238 1,930,523 0 0 0 20,326,275 22,367,036 3,278,774 8,139,066 1,218,020 1,218,020 1,380,165 0 0 5,540,881 0 5,540,881 0 0 0 5,540,881 66.71 66.71
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