<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended March 31, 1997 Commission File Number 0-11884
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2774875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART I
FINANCIAL INFORMATION
-----------------------
<PAGE>
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1997 December 31,1996
-------------- -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Ground leases and mortgage loans,
net $ 4,761,213 $ 4,722,880
Property, net 5,531,184 5,588,459
Deferred leasing costs and
other assets, net 275,283 269,876
----------- -----------
10,567,680 10,581,215
Cash and cash equivalents 2,392,976 2,300,885
Short-term investments 546,313 498,869
Interest, rent and other receivables 8,013 50,452
----------- -----------
$13,514,982 $13,431,421
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 409,654 $ 437,083
Deferred disposition fees 654,543 654,543
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Total liabilities 1,064,197 1,091,626
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Partners' capital:
Limited partners ($360.00 per
unit; 30,000 units authorized,
issued and outstanding) 12,404,591 12,294,711
General partner 46,194 45,084
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Total partners' capital 12,450,785 12,339,795
----------- -----------
$13,514,982 $13,431,421
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1997 1996
------ ------
<S> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 240,543 $ 191,362
Property operating expenses (72,667) (86,004)
Depreciation and amortization (63,018) (52,117)
--------- ---------
104,858 53,241
Ground rentals and interest on
mortgage loans -- 306,625
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Total real estate activity 104,858 359,866
Interest on cash equivalents
and short term investments 33,957 27,575
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Total investment activity 138,815 387,441
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PORTFOLIO EXPENSES
Management fee -- 28,681
General and administrative 27,825 27,265
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27,825 55,946
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Net Income $ 110,990 $ 331,495
========= =========
Net income per limited partnership
unit $ 3.66 $ 10.94
========= =========
Cash distributions per
limited partnership unit $ -- $ 8.20
========= =========
Number of limited partnership
units outstanding during the
period 30,000 30,000
========= =========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1997 1996
---------------------- -------------------------
General Limited General Limited
Partner Partners Partner Partners
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at
beginning of
period $ 45,084 $ 12,294,711 $ 50,874 $ 18,467,706
Cash
distributions -- -- (2,485) (246,000)
Net income 1,110 109,880 3,315 328,180
--------- ----------- -------- ------------
Balance at
end of period $ 46,194 $ 12,404,591 $ 51,704 $ 18,549,886
========= ============ ========= ============
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------
1997 1996
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<S> <C> <C>
Net cash provided by operating activities $ 144,011 $ 161,526
----------- -----------
Cash flows from investing activities:
Capital expenditures on owned property (4,476) (5,598)
(Increase) decrease in short-term
investments, net (47,444) 114,550
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Net cash(used in) provided by
investing activities (51,920) 108,952
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Cash flows from financing activity:
Distributions to partners -- (248,485)
----------- -----------
Net increase in
cash and cash equivalents 92,091 21,993
Cash and cash equivalents:
Beginning of period 2,300,885 1,204,043
----------- -----------
End of period $ 2,392,976 $ 1,226,036
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of March 31, 1997 and December 31, 1996 and the results of
its operations, its cash flows and changes in partners' capital for the interim
periods ended March 31, 1997 and 1996. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1996
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
New England Life Pension Properties; A Real Estate Limited Partnership
(the "Partnership") is a Massachusetts limited partnership organized for the
purpose of investing primarily in newly constructed and existing income
producing real properties. It primarily serves as an investment for qualified
pension and profit sharing plans and other entities intended to be exempt from
Federal income tax. The Partnership commenced operations in June, 1983 and
acquired six real estate investments through 1985, four of which have been sold
as of March 31, 1997. It intends to dispose of its investments within twelve
years of their acquisition, and then liquidate; however, the general partner
could extend the investment period if it is in the best interest of the limited
partners.
NOTE 2 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
- --------------------------------------------------------
Decatur TownCenter was sold on October 10, 1996 for a price which
approximated the Partnership's carrying value, as previously adjusted for
valuation allowances.
In September 1996, the sole tenant at Rivers Corporate Park filed for
Chapter 11 bankruptcy protection. The Partnership's ground lessee is negotiating
with the tenant to settle amounts due under the tenant's lease. The Partnership
has not received ground rent payments or interest payments on the mortgage loan
since the bankruptcy filing, and believes that a portion of the mortgage amount
may not be collected.
In October 1996, the Partnership reached an agreement in principle with
the borrower on the Rivers Corporate Park mortgage loan which had matured in
1994, whereby the maturity date will be extended to December 1997. In addition,
the fixed interest and ground rental payments will be reduced, but the
Partnership's rate of participation in revenue from the underlying property will
be increased. These changes will be retroactive to January 1, 1996; however, any
adjustment to amounts previously recognized by the Partnership is expected to be
insignificant. Further, the Partnership will be able to cause a sale of the
property.
<PAGE>
The mortgage loan on Rivers Corporate Park is impaired, as were the
mortgage loans on Decatur TownCenter. Accordingly, a valuation allowance has
been established to adjust the carrying value of each loan to its estimated fair
market value less anticipated costs of sale. The activity in the valuation
allowance during 1996 and 1997, together with the related recorded and carrying
values of the impaired mortgage loans at the beginning and end of the respective
periods, are as follows:
<TABLE>
<CAPTION>
Recorded Valuation Carrying
Value Allowance Value
----------- ----------- ----------
<S> <C> <C> <C>
Balance at January 1, 1996 $ 6,781,928 $ (2,340,000) $ 4,441,928
============= ============= =============
Balance at March 31, 1996 $ 6,781,928 $ (2,340,000) $ 4,441,928
============= =============
Reduction in estimated fair
market value of collateral, net (9,592)
Additional impaired loan (400,000)
Sale of collateral 2,349,592
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Balance at December 31, 1996 $ 4,000,000 $ (400,000) $ 3,600,000
============= ============= =============
Balance at March 31, 1997 $ 4,038,333 $ (400,000) $ 3,638,333
============= ============= =============
</TABLE>
The average recorded value of the impaired mortgage loans did not differ
materially from the balance at the end of the quarterly periods.
NOTE 3 - SUBSEQUENT EVENT
- -------------------------
The general partner decided not to make a quarterly distribution of cash flow
from operations related to the first quarter of 1997. The uncertainty as to cash
flow from Rivers Corporate Park due to the bankruptcy of the sole tenant has
warranted an increase in working capital reserves.
<PAGE>
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 June, 1983. A total of 30,000 units were sold. The Partnership
received proceeds of $27,253,251, net of selling commissions and other offering
costs, which have been used for investment in real estate and the payment of
related acquisition costs, or retained as working capital reserves. The
Partnership made six real estate investments; four investments have been sold,
one in each of 1985, 1991, 1994 and 1996. As a result of these sales and similar
transactions, capital of $19,200,000 ($640 per limited partnership unit) has
been returned to the limited partners.
At March 31, 1997, the Partnership had $2,939,289 in cash, cash
equivalents and short-term investments which is primarily being retained as
working capital reserves. The Partnership also has a commitment to fund the
balance of its share of the renovation of the Willows Shopping Center, which
approximates $316,000. As a result of the bankruptcy of the sole tenant at
Rivers Corporate Park and the uncertainty as to future cash flow from this
investment, the general partner determined that it is prudent to augment working
capital reserves. Accordingly, no distribution of cash from operations was made
relating to the first quarter of 1997 or the fourth quarter of 1996.
Distributions for the first quarter of 1996 were made at the annualized rate of
7% on the adjusted capital contribution.
The carrying value of real estate investments in the financial statements,
other than impaired mortgage loans (Rivers Corporate Park), is at depreciated
cost or, if the investment's carrying value is determined not to be recoverable
through expected undiscounted future cash flows, the carrying value is reduced
to estimated fair market value. The fair market value of such investments is
further reduced by the estimated cost of sale for properties held for sale.
Carrying value may be greater or less than current appraised value. At March 31,
1997, the appraised value of Willows Shopping Center exceeded its carrying value
by approximately $294,000. The current appraised value of real estate
investments has been estimated by the general partner and is generally based on
a correlation of traditional appraisal approaches performed by the Partnership's
advisor and independent appraisers. Because of the subjectivity inherent in the
valuation process, the estimated current appraised value may differ
significantly from that which could be realized if the real estate were actually
offered for sale in the marketplace.
Results of Operations
- ---------------------
Operating Factors
At March 31, 1997, the Willows Shopping Center was 94% leased, compared to
91% at March 31, 1996. The ground lessee/borrower has substantially completed
the full rehabilitation of the Center. The Partnership's share of the remaining
cost is approximately $316,000 at March 31, 1997 which largely relates to the
renovation of space occupied by a significant anchor tenant which began
operating in October 1996.
Rivers Corporate Park was 100% leased at March 31, 1997 and 1996. However,
on September 27, 1996, the sole tenant filed for chapter 11 bankruptcy
protection. The Partnership's ground lessee is negotiating with the tenant to
settle amounts due under the tenant's lease. The Partnership has not received
ground rent payments and interest payments on its mortgage loan since the
bankruptcy filing, and believes a portion of the mortgage amount may not be
collected. The mortgage loan matured in 1994. In October 1996, the Partnership
reached an agreement in principle with the borrower, whereby the maturity date
will be extended to December 1997. In addition, the
<PAGE>
fixed interest and ground rental payments will be reduced, but the Partnership's
rate of participation in revenue from the underlying property will be increased.
These changes will be retroactive to January 1, 1996; however, any adjustment to
amounts previously recognized by the Partnership is expected to be
insignificant. Further, the Partnership will be able to cause a sale of the
property.
Investment Results
Exclusive of the operating results from Decatur TownCenter in 1996 of
$160,000, total real estate activity was $104,858 and $199,866 for the quarters
ended March 31, 1997 and 1996, respectively. This decrease was caused by the
lack of interest income and ground rent from Rivers Corporate Park as a result
of the tenant's bankruptcy, partially offset by an increase in operating results
at Willows Shopping Center due to increased occupancy and lower operating
expenses.
Interest on cash equivalents and short-term investments increased by
$6,382, or 23%, between the two first quarters due primarily to higher invested
balances caused by the retention of a portion of the Decatur TownCenter sales
proceeds.
While net income decreased by $220,505 between the first quarter of 1997
and 1996, cash flow from operations decreased by only $17,515, or 11%, because
of changes in net working capital and the timing of cash payments from Decatur
Town Center in 1996.
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 general partner. General and administrative expenses primarily
consist of real estate appraisal, printing, legal, accounting and investor
servicing fees.
No Partnership management fee was incurred for the first quarter of 1997
due to the suspension of cash distributions. General and administrative expenses
were relatively unchanged between the first quarters of 1996 and 1997.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
March 31, 1997.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
May 12, 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Managing Director and General Counsel
of General Partner,
Copy Properties Company, Inc.
May 12, 1997
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of General Partner,
Copley Properties Company, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,392,976
<SECURITIES> 546,313
<RECEIVABLES> 8,013
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,947,302
<PP&E> 10,292,397
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,514,982
<CURRENT-LIABILITIES> 409,654
<BONDS> 654,543
0
0
<COMMON> 0
<OTHER-SE> 12,450,785
<TOTAL-LIABILITY-AND-EQUITY> 13,514,982
<SALES> 240,543
<TOTAL-REVENUES> 274,500
<CGS> 72,667
<TOTAL-COSTS> 72,667
<OTHER-EXPENSES> 90,843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 110,990
<INCOME-TAX> 0
<INCOME-CONTINUING> 110,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,990
<EPS-PRIMARY> 3.66
<EPS-DILUTED> 3.66
</TABLE>
