<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------------------------------------
For Quarter Ended June 30, 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
- ----------------------------------------------------------------------------
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 JUNE 30, 1997
PART I
FINANCIAL INFORMATION
----------------------
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, 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 5,473,773 5,588,459
Deferred leasing costs and
other assets, net 283,645 269,876
----------- -----------
10,518,631 10,581,215
Cash and cash equivalents 2,138,751 2,300,885
Short-term investments 983,053 498,869
Interest, rent and other receivables 8,475 50,452
----------- -----------
$13,648,910 $13,431,421
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 390,369 $ 437,083
Deferred disposition fees 654,543 654,543
----------- -----------
Total liabilities 1,044,912 1,091,626
----------- -----------
Partners' capital:
Limited partners ($360.00 per
unit; 30,000 units authorized,
issued and outstanding) 12,556,272 12,294,711
General partner 47,726 45,084
----------- -----------
Total partners' capital 12,603,998 12,339,795
----------- -----------
$13,648,910 $13,431,421
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
-------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 274,413 $ 514,956 $ 184,452 $ 375,814
Property operating expenses (65,745) (138,412) (76,679) (162,683)
Depreciation and amortization (63,018) (126,036) (57,939) (110,056)
---------- ---------- --------- ----------
145,650 250,508 49,834 103,075
Provision for impaired
mortgage loans - - (175,000) (175,000)
Ground rentals and interest on
mortgage loans - - 158,325 464,950
---------- ---------- --------- ----------
Total real estate activity 145,650 250,508 33,159 393,025
Interest on cash equivalents
and short term investments 36,718 70,675 27,692 55,267
---------- ---------- --------- ----------
Total investment activity 182,368 321,183 60,851 448,292
---------- ---------- --------- ----------
PORTFOLIO EXPENSES
Management fee - - 28,682 57,363
General and administrative 29,155 56,980 29,249 56,514
---------- ---------- --------- ----------
29,155 56,980 57,931 113,877
---------- ---------- --------- ----------
Net Income $ 153,213 $ 264,203 $ 2,920 $ 334,415
========== ========== ========= ==========
Net income per limited partnership
unit $ 5.06 $ 8.72 $ 0.10 $ 11.04
========== ========== ========= ==========
Cash distributions per
limited partnership unit $ - $ - $ 9.57 $ 17.77
========== ========== ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
-------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Number of limited partnership
units outstanding during the
period 30,000 30,000 30,000 30,000
========== ========== ========= ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
-------------------- -------------------- --------------------- --------------------
General Limited General Limited General Limited General Limited
Partner Partners Partner Partners Partner Partners Partner Partners
------- --------- ------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
period $ 46,194 $ 12,404,591 $ 45,084 $ 12,294,711 $ 51,704 $ 18,549,886 $ 50,874 $ 18,467,706
Cash
distributions - - - - (2,900) (287,100) (5,385) (533,100)
Net income 1,532 151,681 2,642 261,561 29 2,891 3,344 331,071
-------- ------------ -------- ------------ -------- ------------ -------- ------------
Balance at
end of period $ 47,726 $ 12,556,272 $ 47,726 $ 12,556,272 $ 48,833 $ 18,265,677 $ 48,833 $ 18,256,677
======== ============ ======== ============ ======== ============ ======== ============
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net cash provided by operating activities $ 326,526 $ 542,433
---------- ----------
Cash flows from investing activities:
Capital expenditures on owned property (4,476) (82,178)
(Increase) decrease in short-term
investments, net (484,184) 347,551
---------- ----------
Net cash (used in) provided by
investing activities (488,660) 265,373
---------- ----------
Cash flows from financing activity:
Distributions to partners - (538,485)
---------- ----------
Net (decrease) increase in
cash and cash equivalents (162,134) 269,321
Cash and cash equivalents:
Beginning of period 2,300,885 1,204,043
---------- ----------
End of period $2,138,751 $1,473,364
========== ==========
</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 June 30, 1997 and December 31, 1996 and the results of
its operations, its cash flows and partners' capital for the interim periods
ended June 30, 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 June 30, 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 or interest payments on the mortgage loan since the
bankruptcy filing.
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. The Partnership is currently negotiating a purchase and sale
agreement for the property. Although, there can be no assurances, we anticipate
a closing during the third quarter of 1997.
<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
=========== ============ ===========
Reduction in estimated fair
market value of collateral (175,000)
------------
Balance at June 30, 1996 $ 6,781,928 (2,515,000) $ 4,266,928
=========== ============ ===========
Increase in estimated fair
market value of collateral, net 165,408
Additional impaired loan (400,000)
Sale of collateral 2,349,592
-----------
Balance at January 1, 1997 $ 4,000,000 (400,000) $ 3,600,000
=========== =========== ===========
Balance at June 30, 1997 $ 4,038,333 $ (400,000) $ 3,638,333
=========== =========== ===========
</TABLE>
The average recorded value of the impaired mortgage loan 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 second quarter of 1997. The uncertainty as to
cash flow from Rivers Corporate Park due to the bankruptcy of the sole tenant,
in 1996, 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 were invested 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 June 30, 1997, the Partnership had $3,121,804 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, in 1996, at Rivers Corporate
Park and the uncertainty as to future cash flow from this investment, the
general partner determined that it was prudent to augment working capital
reserves. Accordingly, no distribution of cash from operations was made relating
to the first and second quarters of 1997 or the fourth quarter of 1996.
Distributions of cash from operations for the first and second quarters 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 June 30,
1997, the appraised value of the Willows Shopping Center exceeded its carrying
value by approximately $718,000. 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
Decatur TownCenter was sold in October 1996.
At June 30, 1997, the Willows Shopping Center was 94% leased, compared to
90% at June 30, 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 June 30, 1997 which largely relates to the
renovation of space occupied by a significant anchor tenant which began
operating in October 1996. The Partnership and its affiliate are currently
negotiating a purchase and sale agreement for the property. Although, there can
be no assurances, a fourth quarter 1997 closing is anticipated.
At June 30, 1996, Rivers Corporate Park was 100% leased; however, on
September 27, 1996 the sole tenant filed for chapter 11 bankruptcy protection.
The Partnership's ground lessee negotiated a six-month lease for 20% of the
<PAGE>
space beginning April 1, 1997. The Partnership's ground lessee is negotiating
with the bankrupt tenant to settle amounts due under their lease. The
Partnership has not received ground rent and interest payments on its mortgage
loan since the bankruptcy filing. 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
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. The Partnership is negotiating a purchase and sale agreement for
the sale of the property. Although there can be no assurances, we anticipate
closing during the third quarter of 1997.
Investment Results
Exclusive of the provision for impaired mortgage loans and operating
results from Decatur TownCenter in 1996 of $160,000, total real estate activity
was $250,508 and $408,025 for the first six months of 1997 and 1996,
respectively. This decrease was caused by the lack of ground rent and interest
income 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
$15,408, or 28%, between the first six month periods due primarily to higher
invested balances caused by the retention of a portion of the Decatur TownCenter
sales proceeds.
Cash flow from operations decreased by $215,907 between the respective six
month periods. This change is more than the aforementioned change in operating
results primarily because of revenue received in advance from Rivers Corporate
Park 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 six months of 1997
due to the suspension of cash distributions. General and administrative expenses
were relatively unchanged between the first six months of 1996 and 1997.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 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
June 30, 1997.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 14, 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Managing Director and General Counsel
of General Partner,
Copley Properties Company, Inc.
August 14, 1997
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of General Partner,
Copley Properties Company, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,138,751
<SECURITIES> 983,053
<RECEIVABLES> 8,475
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,130,279
<PP&E> 10,234,986
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,648,910
<CURRENT-LIABILITIES> 390,369
<BONDS> 654,543
0
0
<COMMON> 0
<OTHER-SE> 12,603,998
<TOTAL-LIABILITY-AND-EQUITY> 13,648,910
<SALES> 514,956
<TOTAL-REVENUES> 585,631
<CGS> 138,412
<TOTAL-COSTS> 138,412
<OTHER-EXPENSES> 183,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 264,203
<INCOME-TAX> 0
<INCOME-CONTINUING> 264,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264,203
<EPS-PRIMARY> 8.72
<EPS-DILUTED> 8.72
</TABLE>
