<PAGE>
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, 1997
COMMISSION FILE NO. 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
incorporation or organization) Identification No.)
225 Franklin Street, 25th Floor
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of 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 non-affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
------
Item 1. Business.
--------
New England Life Pension Properties; A Real Estate Limited Partnership
(the "Partnership") was organized under the Uniform Limited Partnership Act of
the Commonwealth of Massachusetts on December 17, 1982, to invest primarily in
newly-constructed and existing income-producing real properties.
The Partnership was initially capitalized with contributions of $2,000
from Copley Properties Company, Inc. (the "General Partner") and $10,000 from
NELRECO Troy, Inc. (the "Initial Limited Partner"). On December 23, 1982 the
Partnership filed a Registration Statement on Form S-11 (the "Registration
Statement") with the Securities and Exchange Commission with respect to the
public offering of 20,000 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 10,000 Units (an aggregate of $30,000,000). The Registration
Statement was declared effective on March 22, 1983. On June 29, 1983 the
Partnership sold all 30,000 Units, and the Partnership admitted 3,193 investors
as limited partners (the "Limited Partners"), with $29,652,760 being contributed
to the capital of the Partnership. At the same time, the Initial Limited Partner
withdrew its contribution from the Partnership.
The Partnership does not have any employees. Services are performed
for the Partnership by the General Partner and by affiliates of the General
Partner.
At December 31, 1997 the Partnership owned the real estate investment
described in A. below. In 1985 a joint venture in which the Partnership was a
partner sold its interest in a second real estate investment. In May, 1991, the
Partnership sold a third real estate investment that resulted in a capital
distribution of $50.00 per Unit. In June 1994, a fourth investment, an
industrial building in Ontario, California, was sold, resulting in a capital
distribution of $193.34 per Unit. In October 1996, the Partnership sold a fifth
investment, an office building in Decatur, Georgia, resulting in a capital
distribution of $186.66 per Unit. In September 1997, the Partnership sold a
sixth investment, a shopping center in Concord, California, resulting in a
capital distribution of $233.75 per Unit.
The Partnership has no other current plan to renovate, improve or
further develop any of its real property. In the opinion of the General Partner
of the Partnership, the property is adequately covered by insurance.
A. Research and Development Facility in Columbia, Maryland ("Rivers
----------------------------------------------------------------
Corporate Park").
- ----------------
In 1984 the Partnership consummated a land purchase-leaseback and
leasehold mortgage loan investment totaling $5,100,000 in a 75,500 square foot
research and development facility located in Rivers Corporate Park, Columbia,
Maryland. The ground lease provided that the Partnership receive an annual
rental of $126,500 plus 50% of the ground lessee's gross revenues from the
building in excess of a base amount. The mortgage loan matured on March 31, 1994
and bore interest at the rate of 11.5% per annum. The lease for the space in the
building gives the tenant occupying the building a right of first offer during
the period which began in September, 1992 and continues through November, 2004.
In September 1996, the sole tenant filed for chapter 11 bankruptcy
protection and ceased paying rent. As part of the bankruptcy, the tenant sold
its assets to another company. During September 1997, the Partnership's ground
lessee received a settlement for amounts due under the tenant's lease and
<PAGE>
paid the Partnership ground rent and interest payments on the mortgage loan that
had not been paid since the bankruptcy filing.
In October 1996, the Partnership reached an agreement in principle
(the "Agreement") with the borrower on the Rivers Corporate Park mortgage loan
which had matured in 1994, whereby the maturity date was to be extended to
December 1997. In addition, the fixed interest and ground rental payments were
to be reduced, but the Partnership's rate of participation in revenue from the
underlying property was to be increased. In October 1997, the Partnership
formally executed the Agreement to renew the mortgage loan at the previously
agreed upon terms. These changes were retroactive to January 1, 1996; however,
any adjustment to amounts previously recognized by the Partnership, as revenue
were not material and accordingly no adjustments have been made to previously
recorded amounts. In addition, the Agreement was further amended whereby the
Partnership gained the right to cause a sale of the property without the consent
of the borrower. On March 4, 1998, this property was sold to an unaffiliated
third party (the "Buyer") for $6,375,000. The selling price was determined by
arm's length negotiations between the Partnership and the Buyer. The Partnership
received net proceeds of $5,104,038 in full satisfaction of its ground lease and
mortgage loan investments and related accrued interest. The Partnership received
additional proceeds of approximately $789,000 after closing costs as its
participation share of the remaining proceeds after it recovered its investment
in the land and mortgage loan.
B. Office Building in Decatur, Georgia ("Decatur TownCenter").
----------------------------------------------------------
In 1985 the Partnership acquired a 3.28 acre parcel of land in
Decatur, Georgia, for $1,675,000 and leased it back to the seller. Situated on
the land was a four-story, 79,855 square foot office building. The Partnership
also fully funded its $5,825,000 non-recourse mortgage loan commitment to the
ground lessee. The loan was secured by a first mortgage of the building and the
leasehold interest in the land.
The Partnership also made an additional loan of $633,076 to fund tenant
improvements. This loan was secured by a second mortgage of the building and the
leasehold interest in the land.
On October 10, 1996, the property was sold at which time the Partnership
received proceeds of $6,573,178 in satisfaction of its mortgage loan and ground
lease. Of the proceeds, $970,000 was held at the Partnership level in order to
augment reserves, and $5,599,800 was distributed to the Limited Partners as a
capital distribution in the amount of $186.66 per Unit on October 25, 1996.
C. Shopping Center in Concord, California ("Willows Shopping Center").
------------------------------------------------------------------
On July 30, 1984, the Partnership and an affiliate of the Partnership
(the "Affiliate") jointly made land purchase-leaseback and leasehold mortgage
loan investments aggregating $15,719,317 in a 24.8 acre shopping center located
in Concord, California, known as the Willows Shopping Center. The Partnership's
share of the investments aggregated $3,929,829, giving the Partnership a 25%
interest in each component of the investment held in common with the Affiliate.
The investments entitled the Partnership and the Affiliate jointly to receive an
annual interest return of 13% on the $10,719,317 ten-year mortgage, together
with an annual fixed rental under the ground lease equal to a 12.2% return on
the $5,000,000 land purchase price plus an annual percentage rental equal to 50%
of the ground tenant's annual gross revenues in excess of specified base
amounts.
<PAGE>
On August 15, 1985, the Partnership and the Affiliate consented to a
sale by the ground tenant, Willows Concord Venture ("Willows Concord"), of the
ground tenant's ownership interest in the buildings and leasehold interest in
the land to an affiliate of VMS Realty, Inc., an Illinois corporation. In
conjunction with the sale, the ground lease was amended to provide that the
Partnership and the Affiliate would no longer participate in excess rental
revenues from the Shopping Center or in net appreciation from the sale of the
property. The mortgage loan was also amended to increase the principal amount by
$3,880,683 to $14,600,000, to extend the maturity date one year to August, 1995,
and to lower the interest rate from 13% per annum to a stepped rate beginning at
9% per annum and increasing to 12% over six years. Under the terms of the
original ground lease, the joint ground lessors were entitled to 50% of the net
proceeds from a sale. The Partnership received cash of $1,071,875 and an
interest in the incremental mortgage loan amount equal to $970,171, 50% of which
was payable to the former ground lessee upon full payment of the loan principal
by the new mortgagor. The joint mortgagees also entered into a Collection and
Disbursement Agreement pursuant to which Willows Concord was entitled to share
in 50% of interest paid under the new note in excess of the interest that would
have been payable under the original note.
The Partnership and the Affiliate had not received interest payments
currently on the mortgage loan since the payment due in March, 1990, and as a
result, the Partnership and the Affiliate began foreclosure proceedings to take
possession of the property. On October 4, 1990, Pacific First Bank, the second
leasehold mortgagee, filed an involuntary bankruptcy petition in the United
States Bankruptcy Court for the Northern District of California against the
ground lessee/debtor, to which filing the ground lessee/debtor subsequently
consented. The ground lessee/debtor later consented to relief from stay of
foreclosure proceedings. The Partnership and its Affiliate sold their interest
in the leasehold mortgage loan to Willows Concord on June 14, 1991. In return,
the Partnership and the Affiliate took back a note in the amount of $14,863,206.
On June 18, 1991, Willows Concord foreclosed on the leasehold
mortgage. The Partnership, the Affiliate and Willows Concord entered into a
replacement promissory note in the principal amount of $14,863,206, effective
June 18, 1991. The new loan was secured by the leasehold interest, bore interest
at the rate of 9.323% per annum and provided for a reduction in principal if the
note was paid prior to maturity. The Partnership, the Affiliate and Willows
Concord also entered into a new ground lease which provides for annual rent in
the amount of $550,000 plus an annual percentage rent equal to 70% of the ground
lessee's annual gross revenues in excess of a specified amount. The Partnership
had a 25% share of such rent. To the extent that operating cash flow from the
shopping center was not sufficient to pay the ground rent, such rent was
accruable until June 1996, at which time Willows Concord was obligated to pay
all unpaid accrued rent and to pay all future ground rent on a current basis.
The Partnership and the Affiliate permitted the accrual of additional ground
rent.
On January 1, 1995 the Partnership and the Affiliate provided a $2.5
million construction loan to the ground lessee to fund the renovation of the
Center. The Partnership committed to fund $625,000 of this amount. The loan bore
interest at 11% per annum, provided for amortization on a 15-year schedule, and
was to mature on December 31, 1997. In addition, the ground lease was amended to
provide the Partnership and the Affiliate with the sole right to cause a sale on
or after January 1, 1996.
On September 18, 1997, the property was sold. The Partnership received
its 25% share of the net proceeds totaling $7,009,315. On October 30, 1997, the
Partnership distributed $7,012,500 as a capital distribution in the amount of
$233.75 per Unit which includes proceeds from prior sales previously held in
reserves.
<PAGE>
Item 2. Properties.
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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 remaining property:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ESTIMATED ANNUAL
1998 CONTRACT
ANNUAL NUMBER OF RENT LINE OF BUSINESS
REALTY TENANTS WITH 10% NAME(S) OF SQUARE FEET OF PER LEASE RENEWAL OF PRINCIPAL
PROPERTY(1) TAXES OR MORE OF GLA TENANT(S) EACH TENANT SQ. FT. EXPIRATION OPTIONS TENANTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R&D Building in $86,361 1 GeneLogic 21,587 $26.63 2/1998 M-T-M Biotechnology
Columbia, MD
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</TABLE>
(1) This property was sold in March 1998.
<PAGE>
The following table sets forth for each of the last five years the gross
leasable area, occupancy rates, rental revenue and net effective rent for the
Partnership's remaining property:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Gross Leasable Year-End Rental Net Effective
Property Area Occupancy Revenue Rent ($/sf/yr)*
Recognized
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R&D Building in Columbia, MD (1)
--------------------------------
1993 75,500 100% $677,374 $ 8.97
1994 75,500 100% $677,374 $ 8.97
1995 75,500 100% $677,374 $ 8.97
1996 75,500 100% $677,374 $ 8.97
1997 75,500 29% $684,626 $52.57
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Net effective rent calculation is based on average occupancy during the
respective years.
(1) Property was sold March 4, 1998.
<PAGE>
Following is a schedule of lease expirations for each of the next ten years
for the Partnership's remaining property based on the annual contract rent in
effect at December 31, 1997:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TENANT AGING REPORT
- -----------------------------------------------------------------------------------------------------------
PROPERTY # OF LEASE TOTAL TOTAL PERCENTAGE OF
EXPIRATIONS SQUARE FEET ANNUAL GROSS ANNUAL
RENTAL RENTAL*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R&D Building in Columbia, MD (1)
- ---------------------------------------
1998 1 21,587 $574,861 100%
1999 0 0 $0 0%
2000 0 0 $0 0%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
2007 0 0 $0 0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The sole tenant declared bankruptcy in 1996, see Item 1 A.
* Does not include expenses paid by tenants.
<PAGE>
Following is information regarding the competitive market conditions for each of
the Partnership's properties. This information has been gathered from sources
deemed reliable. However, the Partnership has not independently verified the
information and, as such, cannot guarantee its accuracy or completeness.
R&D in Columbia, MD.
-------------------
The property is located within the Howard County R&D submarket, which has a base
of 8.9 million square feet and a 6.3% vacancy rate as of year-end 1997. Due to
limited space in the marketplace, tenants continue to seek space that will
accommodate their growth needs and are moving from Washington D.C. to the
Baltimore suburbs. The Columbia flex submarket contains 6.8 million square feet
of space and a 6.5% vacancy rate. Planned construction of 300,000 square feet of
speculative space in this market is showing offering rates on new product that
are setting new highs. As a result, 1997 rents for Howard County averaged in the
$10.00-10.50 range.
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.
<PAGE>
PART II
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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, 1997, there were 3,280 holders of Units.
The Partnership's Amended and Restated Agreement of Limited
Partnership dated June 29, 1983, as amended (the "Partnership Agreement"),
requires that any Distributable Cash (as defined therein) be distributed
quarterly to the Partners in specified proportions and priorities. There are no
restrictions on the Partnership's present or future ability to make
distributions of Distributable Cash. For the year ended December 31, 1997 cash
distributions paid in 1997 or distributed after year end with respect to 1997 to
the Limited Partners as a group totaled $7,840,119 including $7,338,900 ($244.63
per limited partnership unit) representing a return of capital from the proceeds
of a property sale and proceeds from previously sold properties. For the year
ended December 31, 1996 cash distributions paid in 1996 or distributed after
year end with respect to 1996 to the Limited Partners as a group totaled
$6,461,100 including $5,599,800 ($186.66 per limited partnership unit)
representing a return of capital from the proceeds of a property sale.
Cash distributions exceeded net income in 1997, and therefore resulted
in a reduction in partners' capital. Cash distributions exceeded net income in
1996. Distributions of operating cash flow were less than cash provided by
operating activities in both years. Reference is made to the Partnership's
Statement of Partners' Capital and Statement of Cash Flows in Item 8 hereof.
<PAGE>
Item 6. Selected Financial Data.
-----------------------
<TABLE>
<CAPTION>
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:
12/31/97/(5)/ 12/31/96/(4)/ 12/31/95/(3)/ 12/31/94/(2)/ 12/31/93(1)
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $3,105,654 $ 1,712,474 $ 2,104,802 $ 3,691,109 $ 2,675,255
Net Income (Loss) $2,420,094 $ 539,500 $ 1,569,268 $ 3,129,077 $ (899,024)
Net Income (Loss) per
Unit of Limited
Partnership
Interest $ 79.86 $ 17.80 $ 51.79 $ 103.26 $ (29.67)
Total Assets $8,025,233 $13,431,421 $19,239,985 $18,681,253 $22,682,389
Total Cash
Distributions
per Limited
Partnership Unit,
including amounts
distributed after
year end with
respect to
such year $ 261.34 $ 215.37 $ 32.80 $ 236.54 $ 51.80
</TABLE>
(1) The Partnership recorded a provision of $2,800,000 ($92.40 per Unit) for
impaired mortgage loans during 1993.
(2) The Partnership consummated a sale in 1994 which increased Net Income by
$1,385,562 ($45.72 per Unit) and capital distributions by $5,800,200
($193.34 per Unit).
The Partnership also recorded a credit of $200,000 ($6.60 per Unit) related
to impaired mortgage loans during 1994.
(3) The Partnership recorded a credit of $260,000 ($8.58 per Unit) related to
impaired mortgage loans during 1995.
(4) The Partnership consummated a sale in 1996 which resulted in capital
distributions of $5,599,800 ($186.66 per Unit).
The Partnership also recorded a provision of $409,592 ($13.52 per Unit) for
impaired mortgage loans during 1996.
(5) The Partnership consummated a sale in 1997 which increased Net Income by
$1,117,467 ($36.88 per Unit) and capital distributions of $7,012,500
($233.75 per Unit).
The Partnership also recorded a credit of $400,000 ($13.20 per Unit)
related to impaired mortgage loans during 1997.
The Partnership also made capital distributions of $326,400 ($10.88 per
Unit) from previously undistributed sale proceeds.
<PAGE>
ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
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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, used to pay related acquisition costs, or
retained as working capital reserves. As of December 31, 1997 the Partnership
owned the real estate investment described in Item 1 hereof. In addition, five
investments have been sold, one in each of 1985, 1991, 1994, 1996 and 1997. As
a result of these sales and similar transactions, capital of $26,538,900
($884.63 per limited partnership unit) has been returned to the limited partners
through December 31, 1997.
On October 10, 1996, the Decatur TownCenter investment was sold and the
Partnership received net proceeds of $6,573,178 which were used to repay the
ground lease investment and the carrying value of the mortgage loans. Since the
mortgage loans were impaired, their carrying value had been previously reduced
to estimated fair market value, less anticipated costs of sale; thus, no gain or
loss on the sale was recognized. The total valuation allowance was $2,349,592
at the time of the sale, which included a disposition fee of $196,775 payable to
the Advisor. The resulting capital distribution to limited partners of
$5,599,800 on October 25, 1996 ($186.66 per limited partnership unit) reduced
the adjusted capital contribution to $360.00 per unit.
On September 18, 1997, the Willows Shopping Center, which was owned by the
Partnership (25%) and an affiliate (75%), was sold and the Partnership received
its 25% share of the net proceeds totaling $7,009,315, after closing costs, and
recognized a gain of $1,117,467 ($36.88 per limited partnership unit). A
disposition fee of $214,312 was accrued but not paid to AEW Real Estate
Advisors, Inc. ("AEW"). The resulting capital distribution to limited partners
of $7,012,500 on October 30, 1997 ($233.75 per limited partnership unit) reduced
the adjusted capital contribution to $126.25 per unit. In addition, a capital
distribution of $10.88 per unit was made at this time from cash reserves
accumulated from previous sales, further reducing the adjusted capital
contribution to $115.37 per unit.
At December 31, 1997, the Partnership had $2,853,573 in cash, cash equivalents
and short-term investments, $179,091 of which was used for operating cash
distributions to partners on January 29, 1997; the remainder will be retained as
working capital reserves. The source of future liquidity and cash distributions
to partners is expected to be cash generated by the Partnership's remaining real
estate investment and proceeds from the sale of such investment. Due to the
increased cash flow from Rivers Corporate Park and Willows Shopping Center, the
general partner decided to resume operating cash distributions starting in the
third quarter of 1997 at an annualized rate of 12% on the adjusted capital
contribution. Operating cash distributions had not previously been made since
the distribution for the third quarter of 1996. Distribution of cash from
operations for the first, second, and third quarters of 1996 were made at an
annualized rate of 7% on the adjusted capital contribution.
The carrying value of the real estate investment in the financial statements at
December 31, 1997 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 investment is further reduced by the estimated costs of
sale for properties held for sale. Carrying value may be greater or less than
current appraised value. At December 31, 1997, the appraised value of the
Partnership's investment was approximately $700,000 greater than its carrying
value. The current appraised value of the real estate investment has been
estimated by the general partner and is generally based on a combination of
traditional appraisal approaches performed by AEW and independent appraisers.
Because of the subjectivity inherent in the valuation process, the current
appraised value may
<PAGE>
differ significantly from that which could be realized if the real estate were
actually offered for sale in the marketplace.
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business operations. The General Partner and its affiliates are assessing the
modifications or replacements of its software that may be necessary. The
General Partner and its affiliates do not believe that the cost of either
modifying existing software or converting to new software will be significant or
that the Year 2000 Issue will pose significant problems.
RESULTS OF OPERATIONS
- ---------------------
FORM OF REAL ESTATE INVESTMENTS
The Willows Shopping Center, which was sold in September 1997, had been
structured as a ground lease/mortgage loan investment. However, for financial
reporting purposes it had been accounted for as a jointly-owned property.
Through October 1997 the Rivers Corporate Park was structured and accounted for
as a ground lease/ mortgage loan investment. In October 1997, the ground lease
and mortgage loan investment were restructured to provide the Partnership
substantially the same risks and potential rewards as ownership of the asset
would entail. Accordingly, the Partnership reported this investment as an owned
property beginning in October 1997.
OPERATING FACTORS
As previously discussed, the Willows Shopping Center was sold on September 18,
1997, and the Partnership recognized a gain of $1,117,467. At the time of sale,
the Willows Shopping Center was 94% leased.
The Decatur Town Center investment was sold on October 10, 1996, as discussed
above.
Rivers Corporate Park was 29% and 100% occupied at December 31, 1997 and 1996,
respectively. However, on September 27, 1996, the sole tenant filed for Chapter
11 bankruptcy protection and ceased paying rent. As part of the bankruptcy, the
tenant sold its assets to another company. During September 1997, the
Partnership's ground lessee received a settlement for amounts due under the
tenant's lease and paid the Partnership ground rent and interest payments on the
mortgage loan that had not been paid since the bankruptcy filing.
In October 1996, the Partnership reached an agreement in principle (the
"Agreement") with the borrower on the Rivers Corporate Park mortgage loan which
had matured in 1994, whereby the maturity date was to be extended to December
1997. In addition, the fixed interest and ground rental payments were to be
reduced, but the Partnership's rate of participation in revenue from the
underlying property was to be increased. In October 1997, the Partnership
formally executed the Agreement to renew the mortgage loan at the previously
agreed upon terms. These changes were retroactive to January 1, 1996; however,
any adjustment to amounts previously recognized by the Partnership, as revenue
were insignificant. In addition, the Agreement was further amended whereby the
Partnership gained the right to cause a sale of the property without the consent
of the borrower. Also, as described above, the Partnership reclassified this
investment to an owned property at the date the Agreement was executed.
On March 4, 1998, the Rivers Corporate Park property located in Columbia,
Maryland, was sold to an unaffiliated third party (the "Buyer") for $6,375,000.
The selling price was determined by arm's length negotiations between the
Partnership and the Buyer. The Partnership received net proceeds of $5,104,038
in full satisfaction of its ground lease and mortgage loan investments and
<PAGE>
related accrued interest. The Partnership received additional proceeds of
approximately $789,000 after closing costs as its participation share of the
remaining proceeds after it recovered its investment in the land and mortgage
loan.
INVESTMENT RESULTS
The Partnership determined that the mortgage loan on Rivers Corporate Park was
impaired and recognized a provision for impaired mortgage loans of $400,000
which was charged to operations in the fourth quarter of 1996. As a result of
favorable market conditions in 1997, this impairment provision was reversed in
October 1997 through a credit to the impairment and valuation accounts.
During 1995 the estimated market value of the loan collateral of Decatur
TownCenter was increased and the valuation allowance was reduced by $260,000
through a credit to operating results. During 1996, a valuation provision of
$9,592 was recognized to adjust the carrying value to the amount of sale
proceeds received, less disposition costs.
1997 COMPARED TO 1996
Exclusive of the 1997 and 1996 credit from and (provision for) impaired mortgage
loans and the operating results from Decatur TownCenter ($341,585) reported
through the date of sale in 1996, real estate operating results increased to
$855,028 in 1997 from $669,507 in 1996. This increase of $185,521 is due to
both overall improved operating results at Willows Shopping Center ($93,894) and
increased interest income, ground rent and operating income (from October 1997)
from Rivers Corporate Park ($91,627). The improved operating results at Willows
Shopping Center were primarily due to lower operating expenses and depreciation
and amortization due to the third quarter sale. The increase in income from the
Rivers Corporate Park was the result of re-leasing the space vacated in 1996.
Interest on cash equivalents and short-term investments increased between 1997
and 1996 primarily due to higher average invested balances caused by a portion
of the Decatur TownCenter sales proceeds being held in reserves combined with
the receipt of the Willows Shopping Center proceeds in September 1997.
Operating cash flow decreased approximately $94,000 between 1997 and 1996. This
decrease was due to the lack of cash flow from Decatur TownCenter which was sold
in 1996, offset by improved operating results at Willows Shopping Center,
discussed above.
1996 COMPARED TO 1995
Exclusive of the credit from (provision for) impaired mortgage loans, and the
operating results from Decatur TownCenter ($341,585 in 1996 and $602,256 in
1995), real estate operating results for 1996 were $669,507, a decrease from
$788,778 in 1995. The change was primarily caused by a decline in the amount of
interest income from Rivers Corporate Park.
Interest on cash equivalents and short-term investments decreased between 1996
and 1995 primarily due to lower average investment balances held during the
first nine months of 1996.
Operating cash flow decreased approximately $353,000 between 1996 and 1995.
This decrease was primarily due to the above mentioned changes in operating
results, increased leasing costs at the Willows and changes in net working
capital.
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
<PAGE>
and administrative expenses primarily consist of real estate appraisal,
printing, legal, accounting and investor servicing fees.
1997 COMPARED TO 1996
The Partnership management fee decreased $35,972 due to the suspension of cash
distributions for the first and second quarters of 1997. General and
administrative expenses were relatively unchanged between 1997 and 1996.
1996 COMPARED TO 1995
The Partnership management fee decreased approximately $12,000 due to the
suspension of cash distributions for the fourth quarter of 1996, partially
offset by an increase in distributable cash flow for the first three quarters of
1996. General and administrative expenses decreased between 1996 and 1995
primarily due to legal fees incurred in 1995 relating to the matured mortgage
loan investment.
INFLATION
- ---------
By their nature, real estate investments tend not to be adversely affected by
inflation. Inflation may result in appreciation in the value of the
Partnership's 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.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
See the Financial Statements of the Partnership included as a part of
this Annual Report on Form 10-K.
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.
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 General Partner and the age and position held by each of them as
of December 31, 1997.
<TABLE>
<CAPTION>
Name Position(s) with the General Partner Age
- ---- ------------------------------------ ---
<S> <C> <C>
Wesley M. Gardiner, Jr. President, Chief Executive Officer and Director 39
Pamela J. Herbst Vice President and Director 42
J. Grant Monahon Vice President and Director 52
James L. Finnegan Vice President 37
Karin J. Lagerlund Treasurer and Principal Financial and Accounting Officer 33
</TABLE>
(c) Identification of Certain Significant Employees.
-------------------------------------------------
None.
(d) Family Relationships.
--------------------
None.
(e) Business Experience.
---------------------
The General Partner was incorporated in Massachusetts on
December 16, 1982. The background and experience of the executive officers and
directors of the General Partner are as follows:
Wesley M. Gardiner, Jr. joined AEW Real Estate Advisors, Inc. ("AEW") , formerly
known as Copley Real Estate Advisors, Inc., in 1990 and has been a Vice
President at AEW since January, 1994. AEW is a subsidiary of AEW Capital
Management, L.P. ("AEW Capital Management"). From 1982 to 1990, he was employed
by Metric Realty, a nationally-known real estate investment advisor and
syndication firm, as a portfolio manager responsible for several public and
private limited partnerships. His career at AEW has included asset management
responsibility for the company's Georgia and Texas holdings. Presently, Mr.
Gardiner has overall responsibility for all the partnerships advised by AEW
whose securities are registered under the Securities and Exchange Act of 1934.
He received a B.A. in Economics from the University of California at San Diego.
Pamela J. Herbst directs AEW Capital Management's Portfolio Advisory Services,
with oversight responsibility for the asset and portfolio management areas.
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
<PAGE>
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 General Counsel and a member of the
firm's Management Committee and Investment Policy Group. He has over 25 years
of experience in real estate law and investments. Prior to joining AEW Capital
Management in 1987, Mr. Monahon was a partner with a major Boston law firm. As
the head of that firm's real estate finance department, he represented a wide
variety of institutional clients, both domestic and international, in complex
equity and debt transactions. He is the former Chairman of the General Counsel
section of the National Association of Real Estate Investment Managers. Mr.
Monahon is a graduate of Dartmouth College (B.A.) and Georgetown University Law
Center (J.D.).
James J. Finnegan is the Assistant 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 Advisory 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 Partner and its
affiliates are entitled to receive various fees, commissions, cash
distributions, allocations of taxable income or loss and expense reimbursements
from the Partnership. See Notes 1, 2 and 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 Partner and its
affiliates for the year ended December 31, 1997. Cash distributions to the
General Partner include amounts distributed after year end with respect to
1997.
<TABLE>
<CAPTION>
Amount of Compensation
Receiving Entity Type of Compensation and Reimbursement
- ---------------- -------------------- ----------------------
<S> <C> <C>
General Partner Share of Distributable Cash $5,064
AEW Real Estate Advisors, Inc. Management Fees 50,072
(formerly known as Copley Real
Estate Advisors, Inc.)
New England Securities Servicing Fees and Out of
Corporation Pocket Reimbursements 5,486
------------------
TOTAL $60,622
==================
</TABLE>
<PAGE>
For the year ended December 31, 1997, the Partnership allocated
$(15,834) of taxable loss to the General Partner.
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, 1997.
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
General Partner.
(b) Security Ownership of Management.
----------------------------------
An affiliate of the General Partner of the Partnership owned
1,094 Units at December 31, 1997.
(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 Statement Schedules, Reports on Form 8-K, and
-----------------------------------------------------------------
Reports on Form 8-K/A
-----------------------
(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 Schedules and Financial
Statements Index No. 2.
(2) Financial Statement Schedules--The Financial Statement
Schedules listed on the accompanying Index to Financial Statements and Schedules
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. The Partnership filed one Current Report on
Form 8-K dated November 26, 1997 reporting on Items No. 2 (Acquisition or
Disposition of Assets) and No. 7 (Financial Statements and Exhibits).
<PAGE>
(c) Reports on Form 8-K/A. The Partnership filed one current report
on Form 8-K/A dated November 1997, reporting on Items No. 2 (Acquisition or
Disposition of Assets) and No. 7 (Financial Statements and Exhibits).
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
Financial Statements
* * * * * * *
December 31, 1997
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
-----------------------------------
A REAL ESTATE LIMITED PARTNERSHIP
---------------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
Report of Independent Accountants
Financial Statements:
Balance Sheets - December 31, 1997 and 1996
Statements of Operations - Years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital - Years ended December 31, 1997, 1996 and
1995
Statements of Cash Flows - Years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation at December 31,
1997
Schedule IV - Mortgage Loans on Real Estate at December 31, 1997
All other schedules have been omitted because they are either not applicable or
the required information is shown in the financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of New England
Life Pension Properties; A Real Estate Limited Partnership (the "Partnership")
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Copley Properties Company, Inc., the
General Partner of the Partnership; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards 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 General Partner, and evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
Boston, Massachusetts
March 18, 1998
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
ASSETS
Real estate investments:
Property held for disposition $5,161,213 $ -
Ground leases and mortgage loans, net - 4,722,880
Property, net - 5,588,459
Deferred leasing costs and other assets, net - 269,876
---------- -----------
5,161,213 10,581,215
Cash and cash equivalents 1,309,837 2,300,885
Short-term investments 1,543,736 498,869
Interest, rent and other receivables 10,447 50,452
---------- -----------
$8,025,233 $13,431,421
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 44,957 $ 437,083
Accrued management fee 17,705 -
Deferred disposition fees 868,855 654,543
---------- -----------
Total liabilities 931,517 1,091,626
---------- -----------
Partners' capital:
Limited partners ($115.37 and $360.00
per unit, respectively; 30,000 units authorized,
issued and outstanding) 7,027,704 12,294,711
General partner 66,012 45,084
---------- -----------
Total partners' capital 7,093,716 12,339,795
---------- -----------
$8,025,233 $13,431,421
========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1997 1996 1995
---------- --------- ----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 964,413 $ 788,265 $ 780,127
Property operating expenses (350,224) (343,067) (354,550)
Depreciation and amortization (188,288) (234,316) (230,712)
---------- --------- ----------
425,901 210,882 194,865
Ground rentals and interest
on mortgage loans 429,127 800,210 1,196,169
(Provision for) credit from impaired
mortgage loans 400,000 (409,592) 260,000
---------- --------- ----------
Total real estate operations 1,255,028 601,500 1,651,034
Gain on sale of investment 1,117,467 - -
---------- --------- ----------
Total real estate activity 2,372,495 601,500 1,651,034
Interest on cash equivalents
and short-term investments 194,647 123,999 128,506
---------- --------- ----------
Total investment activity 2,567,142 725,499 1,779,540
---------- --------- ----------
PORTFOLIO EXPENSES
Management fee 50,072 86,044 98,302
General and administrative 96,976 99,955 111,970
---------- --------- ----------
147,048 185,999 210,272
---------- --------- ----------
NET INCOME $2,420,094 $ 539,500 $1,569,268
========== ========= ==========
Net income per limited
partnership unit $79.86 $17.80 $51.79
========== ========= ==========
Cash distributions per limited
partnership unit $255.43 $223.57 $32.80
========== ========= ==========
Number of limited partnership units
outstanding during the year 30,000 30,000 30,000
========== ========= ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------
1997 1996 1995
---------- ----------- ----------
General Limited General Limited General Limited
Partner Partners Partner Partners Partner Partners
------- ----------- -------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $45,084 $12,294,711 $ 50,874 $18,467,706 $45,121 $17,898,131
Cash distributions (3,273) (7,662,900) (11,185) (6,707,100) (9,940) (984,000)
Net income 24,201 2,395,893 5,395 534,105 15,693 1,553,575
------- ----------- -------- ----------- ------- -----------
Balance at end
of year $66,012 $ 7,027,704 $ 45,084 $12,294,711 $50,874 $18,467,706
======= =========== ======== =========== ======= ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,420,094 $ 539,500 $ 1,569,268
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 188,288 234,316 230,712
Provision for (credit from) impaired
mortgage loans (400,000) 409,592 (260,000)
Gain on sale of investment (1,117,467) - -
Increase in deferred leasing costs
and other assets (7,623) (116,164) (22,623)
Decrease (increase) in operating
receivables 1,672 73,476 (88,234)
Increase (decrease) in operating liabilities (119,811) (81,166) (16,596)
----------- ----------- -----------
Net cash provided by operating activities 965,153 1,059,554 1,412,527
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of investment 6,795,003 2,267,919 -
Repayment of mortgage loan investment - 4,108,484 -
Capital expenditures on owned property and
property collateralizing ground lease/
mortgage loan investments (254,476) (428,550) (550,779)
Decrease (increase) in short-term investments,
net (1,044,867) 610,945 (1,094,854)
Increase in deferred disposition fees 214,312 196,775 -
----------- ----------- -----------
Net cash provided by (used in) investing
activities 5,709,972 6,755,573 (1,645,633)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions to partners (7,666,173) (6,718,285) (993,940)
----------- ----------- -----------
Net cash used in financing activity (7,666,173) (6,718,285) (993,940)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (991,048) 1,096,842 (1,227,046)
Cash and cash equivalents:
Beginning of year 2,300,885 1,204,043 2,431,089
----------- ----------- -----------
End of year $ 1,309,837 $ 2,300,885 $ 1,204,043
=========== =========== ===========
</TABLE>
NON-CASH TRANSACTION:
Effective October 14, 1997, the Partnership's ground lease and mortgage
loan investment in Rivers Corporate Park was converted to a wholly-owned
property. The carrying value of the investment at conversion was $5,161,213.
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
General
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, five of which have been sold as of
December 31, 1997. The Partnership intended to dispose of its investments
within twelve years of their acquisition, and then liquidate; however, the
general partner has extended the investment period into 1998, having determined
it to be in the best interest of the limited partners.
The general partner of the Partnership is Copley Properties Company, Inc.,
a wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"), formerly
known as Copley Real Estate Advisors, Inc. ("Copley"). Subject to the 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. As such, at December
31, 1997, AEW Capital Management, L.P. is wholly owned by NEIC Operating
Partnership, L.P. AEW is a subsidiary of AEW Capital Management, L.P. AEW is a
subsidiary of AEW Capital Management, 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 of the
outstanding stock of NEIC's general partner. On August 30, 1996, The New
England merged with and into Metropolitan Life Insurance Company ("Met Life").
Met Life is the surviving entity and, therefore, through a wholly-owned
subsidiary, became the owner of the units of partnership interest previously
owned by The New England and of the stock of NEIC's general partner.
At December 31, 1997 and 1996 an affiliate of the general partner owned
1,094 units of limited partnership interest, which were repurchased from certain
qualified plans, within specified annual limitations provided for in the
Partnership Agreement.
Management
AEW, as advisor, is entitled to receive stipulated fees from the
Partnership in consideration of services performed in connection with the
management of the Partnership and the acquisition and disposition of Partnership
investments in real property. Partnership management fees are 9% of
distributable cash flow from operations, as defined, before deducting such fees.
Acquisition fees were paid in an amount equal to 2% of the gross proceeds from
the offering available for investment. Disposition fees are limited to the
lesser of 3% of the selling price of the 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.
New England Securities Corporation ("NESC"), 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 $5,486, $5,231 and
$4,719 in 1997, 1996 and 1995, respectively.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the 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.
Ground Leases and Mortgage Loans
While the related land and loan investments are legally separable, the
terms thereof have been negotiated jointly and the investment performance is
evaluated on a combined basis. They are, therefore, presented together in the
accompanying balance sheet and statement of operations.
Investments in land subject to ground leases are stated at cost, plus
accrued revenue. Investments in mortgage loans to the related ground lessees
are originally stated at cost, plus accrued interest. If the mortgage loan is
impaired (see "Impaired Mortgage Loans" below), the carrying amount is adjusted
to the estimated market value of the underlying collateral less anticipated
costs of sale.
Impaired Mortgage Loans
The Partnership considers a loan to be impaired when it is probable that it
will be unable to collect all amounts due under the contractual terms of the
loan agreement. Factors that the Partnership considers in determining whether a
loan is impaired include its past due status, fair value of the underlying
collateral and economic prospects of the borrower. When a loan is impaired, its
carrying value is periodically adjusted, through a valuation allowance, to its
estimated market value which is based on the appraised value of the underlying
collateral less anticipated costs of sale. Changes in the valuation allowance
are reported in the Statement of Operations.
Property
Property, including ground lease and mortgage loans which are in substance
real estate investments, includes land, building and improvements which are
stated at cost less accumulated depreciation plus other operating assets and
liabilities. The Partnership's inititial carrying value of property previously
reported as a ground lease/mortgage loan equals the carrying value of the
predecessor investment on the conversion date.
The Partnership and an affiliate previously shared common ownership of an
investment. The form of the investment was a combination ground lease and
mortgage loan, as described above; however, in this case (Willows Shopping
Center), substantial economic risks of property ownership rested with the
Partnership and its affiliate. Accordingly, the investment was accounted for as
owned property, although the Partnership and its affiliate had a priority claim
to all unrecognized contractual revenue. The Partnership's financial statements
included its proportionate ownership share (25%) of the individual assets,
liabilities, revenue and expenses related to the property. Land and buildings
and improvements (net of accumulated depreciation) were classified as property
in the balance sheet. This investment asset was sold during 1997.
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 from the operations and disposition of the
property. The impairment loss is based on the excess of the investment's
carrying value over its estimated fair market value. For investments held for
disposition, the impairment loss also includes estimated costs of sale.
Investments held for disposition are not depreciated during the holding period.
<PAGE>
The carrying value of an investment may be more or less than its current
appraised value. At December 31, 1997, the appraised value of the investment
exceeded its carrying value; the aggregate excess was approximately $700,000.
The current appraised value of the real estate investment has been
estimated by the General Partner and is generally based on a combination of
traditional appraisal approaches performed by AEW and independent appraisers.
Because of the subjectivity inherent in the valuation process, the current
appraised value may differ significantly from that which could be realized if
the real estate were actually offered for sale in the marketplace.
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 being amortized using the
straight-line method over the terms of the mortgage loans or the estimated
useful lives of the property.
Leases provide for rental increases over the respective lease terms.
Rental revenue is being recognized on a straight-line basis over the lease
terms.
Cash Equivalents and Short-Term Investments
Cash equivalents are stated at cost, plus accrued interest. The
Partnership considers all highly liquid debt instruments purchased with a
maturity of ninety days or less to be cash equivalents; otherwise, they are
classified as short-term investments.
The Partnership has the positive intent and ability to hold all short-term
investments to maturity; therefore, short-term investments are carried at cost
plus accrued interest, which approximates market value. At December 31, 1997
and 1996, all investments were in commercial paper with less than six and three
months, respectively, remaining to maturity.
Deferred Disposition Fees
Disposition fees due to AEW related to sales or restructuring 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 stipulated returns 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
Per unit computations are based on the number of units of limited
partnership interest outstanding during the year. The actual per unit amount
will vary by partner depending on the date of admission to, or withdrawal from,
the Partnership.
Effective January 1, 1998, the Partnership adopted FAS 128 "Earnings per
Share," which simplifies the standards of reporting earnings per share (EPS)
previously found in APB Opinion No. 15. It provides guidance on the computation
and disclosure of basic and diluted EPS and requires restatement of prior
periods for comparative purposes. The adoption of FAS 128 did not have a
material impact on the Partnership's financial statements.
<PAGE>
Reclassifications
Certain amounts in prior year financial statements have been reclassified
to conform with the current year presentation.
NOTE 3 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
- --------------------------------------------------------
Rivers Corporate Park, Columbia, Maryland
In 1984, the Partnership acquired a ground lease investment and mortgage loan
investment for $1,100,000 and $4,000,000, respectively. The ground lease
investment and mortgage loan investment originally had fixed interest rates of
11.5% and were payable monthly. The mortgage loan is secured by a first
mortgage on the Rivers Corporate Park buildings and by the ground leasehold
interest. The mortgage loan on Rivers Corporate Park matured on March 31, 1994.
In September 1996, the sole tenant filed for Chapter 11 bankruptcy protection
and ceased paying rent. As part of the bankruptcy, the tenant sold its assets
to another company. During the fourth quarter of 1996, the Partnership
determined that the mortgage loan was impaired and recorded a valuation
allowance of $400,000. In September 1997, the Partnership's ground lessee
received a settlement for amounts due under the tenant's lease and paid the
Partnership ground rent and interest payments on the mortgage loan that had not
been paid since the bankruptcy filing.
In October 1996, the Partnership reached an agreement in principle (the
"Agreement") with the borrower on the Rivers Corporate Park mortgage loan which
had matured in March 1994, whereby the maturity date was to be extended to
December 1997. Pursuant to the Agreement the fixed interest and ground rental
payments were reduced from 11.5% to 9.5% and the Partnership's rate of
participation in revenue from Rivers Corporate Park increased from 50% to 80%.
In October 1997, the Partnership formally executed the Agreement to renew the
mortgage loan at the previously agreed upon terms. These changes were
retroactive to January 1, 1996; however, any adjustment to amounts previously
recognized by the Partnership as revenue were insignificant. In addition, the
Agreement was further amended whereby the Partnership gained the right to cause
a sale of the property without the borrower's consent. Accordingly the
Partnership converted this investment to an owned property on the date the
Agreement was executed.
The ground lease has a term of fifty years and provides for additional rent
equal to a percentage, ranging from 50% to 80%, of gross revenues in excess of a
base amount from the rental of the buildings situated on the land. Percentage
rent totaled $12,021, $1,322, and $7,413 in 1997, 1996 and 1995, respectively.
The Partnership is also entitled to that same percentage of the net proceeds
from the sale of the entire property after it has recovered its cash investment
in the land and mortgage loan. The lease agreements require the lessee to pay
all operating expenses related to the subject land.
As a result of the execution of the Agreement which, among other changes,
increased the Partnership's participation in revenues and proceeds from sale of
the collateral to 80%, the Partnership has recorded the Rivers Corporate Park
investments as an owned "Property" effective in October 1997. Net income from
real estate operations for the fourth quarter of 1997 amounted to approximately
$120,000 for Rivers Corporate Park.
Additionally, during the fourth quarter of 1997 the Partnership reclassified the
Rivers Corporate Park Property to Property Held for Disposition due to the
execution of a purchase and sale agreement on the property. On March 4, 1998,
the Rivers Corporate Park was sold (see Note 7 - Subsequent Events).
<PAGE>
The following is a summary of the Partnership's investments in the Rivers
Corporate Park ground lease and mortgage loan investment:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash invested $ 5,100,000 $5,100,000
Unamortized closing costs and
acquisition fees, net 22,880 22,880
Accrued ground lease and
mortgage loan receivables 38,333 -
Valuation allowance for
impaired mortgage loans (400,000) (400,000)
Recovery of valuation allowance
for impaired mortgage loans 400,000 -
Transfer to property held for
disposition (5,161,213) -
----------- ----------
$ - $4,722,880
=========== ==========
</TABLE>
Sale of Decatur TownCenter
Decatur TownCenter in Decatur, Georgia was sold on October 10, 1996. The
net sale proceeds received by the Partnership were used to repay the ground
lease investment and the carrying value of the mortgage loans. Since the
mortgage loans were impaired, their carrying value had been previously reduced
to estimated fair market value, less anticipated costs of sale and thus no gain
or loss on the sale was recognized. The total valuation allowance at the date of
sale was $2,349,592, including $9,592 provided in 1996, which included a
disposition fee of $196,775 payable to AEW. On October 25, 1996, the Partnership
made a capital distribution to the limited partners in the aggregate amount of
$5,599,800 ($186.66 per limited partnership unit) with proceeds from this sale.
Valuation Allowance
The activity in the valuation allowance during 1996 and 1997, together with
the related recorded and carrying value of the impaired mortgage loans at the
beginning and end of each year, are summarized in the table below.
<PAGE>
<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, net (9,592)
Additional impaired loan (400,000)
Sale of collateral (Decatur TownCenter) 2,349,592
-----------
Balance at December 31, 1996 4,000,000 (400,000) 3,600,000
=========== =========== ===========
Accrued interest receivable 38,333 38,333
Reversal of impairment of loan - 400,000 400,000
Transfer to Property Held for Disposition
(Rivers Corporate Park) (4,038,333) - (4,038,333)
Balance at December 31, 1997 $ - $ - $ -
=========== =========== ===========
</TABLE>
Except for the effect of the mortgage loan restructuring, the average recorded
value of the impaired mortgage loans did not differ materially from the balances
at the end of the period.
NOTE 4 - INVESTMENTS IN PROPERTY
- --------------------------------
The Willows Shopping Center investment (the "Willows"), acquired in 1984,
was owned jointly with an affiliate of the Partnership (the "Affiliate"); the
Partnership had a 25% ownership share. The ground lessee/mortgagor stopped
paying interest on the mortgage loan as of March 1990. As a result, the
Partnership and its Affiliate began foreclosure proceedings to take possession
of the property. A protracted series of legal interactions ensued, including
the filing of an involuntary bankruptcy petition by the second leasehold
mortgagee. In June 1991, the Partnership and its Affiliate sold the mortgage
note to the original owner of the Willows, who in turn undertook and completed
the foreclosure action. The Partnership and its Affiliate received a new
mortgage note; the principal related to the Partnership's share was $3,715,802.
The note bore interest at 9.323% per annum, payable monthly; however, it could
accrue with interest compounded at 11%. The loan was to mature on June 18,
2001. The original owner also assumed the ground lease. The ground lease
provided for annual rental payments to the Partnership of $137,500. Rental
payments were accruable through June 1996, with interest compounding at 11%;
however, the Partnership had permitted additional accrual beyond that date as it
evaluated various alternatives. The ground lease also provided for
participation rentals at 70% of gross revenues in excess of a base amount to the
Partnership and its Affiliate. Under this investment arrangement, the
Partnership and its Affiliate were bearing substantial economic risks of
ownership; accordingly, the investment was accounted for as a jointly owned
property.
In connection with a major renovation of the property, on January 1, 1995,
the Partnership and its Affiliate committed to make a construction loan to the
ground lessee in the amount of $2,500,000. This loan was also accounted for as
an investment in property. The Partnership's share was $625,000 of which
$309,181 had been funded as of December 31, 1996. Interest accrued at 11%
compounded monthly; debt service payments began on January 1, 1996, including
principal payments based upon a 15-year amortization schedule. The note was to
mature on December 31, 1997, however, this property was sold on September 18,
1997. The Partnership received its 25% share of the net proceeds totaling
$7,009,315, after closing costs, and recognized a gain of $1,117,467 ($36.88 per
limited partnership unit). A disposition fee of $214,312 was accrued but not
paid to AEW. On October 30, 1997, the Partnership made a capital distribution
to the limited partners in the aggregate amount $7,012,500 ($233.75 per limited
partnership unit) with proceeds from this sale and partially from proceeds from
previously established capital reserves.
<PAGE>
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:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per financial
statements $ 2,420,094 $ 539,500 $1,569,268
Timing differences:
Ground rent and mortgage
loan interest (1) 283,515 947,478 688,074
(Loss) gain on sale (3,886,969) (3,631,081) -
Valuation allowance
(recovery) (400,000) 400,000 (260,000)
----------- ----------- ----------
Taxable (loss) income $(1,583,360) $(1,744,103) $1,997,342
=========== =========== ==========
</TABLE>
(1) Represents additional contractual revenue recognized for tax purposes
related to the Willows Shopping Center.
NOTE 6 - PARTNERS' CAPITAL
- --------------------------
Allocations of net income (losses) from operations and distributions of
distributable cash from operations, as defined, are in the ratio of 99% to the
limited partners and 1% to the general partner. Cash distributions are made
quarterly.
Net sales 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 partner. As a result of such transactions, the
adjusted capital contribution per limited partnership unit was reduced from
$1,000 to $790 during 1985, from $790 to $740 during 1991, from $740 to $546.66
during 1994, from $546.66 to $360 during 1996 and from $360 to $115.37 during
1997. Income from a sale is allocated in proportion to the distribution of
related proceeds, provided that the general partner is 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 partner.
Note 7 - Subsequent Events
--------------------------
Distributions of cash from operations relating to the quarter ended December 31,
1997 were made on January 29, 1998 in the aggregate amount of $179,091 ($5.91
per weighted average limited partnership unit).
On March 4, 1998, the Rivers Corporate Park property located in Columbia,
Maryland, was sold to an unaffiliated third party (the "Buyer") for $6,375,000.
The selling price was determined by arm's length negotiations between the
Partnership and the Buyer. The Partnership received net proceeds of $5,104,038
in full satisfaction of its ground lease and mortgage loan investments and
related accrued interest. The Partnership received additional proceeds of
approximately $789,000 after closing costs as its participation share of the
remaining proceeds after it recovered its investment in the land and mortgage
loan.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Costs Subsequent
Initial Costs to Partnership to Acquisitions
------------------------------------------- -----------------
Encum - Buildings & Improve -
Description brances Land Improvements ments
- ----------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland Note A 1,122,880 -- --
-------------------------------------------------------------------
Total $1,122,880 $0 $0
===================================================================
<CAPTION>
Gross Amount at Which
Carried at Close of Period
---------------------------------
Buildings & Accrued Accumulated
Description Land Improvements Ground Rent Total Depreciation
- ----------- ---------- -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland 1,122,880 4,038,333 -- 5,161,213 --
-----------------------------------------------------------------------------------------
Total $1,122,880 $4,038,333 $0 $5,161,213 $0
=========================================================================================
<CAPTION>
Date of Date Depreciable
Description Construction Acquired Life
- ----------- ------------ -------- -----------
<S> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland -- 03/28/84 --
__________________________________________________
Total
==================================================
</TABLE>
Notes:
(A) The senior mortgage on the property is held by New England Life
Pension Properties. 1997 additions represent a reclass of mortgage
loan investment to property (see Note 3 to the Financial
Statements)
<TABLE>
<CAPTION>
(B) Reconciliation of real estate owned: 1995 1996 1997
<S> <C> <C> <C>
Balance at beginning of year $8,535,439 $8,951,218 $7,690,314
Acquisitions 415,779 683,162 4,038,333
Dispositions 0 (1,944,066) (6,567,434)
------------ ------------ -------------
Balance at end of year $8,951,218 $7,690,314 $5,161,213
============ ============ =============
Accumulated depreciation: Balance at beginning of year $581,911 $766,954 $978,975
Depreciation expense 185,043 212,021 171,825
Disposition 0 0 (1,150,800)
------------ ------------ -------------
Balance at end of year $766,954 $978,975 $0
============ ============ =============
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
MORTGAGE LOANS ON REAL ESTATE
AT DECEMBER 31, 1997
SCHEDULE IV
<TABLE>
<CAPTION>
Valuation
Final Periodic Cost allowance Accrued
Interest Maturity Payment Face Amount Recovery for impaired Interest
Description Rate Date Terms of Mortgage Allowance Mortgage loans Receivable
- ----------- ---------- --------- ---------- --------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Research and Development
Facility Interest
Columbia, Maryland 11.50% 03/28/94 Monthly 4,000,000 -- -- 38,333
(See Note 3) Principal
at Maturity
-------------------------------------------------------------------------------------------------------
Total $4,000,000 $0 $0 $38,333
=======================================================================================================
<CAPTION>
Carrying
Reclass Amount of
Description (1) Mortgage
------------- -------------
<S> <C> <C>
Research and Development
Facility
Columbia, Maryland (4,038,333) $0
_____________ _____________
Total ($4,038,333) $0
============= =============
1995: 1996: 1997:
Balance at beginning of year $8,048,662 $8,441,928 $3,600,000
Reclass of accrued interest receivable 0 0 $38,333
Valuation recovery (allowance) for impaired loans 260,000 (409,592) 400,000
Increase in accrued ground lease/mortgage
loan receivables 135,000 0 0
Amortization of deferred acquisition fees (1,734) 0 0
Reclass (1) 0 0 (4,038,333)
Disposition 0 (4,432,336) 0
------------ ------------- --------------
Balance at end of year $8,441,928 $3,600,000 $0
============ ============= ==============
</TABLE>
Notes:
(1) - Represents the reclass of the Partnership's mortgage loan investment to
Property (see Note 3 to the Financial Statements)
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
OF M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
(REFERRED TO ELSEWHERE HEREIN AS RIVERS CORPORATE PARK)
Independent Auditor's Report of Wolpoff & Company
Balance Sheet - December 31, 1997 and 1996
Statement of Income - For the Years Ended December 31, 1997, 1996 and 1995
Statement of Partners' Capital - For the Years Ended December 31, 1997, 1996 and
1995
Statement of Cash Flows - For the Years Ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL REPORT
DECEMBER 31, 1997
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
CONTENTS
--------
DECEMBER 31, 1997
-----------------
<TABLE>
<S> <C>
ACCOUNTANT'S REVIEW REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2 - 3
Statement of Income 4
Statement of Partners' Capital 5
Statement of Cash Flows 6 - 7
Notes to Financial Statements 8 - 12
ACCOUNTANT'S REPORT ON SUPPLEMENTARY INFORMATION 13
SUPPLEMENTARY INFORMATION
Schedule of Changes in Partners' Capital - Income Tax Basis 14
Supplemental Ground Rent 15
</TABLE>
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP APPEARS HERE]
To the Partners
M.O.R. XVIII Associates Limited Partnership
Columbia, Maryland
We have reviewed the balance sheet of M.O.R. XVIII Associates Limited
Partnership as of December 31, 1997 and 1996, and the related statements of
income, partners' capital, and cash flows for the three years ended December 31,
1997, 1996, and 1995, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of M.O.R. XVIII Associates Limited Partnership.
A review consists principally of inquiries of Partnership personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/s/ WOLPOFF & COMPANY, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 23, 1998
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
PROPERTY, AT COST - Notes 1 and 2
Land, 5.3 Acres - Building No. 2 (11 Acres are leased - See Note 5) $ 762,452 $ 762,452
Building No. 1 2,449,170 2,449,170
Building No. 2 2,754,990 -0-
Tenant Improvements 1,138,724 1,138,724
Construction in Progress - Building No. 2 -0- 2,597,015
Deferred Costs 489,346 620,740
--------------- ---------------
7,594,682 7,568,101
Less Accumulated Depreciation and Amortization (1,354,658) (1,316,878)
--------------- ---------------
PROPERTY, NET 6,240,024 6,251,223
--------------- ---------------
OTHER ASSETS
Restricted Funds 48,042 47,199
Receivable From Tenants 62 134,952
Receivable, Affiliates - Note 3 40,512 40,512
Prepaid Expenses 73,567 6,573
--------------- ---------------
TOTAL OTHER ASSETS 162,223 229,236
--------------- ---------------
$ 6,402,247 $ 6,480,459
=============== ===============
</TABLE>
_______________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-2-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
BALANCE SHEET
-------------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
LIABILITIES
Mortgages Payable - Note 2 $ 6,934,185 $ 4,000,000
Bank Note Payable - Note 2 188,606 -0-
Construction Loan Payable - Note 2 -0- 1,793,887
Payable, Affiliates - Note 3 477,131 585,924
Accounts Payable and Accrued Expenses 20,902 951,093
Tenant Security Deposits 22,936 43,161
Prepaid Tenant Reimbursements 21,671 -0-
Accrued Interest Payable -0- 65,531
--------------- ---------------
TOTAL LIABILITIES 7,665,431 7,439,569
COMMITMENTS AND CONTINGENCY - Note 5
PARTNERS' CAPITAL - Note 1 (1,263,184 (959,137)
--------------- ---------------
$ 6,402,247 $ 6,480,459
=============== ===============
</TABLE>
_______________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-3-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF INCOME
-------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------------- -------------- ------------
<S> <C> <C> <C>
REVENUE - Notes 1 and 4
Rental Income $ 1,223,211 $ 677,374 $ 677,374
Less: Vacancy Loss 380,700 -0- -0-
-------------- -------------- ------------
Net Rental Income 842,511 677,374 677,374
Lease Termination Income - Note 4 246,898 -0- -0-
Expense Reimbursement From Tenants 45,776 -0- -0-
Interest and Other Income 4,000 15,563 4,072
-------------- -------------- ------------
TOTAL REVENUE 1,139,185 692,937 681,446
-------------- -------------- ------------
EXPENSES
Property Taxes 93,565 6,602 9,751
Utilities 93,743 -0- -0-
Legal and Accounting 58,858 15,560 3,700
Management Fees - Note 3 39,692 19,045 19,232
Repairs and Maintenance 33,616 -0- -0-
General and Administrative 9,754 409 7,342
Bad Debt - Note 4 -0- 668,335 -0-
-------------- -------------- ------------
TOTAL EXPENSES 329,228 709,951 40,025
-------------- -------------- ------------
OPERATING INCOME (LOSS) 809,957 (17,014) 641,421
-------------- -------------- ------------
MORTGAGE INTEREST AND GROUND RENT
Interest on Mortgage #1 - Note 2 380,000 380,000 460,000
Interest on Mortgage #2 - Note 2 232,351 -0- -0-
Interest on Bank Note - Note 2 18,613 -0- -0-
Ground Rent - Note 5 116,521 105,822 154,538
-------------- -------------- ------------
747,485 485,822 614,538
-------------- -------------- ------------
INCOME (LOSS) BEFORE DEPRECIATION 62,472 (502,836 26,883
DEPRECIATION AND AMORTIZATION (196,524) (66,529) (74,666)
-------------- -------------- ------------
NET LOSS - Notes 1 and 6 $ (134,052) $ (569,365) $ (47,783)
============== ============== ============
</TABLE>
_______________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-4-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
------------------------------------------
STATEMENT OF PARTNERS' CAPITAL
------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS
Prior Years $ 1,710,172 $ 1,489,546 $ 1,489,546
Current Year - Note 3 80,952 220,626 -0-
-------------- ------------- -------------
1,791,124 1,710,172 1,489,546
-------------- ------------- -------------
DISTRIBUTIONS
Prior Years (1,674,981) (788,241) (788,241)
Current Year - Note 3 (250,947) (886,740) -0-
-------------- ------------- -------------
(1,925,928) (1,674,981) (788,241)
-------------- ------------- -------------
ACCUMULATED LOSSES
Prior Years (994,328) (424,963) (377,180)
Current Year (134,052) (569,365) (47,783)
-------------- ------------- -------------
(1,128,380) (994,328) (424,963)
-------------- ------------- -------------
TOTAL PARTNERS' CAPITAL (DEFICIT) $ (1,263,184) $ (959,137) $ 276,342
============== ============= =============
</TABLE>
_______________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-5-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1996 1995
--------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (134,052) $ (569,365) $ (47,783)
--------------- --------------- -------------
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operating Activities
Depreciation and Amortization 196,524 66,529 74,666
Interest Expense Paid by Affiliate 18,613 -0- -0-
Change in Receivables From Tenant 134,890 509,085 (22,519)
Change in Restricted Funds (883) 105,357 (6,983)
Change in Prepaid Expenses (66,994) (6,573) 20,625
Increase in Accounts Payable and Accrued Expenses 18,136 27,169 1,271
Decrease in Accrued Interest Payable (65,531) -0- -0-
Decrease in Security Deposits (20,225) -0- -0-
Decrease in Prepaid Tenant Reimbursements 21,671 -0- -0-
--------------- --------------- -------------
Total Adjustments 236,201 701,567 67,060
--------------- --------------- -------------
Net Cash Provided by Operating Activities 102,149 132,202 19,277
--------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction Costs, Net of Accounts Payable (1,106,304) (1,419,451) -0-
Leasing Commissions (27,350) (217,681) -0-
Change in Receivable, Partner -0- 150,000 -0-
--------------- --------------- -------------
Net Cash Used by Investing Activities (1,133,654) (1,487,132) -0-
--------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Construction Loan 1,281,113 1,793,887 -0-
Mortgage Principal Payments (140,815) -0- -0-
Change in Payable, Affiliates (108,793) 225,663 (19,347)
Capital Contributions -0- 220,626 -0-
Distributions to Partners -0- (886,740) -0-
--------------- --------------- -------------
Net Cash Provided (Used) by Financing Activities 1,031,505 1,353,436 (19,347)
--------------- --------------- -------------
</TABLE>
(Continued)
_______________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-6-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
NET DECREASE IN CASH AND CASH EQUIVALENTS $ -0- $ (1,494) $ (70)
CASH, BEGINNING OF YEAR -0- 1,494 1,564
------------- ------------- -------------
CASH, END OF YEAR $ -0- $ -0- $ 1,494
============= ============= =============
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest
Expensed $ 669,298 $ 458,625 $ 539,244
Capitalized $ -0- $ 10,759 $ -0-
============= ============= =============
SUPPLEMENTAL SCHEDULE OF
NONCASH FINANCING ACTIVITIES:
Note 1: 1997 Distributions represent the transfer
to the Partnership by a partner of a note
payable (see Note 3). $ 250,947 $ -0- $ -0-
Payments on the loan made by the partner
classified as capital contributions in 1997 $ 80,752 $ -0- $ -0-
============= ============= =============
Note 2: During 1997, the construction loan was converted
to a mortgage payable of $3,075,000 (see Note 2).
</TABLE>
____________________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
-7-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
M.O.R. XVIII Associates Limited Partnership (the Partnership) was
formed in 1982 pursuant to an agreement under the Maryland Uniform
Limited Partnership Act.
Property
--------
The Partnership owns a leasehold interest in a 75,000-square-foot
office/warehouse building (Building No. 1) in Columbia (Howard
County), Maryland. See Note 5 regarding the related land lease. The
development of the property was completed and operations commenced in
February 1984.
In 1996, the Partnership constructed a building (Building No. 2)
containing 35,000 square feet of leasable space on 5.3 acres of land
adjacent to Building No. 1. The building was completed and operations
commenced on January 1, 1997. GTS/Duratek leases the building (see
Note 4).
Carrying costs and expenses incurred during the construction of
Building No. 2 were capitalized and included in the building cost.
Depreciation
------------
Building and improvement costs are being depreciated using the
straight-line method over the estimated useful life of 50 years.
Amortization
------------
Various deferred costs are being amortized as follows:
<TABLE>
<CAPTION>
Amortization
Amount Period
------------ -----------
<S> <C> <C>
Leasing Costs $ 186,750 3 - 10 Years
Mortgage Costs 285,857 4 - 10 Years
Organization Costs 16,739 Completed
------------
$ 489,346
============
</TABLE>
Rental Income
-------------
Rental income is recognized on a straight-line basis over the term of
the lease. The excess of resulting rental income over the rent
stipulated in the lease is reflected as deferred rent receivable.
Income Taxes
------------
Partnerships, as such, are not subject to income taxes. The partners
are required to report their respective shares of partnership income
or loss on their respective income tax returns (see Note 6).
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.
-8-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
Note 2 - DEBT SERVICE
Mortgage Financing - Building No. 1
-----------------------------------
On March 28, 1984, the Partnership obtained permanent financing on the
leasehold interest from New England Life Pension Properties in the
amount of $4,000,000. Effective January 1, 1996, the loan was amended
to reduce the interest rate from 11.5% to 9.5%, and the maturity date
was extended from March 1994 to December 1997. The mortgage
automatically renews each year for an additional 1 year term.
Pertinent terms of the mortgage are as follows:
<TABLE>
<S> <C>
Mortgage Amount $4,000,000
Date Settled March 28, 1984
Interest Rate 9.5%
Total Annual Payments (Interest Only) $380,000
Maturity Date December 31, 1998
</TABLE>
Mortgage Financing - Building No. 2
-----------------------------------
On January 1, 1997, the Partnership converted construction financing
on Building No. 2 to a four year mortgage. The lender is First Union
National Bank of Maryland. The mortgage requires fixed monthly
payments of principal and interest (totaling $326,520 annually). The
mortgage also calls for an additional annual principal payment equal
to the annual net cash flow. The additional principal payment for 1997
was $91,081, and the regular principal payments totaled $49,734.
Pertinent terms of the mortgage are as follows:
<TABLE>
<S> <C>
Mortgage Amount $3,075,000
Date Settled January 1, 1997
Interest Rate LIBOR+2.25% (adjusted daily) (8.2148% at December 31, 1997)
Maturity Date January 1, 2001
Total Basic Annual Payments $326,520
Payment Constant 8.77%
Contingent Principal Payment 100% of annual net cash flow
</TABLE>
A related company, Manekin Corporation, is a guarantor on one half of
the outstanding loan balance. The loan is personally guaranteed by
certain partners of MRU Limited Partnership (MRU), a limited partner
in this partnership.
The construction loan originated September 1996, and bore interest at
the LIBOR rate plus 225 basis points.
-9-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
Note 2 - Bank Note
---------
(Cont.) The Partnership has a note payable with First National Bank. This note
bears interest at 8.2% and matures January 2001. Principal payments
for the note are as follows:
<TABLE>
<S> <C>
1998 $ 62,340
1999 62,340
2000 62,340
2001 1,586
------------
$ 188,606
============
</TABLE>
Note 3 - RELATED PARTY TRANSACTIONS
Management Fees
---------------
The Partnership has entered into an agreement with Manekin
Corporation, an affiliated entity, to act as management agent for the
property. The management agreement provides for management fees equal
to 3% of rent and tenant expense billings collected. Management fees
totaled $39,692, $19,045, and $19,232 in 1997, 1996, and 1995,
respectively.
Receivable, Affiliates
----------------------
As of December 31, 1997 and 1996, the Partnership had amounts due from
various affiliated entities totaling $40,512.
Payable, Affiliates
-------------------
The Partnership participates in a central disbursing cash account with
various entities affiliated with the Partnership. As of December 31,
1997 and 1996, funds used by the Partnership in excess of the
Partnership's cash balance amounted to $477,131 and $585,924,
respectively, and are reflected as payable, affiliates.
Construction Contracts
----------------------
During 1996, the Partnership entered into contracts with Manekin
Corporation, an affiliated entity, for the construction of Building
No. 2 and related tenant improvements. The contracts amounted to
approximately $2,286,000.
Partner Contribution and Distribution
-------------------------------------
During 1997, MRU (a limited partner) transferred a liability of
$250,947 to the Partnership (the partner's capital account was
charged). The liability was a note owing to First National Bank, which
was incurred in prior years in a transaction pertaining to the
Partnership (Note 2). Throughout 1997, MRU continued to make the debt
service payments totaling $80,952 (shown as a capital contribution).
The payments included $18,613 of interest, which was expensed by the
Partnership.
-10-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
Note 4 - TENANT LEASES
Building No. 1
--------------
In March 1997, Crop Genetics vacated the building after filing
bankruptcy. Crop Genetics had leased the space since December 1992. In
1996, the Partnership wrote off deferred rent receivables (straight-
line rent) of $668,335. Lease termination income of $246,898 was
received from the tenant in 1997.
In April 1997, Gene Logic entered into a short-term lease with the
Partnership to occupy 21,000 square feet of the building. The lease
will terminate February 28, 1998. Future minimum rents to be received
under the remaining 2 months of the lease total $95,810.
Building No. 2
--------------
GTS/Duratek entered into a lease for Building No. 2, effective January
1, 1997. The 10-year lease is for 100% of the building. Annual rent is
$424,250.
Future minimum rents to be received under the noncancellable term of
both leases are as follows:
<TABLE>
<S> <C>
1998 $ 520,360
1999 424,550
2000 424,550
2001 424,550
2002 424,550
</TABLE>
Note 5 - LAND SALE AND LEASEBACK
On March 28, 1984, the Partnership entered into a sale-leaseback
agreement, with New England Life Pension Properties (a real estate
limited partnership). Pursuant to this agreement, the Partnership sold
11 acres of land (Building No. 1) for $1,100,000 in exchange for a 60-
year net leasehold interest in the land. The annual rent is $104,500.
The supplemental land rent is 80% of net revenues in excess of
$508,095 (for 1996, it was 80% of gross revenue in excess of
$597,000). Prior to January 1, 1996, the annual rent was $126,500, and
the supplemental land rent was 50% of all gross revenues in excess of
$597,000.
The supplemental land rent was $12,021, $1,322, and $28,038 for 1997,
1996, and 1995, respectively.
-11-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
Note 6 - TAX ACCOUNTING
The taxable loss of the Partnership differs from financial reporting
as follows:
<TABLE>
<CAPTION>
Current Prior
Year Years Total
------------- --------------- ---------------
<S> <C> <C> <C>
Financial Income $ (134,052) $ (994,328) $ (1,128,380)
Depreciation Adjustment (147,394) (1,935,068) (2,082,462)
Amortization of Interest and Taxes -0- (269,005) (269,005)
Capitalized Interest and
Taxes on Undeveloped Land -0- 108,510 108,510
Prepaid Tenant Reimbursements 21,671 -0- 21,671
Prepaid Property Taxes (64,174) (6,573) (70,747)
Other 124 -0- 124
------------- --------------- ---------------
Taxable Loss $ (323,825) $ (3,096,464) $ (3,420,289)
============= =============== ===============
</TABLE>
Note 7 - SUBSEQUENT EVENT
The Partnership is currently negotiating to sell Building No. 1.
-12-
<PAGE>
To the Partners
M.O.R. XVIII Associates Limited Partnership
Columbia, Maryland
ACCOUNTANT'S REPORT ON SUPPLEMENTARY INFORMATION
------------------------------------------------
The accompanying supplementary information contained on pages 14 and 15 is
presented for purposes of additional analysis. Such information has not been
subjected to the same inquiries and analytical procedures applied in the review
of the basic financial statements, but has been compiled from information that
is the representation of the management of M.O.R. XVIII Associates Limited
Partnership, without audit or review. Accordingly, we do not express an opinion
or any other form of assurance on such supplementary information.
/s/ WOLPOFF & COMPANY, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 23, 1998
-13-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
-----------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
<TABLE>
<CAPTION>
Partners' Partners'
Partners' Capital Capital
Ownership (Deficit) Capital Current (Deficit)
Percentage 12/31/96 Contribution Distributions Year Loss 12/31/97
------------- ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER
RA & DM, Inc. 1.00% $ (45,691) $ -0- $ -0- $ (3,238) $ (48,929)
LIMITED PARTNER
MRU Limited Partner 99.00% (3,015,708) 80,952 (250,947) (320,587) (3,506,290)
------------- ------------ ------------ ------------- ----------- -------------
100.00% $ (3,061,399) $ 80,952* $ (250,947)* $ (323,825) $ (3,555,219)
============= ============ ============ ============= =========== =============
</TABLE>
* See Note 3.
_______________
See Accountant's Report on Supplementary Information.
-14-
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
SUPPLEMENTAL GROUND RENT
------------------------
DECEMBER 31, 1997
-----------------
<TABLE>
<CAPTION>
1997*
-------------
<S> <C>
Gross Rental Receipts $ 841,930
Less Operating Expenses 318,809
-------------
Net Rental Receipts 523,121
Base Rent 508,095
-------------
Excess Rent Receipts Over Base Rent 15,026
Supplemental Ground Rent Rate 80.0%
-------------
Supplemental Ground Rent $ 12,021
=============
<CAPTION>
1996* 1995
------------- -------------
<S> <C> <C>
Rental Income $ 677,374 $ 677,374
------------- -------------
Deferred Rent Receivable
Current Year (668,336) (644,037)
Prior Year 644,037 619,738
------------- -------------
(24,299) (24,299)
------------- -------------
Rent Receivable
Current Year (54,423) -0-
Prior Year -0- -0-
------------- -------------
(54,423) -0-
------------- -------------
Net Rent 598,652 653,075
Base Rent 597,000 597,000
------------- -------------
Excess Net Rent Over Base Rent 1,652 56,075
Supplemental Ground Rent Rate 80.0% 50.0%
------------- -------------
Supplemental Ground Rent $ 1,322 $ 28,038
============= =============
</TABLE>
_______________
See Accountant's Review Report on Supplementary Information.
-15-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
4. Amended and Restated Agreement of Limited *
Partnership of the Registrant, dated June 29,
1983 (filed as Exhibit 4 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1983 [the "1983 Annual
Report"]).
10A. Form of Escrow Deposit Agreement among the *
Registrant, NEL Equity Services Corporation
and The First National Bank of Boston (filed
as Exhibit 10A to the Registrant's Registration
Statement on Form S-11, dated December 22, 1982,
file no. 2-81059 [the "Registration Statement"]).
10B. Advisory Contract dated March 22, 1983, between *
the Registrant and Copley Real Estate Advisors,
Inc. (filed as Exhibit 10 to the 1983 Annual Report).
10C. Form of Agreement between the Registrant and *
Copley Properties Company, Inc. relating to
organizational expenses (filed as Exhibit 10C
to the Registration Statement).
10D. Purchase Agreement and Deposit Receipt dated *
April 14, 1983 between Doyle Development Company
and NBS Investment Corporation, which assigned
its rights and obligations thereunder to the
Registrant (filed as Exhibit 10 to Current Report
on Form 8-K dated June 29, 1983, as filed on
July 14, 1983).
10E. Purchase and Sale Agreement dated December 1984, *
as amended by First Addendum to Purchase and Sale
Agreement dated as of January 10, 1985 (filed as
Exhibit 28 to Current Report on Form 8-K dated
January 23, 1985).
10F. Amended and Restated Secured Promissory Note *
dated August 20, 1985, by VMS 1984-133, Ltd.,
for the benefit of the Registrant and New
England Life Pension Properties II; A Real
Estate Limited Partnership.
_________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
10G. Amended and Restated Ground Lease dated *
August 20, 1985 between the Registrant, New
England Life Pension Properties II; A Real
Estate Limited Partnership and VMS 1984-133,
Ltd.
10H. Amended and Restated Memorandum of Ground *
Lease dated August 20, 1985 by and among the
Registrant, New England Life Pension Properties
II; A Real Estate Limited Partnership and
VMS 1984-133, Ltd.
10I. Contract of Sale dated as of March 30, 1984 by *
and between Decatur TownCenter Associates, Ltd.,
and the Registrant.
10J. Three Party Agreement dated as of March 30, 1984 *
by and among Decatur Town Center Associates,
the Registrant and the Citizens and Southern
National Bank.
10K. Promissory Note dated February 20, 1985, in the *
principal amount of $5,825,000 from the Registrant
to Decatur Town Center Associates, Ltd.
10L. Ground Lease dated February 20, 1985 between *
the Registrant and Decatur Town Center Associates,
Ltd.
10M. First Consolidated Amendatory Agreement dated *
December 29, 1988 by and between Decatur
TownCenter Associates, Ltd. and the Registrant.
10N. Purchase and Sale Agreement dated September 27, *
1990 by and between New England Mutual Life
Insurance Company, a Massachusetts corporation,
and Tom Hennig Co., Inc., a California corporation,
as amended by Letter dated December 12, 1990.
_________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
10O. Letter Agreement between New England Life *
Pension Properties II; A Real Estate Limited
Partnership, the Registrant and Willows
Concord Venture dated June 14, 1991.
10P. Promissory Note dated June 14, 1991, in the *
principal amount of $14,863,206.38 from Willows
Concord Venture to New England Life Pension
Properties II; A Real Estate Limited Partnership
and the Registrant.
10Q. Assignment of Note and Liens Including Deed of *
Trust dated as of June 13, 1991 by New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant to Willows Concord
Venture.
10R. Assignment of VMS Loan Documents dated June 14, *
1991 by Willows Concord Venture to New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant.
10S. Deed of Trust and Security Agreement dated June 13, *
1991 between Willows Concord Venture, as Trustor,
Chicago Title Company, as Trustee, and New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant, as Beneficiary.
10T. Assignment of Leases and Rents dated June 13, 1991 *
by Willows Concord Venture to New England Life
Pension Properties II; A Real Estate Limited
Partnership and the Registrant.
10U. Amended and Completely Restated Ground Lease *
dated effective as of June 18, 1991 between
Registrant, New England Life Pension Properties
II; A Real Estate Limited Partnership and
Willows Concord Venture.
_________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
10V. Amended and Restated Secured Promissory Note *
effective as of June 14, 1991, in the principal
amount of $14,863,206.38 from Willows
Concord Venture to the Registrant and
New England Life Pension Properties II;
A Real Estate Limited Partnership.
10W. Modification Agreement and First Amendment to *
Loan Documents dated August 13, 1991, by and
between Willows Concord Venture, the
Registrant and New England Life Pension
Properties II; A Real Estate Limited Partnership.
10X. Modification Agreement and Second Amendment to *
Loan Documents dated September 12, 1991, by
and between Willows Concord Venture, the
Registrant and New England Life Pension Properties
II; A Real Estate Limited Partnership.
10Y. Modification Agreement and Third Amendment to *
Loan Documents dated October 15, 1991, by and
between Willows Concord Venture, the Registrant
and New England Life Pension Properties II;
A Real Estate Limited Partnership.
10Z. Fourth Amendment to Loan Documents dated *
December 17, 1992 by and between Willows
Concord Venture, Registrant and New England
Life Pension Properties II; A Real Estate
Limited Partnership.
10AA. Amendment to Promissory Note executed as of *
March 1, 1993 made by Decatur TownCenter
Associates, Ltd. in favor of Registrant.
10BB. First Amendment to First Consolidated *
Amendatory Agreement executed as of March 1,
1993 made by and between the Registrant and
Decatur TownCenter Associates, Ltd.
_________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
10CC. Fee Transfer and Lien Release Agreement dated *
June 1, 1994 by and between New England Life
Pension Properties, A Real Estate Limited Partnership.
a Massachusetts limited partnership and 5141 E.
Santa Ana Property Company, a California Limited
Partnership.
10DD. Construction Loan Agreement dated January 1, 1995 by *
and between Willows Concord Venture, A California
Limited Partnership as Borrower, and New England
Life Pension Properties; A Real Estate Limited
Partnership as Lender.
10EE. Second Amendment to Promissory Note dated as of February *
19, 1995 between the Registrant and Decatur TownCenter
Associates, Ltd. ("Decatur").
10FF. Second Amendment to Ground Lease dated as of February *
19, 1995 between the Registrant and Decatur.
10GG. Second Amendment to First Consolidated Amendatory *
Agreement dated as of February 19, 1995 between the
Registrant and Decatur.
10HH. Third Amendment to Participation Agreement dated as of *
February 19, 1995 among the Registrant, A.J. Land, Jr.,
David B. Pattillo and Lawrence P. Kelly.
27. Financial Data Schedule
_________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 30, 1998 By: /s/ Wesley M. Gardiner, Jr.
-------------------------------------------
Wesley M. Gardiner, Jr.
President of the General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief
Executive Officer and
/s/ Wesley M. Gardiner, Jr. Director March 30, 1998
- ----------------------------
Wesley M. Gardiner, Jr
Vice President and
/s/ Pamela J. Herbst Director March 30, 1998
- ----------------------------
Pamela J. Herbst
Vice President and
/s/ J. Grant Monahon Director March 30, 1998
- ----------------------------
J. Grant Monahon
/s/ James J. Finnegan Vice President March 30, 1998
- ----------------------------
James J. Finnegan
Treasurer and Principal Financial
/s/ Karin J. Lagerlund and Accounting Officer March 30, 1998
- ----------------------------
Karin J. Lagerlund
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,309,837
<SECURITIES> 1,543,736
<RECEIVABLES> 10,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,864,020
<PP&E> 5,161,213
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,025,233
<CURRENT-LIABILITIES> 62,662
<BONDS> 868,855
0
0
<COMMON> 0
<OTHER-SE> 7,093,716
<TOTAL-LIABILITY-AND-EQUITY> 8,025,233
<SALES> 1,393,540
<TOTAL-REVENUES> 3,105,654
<CGS> 350,224
<TOTAL-COSTS> 350,224
<OTHER-EXPENSES> 335,336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,420,094
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,420,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,420,094
<EPS-PRIMARY> 79.86
<EPS-DILUTED> 79.86
</TABLE>
