SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JUNE 30, 1995 COMMISSION FILE NUMBER 0-13323
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2803902
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
399 BOYLSTON STREET, 13TH FL.
BOSTON, MASSACHUSETTS 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
Former Name, former address and former fiscal year if changed since
last report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve (12) months (or for
such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No ___
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1995
PART I
FINANCIAL INFORMATION
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
June 30, 1995 December 31, 1994
ASSETS
Real estate investments:
Ground leases and mortgage
loans, net $ 18,800,332 $ 19,014,308
Property, net 14,735,090 14,689,691
Deferred leasing costs and other
assets, net 600,125 591,963
----------- ---------------
34,135,547 34,295,962
Cash and cash equivalents 4,033,344 4,101,201
Short-term investments 1,671,040 1,292,505
Interest and rent receivable 75,293 179,289
----------- ---------------
$ 39,915,224 $ 39,868,957
=========== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 164,116 $ 548,907
Accrued management fee 62,089 57,662
Deferred disposition fees 314,464 314,464
----------- ---------------
Total liabilities 540,669 921,033
----------- ---------------
Partners' capital:
Limited partners ($889.89 per unit;
110,000 units authorized,
39,917 units issued and outstanding)
39,297,846 38,875,480
General partner 76,709 72,444
----------- ---------------
Total partners' capital 39,374,555 38,947,924
----------- ---------------
$ 39,915,224 $ 39,868,957
=========== ===============
(See accompanying notes to financial statements)
<PAGE>
<TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED QUARTER ENDED SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1994
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 697,414 $ 1,279,743 $ 386,974 $ 844,751
Property operations (221,225) (434,972) (216,991) (450,123)
Depreciation and amortization (143,477) (288,968) (130,238) (260,500)
----------- ------------- ----------- -------------
332,712 555,803 39,745 134,128
Provision for impaired
mortgage loans (205,000) (205,000) (800,000) (800,000)
Ground rentals and interest
on mortgage loans 715,684 1,346,399 661,616 1,455,293
----------- ------------- ----------- -------------
Total real estate activity 843,396 1,697,202 (98,639) 789,421
Interest on cash equivalents
and short-term investments 75,730 150,611 69,470 125,649
----------- ------------- ----------- -------------
Total investment activity 919,126 1,847,813 (29,169) 915,070
----------- ------------- ----------- -------------
PORTFOLIO EXPENSES
Management fee 62,088 124,177 60,932 121,864
General and administrative 42,438 86,188 49,167 87,626
----------- ------------- ----------- -------------
104,526 210,365 110,099 209,490
----------- ------------- ----------- -------------
NET INCOME (LOSS) $ 814,600 $ 1,637,448 $ (139,268) $ 705,580
=========== ============= =========== =============
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $ 20.20 $ 40.61 $ (3.45) $ 17.50
=========== ============= =========== =============
CASH DISTRIBUTIONS PER
LIMITED PARTNERSHIP UNIT $ 15.57 $ 30.03 $ 15.28 $ 30.56
=========== ============= =========== =============
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING
THE PERIOD 39,917 39,917 39,917 39,917
=========== ============= =========== =============
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1995 June 30, 1995 June 30, 1994 June 30, 1994
General Limited General Limited General Limited General Limited
Partner Partners Partner Partners Partner Partners Partner Partners
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bal. at
beginning of
period $74,842 $ 39,112,900 $72,444 $ 38,875,480 $ 75,736 $41,201,861 $ 73,449 $ 40,975,393
Cash dis-
tributions (6,279) (621,508) (12,109) (1,198,708) (6,161) (609,932) (12,322) (1,219,864)
Net income
(loss) 8,146 806,454 16,374 1,621,074 (1,392) (137,876) 7,056 698,524
------ ----------- ------- ----------- ------- ----------- -------- -----------
Bal. at end
of period $76,709 $ 39,297,846 $76,709 $ 39,297,846 $ 68,183 $40,454,053 $ 68,183 $ 40,454,053
====== =========== ======= =========== ======= =========== ======== ===========
<FN>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1995 1994
Net cash provided by operating activities $ 2,008,381 $1,359,110
----------- ----------
Cash flows from investing activities:
Increase in mortgage loan - (110,253)
Capital expenditures on owned property (492,159) (350,730)
Decrease (increase) in short-term
investments, net (373,262) 671,599
----------- ----------
Net cash provided by (used in)
investing activities (865,421) 210,616
----------- ----------
Cash flows from financing activity:
Distributions to partners (1,210,817) (1,232,186)
----------- ----------
Net increase (decrease) in
cash and cash equivalents (67,857) 337,540
Cash and cash equivalents:
Beginning of period 4,101,201 7,075,659
----------- ----------
End of period $ 4,033,344 $7,413,199
=========== ==========
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Partnership's financial position as of June 30, 1995 and December 31,
1994 and the results of its operations and its cash flows for the
interim periods ended June 30, 1995 and 1994. These adjustments are of
a normal recurring nature.
See notes to financial statements included in the Partnership's 1994
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
New England Life Pension Properties II; A Real Estate Limited
Partnership (the "Partnership") is a Massachusetts limited partnership
organized for the purpose of investing primarily in newly constructed
and existing income producing real properties. The Partnership
commenced operations in June 1984 and acquired several properties
through 1986. It intends to dispose of its investments within twelve
years of their acquisition, and then liquidate; however, the general
partner could extend the investment period if it is in the best
interest of the limited partners.
NOTE 2 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
In accordance with Statement of Financial Accounting Standards No.
114 which the Partnership adopted as of January 1, 1993, the mortgage
loans on Elkridge and Susana Corporate Center are impaired.
Accordingly, a valuation allowance has been established to adjust the
carrying value of the loans to their estimated fair market value less
anticipated costs of sale. The aggregate recorded and carrying values
of the impaired mortgage loans at the beginning and end of the
respective periods are as follows:
Recorded Valuation Carrying
Value Allowance Value
Balance at December 31, 1993 $5,541,140 $(1,670,000) $3,871,140
========== ==========
Decrease in estimated fair market
value of collateral (800,000)
--------
Balance at June 30, 1994 $5,806,133 $(2,470,000) $3,336,133
========== =========== ==========
Balance at December 31, 1994 $5,517,874 $(2,200,000) $3,317,874
========== ==========
Decrease in estimated fair market
value of collateral (205,000)
--------
Balance at June 30, 1995 $5,585,250 $(2,405,000) $3,180,250
========== =========== ==========
During the second half of 1994, the allowance was decreased by
$270,000.
NOTE 3 - SUBSEQUENT EVENT
Distributions of cash from operations relating to the quarter ended
June 30, 1995 were made on July 27, 1995 in the aggregate amount of
$627,786 ($15.57 per limited partnership unit).
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership completed its offering of units of limited partnership
interest in November 1984. A total of 39,917 units were sold. The
Partnership received proceeds of $36,296,995, 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. Capital of $4,395,261 has been returned to the
limited partners through June 30, 1995. Two of the Partnership's
mortgage loan investments had a maturity date in 1994; another matured
in early 1995. The Partnership is in the process of evaluating various
alternatives to renewing these loans.
At June 30, 1995, the Partnership had $5,704,384 in cash, cash
equivalents and short-term investments, of which $627,786 was used for
cash distributions to partners on July 27, 1995; the remainder will be
used to fund the rehabilitation of the Willows Shopping Center or
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 investments and proceeds from the sale of such
investments. Distributions of cash from operations for the first and
second quarters of 1995 were made at the annualized rate of 7% on the
adjusted capital contribution, while the cash distribution rate for the
comparative prior year quarters was 6.5% and 6%, respectively. The
adjusted capital contribution was reduced from $940 per unit to $889.89
per unit due to the distribution of the Oxford Place sale proceeds
(sold in December, 1993) during July 1994. The cash distribution rate
increased with the stabilization of property operations and the
attainment of appropriate reserve levels.
The carrying value of real estate investments in the financial
statements, other than impaired mortgage loans, is reduced to its lower
net realizable value if the investment's carrying value is determined
not to be recoverable through expected undiscounted future cash flows.
At June 30, 1995, the carrying value of Willows Shopping Center
exceeded its appraised value by approximately $1,100,000, and the
carrying values of the remainder of the investments exceeded their
appraised values by an aggregate of approximately $285,000. The
current appraised value of real estate investments has been estimated
by the general partner and is generally based on a combination of
traditional appraisal approaches performed by the advisor and
independent appraisers. Because of the subjectivity inherent in the
valuation process, the estimated current appraised value may differ
significantly from that which could be realized if the real estate were
actually offered for sale in the marketplace.
RESULTS OF OPERATIONS
OPERATING FACTORS
Leasing at the Willows Shopping Center has remained at 91% during the
first half of 1995. (The Center was 78% leased at June 30, 1994.)
This property is undergoing a full rehabilitation, including the
complete renovation and reconfiguration of the Center. The general
partner has determined that it is in the best interest of the
Partnership to provide funding for the rehabilitation costs together
with its affiliate which shares in the ownership. The Partnership's
share of the remaining estimated rehabilitation cost is approximately
$2,625,000. Two tenants (totaling 3,200 square feet) that signed
leases in the first quarter are now scheduled to commence occupancy in
the third quarter; their occupancy was pushed back due to delays in
construction. In addition, two other tenants (totaling 15,700 square
feet) have signed leases and are scheduled to commence occupancy late
in the third quarter. During the second quarter, a lease buyout was
agreed upon with the tenant who had vacated the pad site at the
entrance to the Center. This space is now available for
rehabilitation; the focus is on finding an attractive long-term tenant
for this site.
Occupancy at Elkridge increased from 40% to 43% during the second
quarter of 1995. (Occupancy was 73% a year ago.) The increase is due
to the signing of three new leases in the R&D building, which brings
its occupancy level up to 73%. The warehouse building, which remains
vacant, is being marketed for sale.
The Susana Corporate Center remained 100% leased to a single tenant at
June 30, 1995. This property is currently listed for sale. Although
there has been some buyer interest, no serious offers have been
received.
INVESTMENT RESULTS
The credit from (provision for) impaired mortgage loans relates to
changes in the net fair market value of the collateral underlying the
Elkridge and Susana Corporate Center mortgage loans.
Exclusive of the provision for impaired mortgage loans, real estate
investment results were $1,902,202 and $1,589,421 for the six months
ended June 30, 1995 and 1994, respectively. This increase of $312,781
or 20% is due to an increase in net operating income generated by
Willows Shopping Center of approximately $420,000 as a result of both
improved occupancy and the Partnership's share of the lease buyout
proceeds (approximately $195,000). The increase was partially offset
by a decrease in percentage rent of approximately $100,000 from Case
Communications. A final settlement of prior year percentage rent of
$200,000 was recognized in 1994.
Short-term interest income increased between the respective six-month
periods due to an increase in the average investment balance and an
increase in short-term investment rates.
The increase in operating cash flow during the first half of 1995 as
compared to the prior year period is generally consistent with the
change in the Partnership's investment results, exclusive of the non-
cash provision for impaired loans taken together with changes in its
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 and administrative
expenses primarily consist of real estate appraisal, printing, legal,
accounting, investor servicing fees and state filing and tax fees.
The management fee and general and administrative expenses remained
relatively unchanged for the six months ended June 30, 1995 compared to
the same period of the prior year.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1995
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: NONE.
b. Reports on Form 8-K: No reports on Form 8-K were
filed during the quarter ended June 30, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES II; A
REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 11, 1995 Peter P. Twining
Managing Director and General Counsel of
Managing General Partner,
Copley Properties Company, Inc.
August 11, 1995 Marie A. Welch
Investment Officer and Chief Accounting
Officer of Managing General Partner
Copley Properties Company, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4033334
<SECURITIES> 1671040
<RECEIVABLES> 75293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5779667
<PP&E> 34135547
<DEPRECIATION> 0
<TOTAL-ASSETS> 39915224
<CURRENT-LIABILITIES> 540669
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 39374555
<TOTAL-LIABILITY-AND-EQUITY> 39915224
<SALES> 0
<TOTAL-REVENUES> 2776753
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1139305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1637448
<INCOME-TAX> 0
<INCOME-CONTINUING> 1637448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1637448
<EPS-PRIMARY> 40.61
<EPS-DILUTED> 40.61
</TABLE>
