SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1995 Commission File Number 0-14052
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2847256
(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
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X_ No ___
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1995
PART I
FINANCIAL INFORMATION
----------------------
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $ 18,232,280 $ 18,674,563
Property, net 1,265,058 1,189,011
--------------- ---------------
19,497,338 19,863,574
Cash and cash equivalents 1,557,199 2,423,836
Short-term investments 1,944,332 996,814
--------------- ---------------
$ 22,998,869 $ 23,284,224
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (Deficit)
Accounts payable $ 82,536 $ 86,049
Accrued management fee 42,101 42,101
--------------- ---------------
Total liabilities 124,637 128,150
--------------- ---------------
Partners' capital (deficit):
Limited partners ($493.14 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 22,916,217 23,195,240
General partners (41,985) (39,166)
--------------- ---------------
Total partners' capital 22,874,232 23,156,074
--------------- ---------------
$ 22,998,869 $ 23,284,224
=============== ===============
<FN>
(See accompanying notes to financial statements)
</TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 59,044 $ 151,758 $ -- $ --
Property operations expense (24,194) (75,295) -- --
Depreciation and amortization (8,462) (27,402) -- --
--------------- --------------- ---------------- ---------------
26,388 49,061 -- --
Joint venture earnings 320,560 1,116,267 378,078 1,149,032
Ground rentals and interest on
mortgage loans -- -- 18,343 45,858
Amortization (2,366) (7,098) (3,812) (11,436)
--------------- --------------- ---------------- ---------------
Total real estate operations 344,582 1,158,230 392,609 1,183,454
Interest on cash equivalents
and short term investments 51,422 152,262 31,387 90,395
--------------- --------------- ---------------- ---------------
Total investment activity 396,004 1,310,492 423,996 1,273,849
--------------- --------------- ---------------- ---------------
Portfolio Expenses
General and administrative 59,970 188,970 54,558 173,045
Management fee 42,101 126,303 37,932 105,526
--------------- --------------- ---------------- ---------------
102,071 315,273 92,490 278,571
--------------- --------------- ---------------- ---------------
Net Income $ 293,933 $ 995,219 $ 331,506 $ 995,278
=============== =============== ================ ===============
Net income per limited partnership
unit $ 4.25 $ 14.40 $ 4.80 $ 14.40
=============== =============== ================ ===============
Cash distributions per
limited partnership unit $ 6.16 $ 18.48 $ 5.55 $ 45.48
=============== =============== ================ ===============
Number of limited partnership
units outstanding during the period 68,414 68,414 68,414 68,414
=============== =============== ================ ===============
<FN>
(See accompanying notes to financial statements)
</TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------- ------------------- ------------------- ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
period $(40,667) $23,046,653 $ (39,166) $23,195,240 $(38,467) $23,264,456 $(38,934) $25,339,093
Cash
distributions (4,257) (421,430) (12,771) (1,264,290) (3,835) (379,698) (10,006) (3,111,469)
Net income 2,939 290,994 9,952 985,267 3,315 328,191 9,953 985,325
--------- ---------- --------- ---------- --------- ---------- ---------- ----------
Balance at
end of period $(41,985) $22,916,217 $ (41,985) $22,916,217 $(38,987) $23,212,949 $(38,987) $23,212,949
========== =========== ========= =========== ======== =========== ========= ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 1,415,963 $ 1,268,901
-------------- -------------
Cash flows from investing activities:
Capital expenditures on owned property (84,856) --
Decrease (increase) in short-term
investments, net (920,683) 105,312
------------ ------------
Net cash provided by (used in)
investing activities (1,005,539) 105,312
------------ ------------
Cash flows from financing activity:
Distributions to partners (1,277,061) (3,121,475)
------------ ------------
Net decrease in cash and
cash equivalents (866,637) (1,747,262)
Cash and cash equivalents:
Beginning of period 2,423,836 3,252,535
------------ ------------
End of period $ 1,557,199 $ 1,505,273
============== ==============
<FN>
(See accompanying notes to financial statements)
</TABLE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
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 September 30, 1995 and December 31, 1994 and the
results of its operations, its cash flows and changes in partners' capital
(deficit) for the interim periods ended September 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 III; 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 July, 1985
and made several investments through 1988. It intends to dispose of its
investments within twelve years of their acquisition, and then liquidate;
however, the managing general partner could extend the investment period if it
is in the best interest of the limited partners.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
----------------------
September 30, 1995 December 31, 1994
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation
of $4,116,951 and $3,697,894,
respectively $ 15,866,139 $ 16,188,586
Other assets 480,539 664,906
------------- -------------
16,346,678 16,853,492
Liabilities 153,598 198,804
------------- -------------
Net Assets $ 16,193,080 $ 16,654,688
============ ============
Results of Operations
Nine months ended September 30,
--------------------------------
1995 1994
---- ----
Revenue
Rental income $ 2,320,006 $ 2,326,671
Other 10,774 10,752
------------ -------------
2,330,780 2,337,423
------------ -------------
Expenses
Operating expenses 795,455 771,622
Depreciation and amortization 419,058 416,769
------------ -------------
1,214,513 1,188,391
------------ -------------
Net income $ 1,116,267 $ 1,149,032
============= ==============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership on behalf of its various financing arrangements with the joint
ventures.
NOTE 3 - PROPERTY
- -----------------
On November 15, 1994, the Partnership restructured its ground
lease/mortgage loan investment into a wholly-owned property, due to the
inability of the ground lessee/mortgagee to meet its financial obligations. The
following is a summary of the Partnership's investment in this property:
September 30, 1995 December 31, 1994
------------------ -----------------
Land $ 347,772 $ 347,772
Buildings and improvements 931,040 846,184
Accumulated depreciation (29,523) (2,802)
Net operating assets/(liabilities) 15,769 (2,143)
------------ -------------
$ 1,265,058 $ 1,189,011
============= =============
The buildings are being depreciated over a 25 year period.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1995 were made on October 26, 1995 in the aggregate amount of
$425,687 ($6.16 per limited partnership unit).
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited partnership
interest in December, 1985. A total of 68,414 units were sold. The Partnership
received proceeds of $61,950,285, 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. The Partnership made nine real
estate investments, six of which were sold prior to 1994. As a result of the
sales, capital of $34,676,320 has been returned to the limited partners through
September 30, 1995.
At September 30, 1995, the Partnership had $3,501,531 in cash, cash
equivalents and short-term investments, of which $425,687 was distributed to
partners on October 26, 1995; the remainder is being retained as working capital
reserves. The source of future liquidity and cash distributions to partners
will be cash generated by the Partnership's investments and proceeds from the
sale of investments. Distributions of cash from operations for the first three
quarters of 1995 were made at the annualized rate of 5% on the adjusted capital
contribution. Distributions of cash from operations relating to the first,
second, and third quarters of 1994 were made at the annualized rate of 3.5%,
4.5% and 4.5%, respectively, on a weighted average adjusted capital
contribution. On January 27, 1994, the Partnership made a capital distribution
of $31 per limited partnership unit from the proceeds of the Heritage Green
Plaza sale in December 1993. The adjusted capital contribution after this
distribution is $493.14 per unit. The increase in the distribution rate results
from the attainment of appropriate cash reserve levels and the improvement in
cash flow from operations.
The carrying value of real estate investments in the financial statements
is at cost or 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 September 30, 1995, the appraised value of each real
estate investment exceeded its related carrying value; the aggregate excess was
approximately $5,500,000. The current appraised value of real estate
investments has been estimated by the managing general partner and is generally
based on a combination of traditional appraisal approaches performed by the
Partnership's advisor and independent appraisers. Because of the subjectivity
inherent in the valuation process, the estimated current appraised value may
differ significantly from that which could be realized if the real estate were
actually offered for sale in the marketplace.
Results of Operations
- ---------------------
Form of Real Estate Investments
Effective November 15, 1994, North Cabot Industrial Park (formerly
Marathon/Hayward) was converted to a wholly-owned property; it was previously
structured as a ground lease with a mortgage loan to the ground lessee.
Bayberry Apartments and 270 Technology Center are structured as joint ventures
with real estate management/development firms.
Operating Factors
Occupancy at North Cabot Industrial Park increased from 66% to 87% during
the third quarter of 1995, with the signing of two new leases. (Occupancy was
66% one year ago and 58% at year end 1994.) Occupancy, however, could decline
over the next year as leases on 48% of the currently occupied space expire.
Although occupancy has improved, the managing general partner does not expect
this investment to achieve the Partnership's original investment objectives.
Occupancy at Bayberry Apartments ended the third quarter of 1995 at 95%.
During the first nine months of both 1994 and 1995, occupancy fluctuated between
92% and 95%. Market conditions remain competitive; however, rental rates in the
Gaithersburg market have increased over the past year, as supply and demand
remain in equilibrium.
Occupancy at 270 Technology Park remained at 98% during the third quarter
of 1995. (Occupancy was 95% one year ago.) The property faces minimal lease
expiration exposure over the next year.
Investment Activity
Interest on cash equivalents and short-term investments increased between
the comparative nine month periods due to higher short-term interest rates and
larger average investment balances.
Real estate operating results were $1,158,230 for the first nine months of
1995 as compared to $1,183,454 for the comparable nine months of 1994. This
decrease was primarily due to a decrease in net operating income at 270
Technology Park ($37,000) resulting from a decrease in rental income caused by
lower lease rates. Rental income at Bayberry Apartments increased during the
comparable nine month period due to an increase in average occupancy; however,
this increase was offset by an increase in operating expenses.
Operating cash flow increased $147,062 or 12% between the first nine months
of 1994 and 1995. Cash flow from Bayberry Apartments increased approximately
$111,000, primarily from the distribution of amounts which had been previously
retained as working capital reserves. Cash flow from 270 Technology Park
increased approximately $46,000 due to the timing of distributions.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
The Partnership management fee increased between the first nine months of
1994 and 1995 due to an increase in distributable cash flow. General and
administrative expenses increased by $15,925 or 9% between the respective
periods. This increase was due to the professional fees associated with the
restructuring of the North Cabot Industrial Park investment.
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 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 September 30,
1995.
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 III;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
November 9, 1995 -----------------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
November 9, 1995 -----------------------------------------
Marie A. Welch
Investment Officer and Chief Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1557199
<SECURITIES> 1944332
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19497338
<DEPRECIATION> 0
<TOTAL-ASSETS> 22998869
<CURRENT-LIABILITIES> 124637
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 22874232
<TOTAL-LIABILITY-AND-EQUITY> 22998869
<SALES> 0
<TOTAL-REVENUES> 1420287
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 425068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 995219
<INCOME-TAX> 0
<INCOME-CONTINUING> 995219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 995219
<EPS-PRIMARY> 14.40
<EPS-DILUTED> 14.40
</TABLE>
