<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------------------
For Quarter Ended March 31, 1996 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
- ------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve (12) months (or for such
shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART I
FINANCIAL INFORMATION
----------------------
<PAGE>
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
----------------- ------------------
ASSETS
<S> <C> <C>
Real estate investments:
Joint ventures $17,978,843 $18,116,002
Property, net 1,317,258 1,243,499
------------ ------------
19,296,101 19,359,501
Cash and cash equivalents 2,120,538 1,399,905
Short-term investments 1,331,513 2,111,608
------------ ------------
$22,748,152 $22,871,014
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 51,662 $ 88,184
Accrued management fee 46,338 42,101
------------ ------------
Total liabilities 98,000 130,285
------------ ------------
Partners' capital (deficit):
Limited partners ($493.14 per
unit; 75,000 units authorized,
68,414 units issued and
outstanding) 22,694,377 22,784,048
General partners (44,225) (43,319)
------------ ------------
Total partners' capital 22,650,152 22,740,729
------------ ------------
$22,748,152 $22,871,014
============ ============
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------
1996 1995
--------- ---------
INVESTMENT ACTIVITY
<S> <C> <C>
Property rentals $ 45,376 $ 48,346
Property operating expenses (32,441) (32,751)
Depreciation and amortization (8,462) (9,797)
----------- -----------
4,473 5,798
Joint venture earnings 387,747 431,795
Amortization (2,366) (2,366)
----------- -----------
Total real estate operations 389,854 435,227
Interest on cash equivalents
and short-term investments 43,544 49,083
----------- -----------
Total investment activity 433,398 484,310
----------- -----------
Portfolio Expenses
General and administrative 51,950 67,687
Management fee 46,338 42,101
----------- -----------
98,288 109,788
----------- -----------
Net Income $ 335,110 $ 374,522
=========== ===========
Net income per limited
partnership unit $ 4.85 $ 5.42
=========== ===========
Cash distributions per
limited partnership unit $ 6.16 $ 6.16
=========== ===========
Number of limited partnership
units outstanding during the
period 68,414 68,414
=========== ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------------------
1996 1995
-------- --------
General Limited General Limited
Partners Partners Partners Partners
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at
beginning of
period $(43,319) $22,784,048 $(39,166) $23,195,240
Cash
distributions (4,257) (421,430) (4,257) (421,430)
Net income 3,351 331,759 3,745 370,777
--------- ---------- --------- ----------
Balance at
end of period $(44,225) $22,694,377 $(39,678) $23,144,587
========= ========== ========= ============
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------
1996 1995
--------- --------
<S> <C> <C>
Net cash provided by operating
activities $ 384,305 $ 468,888
----------- -----------
Cash flows from investing activities:
Capital expenditures on owned property (901) (39,459)
Decrease (increase) in short-term
investments, net 762,916 (237,820)
----------- -----------
Net cash provided by (used in)
investing activities 762,015 (277,279)
----------- -----------
Cash flows from financing activity:
Distributions to partners (425,687) (425,687)
----------- -----------
Net increase (decrease) in
cash and cash equivalents 720,633 (234,078)
Cash and cash equivalents:
Beginning of period 1,399,905 2,423,836
----------- -----------
End of period $ 2,120,538 $2,189,758
============ ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Partnership's financial position as of March 31, 1996 and December 31,
1995 and the results of its operations, its cash flows and changes in
partners' capital (deficit) for the interim periods ended March 31, 1996
and 1995. These adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1995
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. 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 July, 1985 and acquired several investments
through 1988. The Partnership 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:
<TABLE>
<CAPTION>
Assets and Liabilities
----------------------
March 31, 1996 December 31, 1995
-------------- -----------------
Assets
<S> <C> <C>
Real property, at cost less
accumulated depreciation
of $4,407,767 and $4,273,114,
respectively $15,603,570 $ 15,753,539
Other assets 561,448 660,423
------------ ------------
16,165,018 16,413,962
Liabilities 93,787 280,372
------------ ------------
Net Assets $16,071,231 $ 16,133,590
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Quarter ended March 31,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Revenue
Rental income $ 771,631 $ 803,968
Other 480 3,162
----------- ------------
772,111 807,130
----------- ------------
Expenses
Operating expenses 249,353 239,511
Depreciation and amortization 135,011 135,824
----------- ------------
384,364 375,335
----------- ------------
Net income $ 387,747 $ 431,795
============ ============
</TABLE>
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
- -----------------
The following is a summary of the Partnership's investment in
property:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------- ----------------
<S> <C> <C>
Land $ 347,772 $ 347,772
Buildings and improvements 1,022,019 1,021,118
Accumulated depreciation
and amortization (66,503) (58,041)
Net operating assets/
(liabilities) 13,970 (67,350)
----------- ------------
$1,317,258 $ 1,243,499
=========== ============
</TABLE>
The buildings are being depreciated over a 25 year period.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
March 31, 1996 were made on April 25, 1996 in the aggregate amount of
$468,532 ($6.78 per limited partnership unit).
<PAGE>
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
- ---------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited
partnership interest in 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 March 31, 1996.
At March 31, 1996, the Partnership had $3,452,051 in cash, cash
equivalents and short-term investments, of which $468,532 was distributed
to partners on April 25, 1996; 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 quarter of 1996 and 1995 were made at the
annualized rate of 5.5% and 5%, respectively, on the adjusted capital
contribution. The increase in the distribution rate during 1996 results
from the attainment of appropriate cash reserve levels and the
stabilization of property operations.
The carrying value of real estate investments in the financial
statements is at depreciated cost, or if the investment's carrying value
is determined not to be recoverable through expected undiscounted future
cash flows, the carrying value is reduced to estimated fair market value.
The fair market value of such investments is further reduced by the
estimated cost of sale for properties held for sale. Carrying value may
be greater or less than current appraised value. At March 31, 1996, 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
North Cabot Industrial Park is a wholly-owned property. Bayberry
Apartments and 270 Technology Center are structured as joint ventures with
real estate management/development firms.
<PAGE>
Operating Factors
Occupancy at North Cabot Industrial Park decreased from 94% to 72%
during the first quarter of 1996, as two tenants did not renew their
leases upon expiration. (Occupancy was 58% at March 31, 1995.)
Occupancy at Bayberry Apartments ended the first quarter of 1996 at
95%. (Occupancy was 92% and 91% at March 31, 1995 and December 31, 1995,
respectively.) 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 first
quarter of 1996. (Occupancy was 95% at March 31, 1995.) The property
does not have significant lease expiration exposure over the next year.
Investment Activity
Interest on cash equivalents and short-term investments decreased
between the comparative quarters due to lower short-term interest rates.
Real estate operating results were $389,854 for the first quarter of
1996 as compared to $435,227 for the comparable quarter of 1995. This
decrease was primarily due to a decrease in net operating income at 270
Technology Park ($35,000) resulting from a decrease in rental income
caused by lower lease rates. Net operating income at the remainder of the
properties was relatively unchanged between the respective quarters.
Operating cash flow decreased $84,583 or 18% between the first
quarter of 1995 and 1996. The decrease in cash flow primarily resulted
from changes in 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 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 quarter of
1995 and 1996 due to an increase in distributable cash flow. General and
administrative expenses decreased by $15,737 or 23% between the respective
periods. The 1995 amount includes the final settlement of professional
fees associated with the ownership restructuring of the North Cabot
Industrial Park investment.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
March 31, 1996.
<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 III;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
May 10, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Copley Properties Company III, Inc.
May 10, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Copley Properties Company III, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,120,538
<SECURITIES> 1,331,513
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,452,051
<PP&E> 19,296,101
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,748,152
<CURRENT-LIABILITIES> 98,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,650,152
<TOTAL-LIABILITY-AND-EQUITY> 22,748,152
<SALES> 433,123
<TOTAL-REVENUES> 476,667
<CGS> 32,441
<TOTAL-COSTS> 32,441
<OTHER-EXPENSES> 109,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 335,110
<INCOME-TAX> 0
<INCOME-CONTINUING> 335,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335,110
<EPS-PRIMARY> 4.85
<EPS-DILUTED> 4.85
</TABLE>
