<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, 1995
Commission File No. 0-15429
_________________
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2893298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
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 IV; A Real Estate Limited
Partnership (the "Partnership") was organized under the Uniform Limited
Partnership Act of the Commonwealth of Massachusetts on October 16, 1985, to
invest primarily in newly constructed and existing income-producing real
properties.
The Partnership was initially capitalized with contributions of $2,000
in the aggregate from Fourth Copley Corp. (the "Managing General Partner") and
CCOP Associates Limited Partnership (the "Associate General Partner")
(collectively, the "General Partners") and $10,000 from Copley Real Estate
Advisors, Inc. (the "Initial Limited Partner"). The Partnership filed a
Registration Statement on Form S-11 (the "Registration Statement") with the
Securities and Exchange Commission on November 12, 1985, with respect to a
public offering of 60,000 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 60,000 Units (an aggregate of $120,000,000). The Registration
Statement was declared effective on January 3, 1986.
The first sale of Units occurred on May 29, 1986, at which time the
Initial Limited Partner withdrew its contribution from the Partnership.
Investors were admitted to the Partnership thereafter at monthly closings; the
offering terminated and the last group of subscription agreements was accepted
by the Partnership on December 31, 1986. As of January 31, 1987, a total of
94,997 Units had been sold, a total of 17,207 investors had been admitted as
limited partners (the "Limited Partners") and a total of $94,348,550 had been
contributed to the capital of the Partnership. The remaining 25,003 Units were
de-registered on February 23, 1987.
As of December 31, 1995, the Partnership had investments in the six
real property investments described below. In December 1988, the Partnership
sold one of its investments and received sale proceeds of $10,577,476 which were
substantially reinvested. A second investment located in Atlanta, Georgia was
sold on August 6, 1993 that resulted in sale proceeds, after closing costs,
totaling $7,917,000. The sale proceeds were distributed to the Limited Partners
in October 1993, in the amount of $82.00 per Unit. A third investment located
in Rancho Cucamonga, California was sold on December 30, 1994, resulting in sale
proceeds, after closing costs, totaling $5,261,275. On January 26, 1995,
$5,224,835 ($55 per Unit) of the sale proceeds was distributed to the Limited
Partners.
The Partnership has no current plan to renovate, improve or further
develop any of its real property. In the opinion of the Managing General
Partner of the Partnership, the properties are adequately covered by insurance.
The Partnership has no employees. Services are performed for the Partnership by
the Managing General Partner and affiliates of the Managing General Partner.
A. Apartment Complex in Fort Myers, Florida ("Reflections").
---------------------------------------------------------
On August 1, 1986, the Partnership acquired a 60% interest in Lee
Partners (the "Joint Venture"), a joint venture formed with Lee-Oxford Limited
Partnership, a Maryland limited partnership ("Lee-Oxford"). As of December 31,
1995, the Partnership had contributed $8,190,145 to the capital of the Joint
Venture out of a maximum obligation of $8,685,000. The joint venture agreement
entitles the Partnership to receive 60% of all cash flow from operations,
refinancing proceeds and net sale proceeds.
The Partnership also committed to make a loan for investment in the
joint venture of up to $5,790,000 to Lee-Oxford, of which $5,460,097 had been
funded as of December 31, 1995. Interest only on the loan is payable monthly at
the rate of 10.5% per annum. The entire outstanding principal balance of the
loan matures in December, 1999 or will be due on the sale of all or
substantially all of the assets of the Joint Venture or the sale of Lee-Oxford's
interest in the Joint Venture. Lee-Oxford must apply any cash flow received from
operations of the Joint Venture to interest payments on the loan and must apply
proceeds of financings or sales received from the Joint Venture to payment of
the interest on and principal of the loan. The Partnership agreed, effective
January 1, 1988, that to the extent that Lee-Oxford's 40% share of the cash flow
is not sufficient to pay interest currently due, interest due on the loan shall
accrue and compound at a rate of 10.5%. The Partnership agreed, effective May
1, 1992, to extend the maturity date of the loan from August, 1996 to December,
1999, and the borrower agreed to pay interest, currently, at a minimum of 7%
with the remainder accruing at 10.5% per annum compounded monthly. The loan is
secured by Lee-Oxford's interest in the Joint Venture and by a guarantee of
Oxford Development Corporation, an affiliate of Lee-Oxford.
The joint venture owns approximately 12.63 acres of land located in
Fort Myers, Florida and has completed construction of a 282-unit apartment
complex consisting of 12 2- and 3-story buildings thereon. The complex was
approximately 96% occupied as of December 31, 1995.
<PAGE>
B. Office/Industrial Buildings in Phoenix, Arizona ("Metro Business
----------------------------------------------------------------
Center").
------
On September 15, 1986, the Partnership acquired a 60% interest in
Copley/Hewson Northwest Associates, a joint venture formed with an affiliate of
The Hewson Company. Effective January 1, 1990, as a result of operating
deficits, the joint venture agreement was amended to reflect an increase of the
Partnership's interest in the joint venture to 80% and a decrease in The Hewson
Company's interest to 20%. As of December 31, 1995, the Partnership had
contributed $5,302,193 to the capital of the joint venture out of a maximum
obligation of $5,580,000.
The Partnership also committed to make a loan for investment in the
joint venture of up to $3,988,000 to an affiliate of The Hewson Company, of
which $3,534,796 had been funded as of December 31, 1995. Interest only on the
loan is payable monthly at the rate of 10.5% per annum. The loan has a ten-year
term and is not prepayable. The Hewson Company must apply any cash flow
received from operations of the joint venture to interest payments on the loan
and must apply proceeds of refinancings or sales received from the joint venture
to payments of interest on and principal of the loan. The loan is secured by
the borrower's interest in the joint venture.
On January 1, 1996 a letter agreement was executed which modified
certain terms of the Joint Venture Agreement. The letter agreement, which
constitutes an amendment to the Joint Venture Agreement, granted the Partnership
full control over management decisions, except that the Partnership does not
have the authority to offer the property for sale prior to July 1, 1996, unless
The Hewson Company approves. The joint venture agreement entitles the
Partnership to receive 80% of net cash flow, refinancing proceeds and sale
proceeds once the loan and accrued interest are repaid in full.
The joint venture owns approximately seven acres of land located in
Phoenix, Arizona, improved with four one-story warehouse buildings containing
approximately 109,930 square feet of space. The buildings were 91% leased as of
December 31, 1995.
C. Office, Industrial and Retail Buildings in Las Vegas, Nevada
------------------------------------------------------------
("Palms Business Centers").
--------------------------
On December 29, 1986, the Partnership acquired a 60% interest in
Rancho Road Associates, a joint venture formed with an affiliate of Commerce
Centre Partners. In the first quarter of 1990, the Partnership committed to
increase its maximum obligation from $13,400,000 to $15,300,000. On October 2,
1991, the Partnership committed to increase its maximum obligation from
$15,300,000 to $15,840,000. As of December 31, 1995, the Partnership had
contributed $15,840,000 of capital to the joint venture. The additional funds
were used to pay for higher than anticipated tenant finish costs and the costs
of re-leasing the space vacated by tenants when leases expired. The joint
venture agreement entitles the Partnership to receive a preferred cumulative
compounded return of 11% per annum on its capital contribution, of which 9.5%
per annum is due currently and up to 1.5% per annum may be accrued if sufficient
cash is not available therefor. The entire unpaid accrued preferred return is
due and payable at the end of the tenth year of the joint venture's operations.
The joint venture agreement also entitles the Partnership to receive 60% of net
cash flow and 60% of sale and refinancing proceeds following the return of the
Partnership's equity capital. As of January 1, 1995, the joint venture
agreement was amended and restated granting the Partnership control over
management and operating decisions. Additionally, the venture partner will
receive 40% of the excess cash flow above a specified level until its cash
investment of $360,000 is repaid in full.
The joint venture owns approximately 14.1 acres of land in Las Vegas,
Nevada improved with 15 one-story buildings suitable for office, industrial and
retail use and containing approximately 224,474 square feet of space. The first
phase, which was completed in the second quarter of 1988, and the second phase,
which was completed in the fourth quarter of 1988, were 93% and 99% leased,
respectively, as of December 31, 1995.
On November 16, 1990, the joint venture filed a complaint against a
tenant for failure to pay rent and fraud, totaling approximately $500,000. A
judgment in the amount of $911,200 was recorded in 1995. The Partnership has not
collected on or recognized the judgment as of December 31, 1995.
On October 26, 1994, the joint venture filed a complaint against Han
Lee, Inc. for failure to pay rent totaling $69,171, including late charges. In
August, 1995, a Judgment by Default in the amount of $83,856 was recorded. The
Partnership has not collected on or recognized the judgment as of December 31,
1995.
<PAGE>
D. Office/Research and Development Buildings in Columbia, Maryland
---------------------------------------------------------------
("Columbia Gateway Corporate Park").
-----------------------------------
On December 21, 1987, the Partnership acquired a 17% interest in a
joint venture formed with an affiliate of the Partnership (the "Affiliate"),
which had a 33% interest, and M.O.R. Gateway 51 Associates Limited Partnership.
As of April 20, 1989, the joint venture agreement was amended and
restated reflecting an increase in the Partnership's interest in the joint
venture to 34.75% and a decrease in the Affiliate's interest in the joint
venture to 15.25%. In addition, the amended and restated joint venture
agreement increased the Partnership's maximum obligation to contribute capital
to the joint venture and reallocated the capital contributed to the joint
venture between the Partnership and the Affiliate. As of December 31, 1995, the
Partnership had contributed $14,086,147 to the capital of the joint venture out
of a maximum obligation of $14,598,000.
The joint venture agreement entitles the Partnership and the Affiliate
to receive a preferred return on the their respective invested capital at the
rate of 10.5% per annum. Such preferred return will be payable currently until
the Partnership and the Affiliate have received an aggregate of $8,865,000;
thereafter, if sufficient cash flow is not available therefore, the preferred
return will accrue and bear interest at the rate of 10.5% per annum, compounded
monthly. The joint venture agreement also entitles the Partnership to receive
34.75% of cash flow following payment of the preferred return and 34.75% of the
net proceeds of sales and refinancings following return of the Partnership's and
the Affiliate's equity.
The joint venture owns approximately 20.85 acres of land in the
Columbia Gateway Corporate Park in Columbia, Maryland. The intended development
plan for this land was for a two-stage development of seven office and research
and development buildings. The first phase of this development was completed by
1992 and included the construction of four, one-story buildings containing
142,545 square feet. The second phase of this development commenced in the
spring of 1994 in which two buildings totaling 46,000 square feet were
constructed and leased to a single tenant for a term of ten years. As of
December 31, 1995, the project was 92% leased.
E. Office/Research and Development Buildings in Frederick, Maryland
----------------------------------------------------------------
("270 Technology Center").
-------------------------
On December 22, 1987, the Partnership acquired a 50% interest in a
joint venture formed with MORF Associates VI Limited Partnership. As of
December 31, 1995, the Partnership had contributed $4,857,000 to the capital of
the joint venture out of a maximum obligation of $5,150,000. The joint venture
agreement entitles the Partnership to receive a preferred return on its invested
capital at the rate of 10% per annum. Such preferred return was payable
currently through September 30, 1988; presently, and until the termination of
the joint venture's operations, to the extent that sufficient cash flow is not
available therefor, the preferred return will accrue and bear interest at the
rate of 10% per annum, compounded monthly. The joint venture agreement entitles
the Partnership to receive 50% of the net proceeds of sales and financings after
return of its equity and preferred return.
As of July 3, 1990, the joint venture sold approximately 3.9 acres of
land to an unrelated third party. In return, the joint venture received
approximately $500,000 and a parcel of land consisting of approximately .4
acres. The joint venture currently owns approximately 8 acres of land in the
270 Technology Center in Frederick, Maryland, together with two one-story
research and development/office buildings, containing approximately 73,360
square feet of space, located thereon. As of December 31, 1995, the buildings
were approximately 98% leased.
F. Office Building in Decatur, Georgia ("Decatur TownCenter II").
-------------------------------------------------------------
On December 31, 1987, the Partnership acquired a 60% interest in a
joint venture formed with an affiliate of Pope and Land Enterprises. As of May
11, 1989, the Partnership increased its maximum obligation to the joint venture
from $11,180,000 to $11,600,000. As of December 31, 1995, the Partnership had
contributed $10,985,575 to the capital of the joint venture. The joint venture
agreement entitles the Partnership to receive a preferred return on its invested
capital at the rate of 10.5% per annum.
The preferred return on $7,826,000 of the Partnership's capital is
payable currently; until December 31, 1994, if sufficient cash flow was not
available to pay the preferred return on the balance of the Partnership's
capital, payment of the preferred return on $3,774,000 would accrue and bear
interest at the rate of 10.5% per annum, compounded monthly, and thereafter
would be payable currently. On January 1, 1995 the joint venture agreement was
amended to allow the $3,774,000 to accrue until December 31, 1996. The joint
venture was further amended to give the Partnership
<PAGE>
the sole right to cause a sale on or after January 1, 1996. The joint venture
agreement also entitles the Partnership to receive 60% of the net proceeds of
sales and refinancings after return of its equity and 60% of cash flow remaining
after payment of the preferred return.
The joint venture owns approximately 2.5 acres of land in Decatur,
Georgia improved with a five-story steel frame office building containing
approximately 98,840 square feet of space. As of December 31, 1995, the
building was 98% leased.
<PAGE>
Item 2. Properties.
----------
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 properties.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER
OF
ESTIMATED TENANTS SQUARE FEET
1996 WITH 10% NAME(S) OF
REALTY TAXES OR MORE OF OF EACH
PROPERTY GLA TENANT(S) TENANT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL $232,404 N/A N/A N/A
Office, Ind. & Retail Bldgs in Las Vegas, NV $109,034 0 N/A N/A
Office/R&D Buildings in Columbia, MD $213,284 4 Wiltel 23,760
EVI, Inc. 31,316
Columbia 45,951
National
Coram 25,932
Office/R&D Buildings in Frederick, MD $ 52,240 1 State Farm 13,918
Office/Industrial Buildings in Phoenix, AZ $ 85,000 1 FW Bell 19,259
Office Building in Decatur, GA $188,300 1 Egleston 46,661
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL
CONTRACT
RENT PER
SQUARE LEASE RENEWAL LINE OF BUSINESS
PROPERTY FOOT EXPIRATION OPTIONS OF PRINCIPAL TENANTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL N/A N/A N/A N/A
Office, Ind. & Retail Bldgs in Las Vegas, NV N/A N/A N/A N/A
Office/R&D Buildings in Columbia, MD $ 8.74 March, 1997 One for 5 Years Telecommunications
$ 9.00 March, 2005 One for 5 years Environmental/Testing
$ 8.95 June, 2004 Two for 5 Years Home Mortgages
$ 8.87 January, 1997 One for 5 Years Medical Services
Office/R&D Buildings in Frederick, MD $ 9.25 February, 1997 None Insurance
Office/Industrial Buildings in Phoenix, AZ $ 6.60 April, 1998 One for 5 Years Light
Assembly/Distribution
Office Building in Decatur, GA $16.00 April, 2005 None Hospital Services
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following table sets forth for each of the last five years the
gross leasable area, occupancy rates, rental revenue and net effective rent for
the Partnership's properties:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NET
RENTAL EFFECTIVE
GROSS LEASABLE YEAR-END REVENUE RENT
PROPERTY AREA OCCUPANCY RECOGNIZED ($/SF/YR)*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL
-----------------------------------
1991 250,810 95% $1,762,501 $7.70
1992 250,810 89% $1,762,819 $7.64
1993 250,810 97% $1,714,144 $7.45
1994 250,810 96% $1,817,688 $7.51
1995 250,810 96% $1,867,298 $7.84
Office, Ind. & Retail Buildings in Las Vegas, NV
------------------------------------------------
1991 224,474 85% $1,769,283 $9.79
1992 224,474 89% $1,895,595 $9.88
1993 224,474 91% $1,515,310 $7.50
1994 224,474 96% $1,756,690 $8.37
1995 224,474 96% $1,938,417 $8.83
Office/R&D Buildings in Columbia, MD
------------------------------------
1991 107,310 57% $499,862 $9.13
1992 142,545 71% $1,225,076 $10.84
1993 142,545 73% $1,334,767 $13.01
1994 188,649 92% $1,496,175 $9.61
1995 188,649 92% $1,870,329 $10.78
Office/R&D Buildings in Frederick, MD
-------------------------------------
1991 73,360 67% $698,525 $12.49
1992 73,360 65% $648,623 $12.54
1993 73,360 65% $541,166 $12.94
1994 73,360 100% $617,457 $10.20
1995 73,360 98% $762,212 $10.66
Office Building in Decatur, GA
------------------------------
1991 98,846 95% $1,562,171 $16.72
1992 98,846 93% $1,286,782 $14.07
1993 98,846 93% $1,756,562 $19.21
1994 98,846 100% $1,752,563 $18.37
1995 98,846 98% $1,863,808 $19.14
Office/Industrial Buildings in Phoenix, AZ
------------------------------------------
1991 109,930 77% $675,372 $7.63
1992 109,930 88% $723,953 $8.31
1993 109,930 98% $899,266 $8.61
1994 109,930 100% $1,009,939 $9.28
1995 109,930 91% $1,000,638 $9.46
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Net Effective Rent calculation is based on average occupancy during the
respective year.
<PAGE>
Following is a schedule of lease expirations for each of the next ten
years for the Partnership's properties based on the annual contract rent in
effect at December 31, 1995:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TENANT AGING REPORT
PERCENTAGE
TOTAL OF
# OF TOTAL ANNUAL GROSS
LEASE SQUARE CONTRACT ANNUAL
PROPERTY EXPIRATIONS FEET RENT RENTAL*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL
-----------------------------------
1996 N/A N/A N/A N/A
1997 N/A N/A N/A N/A
1998 N/A N/A N/A N/A
1999 N/A N/A N/A N/A
2000 N/A N/A N/A N/A
2001 N/A N/A N/A N/A
2002 N/A N/A N/A N/A
2003 N/A N/A N/A N/A
2004 N/A N/A N/A N/A
2005 N/A N/A N/A N/A
Office/Industrial Buildings in Phoenix, AZ
------------------------------------------
1996 9 42,752 $368,758 46%
1997 6 24,106 $184,845 23%
1998 4 27,051 $203,739 26%
1999 1 5,616 $38,798 5%
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%
Office, Ind., & Retail Buildings in Las Vegas, NV
-------------------------------------------------
1996 24 71,067 $629,519 33%
1997 18 63,881 $540,803 28%
1998 17 68,768 $642,763 33%
1999 1 1,242 $8,496 0%
2000 3 10,073 $84,792 4%
2001 1 3,290 $30,540 2%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
Office/R&D Buildings in Columbia, MD
------------------------------------
1996 1 6,909 $56,447 3%
1997 3 53,008 $466,595 30%
1998 1 8,781 $93,079 6%
1999 2 32,570 $270,248 17%
2000 0 0 $0 0%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 1 45,951 $411,261 26%
2005 1 31,316 $281,844 18%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Office/R&D Buildings in Frederick, MD
-------------------------------------
<S> <C> <C> <C> <C>
1996 6 25,872 $212,640 33%
1997 3 39,006 $386,344 61%
1998 1 8,229 $40,800 6%
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%
Office Building in Decatur, GA
------------------------------
1996 3 6,410 $97,526 6%
1997 7 13,568 $236,266 16%
1998 3 9,935 $124,522 8%
1999 4 12,244 $217,454 14%
2000 0 0 $0 0%
2001 2 6,360 $118,520 8%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 2 48,616 $712,580 48%
- -------------------------------------------------------------------------
</TABLE>
* Does not include expenses paid by tenants.
Note: N/A denotes that the disclosure is not applicable based on the nature of
the property.
<PAGE>
The following table sets forth for each of the Partnership's
properties the: (i) federal tax basis, (ii) rate of depreciation, (iii) method
of depreciation, (iv) life claimed, and (v) accumulated depreciation, with
respect to each property or component thereof for purposes of depreciation:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Rate of Life Accumulated
Entity / Property Tax Basis Depreciation Method in years Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Office, Industrial and Retail Buildings, Las Vegas, NV
- ----------------------------------------------------------
Building & Improvements $ 9,920,072 3.18% SL 31.5 $ 2,256,053
Improvements 130,115 2.56% SL 39 6,593
--------- -------
Total Depreciable Assets $10,050,187 $ 2,262,646
Industrial Buildings, Phoenix, AZ
- ----------------------------------------------------------
Building & Improvements $ 4,819,444 3.18% SL 31.5 $ 1,041,700
Building Improvements 27,547 2.56% SL 39 1,258
--------- -------
Total Depreciable Assets $ 4,846,991 $ 1,042,958
Office/Research and Development Buildings, Frederick, MD
- ----------------------------------------------------------
Building $ 4,199,372 3.18% SL 31.5 $ 1,065,543
Land Improvements 202,710 2.56% SL 39 2,478
Land Improvements 100,000 10.00% SL 15 19,303
--------- -------
Total Depreciable Assets $ 4,502,082 $ 1,087,324
Apartment Complex, Fort Myers, FL
- ----------------------------------------------------------
Building $ 9,129,462 3.64% SL 27.5 $ 2,276,114
--------- ---------
Total Depreciable Assets $ 9,129,462 $ 2,276,114
Office Building, Decatur, GA
- ----------------------------------------------------------
Building & Improvements $ 8,566,308 2.50% SL 40 $ 1,385,244
Improvements 442,463 2.56% SL 39 7,915
Land Improvements 120,065 5.00% SL 20 39,992
--------- -------
Total Depreciable Assets $ 9,128,836 $ 1,433,151
Office/Research and Development Buildings, Columbia, MD
- ----------------------------------------------------------
Building $ 7,829,962 3.18% SL 31.5 $ 1,282,640
Land Improvements 3,092,260 2.56% SL 39 30,296
Land Improvements 94,022 10.00% 150%DB 15 28,050
--------- -------
Total Depreciable Assets $11,016,244 $ 1,340,986
Total Depreciable Assets $48,673,802 $ 9,443,179
=========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SL= Straight Line
DB= Declining Balance
<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.
Apartment Complex in Fort Myers, Florida
- ----------------------------------------
Reflections is located in the City of Fort Myers in Lee County. Reflections
competes directly with seven other apartment complexes comprising 2,547 units.
This sub market had occupancy of approximately 93%, a slight decrease from last
year.
Office/Industrial Buildings in Phoenix, Arizona
- -----------------------------------------------
This property is located in the metropolitan Phoenix market which includes an
inventory of approximately 142 million square feet of industrial space, of
which 6% was vacant as of year end 1995, compared to the 7% and 12% vacancy
rates as of December 31, 1994 and 1993, respectively. The office market,
consisting of 39 million square feet, was 11% vacant at year end 1995 compared
to 1993 and 1994 vacancies of 20% and 13%, respectively. Rental rates in the
Phoenix area continue to increase.
Office/Industrial/Retail Buildings in Las Vegas, Nevada
- -------------------------------------------------------
The healthy business climate of Las Vegas, fueled by the gaming and service
industries, is responsible for a strong industrial market, which exhibits a low
vacancy rate of approximately 2% on a base inventory of 38 million square feet.
Rental rates have increased over the past year and most free rent concessions
have been eliminated. Given the low vacancy level, new construction in all
product types and sizes is underway.
Office, Research and Development Buildings in Columbia, Maryland
- ----------------------------------------------------------------
The Howard County R&D market contains approximately 3.2 million square feet and
exhibited a vacancy rate of 10% as of December 31, 1995. The 10% vacancy rate
is a strong improvement from the 1990-to-1993 period when the vacancy rate
hovered in the 22% to 24% range.
Office, Research and Development Buildings in Frederick, Maryland
- -----------------------------------------------------------------
The Frederick R&D market contains approximately 5.5 million square feet
of R&D/Industrial space with a vacancy rate of approximately 9%. This is a
strong improvement from 1994 when the vacancy rate stood at 16%. The
improvement is attributed to a lack of new construction and positive job
growth.
Office building in Decatur, Georgia.
- -----------------------------------
The metropolitan Atlanta class "A" office market comprises eight sub-markets
that total 47 million square feet of which approximately 16 million square feet
is located in the Central Business District area. The overall office vacancy
rate stands at 9.5%, which is a significant decline from 14.7% rate in 1993.
The Decatur office building is located in the Northlake sub-market, one of the
smallest markets with just 1.3 million square feet of space. This sub-market
has a reported vacancy of 5% which is down significantly from 10.9% in 1993.
Item 3.
Legal Proceedings
- -----------------
The Partnership is not a party to, nor are any of its properties subject to,
any material pending legal proceedings. A joint venture in which the
Partnership holds an interest has received judgments against two former tenants
for defaults under leases. See Item 1.C.
<PAGE>
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.
PART II
- -------
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, 1995, there were 17,443 holders of Units.
The Partnership's Amended and Restated Agreement of Limited
Partnership dated May 29, 1986, as amended to date (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, 1995, cash
distributions paid in 1995 or distributed after year end with respect to 1995 to
the Limited Partners as a group totaled $5,711,220. For the year ended December
31, 1994, cash distributions paid in 1994 or distributed after year end with
respect to 1994 to the Limited Partners as a group totaled $ 10,021,234,
including $5,224,835 ($55 per Limited Partnership Unit) from the proceeds of a
property sale.
Cash distributions exceeded net income in 1995 and, therefore,
resulted in a reduction of partners' capital. Reference is made to the
Partnership's Statement of Changes in Partner's Capital (Deficit) 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
as of as of as of as of or as of
12/31/95(1) 12/31/94(2) 12/31/93(3) 12/31/92 12/31/91
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,906,735 $ 4,576,435 $ 3,784,731 $ 4,169,119 $ 4,529,439
Net Income (Loss) $ 3,912,897 $ 3,752,101 $ (378,545) $ 2,277,301 $ 2,731,447
Net Income (Loss)
per Unit of
Limited
Partnership
Interest
Outstanding $ 40.78 $ 39.10 $ (3.94) $ 23.73 $ 28.47
Total Assets $ 59,991,655 $ 67,145,010 $ 67,471,037 $ 79,547,070 $ 81,396,478
Total Cash
Distributions
per Unit of
Limited
Partnership
Interest,
including
amounts
distributed after
year end with
respect to the
previous year $ 60.12 $ 105.49 $ 126.22 $ 46.25 $ 40.00
</TABLE>
(1) Cash distributions include $8.09 per Limited Partnership Unit that is
attributable to a discretionary reduction of cash reserves, which had been
previously accumulated through operating activities.
(2) Net income includes a gain on the sale of a joint venture investment of
$399,865. Cash distributions include a return of capital of $55.00 per Limited
Partnership Unit.
(3) The Partnership recorded investment valuation allowances totaling
$2,760,784 ($28.77 per Limited Partnership Unit) during 1993. Cash
distributions include a return capital of $82.00 per Limited Partnership Unit.
<PAGE>
Item 7
- ------
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 1986. A total of 94,997 units were sold. The Partnership
received proceeds of $85,677,259, net of selling commissions and other offering
costs, which have been invested in real estate, used to pay related acquisition
costs or retained as working capital reserves. The Partnership made nine real
estate investments; those currently owned are described in Item 1 hereof. Three
investments have been sold; one in 1988 and one each in 1993 and 1994. As a
result of the sales, capital of $13,014,589 has been returned to the Limited
Partners through December 31, 1995.
On December 30, 1994, the Rancho Cucamonga joint venture sold its property
and the Partnership received net sale proceeds of $5,261,275. On January 26,
1995, the Partnership made a capital distribution of $55 per limited partnership
unit ($5,224,835) from the proceeds of the sale. The adjusted capital
contribution after this distribution is $863 per unit.
At December 31, 1995, the Partnership had $7,416,538 in cash, cash
equivalents and short-term investments, which was partially used for cash
distributions of $1,242,638 to partners on January 25, 1996. The remainder will
primarily be used for working capital reserves. The source of future liquidity
and cash distributions to partners will be cash generated by the Partnership's
real estate and short-term investments and proceeds from the sale of such
investments. Distributions of cash from operations relating to the first quarter
of 1995 were made at the annualized rate of 6% on the weighted average adjusted
capital contribution. In addition, at this time, a special distribution totaling
$776,289 ($8.09 per limited partnership unit) was made which was attributable to
a discretionary reduction of cash reserves which had previously accumulated from
operating activities. Since the total quarterly distribution exceeded the rate
of 2%, previously deferred management fees to the advisor were paid in the
amount of $175,374 or 50% of the excess distribution. The Managing General
Partner will continue to evaluate reserve levels in the context of the
Partnership's investment objectives. Distributions of cash from operations
relating to the second, third and fourth quarters of 1995 were made at the
annualized rate of 6% on the adjusted capital contribution. Distributions of
cash from operations relating to the first, second, third and fourth quarters of
1994 were made at the annualized rates of 5%, 5.5%, 5.5%, and 6%, respectively,
on an adjusted capital contribution of $918 per unit. The increase in the
distribution rate 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
at December 31, 1995 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 December 31, 1995, the appraised values of certain
investments exceeded the related carrying values by an aggregate of $9,400,000
and the appraised values of the remaining investments were less than the related
carrying values by an aggregate of $1,400,000. 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 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
The investments currently in the portfolio are structured as joint ventures
with real estate development/management firms. However, effective January 1,
1995, the Palms Business Center joint venture was restructured to grant the
Partnership control over management decisions and the investment has been
accounted for as a wholly-owned property since that date. The Summit Vinings
<PAGE>
apartment complex, which was sold in August 1993, was a wholly-owned property.
The Rancho Cucamonga property, which was sold in December 1994, was owned by a
joint venture.
OPERATING FACTORS
Overall occupancy at the Columbia Gateway Corporate Park remained at 92% at
December 31, 1995, where it was at the preceding year end. Construction of a
46,000 square foot build-to-suit facility was completed during the third quarter
of 1994 and the tenant assumed occupancy on September 1, 1994. Occupancy was at
73% at December 31, 1993.
Occupancy at Reflections Apartments ended 1995 at 96%; it ranged from 92%
to 96% during 1995. Occupancy during 1994 and 1993 was in this same range.
Although the Fort Myers apartment market remains competitive, rental rates have
improved during 1995.
Occupancy at Metro Business Center at December 31, 1995 was 91%, down from
100% a year ago, although it had been at 98% for the first three quarters of
1995. Occupancy was 98% at December 31, 1993. Rental rates are increasing as the
Phoenix market appears to have stabilized. However, this property faces
significant leasing exposure during 1996 as leases for approximately 46% of the
space expire.
Leasing at Decatur TownCenter II decreased to 98% during 1995, down from
100% a year ago, but up from 93% at December 31, 1993.
Occupancy at Palms Business Centers was 96% at December 31, 1995,
consistent with one year ago and up from 91% two years prior. The overall health
of the Las Vegas market has improved and there has been some upward movement in
rental rates.
Leasing at 270 Technology Center was 65% at December 31, 1993 and increased
to 100% during the third quarter of 1994, where it remained until the second
quarter of 1995. Leasing declined to 92% during the third quarter of 1995 and
ended the year at 98%. However, leases for one-third of the space expire in 1996
and for 60% of the space in 1997.
INVESTMENT RESULTS
On December 30, 1994, the Rancho Cucamonga joint venture sold its property
and the Partnership recognized a gain of $399,865. In August 1993, the
Partnership sold the Summit Vinings Apartments in Atlanta, Georgia at no gain or
loss. During the first and second quarters of 1993, however, its carrying value
had been reduced to the approximate selling price. The Managing General Partner
determined in 1993 that the carrying value of Columbia Gateway Corporate Park
should be reduced to its estimated net realizable value, which resulted in an
investment valuation allowance of $1,050,000.
1995 Compared to 1994
Interest on cash equivalents and short-term investments increased as a
result of larger invested balances, as well as an increase in interest rates.
Exclusive of the gain from the Rancho Cucamonga sale in 1994 and its 1994
operating results ($309,969), real estate operating activity was $4,402,974 for
1995 and $3,490,615 for 1994. This 26% increase was due to improved operating
results at all of the Partnership's investments. Improvement was most notable at
Columbia Gateway Corporate Park, from which results increased by approximately
$289,000 due to improvements in rental income. Improved occupancy and rental
rates also resulted in an increase of approximately $272,000 in net operating
income generated from Palms Business Center. Net operating income at Decatur
TownCenter II increased by approximately $203,000 as a result of a lease
termination fee.
Notwithstanding the improved operating results and excluding $488,772 in
cash flow from Rancho Cucamonga in 1994, cash flow from operations decreased
$24,657. The change primarily stems from discretionary adjustments to cash
reserve levels made by joint ventures. Both 270 Technology Park and Columbia
Gateway Corporate Park reduced cash reserves held at the property level in 1994
and, therefore, increased the Partnership's cash flow in 1994. Metro Business
Center
<PAGE>
reduced cash reserves at the property level and increased Partnership cash flow
in 1995. Operating cash flow from the remainder of the Partnership's investments
was consistent with the change in operating results. The decrease in operating
cash flow was also due to the payment of previously accrued, but deferred
management fees to the advisor of $175,374.
1994 Compared to 1993
Interest on cash equivalents and short-term investments increased as a
result of larger invested balances, as well as an increase in interest rates.
Exclusive of the gain from the Rancho Cucamonga sale in 1994, investment
valuation allowances in 1993, and the operating results of Summit Vinings, real
estate investment results were $3,800,584 for 1994 and $2,720,859 for 1993. This
40% increase was primarily due to improved operating results at all of the
Partnership's investments, with the exception of Rancho Cucamonga, as described
below. Improvement was most notable at Palms Business Center and Columbia
Gateway Corporate Park, at which results increased by approximately $300,000 in
both cases; at Metro Business Center, at which results increased by
approximately $250,000; and at 270 Technology Center and Reflections Apartments
at which results increased by approximately $100,000 in both cases. Operating
income at Rancho Cucamonga declined during 1994 as a result of lower rental
revenue from the new tenant lease effective May 1, 1993.
Operating cash flow, exclusive of the results from Summit Vinings of
$336,532 in 1993, increased by $1,660,323 or 40% between 1993 and 1994. In
addition to the effect of improved operating results as previously described,
cash flow also increased during 1994 as a result of the timing of cash
distributions to the Partnership from certain joint ventures which previously
had been retaining additional working capital reserves. This reduction in
working capital reserves was most notable at 270 Technology Center ($575,000),
Rancho Cucamonga ($400,000) and Columbia Gateway Corporate Park ($325,000). Cash
distributions decreased from Decatur TownCenter II by approximately $350,000 due
to costs associated with re-leasing and from Metro Business Center by
approximately $210,000 due to timing.
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.
1995 Compared to 1994
The Partnership management fee increased due to an increase in
distributable cash flow from operations. General and administrative expenses
increased approximately 10% or $32,000 primarily due to legal fees associated
with the various investment restructurings.
1994 Compared to 1993
The Partnership management fee increased due to an increase in
distributable cash flow from operations. General and administrative expenses
increased approximately 13% or $37,000 primarily due to increased professional
fees.
INFLATION
- ---------
By their nature, real estate investments tend not to be adversely affected
by inflation. Inflation may tend to 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 the
Partnership operations, due to market and economic conditions, have overshadowed
the overall 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 Managing General Partner and the age and position held
by each of them as of December 31, 1995.
<TABLE>
<CAPTION>
Name Position(s) with the Managing General Partner Age
- ---- ---------------------------------------------- ---
<S> <C> <C>
Joseph W. O'Connor President, Chief Executive Officer and Director 49
Daniel J. Coughlin Managing Director and Director 43
Peter P. Twining Managing Director, General Counsel and Director 49
Wesley M. Gardiner, Jr. Vice President 37
Daniel C. Mackowiak Principal Financial and Accounting Officer 44
</TABLE>
Mr. O'Connor and Mr. Coughlin have served in an executive capacity
since the organization of the Managing General Partner on October 16, 1985. Mr.
Gardiner and Mr. Twining have served in their capacities since June 1994, and
Mr. Mackowiak has served in his capacity as of January 1, 1996. All of these
individuals will continue to serve in such capacities until their successors are
elected and qualified.
(c) Identification of Certain Significant Employees.
-----------------------------------------------
None.
(d) Family Relationships.
--------------------
None.
(e) Business Experience.
-------------------
The Managing General Partner was incorporated in Massachusetts on
October 16, 1985. The background and experience of the executive officers and
directors of the Managing General Partner are as follows:
Joseph W. O'Connor has been President, Chief Executive Officer and a
Director of Copley Real Estate Advisors, Inc. ("Copley") since January, 1982. He
was a Principal of Copley from 1985 to 1987 and has been a Managing Director of
Copley since January 1, 1988. He has been active in real estate for 27 years.
From June, 1967, until December, 1981, he was employed by New England Mutual
Life Insurance Company ("The New England"), most recently as a Vice President in
which position he was responsible for The New England's real estate portfolio.
He received a B.A. from Holy Cross College and an M.B.A. from Harvard Business
School.
Daniel J. Coughlin was a Principal of Copley from 1985 to 1987 and has
been a Managing Director of Copley since January 1, 1988 and a Director of
Copley since July 1994. Mr. Coughlin has been active in financial management and
control for 21 years. From June, 1974 to December, 1981, he was a Real Estate
Administration Officer in the Investment Real Estate Department at The New
England. Since January, 1982, he has been in charge of the asset management
division of Copley. Mr. Coughlin is a Certified Property Manager and a licensed
real estate broker. He received a B.A. from Stonehill College and an M.B.A. from
Boston University.
Peter P. Twining is a Managing Director and General Counsel of Copley.
As such, he is responsible for general legal oversight and policy with respect
to Copley and its investment portfolios. Before being promoted to
<PAGE>
this position in January 1994, he was a Vice President/Principal and senior
lawyer responsible for assisting in the oversight and management of Copley's
legal operations. Before joining Copley in 1987, he was a senior member of the
Law Department at The New England and was associated with the Boston law firm,
Ropes and Gray. Mr. Twining is a graduate of Harvard College and received his
J.D. in 1979 from Northeastern University.
Wesley M. Gardiner, Jr. joined Copley in 1990 and has been a Vice
President at Copley since January, 1994. 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 Copley has included asset management responsibility
for the company's Georgia and Texas holdings. Presently, as a Vice President and
Team Leader, Mr. Gardiner has overall responsibility for all the partnerships
advised by Copley 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.
Daniel C. Mackowiak has been a Vice President of Copley since January
1989 and has been a Vice President and the Principal Financial and Accounting
Officer of the Managing General Partner since January 1996. Mr. Mackowiak
previously held the offices of Chief Accounting Officer of Copley from January
1989 through April 1994 and Vice President and Principal Financial and
Accounting Officer of the Managing General Partner between January 1989 and May
1994. From 1975 until joining Copley, he was employed by the public accounting
firm of Price Waterhouse, most recently as a Senior Audit Manager. He is a
certified public accountant and has been active in the field of accounting his
entire business career. He received a B.S. from Nichols College and an M.B.A.
from Cornell University.
Mr. O'Connor is a director of Copley Properties, Inc., a Delaware
corporation organized as a real estate investment trust which is listed for
trading on the American Stock Exchange. None of the other directors of the
Managing General Partner is a director of a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934. All of
the directors and officers of the Managing General Partner also serve as
directors and officers of one or more corporations which serve as general
partners of publicly-traded real estate limited partnerships which are
affiliated with the Managing General Partner.
(f) Involvement in Certain Legal Proceedings.
----------------------------------------
None.
Item 11. Executive Compensation.
----------------------
Under the Partnership Agreement, the General Partners and their
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 to Notes to Financial Statements.
<PAGE>
The following table sets forth the amounts of the fees and cash
distributions and reimbursements of out-of-pocket expenses which the Partnership
paid to or accrued for the account of the General Partners and their affiliates
for the year ended December 31, 1995.
<TABLE>
<CAPTION>
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
<S> <C> <C>
General Partners Share of Distributable Cash $ 57,689
Copley Real Estate Advisors, Inc. Management Fees and
Reimbursement of Expenses 584,425
New England Securities Corporation Servicing Fees and
Reimbursement of Expenses 21,543
-------------
TOTAL $ 663,657
=============
</TABLE>
For the year ended December 31, 1995 the Partnership allocated
$50,454 of taxable income to the General Partners.
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, 1995. 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 Managing
General Partner.
(b) Security Ownership of Management.
--------------------------------
An affiliate of the Managing General Partner of the Partnership owned
1,558 Units as of December 31, 1995.
(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.
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K.
-------------------------------------------------------
(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 Schedule and Financial
Statement Index No. 2 are filed as part of this Annual Report.
(2) Financial Statement Schedule--The Financial Statement Schedule
listed on the accompanying Index to Financial Statements and Schedule
is 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. During the last quarter of the year ended
December 31, 1995, the Partnership filed no Current Reports on Form 8-K.
<PAGE>
New England Life
Pension Properties IV;
A Real Estate Limited Partnership
Financial Statements
*******
December 31, 1995
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
--------------------------------------
A REAL ESTATE LIMITED PARTNERSHIP
---------------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants...............................................
Financial Statements:
Balance Sheet - December 31, 1995 and 1994................................
Statement of Operations -
Years ended December 31, 1995, 1994 and 1993............................
Statement of Changes in Partners' Capital (Deficit) -
Years ended December 31, 1995, 1994 and 1993............................
Statement of Cash Flows -
Years ended December 31, 1995, 1994 and 1993............................
Notes to Financial Statements.............................................
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1995.......................................
</TABLE>
<PAGE>
Report of Independent Accountants
---------------------------------
To the Partners
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
In our opinion, based upon our audits and the reports of other auditors, the
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of New England Life Pension Properties
IV; a Real Estate Limited Partnership (the "Partnership") at December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Fourth Copley Corp., the Managing General Partner of the
Partnership; our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of the
Partnership's Decatur TownCenter II joint venture investee for the year ended
December 31, 1995, which results of operations are recorded using the equity
method of accounting in the Partnership's financial statements. Equity in joint
venture income for this venture was $680,012 for the year ended December 31,
1995. We also did not audit the financial statements of the Partnership's
Columbia Gateway Corporate Park, 270 Technology Center and Reflections joint
venture investees for the years ended December 31, 1995, 1994 and 1993, which
results of operations are recorded using the equity method of accounting in the
Partnership's financial statements. Equity in joint venture income for these
ventures aggregated $2,022,381, $1,631,665 and $1,118,613 for the years ended
December 31, 1995, 1994 and 1993, respectively. We also did not audit the
financial statements of the Partnership's Metro Business Center joint venture
investee for the years ended December 31, 1995 and 1994, which results of
operations are recorded using the equity method of accounting in the
Partnership's financial statements. Equity in joint venture income for this
venture was $394,403 and $354,788 for the years ended December 31, 1995 and
1994. We also did not audit the financial statements of the Partnership's
investment in Palms Business Centers for the years ended December 31, 1995, 1994
and 1993. Operating income for this investment was $1,770,345 for the year ended
December 31, 1995, and equity in joint venture income was $1,053,707 and
$739,894 for the years ended December 31, 1994 and 1993. Those statements were
audited by other auditors whose reports thereon have been furnished to us, and
our opinion expressed herein, insofar as it relates to the amount included for
the equity in joint venture income for Decatur TownCenter II for the year ended
December 31, 1995, and for Columbia Gateway Corporate Park, 270 Technology
Center and Reflections for the years ended December 31, 1995, 1994 and 1993,
respectively, and for Metro Business Center for the years ended December 31,
1995 and 1994, respectively, and for the operating income and equity in joint
venture income for Palms Business Centers for the years ended December 31, 1995,
1994 and 1993 is based solely on the reports of the other auditors. 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 Managing
General Partner, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors for the years ended
December 31, 1995, 1994 and 1993 provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
March 11, 1996
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
---------- -----------
ASSETS
<S> <C> <C>
Real estate investments:
Joint ventures $ 40,466,827 $ 53,837,786
Property, net 12,108,290 -
------------ -------------
52,575,117 53,837,786
Cash and cash equivalents 4,051,999 12,370,267
Short-term investments 3,364,539 922,981
Other receivables - 13,976
------------ -------------
$ 59,991,655 $ 67,145,010
============ =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 129,043 $ 127,950
Accrued management fee 61,449 65,340
Deferred management and disposition fees 2,806,904 2,797,930
------------ -------------
Total liabilities 2,997,396 2,991,220
------------ -------------
Partners' capital (deficit):
Limited partners ($863 and $918 per unit,
respectively; 120,000 units authorized,
94,997 units issued and outstanding) 57,148,961 64,289,145
General partners (154,702) (135,355)
------------ --------------
Total partners' capital 56,994,259 64,153,790
------------ --------------
$ 59,991,655 $ 67,145,010
============ =============
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1995 1994 1993
---------- ---------- -----------
INVESTMENT ACTIVITY
<S> <C> <C> <C>
Property rentals $2,379,352 $ - $ 716,554
Property operating expenses (609,007) - (380,433)
Depreciation and amortization (444,790) - (293,874)
---------- ---------- -----------
1,325,555 - 42,247
Joint venture earnings 3,096,796 3,827,109 2,747,390
Investment valuation allowances - - (2,760,784)
Amortization (19,377) (26,525) (26,531)
---------- ---------- -----------
Total real estate operations 4,402,974 3,800,584 2,322
Gain on sale of property by joint venture - 399,865 -
---------- ---------- -----------
Total real estate activity 4,402,974 4,200,449 2,322
Interest on cash equivalents
and short-term investments 430,587 349,461 320,787
---------- ---------- -----------
Total investment activity 4,833,561 4,549,910 323,109
---------- ---------- -----------
PORTFOLIO EXPENSES
Management fee 570,551 479,161 419,766
General and administrative 350,113 318,648 281,888
---------- ---------- -----------
920,664 797,809 701,654
---------- ---------- -----------
NET INCOME (LOSS) $3,912,897 $3,752,101 $ (378,545)
========== ========== ===========
Net income (loss) per limited
partnership unit $ 40.78 $ 39.10 $ (3.94)
========== ========== ===========
Cash distributions per limited
partnership unit $ 115.94 $ 47.19 $ 127.00
========== ========== ===========
Number of limited partnership units
outstanding during the year 94,997 94,997 94,997
========== ========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
1995 1994 1993
----------------------- ------------------- ---------------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
--------- ------------ --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $(135,355) $ 64,289,145 $(127,594) $65,057,473 $ (80,629) $ 77,496,852
Cash distributions (58,476) (11,013,952) (45,282) (4,482,908) (43,180) (12,064,619)
Net income (loss) 39,129 3,873,768 37,521 3,714,580 (3,785) (374,760)
--------- ------------ --------- ----------- --------- ------------
Balance at end
of year $(154,702) $ 57,148,961 $(135,355) $64,289,145 $(127,594) $ 65,057,473
========= ============ ========= =========== ========= ============
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,912,897 $ 3,752,101 $ (378,545)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 464,167 26,525 320,405
Investment valuation allowances - - 2,760,784
Equity in joint venture earnings (3,096,796) (3,827,109) (2,747,390)
Cash distributions from joint ventures 3,928,414 5,919,979 4,501,152
Gain on sale of property by joint venture - (399,865) -
Decrease (increase) in investment income
and other receivables (24,016) 95,390 (94,996)
Decrease in property working capital 148,652 - 411
Increase in operating liabilities 181,550 285,902 167,311
Payment of deferred management fee (175,374) - -
------------ ----------- ------------
Net cash provided by operating activities 5,339,494 5,852,923 4,529,132
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property - 5,097,115 7,673,614
Deferred disposition fees - 164,160 243,000
Investment in joint ventures - (1,928,609) -
Payment of note payable to venture partner (130,000) - -
Investment in property (51,768) - -
Decrease (increase) in short-term
investments, net (2,403,566) 5,566,195 (2,809,728)
------------ ----------- ------------
Net cash provided by (used in) investing
activities (2,585,334) 8,898,861 5,106,886
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions to partners (11,072,428) (4,528,190) (12,107,799)
------------ ----------- ------------
Net cash used in financing activity (11,072,428) (4,528,190) (12,107,799)
------------ ----------- ------------
Net increase (decrease) in cash
and cash equivalents (8,318,268) 10,223,594 (2,471,781)
Cash and cash equivalents:
Beginning of year 12,370,267 2,146,673 4,618,454
------------ ----------- ------------
End of year $ 4,051,999 $12,370,267 $ 2,146,673
============ =========== ============
</TABLE>
NON-CASH TRANSACTION:
Effective January 1, 1995, the Partnership's joint venture investment in Palms
Business Center was converted to a wholly-owned property. The carrying value of
this investment at conversion was $12,519,964.
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and Business
- ----------------------------------
General
New England Life Pension Properties IV; 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 organizations intended to be exempt
from federal income tax. The Partnership commenced operations in May, 1986 and
acquired the six real estate investments it currently owns prior to the end of
1987. 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 considered to be in the best interest of
the limited partners.
The Managing General Partner of the Partnership is Fourth Copley Corp., a
wholly-owned subsidiary of Copley Real Estate Advisors, Inc. ("Copley"). The
associate general partner is CCOP Associates Limited Partnership, a
Massachusetts limited partnership, the general partners of which are managing
directors of Copley and/or officers of the Managing General Partner. Subject to
the Managing General Partner's overall authority, the business of the
Partnership is managed by Copley pursuant to an advisory contract. Copley is an
indirect wholly-owned subsidiary of New England Investment Companies, L.P.
("NEIC"), a publicly traded limited partnership. New England Mutual Life
Insurance Company ("The New England"), the parent of NEIC's predecessor, is
NEIC's principal unitholder. In August 1995, The New England announced an
agreement to merge (the "Merger") with Metropolitan Life Insurance Company
("Metropolitan Life"), with Metropolitan Life to be the surviving entity. This
merger, which is subject to various policyholder and regulatory approvals, is
expected to take place in the first half of 1996. Metropolitan Life is the
second largest life insurance company in the United States in terms of total
assets, having assets of over $130 billion (and adjusted capital of over $8
billion) as of June 30, 1995.
At December 31, 1995 an affiliate of the Managing General Partner owned
1,558 units and at December 31, 1994 the Managing General Partner owned 1,300
units of limited partnership interest, which were repurchased from certain
qualified plans, within specified annual limitations as provided for in the
Partnership Agreement.
Management
Copley, 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.
Payment of 50% of management fees incurred is deferred until cash distributions
to limited partners exceed a specified rate. Cash distributions for the first
quarter of 1995 exceeded the stipulated minimum, which resulted in a payment to
Copley of previously deferred management fees totaling $175,374. Deferred
management fees were $2,094,251 and $2,085,277 at December 31, 1995 and 1994,
respectively. Copley is also reimbursed for expenses incurred in connection with
administering the Partnership ($13,874 in 1995, $21,155 in 1994 and $15,490 in
1993). Acquisition fees paid were based on 2% of the gross proceeds from the
offering. Disposition fees are generally 3% of the selling price of the
property, but are subject to the prior receipt by the limited partners of their
capital contributions plus a stipulated return thereon. Deferred disposition
fees were $712,653 at December 31, 1995 and 1994.
<PAGE>
New England Securities Corporation, a direct subsidiary of The New England,
is engaged by the Partnership to act as its unit holder servicing agent. Fees
and out-of-pocket expenses for such services totaled $21,543, $30,526, and
$25,358 in 1995, 1994 and 1993, respectively.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Managing 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.
Real Estate Joint Ventures
Investments in joint ventures, including loans made to venture partners,
which are in substance real estate investments, are stated at cost plus (minus)
equity in undistributed joint venture income (losses). Allocations of joint
venture income (losses) were made to the Partnership's venture partners as long
as they had substantial economic equity in the project. Economic equity is
measured by the excess of the appraised value of the property over the
Partnership's total cash investment plus accrued preferential returns and
interest thereon. Currently, the Partnership records an amount equal to 100% of
the operating results of each joint venture, after the elimination of all inter-
entity transactions, except for the one venture jointly owned by an affiliate of
the Partnership, which has substantial economic equity in the project.
Property
Property includes land and buildings and improvements, which are stated at
cost less accumulated depreciation, plus other operating net assets
(liabilities). The Partnership's initial carrying value of a property previously
owned by a joint venture equals the Partnership's carrying value of the
predecessor investment on the conversion date.
Certain tenant leases at the property provide for rental increases over the
respective lease terms. Rental revenue is being recognized on a straight-line
basis over the lease terms.
Capitalized Costs
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 estimated useful lives of the underlying property.
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
undiscounted cash flows generated from the operations and disposal of property.
Effective January 1, 1995, with its adoption of Statement of Financial
Accounting Standards No. 121 (SFAS 121) entitled "Accounting for the Impairment
of
<PAGE>
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Partnership
measures the impairment loss based on the excess of the investment's carrying
value over its estimated fair market value. For investments being held for sale,
the impairment loss is measured based on the excess of the investment's carrying
value over its estimated fair market value less estimated costs of sale.
Property held for sale is not depreciated during the holding period. Prior to
the adoption of SFAS 121, the impairment loss was measured based on the excess
of the investment's carrying value over its net realizable value. During 1993,
the Managing General Partner determined that the carrying value of the Columbia
Gateway Corporate Park and Summit Vinings investments should be reduced to net
realizable value. (See Notes 3 and 4.)
The carrying value of an investment may be more or less than its current
appraised value. At December 31, 1995 and 1994, the appraised values of certain
investments exceeded the related carrying values by an aggregate of $9,400,000
and $6,700,000, respectively; and the appraised values of the remaining
investments were less than the related carrying values by an aggregate of
$1,400,000 and $2,000,000, respectively.
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 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.
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, 1995 and
1994 all investments were in commercial paper with less than seven months and
one month, respectively, remaining to maturity.
Deferred Disposition Fees
Disposition fees due to Copley related to sales 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.
<PAGE>
Note 3 - Real Estate Joint Ventures
-----------------------------------
The Partnership has investments in six real estate joint ventures which are
organized as general partnerships with real estate management/development firms.
(A seventh investment was sold in December 1994). It made capital contributions
to the ventures, which are generally subject to preferential cash distributions
at a specified rate and to priority distributions with respect to sale or
refinancing proceeds. The Partnership also made loans to certain of its venture
partners who, in turn, contributed the proceeds to the capital of the venture.
The loans bear interest at a specified rate. The loans are in substance real
estate investments and are accounted for accordingly. The joint venture
agreements provide for the funding of cash flow deficits by the venture partners
in proportion to their ownership interests.
The Partnership's venture partners are responsible for day-to-day
development and operating activities, although overall authority and
responsibility for the business is shared by the venturers. The respective real
estate development/management firms or their affiliates also provide various
services to the joint ventures for a fee.
The following is a summary of cash invested in joint ventures, net of
returns of capital and excluding acquisition fees:
<TABLE>
<CAPTION>
Preferential December 31,
Investment/ Rate of Ownership ------------------------------------
Location Return Interest 1995 1994
- ----------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Reflections 10.5% 60% $13,650,242 $13,650,242
FT. Myers, Florida
Metro Business Center
Phoenix, Arizona 10.5% 80% $ 8,836,989 $ 8,836,989
Palms Business Centers
Las Vegas, Nevada 11.0% 60% $ - $15,840,000
Columbia Gateway Corp. Park
Columbia, Maryland 10.5% 34.75% $12,580,704 $12,580,704
270 Technology Center
Frederick, Maryland 10.0% 50% $ 4,886,902 $ 4,886,902
Decatur TownCenter II
Decatur, Georgia 10.5% 60% $10,985,575 $10,985,575
</TABLE>
Reflections
On August 1, 1986, the Partnership entered into a joint venture with an
affiliate of Oxford Development Corporation to construct and operate a multi-
family apartment complex. The Partnership's commitment is for a total cash
investment of $14,475,000, $5,790,000 of which is a loan to the venture partner.
In May 1992, the Partnership agreed to extend the maturity of the loan from
August, 1996 to December, 1999 and the venture partner agreed to pay interest at
a minimum of 7% per annum with the unpaid amount subject to compounding at
10.5%. The loan is secured by the venture partner's interest in the joint
venture, as well as a guarantee from an affiliate of the venture partner.
<PAGE>
Metro Business Center
On September 15, 1986, the Partnership entered into a joint venture with an
affiliate of Hewson Properties, Inc., to construct and operate four multi-tenant
office/warehouse buildings. The Partnership committed to make a maximum cash
investment of $9,568,000, $3,988,000 of which is a loan to the venture partner.
The loan matures in October 1996 and is secured by the venture partner's
interest in the joint venture. Subsequent to December 31, 1995, and effective
January 1, 1996, the joint venture agreement was amended to grant the
Partnership full control over management decisions, except that it does not have
the authority to unilaterally offer the property for sale prior to July 1, 1996.
The minimum future rentals due to the venture under non-cancelable operating
leases are: $506,391 in 1996, $288,080 in 1997, $98,065 in 1998 and $3,500 in
1999.
Palms Business Centers
On December 29, 1986, the Partnership entered into a joint venture with an
affiliate of Commerce Centre Partners to construct and operate fifteen one-story
office/industrial buildings. The Partnership committed to make a capital
contribution of $15,840,000.
Effective January 1, 1995, this investment was converted to a wholly-owned
property for financial reporting purposes, pursuant to an amendment to the joint
venture agreement granting the Partnership control over management decisions
(see Note 4).
Columbia Gateway Corporate Park
On December 21, 1987, the Partnership entered into a joint venture with an
affiliate of the Partnership and with an affiliate of the Manekin Corporation to
construct and operate seven research and development/office buildings, of which
six have been constructed to date. The Partnership committed to make a
$14,598,000 capital contribution. The Partnership and its affiliate collectively
have a 50% interest in the joint venture. The minimum future rentals due to the
venture under non-cancelable operating leases are: $1,316,589 in 1996,
$1,176,845 in 1997, $1,116,297 in 1998, $1,038,834 in 1999, $411,261 in 2000 and
$1,507,959 thereafter.
In 1993, the Managing General Partner determined that the carrying value of
this investment should be reduced to its estimated net realizable value, which
resulted in an investment valuation allowance of $1,050,000.
270 Technology Center
On December 22, 1987, the Partnership entered into a joint venture with an
affiliate of the Manekin Corporation to construct and operate two research and
development/office buildings. The Partnership committed to make a $5,150,000
capital contribution. The minimum future rentals due to the venture under non-
cancelable operating leases are: $387,579 in 1996 and $147,418 in 1997.
Decatur TownCenter II
On December 31, 1987, the Partnership entered into a joint venture with an
affiliate of Pope & Land Enterprises to construct and operate an office
building. The Partnership committed to make an $11,600,000 capital contribution.
To the extent that up to $7,826,000 of the Partnership's contribution is
returned within ten years, the joint venture agreement provides for a prepayment
premium to the Partnership. The minimum future rentals due to the venture under
non-cancelable operating leases are: $1,431,662 in 1996, $1,212,866 in 1997,
$1,186,138 in 1998, $941,181 in 1999, $861,897 in 2000 and $3,725,478
thereafter. A portion of the land on which the building was constructed consists
of a leasehold interest assigned to the venture. The lease terminates in 2073
and requires annual ground rental payments of $32,349. These payments are
adjusted for inflation every five years.
<PAGE>
During 1995, the joint venture agreement was amended to allow the
Partnership the sole right to cause a sale on or after January 1, 1996.
Sale of Rancho Cucamonga
On September 4, 1986, the Partnership entered into a joint venture with an
affiliate of Vance Charles Mape III to construct and operate a warehouse
facility. The Partnership made a contribution of $5,273,545. On December 30,
1994, the joint venture sold the property for a total sales price of
$5,472,000. After closing costs, the Partnership received its share of the
proceeds of $5,261,275 and recognized a gain on the sale of $399,865 ($4.17 per
limited partnership unit). A disposition fee of $164,160 was accrued but not
paid to Copley. A capital distribution to the limited partners was made on
January 26, 1995 in the aggregate amount of $5,224,835 ($55.00 per limited
partnership unit).
Summarized Financial Information
--------------------------------
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation
of $10,623,335 and
$12,483,694, respectively $41,201,074 $52,351,990
Other 1,224,883 1,881,118
----------- -----------
42,425,957 54,233,108
Liabilities 314,534 644,808
----------- -----------
Net assets $42,111,423 $53,588,300
=========== ===========
</TABLE>
Results of Operations
---------------------
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
Rental income $7,364,285 $9,306,359 $8,680,294
Other income 173,436 291,152 171,064
---------- ---------- ----------
7,537,721 9,597,511 8,851,358
---------- ---------- ----------
Expenses
Operating expenses 2,491,930 3,139,433 3,128,730
Depreciation and amortization 1,583,687 2,430,786 2,833,234
---------- ---------- ----------
4,075,617 5,570,219 5,961,964
---------- ---------- ----------
Net income $3,462,104 $4,027,292 $2,889,394
========== ========== ==========
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures.
<PAGE>
The Rancho Cucamonga investment was sold on December 30, 1994. The above
amounts include the results of operations through that date. The Palms Business
Center investment was converted to a wholly-owned property on January 1, 1995.
The above amounts exclude its results of operations for 1995.
Note 4 - Property
- -----------------
Palms Business Center
Effective January 1, 1995, the Palms Business Center joint venture was
restructured, giving the Partnership control over management decisions. Since
that date, the investment is being accounted for as a wholly-owned property. The
carrying value of the joint venture investment at conversion was allocated to
land, building and improvements, amount payable to venture partner and other net
operating liabilities. The venture partner will receive 40% of the excess cash
flow above a specified level until the initial obligation of $360,000 is repaid
in full.
The following is a summary of the Partnership's investment at December 31,
1995:
<TABLE>
<S> <C>
Land $ 3,072,333
Buildings and improvements
and other capitalized costs 9,780,823
Accumulated depreciation and amortization (444,790)
Payable to venture partner (230,000)
Net operating liabilities (70,076)
-----------
$12,108,290
===========
</TABLE>
The buildings and improvements are being depreciated over 25 years,
beginning January 1, 1995.
The minimum future rentals under non-cancelable operating leases are:
$1,579,802 in 1996, $1,066,615 in 1997, $344,574 in 1998, $87,837 in 1999 and
$35,844 in 2000.
Summit Vinings
On August 6, 1993, the Partnership sold the Summit Vinings apartment
complex located in Atlanta, Georgia. The total sales price was $8,100,000. After
closing costs, the Partnership received proceeds of $7,916,614. In anticipation
of the sale, the carrying value of the investment had been reduced in the first
and second quarters of 1993 to approximate the selling price through the
recognition of an investment valuation allowance of $1,710,784. A disposition
fee of $243,000 was accrued but not paid to Copley. On October 28, 1993, the
Partnership made a capital distribution to the limited partners in the aggregate
amount of $7,789,754 ($82 per limited partnership unit.)
<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,
-----------------------------------
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Net income (loss) per
financial statements $3,912,897 $3,752,101 $ (378,545)
Timing differences:
Joint venture earnings 978,808 1,092,778 1,113,243
Depreciation and amortization 125,347 26,525 161,062
Expenses 28,383 244,047 231,192
Valuation allowance - - 1,050,000
Gain on sale - 756,363 2,845,864
---------- ---------- ----------
Taxable income $5,045,435 $5,871,814 $5,022,816
========== ========== ==========
</TABLE>
Note 6 - Partners' Capital
- --------------------------
Allocation 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 partners. Cash distributions are made
quarterly.
Net sale 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 partners. The adjusted capital contribution per
limited partnership unit was reduced from $1,000 to $918 in 1993 and to $863 in
1995 as a result of the capital distribution from the Summit Vinings and Rancho
Cucamonga sales, respectively. No capital distributions have been made to the
general partners. Income from a sale is allocated in proportion to the
distribution of related proceeds, provided that the general partners are
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 partners.
Note 7 - Subsequent Event
- -------------------------
Distributions of cash from operations relating to the quarter ended
December 31, 1995 were made on January 25, 1996 in the aggregate amount of
$1,242,638 ($12.95 per limited partnership unit).
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Initial Cost to Costs Subsequent
the Partnership to Acquisition
---------------------------------------------------- --------------------------
Change in
Buildings & Incidental Working
Description Land Improvements Working Capital Improvements Capital
---------------- ------------ --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
60% interest in
Lee Parnters. Owners of
an apartment complex of
twelve, two and three _____________________________________ See Note A __________________________
story buildings in Fort
Myers, Florida.
80% interest in
Copley/Hewson Northwest
Associates Joint Venture.
Owners of four one story _____________________________________ See Note A __________________________
office/industrial buildings in
Phoenix, Arizona.
50% interest in
Morf VI Venture.
Owners of two single story
office/research and _____________________________________ See Note A __________________________
development buildings in
Frederick, Maryland.
60% interest in
Decatur TownCenter II
Associates. The Partnership
owns land in Decatur, Georgia _____________________________________ See Note A __________________________
and has constructed a five
story office building.
34.75% interest in
Gateway 51 Partnership.
The Partnership has constructed
six office and research and _____________________________________ See Note A __________________________
development buildings, and owns
land in Columbia, Maryland.
-------------------------------------------------------------------------------
Sub-total
===============================================================================
<CAPTION>
Gross amount at which
Carried at Close of Period
----------------------------------------------------
Buildings & Incidental
Description Land Improvements Working Capital Total
- ----------- ---------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
60% interest in
Lee Parnters. Owners of
an apartment complex of
twelve, two and three ____________________________________________________ $10,659,267
story buildings in Fort
Myers, Florida.
80% interest in
Copley/Hewson Northwest
Associates Joint Venture.
Owners of four one story ____________________________________________________ $5,832,584
office/industrial buildings in
Phoenix, Arizona.
50% interest in
Morf VI Venture.
Owners of two single story
office/research and ____________________________________________________ $4,691,768
development buildings in
Frederick, Maryland.
60% interest in
Decatur TownCenter II
Associates. The Partnership
owns land in Decatur, Georgia ____________________________________________________ $8,325,253
and has constructed a five
story office building.
34.75% interest in
Gateway 51 Partnership.
The Partnership has constructed
six office and research and ____________________________________________________ $10,957,955
development buildings, and owns
land in Columbia, Maryland.
--------------------------------------------------------------------
Sub-total $40,466,827
====================================================================
<CAPTION>
Accumulated Date of Date Depreciable
Description Depreciation Construction Acquired Life
- ----------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
60% interest in
Lee Parnters. Owners of
an apartment complex of
twelve, two and three N/A 1987 8/01/86 40 Years
story buildings in Fort
Myers, Florida.
80% interest in
Copley/Hewson Northwest
Associates Joint Venture.
Owners of four one story N/A 1987 9/15/86 30 Years
office/industrial buildings in
Phoenix, Arizona.
50% interest in
Morf VI Venture.
Owners of two single story
office/research and N/A 1987 12/22/87 50 Years
development buildings in
Frederick, Maryland.
60% interest in
Decatur TownCenter II
Associates. The Partnership
owns land in Decatur, Georgia N/A 1989 12/31/87 20 years
and has constructed a five
story office building.
34.75% interest in
Gateway 51 Partnership.
The Partnership has constructed
six office and research and N/A 1992 12/21/87 50 years
development buildings, and owns
land in Columbia, Maryland.
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AT DECEMBER 31, 1995 (Continued)
<TABLE>
<CAPTION>
Initial Cost to Costs Subsequent
the Partnership to Acquisition
-------------------------------------------------------------------------------------------------
Change in
Buildings & Other Net Improvements Working
Description Land Improvements Operating Liabilities Capital Land
- ------------------------- ----------- --------------- --------------------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates 3,072,333 9,729,055 (281,424) 51,768 (18,652) 3,072,333
---------------------------------------------------------------------------------------------
Sub-total 3,072,333 9,729,055 (281,424) 51,768 (18,652) 3,072,333
---------------------------------------------------------------------------------------------
Total Real Estate and Joint Ventures
=============================================================================================
<CAPTION>
Gross amount at which
Carried at Close of Period
--------------------------------------------------------
Building & Other Net Accumulated
Description Improvements Operating Liabilities Total Depreciation
- ------------------------- ------------- ------------------------ ------------- --------------
<S> <C> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates 9,780,823 (300,076) 12,553,080 (444,790)
---------------------------------------------------------------------------
Sub-total 9,780,823 (300,076) 12,553,080 (444,790)
---------------------------------------------------------------------------
Total Real Estate and Joint Ventures 53,019,907 (444,790)
=================================================================
<CAPTION>
Date of Date Depreciable
Description Construction Acquired Life
- ------------------------- ------------ -------------- -----------
<S> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates 1988 12/29/86 25 Years
Converted to
wholly-owned
1/1/95
Sub-total
Total Real Estate and Joint Ventures
</TABLE>
<TABLE>
<S> <C>
Reconciliation of Real Estate Owned:
Beginning balance, January 1, 1995 $0
Conversion to Wholly-Owned 12,519,964
Additions to property 51,768
Decrease in working capital (18,652)
-----------------
Ending balance, December 31, 1995 $12,553,080
=================
Accumulated Depreciation- January 1, 1995 $0
Depreciation Expense - 1995 (444,790)
-----------------
Accumulated Depreciation - December 31, 1995 ($444,790)
=================
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Schedule III NOTE A
JOINT VENTURES SUMMARY
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
CASH
PERCENT BALANCE INVESTMENT EQUITY IN 1995 AMORTIZATION DISTRIBUTION
OF AS OF IN JOINT INCOME/ OF DEFERRED FROM
DESCRIPTION OWNERSHIP 12/31/94 VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE
- --------------------------------- --------- -------------- ----------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Lee Partners 60% $10,957,237 $0 $650,904 ($6,201) ($942,673)
Copley/Hewson 80% 6,265,191 0 394,403 (4,010) (823,000)
Northwest Associates
Rancho Road Associates 60% 12,519,964 0 0 0 0
MORF VI Venture 50% 4,749,674 0 523,836 (1,840) (579,902)
Decatur TownCenter II Associates 60% 8,399,498 0 680,012 (5,418) (748,839)
Gateway 51 Partnership 34.75% 10,946,222 0 847,641 (1,908) (834,000)
-------------- ----------- --------------- ----------------- -----------------
$53,837,786 $0 $3,096,796 ($19,377) ($3,928,414)
============== =========== =============== ================= =================
<CAPTION>
CONVERSION TO BALANCE
WHOLLY-OWNED AS OF
DESCRIPTION PROPERTY 12/31/95
- --------------------------------- ---------------------- -----------------------
<S> <C> <C>
Lee Partners $0 $10,659,267
Copley/Hewson 0 5,832,584
Northwest Associates
Rancho Road Associates (12,519,964) 0
MORF VI Venture 0 4,691,768
Decatur TownCenter II Associates 0 8,325,253
Gateway 51 Partnership 10,957,955
---------------------- --------------------
($12,519,964) $40,466,827
====================== ====================
</TABLE>
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
FINANCIAL REPORT
DECEMBER 31, 1995
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
OF GATEWAY 51 PARTNERSHIP
<TABLE>
<CAPTION>
PAGE #
<S> <C>
Independent Auditor's Report of Wolpoff & Company, LLP.................
Balance Sheet - December 31, 1995 and 1994.............................
Statement of Income - For the Years ended
December 31, 1995, 1994 and 1993......................................
Statement of Changes on Partners' Capital - For the Years ended
December 31, 1995, 1994, and 1993.....................................
Statement of Cash Flows - For the Years ended
December 31, 1995, 1994 and 1993......................................
Notes to Financial Statements..........................................
</TABLE>
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP]
To the Partners
Gateway 51 Partnership (A Maryland General Partnership)
Columbia, Maryland
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
----------------------------------------------------
We have audited the balance sheet of Gateway 51 Partnership (A Maryland General
Partnership) as of December 31, 1995 and 1994, and the related statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1995, 1994 and 1993. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gateway 51 Partnership (A
Maryland General Partnership) as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
/S/ WOLPOFF & COMPANY, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 22, 1996
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
------------- -------------
<S> <C> <C>
PROPERTY, AT COST-Notes 1 and 4
Land $ 4,966,738 $ 4,960,338
Building and Improvements 11,124,907 10,944,239
Preliminary Development Costs 42,247 42,247
Deferred Costs 1,050,284 924,454
------------- -------------
17,184,176 16,871,278
Less Accumulated Depreciation and Amortization 1,619,148 1,330,252
------------- -------------
PROPERTY, NET 15,565,028 15,541,026
------------- -------------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 156,930 67,917
------------- -------------
Receivables from Tenants
Rents and Expense Billings -0- 58,674
Tenant Improvement Loans - Note 3 32,745 106,616
Deferred Rent Receivable - Note 1 41,080 54,888
Allowance for Doubtful Accounts -0- (19,260)
------------- -------------
73,825 200,918
------------- -------------
Prepaid Expenses 36,270 20,936
------------- -------------
TOTAL OTHER ASSETS 267,025 289,771
------------- -------------
$15,832,053 $15,830,797
============= =============
</TABLE>
_______________
The notes to financial statements are an integral part of this statement.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
BALANCE SHEET
-------------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
LIABILITIES
Accounts Payable and Accrued Expenses $ 24,585 $ 5,185
Tenant Security Deposits 2,409 9,180
------------- -------------
TOTAL LIABILITIES 26,994 14,365
PARTNERS' CAPITAL - Notes 1 and 2 15,805,059 15,816,432
------------- -------------
$15,832,053 $15,830,797
============= =============
</TABLE>
____________
The notes to financial statements are an integral part of this statement.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
STATEMENT OF INCOME
-------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUE - Notes 1 and 6
Gross Rent Potential $1,676,953 $ 1,485,628 $ 1,385,031
Less Vacancies 133,073 314,307 298,115
--------------- --------------- ---------------
Net Rental Income 1,543,880 1,171,321 1,086,916
Expense Reimbursements from Tenants 326,449 324,854 247,851
Interest and Other Income 23,511 10,929 9,209
--------------- --------------- ---------------
TOTAL REVENUE 1,893,840 1,507,104 1,343,976
--------------- --------------- ---------------
OPERATING EXPENSES
Real Property and CPRA Taxes 191,439 188,523 134,121
Building and Grounds Maintenance 121,868 113,127 107,828
Management Fees - Note 4 57,915 49,122 49,470
General and Administrative 13,558 32,896 19,659
Utilities 21,545 24,660 21,857
Bad Debts -0- 11,929 33,515
Insurance 9,992 5,291 4,934
--------------- --------------- ---------------
TOTAL OPERATING EXPENSES 416,317 425,548 371,384
--------------- --------------- ---------------
OPERATING INCOME 1,477,523 1,081,556 972,592
--------------- --------------- ---------------
DEPRECIATION AND AMORTIZATION 288,896 308,697 572,179
--------------- --------------- ---------------
NET INCOME - Note 5 $1,188,627 $ 772,859 $ 400,413
=============== =============== ===============
</TABLE>
_______________
The notes to financial statements are an integral part of this statement.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
STATEMENT OF PARTNERS' CAPITAL
------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $20,267,826 $17,744,733 $17,744,733
Current Year -0- 2,523,093 -0-
--------------- --------------- ---------------
20,267,826 20,267,826 17,744,733
--------------- --------------- ---------------
CAPITAL PLACEMENT
Prior Years (202,678) (177,447) (177,447)
Current Year -0- (25,231) -0-
--------------- --------------- ---------------
(202,678) (202,678) (177,447)
--------------- --------------- ---------------
DISTRIBUTIONS
Prior Years (5,748,893) (4,543,893) (4,233,893)
Current Year (1,200,000) (1,205,000) (310,000)
--------------- --------------- ---------------
(6,948,893) (5,748,893) (4,543,893)
--------------- --------------- ---------------
ACCUMULATED INCOME
Prior Years 1,500,177 727,318 326,905
Current Year 1,188,627 772,859 400,413
--------------- --------------- ---------------
2,688,804 1,500,177 727,318
--------------- --------------- ---------------
TOTAL PARTNERS' CAPITAL $15,805,059 $15,816,432 $13,750,711
=============== ============== ===============
</TABLE>
_______________
The notes to financial statements are an integral part of this statement.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,188,627 $ 772,859 $ 400,413
--------------- --------------- ---------------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization 288,896 308,697 572,179
Change in Receivables from Tenants, Net of Allowance 53,222 (61,280) 26,452
Change in Accounts Payable and Accrued Expenses 19,400 3,807 (4,021)
Change in Prepaid Expenses (15,334) 3,764 (12,400)
--------------- --------------- ---------------
Total Adjustments 346,184 254,988 582,210
--------------- --------------- ---------------
Net Cash Provided by Operating Activities 1,534,811 1,027,847 982,623
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Building and Improvement Additions (180,668) (2,776,353) (111,122)
Land Costs (6,400) (15,516) (31,313)
Deferred Costs (125,830) (119,483) (7,514)
Decrease in Tenant Security Deposits (6,771) -0- (3,135)
Change in Tenant Improvement Loans 73,871 (18,972) (1,306)
Construction in Progress -0- -0- (29,733)
--------------- --------------- ---------------
Net Cash Used by Investing Activities (245,798) (2,930,324) (184,123)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions -0- 2,523,093 -0-
Capital Placement Fee -0- (25,231) -0-
Distributions to Partners (1,200,000) (1,205,000) (310,000)
--------------- --------------- ---------------
Net Cash Provided (Used)
by Financing Activities (1,200,000) 1,292,862 (310,000)
--------------- --------------- ---------------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 89,013 (609,615) 488,500
CASH AND CASH
EQUIVALENTS, BEGINNING 67,917 677,532 189,032
--------------- --------------- ---------------
CASH AND CASH
EQUIVALENTS, ENDING $ 156,930 $ 67,917 $ 677,532
=============== =============== ===============
</TABLE>
_______________
The notes to financial statements are an integral part of this statement.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Gateway 51 Partnership (A Maryland General Partnership) was formed on
December 21, 1987, under the Maryland Uniform Partnership Act. The
agreement was amended and restated in 1989 to reflect changes in
partner ownership percentages.
Property
--------
The Partnership owns 21 acres of land in Howard County, Maryland. The
property has been developed with six office/research type buildings,
with two placed into service in August 1994. Plans call for a seventh
building with approximately 15,000 square feet of space.
All property is recorded at cost. Information regarding the buildings
is as follows:
<TABLE>
<CAPTION>
Occupancy
--------------------------------
Square Date Placed
Building Footage into Service Tenants 12/31/95 12/31/94 12/31/93
- ---------- --------- -------------- ----------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
A 46,840 3/1/91 Multiple 92% 73% 71%
B 21,991 9/1/90 AVNET 100% 100% 0%
C 38,182 7/15/91 Multiple 76% 100% 100%
F 35,532 2/1/92 Multiple 82% 92% 92%
D-E 45,951 8/8/94 Columbia National 100% 100% --
--------- ---------- ---------- ----------
188,496 90% 91% 73%
========= ========== ========== ==========
</TABLE>
Carrying costs, operating expenses and depreciation begin as a charge
against operations on the date the buildings are placed into service.
Initial Rental Operations
-------------------------
As buildings became substantially complete, the Partnership
recognized related revenues and expenses (including depreciation and
interest) pertaining to that space. Buildings were considered
substantially complete upon the earlier of the completion of
substantial tenant improvements or 1 year from the completion of the
building shell. Incidental rental revenue and expenses incurred prior
to substantial completion were included in building costs.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 1 - Cash and Cash Equivalents
-------------------------
(Cont.) The Partnership considers all highly liquid debt instruments purchased
with a maturity of 3 months or less to be cash equivalents.
The majority of the Partnership's cash is held in financial
institutions with insurance provided by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. Periodically during the year, the
balance may have exceeded the FDIC limitation.
Depreciation
------------
Building costs and tenant improvements are being depreciated using the
straight-line method over the estimated useful lives of 50 years.
Rental Income
-------------
Rental income for major leases is being recognized on a straight-line
basis over the terms of the leases. The excess of the rental income
recognized over the amount stipulated in the lease is shown as deferred
rent receivable.
Amortization
------------
Deferred costs are amortized as follows:
<TABLE>
<CAPTION>
Amortization
Amount Period
------------- --------------
<S> <C> <C>
Organization Costs $ 13,555 Complete
Leasing Costs and Commissions 1,036,729 Lease Terms
--------------
$1,050,284
==============
</TABLE>
Income Taxes
------------
Partnerships, as such, are not subject to income taxes. The individual
partners are required to report their respective shares of partnership
income or loss and other tax items on their individual income tax
returns (see Note 5).
Capital Placement Fee
---------------------
Costs incurred for arranging the Partnership's equity have been treated
as a reduction of partners' capital (see Note 2).
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 2 - PARTNERS' CAPITAL
Capital Investment
------------------
New England Life Pension Properties IV (NELPP IV) and New England
Pension Properties V (NEPP V) have agreed to provide equity of
$14,598,000 and $6,402,000, respectively, totaling $21,000,000. During
1994, NELPP IV and NEPP V made capital contributions of $1,753,550 and
$769,543, respectively, to fund the construction and completion of
Buildings D and E. As of December 31, 1995, 1994 and 1993, total
capital contributions amounted to $20,267,826, $20,267,826 and
$17,744,733, respectively.
Cumulative Priority Return
--------------------------
NELPP IV and NEPP V are entitled to cumulative priority returns of
10.5%, compounded monthly on capital invested. The Partnership paid
priority returns totaling $1,200,000, $1,205,000 and $310,000 during
1995, 1994 and 1993, respectively. As of December 31, 1995, 1994 and
1993, unpaid priority returns amounted to $5,427,949, $3,832,711 and
$2,993,149, respectively.
Capital Placement Fee
---------------------
The Partnership incurred fees of $202,678 with Paine Webber Mortgage
Finance, Inc. with respect to capital raised by the Partnership. This
amount has been charged against partners' capital.
Note 3 - TENANT IMPROVEMENT LOANS RECEIVABLE
The Partnership has made several tenant improvement loans to tenants.
These loans require monthly principal and interest payments. Pertinent
terms are as follows:
<TABLE>
<CAPTION>
Balance
Due
----------------------
Original Interest
Tenant Loan Amount Rate Due Date 12/31/95 12/31/94
-------------- ------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HMSS $ 28,741 10.78% 7/1/01 $18,917 $ 21,455
Bohdan 24,124 11.00% --- -0- 19,724
Pediatric Care 16,580 12.00% 3/31/97 5,114 8,689
HMSS 12,310 10.78% 10/1/01 8,714 9,731
Columbia National 47,107 15.00% --- -0- 47,017
------------- ----------- -----------
$ 128,862 $32,745 $106,616
============= =========== ===========
</TABLE>
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 4 - RELATED PARTY TRANSACTIONS
Management Fees
---------------
The Partnership has entered into an agreement with Manekin Corporation
to act as management agent for the property. The management agreement
provided for a management fee equal to 3.5% of rent and tenant expense
billings during 1994 and 1993. The agreement was modified to adjust the
fee to 3%, effective January 1, 1995.
Development Fees
----------------
The Partnership has entered into a development agreement with Manekin
Corporation. A fee of $138,611 was incurred in 1992 and is included in
building costs.
Note 5 - TAX ACCOUNTING
Tax accounting differs from financial accounting as follows:
<TABLE>
<CAPTION>
Current Year Prior Years Total
-------------- ------------- ------------
<S> <C> <C> <C>
Financial Income $1,188,627 $1,500,177 $2,688,804
Additional Depreciation (110,994) (418,056) (529,050)
Lease-Up Period Items
Capitalized for GAAP -0- 4,264 4,264
Deferred Rent 13,808 (54,888) (41,080)
Bad Debt Allowance (19,260) 19,260 -0-
Prepaid Property Taxes (12,280) (13,450) (25,730)
-------------- ------------- ------------
Taxable Income $1,059,901 $1,037,307 $2,097,208
============== ============= ============
</TABLE>
Note 6 - LEASES
The following is a schedule of future minimum lease payments to be
received under noncancelable operating leases at December 31, 1995:
<TABLE>
<S> <C>
Year Ending December 31, 1996 $ 1,316,589
1997 1,176,845
1998 1,116,297
1999 1,038,834
2000 411,261
Thereafter 1,507,959
-----------
$ 6,567,785
===========
</TABLE>
<PAGE>
To the Partners
Gateway 51 Partnership (A Maryland General Partnership)
Columbia, Maryland
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
---------------------------------------------------------
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information contained on pages 12 and 13 is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has not been subjected to the auditing procedures applied in the
audits of the basic financial statements, and accordingly, we express no opinion
on it.
/s/ WOLPOFF & COMPANY, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 22, 1996
<PAGE>
GATE 51 PARTNERSHIP
-------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
SCHEDULE OF PARTNERS' CAPITAL
-----------------------------
DECEMBER 31, 1995
-----------------
<TABLE>
<CAPTION>
M.O.R. 51
New England New England Gateway
Life Pension Pension Limited
Properties IV Properties V Partnership Total
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
OWNERSHIP PERCENTAGE 34.75% 15.25% 50.00% 100.00%
=============== =============== ============= ===============
CAPITAL CONTRIBUTIONS
Prior Years $14,086,139 $6,181,687 $ -0- $20,267,826
Current Year -0- -0- -0- -0-
--------------- --------------- ------------- ---------------
14,086,139 6,181,687 -0- 20,267,826
--------------- --------------- ------------- ---------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- (202,678)
Current Year -0- -0- -0- -0-
--------------- --------------- ------------- ---------------
(106,427) (96,251) -0- (202,678)
--------------- --------------- ------------- ---------------
DISTRIBUTIONS - Note 2
Prior Years (3,851,455) (1,897,438) -0- (5,748,893)
Current Year (834,000) (366,000) -0- (1,200,000)
--------------- --------------- ------------- ---------------
(4,685,455) (2,263,438) -0- (6,948,893)
--------------- --------------- ------------- ---------------
ACCUMULATED INCOME
Prior Years 1,042,625 457,552 -0- 1,500,177
Current Year 826,096 362,531 -0- 1,188,627
--------------- --------------- ------------- ---------------
1,868,721 820,083 -0- 2,688,804
--------------- --------------- ------------- ---------------
PARTNERS' CAPITAL, 12/31/95 $11,162,978 $4,642,081 $ -0- $15,805,059
=============== =============== ============= ===============
</TABLE>
_______________
See Independent Auditor's Report on Supplementary Information.
<PAGE>
<TABLE>
<CAPTION>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
-----------------------------------------------------------
DECEMBER 31, 1995
-----------------
M.O.R. 51
New England New England Gateway
Life Pension Pension Limited
Properties IV Properties V Partnership Total
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
OWNERSHIP PERCENTAGE 34.75% 15.25% 50.00% 100.00%
=============== =============== ============= ===============
CAPITAL CONTRIBUTIONS
Prior Years $14,086,139 $6,181,687 $ -0- $20,267,826
Current Year -0- -0- -0- -0-
--------------- --------------- ------------- ---------------
14,086,139 6,181,687 -0- 20,267,826
--------------- --------------- ------------- ---------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- (202,678)
Current Year -0- -0- -0- -0-
--------------- --------------- ------------- ---------------
(106,427) (96,251) -0- (202,678)
--------------- --------------- ------------- ---------------
DISTRIBUTIONS - Note 2
Prior Years (3,851,455) (1,897,438) -0- (5,748,893)
Current Year (834,000) (366,000) -0- (1,200,000)
--------------- --------------- ------------- ---------------
(4,685,455) (2,263,438) -0- (6,948,893)
--------------- --------------- ------------- ---------------
ACCUMULATED INCOME
Prior Years 723,100 314,207 -0- 1,037,307
Current Year 736,631 323,270 -0- 1,059,901
--------------- --------------- ------------- ---------------
1,459,731 637,477 -0- 2,097,208
--------------- --------------- ------------- ---------------
PARTNERS' CAPITAL, 12/31/95 $10,753,988 $4,459,475 $ -0- $15,213,463
=============== =============== ============= ===============
</TABLE>
______________
See Independent Auditor's Report on Supplementary Information.
<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 IV;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 11 , 1996 By: /s/ Joseph W. O'Connor
------ ----------------------
Joseph W. O'Connor
President of the
Managing 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, Principal
Executive Officer and
Director of the
/s/ Joseph W. O'Connor Managing General Partner March 11 , 1996
- --------------------------- ------
Joseph W. O'Connor
Principal Financial and
Accounting Officer of the
/s/ Daniel C. Mackowiak Managing General Partner March 11 , 1996
- --------------------------- ------
Daniel C. Mackowiak
Director of the
/s/ Daniel J. Coughlin Managing General Partner March 11 , 1996
- -------------------------- ------
Daniel J. Coughlin
Director of the
/s/ Peter P. Twining Managing General Partner March 11 , 1996
- -------------------------- ------
Peter P. Twining
<PAGE>
EXHIBIT INDEX
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<TABLE>
<CAPTION>
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NUMBER NUMBER
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<S> <C> <C>
10A. Agreement of Limited Partnership of Lee Partners, a *
Maryland Partnership, dated August 12, 1986, by and
among the Registrant and Lee-Oxford Limited Partnership,
as amended October 7, 1986.
10B. Term Loan Agreement dated August 1, 1986 between *
Lee-Oxford Limited Partnership and The Registrant,
as amended October 7, 1986.
10C. Promissory Note in the amount of $5,790,000 dated *
August 15, 1986 given by Lee-Oxford Limited Partnership
to the Registrant, and Allonge to Promissory Note dated
October 7, 1986
10D. General Partnership Interest Pledge and Security *
Agreement, dated August 1, 1986, by and between
Lee-Oxford Limited Partnership and The Registrant,
as amended October 7, 1986.
10E. Rancho Cucamonga No. 1 Associates Joint Venture *
Agreement dated as of December 1986 by and between
The Registrant and Vance Charles Mape III.
10F. Rancho Road Associates Joint Venture Agreement dated *
as of December 29, 1986 by and between The Registrant
and Commerce Centre Partners.
10G. General Warranty Deed as of December 23, 1986 between *
Calibre Log Cabin, Ltd., and the Registrant.
10H. Ground Lease by and between the Registrant, as Landlord *
and Calibre Log Cabin, Ltd., and the Registrant.
10I. Promissory Note dated December 22, 1986 in the amount *
of $8,862,500 from Calibre Log Cabin, Ltd. to the
Registrant.
10J. Deed to Secure Debt and Security Agreement, dated as of *
December 23, 1986 by and between Calibre Log Cabin, Ltd.,
as Borrower, and the Registrant, as Lender, in the amount
of $8,862,500.
10K. Hewson/Copley Northwest Associates Joint Venture *
Agreement by and between Hewson Properties, Inc. and
The Registrant dated as of September 15, 1986.
10L. Term Loan Agreement between Hewson Properties, Inc., *
Borrower, and the Registrant, as Lender, dated as of
September 15, 1986.
10M. Promissory Note dated September 15, 1986 in the amount *
of $3,720,000 from Hewson Properties, Inc. to the Registrant.
</TABLE>
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<S> <C> <C>
10N. Ground Lease, dated December 16, 1987, between the *
Partnership and Rouse and Associates - 101 Brandywine
Limited Partnership ("Rouse-101").
10O. Promissory Note, dated December 17, 1987, from *
Rouse-101 to the Partnership.
10P. Leasehold Mortgage and Security Agreement, dated as of *
December 16, 1987, between Rouse-101 and the Partnership.
10Q. Ground Lease, dated December 16, 1987, between the *
Partnership and Rouse and Associates - 201-301 Brandywine
Limited Partnership ("Rouse - 201-301").
10R. Promissory Note, dated December 17, 1987, from Rouse *
-201-301 to the Partnership.
10S. Leasehold Mortgage and Security Agreement, dated as of *
December 16, 1987, between Rouse-201-301 and the
Partnership.
10T. General Partnership Agreement of Gateway 51 Partnership, *
dated as of December 21, 1987, between M.O.R. Gateway
51 Associates Limited Partnership and the Partnership.
10U. General Partnership Agreement of MORF 6 Venture, dated *
as of December 18, 1987, between M.O.R.F. 6 Associates
Limited Partnership and the Partnership.
10V. Decatur Town Center II Associates Joint Venture Agreement, *
dated as of December 31, 1987, between Decatur Town Center
Associates, Ltd. and the Partnership.
10W. First Amendment to Ground Lease dated as of July 1, 1988 *
by and between New England Mutual Life Insurance Company
and Calibre Briar Oaks, Ltd.
10X. First Amendment to Ground Lease dated as of July 1, 1988 *
by and between the Registrant and Calibre Log Cabin Ltd.
10Y. Second Priority Leasehold Deed To Secure Debt dated as *
of July 1, 1988 between the Registrant and Calibre Log
Cabin, Ltd.
10Z. Amended and Restated General Partnership Agreement *
Gateway 51 Partnership dated as of April 20, 1989,
between M.O.R. Gateway 51 Associates Limited Partnership,
New England Life Pension Properties IV; a Real Estate
Limited Partnership and New England Pension Properties
V; a Real Estate Limited Partnership.
</TABLE>
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<S> <C> <C>
10AA. First Amendment to Decatur TownCenter II Associates *
Joint Venture Agreement dated as of September 15, 1989
by and between Decatur TownCenter Associates, Ltd. and
New England Life Pension Properties IV; a Real Estate
Limited Partnership.
10BB. Pledge and Security Agreement dated as of March 7, *
1988 by and between Commerce Centre Partners, a California
general partnership, and the Registrant.
10CC. First Amendment to Pledge and Security Agreement dated as *
of November 1, 1989 by and between Commerce Centre Partners and
the Registrant.
10DD. First Amendment to Rancho Road Associates Joint Venture *
Agreement dated as of November 1, 1989 by and between the
Registrant and Commerce Centre Partners.
10EE. First Amendment to Promissory Note and Joint Venture Interest *
Pledge and Security Agreement dated and effective as of
January 1, 1990 by and between Hewson Properties, Inc. and
the Registrant.
10FF. First Amendment to Hewson/Copley Northwest Associates *
Amended and Restated Joint Venture Agreement dated and
effective as of January 1, 1990 by and between the
Registrant and Hewson Properties, Inc.
10GG. Second Allonge to Promissory Note dated March 30, 1990 *
by and between Lee-Oxford Limited Partnership and the
Registrant.
10HH. Letter Agreement dated as of March 30, 1990 by and between *
the Registrant and Lee-Oxford Limited Partnership.
10II. Like-Kind Exchange Contract entered into as of July 3, 1990 *
by and between Crown American Corporation and M.O.R.F. 6
Venture.
10JJ. Agreement for Purchase and Sale made and entered into as *
of February 1, 1990 by and between Calibre Log Cabin, Ltd.
and the Registrant.
10KK. Assignment of Ground Lease and Limited Warranty Deed made *
by and entered into as of February 1, 1990 by and between
Calibre Log Cabin, Ltd. and the Registrant.
10LL. Warranty Bill of Sale and Assignment made by and entered *
into as of February 1, 1990 by and between Calibre Log
Cabin, Ltd. and the Registrant.
10MM. Assignment of Rents and Leases made and entered into as *
of February 1, 1990 by and between Calibre Log Cabin,
Ltd. and the Registrant.
</TABLE>
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<S> <C> <C>
10NN. Allonge to Promissory Note dated May 1, 1992, by and between Lee-
Oxford Partnership and the Registrant. *
10OO. Purchase and Sale Agreement and Escrow Instructions by and between
Rancho Cucamonga No. 1 Associates, a California general partnership *
and APT- Cabot California, Inc., a Delaware corporation dated as of
November 30, 1994.
10PP. Amended and Restated Joint Venture Agreement of Rancho Road
Associates between New England Life Pension Properties IV,
a Real Estate Limited Partnership and Commerce Centre Partners
dated January 1, 1995.
10QQ. Fourth Amendment to Decatur TownCenter II Associates Joint Venture
Agreement dated as of August 15, 1995 between Decatur TownCenter
Associates LTD., and the Registrant.
</TABLE>
____________________________________________________________________
* Previously filed and incorporated herein by reference
<PAGE>
Amended and Restated Joint Venture Agreement of Rancho Road Associates
between New England Life Pension Properties IV, a Real Estate Limited
Partnership and Commerce Centre Partners dated January 1, 1995.
<PAGE>
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
RANCHO ROAD ASSOCIATES
TABLE OF CONTENTS
-----------------
<TABLE>
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<S> <C> <C> <C>
ARTICLE 1 - THE PARTNERSHIP
Section 1.1 Organization........................................ 1
Section 1.2 Name................................................ 1
Section 1.3 Place of Business; Registered Agent................. 2
Section 1.4 Purposes............................................ 2
Section 1.5 Purposes Limited.................................... 3
Section 1.6 No Payments of Individual Obligations............... 3
Section 1.7 Statutory Compliance................................ 3
Section 1.8 Title to Property................................... 4
Section 1.9 Duration............................................ 4
ARTICLE 2 - THE PARTNERS
Section 2.1 Identification...................................... 4
Section 2.2 Liability Several................................... 4
Section 2.3 Noncompetition...................................... 4
Section 2.4 Limits on Developer's Activities.................... 4
Section 2.5 Other Conflicts..................................... 4
Section 2.6 Reimbursement and Fees.............................. 5
Section 2.7 Indemnification of NELPP by the Partnership......... 5
Section 2.8 Indemnification by Partners......................... 5
Section 2.9 Limitation on Liability of Partners................. 6
Section 2.10 Restrictions on Developer........................... 7
Section 2.11 ERISA Protection.................................... 7
ARTICLE 3 - CAPITAL
Section 3.1 Capital Accounts and Adjusted Capital Accounts...... 7
Section 3.2 Capital Contributions............................... 9
Section 3.3 No Further Capital Contributions.................... 9
Section 3.4 Capital Contributions - General..................... 9
ARTICLE 4 - LOANS
Section 4.1 Loans............................................... 9
</TABLE>
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<TABLE>
<S> <C> <C> <C>
ARTICLE 5 - CASH DISTRIBUTIONS
Section 5.1 Definitions......................................... 10
Section 5.1.1 Guaranteed Payments................................. 13
Section 5.2 Operating Cash Flow................................. 14
Section 5.3 Extraordinary Cash Flow ............................ 15
Section 5.4 Distributions in Liquidation........................ 15
Section 5.5 In-Kind Distribution................................ 15
ARTICLE 6 - OPERATING DEFICITS
Section 6.1 Deficit Contributions............................... 16
ARTICLE 7 - TAX ALLOCATIONS
Section 7.1 Definition of Net Profit and Net Loss............... 16
Section 7.2 Allocation of Net Profit, Gross Income and
Net Loss............................................ 17
Section 7.3 Tax Allocations; Code Section 704(c)................ 21
Section 7.4 Allocations Upon Transfer or Change of Interests.... 21
ARTICLE 8 - ACCOUNTING AND RECORDS
Section 8.1 Books and Records................................... 22
Section 8.2 Reports............................................. 22
Section 8.3 Annual Audit........................................ 23
Section 8.4 Tax Returns......................................... 23
Section 8.5 Depreciation........................................ 24
Section 8.6 Special Basis Adjustment............................ 24
Section 8.7 Tax Matters Partner................................. 24
Section 8.8 Fiscal Year......................................... 24
Section 8.9 Bank Accounts....................................... 24
ARTICLE 9 - MANAGEMENT AND OPERATIONS
Section 9.1 Management.......................................... 24
Section 9.2 Standard of Care.................................... 27
Section 9.3 Insurance........................................... 27
ARTICLE 10 - REPRESENTATIONS AND WARRANTIES
Section 10.1 Financial Advisory Fee.............................. 27
ARTICLE 11 - TRANSFER OF INTERESTS
Section 11.1 Restrictions on Transfer............................ 28
Section 11.2 Right of First Refusal.............................. 28
Section 11.3 Permitted Transfers................................. 29
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 11.4 General Transfer Provisions......................... 29
Section 11.5 Tax Allocations and Cash Distributions.............. 30
Section 11.6 Compliance.......................................... 30
Section 11.7 Waiver of Partition................................. 30
Section 11.8 Option to Acquire Interest of Developer............. 31
ARTICLE 12 - BUY/SELL
Section 12.1 Buy/Sell Events..................................... 31
Section 12.2 Rights Arising from a Buy/Sell Event................ 32
Section 12.3 Determination of Fair Market Value.................. 32
Section 12.4 Determination of Purchase Price..................... 32
Section 12.5 Electing Partner's Option........................... 32
Section 12.6 Closing of Purchase and Sale........................ 32
Section 12.7 Payment............................................. 33
Section 12.8 Liabilities......................................... 33
ARTICLE 13 - TERMINATION OF THE PARTNERSHIP
Section 13.1 Events of Dissolution............................... 33
Section 13.2 Effect of Dissolution............................... 34
Section 13.3 Sale of Assets by Liquidating Trustees.............. 34
ARTICLE 14 - MISCELLANEOUS
Section 14.1 Notices............................................. 35
Section 14.2 Successors and Assigns.............................. 36
Section 14.3 No Oral Modifications; Amendments................... 36
Section 14.4 Captions............................................ 36
Section 14.5 Terms............................................... 36
Section 14.6 Invalidity.......................................... 37
Section 14.7 Counterparts........................................ 37
Section 14.8 Further Assurances.................................. 37
Section 14.9 Complete Agreement.................................. 37
Section 14.10 Attorneys' Fees..................................... 37
Section 14.11 Governing Law....................................... 37
Section 14.12 No Third Party Beneficiary.......................... 37
Section 14.13 Exhibits and Glossary............................... 37
Section 14.14 Estoppels........................................... 38
Section 14.15 References to this Agreement........................ 38
Section 14.16 Reliance on Authority of Person Signing Agreement... 38
Section 14.17 Consents and Approvals.............................. 39
</TABLE>
EXHIBIT A Legal Description of Land
A Glossary of Defined Terms used in this Agreement is attached.
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<PAGE>
RANCHO ROAD ASSOCIATES
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT of Rancho Road
Associates, a Nevada general partnership (the "Partnership"), is dated as of
January 1, 1995 among Commerce Centre Partners, a California general partnership
("Developer"), and New England Pension Properties IV; a Real Estate Limited
Partnership, a Massachusetts limited partnership ("NELPP"). Developer and NELPP
are sometimes hereinafter referred to individually as a "Partner" and
collectively as the "Partners". Capitalized terms used herein shall have the
meanings ascribed to them in the Glossary attached hereto.
WHEREAS, the Partners formed the Partnership pursuant to a Joint Venture
Agreement dated as of December 29, 1986, which Joint Venture Agreement has been
amended from time to time since such date (as so amended, the "Original
Agreement"); and
WHEREAS, Developer desires to transfer to NELPP a portion of its interest
in the Partnership; and
WHEREAS, in connection with such transfer to NELPP, the Partners desire to
modify certain provisions of the Original Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
agreements set forth in this Agreement and intending to be legally bound, the
parties hereby agree to continue Rancho Road Associates as a Nevada general
partnership in accordance with the Nevada Revised Uniform Partnership Act (the
"Act") and do hereby agree to amend and restate the Original Agreement to read
in its entirety as follows:
ARTICLE I
THE PARTNERSHIP
---------------
Section 1.1 Organization. The Partnership was formed as a Nevada general
------------
partnership and is hereby continued as a Nevada general partnership pursuant to,
in accordance with, and for purposes of, the provisions of the Act.
Section 1.2 Name. The name of the Partnership shall be Rancho Road
----
Associates and all business of the Partnership shall be conducted in such name.
<PAGE>
Section 1.3 Place of Business; Registered Agent. The registered office of
-----------------------------------
the Partnership in the State of Nevada shall be located in care of Nevada
Brokers, Inc., 3137 West Tompkins Avenue, Las Vegas, Nevada 89103. The principal
place of business of the Partnership shall be located c/o Copley Real Estate
Advisors, Inc., 399 Boylston Street, Boston, Massachusetts 02116, or at such
other place within or without the State of Nevada as may be selected by NELPP.
Section 1.4 Purposes. The sole purpose of the Partnership shall be to
--------
acquire, own and hold for production of income, improve, develop, operate,
manage, lease, sell, dispose and otherwise deal with real estate. In furtherance
of this purpose, but subject to all other provisions of this Agreement, the
Partnership is hereby authorized:
- to acquire by purchase, lease, contribution or otherwise, any real or
personal property which may be necessary, convenient or incidental to
the accomplishment of the purpose of the Partnership;
- to construct, operate, maintain, finance, improve, own, sell, convey,
assign, mortgage or lease any real estate, and any personal property
necessary, convenient or incidental to the accomplishment of the
purpose of the Partnership;
- to borrow money and issue evidences of indebtedness in furtherance of
any or all of the purposes of the Partnership, and to secure the same
by mortgage, pledge or other lien on any of the Land and/or the
Improvements, owned or operated by the Partnership and/ or any other
assets of the Partnership;
- to borrow money on the general credit of the Partnership for use in
the Partnership business and to execute documents in connection
therewith;
- to enter into, perform and carry out contracts of any kind, including
contracts with an Affiliate of a Partner, necessary to, in connection
with or incidental to, the accomplishment of the purpose of the
Partnership;
- to engage in any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or
incidental to the accomplishment of the purpose of the Partnership, so
long as said activities and contracts may be lawfully carried on or
performed by a partnership under applicable laws;
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<PAGE>
- to enter into, on behalf of the Partnership, easements, rights of way,
utility or other agreements necessary for the development of any of
the Land and/or the Improvements owned or operated by the Partnership
or any portion thereof or to permit access over, through, and across
such land and/or improvements or any portion thereof (to serve
adjoining properties, for vehicular and pedestrian access, utility
installations maintenance and other purposes);
- to prepay in whole or in part, refinance, recast, increase, modify, or
extend any mortgage affecting any of the land or the improvements
owned or operated by the Partnership or other indebtedness of the
Partnership and, in connection therewith, to execute any extensions,
renewals or modifications of such other mortgages and indebtedness;
and
- to take or cause to be taken all actions and to perform or cause to be
performed all functions necessary or appropriate to promote the
business of the Partnership and to realize and carry out its purpose.
Section 1.5 Purposes Limited. The Partnership shall be a partnership only
----------------
for the purpose specified in Section 1.4. Except as otherwise provided in this
Agreement, the Partnership shall not engage in any other activity or business
and no Partner shall have any authority to hold itself out as a general agent of
another Partner in any other business or activity.
Section 1.6 No Payments of Individual Obligations. The Partners shall use
-------------------------------------
the Partnership's credit and assets solely for the benefit of the Partnership.
No asset of the Partnership shall be transferred or encumbered for or in payment
of any individual obligation of a Partner.
Section 1.7 Statutory Compliance. The Partnership shall exist under and
--------------------
be governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of Nevada, including without limitation, the Act.
The Partners shall make all filings and disclosures required by, and shall
otherwise comply with, all such laws.
NELPP and the Developer shall also execute and file in the appropriate
records any fictitious name certificate required by law to be filed in
connection with the formation of the Partnership and shall execute and file such
other documents and instruments as may be necessary or appropriate with respect
to the continuation of, and conduct of business by, the Partnership.
-3-
<PAGE>
Section 1.8 Title to Property. All real and personal property owned by
-----------------
the Partnership shall be owned by the Partnership as an entity and, insofar as
permitted by applicable law, no Partner shall have any ownership interest in
such property in its individual name or right and each Partner's interest in the
Partnership shall be personal property for all purposes.
Section 1.9 Duration. The term of the Partnership commenced on December
--------
29, 1986, and the Partnership shall dissolve on December 31, 1998 unless sooner
dissolved or terminated pursuant to statute or any provision of this Agreement.
ARTICLE 2
THE PARTNERS
------------
Section 2.1 Identification. Developer and NELPP shall be the Partners in
--------------
the Partnership. No other person may become a Partner except for a transfer
specifically permitted under and effected in compliance with this Agreement.
Section 2.2 Liability Several. The obligations of the Partners under this
-----------------
Agreement to one another shall be in every case be several and shall not be, or
be construed to be, either joint or joint and several.
Section 2.3 Noncompetition. Intentionally Omitted.
--------------
Section 2.4 Limits on Developer's Activities. Developer shall not engage,
--------------------------------
invest or otherwise participate in any activity, investment or undertaking other
than this Partnership.
Section 2.5 Other Conflicts. NELPP, Affiliates of NELPP and Affiliates of
---------------
Developer (but not Developer itself) may conduct any business or activity
whatsoever (including the acquisition, development, leasing and operation and/or
sale of real property) without any accountability to the Partnership or to any
Partner even if such business or activity competes with the business of the
Partnership. Each Partner understands that NELPP, Affiliates of NELPP and
Affiliates of Developer may be interested, directly or indirectly, in various
other businesses and undertakings not including the Partnership.
Further, each Partner understands and acknowledges that the conduct of the
business of the Partnership may involve business dealings with such other
businesses or undertakings of NELPP, Affiliates of Developer and Affiliates of
NELPP. The creation of the Partnership and the assumption by each of the
Partners of its duties hereunder shall be without prejudice to the respective
rights of NELPP, Affiliates of Developer and Affiliates of NELPP
-4-
<PAGE>
to maintain such other interests and activities and to receive and enjoy profits
or compensation therefrom, and each Partner waives any rights it might otherwise
have to share or participate in such other interests or activities of NELPP,
Affiliates of Developer and Affiliates of NELPP. However, each Partner shall
give notice to the other Partners of its interest, or of the interest of any of
its Affiliates, in any other business which it proposes to enter into with the
Partnership, and such business or undertaking with the Partnership must be
approved by the non-interested Partner.
Section 2.6 Reimbursement and Fees. NELPP shall be entitled to be
----------------------
reimbursed for all out-of-pocket expenses incurred by it in connection with the
performance of its duties hereunder.
Section 2.7 Indemnification of NELPP by the Partnership. NELPP shall
-------------------------------------------
perform its duties under this Agreement with ordinary prudence and in a manner
characteristic of businessmen in similar circumstances. However, it shall not
have any liability whatsoever to the Partnership or to any other Partner for
loss caused by any act or by the failure to do any act (i) if the loss suffered
arises out of a mistake in judgment of NELPP, or (ii) if NELPP, in good faith,
had determined that the action or lack of action giving rise to the loss was in
the best interests of the Partnership or (iii) if the action or lack of action
giving rise to the loss was based on the reasonable advice of counsel that such
action or lack of action was not in violation of the express provisions of this
Agreement; provided, however, that such exculpation from liability shall not
apply to any liability for loss caused by any act or by the failure to do any
act which arises out of the gross negligence, willful neglect or willful
misconduct of NELPP.
The Partnership, its receiver or liquidating trustee, shall indemnify, hold
harmless and pay all judgments and claims against NELPP arising from any actions
or decisions performed or made by NELPP in connection with the business of the
Partnership, provided such actions or decisions are within the scope of the
--------
purposes of the Partnership and NELPP complied with the immediately preceding
paragraph. This indemnification shall include, without limitation, payment of
reasonable attorneys' and accountants' fees incurred in connection with the
defense of any claim or proceeding based on any such action or decision, which
attorneys' and accountants' fees shall be paid as incurred, and liabilities
under Federal and state securities laws, to the extent permitted by law.
Section 2.8 Indemnification by Partners. Subject to Section 2.7, each
---------------------------
Partner (an "Indemnitor") shall indemnify and hold harmless the other Partner
from and against all claims, demands, actions and rights of action which shall
or may arise by virtue of anything done or omitted to be done by the Indemnitor
(directly or
-5-
<PAGE>
through or by agents, employees or other representatives) outside the scope of,
or in breach of the terms of this Agreement including, without limitation,
Section 1.5 and, in the case of NELPP, Article 9. A Partner who desires to make
a claim against an Indemnitor under this Section shall notify the Indemnitor of
the claim, demand, action or right of action which is the basis of such claim,
and shall give the Indemnitor a reasonable opportunity to participate in the
defense thereof. Failure to give such notice shall not affect the Indemnitor's
obligations hereunder, except to the extent of any actual prejudice resulting
therefrom. Any cash distributions of the Indemnitor under Article 5 shall be
charged for any amounts the Indemnitor is required to pay pursuant to this
Section 2.8.
Section 2.9 Limitation on Liability of Partners. Notwithstanding the
-----------------------------------
provisions of Section 2.8 above, except for obligations to recontribute funds to
the Partnership under Section 5.2, no Partner shall have personal liability for
the payment of any sums owing by such Partner to the Partnership or any other
Partner under the terms of this Agreement, or for the performance of any other
covenant or agreement of such Partner contained herein; rather, the Partnership
and each other Partner shall look solely to the Interest of such Partner or to
such other specific remedies as may be provided for herein, for satisfaction of
each and every of such payments and obligations, and shall never seek, obtain or
enforce any deficiency judgment or other judgment or mandatory order of any
nature the effect of which would be to compel such Partner to pay any sum of
money to any party in respect of any obligation arising under the terms of this
Agreement and owed to the Partnership or any other Partner (including, without
limitation, any subrogation right or remedy obtained by payment by a Partner of
all or any portion of any loan or other indebtedness of the Partnership).
Except as otherwise provided above in this Section 2.9, each Partner hereby
waives and relinquishes any right to have any recourse or pursue any remedy
whatsoever, other than the foregoing specified remedy, against the following:
- the Partnership, the Partners (or any partner, general or limited,
present or future subscriber to the capital stock, stockholder,
officer or director of any of the Partners); or
- any corporation, partnership (or any partner thereof), individual or
entity to which any interest in the Project shall have been
transferred.
The foregoing provisions shall not limit the right of any Partner to name
the Partnership or the other Partners a party defendant in any action or suit in
the exercise of the sole remedy
-6-
<PAGE>
permitted hereunder, so long as no judgment obtained by such Partner shall be
enforced other than as provided above.
Section 2.10 Restrictions on Developer. Developer shall have no right,
-------------------------
power or authority to act for or bind the Partnership, and shall take no part in
the conduct or control of the Partnership business.
Section 2.11 ERISA Protection. The Partners acknowledge that NELPP's
----------------
Interest is subject to compliance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). As a result, the Partnership may be
prohibited from transacting business with "parties in interest" (as defined in
ERISA) of employee benefit plans participating in NELPP. Accordingly,
notwithstanding any other provisions of this Agreement, no Partner shall
knowingly permit the Partnership to transact any business with such "parties in
interest," or knowingly undertake any action or fail to take any action which
would cause a violation of the provisions of ERISA as such are applicable to
NELPP or the Partnership.
ARTICLE 3
CAPITAL
-------
Section 3.1 Capital Accounts and Adjusted Capital Accounts.
----------------------------------------------
(a) A separate capital account ("Capital Account") shall be maintained for
each Partner and adjusted in accordance with Treasury Regulations under Section
704(b) of the Code. To the extent consistent with such Regulations, the
adjustments to such accounts shall include the following:
(i) There shall be credited to each Partner's Capital Account the
amount of any cash (which shall not include imputed or actual interest on
any deferred contributions) actually contributed by such Partner to the
capital of the Partnership (or deemed contributed pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(c)), the fair market value of any
property contributed by such Partner to the capital of the Partnership (net
of any liabilities secured by such property that the Partnership is
considered to assume or to take subject to under Code Section 752) and such
Partner's share of the Gross Income and Net Profits (and all items thereof)
of the Partnership. There shall be charged against each Partner's Capital
Account the amount of all cash distributions to such Partner by the
Partnership (or deemed distributed pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(c)), the fair market value of any property distributed to
such Partner by the Partnership (net of any
-7-
<PAGE>
liability secured by such property that the Partner is considered to assume
or take subject to under Code Section 752) and such Partner's share of the
Net Losses (and all items thereof) of the Partnership.
(ii) If the Partnership at any time distributes any of its assets in-
kind to any Partner, the Capital Account of each Partner shall be adjusted
to account for that Partner's allocable share (as determined under Article
7 below) of the Net Profit or Net Loss that would have been realized by the
Partnership had it sold the assets that were distributed at their
respective fair market values immediately prior to their distribution.
(iii) Any adjustments to the tax basis (or Book Value) of Partnership
property under Code Sections 732, 734 or 743, will be reflected as
adjustments to the Capital Accounts of the Partners, only in the manner and
to the extent provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
(b) An adjusted capital account ("Adjusted Capital Account") shall also be
maintained for each Partner, which shall be equal to such Partner's Capital
Account balance increased by (i) the Partner's Share of Partnership Minimum Gain
and (ii) the Partner's Share of Partner Nonrecourse Debt Minimum Gain.
(c) For purposes of Section 7.2(g) and (h) only, below, a Partner's
Adjusted Capital Account shall be reduced by the net adjustments, allocations
and distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
(4), (5) and (6) which, as of the end of the Partnership's taxable year are
reasonably expected to be made to such Partner, and shall be increased by the
sum of (i) any amount which the Partner is required to restore to the
Partnership upon liquidation of his or its interest in the Partnership (or which
is so treated pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c))
pursuant to the terms of this Agreement or under state law and (ii) that portion
of any indebtedness of the Partnership (other than Partner Nonrecourse Debt)
with respect to which the Partner bears the Economic Risk of Loss that such
indebtedness would not be repaid out of the Partnership's assets if all of the
Partnership's assets were sold at their respective Book Values as of the end of
the Fiscal Year or other period and the proceeds from the sales together with
any amounts described in clause (i) above were used to pay the Partnership's
liabilities.
(d) It is the intention of the Partners that the Capital Accounts of the
Partnership be maintained strictly in accordance with the Capital Account
maintenance requirements of Treasury Regulation Section 1.704-1(b). The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of
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<PAGE>
Capital Accounts are intended to comply with Treasury Regulation Section 1.704-
1(b), and shall be interpreted and applied in a manner consistent with such
Regulations and any amendment or successor provision thereto. The Partners also
shall make any appropriate modifications if unanticipated events might otherwise
cause this Agreement not to comply with Treasury Regulation Section 1.704-1(b).
Section 3.2 Capital Contributions.
---------------------
(a) Through the date of this Agreement, NELPP has contributed $18,776,920
to the capital of the Partnership (which amount includes $2,936,919 of
Guaranteed Payments which have accrued through the date hereof).
(b) Through the date of this Agreement, Developer has contributed $360,000
in cash to the capital of the Partnership.
Section 3.3 No Further Capital Contributions. The Partners shall not be
--------------------------------
permitted or required to contribute additional capital or loan any funds to the
Partnership, except as expressly provided in this Article 3, Article 5 and
Article 6 (Operating Deficits). Specifically, but not by way of limitation and
except as required by applicable state law, the Partners shall not be required
upon the liquidation and winding up of the Partnership, to contribute to the
capital of the Partnership the amount of the negative balance, if any, in their
respective Capital Accounts.
Section 3.4 Capital Contributions - General. No interest shall be paid on
-------------------------------
any capital contribution to the Partnership by any Partner. Except as
specifically provided herein, no Partner may contribute capital to, or withdraw
capital from, the Partnership. To the extent any cash which any Partner is
entitled to receive pursuant to Article 5 or any other provision of this
Agreement would constitute a return of capital, each of the Partners consents to
the withdrawal of such capital. Under circumstances requiring a return of any
capital, no Partner shall have the right to receive property other than cash.
ARTICLE 4
LOANS
-----
Section 4.1 Loans. The Partnership has not obtained and does not intends
-----
in the future to obtain, loans from any third party.
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ARTICLE 5
CASH DISTRIBUTIONS
------------------
5.1 Definitions.
-----------
Terms Definition
----- ----------
NELPP Invested Capital an amount equal to the aggregate amount of
capital NELPP has contributed to the capital
of the Partnership pursuant to Section 3.2
and Article 6 hereof decreased by the amount
---------
of proceeds distributed to NELPP pursuant to
clauses SECOND and THIRD of Section 5.2 and
clauses SECOND and THIRD of Section 5.3.
Developer Invested Capital an amount equal to the aggregate amount of
capital Developer has contributed to the
capital of the Partnership pursuant to
Section 3.2 hereof decreased by the amount of
---------
proceeds distributed to Developer pursuant to
clause SECOND of Section 5.2 and clause
SECOND of Section 5.3.
Project Expenses all expenditures, expenses and charges
relating to the ownership, operation,
construction, development, maintenance and
upkeep of the Project or any portion thereof
and the operations of the Partnership (other
than Monthly Guaranteed Payments and Accrued
Monthly Guaranteed Payments) including,
without limitation, the following:
- all taxes, assessments, ground rents and
other similar governmental and
quasi-governmental charges levied or
imposed on the Project or any portion
thereof;
- insurance premiums;
- maintenance and security expenses;
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- marketing, advertising and other
promotional expenses;
- utility costs;
- legal, accounting and other professional
fees and expenses, including without
limitation expenses incurred in preparing
the Partnership's tax returns;
- architects, engineers and surveyors' fees;
- cost of roads and utilities built and
installed on the Land, or any portion
thereof;
- other costs associated with the zoning,
subdivision and improvement of the Land,
or any portion thereof, into building
lots, whether incurred on or off the Land;
- development and management fees;
- payments of principal, interest and other
amounts due or accrued under any loans
obtained by the Partnership; and
- any and all other costs and expenses
included in an Annual Business Plan.
Operating Revenues as to any particular Fiscal Year or portion
thereof, the total cash receipts of the
Partnership (including amounts released from
or expended from the Working Capital Fund and
the Reserve for Replacements) other than (i)
----------
Extraordinary Cash Flow, (ii) any properly
unapplied advance rentals of the Partnership
in connection with the leasing of the Project
(which shall be Operating Revenues when
applied), and (iii) any unforfeited security
deposits of Project tenants.
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<PAGE>
Operating Cash Flow as to any particular Fiscal Year or portion
thereof, Operating Revenues of the
Partnership less the sum of the following:
----
- Project Expenses paid from Operating
Revenues; and
- a provision for a reasonable working
capital reserve and a reserve for future
Project Expenses in an amount established
by NELPP in its sole but reasonable
discretion (the "Working Capital Fund"),
and a reasonable reserve for replacement
of Partnership assets subject to
depreciation ("Reserve for Replacements")
in an amount established by NELPP in its
sole but reasonable discretion.
Capital Transaction the sale, exchange, condemnation (or similar
eminent domain taking or disposition in lieu
thereof), destruction by casualty,
refinancing or disposition of all or any
portion of the Project.
Extraordinary Cash Flow the cash proceeds (including any applicable
insurance proceeds) realized by the
Partnership as a result of a Capital
Transaction plus cash interest payments
----
received on such proceeds, decreased by the
---------
sum of the following:
- payments to creditors of debts then due
and payable;
- the amount of such proceeds used, set
aside or committed by the Partnership for
restoration and repair of the Project;
- a reserve in an amount established by
NELPP in its sole but reasonable
discretion, for (i) future Project
Expenses, (ii) future payments of Priority
Return Amounts, and (iii) future
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<PAGE>
repayments of capital contributions, and
(iv) contingent, unmatured or unforeseen
liabilities or obligations of the
Partnership; and
- any expenses, costs or liabilities
incurred by the Partnership in effecting
or obtaining any such Capital Transaction
or the proceeds thereof (including,
without limitation, attorneys' and
accountants' fees, court costs, brokerage
fees, commissions, recording fees,
transfer taxes, and the like), all of
which expenses, costs and liabilities
shall be paid from the gross amount of
such cash proceeds to the extent thereof.
Section 5.1.1 Guaranteed Payments. The Partnership shall make a
-------------------
monthly guaranteed payment to NELPP, within 10 days following the end of each
calendar month during the term of the Partnership ("Monthly Guaranteed
Payment"), in the amount of $121,125. Monthly Guaranteed Payments shall be paid
monthly in arrears commencing on the first day of the first full calendar month
following the date hereof and ending on the date on which NELPP's Invested
Capital shall have been reduced to zero. Monthly Guaranteed Payments shall be
made from Operating Cash Flow, Extraordinary Cash Flow and distributions in
liquidation as provided in Sections 5.2, 5.3 and 5.4. To the extent that, any
such payments cannot be made from such sources when due, such payments may
accrue, and such accruals shall bear interest at the rate of 9 % per annum,
compounded monthly, until paid. The amount of such unpaid Monthly Guaranteed
Payments and the interest accruing thereon is hereinafter referred to
collectively as "Accrued Monthly Guaranteed Payments." Accrued Monthly
Guaranteed Payments shall be payable out of Operating Cash Flow, Extraordinary
Cash Flow and distributions in liquidation as provided in Sections 5.2, 5.3 and
5.4. As of the date hereof, Accrued Monthly Guaranteed Payments payable to NELPP
equals zero.
It is intended that the Monthly Guaranteed Payments and Accrued Monthly
Guaranteed Payments described in this Section 5.1.1 shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, that they shall be
deducted as an expense of the Partnership (unless the Partners agree that such
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<PAGE>
expense should be amortized) and that their payment shall not directly reduce
the Capital Account of NELPP.
Section 5.2 Operating Cash Flow. Except as provided in Section 5.5 below,
-------------------
Operating Cash Flow shall be determined for each Fiscal Year, or fraction
thereof, and shall be distributed in the following order of priority:
FIRST: to NELPP in payment of any Monthly Guaranteed Payments then due
-----
and then any Accrued Monthly Guaranteed Payments;
SECOND: 60% to NELPP and 40% to Developer, until the Developer Invested
------
Capital is reduced to zero; and
THIRD: the balance, 100% to NELPP.
-----
Distributions of Operating Cash Flow shall be made provisionally at such
reasonable intervals during the Fiscal Year as shall be determined by NELPP, and
in any event shall be made on a monthly basis within 30 days after the last day
of each month. Following the end of each Fiscal Year, and at any time or from
time to time during any Fiscal Year if requested by either Partner (and after
determination of the actual amount of Operating Cash Flow for such Fiscal Year,
or the portion thereof which then shall have elapsed, as applicable), the above
provisional distributions of Operating Cash Flow to the Partners with respect to
such Fiscal Year or portion thereof shall be recomputed on the basis of the
actual amount of Operating Cash Flow. If the above provisional distributions
with respect to such Fiscal Year or portion thereof are greater than the
distributions thus recomputed for such Fiscal Year or portion thereof, then the
Partners shall recontribute to the Partnership in reverse order of the
priorities set forth above the amounts received by the Partners for such Fiscal
Year or portion thereof until all distributions of Operating Cash Flow for such
Fiscal Year or portion thereof shall be in conformance with this Section 5.2.
Further, if it is projected that the Partnership will not have sufficient
cash (from any source) to pay its obligations as they become due, for all or a
portion of the then Fiscal Year, and distributions of Operating Cash Flow
theretofore have been made with respect to such Fiscal Year, then the Partners
shall recontribute to the Partnership such distributions in reverse order of the
priorities set forth in this Section 5.2, until there has been recontributed to
the Partnership that aggregate amount which is equal to the lesser of the total
of such distributions previously made with respect to such Fiscal Year, or the
amount of such projected cash shortfall for such Fiscal Year. Any amounts so
recontributed shall be characterized in the same manner as they were originally
distributed so that, following such
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<PAGE>
recontribution, subsequent distributions to the Partners pursuant to any clause
of this Section shall be made in the same manner as if the original
distributions were never made. For example, to the extent the Partners are
required to recontribute distributions made pursuant to clause SECOND of this
Section, the amount of the Developer Invested Capital represented by Developer's
share of such distributions shall be deemed not to have been made for purpose of
calculating the Developer Invested Capital.
Any amounts previously set aside out of Operating Revenues as reserves
shall be additions to Operating Cash Flow when and to the extent NELPP no longer
regards such reserves as reasonably necessary to the efficient conduct of the
affairs of the Partnership.
Section 5.3 Extraordinary Cash Flow. Except as provided in Section 5.5
-----------------------
below, Extraordinary Cash Flow shall be distributed by the Partnership in the
following order of priority:
FIRST: to NELPP in payment of any Monthly Guaranteed Payments then due
-----
and then any Accrued Monthly Guaranteed Payments;
SECOND: 60% to NELPP and 40% to Developer, until the Developer Invested
------
Capital is reduced to zero; and
THIRD: the balance, 100% to NELPP.
-----
Section 5.4 Distributions in Liquidation. Distributions in connection
----------------------------
with the liquidation and winding up of the Partnership (including distributions
of Operating Cash Flow, Extraordinary Cash Flow) shall be made (after payment of
(i) the reasonable expenses incurred in dissolution and termination and payment
to creditors of the Partnership, but excluding secured creditors whose
obligations will be assumed or otherwise transferred on the liquidation of the
Partnership property or assets and (ii) Monthly Guaranteed Payments and Accrued
Monthly Guaranteed Payments) to the Partners in proportion to the positive
balances of their Capital Accounts after Capital Accounts have been adjusted for
the allocation of Net Profit and Net Loss (and items thereof) for the Fiscal
Year during which such liquidation occurs.
Section 5.5 In-Kind Distribution. If any assets of the Partnership are
--------------------
distributed to the Partners in kind, such assets shall be valued on the basis of
the fair market value thereof on the date of distribution, and any Partner
entitled to any interest in such assets shall receive such interest as a
tenant-in-common with all other Partners so entitled.
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<PAGE>
ARTICLE 6
OPERATING DEFICITS
------------------
Section 6.1 Deficit Contributions. If, at any time, Project Expenses
---------------------
exceed Operating Revenues, Extraordinary Cash Flow, and other funds available to
the Partnership (an "Operating Deficit"), then funds shall be withdrawn from the
Working Capital Fund as required and if available. If Operating Deficits cannot
be so funded, or if it reasonably appears that the Partnership will be unable to
meet in a timely manner any of its obligations as they mature, then NELPP may
elect, but shall not be required, to contribute all or any portion of the amount
so required to the capital of the Partnership.
ARTICLE 7
TAX ALLOCATIONS
---------------
Section 7.1 Definition of Net Profit and Net Loss. (a) "Net Profit" and
-------------------------------------
"Net Loss" shall mean, for each Fiscal Year or other period, an amount equal to
the Partnership's taxable income or loss for such Fiscal Year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) any income of the Partnership that is exempt from federal income
tax or not otherwise taken into account in computing Net Profit or Net Loss
pursuant to this Section 7.1 shall be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures under
Code Section 704(b) and not otherwise taken into account in computing Net
Profit or Net Loss pursuant to this Section 7.1, shall be subtracted from
such taxable income or loss;
(iii) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Book Value of
such property rather than its adjusted tax basis;
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<PAGE>
(iv) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing taxable income or
loss, there shall be taken into account depreciation on the assets'
respective Book Values for such Fiscal Year or other period determined in
accordance with Treasury Regulations under Code Section 704(b); and
(v) the amount of any Gross Income allocated to the Partners pursuant
to Section 7.2(a) and Sections 7.2(e), (f) and (i), below, shall not be
included as income or revenue.
(b) Definition of Net Profits or Net Losses From Capital Transactions.
-----------------------------------------------------------------
"Net Profits or Net Losses from Capital Transactions" shall mean for each Fiscal
Year or other period, the Net Profit or Net Loss for such Fiscal Year or other
period calculated solely by reference to gains and losses from Capital
Transactions.
(c) Definition of Net Profits or Net Losses From Operations. "Net Profits
-------------------------------------------------------
or Net Losses from Operations" shall mean for each Fiscal Year or other period,
the Net Profit or Net Loss for such Fiscal Year or other period calculated
without regard to Net Profits and Net Losses from Capital Transactions.
(d) Definition of Gross Income. "Gross Income" shall mean, for each
--------------------------
Fiscal Year or other period, an amount equal to the Partnership's gross income
as determined for federal income tax purposes for such Fiscal Year or period but
computed with the adjustments specified in Section 7.1(a)(i) and (iii), above.
(e) Definition of Gross Income from Operations. "Gross Income from
------------------------------------------
Operations" shall mean for each Fiscal Year or other period, the Gross Income
for such year calculated without regard to Gross Income attributable to Capital
Transactions.
Section 7.2 Allocation of Net Profit, Gross Income and Net Loss. The
---------------------------------------------------
Partners hereby agree that, the Net Profit, Gross Income and Net Loss of the
Partnership shall be allocated among them in accordance with this Section 7.2.
(a) Gross Income from Operations. Except as otherwise provided in this
----------------------------
Article 7, Gross Income from Operations, if any, of the Partnership (and each
item thereof) for each Fiscal Year or other period, in an amount equal to the
total amount distributed to Developer pursuant to Section 5.2 with respect to
such Fiscal Year or other period, shall be allocated to Developer.
(b) Net Profits From Operations and Capital Transactions. Except as
----------------------------------------------------
otherwise provided in this Article 7, Net Profit, if any, of the Partnership
(and each item thereof) for each Fiscal Year or other period shall be allocated
among the Partners as follows:
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<PAGE>
(i) All Net Profit from Operations of the Partnership shall be
allocated to NELPP.
(ii) Net Profit from Capital Transactions shall:
(x) first be allocated to the Partners in proportion to the
negative balances, if any, in their Adjusted Capital Accounts (after
adjusting such Adjusted Capital Accounts for allocations of any Gross
Income, Net Loss or Net Profit from Operations of the Partnership for
the Fiscal Year or other period) until such negative balances are
increased to zero, and
(y) thereafter, be allocated to the Partners in such proportions
and in such amounts as would result in the Adjusted Capital Account
balance of each Partner equaling, as nearly as possible, such
Partner's share of the then Partnership Capital determined by
calculating the amount the Partner would receive if an amount equal to
the Partnership Capital were distributed to the Partners in accordance
with the provisions of Section 5.3 hereof, other than clause FIRST
thereof.
(c) Net Losses From Operations and Capital Transactions. Except as
---------------------------------------------------
otherwise provided in this Article 7, Net Loss, if any, of the Partnership (and
each item thereof) for each Fiscal Year or other period shall be allocated as
follows:
(i) All Net Loss from Operations of the Partnership shall be
allocated to NELPP.
(ii) Net Loss from Capital Transactions shall:
(x) first be allocated to those Partners with positive
balances in their Adjusted Capital Accounts in amounts equal to
their respective Adjusted Capital Account balances; provided,
however, that if the amount of Net Loss to be allocated is less
than the sum of the Adjusted Capital Account balances of all
Partners having positive Adjusted Capital Account balances, then
the Net Loss shall be allocated to the Partners in such
proportions and in such amounts as would result in the Adjusted
Capital Account balance of each Partner equaling, as nearly as
possible, such Partner's share of the then Partnership Capital
determined by calculating the amount the Partner would receive if
an amount equal to the Partnership Capital were distributed to
the Partners in accordance with the provisions of Section 5.3
hereof, other than clause FIRST thereof; and
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<PAGE>
(y) thereafter, one hundred percent (100%) to NELPP.
(d) Liquidation. Subject to the provisions of Sections 7.2(e) through
-----------
(j), Gross Income, Net Profit and Net Loss incurred in the Fiscal Year in which
the Partnership is liquidated shall be allocated in accordance with the
provisions of Sections 7.2(b)(ii) and 7.2(c)(ii) without regard to whether such
Net Profit and Net Loss arises from a Capital Transaction, and Sections 7.2(a),
7.2(b)(i) and 7.2(c)(i) shall not apply.
(e) Minimum Gain Chargeback. Notwithstanding any other provision of this
-----------------------
Agreement to the contrary, if in any Fiscal Year or other period there is a net
decrease in the amount of Partnership Minimum Gain, then each Partner shall
first be allocated items of Gross Income for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net decrease
in Partnership Minimum Gain determined as set forth in the definition of
Partnership Minimum Gain; provided, however, that no such allocation of Gross
Income to a Partner shall occur in the following circumstances:
(i) If the net decrease in Partnership Minimum Gain is caused by
a modification of a Nonrecourse Liability and the Partner bears the
Economic Risk of Loss with respect to such modified liability;
(ii) If the net decrease in Partnership Minimum Gain is
attributable to a repayment of a Nonrecourse Liability with amounts
contributed to the capital of the Partnership by the Partner; and
(iii) If the allocation of Gross Income would cause a "distortion
in the economic arrangement among the Partners" and the Partnership receives
a waiver of the requirement that Gross Income be so allocated from the
Commissioner of the Internal Revenue Service pursuant to Treasury Regulation
Section 1.704-2(f)(4).
(f) Minimum Gain Chargeback for Partner Nonrecourse Debt.
----------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary other than
Section 7.2(e), above, if in any year there is a net decrease in the amount of
Partner Nonrecourse Debt Minimum Gain, then each Partner shall first be
allocated items of Gross Income for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's net decrease in Partner Nonrecourse
Debt Minimum Gain with respect to liabilities for which the Partner bears the
Economic Risk of Loss; provided, however, that no such allocation of Gross
Income to a Partner shall occur in the following circumstances:
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<PAGE>
(i) If the net decrease in Partner Nonrecourse Debt Minimum Gain
is caused by a modification of a Partner Nonrecourse Debt and the Partner
bears the Economic Risk of Loss with respect to such modified liability;
(ii) If the net decrease in Partner Nonrecourse Debt Minimum Gain
is attributable to a repayment of a Partner Nonrecourse Debt with amounts
contributed to the capital of the Partnership by the Partner;
(iii) In any circumstance described in clause (iii) of Section
7.2(e) hereof; and
(iv) If the net decrease in Partner Nonrecourse Debt Minimum Gain
is caused by a modification of a Partner Nonrecourse Debt that causes it to
become a Nonrecourse Liability.
(g) Nonrecourse Deductions. All Nonrecourse Deductions of the Partnership
----------------------
for any Fiscal Year or other period shall be allocated among the Partners in the
same manner and proportions as are Net Losses from Operations of the
Partnership.
(h) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
------------------------------
shall be allocated to the Partner who bears the Economic Risk of Loss with
respect to the Partner Nonrecourse Debt.
(i) Qualified Income Offset. Notwithstanding any of the provisions above
-----------------------
(except Sections 7.2(e) and (f) which shall be applied first), if in any Fiscal
Year or other period a Partner receives an adjustment, allocation or
distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6), Gross Income (and items thereof) shall first be allocated to
Partners with negative Adjusted Capital Account balances (adjusted in accordance
with Section 3.1(c) hereof), in proportion to such negative balances, until such
balances are increased to zero.
(j) Limit on Loss Allocations. Notwithstanding the provisions of Section
-------------------------
7.2(c), Net Loss (or items thereof) shall not be allocated to a Partner if such
allocation would cause or increase a negative balance in such Partner's Adjusted
Capital Account (adjusted in accordance with Section 3.1(c) hereof) and shall be
reallocated to the other Partner or Partners, subject to the limitations of this
Section 7.2(j).
(k) Reversal of Mandatory Allocations. In the event that any Net Profit
---------------------------------
or Net Loss, or items thereof, of the Partnership are allocated pursuant to
Sections 7.2(i) or (j), subsequent Net Profit or Net Loss (or items thereof)
will first be allocated (subject to Sections 7.2(e) through (j)) to the Partners
in a
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<PAGE>
manner which will result in each Partner having a Capital Account balance equal
to that which would have resulted had the original allocation of Net Profit or
Loss or items thereof pursuant to Sections 7.2(i) and (j) not occurred.
(l) Priority. For purposes of the allocations pursuant to this Article 7
--------
and except as otherwise provided, Sections 7.2(a) (Gross Income from Operations)
shall apply first, then Sections 7.2(b)(i) and 7.2(c)(i) (Net Profit or Loss
from Operations), and thereafter Sections 7.2(b)(ii) and 7.2(c)(ii) (Net Profit
or Loss from Capital Transactions). The allocation of Net Profit and Net Loss
from Capital Transactions shall be made before adjusting Capital Account
balances to reflect the distribution of proceeds from such Capital Transactions.
(m) Compliance with Code. The foregoing provisions of this Agreement
--------------------
relating to the allocation of Net Profit and Net Loss are intended to comply
with Treasury Regulations under Section 704(b) of the Code and shall be
interpreted and applied in a manner consistent with such regulations.
Section 7.3 Tax Allocations; Code Section 704(c). In accordance with Code
------------------------------------
Sections 704(b) and 704(c) and the Treasury Regulations thereunder,
depreciation, amortization, gain and loss, as determined for tax purposes, with
respect to any property whose Book Value differs from its adjusted basis for
federal income tax purposes shall, for tax purposes, be allocated among the
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes and its Book
Value.
Any elections or other decisions relating to such allocations shall be made
by the Partners in any manner that reasonably reflects the purpose and intention
of this Agreement. Allocations pursuant to this Section 7.3 are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Partner's Capital Account or share of
Net Profit, Net Loss, other items, or distributions pursuant to any provision of
this Agreement.
Section 7.4 Allocations Upon Transfer or Change of Interests. Upon a
------------------------------------------------
transfer of all or a portion of a Partner's Interest, Gross Income, Net Profits
and Net Losses shall be allocated among the Partners in accordance with the
provisions of Section 11.5.
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ARTICLE 8
ACCOUNTING AND RECORDS
----------------------
Section 8.1 Books and Records. NELPP shall cause Nevada Brokers, Inc. (an
-----------------
Affiliate of Developer), whom the Partnership has engaged to provide property
management services pursuant to a Property Management Agreement dated as of
January 1, 1994 (the "Property Management Agreement"), or any other party whom
the Partnership has engaged to provide property management services to the
Project (the "Property Manager"), to keep at the Partnership's principal office
separate books of account for the Partnership which shall show a true and
accurate record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with the
operation of the Partnership business in accordance with generally accepted
accounting principles consistently applied and sufficient to obtain an
unqualified opinion from the Accountants as to the Partnership's financial
position and results of operations. The Partnership shall use the accrual method
of accounting in preparation of its annual reports and for tax purposes and
shall keep its books accordingly. The expenses chargeable to the Partnership
shall include only those which are reasonable and necessary for the ordinary
operation of the Partnership business and the performance of the obligations of
the Partnership under any leases or other agreements relating to the Project or
the business of the Partnership.
Each Partner shall, at its sole expense, have the right, at any time
without notice to the other, to examine, copy and audit the Partnership's books
and records during normal business hours.
All books, records (including bills and invoices), reports and returns of
the Partnership required by this Article 8 shall be maintained in a manner and
form consistent with NELPP's methods and procedures of reporting investment
transactions.
Section 8.2 Reports. NELPP, at the expense of the Partnership, shall
-------
cause the Property Manager to prepare and distribute to NELPP the following
reports (within 25 days following the last day of each month or calendar
quarter, as the case may be):
- Monthly: an income statement
-------
- Quarterly: an income statement, balance sheet and statements of the
---------
Partnership's equity.
The above shall be prepared on the accrual basis and shall cover the
immediately preceding month or quarter, as the case
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<PAGE>
may be, plus the current Fiscal Year through the end of such preceding
month or quarter, as the case may be, on both an actual and year-to-date
budgeted basis.
- Other: such other financial statements, budgets, plans and schedules
-----
as are from time to time reasonably requested by NELPP.
Section 8.3 Annual Audit. Each Fiscal Year, a general accounting and
------------
audit shall be made by the Accountants at the expense of the Partnership. The
audit shall be conducted in accordance with generally accepted auditing
standards, and shall cover all of the assets, properties, liabilities and net
worth of the Partnership as well as its dealings, transactions and operations
during such Fiscal Year, together with all other matters customarily included in
such accounts and audits.
Within 60 days after the end of each Fiscal Year, NELPP shall cause the
Property Manager to furnish to each Partner audited financial statements,
prepared on an accrual basis and otherwise in accordance with generally accepted
accounting principles consistently applied, which shall contain a balance sheet
as of the end of the Fiscal Year, statements of profit and loss, and Operating
Cash Flow, changes in the Capital Accounts and a statement of changes in
financial position for the Fiscal Year then ended. Such financial statements
shall disclose and/or footnote, in sufficient detail, all items of taxable
income, gain, loss, or accounts which vary from the reporting of such items for
financial accounting purposes. The timing of the annual audit for each Fiscal
Year shall be such that the Accountants are in a position to render a conclusion
as to the probable fairness of presentation of the financial statements of the
Partnership for such Fiscal Year (which shall have been furnished pursuant to
the above provisions of this Section) by the 45th day following the close of the
Fiscal Year. Any exceptions to the audited statements rendered must be made by a
Partner within one year from its receipt and, if no exception is made within
that time, the statements shall be considered to be correct.
Section 8.4 Tax Returns. NELPP shall cause the Accountants to prepare all
-----------
income and other tax returns of the Partnership (on an accrual basis) and cause
the same to be filed in a timely manner. NELPP shall cause the Accountants to
furnish to each Partner a copy of each such return before it has been filed,
together with any schedules or other information which each Partner may require
in connection with such Partners' own tax affairs. Each of the Partners shall,
in its respective income tax return and other statements filed with the Internal
Revenue Service or other taxing authority, report taxable income in accordance
with the provisions of this Agreement.
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Section 8.5 Depreciation. The Partnership shall depreciate the
------------
Improvements on a straight-line basis over the shortest permissible recovery
period.
Section 8.6 Special Basis Adjustment. NELPP shall cause the Partnership,
------------------------
at the time and in the manner provided in Treasury Regulation Section 1.754-1(b)
(or any like statute or regulation then in effect), to make an election to
adjust the basis of the Partnership's property in the manner provided in
Sections 734(b) and 743(b) of the Code.
Section 8.7 Tax Matters Partner. NELPP shall be the party designated to
-------------------
receive all notices from the Internal Revenue Service ("IRS") which pertain to
the tax affairs of the Partnership and NELPP shall be entitled to require that
any IRS examinations or audits shall take place at the offices of Developer.
NELPP may engage in judicial or administrative proceedings. Except as otherwise
provided above, and unless and until the parties agree otherwise in writing,
NELPP shall be the "Tax Matters Partner" of the Partnership pursuant to the
Code.
Section 8.8 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year, unless otherwise approved by NELPP. As used in this Agreement, a
fiscal year shall include any partial fiscal year at the beginning and end of
the Partnership term.
Section 8.9 Bank Accounts. NELPP shall have fiduciary responsibility for
-------------
the safekeeping and use of all funds and assets of the Partnership. The funds of
the Partnership shall not be commingled with the funds of any other person and
NELPP shall not employ, or permit any other person to employ, such funds in any
manner except for the benefit of the Partnership.
The bank accounts of the Partnership shall be maintained in such banking
institutions as are selected by NELPP and withdrawals shall be made only in the
regular course of Partnership business and as otherwise authorized in this
Agreement on such signature or signatures as NELPP may determine.
ARTICLE 9
MANAGEMENT AND OPERATIONS
-------------------------
Section 9.1 Management. (a) Except as provided in Section 9.1(b) below,
----------
NELPP acting alone, and without the consent or approval of Developer, shall have
the sole authority to manage the business and operations of the Partnership.
NELPP shall devote itself to the business of the Partnership to the extent it
reasonably determines necessary for the efficient carrying on thereof, without
compensation therefor except as specifically
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provided in this Agreement; provided, however, that all of the Partners agree
and acknowledge that (a) NELPP shall not be required, nor is it expected, to
devote itself to the business of the Partnership on a full-time basis, (b) the
Project shall be managed and maintained by the Property Manager pursuant to the
Property Management Agreement, and NELPP may rely on the Manager to manage and
maintain the Project in a prudent and reasonable manner and shall have no
liability to the Partnership or the Partners with respect to any matter
delegated to the Property Manager under the Management Agreement and (c) NELPP
shall be permitted to delegate to a third party such other of its duties and
obligations under this Agreement as it may determine in its sole discretion, and
shall have no liability to the Partnership or the Partners with respect to any
matter so delegated.
Without in any manner limiting the foregoing, but subject to the provisions
of Section 9.1(b) below, NELPP shall be authorized, acting in the name and on
behalf of the Partnership, or in its own name and on its own behalf, as
appropriate, to take any of the following actions, and Developer shall have no
right to approve or disapprove such actions:
- giving or granting any options, rights of first refusal, deeds of
trust, mortgages, pledges, ground leases, security interests or
otherwise encumbering the Project or any portion thereof;
- obtaining, increasing, modifying, consolidating or extending any loan
or other obligation, whether secured or unsecured, affecting the
Project or the Partnership;
- consenting to any rezoning or subdivision of the Land or any other
material change in the legal status thereof;
- selling, conveying or refinancing all or any portion of the Project;
- releasing, compromising, assigning or transferring any material
claims, rights or benefits of the Partnership;
- confessing a judgment against the Partnership or submitting a
Partnership claim to arbitration;
- filing on behalf of the Partnership any Federal or state income tax or
information returns, or changing the elections or choices of methods
of reporting income or loss for Federal or state income tax purposes
provided for in Article 8;
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- spending money or entering into any contract or agreement of any
nature whatsoever with respect to the Partnership or the Project (or
any portion thereof);
- entering into any lease with respect to all or a portion of the space
in the Project;
- selecting attorneys or Accountants for the Partnership;
- granting easements or other property rights by documents that are
frequently recorded, except easements for utilities serving the
Project exclusively;
- entering into, amending, terminating, modifying, or giving any
approval under any management, construction or other contract to which
the Partnership is a party;
- changing or amending the plans or specifications for any building or
structure being constructed by the Partnership; or
- entering into any amendment, modification, revision, supplement or
rescission with respect to any of the foregoing.
(b) Notwithstanding the provisions of Section 9.1(a) or any other
provision of this Agreement, NELPP shall not, without the prior approval of
Developer:
(1) Obtain, increase, modify or consolidate any loan or other similar
obligation, whether secured or unsecured, affecting the Project or the
Partnership (a "Loan"), if, as a result of such action the lender shall
have personal recourse against the Developer in respect of the Loan,
provided, however, that the provisions of this Section 9.1(b)(1) shall not
prohibit the Partnership from obtaining (and NELPP may cause the
Partnership to obtain) without Developer's prior approval, a Loan that is
nonrecourse to the Partnership and the Partners, except for customary
exceptions, such as, by way of example but not limitation, for fraud, for
willful misconduct, and for environmental conditions arising at the
Project; or
(2) Enter into any partnership or joint venture agreement, if, as a
result of such action the partner or joint venturer of the Partnership
shall have personal recourse against the Developer in respect of such
agreement, provided, however, that the provisions of this Section 9.1(b)(2)
shall not prohibit the Partnership from entering into such an agreement
(and NELPP may cause the Partnership to enter into such an agreement)
without Developer's prior
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approval, if such agreement is nonrecourse to the Developer, except for
customary exceptions, such as, by way of example but not limitation, for
fraud or for willful misconduct.
(c) With respect to all of its obligations, powers, and responsibilities
under this Agreement, NELPP is authorized, in the name and on behalf of the
Partnership, to execute, deliver, and perform the terms, covenants and
obligations of, such notes and other evidences of indebtedness, contracts,
agreements, assignments, deeds, leases, loan agreements, mortgages, and other
security instruments and agreements as it deems proper, all on such terms and
conditions as it deems proper.
Section 9.2 Standard of Care. NELPP shall use reasonable efforts to
----------------
perform its duties under this Agreement, including, without limitation,
employing necessary personnel, on and off-site, in connection with the business
of the Partnership.
Section 9.3 Insurance. NELPP shall procure and maintain, or cause to be
---------
procured and maintained, at the expense of the Partnership, insurance sufficient
to enable the Partnership to comply with applicable laws, regulations and
requirements, including without limitation, obligations imposed on the Project
by the any documents relating to loan obtained by the Partnership, and any and
all other agreements and instruments by which the Project is bound, such
additional insurance as may be customary for projects of a similar type in the
geographic area in which the Project is located, and such additional insurance
as NELPP reasonably determines to be appropriate for the Project.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 10.1 Financial Advisory Fee. The Partnership paid to Charterhouse
----------------------
Investment Company in the amount of $124,000 for its services in connection with
advising the Partnership with regard to various financial matters involving the
Partnership. Except for Charterhouse Investment Company, the parties each
represent to the other that they have not retained or been approached by any
broker, finder, agent or the like in connection with the organization of the
Partnership or the negotiations relating thereto. Each party shall indemnify and
hold the other party hereto harmless from and against all loss, liabilities,
claims, damages and expenses, including court costs and reasonable attorneys'
fees, arising out of any claim for brokerage or other commissions relative to
the organization of the Partnership or the transactions contemplated hereby
insofar as any such claim arises by reason of services alleged to have been
rendered to or at the insistence of such indemnifying party.
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ARTICLE 11
TRANSFER OF INTERESTS
---------------------
Section 11.1 Restrictions on Transfer. Except as expressly provided for in
------------------------
this Agreement, no Partner may, without the consent of the other Partner, sell,
convey, transfer, assign, mortgage, pledge, hypothecate or otherwise encumber in
any way ("transfer") all or any portion of its Partnership Interest or any
interest it may have in any property of the Partnership, or withdraw or retire
from the Partnership. Any such attempted transfer, withdrawal or retirement not
permitted hereunder shall be null and void. A transfer of an interest in
Developer shall be deemed a transfer for the purpose of this Section 11.1.
Section 11.2 Right of First Refusal. If a Partner consents to a proposed
----------------------
transfer or the prohibitions contained in Section 11.1 are determined by a court
of competent jurisdiction to be unenforceable, then a Partner (the "Selling
Partner") desiring to transfer its Interest shall nevertheless notify ("Offering
Notice") the other of its intention to do so. The Offering Notice shall specify
the nature of the transfer, the consideration to be received therefor, the
identity of the proposed purchaser (or lender, as the case may be), and the
terms upon which it intends to undertake such transfer. The non-Selling Partner
shall have the right to elect to purchase from the Selling Partner all (but not
less than all) of the Interest referred to in the Offering Notice at the same
price and on the same terms as specified in the Offering Notice for a period of
30 days after the giving of the Offering Notice (or make the loan, if the same
involves an encumbrance, hypothecation or mortgage, upon the same terms on which
said loan was to be made therefor) by delivering in writing to the Selling
Partner an offer to purchase (or loan) that portion of the Interest of the
Selling Partner covered by the Offering Notice. Within 45 days thereafter, the
purchase by the non-Selling Partner of said Interest shall be consummated on the
terms and conditions set forth in the Offering Notice of the Selling Partner (or
if the same involves a mortgage, encumbrance or other hypothecation, the loan
shall be consummated upon the terms and conditions of the loan set forth in the
Offering Notice).
If within the 30-day period during which the non-Selling Partner has the
right to elect to purchase the Selling Partner's Interest (or to elect to make
the loan specified therein), it does not make such election, then the Selling
Partner, within 60 days after the expiration of said 30-day period, or within
the time scheduled for closing by the purchasing person, firm or corporation,
whichever is later, may undertake and complete the transfer to any Person the
identity of which was disclosed in the Offering Notice. The transfer shall not
be undertaken at a lower price or upon more favorable terms than specified in
the Offering
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Notice. If the Selling Partner does not then consummate the original proposed
transfer within 60 days after the date of the Offering Notice, or within the
time scheduled for closing by the purchasing person, firm or corporation,
whichever is later, then all restrictions of this Section 11.2 shall apply as
though no Offering Notice had been given.
Section 11.3 Permitted Transfers.
-------------------
(a) NELPP, without the consent of Developer, or being subject to Section
11.2, may:
- transfer all of its Interest to its successors by merger or
consolidation or to an Affiliate of NELPP, or to any entity managed by
Copley Real Estate Advisors, Inc. or any Affiliate of Copley Real
Estate Advisors, Inc.;
- transfer to any Person any portion of its allocable interest in the
items of loss, deduction and credit of the Partnership (on the
condition that NELPP never shall have less than 1% interest in such
items); or
- assign its rights to all cash distributions and other issues, profits,
proceeds and avails payable to it under this Agreement in connection
with any loans or financing arrangements obtained by it from time to
time.
Any such permitted transferee shall receive and hold such Partnership Interest
or portion thereof subject to the terms of this Agreement and the obligations of
the transferor Partner, and there shall be no further transfer of such
Partnership Interest or portion thereof except to a trust, person or entity to
whom such permitted transferee could have transferred his Partnership Interest
in accordance with this Section 11.3 had such permitted transferee originally
been named as a Partner, or otherwise in accordance with the other terms of this
Agreement.
In the event that NELPP proposes to transfer to any third party (other than
a permitted transferee, as described above), all or substantially all of its
Interest, it shall use commercially reasonable efforts to cause such permitted
transferee to offer to acquire at the same time and on the same terms, a
proportionate share of the Interest of the Developer in the Partnership.
Section 11.4 General Transfer Provisions. All transfers shall be by
---------------------------
instrument in form and substance satisfactory to counsel for the Partnership and
shall contain an expression by the assignee of its intention to accept the
assignment and to accept and adopt all of the terms and provisions of this
Agreement, as the same may have been amended, and shall provide for the payment
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<PAGE>
by the assignor of all reasonable expenses incurred by the Partnership in
connection with such assignment, including, without limitation, the necessary
amendments to this Agreement to reflect such transfer. The transferor shall
execute and acknowledge all such instruments, in form and substance reasonably
satisfactory to the Partnership's counsel, as may be necessary or desirable to
effectuate such transfer.
In no event shall the Partnership dissolve or terminate upon the admission
of any Partner to the Partnership or upon any permitted assignment of an
interest in the Partnership by any Partner. Each Partner hereby waives its right
to dissolve, liquidate or terminate the Partnership in such event.
Upon completion of a transfer in compliance with this Agreement, the
transferor shall be released from all future obligations arising under this
Agreement after the date of such transfer provided the assignee of such
--------
transferor assumes all such obligations of the transferor. However, the
transferor shall remain liable for its obligations under this Agreement
(including NELPP's obligation to make capital contributions pursuant to Section
3.2) occurring on or prior to the date of such transfer.
Section 11.5 Tax Allocations and Cash Distributions. If an Interest is
--------------------------------------
transferred, the Gross Income, Net Profit or Loss allocable, and cash
distributable, to the holder of such Interest for the then Fiscal Year shall be
allocated and distributed based on a method consistent with Section 706(d) of
the Code. However, if such parties agree that such Net Profit or Loss and cash
are to be allocated and distributed based upon an interim closing of the
Partnership books, and such parties agree to pay all expenses incurred by the
Partnership in connection therewith and so notify the non-transferring Partner,
then all such Net Profit or Loss and cash shall be allocated and distributed
between the transferor and transferee based upon an interim closing of the
Partnership's books and records. In no event, however, shall Extraordinary Cash
Flow or Net Profit or Loss arising from a Capital Transaction be distributed and
allocated to any Partner other than the Partners owning Interests as of the date
of the Capital Transaction in question.
Section 11.6 Compliance. Notwithstanding anything to the contrary in this
----------
Agreement, at law or in equity, no Partner shall transfer or otherwise deal with
any Interest in a way that would cause a default under any material agreement to
which the Partnership is a party or by which it is bound.
Section 11.7 Waiver of Partition. Neither Partner shall, either directly
-------------------
or indirectly, take any action to require partition or appraisal of the
Partnership or of any of its assets or properties or cause the sale of any
Partnership property, and
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<PAGE>
notwithstanding any provisions of applicable law to the contrary, each Partner
(and its legal representatives, successors or assigns) hereby irrevocably waives
any and all right to maintain any action for partition or to compel any sale
with respect to his Interest, or with respect to any assets or properties of the
Partnership, except as expressly provided in this Agreement.
Section 11.8 Option to Acquire Interest of Developer. At any time after
---------------------------------------
the date on which the Developer Invested Capital has been reduced to zero, NELPP
(or its designee) shall have the option to purchase, for $1.00, the entire
right, title and interest of Developer in the Partnership. Such option shall be
exercisable at any time by NELPP, effective upon written notice of exercise to
the Developer. Promptly following the exercise of such option, Developer and
NELPP shall execute and deliver an amendment to this Agreement, an assignment
and assumption agreement, statements of partnership, and/or such other
agreements, instruments, documents, certificates and filings shall may be
necessary, appropriate or convenient in order to reflect the transfer of
Developer's interest to NELPP.
Developer hereby constitutes and appoints NELPP, and each general partner
of NELPP, Developer's agent and attorney-in-fact for the purpose of (i)
executing, delivering and filing such amendments, assignments, statements of
partnership, agreements, certificates and other instruments as said
attorney-in-fact shall deem necessary or appropriate in order to transfer the
interest of Developer in the Partnership to NELPP following exercise by NELPP of
the option contained in this Section 11.8. The power of attorney contained in
this Section 11.8 is coupled with an interest and, therefore, is irrevocable and
shall survive the death, dissolution, bankruptcy or incapacity of Developer.
Any transfer effectuated pursuant to this Section 11.8 shall not be subject
to the provisions of Sections 11.1 and 11.2.
ARTICLE 12
BUY/SELL
--------
Section 12.1 Buy/Sell Events. For purposes of this Article 12, each of
---------------
the following shall constitute a "Buy/Sell Event":
- if an Event of Bankruptcy with respect to a Partner occurs which is
not discharged or stayed within a period of 90 days of its occurrence;
- the Incapacity of a Partner;
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Section 12.2 Rights Arising from a Buy/Sell Event. When a Buy/Sell Event
------------------------------------
occurs with respect to a Partner (the "Defaulting Partner"), the other Partner
(the "Electing Partner") shall have the right, but not the obligation, to
implement the Buy/Sell procedures set forth in this Article 12, by giving
written notice within 120 days of the Buy/Sell Event ("Election Notice") thereof
to the Defaulting Partner.
Section 12.3 Determination of Fair Market Value. Upon the giving of an
----------------------------------
Election Notice, NELPP, acting in good faith, shall determine the "Fair Market
Value" of the assets of the Partnership based on the most recent third party
appraisal of the Project obtained by NELPP in connection with its year-end
valuation of its assets.
Section 12.4 Determination of Purchase Price. Within 15 days after the
-------------------------------
determination of the Fair Market Value of the assets of the Partnership, the
Accountants shall determine the amount of cash which would be distributed to
each Partner pursuant to the provisions of each of clauses FIRST through THIRD
of Section 5.3 if the assets of the Partnership had been sold for the Fair
Market Value as of the date of the Buy/Sell Event and shall give each Partner
written notice ("Accountant's Notice") thereof. The determination by the
Accountant of such amounts shall be conclusive.
Section 12.5 Electing Partner's Option. If the Electing Partner is NELPP,
-------------------------
for a period of 30 days after the Electing Partner receives the Accountant's
Notice, the Electing Partner shall have the option to purchase, exercisable by
notice to Developer, for cash, the Interest of Developer for 100% of the
aggregate amount which would be distributable to Developer under clause SECOND
of Section 5.3 if the assets of the Partnership had been sold for the Fair
Market Value as of the date of the Buy/Sell Event (the "Purchase Price"). If the
Electing Partner is Developer, the Electing Partner shall have the option to
purchase, exercisable by notice to NELPP, for cash, the Interest of NELPP for
100% of the aggregate amount which would be distributable to NELPP under clauses
FIRST through THIRD of Section 5.3 if the assets of the Partnership had been
sold for the their fair market value on the date of the Buy/Sell Event (the
"Purchase Price").
If the foregoing options are not so exercised, then they shall terminate
and be of no further force or effect.
Section 12.6 Closing of Purchase and Sale. The closing of a purchase
----------------------------
pursuant to this Article 12 shall be held at the principal office of the
Partnership 30 days after the Electing Partner exercises its option under
Section 12.5. The Defaulting Partner (the seller) shall transfer to the Electing
Partner (the buyer or its designee) the entire Interest of the Defaulting
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Partner in the Partnership free and clear of all liens, security interests and
competing claims, and shall deliver to the Electing Partner or its designee such
instruments of transfer, releases and such evidence of due authorization,
execution and delivery and of the absence of any liens, security interests or
competing claims as the Electing Partner shall reasonably request.
Section 12.7 Payment. At the closing, the Electing Partner or its
-------
designee shall pay the Purchase Price by delivery at the closing of a certified
or bank cashier's check payable to the order of the Defaulting Partner in the
amount of the Purchase Price determined pursuant to clause 12.5.
Section 12.8 Liabilities. The purchase of the Interest of a Defaulting
-----------
Partner pursuant to this Article 12 shall release the Defaulting Partner (and
the purchasing Partner shall indemnify and hold harmless the Defaulting Partner)
from all liabilities and claimed liabilities of the Partnership except for
liabilities not taken into account in the determination of Purchase Price and
tort liabilities not covered by insurance for events occurring prior to the
Defaulting Partners' withdrawal from the Partnership.
ARTICLE 13
TERMINATION OF THE PARTNERSHIP
------------------------------
Section 13.1 Events of Dissolution. The Partnership shall dissolve upon
---------------------
the first to occur of the following events:
- the expiration of the term of the Partnership as provided in Section
1.9;
- on a date determined by NELPP;
- the sale or other disposition (including, without limitation, taking
by eminent domain) of all or substantially all of the assets of the
Partnership unless such sale or other disposition involves any
deferred payment of the consideration for such sale or disposition, in
which case the Partnership shall not dissolve until the last day of
the calendar year during which the Partnership shall receive the
balance of such deferred payment;
- the occurrence of an Event of Bankruptcy of the which is not
discharged or stayed within 90 days of occurrence;
- the issuance of a decree of dissolution by a court of competent
jurisdiction; and
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- upon the occurrence of an event which causes the dissolution of a
general partnership as provided in the Act, unless the Partnership is
continued pursuant to a right to do so contained herein or pursuant to
the Act.
Section 13.2 Effect of Dissolution. Upon dissolution of the Partnership
---------------------
pursuant to Section 13.1, the Partnership shall not terminate but shall continue
solely for the purposes of liquidating all of the assets owned by the
Partnership (until all such assets have been sold or liquidated) and collecting
the proceeds from such sales and all receivables of the Partnership unless the
same have been written off as uncollectible. Upon dissolution, the Partnership
shall engage in no further business thereafter other than that necessary to
cause the Project to be operated on an interim basis and for the Partnership to
collect its receivables, liquidate its assets and pay or discharge its
liabilities.
Section 13.3 Sale of Assets by Liquidating Trustee. Upon dissolution of
-------------------------------------
the Partnership, NELPP (or its designee) shall, as "Liquidating Trustee",
proceed diligently to wind up the affairs of the Partnership. Another person may
be selected by NELPP to succeed the original Liquidating Trustee, or to succeed
any subsequently selected successor, whenever the person originally selected or
any such subsequently selected successor, as the case may be, fails for any
reason to carry out such purpose. The Liquidating Trustee may be an individual,
corporation or general or limited partnership.
All of the assets of the Partnership, if any, other than cash, shall be
offered (either as an entirety or on an asset-by-asset basis) promptly for sale,
upon such terms as the Liquidating Trustee shall determine.
The Partners and their Affiliates shall have the right to negotiate or bid
for any or all of the assets being offered for sale from and after such date as
is 90 days after the Partnership dissolves, but not before such date.
Subject only to the Partners' rights to match offers below, the decision to
accept or reject an offer to purchase assets of the Partnership (a "Purchase
Offer") shall be made solely by the Liquidating Trustee. Within five days of
receipt of any Purchase Offer by the Liquidating Trustee, the Liquidating
Trustee shall notify each Partner of the terms of such Purchase Offer.
Each Partner shall have the right to match each Purchase Offer and upon so
matching, shall have the right and duty to purchase in accordance with all of
the terms of the Purchase Offer, provided, however;
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- the right to match shall be exercised and shall be effective only if
exercised by written notice of exercise delivered by the exercisor to
the Liquidating Trustee and the other Partner within 30 days of the
date of the notice of the Purchase Offer provided by the Liquidating
Trustee to the Partners (the "Notice Date"); and
- if both Partners make timely exercise of the right to match neither
exercise shall be effective but instead, on the thirtieth day after
the Notice Date, each Partner shall by sealed bid deliver to the other
Partner (the bids to be simultaneously exchanged) an offer to purchase
the asset or assets to which the Purchase Offer relates. Any such
offer shall be on terms substantially similar to those contained in
the Purchase Offer, except for the purchase price specified therein.
On such date, the sealed bids shall be opened and the Partner who
shall have made the higher offer shall have the right to purchase the
assets in accordance with such offer.
In winding up the affairs of the Partnership, the Liquidating Trustee shall
pay the liabilities of the Partnership in such order of priority as provided by
law. If at the time of dissolution the completion of all buildings then under
construction on the Land has not occurred, the Liquidating Trustee, in winding
up the affairs of the Partnership, shall have the authority, but not the
obligation, to complete the construction of the buildings.
All distributions of cash in winding up the affairs of the Partnership
shall be made in accordance with the provisions of Section 5.5.
ARTICLE 14
MISCELLANEOUS
-------------
Section 14.1 Notices. All notices required or permitted by this Agreement
-------
shall be in writing and may be delivered in person to either party or may be
sent by registered or certified mail, with postage prepaid, return receipt
requested or federal express (or other reputable overnight courier), or may be
transmitted by
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telegraph or facsimile telecopy, and addressed in the case of NELPP to:
c/o Copley Real Estate Advisors, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
Re: Rancho Road Associates
Telecopy Number: (617) 578-1728
and in the case of Developer to:
B.H. Miller Companies
One Brookhollow Drive
Santa Ana, California 92705
Attention: Mr. Bradford H. Miller
Telecopy Number: (714) 641-3877
or to such other address as shall from time to time be supplied in writing by
any party to the other. Notice sent by registered or certified mail, postage
prepaid, with return receipt requested, addressed as above provided, shall be
deemed given four days after deposit of same in the United States mail. Notice
sent by federal express or facsimile telecopy shall be deemed given one business
day after sent. If any notice is telegraphed the same shall be deemed served or
delivered 48 hours after the transmission thereof. Any notice or other document
sent or delivered in any other manner shall be effective only if and when
received.
Section 14.2 Successors and Assigns. Subject to the restrictions on
----------------------
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representative, successors and
assigns.
Section 14.3 No Oral Modifications; Amendments. No oral amendment of this
---------------------------------
Agreement shall be binding on the Partners. Any modification or amendment of
this Agreement must be in writing signed by all of the Partners.
Section 14.4 Captions. Any article, section or paragraph titles or
--------
captions contained in this Agreement and the table of contents are for
convenience of reference only and shall not be deemed a part of this Agreement.
Section 14.5 Terms. Common nouns and pronouns shall be deemed to refer to
-----
the masculine, feminine, neuter, singular and plural, as the identity of the
Person or Entity may in the context require. Any references to the Code, Act or
other statutes or laws shall include all amendments, modifications or
replacements of the specific sections and provisions concerned.
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Section 14.6 Invalidity. If any provision of this Agreement shall be held
----------
invalid, it shall not affect in any respect whatsoever the validity of the
remainder of this Agreement.
Section 14.7 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument, binding on the
Partners, and the signature of any party to any counterpart shall be deemed a
signature to, and may be appended to, any other counterpart.
Section 14.8 Further Assurances. The parties hereto agree that they will
------------------
cooperate with each other and will execute and deliver, or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from time to time in order to
effectuate the provisions and purposes hereof.
Section 14.9 Complete Agreement. This Agreement constitutes the complete
------------------
and exclusive statement of the agreement between the Partners. It supersedes all
prior written and oral statements and no representation, statement, condition or
warranty not contained in this Agreement shall be binding on the Partners or
have any force or effect whatsoever.
Section 14.10 Attorneys' Fees. If any proceeding is brought by one
---------------
Partner against the other to enforce, or for breach of, any of the provisions in
this Agreement, the prevailing Partner shall be entitled in such proceeding to
recover reasonable attorneys' fees together with the costs of such proceeding
therein incurred.
Section 14.11 Governing Law. This Agreement shall be construed and
-------------
enforced in accordance with the laws of the State of Nevada.
Section 14.12 No Third Party Beneficiary. Any agreement to pay any amount
--------------------------
and any assumption of liability herein contained, express or implied, shall be
only for the benefit of the Partners and their respective heirs, successors and
assigns, and such agreements and assumption shall not inure to the benefit of
the obligees of any indebtedness or any other party, whomsoever, it being the
intention of the Partners that no one shall be deemed to be a third party
beneficiary of this Agreement.
Section 14.13 Exhibits and Glossary. Each of the Exhibits and the
---------------------
Glossary attached hereto are hereby incorporated herein and made a part hereof
for all purposes, and references herein thereto shall be deemed to include this
reference and incorporation.
-37-
<PAGE>
Section 14.14 Estoppels. Each Partner shall, upon not less than 15 days'
---------
written notice from the other Partner, execute and deliver to the other Partner
a statement certifying that this Agreement is unmodified and in full force and
effect (or, if modified, the nature of the modification) and whether or not
there are, to such Partner's knowledge, any uncured defaults on the part of the
other Partner, specifying such defaults if any are claimed. Any such statement
may be relied upon by third parties.
Section 14.15 References to this Agreement. Numbered or lettered
----------------------------
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated. The words
"herein," "hereof," "hereunder," "hereby," "this Agreement" and other similar
references shall be construed to mean and include this Partnership Agreement and
all amendments thereof and supplements thereto unless the context shall clearly
indicate or require otherwise.
Section 14.16 Reliance on Authority of Person Signing Agreement. If a
-------------------------------------------------
Partner is a trust (with or without disclosed beneficiaries), general
partnership, limited partnership, joint venture, corporation, or any entity
other than a natural person, the Partnership and the Partners shall:
- not be required to determine the authority of the person signing this
Agreement to make any commitment or under-taking on behalf of such
entity or to determine any fact or circumstance bearing upon the
existence of the authority of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such
person;
- not be required to see to the application or distribution of proceeds
paid or credited to persons signing this Agreement on behalf of such
entity;
- be entitled to rely on the authority of the person signing this
Agreement with respect to the voting of the Interest of such entity
and with respect to the giving of consent on behalf of such entity in
connection with any matter for which consent is permitted or required
under this Agreement; and
- be entitled to rely upon the authority of any general partner, joint
venturer, co- or successor trustee, or president or vice president, as
the case may be, of any such entity the same as if such person were
the person originally signing this Agreement on behalf of such entity.
-38-
<PAGE>
Section 14.17 Consents and Approvals. Whenever the consent or approval of
----------------------
a Partner is required by this Agreement, such Partner shall have the right to
give or withhold such consent or approval in its sole discretion, unless
otherwise specified.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
NEW ENGLAND LIFE PENSION PROPERTIES IV; A
REAL ESTATE LIMITED PARTNERSHIP, a
Massachusetts limited partnership
By: FOURTH COPLEY CORP., a Massachusetts
corporation, its general partner
By____________________________
Authorized Officer
COMMERCE CENTRE PARTNERS, a California
general partnership
By_________________________________
Bradford H. Miller, General Partner
-39-
<PAGE>
RANCHO ROAD ASSOCIATES
EXHIBIT A
LEGAL DESCRIPTION OF LAND
-------------------------
<PAGE>
GLOSSARY OF DEFINED TERMS
RANCHO ROAD ASSOCIATES
Capitalized terms used in the General Partnership Agreement of the
Partnership shall have the meanings ascribed to them below:
Accountants means Deloitte & Touche or such other firm of nationally-
-----------
recognized independent certified public accountants as may be selected by NELPP.
Accountant's Notice shall have the meaning set forth in Section 12.5.
-------------------
Accrued Monthly Guaranteed Payment shall have the meaning set forth in
----------------------------------
Section 5.1.1.
Act means the Uniform Partnership Act as from time to time in force in the
---
State of Nevada.
Adjusted Capital Account shall have the meaning set forth in Section
------------------------
3.1(b).
Affiliate means a Person that directly or indirectly, through one or more
---------
intermediaries, controls, is controlled by, or is under common control with the
person in question and any officer, director, trustee, employee, stockholder
(10% or more) or partner of any Person referred to in the preceding clause. For
purposes of this definition, the term "control" means the ownership of 10% or
more of the beneficial interest or the voting power of the appropriate Entity.
Notwithstanding the foregoing, a person shall not be considered an affiliate of
NELPP or Developer solely by reason of the fact that such person is engaged in
one or more real estate projects with NELPP or Developer on a joint venture
basis.
Book Value means, with respect to any asset, the asset's adjusted basis for
----------
federal income tax purposes, except as follows:
(i) the initial Book Value of any asset contributed (or deemed
contributed) to the Partnership shall be such asset's gross fair market
value at the time of such contribution;
(ii) the Book Value of all Partnership assets shall be adjusted to equal
their respective gross fair market values at the times specified in
Treasury Regulation Section 1.704-1(b)(2)(iv)(f) if the Partnership so
elects;
(iii) if the adjusted basis of any asset acquired by the Partnership is
determined by reference to the adjusted basis of any other asset of the
Partnership, the Book Value of the acquired asset shall be determined by
reference to the Book Value of the other asset rather than its adjusted
basis; and
<PAGE>
(iv) if the Book Value of an asset has been determined pursuant to clause
(i), (ii) or (iii), such Book Value shall thereafter be adjusted in the
same manner as would the asset's adjusted basis for federal income tax
purposes except that depreciation deductions shall be computed in
accordance with Section 7.1(a)(iv).
Buy/Sell Event shall have the meaning set forth in Section 12.1.
--------------
Capital Account shall have the meaning set forth in Section 3.1(a).
---------------
Capital Transaction shall have the meaning set forth in Section 5.1.
-------------------
Code means the Internal Revenue Code of 1986, as amended from time to time,
----
and all published rules, rulings and regulations thereunder at the time of
reference thereto.
Defaulting Partner shall have the meaning set forth in Section 12.2.
------------------
Developer shall have the meaning set forth in the Recital.
---------
Developer Invested Capital shall have the meaning set forth in Section 5.1.
--------------------------
Economic Risk of Loss means the risk as determined under Treasury
---------------------
Regulation Section 1.752-2 that a partner or person related to a partner will
suffer an economic loss as a result of the failure of the partnership to repay a
liability.
Electing Partner shall have the meaning set forth in Section 12.2.
----------------
Election Notice shall have the meaning set forth in Section 12.2.
---------------
Entity means any general partnership, limited partnership, corporation,
------
joint venture, trust, business trust, cooperative or association.
ERISA shall have the meaning set forth in Section 2.11.
-----
Event of Bankruptcy means, as to the Partnership or a Partner, (1) filing a
-------------------
voluntary petition in bankruptcy or for reorganization or for the adoption of an
arrangement under the Federal Bankruptcy Code (as now or in the future amended)
or an admission seeking the relief therein provided; (2) making a general
assignment for the benefit of its creditors; (3) consenting to the appointment
of a receiver for all or a substantial part of its property; (4) in the case of
the filing of an involuntary petition in bankruptcy, an entry of an order for
-2-
<PAGE>
relief; (5) the entry of a court order appointing a receiver or trustee for all
or a substantial part of its property without its consent; or (6) the assumption
of custody or sequestration by a court of competent jurisdiction of all or
substantially all of its property.
Extraordinary Cash Flow shall have the meaning set forth in Section 5.1.
-----------------------
Fair Market Value shall have the meaning set forth in Section 12.3.
-----------------
Fiscal Year shall have the meaning set forth in Section 8.8.
-----------
Gross Income shall have the meaning set forth in Section 7.1.
------------
Improvements means the buildings and other improvements constructed on the
------------
Land by the Partnership.
Incapacity means for a Partner or an Entity which is the general partner of
----------
a Partner, the dissolution, liquidation or termination (but not including a
termination under Section 708(b)(1)(B) or Section 708(b)(2)(A) of the Code) of
such Partner or Entity.
Indemnitor shall have the meaning set forth in Section 2.8.
----------
Interest means the entire ownership interest (which may be segmented into
--------
and/or expressed as a percentage of various rights and/or liabilities) of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Partner
to comply with all the terms and provisions of this Agreement and of the Act.
IRS means the Internal Revenue Service.
---
Land means the approximately 14.08-acre parcel of land zoned for commercial
----
use which is located in the County of Clark, State of Nevada, as more
particularly described in Exhibit A to this Agreement.
Liquidating Trustee shall have the meaning set forth in Section 13.3.
-------------------
Monthly Guaranteed Payment shall have the meaning set forth in Section
--------------------------
5.1.1.
NELPP shall have the meaning set forth in the Recital.
-----
NELPP Invested Capital shall have the meaning set forth in Section 5.1.
----------------------
-3-
<PAGE>
Net Profit and Net Loss shall have the meanings set forth in Section 7.1.
---------- --------
Nonrecourse Deductions for a Fiscal Year (or other period) means deductions
----------------------
funded by Nonrecourse Liabilities (as determined under Treasury Regulation
Section 1.704-2(c)) for such year and are generally equal to the excess, if any,
of (i) the net increase in Partnership Minimum Gain during such year over (ii)
the sum of (A) the aggregate distributions of proceeds from Nonrecourse
Liabilities attributable to increases in Partnership Minimum Gain during such
year and (B) increases in Partnership Minimum Gain during such year attributable
to conversions of liabilities into Nonrecourse Liabilities.
Nonrecourse Liability means any liability of a partnership (or portion
---------------------
thereof) to the extent that no partner bears the Economic Risk of Loss
associated with the liability.
Notice Date shall have the meaning set forth in Section 13.3.
-----------
Offering Notice shall have the meaning set forth in Section 11.2.
---------------
Operating Cash Flow shall have the meaning set forth in Section 5.1.
-------------------
Operating Deficit shall have the meaning set forth in Section 6.1.
-----------------
Operating Revenues shall have the meaning set forth in Section 5.1.
------------------
Original Agreement shall have the meaning set forth in the Recital.
------------------
Partner means NELPP and Developer, and such successors, assigns or
-------
additional joint venturers as may be admitted to the Partnership, from time to
time, pursuant to the terms of this Agreement.
Partner Nonrecourse Debt means any partnership liability to the extent that
------------------------
the liability is nonrecourse for purposes of Treasury Regulation Section
1.1001-2 and a partner bears the Economic Risk of Loss associated with the
liability.
Partner Nonrecourse Debt Minimum Gain means the amount that would result if
------------------------
Partnership Minimum Gain were computed with respect to Partner Nonrecourse Debt
rather than Nonrecourse Liabilities.
Partner Nonrecourse Deductions means deductions funded from Partner
------------------------------
Nonrecourse Debt (as determined under Treasury Regulation Section 1.704-2(i)(2))
computed for a Fiscal Year (or other period) in a manner similar to that used in
computing Nonrecourse
-4-
<PAGE>
Deductions but with reference to Partner Nonrecourse Debt Minimum Gain rather
than Partnership Minimum Gain.
Partner's Share of Partner Nonrecourse Debt Minimum Gain means an amount of
--------------------------------------------------------
Partner Nonrecourse Debt Minimum Gain computed for each Partner in a manner
similar to that used in computing a Partner's Share of Partnership Minimum Gain
but with reference to Partner Nonrecourse Debt with respect to which the Partner
bears the Economic Risk of Loss rather than to Nonrecourse Liabilities.
Partner's Share of Partnership Minimum Gain means an amount of Partnership
-------------------------------------------
Minimum Gain computed for each Partner under Treasury Regulation Section
1.704-2(g) and generally equal to the excess of (i) the sum of (A) the aggregate
amount of Nonrecourse Deductions previously allocated to the Partner, (B) the
aggregate amount of proceeds of Nonrecourse Liabilities attributable to
increases in Partnership Minimum Gain previously distributed to the Partner and
(C) increases in Partnership Minimum Gain during such Fiscal Year attributable
to conversions of liabilities into Nonrecourse Liabilities over (ii) the
Partner's aggregate proportionate share of previous decreases in Partnership
Minimum Gain. A Partner's proportionate share of the decrease in Partnership
Minimum Gain for a Fiscal Year shall be based upon the ratio that such Partner's
Share of Minimum gain for the preceding year bore to the aggregate amount of
Partnership Minimum Gain for such preceding Fiscal Year.
Partnership means the general partnership governed by this Agreement as
-----------
said general partnership may from time to time be constituted and amended.
Partnership Agreement shall have the meaning set forth in the Recital.
---------------------
Partnership Capital means an amount equal to the sum of all of the
-------------------
Partners' Capital Account balances determined immediately prior to the
allocation to the Partners pursuant to Sections 7.2(b)(ii)(y) or 7.2(c)(ii)(x)
of any Net Profit or Net Loss from a Capital Transaction increased by the
aggregate amount of Net Profit to be allocated to the Partners pursuant to
Section 7.2(b)(ii)(y) as a result of such Capital Transaction or decreased by
the aggregate amount of Net Loss to be allocated to the Partners pursuant to
Section 7.2(c)(ii)(x) as a result of such Capital Transaction.
Partnership Interest shall have the meaning set forth in Section 11.3.
--------------------
Partnership Minimum Gain means the amount determined by computing with
------------------------
respect to each Nonrecourse Liability of the Partnership, the amount of Gross
Income, if any, that would be realized by the Partnership if it disposed of the
property securing such liability in full satisfaction thereof, and by then
aggregating the amounts so computed. For purposes of determining
-5-
<PAGE>
the amount of such Gross Income with respect to a liability, the Book Value of
the asset securing the liability shall be allocated among all the liabilities
that the asset secures in the manner set forth in Treasury Regulation Section
1.704-2(d)(2).
Person means any individual or Entity, and the heirs, executors,
------
administrators, legal representatives, successors and assigns of such Person
where the context so admits; and, unless the context otherwise requires, the
singular shall include the plural, and the masculine gender shall include the
feminine and the neuter and vice versa.
Project means the Land, together with the streets, sewers, curbs, gutters,
-------
utility service connections, and other land development infrastructure and
improvements constructed or to be constructed on or related to the Land
(including related off-site improvements) pursuant to an Annual Business Plan.
Project Expenses shall have the meaning set forth in Section 5.1.
----------------
Property Management Agreement shall have the meaning set forth in Section
-----------------------------
8.1.
Property Manager shall have the meaning set forth in Section 8.1.
----------------
Purchase Offer shall have the meaning set forth in Section 13.3.
--------------
Purchase Price shall have the meaning set forth in Section 12.6.
--------------
Reserve for Replacements shall have the meaning set forth in Section 5.1.
------------------------
Selling Partner shall have the meaning set forth in Section 11.2.
---------------
Tax Matters Partner shall have the meaning set forth in Section 8.7.
-------------------
Transfer shall have the meaning set forth in Section 11.1.
--------
Working Capital Fund shall have the meaning set forth in Section 5.1.
--------------------
-6-
<PAGE>
Fourth Amendment to Decatur TownCenter II Associates
Joint Venture Agreement dated as of August 15, 1995 beween
Decatur TownCenter Associates LTD., and the Registrant.
<PAGE>
FOURTH AMENDMENT TO DECATUR TOWNCENTER II ASSOCIATES
JOINT VENTURE AGREEMENT
This Fourth Amendment to Decatur TownCenter II Associates Joint Venture
Agreement (the "Fourth Amendment") is entered into as of December 31, 1994, by
and between Decatur TownCenter Associates, Ltd., a Georgia limited partnership
("Developer"), and New England Life Pension Properties IV; A Real Estate Limited
Partnership, a Massachusetts limited partnership ("NELP").
WHEREAS, Developer and NELP entered into that certain joint venture
agreement, dated as of December 31, 1987 (the "Joint Venture Agreement") forming
Decatur TownCenter II Associates;
WHEREAS, Developer and NELP entered into that certain First Amendment to
Decatur TownCenter II Associates Joint Venture Agreement, dated as of September
15, 1989 (the "First Amendment");
WHEREAS, Developer and NELP entered into that Second Amendment to Decatur
TownCenter II Associates Joint Venture Agreement, dated as of December 31, 1992
(the "Second Amendment");
WHEREAS, Developer and NELP entered into that Third Amendment to Decatur
TownCenter II Associates Joint Venture Agreement, dated as of December 31, 1993
(the "Third Amendment") (the Joint Venture Agreement, as amended by the First
Amendment, the Second Amendment and the Third Amendment, is hereinafter referred
to as the "Agreement"); and
WHEREAS, Developer and NELP wish to further amend the Agreement by entering
into this Fourth Amendment.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
agreements set forth in this Fourth Amendment, and intending to be legally
bound, Developer and NELP hereby agree as follows:
1. The second sentence of the second paragraph of Section 5.1.1(a) of the
Agreement is hereby deleted in its entirety and a new sentence is hereby
substituted in its place, as follows:
To the extent that, through December 31, 1996, any such payments
cannot be made from such sources when due, the portion thereof
attributable to the first $3,774,000 of NELP's Invested Capital may
accrue, and NELP shall be entitled to a cumulative return on the
amount of such accruals at the rate of 10.5% per annum, compounded
monthly.
2. The fifth sentence of the second paragraph of Section 5.1.1(a) of the
Agreement is hereby deleted in its entirety and the following sentence is hereby
substituted in its place as follows:
Commencing on December 31, 1996, all Monthly Guaranteed Payments and
the 10.5% cumulative return on Accrued Monthly Guaranteed Payments
shall be payable on a current basis.
-2-
<PAGE>
3. Section 5.6(a) of the Agreement is hereby deleted in its entirety and
a new Section 5.6(a) is hereby substituted in its place, as follows:
a. The Venture shall distribute to NELP, on December 31, 1996, an
amount sufficient to reduce the amount of the Accrued Monthly
Guaranteed Payments (and any accrued and unpaid interest thereon)
to zero, subject to adjustment for any distributions of Accrued
Monthly Guaranteed Payments (and accrued and unpaid interest
thereon) prior to such date pursuant to clause FIRST of Section
5.2 and clause FIRST of Section 5.3.
4. The following is added as a new Section 9.8 of the Agreement:
Section 9.8 Sale of Project. Notwithstanding anything to the
---------------
contrary set forth herein, including without limitation anything set
forth in this Article 9, NELP shall have the right, without the
Approval of the Developer, to sell all or any part of the Project at
such time or times and upon such terms as NELP may determine in its
sole discretion. In connection with any such sale or proposed sale,
NELP shall have the right (i) to cause all or any part of the Project
to be marketed to such prospective purchasers and upon such
-3-
<PAGE>
terms as NELP shall determine at its sole discretion; (ii) to employ
on behalf of the Venture such advisors, consultants, brokers,
attorneys, accountants and other professionals as NELP deems
appropriate and upon such terms as NELP shall determine in its sole
discretion; (iii) to execute and deliver on behalf of the Venture,
without the necessity of any signature of the Developer, any and all
documents which NELP may determine in its sole discretion to be
necessary or appropriate in connection with such a sale or proposed
sale, including without limitation purchase and sale agreements and
deeds, any of such documents so executed and delivered to constitute
binding obligations of the Venture; and (iv) to take such other
actions as it deems necessary or appropriate in connection with such
sale or proposed sale. Developer agrees, at the direction of NELP, to
execute and deliver such documents as may reasonably be required in
connection with any such sale or proposed sale.
5. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement.
6. Except as expressly modified hereby, all other terms and provisions of
the Agreement shall remain in full force and effect, are incorporated herein by
this reference and shall govern the conduct of the parties hereto; provided,
however, to the extent of
-4-
<PAGE>
any inconsistency between the provisions of the Agreement and the provisions of
this Fourth Amendment, the provisions of this Fourth Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as of December 31, 1994.
NEW ENGLAND LIFE PENSION
PROPERTIES IV; A REAL ESTATE
LIMITED PARTNERSHIP, a
Massachusetts Limited
Partnership
By: FOURTH COPLEY CORP.,
a Massachusetts
corporation, its managing
general partner
By:_____________________________
DECATUR TOWNCENTER ASSOCIATES,
LTD., a Georgia limited
partnership
By:_____________________________
A.J. Land, Jr.,
General Partner
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,051,999
<SECURITIES> 3,364,539
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,416,538
<PP&E> 52,575,117
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,991,655
<CURRENT-LIABILITIES> 190,492
<BONDS> 2,806,904
0
0
<COMMON> 0
<OTHER-SE> 56,994,259
<TOTAL-LIABILITY-AND-EQUITY> 59,991,655
<SALES> 5,476,148
<TOTAL-REVENUES> 5,906,735
<CGS> 609,007
<TOTAL-COSTS> 609,007
<OTHER-EXPENSES> 1,384,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,912,897
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,912,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,912,897
<EPS-PRIMARY> 40.78
<EPS-DILUTED> 40.78
</TABLE>
