<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, 1996
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.)
225 Franklin Street, 25th FL.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
No voting stock is held by non-affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
------
Item 1. Business.
--------
New England Life Pension Properties 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, 1996, the Partnership had investments in the five
real properties described below. In December 1988, the Partnership sold one of
its investments and received sale proceeds of $10,577,476 which were
substantially reinvested. The three other investments have been sold. One
investment in Atlanta, Georgia was sold on August 6, 1993, resulting in sale
proceeds of $7,917,000. Capital was distributed to the Limited Partners in
October 1993, in the amount of $82.00 per Unit . A second investment in Rancho
Cucamonga, California was sold on December 30, 1994, resulting in sale proceeds
of $5,261,275. On January 26, 1995, capital of $5,224,835 ($55 per Unit) was
distributed to the Limited Partners. Finally, a third investment located in
Decatur, Georgia was sold on October 10, 1996, resulting in sales proceeds of
$9,333,325. On October 24, 1996, capital of $9,214,709 ($97 per unit) 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,
1996, the Partnership had contributed $8,190,145 to the capital of the Joint
Venture out of a maximum commitment 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, 1996. 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 was restructured in the second quarter of 1996,
whereby Lee-Oxford became an indirect limited partner. The Partnership thereby
obtained control over management and operating decisions. The ownership
<PAGE>
restructuring was accomplished with the establishment of a new partnership
entity in which the Partnership is the general partner and Lee-Oxford is the
limited partner. The new entity holds a 42% interest in the Joint Venture,
representing all of Lee-Oxford's prior direct ownership interest and 2% of the
Partnership's prior direct interest. The Partnership also agreed to release the
guarantee from Oxford Development Corporation upon payment to the Partnership of
a total of $650,000 of which $136,437 remains unpaid at December 31, 1996.
The joint venture owns approximately 12.63 acres of land located in
Fort Myers, Florida and has constructed a 282-unit apartment complex, consisting
of 12 2- and 3-story buildings, thereon. The complex was approximately 88%
occupied as of December 31, 1996.
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 (the "Developer"). 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 Developer's interest to 20%. As of December 31, 1996, 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 the Developer, of which $3,534,796 had been
funded as of December 31, 1996. 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 Developer 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.
The joint venture agreement entitled the Partnership to receive 80% of
net cash flow, refinancing proceeds and sale proceeds once the loan and accrued
interest are repaid in full.
On January 1, 1996 a letter agreement was executed which modified
certain terms of the Joint Venture Agreement. The letter agreement, which
constituted an amendment to the Joint Venture Agreement, granted the Partnership
full control over management decisions. Control over the decision to sell the
property, however, became effective on July 1, 1996.
Effective December 30, 1996, the property owned by the joint venture
was distributed to the venture partners as tenants-in-common. The Partnership,
however, retained its overall decision-making authority. The property interest
distributed to the Developer is encumbered by the aforementioned loan. The note
was amended to mature on February 1, 1997 and is secured by a recorded deed-of-
trust. The maturity date is in the process of being extended. In connection with
the transaction, the Partnership obtained the option to purchase the
tenancy-in-common interest of the Hewson affiliate at its fair market value
beginning February 1, 1997.
The tenants-in-common own 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 98% leased as of
December 31, 1996.
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 commitment from $13,400,000 to $15,300,000. On October 2,
1991, the Partnership committed to increase its maximum commitment from
$15,300,000 to $15,840,000. As of December 31, 1996, 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 was
due and payable at the end of the tenth year of the joint venture's operations.
The joint venture agreement also entitled 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
<PAGE>
above a specified level until its cash investment of $360,000 is repaid in full,
at which time the Partnership will be entitled to all cash flow. Unpaid
preferred returns of $2,936,919 were added to the Partnership's capital account.
Future preferred return payments are to be made monthly in the amount of
$121,125. Monthly payments shall be made to the extent operating revenues or
extraordinary cash flows are available. To the extent such payments cannot be
made from such sources when due, payments may accrue at a rate of 9.5% per
annum, compounded monthly, until paid.
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. At
December 31, 1996, approximately 98% of the available leasable area was leased.
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 legally recorded in 1995. The Partnership
has not collected on or recognized the judgment as of December 31, 1996.
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 legally
recorded. The Partnership has determined that the claim is not collectible at
this time.
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 commitment 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, 1996, the
Partnership had contributed $14,086,147 to the capital of the joint venture out
of a maximum commitment 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 therefor, 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, 1996, the project was 94% 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, 1996, the Partnership had contributed $4,857,000 to the capital of the joint
venture out of a maximum commitment 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
<PAGE>
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, 1996, the buildings were
approximately 89% 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 ANNUAL
TENANTS SQUARE FEET CONTRACT
ESTIMATED WITH 10% NAME(S) OF RENT PER
1997 OR MORE OF OF EACH SQUARE LEASE RENEWAL
PROPERTY REALTY TAXES GLA TENANT(S) TENANT FOOT EXPIRATION OPTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartment Complex in Fort $229,882 N/A N/A N/A N/A N/A N/A
Myers, FL
Office, Ind. & Retail $109,842 0 N/A N/A N/A N/A N/A
Bldgs in Las Vegas, NV
Office/R&D Buildings in $210,124 4 Wiltel 23,760 $ 8.74 March, 1997 One for 5 Years
Columbia, MD
Columbia 45,951 $ 8.95 August, 2004 Two for 5
National Years
EVI, Inc. 38,225 $ 9.00 February, 2006 One for 5 Years
Coram 25,932 $ 8.87 January, 1997 One for 5 Years
Office/R&D Buildings in $ 55,020 4 State Farm 13,918 $ 9.50 January, 1997 None
Frederick, MD Chevy Chase 22,059 $10.25 July, 1997 None
Bank
Stulz America 9,933 $ 7.66 December, 1999 None
Science 8,355 11.99 August, 1998 None
Applications
Office/Industrial $ 87,000 1 FW Bell 19,259 $ 6.60 April, 1998 One for 5 Years
Buildings in Phoenix, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LINE OF BUSINESS
OF PRINCIPAL TENANTS
- ---------------------------------------------------------------
<S> <C>
Apartment Complex in Fort N/A
Myers, FL
Office, Ind. & Retail N/A
Bldgs in Las Vegas, NV
Office/R&D Buildings in
Columbia, MD Telecommunications
Home Mortgages
Environmental/Testing
Medical Services
Office/R&D Buildings in
Frederick, MD Insurance
Banking
HVAC Manufacturing
Technology
Office/Industrial
Buildings in Phoenix, AZ Light
Assembly/Distribution
- ---------------------------------------------------------------
</TABLE>
<PAGE>
The following tables 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
- -----------------------------------
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
1996 250,810 88% $1,787,247 $ 7.75
Office, Ind. & Retail Buildings in Las Vegas, NV
- ------------------------------------------------
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
1996 224,474 98% $1,921,300 $ 8.85
Office/R&D Buildings in Columbia, MD
- ------------------------------------
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
1996 188,649 94% $1,941,458 $11.13
Office/R&D Buildings in Frederick, MD
- -------------------------------------
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
1996 73,360 89% $ 769,262 $11.43
Office/Industrial Buildings in Phoenix, AZ
- ------------------------------------------
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
1996 109,930 92% $ 925,727 $ 9.25
- ---------------------------------------------------------------------------------------------------
</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, 1996:
<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
- -----------------------------------
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
2006 N/A N/A N/A N/A
Office/Industrial Buildings in Phoenix, AZ
- ------------------------------------------
1997 8 23,649 $283,788 36%
1998 5 28,755 $217,140 27%
1999 1 20,542 $175,908 22%
2000 0 0 $0 0%
2001 0 14,869 $116,916 15%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
Office. Ind., & Retail Buildings in Las Vegas, NV
- -------------------------------------------------
1997 28 94,999 $865,392 44%
1998 23 82,752 $808,752 42%
1999 12 34,660 $235,332 12%
2000 1 2,016 $ 22,176 1%
2001 1 1,333 $ 13,440 1%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
Office/R&D Buildings in Columbia, MD
- ------------------------------------
1997 3 53,008 $466,595 29%
1998 1 8,781 $ 93,077 6%
1999 2 32,570 $270,257 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 0 0 $0 0%
2006 1 38,225 $344,025 22%
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Office/R&D Buildings in Frederick, MD
- -------------------------------------
1997 3 39,082 $382,248 59%
1998 2 12,411 $138,732 21%
1999 0 9,933 $ 76,080 12%
2000 0 4,601 $ 49,464 8%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
- ---------------------------------------------------------------
</TABLE>
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 $2,597,904
Improvements 130,115 2.56% SL 39 9,930
----------- ----------
Total Depreciable Assets $10,050,187 $2,607,834
Industrial Buildings, Phoenix, AZ
- ----------------------------------------------------------
Building & Improvements $ 4,819,444 3.18% SL 31.5 $1,194,687
Building Improvements 93,738 2.56% SL 39 2,892
----------- ----------
Total Depreciable Assets $ 4,913,182 $1,197,579
Office/Research and Development Buildings, Frederick, MD
- ----------------------------------------------------------
Building $ 4,199,372 3.18% SL 31.5 $1,195,546
Land Improvements 345,335 2.56% SL 39 4,419
Land Improvements 100,000 10.00% SL 15 19,303
----------- ----------
Total Depreciable Assets $ 4,644,707 $1,219,268
Apartment Complex, Fort Myers, FL
- ----------------------------------------------------------
Building $ 9,151,344 3.64% SL 27.5 $2,546,339
----------- ----------
Total Depreciable Assets $ 9,151,344 $2,546,339
Office/Research and Development Buildings, Columbia, MD
- ----------------------------------------------------------
Building $ 7,829,962 3.18% SL 31.5 $1,611,916
Land Improvements 3,326,316 2.56% SL 39 38,036
Land Improvements 94,022 N/A 150%DB 15 28,050
----------- ----------
Total Depreciable Assets $11,250,300 $1,678,002
Total Depreciable Assets $40,009,720 $9,249,022
=========== ==========
- ----------------------------------------------------------------------------------------------------------------------------
</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 ten other apartment complexes comprising 3,443 units.
Reported occupancy among the property's primary competitors ranged from 82% to
97% and averaged approximately 91%. This is down slightly from the 93% level of
a year ago. The Ft. Meyers multi-family market remains seasonal with greatest
demand during the winter months.
Office/Industrial Buildings in Phoenix, Arizona
- -----------------------------------------------
This property is located in the metropolitan Phoenix market which has an
inventory of approximately 149 million square feet of industrial space, of which
7.4% was vacant as of third quarter 1996, compared to the 6.6% and 7.1% vacancy
rates as of December 31, 1995 and 1994, respectively. More specifically, the
property is located within the Northwest industrial market, which consists of
18.8 million square feet, or 13% of the total Phoenix industrial market. As of
September 30, 1996, the Northwest industrial vacancy rate was approximately
11.5%. Approximately 4.4 million square feet was under construction at
September 30, 1996 in Phoenix, of which 426,000 square feet or 10% was in the
Northwest market.
Office/Industrial/Retail Buildings in Las Vegas, Nevada
- -------------------------------------------------------
This property is located within the greater Las Vegas industrial market. As of
December 31, 1996, the total industrial inventory was 43 million square feet, up
from approximately 38 million square feet a year ago. Overall vacant space
totaled approximately 4.2 million square feet or 6.4% of the industrial
inventory. The Las Vegas market absorbed 4.3 million square feet in 1996, down
slightly from the 4.6 million absorbed in 1995 and the 5.7 million square feet
absorbed in 1994. Given the continued strong demand for industrial space,
rental rates are expected to increase in 1997.
Office, Research and Development Buildings in Columbia, Maryland
- ----------------------------------------------------------------
The property is located within the Howard County R&D market which contains
approximately 8.8 million square feet in a total of 179 buildings. As of
September 30, 1996, the Howard County market exhibited a vacancy rate of
approximately 5.6%, which represents an improvement from 1995, 1994 and 1993
when overall vacancy was 8.7%, 12% and 18%, respectively. The Columbia R&D
submarket contains a total of approximately 6.9 million square feet and, at
September 30, 1996, had a vacancy rate of approximately 5.3%. The market has
strengthened to the point where speculative R&D construction is now underway in
Howard County and in the Columbia market.
Office, Research and Development Buildings in Frederick, Maryland
- -----------------------------------------------------------------
The property is located in the Frederick County office/flex market.
There are a total of 119 office/flex buildings in this market containing
approximately 4.9 million square feet of space. Year end 1996 vacancy was
approximately 12%, up from approximately 9% a year ago. The increase
principally reflects new construction activity in the market. Two large
distribution facilites are under construction for Georgia Pacific and Toy 'R' Us
totaling 1.5 million square feet. In addition, Chevy Chase Bank and State Farm
completed new office facilities in 1996 totaling 630,000 square feet.
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, 1996, there were 17,385 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, 1996, cash distributions
paid in 1996 or distributed after year end with respect to 1996 to the Limited
Partners as a group totaled $14,032,008, including $9,214,709 ($97 per Limited
Partnership Unit) from the proceeds of a property sale. 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.
Cash distributions exceeded net income in 1996 and 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 or
as of as of as of as of as of
12/31/96(1) 12/31/95(2) 12/31/94(3) 12/31/93(4) 12/31/92
----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 7,582,119 $ 5,906,735 $ 4,576,435 $ 3,784,731 $ 4,169,119
Net Income (Loss) $ 4,392,513 $ 3,912,897 $ 3,752,101 $ (378,545) $ 2,277,301
Net Income (Loss)
per Unit of
Limited
Partnership
Interest $ 45.78 $ 40.78 $ 39.10 $ (3.94) $ 23.73
Total Assets $ 50,710,887 $ 59,991,655 $ 67,145,010 $ 67,471,037 $ 79,547,070
Total Cash
Distributions
per Unit of
Limited
Partnership
Interest,
including
amounts
distributed after
year end with
respect to the
previous year $ 147.71 $ 60.12 $ 105.49 $ 126.22 $ 46.25
</TABLE>
(1) Net income includes a gain on the sale of a joint venture investment of
$1,055,591. Cash distributions include a return of capital of $97.00 per Limited
Partnership Unit.
(2) 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.
(3) 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.
(4) The Partnership recorded investment valuation allowances totaling
$2,760,784 ($28.77 per Limited Partnership Unit) during 1993. Cash distributions
include a return of 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; the five currently owned are described in Item 1 hereof.
One investment was sold in each of 1988, 1993, 1994 and 1996. As a result of
the sales, capital of $22,229,298 has been returned to the limited partners
through December 31, 1996.
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 was $863 per unit.
On October 10, 1996, the Decatur TownCenter II joint venture sold its
property and the Partnership received net sale proceeds of $9,333,325. On
October 24, 1996, the Partnership made a capital distribution of $97 per limited
partnership unit ($9,214,709) from the proceeds of the sale. The adjusted
capital contribution after this sale is $766.
At December 31, 1996, the Partnership had $7,772,496 in cash, cash
equivalents and short-term investments, which was partially used for cash
distributions of $1,138,045 to partners on January 30, 1997. 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. Quarterly distributions of cash from operations relating to 1996
were made at the annualized rate of 6% on the weighted average adjusted capital
contribution. Quarterly distributions of cash from operations relating to 1995
were also made at the annualized rate of 6% on the weighted average adjusted
capital contribution. In addition, for the first quarter of 1995, 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.
The carrying value of real estate investments in the financial statements
at December 31, 1996 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, 1996, the appraised values of certain
investments exceeded the related carrying values by an aggregate of $10,000,000
and the appraised values of the remaining investments were less than the related
carrying values by an aggregate of $1,200,000. 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
At December 31, 1996 two of the portfolio investments are structured as
joint ventures with real estate development/management firms, and in one case,
with an affiliate of the Partnership. Effective January 1, 1995, the Palms
Business Center joint venture was restructured to grant the Partnership
<PAGE>
control over management decisions and the investment has been accounted for as a
wholly-owned property since that date. Effective April 1, 1996 the Reflections
joint venture was restructured whereby the Partnership's venture partner became
an indirect limited partner and the investment has been accounted for as a
wholly-owned property since that date. Effective July 1, 1996, the Metro
Business Center joint venture was restructured to grant the Partnership control
over all management decisions and the investment has been accounted for as a
wholly-owned property since that date. The Rancho Cucamonga and Decatur
TownCenter II properties, which were sold in December 1994 and October 1996,
respectively, were owned by joint ventures.
OPERATING FACTORS
Overall occupancy at the Columbia Gateway Corporate Park was 94% at
December 31, 1996, an increase from 92% at the two preceding year ends.
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 at Reflections Apartments ended 1996 at 88%; it ranged from 92%
to 96% during 1995 and 1994. Although the Fort Myers apartment market remains
competitive, rental rates have increased.
Occupancy at Metro Business Center at December 31, 1996 was 92%, up
slightly from 91% a year ago and down from 100% at December 31, 1994. This area
of Phoenix has been experiencing slow leasing activity, although most of the
space whose tenants vacated in 1996 was re-leased.
Occupancy at Palms Business Centers was 98% at December 31, 1996, an
increase from 96% one year ago and 91% in 1994. However, leases for 44% of the
space expire in 1997. Rental rates have increased over the past year.
Leasing at 270 Technology Center was 89% at December 31, 1996, down from
98% at December 31, 1995 and 100% at December 31, 1994. Furthermore, leases for
50% of the space expire in 1997, and two significant tenants are not expected to
renew.
SIGNIFICANT TRANSACTIONS
On December 30, 1994, the Rancho Cucamonga joint venture sold its property
and the Partnership recognized a gain of $399,865. On October 10, 1996, the
Decatur TownCenter II joint venture sold its property and the Partnership
recognized a gain of $1,055,591.
INVESTMENT RESULTS
Interest on short-term investments and cash equivalents decreased in 1996
compared to 1995 due to the temporary investment of proceeds from the Rancho
Cucamonga sale in 1995 and to lower average yields. In 1995, interest on short-
term investments and cash equivalents increased compared to 1994 as a result of
larger invested balances (again due to the investment of proceeds from the 1994
Rancho Cucamonga sale) and an increase in interest rates.
1996 COMPARED TO 1995
Exclusive of the operating results from Decatur TownCenter II ($220,428 in
1996 and $680,012 in 1995), total real estate operating activity was $3,558,278
for 1996 and $3,722,962 for 1995. The decrease is primarily attributable to a
decline in operating income at Reflections ($270,000) due to a decrease in
occupancy and higher maintenance expenses. Operating results at the other
properties were relatively unchanged between 1996 and 1995, except for the
receipt of $90,000 by 270 Technology Center from a former tenant in bankruptcy.
Operating cash flow in 1996 includes $250,000 received pursuant to a loan
guarantee from one of the Partnership's joint venture partners, relating to
previously accrued investment income. Operating cash flow in 1995 was reduced
by the payment of previously deferred management fees of $175,374. Exclusive of
these items, operating cash flow decreased $913,331 between 1996 and 1995. The
change primarily stems from the change in Partnership operating results,
together with the timing of cash distributions from certain joint ventures.
<PAGE>
1995 COMPARED TO 1994
Exclusive of the operating results from Rancho Cucamonga in 1994
($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, primarily at Columbia Gateway Corporate
Park, where results increased by approximately $289,000 due to improvements in
rental income, and at Palms Business Center, where improved occupancy and rental
rates resulted in an increase of approximately $272,000 in net operating income.
In addition, 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 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.
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.
1996 COMPARED TO 1995
The management fee decreased from 1995 to 1996 due to a decrease in
distributable cash flow from operations. This decrease is primarily
attributable to the discretionary reduction in the Partnership's cash reserves
in 1995 noted previously. General and administrative expenses decreased by
approximately $18,000 as a result of lower legal expenses.
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.
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, 1996.
<TABLE>
<CAPTION>
Name Position(s) with the Managing General Partner Age
- ---- ---------------------------------------------- ---
<S> <C> <C>
Joseph W. O'Connor President, Chief Executive Officer and Director 50
Daniel J. Coughlin Managing Director and Director 44
Peter P. Twining (1) Managing Director, General Counsel and Director 50
Wesley M. Gardiner, Jr. Vice President 38
Daniel C. Mackowiak Principal Financial and Accounting Officer 45
James J. Finnegan (2) Managing Director, General Counsel and Director 36
</TABLE>
(1) Through January 24, 1997 only
(2) As of January 25, 1997
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 since 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 AEW Real Estate Advisors, Inc. ("AEW"), formerly known as Copley
Real Estate Advisors, Inc., since January, 1982. He was a Principal of AEW from
1985 to 1987 and has been a Managing Director of AEW since January 1, 1988. He
has been active in real estate for 28 years. From June, 1967, until December,
1981, he was employed by New England Mutual Life Insurance Company ("The New
England"), which has been merged with and into Metropolitan Life Insurance
Company, 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 AEW from 1985 to 1987 and has been a
Managing Director of AEW since January 1, 1988 and a Director of AEW since July
1994. Mr. Coughlin has been active in financial management and control for 22
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
<PAGE>
of the asset management division of AEW. 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 was a Managing Director and General Counsel of AEW until
January 24, 1997 when he resigned from all offices and directorships. As such,
he was responsible for general legal oversight and policy with respect to AEW
and its investment portfolios. Before being promoted to this position in
January 1994, he was a Vice President/Principal and senior lawyer responsible
for assisting in the oversight and management of AEW's legal operations. Before
joining AEW 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 AEW in 1990 and has been a Vice President
at AEW 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 AEW 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 AEW whose securities are registered under the Securities
and Exchange Act of 1934. He received a B.A. in Economics from the University
of California at San Diego.
Daniel C. Mackowiak has been a Vice President of AEW 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 AEW 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 AEW, 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.
James J. Finnegan is the Assistant General Counsel of AEW Capital
Management, L.P. ("AEW Capital Management") and has succeeded Peter Twining as
Managing Director, General Counsel and Director of AEW, a subsidiary of AEW
Capital Management. Mr. Finnegan served as Vice President and Assistant
General Counsel of Aldrich, Eastman & Waltch, L.P., a predecessor to AEW Capital
Management. Mr. Finnegan has over ten years of experience in real estate law,
including seven years of experience in private practice with major New York City
and Boston law firms. Mr. Finnegan also serves as the firm's securities and
regulatory compliance officer. Mr. Finnegan is a graduate of the University of
Vermont (B.A.) and Fordham University School of law (J.D.).
Mr. O'Connor is a director of Evans Withycombe Residential, Inc., a
Maryland corporation organized as a real estate investment trust which is listed
for trading on the New York 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 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.
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, 1996.
<PAGE>
<TABLE>
<CAPTION>
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
<S> <C> <C>
General Partners Share of Distributable Cash $ 48,658
AEW Real Estate Advisors, Inc. Management Fees and
(formerly known as Copley Real Reimbursement of Expenses 496,395
Estate Advisors, Inc.)
New England Securities Corporation Servicing Fees and
Reimbursement of Expenses 24,040
-------------
TOTAL $ 569,093
=============
</TABLE>
For the year ended December 31, 1996 the Partnership allocated $52,432 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, 1996. 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 1,613
Units as of December 31, 1996.
(c) Changes in Control.
------------------
There exists no arrangement known to the Partnership the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The Partnership has no relationships or transactions to report other than
as reported in Item 11 above.
PART IV
-------
Item 14. Exhibits, Financial 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.
<PAGE>
(b) Reports on Form 8-K. During the last quarter of the year ended December 31,
1996, the Partnership filed no Current Report on Form 8-K.
<PAGE>
New England Life Pension Properties IV;
A Real Estate Limited Partnership
Financial Statements
* * * * * * *
December 31, 1996
<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, 1996 and 1995............................
Statement of Operations -
Years ended December 31, 1996, 1995 and 1994.......................
Statement of Changes in Partners' Capital (Deficit) -
Years ended December 31, 1996, 1995 and 1994.......................
Statement of Cash Flows -
Years ended December 31, 1996, 1995 and 1994.......................
Notes to Financial Statements.........................................
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1996..................................
</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, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, 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 and 270 Technology Center joint
venture investees for the years ended December 31, 1996, 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 these
ventures aggregated $1,415,605, $1,371,477 and $1,006,828 for the years ended
December 31, 1996, 1995 and 1994, respectively. We also did not audit the
financial statements of the Partnership's investment in Reflections and Metro
Business Center for the years ended December 31, 1996, 1995 and 1994. Operating
income for these investments was $809,714 for the year ended December 31, 1996,
and equity in joint venture income was $339,763, $1,045,307 and $979,625 for the
years ended December 31, 1996, 1995 and 1994, respectively. We also did not
audit the financial statements of the Partnership's investment in Palms Business
Centers for the years ended December 31, 1996, 1995 and 1994. Operating income
for this investment was $1,806,638 and $1,770,345 for the years ended December
31, 1996 and 1995, and equity in joint venture income was $1,053,707 for the
year ended December 31, 1994. 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 and 270 Technology Center for the years
ended December 31, 1996, 1995 and 1994, and for the operating income and equity
in joint venture income for Reflections, Metro Business Center and Palms
Business Centers for the years ended December 31, 1996, 1995 and 1994 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, 1996,
1995 and 1994 provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse
- -------------------
Boston, Massachusetts
March 24, 1997
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $15,733,520 $40,466,827
Property, net 27,204,871 12,108,290
----------- -----------
42,938,391 52,575,117
Cash and cash equivalents 5,045,964 4,051,999
Short-term investments 2,726,532 3,364,539
----------- -----------
$50,710,887 $59,991,655
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 119,344 $ 129,043
Accrued management fee 56,277 61,449
Deferred management and disposition fees 3,333,754 2,806,904
----------- -----------
Total liabilities 3,509,375 2,997,396
----------- -----------
Partners' capital (deficit):
Limited partners ($766 and $863 per unit,
respectively; 120,000 units authorized,
94,997 units issued and outstanding) 47,361,993 57,148,961
General partners (160,481) (154,702)
----------- -----------
Total partners' capital 47,201,512 56,994,259
----------- -----------
$50,710,887 $59,991,655
=========== ===========
</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,
-------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 4,173,714 $2,379,352 $ -
Property operating expenses (1,557,362) (609,007) -
Depreciation and amortization (805,522) (444,790) -
----------- ---------- ----------
1,810,830 1,325,555 -
Joint venture earnings 1,980,804 3,096,796 3,827,109
Amortization (12,928) (19,377) (26,525)
----------- ---------- ----------
Total real estate operations 3,778,706 4,402,974 3,800,584
Gain on sales of property by joint ventures 1,055,591 - 399,865
----------- ---------- ----------
Total real estate activity 4,834,297 4,402,974 4,200,449
Interest on cash equivalents
and short-term investments 372,010 430,587 349,461
----------- ---------- ----------
Total investment activity 5,206,307 4,833,561 4,549,910
----------- ---------- ----------
PORTFOLIO EXPENSES
Management fee 481,249 570,551 479,161
General and administrative 332,545 350,113 318,648
----------- ---------- ----------
813,794 920,664 797,809
----------- ---------- ----------
NET INCOME $ 4,392,513 $3,912,897 $3,752,101
=========== ========== ==========
Net income per limited
partnership unit $ 45.78 $ 40.78 $ 39.10
=========== ========== ==========
Cash distributions per limited
partnership unit $ 148.80 $ 115.94 $ 47.19
=========== ========== ==========
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,
----------------------------------------------------------------------------
1996 1995 1994
-------------- --------------- --------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $(154,702) $ 57,148,961 $(135,355) $ 64,289,145 $(127,594) $65,057,473
Cash distributions (49,704) (14,135,556) (58,476) (11,013,952) (45,282) (4,482,908)
Net income 43,925 4,348,588 39,129 3,873,768 37,521 3,714,580
--------- ------------ --------- ------------ --------- -----------
Balance at end
of year $(160,481) $ 47,361,993 $(154,702) $ 57,148,961 $(135,355) $64,289,145
========= ============ ========= ============ ========= ===========
</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,
------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,392,513 $ 3,912,897 $ 3,752,101
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 818,450 464,167 26,525
Equity in joint venture earnings (1,980,804) (3,096,796) (3,827,109)
Cash distributions from joint ventures 2,350,903 3,928,414 5,919,979
Gain on sales of property by joint ventures (1,055,591) - (399,865)
Decrease (increase) in investment income
and other receivables 20,992 (24,016) 95,390
Increase in deferred leasing commissions (58,972) - -
Decrease (increase) in property working capital 138,293 148,652 -
Increase in operating liabilities 225,753 181,550 285,902
Payment of deferred management fee - (175,374) -
------------ ------------ -----------
Net cash provided by operating activities 4,851,537 5,339,494 5,852,923
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of property 9,333,325 - 5,097,115
Deferred disposition fees 286,226 - 164,160
Investment in joint ventures - - (1,928,609)
Payment of note payable to venture partner (100,000) (130,000) -
Investment in property (72,441) (51,768) -
Decrease (increase) in short-term
investments, net 617,015 (2,403,566) 5,566,195
Loan repayment by joint venture partner 263,563 - -
------------ ------------ -----------
Net cash provided by (used in) investing
activities 10,327,688 (2,585,334) 8,898,861
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions to partners (14,185,260) (11,072,428) (4,528,190)
------------ ------------ -----------
Net cash used in financing activity (14,185,260) (11,072,428) (4,528,190)
------------ ------------ -----------
Net increase (decrease) in cash
and cash equivalents 993,965 (8,318,268) 10,223,594
Cash and cash equivalents:
Beginning of year 4,051,999 12,370,267 2,146,673
------------ ------------ -----------
End of year $ 5,045,964 $ 4,051,999 $12,370,267
============ ============ ===========
</TABLE>
NON-CASH TRANSACTIONS:
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 $12,519,961. Effective April 1, 1996, the
Partnership's joint venture investment in Reflections Apartments was converted
to a wholly-owned property. The carrying value of this investment at conversion
was $10,469,511. Effective July 1, 1996, the Partnership's joint venture
investment in Metro Business Center was converted to a wholly-owned property.
The carrying value of this investment at conversion was $5,889,261.
(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 five 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 AEW Real Estate Advisors, Inc. ("AEW"), formerly
known as 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 AEW 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 AEW
pursuant to an advisory contract.
On December 10, 1996, Copley's parent, New England Investment Companies,
Limited Partnership ("NEIC"), a publicly traded master limited partnership,
acquired certain assets subject to then existing liabilities from Aldrich,
Eastman & Waltch, Inc. and its affiliates and principals (collectively "the AEW
Operations"). Simultaneously, a new entity, AEW Capital Management, L.P., was
formed into which NEIC contributed its interest in Copley and its affiliates.
As a result, the AEW Operations were combined with Copley to form the business
operations of AEW Capital Management, L.P. This transaction is not expected to
have a material effect on the operations of the Partnership.
Prior to August 30, 1996, New England Mutual Life Insurance Company ("The
New England") was NEIC's principal unit holder and owner of all of the
outstanding stock of NEIC's general partner. On August 30, 1996, The New
England merged with and into Metropolitan Life Insurance Company ("Met Life").
Met Life is the surviving entity and, therefore, through a wholly-owned
subsidiary, became the owner of the units of partnership interest previously
owned by The New England and of the stock of NEIC's general partner. This
transaction is not expected to have a material effect on the operations of the
Partnership.
At December 31, 1996 and 1995, an affiliate of the Managing General Partner
owned 1,613 and 1,558 units of limited partnership interest, respectively,
which were repurchased from certain qualified plans, within specified annual
limitations provided for in the Partnership Agreement.
Management
AEW, as advisor, is entitled to receive stipulated fees from the
Partnership in consideration of services performed in connection with the
management of the Partnership and the acquisition and disposition of Partnership
investments in real property. Partnership management fees are 9% of
distributable cash flow from operations, as defined, before deducting such fees.
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
AEW of previously deferred management fees totaling $175,374. Deferred
management fees were $2,334,875 and $2,094,251 at December 31, 1996 and 1995,
respectively. AEW is also reimbursed for expenses incurred in connection with
administering the Partnership ($15,146 in 1996, $13,874 in 1995 and $21,155 in
1994). 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 $998,879 and $712,653 at December 31, 1996 and 1995, respectively.
<PAGE>
New England Securities Corporation, an indirect subsidiary of Met Life, is
engaged by the Partnership to act as its unit holder servicing agent. Fees and
out-of-pocket expenses for such services totaled $24,040, $21,543, and $30,526
in 1996, 1995 and 1994, 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. Joint
ventures are consolidated with the accounts of the Partnership if, and when, the
venture partner no longer shares in the control of the business.
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.
Capitalized Costs, Depreciation and Amortization
Maintenance and repair costs are expensed as incurred. Significant
improvements and renewals are capitalized. Depreciation is computed using the
straight-line method based on estimated useful lives of the buildings and
improvements. Leasing costs are also capitalized and amortized over the related
lease terms.
Acquisition fees have been capitalized as part of the cost of real estate
investments. Amounts not related to land are being amortized using the
straight-line method over the estimated useful lives of the underlying property.
Certain tenant leases provide for rental increases over the respective
lease terms. Rental revenue is being recognized on a straight-line basis over
the lease terms.
Realizability of Real Estate Investments
The Partnership considers a real estate investment to be impaired when it
determines the carrying value of the investment is not recoverable through
expected undiscounted cash flows generated from the operations and disposal of
the property. The impairment loss is based on the excess of the investment's
carrying value over its estimated fair market value. For investments being held
for sale, the impairment loss also includes estimated costs of sale. Property
held for sale is not depreciated during the holding period. Prior to the
adoption of Statement of Financial Accounting Standards No. 121 effective
January 1, 1995, the impairment loss was measured based on the excess of the
investment's carrying value over its net realizable value.
<PAGE>
The carrying value of an investment may be more or less than its current
appraised value. At December 31, 1996 and 1995, the appraised values of certain
investments exceeded the related carrying values by an aggregate of $10,000,000
and $9,400,000, respectively; and the appraised values of the remaining
investments were less than the related carrying values by an aggregate of
$1,200,000 and $1,400,000, 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 Partnership's advisor and
independent appraisers. Because of the subjectivity inherent in the valuation
process, the estimated current appraised value may differ significantly from
that which could be realized if the real estate were actually offered for sale
in the marketplace.
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, 1996
and 1995 all investments were in commercial paper with less than three months
and seven months, respectively, remaining to maturity.
Deferred Disposition Fees
Disposition fees due to AEW 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.
Note 3 - Real Estate Joint Ventures
- -----------------------------------
The Partnership had invested in seven real estate joint ventures, organized
as general partnerships with a real estate management/development firm, and in
one case, with an affiliate of the Partnership. One joint venture sold its
property in 1994; another sold its property 1996. One joint venture investment
was restructured into a wholly-owned property in 1995; and two joint venture
investments were restructured into wholly-owned properties in 1996. The
Partnership 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, and
for the dilution of their ownership share in the event a venture partner does
not contribute proportionately.
The respective real estate management/development firms are responsible for
day-to-day development and operating activities, although overall authority and
responsibility for the business is
<PAGE>
shared by the venturers. The real estate development/management firms or their
affiliates also provide various services to the respective 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 1996 1995
----------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Reflections 10.5% 60% - $13,650,242
Ft. Myers, Florida
Metro Business Center
Phoenix, Arizona 10.5% 80% - $ 8,836,989
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
</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. In
the second quarter of 1996, the joint venture agreement was amended, whereby the
Partnership's venture partner became an indirect limited partner. Accordingly,
this investment has been accounted for as a wholly-owned property since April 1,
1996. (See Note 4.)
In connection with the ownership restructuring, the Partnership agreed to
release the affiliate of the venture partner from its guarantee upon payment to
the Partnership of $650,000. The Partnership received $250,000 at the time the
agreement was executed. During the third quarter of 1996, the Partnership
received an additional $263,563. The first payment was accounted for as a
reduction of previously accrued investment income. The second payment was
accounted for as a reduction of the Partnership's investment in the property.
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 was to mature in October 1996 and was secured by the venture partner's
interest in the joint venture. Effective January 1, 1996, the joint venture
agreement was amended to grant the Partnership full control over management
decisions, beginning July 1, 1996. As full control over the operation of this
investment was not transferred until July 1, 1996, the Partnership accounted for
this investment as a joint venture until that date.
Effective December 30, 1996, the property owned by the joint venture was
distributed to the venture partners as tenants-in-common. The Partnership,
however, retained its overall decision-making authority. The property interest
distributed to the Hewson affiliate is encumbered by the aforementioned loan to
the Hewson affiliate. The note was amended to mature on February 1, 1997 and
<PAGE>
is secured by a recorded deed-of-trust which provides that the note is due upon
the sale of the collateral. In connection with this transaction, the Partnership
obtained the option to purchase the tenancy-in-common interest of the Hewson
affiliate at its fair market value beginning February 1, 1997.
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: $1,176,271
in 1997, $1,115,722 in 1998, $1,007,807 in 1999, $411,261 in 2000 and 2001, and
$1,096,697 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: $332,474 in 1997, $158,600 in 1998 and $68,325
in 1999.
Sale of 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 contributed a total of $10,985,575 to the venture.
On October 10, 1996, the joint venture sold its property for a total sales price
of $9,540,860. In conjunction with this sale, the joint venture was also
dissolved. After closing costs, the Partnership received proceeds of $9,333,325
and recognized a gain on the sale of $1,055,591 ($11 per limited partnership
unit.) A disposition fee of $286,226 was accrued but not paid to AEW. A
capital distribution to the limited partners was made on October 24, 1996 in the
aggregate amount of $9,214,709 ($97 per limited partnership unit).
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 in Rancho Cucamonga, California. 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
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 AEW. A capital distribution to the limited partners was made on January
26, 1996 in the aggregate amount of $5,224,835 ($55.00 per limited partnership
unit).
<PAGE>
Summarized Financial Information
- --------------------------------
The following summarized financial information is presented in the
aggregate for the joint ventures (two in 1996 and five in 1995):
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation
of $2,882,980 and
$10,623,335, respectively $19,857,292 $41,201,074
Other 466,934 1,224,883
----------- -----------
20,324,226 42,425,957
Liabilities 76,032 314,534
----------- -----------
Net assets $20,248,194 $42,111,423
=========== ===========
</TABLE>
Results of Operations
---------------------
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
Rental income $4,926,504 $7,364,285 $9,306,359
Other income 138,669 173,436 291,152
---------- ---------- ----------
5,065,173 7,537,721 9,597,511
---------- ---------- ----------
Expenses
Operating expenses 1,690,232 2,491,930 3,139,433
Depreciation and amortization 1,038,931 1,583,687 2,430,786
---------- ---------- ----------
2,729,163 4,075,617 5,570,219
---------- ---------- ----------
Net income $2,336,010 $3,462,104 $4,027,292
========== ========== ==========
</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.
The Rancho Cucamonga investment was sold on December 30, 1994 and the
Decatur TownCenter II investment was sold on October 10, 1996. The Palms
Business Center, Reflections and Metro Business Center investments were
converted to wholly-owned properties on January 1, 1995, April 1, 1996 and July
1, 1996, respectively. The above amounts include results of operations through
those dates.
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 has been accounted for as a wholly-owned property.
The carrying value of the joint venture investment at conversion ($12,519,961)
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. As of December 31, 1996, $130,000 of the initial
obligation remains unpaid.
<PAGE>
The buildings and improvements (fifteen office/industrial buildings in Las
Vegas, Nevada) are being depreciated over 25 years, beginning January 1, 1995.
Reflections
Effective April 1, 1996, the Reflections joint venture was restructured,
whereby the Partnership's venture partner became an indirect limited partner.
Accordingly, the investment has been accounted for as a wholly-owned property
since that date. The carrying value of the joint venture investment at
conversion ($10,469,511) was allocated to land, building and improvements and
other net operating assets.
The buildings and improvements (a multi-family apartment complex in Fort
Meyers, Florida) are being depreciated over 25 years, beginning April 1, 1996.
Metro Business Center
Effective July 1, 1996, the Partnership obtained control over all
management decisions related to the properties owned by the Metro Business
Center joint venture (and subsequently by the tenants-in common). (See Note 3.)
Since that date, the investment has been accounted for as a wholly-owned
property. The carrying value of the joint venture investment at conversion
($5,889,261) was allocated to land, buildings and improvements, and other net
operating assets.
The buildings and improvements (four office/warehouse buildings in Phoenix,
Arizona) are being depreciated over 25 years, beginning July 1, 1996.
The following is a summary of the Partnership's investment in properties
(three in 1996 and one in 1995):
<TABLE>
<CAPTION>
Assets and Liabilities
----------------------
December 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Land $ 6,523,605 $ 3,072,333
Buildings and improvements
and other capitalized costs 22,122,254 9,780,823
Accumulated depreciation and amortization (1,171,576) (444,790)
Payable to venture partner (130,000) (230,000)
Net operating liabilities (139,412) (70,076)
----------- -----------
$27,204,871 $12,108,290
=========== ===========
</TABLE>
Tenant leases provide for minimum rents, subject to periodic adjustments.
Tenants are also generally obligated to reimburse their pro-rata share of
operating expenses. The minimum rents due under non-cancelable operating leases
at all of the Partnership's properties are as follows: $2,209,687 in 1997;
$1,080,306 in 1998; $415,545 in 1999; $149,560 in 2000, and $65,480 thereafter.
<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,
----------------------------------------
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Net income per financial
statements $4,392,513 $3,912,897 $3,752,101
Timing differences:
Joint venture earnings 539,479 978,808 1,092,778
Depreciation and amortization 230,922 125,347 26,525
Expenses 253,552 28,383 244,047
Gain (loss) on sale (173,256) - 756,363
---------- ---------- ----------
Taxable income $5,243,210 $5,045,435 $5,871,814
========== ========== ==========
</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. As a result of returns of capital
from sales transactions, the adjusted capital contribution per limited
partnership unit was reduced from $1,000 to $918 in 1993, to $863 in 1995 and to
$766 in 1996. 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, 1996 were made on January 30, 1997 in the aggregate amount of
$1,138,045 ($11.86 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, 1996
<TABLE>
<CAPTION>
Initial Cost to
the Partnership
----------------------------------------------------------------------
Buildings & Other Net
Description Land Improvements Operating Liabilities
- ----------- -------------------- ------------------- ---------------------
<S> <C> <C> <C>
50% interest in
Morf VI Venture. See Note B
Owners of two single story -------------------------------------------------
office/research and
development buildings in
Frederick, Maryland.
34.75% interest in See Note B
Gateway 51 Partnership. -------------------------------------------------
The Partnership has constructed
six office and research and
development buildings, and owns
land in Columbia, Maryland.
----------------------------------------------------------------------
Total Joint Ventures
======================================================================
Las Vegas, NV
-Rancho Road Associates $3,072,333 $9,729,055 ($281,424)
Fort Myers, FL
- Lee Partners 1,571,173 8,653,313 245,029
Phoeniz, AZ
-Copley/Hewson Northwest 1,880,099 3,879,241 129,921
----------------------------------------------------------------------
Total Wholly-Owned Properties 6,523,605 22,261,609 93,526
----------------------------------------------------------------------
<CAPTION>
Costs Subsequent Gross amount at which
to Acquisition Carried at Close of Per
----------------------------------- ---------------------------------------------
Change in
Improvements Working Buildings & Other Net
Description Capital Land Improvements Operating Liabilities
------------ ------------- ---------- -------------- -----------------------
<S> <C> <C> <C> <C> <C>
50% interest in
Morf VI Venture.
Owners of two single story ----------------------------------------------------------------------------------
office/research and
development buildings in
Frederick, Maryland.
34.75% interest in
Gateway 51 Partnership. ----------------------------------------------------------------------------------
The Partnership has constructed
six office and research and
development buildings, and owns
land in Columbia, Maryland.
----------------------------------------------------------------------------------
Total Joint Ventures
==================================================================================
Las Vegas, NV
-Rancho Road Associates $51,768 $189,756 $3,072,333 $9,780,823 ($91,668)
Fort Myers, FL
- Lee Partners 42,591 (606,078) 1,571,173 8,695,904 (361,053)
Phoeniz, AZ
-Copley/Hewson Northwest 29,850 (131,440) 1,880,099 3,909,091 (1,519)
----------------------------------------------------------------------------------
Total Wholly-Owned Properties 124,209 (547,762) 6,523,605 22,385,818 (454,240)
----------------------------------------------------------------------------------
<CAPTION>
Accumulated Date of Date Depreciable
Description Total Depreciation Construction Acquired Life
- ----------- -------------------- -------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
50% interest in
Morf VI Venture.
Owners of two single story $4,722,717 N/A 1987 12/22/87 50 Years
office/research and
development buildings in
Frederick, Maryland.
34.75% interest in
Gateway 51 Partnership. $11,010,803 N/A 1992 12/21/87 50 years
The Partnership has constructed
six office and research and
development buildings, and owns
land in Columbia, Maryland.
-----------
Total Joint Ventures $15,733,520
-----------
Las Vegas, NV
-Rancho Road Associates $12,761,488 ($894,659) 1988 12/29/86 25 Years
Converted to
wholly-owned 1/1/95
Fort Myers, FL 8/1/86 25 Years
- Lee Partners 9,906,024 (257,265) 1987 Converted to
wholly-owned 4/1/96
Phoeniz, AZ
-Copley/Hewson Northwest 5,787,671 (98,388) 1987 9/15/86 25 Years
Converted to
wholly-owned 7/1/96
---------------------------------
Total Wholly-Owned Properties 28,455,183 (1,250,312)
=================================
</TABLE>
<PAGE>
NEW ENGLAND PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
SCHEDULE III NOTE A
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Balance Conversion to Additions to Change in
as of Wholly-Owned Lease Additions to Write Down Property Working
Description 12/31/95 Property Commissions Property of Property Capital
- -------------------------- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fort Myers, FL.
- Lee Partners $0 $10,469,511 $0 $42,591 $0 ($606,078)
Las Vegas, NV.
- Rancho Road Associates 12,553,080 0 37,164 0 0 171,244
Phoenix, AZ
- Copley/Hewson Northwest 0 5,889,261 21,808 29,850 0 (153,248)
--------------------------------------------------------------------------------------------------
Total Wholly-Owned Property $12,553,080 $16,358,772 $58,972 $72,441 $0 ($588,082)
==================================================================================================
<CAPTION>
---------------------------------------------------------------------------------------
12/31/95 1996 12/31/96
Balance Accumulated Depreciation Accumulated
as of Depreciation and and Amortization Depreciation and
Description 12/31/96 Amortization Expense Amortization
- -------------------------- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fort Myers, FL.
- Lee Partners $9,906,024 $0 ($257,265) $257,265
Las Vegas, NV.
- Rancho Road Associates 12,761,488
444,790 (449,869) $894,659
Phoenix, AZ
- Copley/Hewson Northwest 5,787,671
0 (98,388) $98,388
--------------------------------------------------------------------------
Total Wholly-Owned Property $28,455,183 $444,790 ($805,522) $1,250,312
==========================================================================
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Schedule III NOTE B
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
CASH
PERCENT BALANCE INVESTMENT EQUITY 1996 AMORTIZATION DISTRIBUTION
OF AS OF IN JOINT INCOME/ OF DEFERRED FROM
DESCRIPTION OWNERSHIP 12/31/95 VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE
----------------- --------- ----------- ---------- -------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lee Partners 60% $10,659,267 $0 $161,081 ($1,550) ($349,287)
Copley/Hewson
Northwest Associates 80% 5,832,584 0 178,682 (2,005) (120,000)
MORF VI Venture 50% 4,691,768 0 594,788 (1,840) (561,999)
Decatur TownCenter II Associates 60% 8,325,253 0 225,436 (4,064) (555,117)
Gateway 51 Partnership 34.75% 10,957,955 0 820,617 (3,469) (764,500)
------------ -------- ---------- ---------------- -----------
$40,466,827 $0 $1,980,804 ($12,928) ($2,350,903)
============ ======== ========== ================ ===========
<CAPTION>
CONVERSION TO BALANCE
WHOLLY-OWNED 1996 AS OF
DESCRIPTION PROPERTY DISPOSALS 12/31/96
----------------- ------------ --------- --------
<S> <C> <C> <C>
Lee Partners ($10,469,511) $0 $0
Copley/Hewson
Northwest Associates (5,889,261) 0 0
MORF VI Venture 0 0 4,722,717
Decatur TownCenter II Associates 0 (7,991,508) 0
Gateway 51 Partnership 0 0 11,010,803
------------ ---------- ------------
($16,358,772) ($7,991,508) $15,733,520
============ =========== ============
</TABLE>
<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 and Company, LLP.............
Balance Sheet - December 31, 1996 and 1995...........................
Statement of Income - For the Years ended December 31,
1996, 1995 and 1994................................................
Statement of Changes in Partners' Capital - For the
Years ended December 31, 1996, 1995 and 1994.......................
Statement of Cash Flows - For the Years ended
December 31, 1996, 1995 and 1994...................................
Notes to Financial Statements........................................
</TABLE>
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
FINANCIAL REPORT
DECEMBER 31, 1996
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP APPEARS HERE]
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, 1996 and 1995, and the related statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1996, 1995 and 1994. 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, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
/s/ WOLPOFF & COMPANY, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 25, 1997
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
PROPERTY, AT COST - Notes 1 and 4
Land $ 4,966,738 $ 4,966,738
Building and Improvements 11,358,960 11,124,907
Preliminary Development Costs 42,247 42,247
Deferred Costs 1,131,070 1,050,284
---------------- ---------------
17,499,015 17,184,176
Less Accumulated Depreciation and Amortization 1,921,732 1,619,148
---------------- ---------------
PROPERTY, NET 15,577,283 15,565,028
---------------- ---------------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 195,955 156,930
---------------- ---------------
Receivables from Tenants
Rents and Expense Billings 37,166 -0-
Tenant Improvement Loans - Note 3 688 32,745
Deferred Rent Receivable - Note 1 44,947 41,080
---------------- ---------------
82,801 73,825
---------------- ---------------
Prepaid Expenses 42,572 36,270
---------------- ---------------
TOTAL OTHER ASSETS 321,328 267,025
---------------- ---------------
$ 15,898,611 $ 15,832,053
================ ===============
</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,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES
Accounts Payable and Accrued Expenses $ 41,112 $ 24,585
Tenant Security Deposits 2,409 2,409
----------- ===========
TOTAL LIABILITIES 43,521 26,994
PARTNERS' CAPITAL - Notes 1 and 2 15,855,090 15,805,059
----------- ===========
$15,898,611 $15,832,053
=========== ===========
</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,
------------------------------------------------
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
REVENUE - Notes 1 and 6
Gross Rent Potential $ 1,684,997 $ 1,676,953 $ 1,485,628
Less Vacancies 108,412 133,073 314,307
-------------- ------------ ------------
Net Rental Income 1,576,585 1,543,880 1,171,321
Expense Reimbursements from Tenants 364,873 326,449 324,854
Interest and Other Income 18,163 23,511 10,929
-------------- ------------ ------------
TOTAL REVENUE 1,959,621 1,893,840 1,507,104
-------------- ------------ ------------
OPERATING EXPENSES
Real Property Taxes 207,855 191,439 188,523
Building and Grounds Maintenance 157,314 121,868 113,127
Management Fees - Note 4 57,542 57,915 49,122
General and Administrative 25,856 13,558 32,896
Utilities 24,890 21,545 24,660
Bad Debts -0- -0- 11,929
Insurance 9,292 9,992 5,291
-------------- ------------ ------------
TOTAL OPERATING EXPENSES 482,749 416,317 425,548
-------------- ------------ ------------
OPERATING INCOME 1,476,872 1,477,523 1,081,556
ADJUSTMENTS TO ARRIVE AT NET INCOME
Depreciation and Amortization 302,585 288,896 308,697
Abandonment of Tenant Improvements 24,256 -0- -0-
-------------- ------------ ------------
326,841 288,896 308,697
-------------- ------------ ------------
NET INCOME - Note 5 $ 1,150,031 $ 1,188,627 $ 772,859
============== ============ ============
</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,
--------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $20,267,826 $20,267,826 $17,744,733
Current Year -0- -0- 2,523,093
------------- ------------- ------------
20,267,826 20,267,826 20,267,826
------------- ------------- ------------
CAPITAL PLACEMENT FEE
Prior Years (202,678) (202,678) (177,447)
Current Year -0- -0- (25,231)
------------- ------------- -----------
(202,678) (202,678) (202,678)
------------- ------------- -----------
DISTRIBUTIONS
Prior Years (6,948,893) (5,748,893) (4,543,893)
Current Year (1,100,000) (1,200,000) (1,205,000)
------------- ------------- -----------
(8,048,893) (6,948,893) (5,748,893)
------------- ------------- -----------
ACCUMULATED INCOME
Prior Years 2,688,804 1,500,177 727,318
Current Year 1,150,031 1,188,627 772,859
------------- ------------- -----------
3,838,835 2,688,804 1,500,177
------------- ------------- ------------
TOTAL PARTNERS' CAPITAL $15,855,090 $15,805,059 $15,816,432
============= ============= ============
</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,
--------------------------------------------
1996 1995 1994
-------------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,150,031 $ 1,188,627 $ 772,859
-------------- ----------- -------------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization 302,585 288,896 308,697
Abandonment of Tenant Improvements 24,256 -0- -0-
Change in Receivables from Tenants, Net of Allowance (41,033) 53,222 (61,280)
Increase in Accounts Payable and Accrued Expenses 16,526 19,400 3,807
Increase in Prepaid Expenses (6,302) (15,334) 3,764
-------------- ----------- -------------
Total Adjustments 296,032 346,184 254,988
Net Cash Provided by Operating Activities 1,446,063 1,534,811 1,027,847
-------------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Building and Improvement Costs (258,309) (180,668) (2,776,353)
Land Costs -0- (6,400) (15,516)
Leasing Costs (80,786) (125,830) (119,483)
Decrease in Tenant Security Deposits -0- (6,771) -0-
Change in Tenant Improvement Loans 32,057 73,871 (18,972)
-------------- ----------- -------------
Net Cash Used by Investing Activities (307,038) (245,798) (2,930,324)
-------------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions -0- -0- 2,523,093
Capital Placement Fee -0- -0- (25,231)
Distributions to Partners (1,100,000) (1,200,000) (1,205,000)
-------------- ----------- -------------
Net Cash Provided (Used)
by Financing Activities (1,100,000) (1,200,000) 1,292,862
--------------------------------------------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 39,025 89,013 (609,615)
CASH AND CASH
EQUIVALENTS, BEGINNING 156,930 67,917 677,532
-------------- ----------- --------------
CASH AND CASH
EQUIVALENTS, ENDING $ 195,955 $ 156,930 $ 67,917
============== =========== =============
</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, 1996
-----------------
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Gateway 51 Partnership (A Maryland General Partnership) (the
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 12/31/96 12/31/95 12/31/94
-------- ---------- ------------ ---------------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
A 46,840 3/1/91 Multiple 92% 92% 73%
B 21,991 9/1/90 AVNET 100% 100% 100%
C 38,182 7/15/91 EVI, Inc. 100% 76% 100%
F 35,532 2/1/92 Multiple 82% 82% 92%
D-E 45,951 8/8/94 Columbia National 100% 100% 100%
--------- --------- --------- --------
188,496 94% 90% 91%
========= --------- --------- --------
</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.
Use of Estimates
----------------
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions by management regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996
-----------------
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 1,117,515 Lease Terms
------------
$1,131,070
============
</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
-----------------------------
DECEMBER 31, 1996
-----------------
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, 1996, 1995 and 1994, total
capital contributions amounted to $20,267,826.
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 $1,100,000, $1,200,000 and $1,205,000 during
1996, 1995 and 1994, respectively. As of December 31, 1996, 1995 and
1994, unpaid priority returns amounted to $6,888,115, $5,427,949 and
$3,832,711, 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
Loan Interest
Tenant Amount Rate Due Date 12/31/96 12/31/95
-------------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
HMSS $ 28,741 10.78% $ -0- $ 18,917
Pediatric Care 16,580 12.00% 3/31/97 688 5,114
HMSS 12,310 10.78% -0- 8,714
---------- --------- ---------
$ 57,631 $ 688 $ 32,745
========== ========= =========
</TABLE>
Note 4 - RELATED PARTY TRANSACTIONS
Management Fees
---------------
The Partnership has entered into an agreement with Manekin
Corporation, a related entity, 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. The agreement
was modified to adjust the fee to 3% effective January 1, 1995.
Leasing Commissions
-------------------
Leasing commissions in the amount of $80,786, $74,448 and $73,056 were
paid to related parties during 1996, 1995 and 1994, respectively.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1996
-----------------
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 $1,150,031 $2,688,804 $3,838,835
Additional Depreciation (112,177) (529,050) (641,167)
Lease-Up Period Items
Capitalized for GAAP -0- 4,264 4,264
Deferred Rent (3,867) (41,080) (44,947)
Prepaid Property Taxes (13,740) (25,730) (39,470)
------------- ------------ -----------
Taxable Income $1,020,247 $2,097,208 $3,117,515
============== ============= ============
</TABLE>
Note 6 - LEASES
The following is a schedule of future minimum lease payments to be
received under noncancelable operating leases at December 31, 1996:
<TABLE>
<S> <C>
Year Ending December 31, 1997 $1,176,271
1998 1,115,722
1999 1,007,807
2000 411,261
2001 411,261
Thereafter 1,096,697
-------------
$5,219,019
=============
</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 25, 1997
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
SCHEDULE OF PARTNERS' CAPITAL
-----------------------------
DECEMBER 31, 1996
-----------------
<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
----------------- -------------- ----------- ------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- (202,678)
----------------- -------------- ----------- ------------
DISTRIBUTIONS - Note 2
Prior Years (4,685,455) (2,263,438) -0- (6,948,893)
Current Year (764,500) (335,500) -0- (1,100,000)
----------------- -------------- ----------- ------------
(5,449,955) (2,598,938) -0- (8,048,893)
----------------- -------------- ----------- ------------
ACCUMULATED INCOME
Prior Years 1,868,721 820,083 -0- 2,688,804
Current Year 799,272 350,759 -0- 1,150,031
----------------- -------------- ----------- ------------
2,667,993 1,170,842 -0- 3,838,835
----------------- -------------- ----------- ------------
PARTNERS' CAPITAL, 12/31/96 $11,197,750 $ 4,657,340 $ -0- $15,855,090
================= ============== =========== ============
</TABLE>
_______________
See Independent Auditor's Report on Supplementary Information.
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
--------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
-----------------------------------------------------------
DECEMBER 31, 1996
-----------------
<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
----------------- -------------- ----------- ------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- (202,678)
----------------- -------------- ----------- ------------
DISTRIBUTIONS - Note 2
Prior Years (4,685,455) (2,263,438) -0- (6,948,893)
Current Year (764,500) (335,500) -0- (1,100,000)
----------------- -------------- ----------- ------------
(5,449,955) (2,598,938) -0- (8,048,893)
----------------- -------------- ----------- ------------
ACCUMULATED INCOME
Prior Years 1,459,731 637,477 -0- 2,097,208
Current Year 709,072 311,175 -0- 1,020,247
----------------- -------------- ----------- ------------
2,168,803 948,652 -0- 3,117,455
----------------- -------------- ----------- ------------
PARTNERS' CAPITAL, 12/31/96 $10,698,560 $ 4,435,150 $ -0- $15,133,710
================= ============== =========== ============
</TABLE>
_______________
See Independent Auditor's Report on Supplementary Information.
<PAGE>
EXHIBIT INDEX
- -------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- -------
NUMBER NUMBER
------
<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>
<PAGE>
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-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- -------
NUMBER NUMBER
------
<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>
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- -------
NUMBER NUMBER
-------
<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>
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- -------
NUMBER NUMBER
------
<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.
10RR. Letter Agreement dated as of January 1, 1996 by and
between the Registrant and Hewson Properties, Inc.
10SS. Amended and Restated Pooling Agreement dated as of
December 1, 1995 by and among the Registrant,
Montgomery-Oxford Associates Limited Partnership,
Waters Landing-Oxford Associates Limited Partnership
and related documents dated as of December 1, 1995 and
May 14, 1996.
10TT. Tenancy in Common Agreement dated as of December 30,
1996 by and among the Registrant and Hewson Properties, Inc.
</TABLE>
___________________________________________________________
*Previously filed and incorporated herein by reference
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 31, 1997 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 31, 1997
- -----------------------
Joseph W. O'Connor
Principal Financial and
Accounting Officer of the
/s/ Daniel C. Mackowiak Managing General Partner March 31, 1997
- ------------------------
Daniel C. Mackowiak
Director of the
/s/ Daniel J. Coughlin Managing General Partner March 31, 1997
- -----------------------
Daniel J. Coughlin
Director of the
/s/ James J. Finnnegan Managing General Partner March 31, 1997
- -----------------------
James J. Finnegan
<PAGE>
EXHIBIT 10RR
Letter Agreement dated as of January 1, 1996 between the Registrant
and Hewson Properties, Inc.
<PAGE>
EXHIBIT 10RR
January 1, 1996
Hewson Properties, Inc.
4636 E. University
Suite 200
Phoenix, Arizona 85034
Re: Hewson/Copley Northwest Associates
----------------------------------
Ladies and Gentlemen:
Hewson Properties, Inc., a California corporation ("Developer"), and New
England Life Pension Properties IV; a Real Estate Limited Partnership, a
Massachusetts limited partnership ("NELP IV"), constitute all of the partners in
Hewson/Copley Northwest Associates (the "Partnership"), a California general
partnership which was formed pursuant to that certain Joint Venture Agreement
dated as of September 15, 1986, which agreement was amended and restated in its
entirety on September 15, 1986 (as so amended and restated, and thereafter
amended through the date hereof, the "Partnership Agreement").
Pursuant to our discussions, Developer and NELP IV desire to modify certain
terms of the Partnership Agreement. This letter is intended to reflect the
agreement of NELP IV and Developer with respect to such modifications, and other
matters relating to the business and affairs of the Partnership. This letter
shall constitute an amendment to the Partnership Agreement. Capitalized terms
used herein, and not otherwise defined herein, shall have the respective
meanings ascribed to them in the Partnership Agreement.
Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Developer and NELP IV hereby agree
as follows:
(a) From and after the date of this letter, NELP IV shall have full
and complete control of the management and any and all other decisions
associated with the business, operations and affairs of the Partnership,
provided, that, NELP IV shall not have authority to cause the Partnership (x) to
- --------------
offer for sale the real property owned by the Partnership, or (y) to consummate
a sale or other voluntary disposition of all or any portion of the real property
owned by the Partnership, in either case prior to July 1, 1996, unless Developer
has approved the terms of any such offer or
<PAGE>
Hewson Properties, Inc.
Page 2
such sale or voluntary disposition. From and after July 1, 1996, Developer shall
have no right to approve or disapprove any such sale or disposition, including
without limitation but subject to paragraph (g) below, any sale or disposition
of Partnership assets to an affiliate of NELP IV, and NELP IV, acting alone,
shall have the authority to cause the Partnership to sell or otherwise dispose
of such assets on terms determined in the sole and absolute discretion of NELP
IV.
(b) Without limiting the generality of paragraph (a), NELP IV shall
be entitled to make all decisions respecting the conduct of the Partnership and
its business, without the consent or approval of Developer, including without
limitation, the following:
1. Consummating leases in the Project or any portion thereof, on such terms as
NELP IV may approve;
2. Consenting to any rezoning or subdivision of the Land or any other material
change in the legal status thereof;
3. Initiating, defending, adjusting, settling or compromising any claim,
action, suit or judgement by or against the Partnership;
4. Releasing, compromising, assigning or transferring any claims, rights or
benefits of the Partnership;
5. Confessing a judgement against the Partnership or submitting a Partnership
claim to arbitration;
6. Distributing any cash of the Partnership, or establishing any reserve;
7. Filing on behalf of the Partnership any Federal or state income tax or
information returns;
8. Spending money or entering into any contract or agreement (or series
thereof) of any nature whatsoever with respect to the Partnership or the
Project (or any portion thereof), with any party, including without
limitation, with an Affiliate of NELP IV;
9. Subject to the restrictions contained in Section (a) above, assigning the
rights of the Partnership in any of its property;
<PAGE>
Hewson Properties, Inc.
Page 3
10. Selecting attorneys or Accountants, or property managers, for the
Partnership and/or the project;
11. Advertising or marketing the Project;
12. Granting easements or other property rights by documents that are
frequently recorded;
13. Giving any approval or exercising any right (including rights to terminate
or amend) under any management, construction or other contract to which the
Partnership or the Project is a party;
14. Entering into any amendment, modification, revision, supplement or
rescission with respect to any of the foregoing.
NELP IV shall be the tax matters partner of the Partnership.
(c) NELP IV shall devote itself to the business of the Partnership to
the extent it, in its sole discretion, reasonably determines necessary for the
efficient carrying on thereof, without compensation therefor except as
specifically provided in the Partnership Agreement; provided, however, that
Developer agrees and acknowledges that (i) NELP IV shall not be required, nor is
it expected, to devote itself to the business of the Partnership on a full-time
basis, (ii) the Project shall be managed and maintained by a property manager
pursuant to a property management agreement, and NELP IV may rely on such
property 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 and (iii) NELP IV shall
be permitted to delegate to a third party such other of its duties and
obligations under the Partnership Agreement as it may determine in its sole
discretion.
(d) Subject to the restrictions contained in paragraph (a), with
respect to all of its obligations, powers, and responsibilities under the
Partnership Agreement, NELP IV 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.
<PAGE>
Hewson Properties, Inc.
Page 4
(e) Without limiting the foregoing, Developer (in its capacity as a
Partner in the Partnership) hereby waives, to the fullest extent permitted by
law, any and all rights it may have at law or in equity to vote on, approve or
consent to any matter or to participate in the management, business or
operations of the Partnership, except to the extent specifically provided
herein.
(f) NELP IV shall use reasonable efforts to perform its duties under
the Partnership Agreement, including, without limitation employing necessary
personnel, on and off-site, in connection with the business of the Partnership.
(g) Without limiting the other provisions of this letter, NELP IV
shall have the right from and after the date of this letter (but subject to the
provisions of paragraph (a) above in respect of sales prior to July 1, 1996) to
sell any of the assets of the Partnership for their fair market value to any
affiliate of NELP IV and/or to any entity managed or advised by Copley Real
Estate Advisors, Inc. (or any affiliate thereof). For purposes of any such sale,
the fair market value of any such assets shall be determined by NELP IV in its
reasonable discretion. Developer agrees that if there is any dispute or
disagreement regarding any sale pursuant to this paragraph (g), including,
without limitation, the determination of the fair market value of the assets
sold, then Developer's sole and exclusive remedy at law and/or in equity shall
be to bring a cause of action seeking as its sole remedy to recover the
difference between (i) the amount Developer received as a result of the sale of
such assets as contemplated by this paragraph (g) and (ii) the amount the
Developer would have received if such assets had been sold for their fair market
value at the time of the sale (as determined by the court in such cause of
action). Without limiting the generality of the foregoing, Developer expressly
waives any other rights and/or remedies it may have at law and/or at equity with
respect to the transfer of any assets under this paragraph (g) including,
without limitation, any right or remedy (x) to recover any fees or compensation
that Developer (or its Affiliates) would have received if the assets had not
been sold, (y) to enjoin or stay the consummation of such sale or (z) to bring
an action for punitive, consequential or any other damages.
(h) NELP IV and Developer agree that third parties may rely on this
letter as an amendment to the Partnership Agreement. In addition, third parties
shall not be required to determine the authority of NELP IV or Developer to
execute this letter or upon
<PAGE>
Hewson Properties, Inc.
Page 5
the authority of any person signing this letter on behalf of the Developer or
NELP IV.
(i) Developer agrees to perform any further acts, and to execute and
deliver any further documents and instruments, as may be necessary to implement
the provisions of this letter and the transactions contemplated herein. Should
any litigation or arbitration proceeding be commenced between the parties
concerning any provision of this letter, the prevailing party in such litigation
or arbitration shall be entitled to reasonable attorneys fees and costs.
If this letter correctly sets forth the terms of our agreement, please so
indicate by signing this letter in the space provided below.
NEW ENGLAND LIFE PENSION PROPERTIES IV; A REAL
ESTATE LIMITED PARTNERSHIP
By: FOURTH COPLEY CORP., a Massachusetts
corporation, its Managing General Partner
By: /s/ Sandra H. O'Connor
-------------------------------------
Authorized Officer
Agreed to and Accepted
as of the date set forth
above:
HEWSON PROPERTIES, INC.,
a California corporation
By /s/ Ernest F. Modzelewski
-----------------------------
Authorized Officer
<PAGE>
EXHIBIT 10SS
Amended and Restated Pooling Agreement dated as of December 1, 1995 by and among
the Registrant, Montgomery-Oxford Associates Limited Partnership, Waters
Landing-Oxford Associates Limited Partnership and related documents dated
as of December 1,1995 and May 14, 1996
<PAGE>
EXHIBIT 10SS
AMENDED AND RESTATED POOLING AGREEMENT
DATED AS OF DECEMBER 1, 1995 BY AND AMONG
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP ("NELPP"),
MONTGOMERY-OXFORD ASSOCIATES LIMITED PARTNERSHIP
("MONTGOMERY-OXFORD"),
WATERS LANDING-OXFORD ASSOCIATES LIMITED PARTNERSHIP
("WATERS LANDING-OXFORD")
AND RELATED DOCUMENTS DATED AS OF
DECEMBER 1, 1995 AND MAY 14, 1996
1. Amended and Restated Pooling Agreement
2. Second Amendment to Partnership Agreement of Lee Partners
3. Second Amendment to General Partnership Interest Pledge and Security
Agreement
4. NELPP Reflections Associates Limited Partnership Agreement of Limited
Partnership
5. Payment Agreement
<PAGE>
AMENDED AND RESTATED POOLING AGREEMENT
--------------------------------------
This Amended and Restated Pooling Agreement (the "Agreement") dated as of
December 1, 1995 is by and among New England Life Pension Properties IV; A Real
Estate Limited Partnership, a Massachusetts limited partnership ("NELPP"),
Montgomery-Oxford Associates Limited Partnership, a Maryland limited partnership
("Montgomery-Oxford"), Waters Landing-Oxford Associates Limited Partnership, a
Maryland limited partnership ("Waters Landing-Oxford") and Largo-Oxford Limited
Partnership, a Maryland limited partnership ("Largo-Oxford"), and amends,
restates and supersedes in its entirety that certain Agreement dated as of March
30, 1990 (the "Original Agreement") by and among NELPP, Montgomery-Oxford,
Waters Landing-Oxford, Largo-Oxford and those other entities set forth on the
signature pages hereto under the caption "Withdrawing Entities."
Montgomery-Oxford, Waters Landing-Oxford and Largo-Oxford are hereinafter
collectively referred to as the "Oxford Entities" and individually as an "Oxford
Entity."
WHEREAS, Montgomery-Oxford is a partner in Hunt Club Partners, a Maryland
general partnership; Waters Landing-Oxford is a partner in Waters Landing
Partners, a Maryland general partnership; and Largo-Oxford is a partner in Largo
Partners, a Maryland general partnership (Hunt Club Partners, Waters Landing
Partners and Largo Partners are hereinafter collectively referred
<PAGE>
to as the "Housing Partnerships" and individually as a "Housing Partnership");
and
WHEREAS, NELPP and the Oxford Entities wish to provide for the funding of
certain obligations owed by the Oxford Entities to NELPP.
NOW, THEREFORE, the parties hereto agree to amend and restate the Original
Agreement as follows:
1. All cash or other consideration otherwise payable to the Oxford
Entities by reason of their ownership of interests in the Housing Partnerships,
including without limitation (i) all distributions from the Housing Partnerships
to the Oxford Entities of cash flow and proceeds of sales, refinancings or other
capital transactions and (ii) the proceeds from any sale or other transfer by
any Oxford Entity of its ownership interest in any Housing Partnership (subject
to the further provisions of this Section 1), shall be paid as follows:
(a) First, 100% to NELPP until NELPP shall have received an aggregate
of Four Hundred Thousand Dollars ($400,000) pursuant to this Section 1(a);
(b) Second, 100% to the Oxford Entities until the Oxford Entities
shall have received an aggregate of Four Hundred Thousand Dollars ($400,000)
pursuant to this Section 1(b); and
(c) Third, 50% of cash flow only to NELPP until NELPP shall have
received an aggregate of One Million Three Hundred Sixty Thousand Dollars
($1,360,000) pursuant to this Section 1(c)
-2-
<PAGE>
(exclusive of payments pursuant to Section 1(a) above), the remaining 50% of
cash flow (and all proceeds of sales, refinancings or other capital transactions
and all proceeds from any sale or other transfer by any Oxford Entity of its
interest in a Housing Partnership after the full satisfaction of the obligations
set forth in Section 1(a) above) to be paid to the Oxford Entity or Entities
entitled thereto.
The Oxford Entities may prepay all or any portion of their obligations
hereunder at any time without premium or penalty.
This Agreement shall terminate and be of no further force and effect when
NELPP shall have received all of the monies to which it is entitled pursuant to
this Section 1, and upon such termination the Oxford Entities shall owe no
further obligations to NELPP.
2. As security for the prompt and complete payment and performance of its
obligations under Sections 1(a) and 1(c) hereof, each Oxford Entity hereby
grants to NELPP a security interest in all of its right, title and interest in
and to (i) all of the cash distributions of operating cash flow payable to it by
the respective Housing Partnership in which it is a partner, and (ii) with
respect to its obligations under Section 1(a) hereof only, all of the cash
distributions of sale and refinancing proceeds and distributions upon
liquidation payable to it by the respective Housing Partnership in which it is a
partner, and (iii) to the extent not otherwise included, all products and
-3-
<PAGE>
proceeds of all of the foregoing. Each Oxford Entity hereby irrevocably appoints
NELPP its attorney-in-fact, which appointment is coupled with an interest, to
execute and deliver such documents, including without limitation financing
statements on Form UCC-1, as may be necessary or appropriate to effect the grant
of this security interest. Any such financing statements shall be released upon
the satisfaction of all of the obligations which they secure. Without limiting
the foregoing, each Oxford Entity confirms the grant of a security interest
pursuant to the Original Agreement.
3. Each Oxford Entity hereby represents and warrants to NELPP that it
owns its interest in its respective Housing Partnership free and clear of all
liens, charges or encumbrances other than encumbrances in favor of ML Oxford
Finance Corp., all of which are being subordinated on the date hereof to the
security interest granted hereunder.
4. Each Oxford Entity shall deliver to NELPP a copy of each of the
audited financial statements for the respective Housing Partnership in which it
is a partner within 10 days of receipt of such audited financial statements by
the Oxford Entity.
5. Each of the parties hereto represents and warrants to each of the
other parties hereto that the person signing on behalf of such party is
authorized to execute and deliver this Agreement on behalf of such party and
that all corporate and/or partnership
-4-
<PAGE>
action necessary to approve the execution and delivery of this Agreement by such
party has been taken.
6. The entities set forth on the signature pages hereto under the caption
"Withdrawing Entities" are executing this Agreement to signify their consent to
the amendment and restatement of the Original Agreement, their withdrawal as
parties hereunder and their acknowledgment that all obligations and duties owed
to them under the Original Agreement have been satisfied or are hereby waived.
7. 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 documents, and will take all such other actions as any party hereto may
reasonably request from time to time in order to effectuate the provisions and
purposes hereof.
8. The sale or other disposition of the Reflections Apartments, which is
owned by a partnership in which NELPP is a partner, shall not terminate any of
the obligations of the Oxford Entities hereunder.
9. This Agreement constitutes the complete and exclusive statement of the
Agreement among the parties hereto regarding the subject matter hereof and
supersedes the Original Agreement in all respects.
10. This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts.
-5-
<PAGE>
11. The terms and provisions of this Agreement shall be interpreted and
construed without regard to, and the parties hereby expressly waive and disclaim
any rule of law to the effect that ambiguous and conflicting terms or provisions
contained in this Agreement shall interpreted or construed against the party
which prepared this Agreement.
12. Each of the parties hereto agrees that nothing contained herein shall
constitute a waiver by any party of any rights that it may have under any other
documents, except as expressly provided herein, and the provisions of all such
other documents shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as with
the date and year first above written.
NEW ENGLAND LIFE PENSION
PROPERTIES IV; A REAL ESTATE
LIMITED PARTNERSHIP
By: Fourth Copley Corp.
By: /s/ Wesley M. Gardiner Jr.
--------------------------------
MONTGOMERY-OXFORD ASSOCIATES
LIMITED PARTNERSHIP
By: Oxford Investment
Corporation
By: /s/ James K. Lowe
--------------------------------
WATERS LANDING-OXFORD
ASSOCIATES LIMITED PARTNERSHIP
By: Oxford Investment
Corporation
By: /s/ James K. Lowe
--------------------------------
-6-
<PAGE>
LARGO-OXFORD LIMITED PARTNERSHIP
By: Oxford Investment
Corporation
By: /s/ James K. Lowe
------------------------------------
"WITHDRAWING ENTITIES"
RESTON-OXFORD ASSOCIATES
LIMITED PARTNERSHIP
BY: Oxford Investment
Corporation
By:/s/ James K. Lowe
--------------------------------
RESTON TWO-OXFORD
LIMITED PARTNERSHIP
By: Oxford Investment
Corporation
By:/s/ James K. Lowe
--------------------------------
-7-
<PAGE>
CENTERVILLE-OXFORD
NEW ENGLAND LIFE PENSION LIMITED PARTNERSHIP
PROPERTIES III; A REAL
ESTATE LIMITED PARTNERSHIP By: Oxford Investment
Corporation
By: Copley Properties By:/s/ James K. Lowe
Company III, Inc. ------------------------------
By:/s/ Wesley M. Gardiner Jr.
--------------------------
NEW ENGLAND PENSION SYRACUSE-OXFORD LIMITED
PROPERTIES V; A REAL PARTNERSHIP
ESTATE LIMITED PARTNERSHIP
By: Oxford Equities
By: Fifth Copley Corp. Corporation
By:/s/ Wesley M. Gardiner Jr. By:/s/ James K. Lowe
-------------------------- -------------------------------
WATERS LANDING - TWO OXFORD
LIMITED PARTNERSHIP
By: Oxford Equities
Corporation
By:/s/ James K. Lowe
------------------------------
LEE-OXFORD
LIMITED PARTNERSHIP
By: OAMCO XIII, L.L.C.
By:/s/ James K. Lowe
-------------------------------
-8-
<PAGE>
New England Mutual Life Insurance Company withdraws from that certain
Agreement dated as of March 30, 1990 among certain entities affiliated with
Oxford Development Corporation and certain entities advised by Copley Real
Estate Advisors, Inc. (the "Agreement") and acknowledges that all obligations
and duties owed to it under the Agreement have been satisfied or hereby waived.
NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
By: CREA, Limited Partnership
By: /s/ Helen Poorman
--------------------------------
<PAGE>
Copley Investors Limited Partnership and ONI Associates hereby withdraw
from that certain Agreement dated as of March 30, 1990 among certain entities
affiliated with Oxford Development Corporation and certain entities advised by
Copley Real Estate Advisors, Inc. (the "Agreement") and acknowledges that all
obligations and duties owed to them under the Agreement have been satisfied or
hereby waived.
COPLEY INVESTORS LIMITED PARTNERSHIP
By: Copley Management Partnership
By: Copley Advisors, Inc.
By: /s/ROBERT J. PLUMB
--------------------------------
ROBERT J. PLUMB
MANAGING DIRECTOR
ONI ASSOCIATES
By: Copley Investors Limited
Partnership
By: Copley Management
Partnership
By: Copley Advisors, Inc.
By: /s/ ROBERT J. PLUMB
------------------------------
ROBERT J. PLUMB
MANAGING DIRECTOR
<PAGE>
Copley Real Estate Advisors, Inc. hereby withdraws from that certain
Agreement dated as of March 30, 1990 among certain entities affiliated with
Oxford Development Corporation and certain entities advised by Copley Real
Estate Advisors, Inc. (the "Agreement") and acknowledges that all obligations
and duties owed to it under the Agreement have been satisfied or hereby waived.
COPLEY REAL ESTATE ADVISORS, INC.
By: /s/ PETER P. TWINING
--------------------------------
PETER P. TWINING
MANAGING DIRECTOR
<PAGE>
LEE PARTNERS
Second Amendment
to
Partnership Agreement of Lee Partners
WHEREAS, Lee Partners is a Maryland general partnership (the "Partnership")
governed by a Partnership Agreement dated as of August 1, 1986, as amended by a
First Amendment to Lee Partners Partnership Agreement dated as of October 7,
1986 (as so amended, the "Agreement");
WHEREAS, effective as of this date, the partners of the Partnership, New
England Life Pension Properties IV; A Real Estate Limited Partnership, a
Massachusetts limited partnership ("NELPP IV"), and Lee-Oxford Limited
Partnership, a Maryland limited partnership ("Lee-Oxford"), desire to evidence
(i) the distribution to Lee-Oxford of its entire interest in the Partnership and
the contribution of such interest to NELPP Reflections Associates Limited
Partnership, a Massachusetts limited partnership ("NRALP"), (ii) the
distribution to NELPP IV of a 2% interest in the Partnership and the
contribution of such interest to NRALP; and (iii) the substitution of NRALP for
Lee-Oxford as a partner of the Partnership; and
WHEREAS, NELPP IV and NRALP desire to amend the Agreement to provide that
NELPP IV be the managing general partner of the Partnership, and to revise the
terms and conditions of the Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Agreement as follows:
1. Section 1.3 is hereby deleted in its entirety, substituting therefor
the following:
"Section 1.3 Principal Office. The principal office of the Partnership
-----------------
shall be located in care of New England Life Pension Properties IV; A Real
Estate Limited Partnership, c/o Copley Real Estate Advisors, Inc., 399 Boylston
Street, Boston, Massachusetts 02116. The Managing General Partner may, at any
time and from time to time, change the location of the Partnership's principal
place of business and establish such additional place or places of business of
the Partnership as it may determine."
<PAGE>
2. NELPP IV shall be the managing general partner (the "Managing General
Partner") of the Partnership. The Managing General Partner and NRALP are herein
collectively referred to as the "Partners."
3. Sections 2.6 and 2.10 of the Agreement are hereby deleted in their
entirety.
4. Section 3.6 of the Agreement is hereby amended to provide that the
Interests of the Partners shall be:
NELPP IV 58%
NRALP 42%
5. The duties and responsibilities of "Developer" pursuant Sections 5.3,
6.1, 8.1, 8.2, 8.3, 8.4, 8.6, and 8.9 of the Agreement shall instead be
performed by NELPP IV, and all references in said Sections to "Developer" shall
instead be to "NELPP IV", and the references therein to "NELPP IV" shall instead
be to "NRALP."
6. Sections 9.1 through 9.9 of the Agreement are hereby deleted in their
entirety, substituting therefor the following:
"MANAGEMENT AND OPERATIONS
--------------------------
Section 9.1 Management of the Partnership.
-----------------------------
Notwithstanding any term or provision of this Agreement to the contrary, the
overall management and control of the business and affairs of the Partnership
shall be vested solely in the Managing General Partner. Except as expressly
provided below, the Managing General Partner, acting alone, shall have complete
authority to make any and all decisions, execute and deliver any and all
agreements, documents, certificates and other instruments and take any and all
actions on behalf of the Partnership including, without limitation, the
authority (a) to acquire by purchase, lease, exchange or otherwise, and to sell,
finance, refinance, encumber and otherwise deal with, any real or personal
property and (b) to borrow money and issue evidences of indebtedness or to
guarantee loans and to secure the same by mortgage, deed of trust, pledge or
other lien on any assets or property of the Partnership and to pay, prepay,
extend, amend or otherwise modify the terms of any such borrowings. Without
limiting the generality of the foregoing, the authority of the Managing General
Partner shall include the authority to sell all or substantially all of the
Project (other than to an Affiliate of the Managing General Partner, which shall
require the consent of NRALP), all on such terms and conditions as the Managing
General Partner shall determine in its sole discretion.
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<PAGE>
Notwithstanding the foregoing provisions of this Section 9.1, the consent
of NRALP shall be required (i) prior to the admittance of an additional general
partner to the Partnership and the admittance of a successor general partner in
the event NELPP IV for any reason ceases to act as the Managing General Partner;
and (ii) in connection with any transaction, the effect of which would be to
decrease the Interest of NRALP to a greater proportionate degree than the
Interest of the Managing General Partner is decreased in connection with such
transaction, whether the proposed transaction is with an unrelated, third party
or with an Affiliate of the Managing General Partner.
The Managing General Partner shall cause to be prepared and shall make
available to NRALP, as soon as it is available, an annual business plan or
annual management plan in connection with the Project, and shall keep NRALP
informed of any decisions made by the Managing General Partner having a material
effect on the Project as a whole. The Managing General Partner shall use
reasonable efforts in performing its duties under this Section and under Article
8. Whenever reasonably requested by NRALP, the Managing General Partner shall
render a just and faithful account of all dealings and transactions relating to
the business of the Partnership. The Managing General Partner shall receive no
compensation from the Partnership for the services provided under the Agreement,
except as may be otherwise provided herein.
Section 9.2 Limitations on NRALP. Except as otherwise expressly
--------------------
provided herein, NRALP shall not: (a) be permitted to take part in the control
of the business or affairs of the Partnership; (b) have any voice in the
management or operation of the Partnership's business or property; or (c) have
the authority or power in its capacity as a Partner to act as an agent for or on
behalf of the Partnership or any other partner, to do any act which would be
binding on the Partnership or any other Partner, or to incur any expenditures on
behalf of or with respect to the Partnership.
Section 9.3 Delegation of Duties. The Managing General Partner may
--------------------
at any time and from time to time, at Partnership expense, subcontract out or
delegate all or any portion of its duties under the Agreement to a property
manager, which property manager may be an Affiliate of a Partner, or may cause
the Partnership to engage a property manager, which property manager may perform
some or all of the Managing General Partner's duties hereunder. Notwithstanding
anything to the contrary in the
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<PAGE>
Agreement, the Managing General Partner shall not have any liability to NRALP
for failure to perform any of its duties under the Agreement, including, without
limitation, Articles 8 and 9 hereof, to the extent that the Managing General
Partner shall have so delegated such duties."
7. Sections 11.1 and 11.2 of the Agreement are hereby deleted in their
entirety, substituting therefor the following:
"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 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 a general partnership
interest in the limited partner in NRALP shall be a transfer for the purpose of
this Section 11.1 unless, following such transfer of a general partnership
interest, OIC, ODC or any of its Affiliates and/or Leo E. Zickler, is the
managing general partner with the power to make all business decisions
concerning the limited partner of NRALP; a transfer of a limited partnership
interest in the limited partner in NRALP shall also be a transfer for the
purpose of this Section 11.1 but shall be permitted so long as (A) effected
through an offering not constituting (i) an offering requiring compliance with
Regulation D promulgated under the Securities Act of 1933 or (ii) a public
offering under the Securities Act of 1933 or requiring compliance with state
"Blue Sky" laws or (B) consented to by NELPP IV in advance, such consent not to
be unreasonably withheld or delayed.
Section 11.2 [Intentionally Omitted.]"
8. Section 13.3 of the Agreement is hereby amended to provide that NELPP
IV shall be, or have the right to designate, the "Liquidating Trustee".
9. Section 14.1 of the Agreement is hereby amended by deleting the words
"and in the case of Developer to:" and the indented portion of Section 14.1
which follows such words, substituting therefor the following:
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<PAGE>
"and in the case of NRALP to:
c/o Copley Real Estate Advisors, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
with a copy to:
Oxford Realty Financial Group, Inc.
7200 Wisconsin Avenue, Suite 1100
Bethesda, Maryland 20814
Attention: General Counsel"
10. Section 14.19 of the Agreement and Exhibit J to the Agreement are
hereby deleted in their entirety.
11. In the event of a conflict between the provisions of this instrument
and the Agreement, the terms and conditions set forth in this instrument shall
control.
12. NELPP IV and Lee-Oxford hereby mutually release, waive, discharge,
remise and forever relinquish all claims, demands, obligations, liabilities and
causes of action of whatever kind or nature which each has or may have or might
assert now or in the future against each other or any one or more of their
respective officers, directors, shareholders, representatives, employees,
agents, partners, attorneys, accountants, consultants, successors and assigns
directly or indirectly, arising out of, based upon or in any manner connected
with the Partnership and the Agreement prior to the date hereof, other than (i)
any matters arising out of fraud or willful misconduct, (ii) warranties and
representations made in and continuing obligations under the Agreement, as
amended by this Second Amendment to Partnership Agreement, and (iii) the
obligations of Lee-Oxford and its affiliates pursuant to the NELPP IV Note and
NELPPIV Security Documents (both as defined in the Agreement), including without
limitation the Guarantee Agreement from Oxford Development Corporation in favor
of NELPP IV dated as of August 1, 1986 and any documents related thereto, and
(iv) any rights of contribution which each may have against the other in respect
of claims made by unaffiliated and unrelated third parties against the
Partnership.
13. That certain guaranty of Completion and Payment dated as of August 1,
1986 from Oxford Development Corporation and Oxford Construction Services, Inc.
in favor of the Partnership is hereby cancelled and discharged in its entirety.
-5-
<PAGE>
14. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement.
15. The parties hereto intend that no termination or dissolution of the
Partnership be caused by or result from this Amendment to the Second Agreement
or the transactions referred to herein.
16. This Second Amendment to the Partnership Agreement may be executed in
a number of counterparts, all of which together shall for all purposes
constitute one Second Amendment to the Partnership Agreement, binding on all the
parties hereto notwithstanding that all parties have not signed the same
counterpart.
Executed to take effect as a sealed instrument as of the 14th day of
May, 1996.
Managing General Partner:
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP,
a Massachusetts general partnership
By: Fourth Copley Corp., a
Massachusetts corporation, its
Managing General Partner
By: /s/ Wesley M. Gardiner, Jr.
-------------------------------
Name: WESLEY M. GARDINER, JR.
-----------------------------
Title: Vice President
----------------------------
Newly Admitted Partner:
NELPP REFLECTIONS ASSOCIATES LIMITED PARTNERSHIP,
a Massachusetts limited partnership
By: New England Life Pension Properties IV;
A Real Estate Limited Partnership,
a Massachusetts limited partnership,
its sole general partner
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<PAGE>
By: Fourth Copley Corp., a
Massachusetts corporation,
its Managing General Partner
By: /s/ Wesley M. Gardiner, Jr.
-------------------------------
Name: WESLEY M. GARDINER, JR.
-----------------------------
Title: Vice President
----------------------------
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<PAGE>
Withdrawing Partner:
LEE-OXFORD LIMITED PARTNERSHIP,
a Maryland limited partnership
By: OAMCO XIII, L.L.C.,
a Maryland limited liability
company, Its General Partner
By: /s/ James K. Lowe
-----------------------------
Name: James K. Lowe
--------------------------
Title: Vice President
-------------------------
By: Leo E. Zackler
----------------------------
Leo E. Zickler,
Its General Partner
-8-
<PAGE>
SECOND AMENDMENT TO GENERAL PARTNERSHIP
INTEREST PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO GENERAL PARTNERSHIP INTEREST PLEDGE AND SECURITY
AGREEMENT is made and entered into as of May 14, 1996 by and among NEW ENGLAND
LIFE PENSION PROPERTIES IV; A REAL ESTATE LIMITED PARTNERSHIP, a Massachusetts
limited partnership (the "Secured Party") and LEE-OXFORD LIMITED PARTNERSHIP, a
Maryland limited partnership (the "Debtor").
WITNESSETH
WHEREAS, Lee Partners is a Maryland general partnership, governed by a
certain Partnership Agreement (together with all amendments thereto, the
"Partnership Agreement") dated as of August 1, 1986, by and between Debtor and
Secured Party, as amended by the First Amendment to Lee Partners Partnership
Agreement dated as of October 7, 1986 and the Second Amendment to Lee Partners
Partnership Agreement as of even date herewith.
WHEREAS, NELPP Reflections Associates Limited Partnership ("NRALP") is a
Massachusetts limited partnership governed by that certain Agreement of Limited
Partnership of even date herewith between Debtor and Secured Party, as partners.
WHEREAS, Secured Party made a loan to Debtor in the principal amount of up
to $5,790,000 (the "Loan") under a certain Term Loan Agreement among the
Borrower and Secured Party, as amended by the First Amendment to Term Loan
Agreement dated October 7, 1986, as evidenced by a Promissory Note from Borrower
to Secured Party dated August 15, 1986, as amended by an Allonge to Promissory
Note between Borrower and Secured Party dated as of October 7, 1986, a Second
Allonge to Promissory Note between Debtor and Secured Party dated as of March
30, 1990, and a Second Allonge to Promissory Note between Borrower and Secured
Party dated as of May 1, 1992.
WHEREAS, the Loan is secured by a General Partnership Interest Pledge and
Security Agreement dated August 1, 1986, as amended by the First Amendment to
General Partnership Interest Pledge and Security Agreement dated October 4, 1986
(the "Pledge and Security Agreement"), pursuant to which Debtor assigned to
Secured Party as collateral its general partnership interest in Lee Partners and
in all proceeds thereof.
WHEREAS, pursuant to the Second Amendment to Partnership Agreement of Lee
Partners of even date herewith: (i) Debtor assigned its entire interest in Lee
Partners to NRALP and received in exchange therefor a limited partnership
interest in NRALP, (ii) Secured Party contributed 2% of its interest in Lee
Partners to NRALP and received in exchange therefor a general partnership
interest in NRALP, and (iii) NRALP was substituted for Debtor as a partner of
Lee Partners.
<PAGE>
WHEREAS, Debtor and Secured Party desire to amend the Pledge and Security
Agreement to confirm that Secured Party has a security interest in Debtor's
interest in NRALP received by the Debtor in exchange for its assignment of its
interest in Lee Partners to NRALP.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Pledge and Security Agreement as follows:
1. The definition of Collateral, contained in paragraph D of the Recitals
of the General Partnership Interest Pledge and Security Agreement dated as of
August 1, 1986 is hereby amended by deleting sub-paragraph (i) in its entirety
and replacing it with the following: "(i) that the Debtor assign its limited
partnership interest in NELPP Reflections Associates Limited Partnership, a
Massachusetts limited partnership, including, without limitation, all of the
Debtor's rights in and to the profits, income, distributions therefrom, and any
proceeds derived therefrom (collectively, the "Collateral") to Secured Party,
----------
and".
2. Except as expressly amended hereby, all of the terms, covenants and
conditions of the Pledge and Security Agreement are hereby confirmed and
acknowledged to be in full force and effect. Without limiting the foregoing,
the Debtor confirms its grant of security interest to Secured Party in the
Collateral (as defined in the Pledge and Security Agreement, as amended) as
amended by this Second Amendment to General Partnership Pledge and Security
Agreement.
IN WITNESS WHEREOF, the Secured Party and Debtor have executed this Second
Amendment to General Partnership Interest Pledge and Security Agreement by
causing their names to be hereunto subscribed all as of the day and year first
written above.
(DEBTOR) LEE-OXFORD LIMITED PARTNERSHIP,
a Maryland limited partnership
ATTEST: By: OXFORD INVESTMENT CORPORATION,
a Maryland corporation
Its General Partner
By: /s/ SUSAN R. ETHERTON By: /s/ JAMES K. LOWE
----------------------- ----------------------------
Name: Susan R. Etherton Name: James K. Lowe
----------------------- ----------------------------
Title: Vice President Title: Vice President
----------------------- ----------------------------
- 2 -
<PAGE>
(SECURED PARTY) NEW ENGLAND LIFE PENSION PROPERTIES
IV; A REAL ESTATE LIMITED
PARTNERSHIP, a Massachusetts limited
partnership
ATTEST: By: FOURTH COPLEY CORP.,
Its General Partner
By: /s/ JAY CORNFORTH By: /s/ WESLEY M. GARDINER, JR.
----------------------- ---------------------------
Name: Jay Cornforth Name: Wesley M. Gardiner, JR.
------------------------ ---------------------------
Title: Investment Manager Title: Vice President
------------------------ ---------------------------
- 3 -
<PAGE>
NELPP REFLECTIONS ASSOCIATES LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
--------------------------------
This Agreement of Limited Partnership (this "Agreement") of NELPP
Reflections Associates Limited Partnership, a Massachusetts limited partnership
(the "Partnership"), is entered into as of the 14th day of May, 1996, by New
England Life Pension Properties IV; A Real Estate Limited Partnership, a
Massachusetts limited partnership (the "General Partner"), as general partner,
and Lee-Oxford Limited Partnership, a Maryland limited partnership (the "Limited
Partner"), as limited partner. The General Partner and the Limited Partner are
sometimes hereinafter referred to collectively as the "Partners" and
individually as a "Partner."
The Partners desire to organize the Partnership as a Massachusetts limited
partnership, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the
agreements hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
GENERAL PROVISIONS
1.01 Formation of Limited Partnership. The parties hereby agree to form
--------------------------------
the Partnership as a Massachusetts limited partnership upon the filing of a
Certificate of Limited Partnership for the Partnership in the Office of the
Secretary of Commonwealth of Massachusetts pursuant to the Massachusetts Uniform
Limited Partnership Act (the "Act").
1.02 Name of the Partnership. The name of the Partnership shall be "NELPP
-----------------------
Reflections Associates Limited Partnership," or such other name as the General
Partner may from time to time determine. The General Partner shall cause to be
filed on behalf of the Partnership such partnership or assumed or fictitious
name certificate or certificates as may from time to time be required by law.
1.03 Business of the Partnership. The business of the Partnership and its
---------------------------
purpose are to own a general partnership interest in a Maryland general
partnership known as "Lee Partners" (the "Project Partnership"); and to engage
in any and all activities directly or indirectly related thereto.
<PAGE>
1.04 Place of Business of the Partnership; Resident Agent. The
----------------------------------------------------
Partnership's office in Massachusetts shall be located in care of Copley Real
Estate Advisors, Inc., 399 Boylston Street, Boston, Massachusetts 02116.
Fourth Copley Corp., 399 Boylston Street, Boston, Massachusetts 02116 is the
Partnership's agent for service of process. The General Partner may, at any
time and from time to time, (a) change the location of the Partnership's
principal place of business and establish such additional place or places of
business of the Partnership as it may determine, and/or (b) change the
Partnership's agent for service of process in Massachusetts, and in each case
shall provide written notice of such change to the other Partners.
1.05 Duration of the Partnership. The term of the Partnership shall
---------------------------
commence upon the filing of a Certificate of Limited Partnership of the
Partnership in the Office of the Secretary of State of the Commonwealth of
Massachusetts, and shall continue until December 31, 2046, unless terminated at
an earlier date in accordance with Article VII hereof.
1.06 Partners' Names and Addresses.
-----------------------------
(a) The name and business address of the General Partner is New
England Life Pension Properties IV; A Real Estate Limited Partnership, c/o
Copley Real Estate Advisors, Inc., 399 Boylston Street, Boston, Massachusetts
02116.
(b) The name and business address of the Limited Partner is Lee-
Oxford Limited Partnership, c/o Oxford Realty Financial Group, Inc. 7200
Wisconsin Avenue, Suite 1100, Bethesda, Maryland 20814.
1.07 Title to Partnership Property. All property owned by the Partnership,
-----------------------------
whether real or personal, tangible or intangible, shall be deemed to be owned
by the Partnership as an entity, and no Partner, individually, shall have any
ownership of such property. The Partnership may hold any of its assets in its
own name or in the name of its nominee, which nominee may be one or more trusts.
Any property held by a nominee trust for the benefit of the Partnership shall,
for purposes of this Agreement, be treated as if such property were directly
owned by the Partnership.
1.08 Nature of Partnership Interest. The interests of all of the Partners
------------------------------
in the Partnership are personal property and shall not, under any circumstances,
be considered real property.
-2-
<PAGE>
ARTICLE II
CAPITAL CONTRIBUTIONS, PROFITS AND LOSSES
2.01 Capital Contributions.
---------------------
(a) By execution of this Agreement, on the date hereof, the General
Partner is hereby assigning to the Partnership all of its right, title and
interest in and to, and contributing to the capital of the Partnership, a 2%
general partnership interest in the Project Partnership. In addition, upon
liquidation of the General Partner's interest in the Partnership (including upon
liquidation of the Partnership), the General Partner shall contribute to the
capital of the Partnership within the time periods set forth in Treasury
Regulation Section 1.704-1(b)(2(ii)(b)(3) an amount equal to the lesser of (i)
its negative Capital Account balance, if any, (determined by assuming that all
of the Partnership's assets are sold at their respective fair market values on
the date of the liquidation and all items of Net Profits or Net Losses for the
taxable period ending on such date are made) or (ii) the excess of (A) 1.01% of
the total capital contributions of the Limited Partners over (B) the aggregate
amount of capital previously contributed to the Partnership by the General
Partner.
(b) By execution of this Agreement, on the date hereof, the Limited
Partner is hereby assigning to the Partnership all of its right, title and
interest in and to, and contributing to the capital of the Partnership, a 40%
general partnership interest in the Project Partnership. Such interest
represents the Limited Partner's entire partnership interest in the Project
Partnership.
(c) Immediately following the above-described contributions to the
Partnership made by the General Partner and the Limited Partner, the Partnership
was admitted to the Project Partnership in respect of its interests therein.
(d) Additional partners may be admitted to the Partnership only with
the consent of all Partners.
(e) Except as provided in this Section 2.01 and in Section 4.05, no
Partner shall be obligated or permitted to contribute any additional capital to
the Partnership. No interest shall accrue on any contributions to the capital
of the Partnership, and no Partner shall have the right to withdraw or to be
repaid any capital contributed by it or to receive any other payment in respect
of its interest in the Partnership, including without limitation as a result of
the withdrawal of such Partner from the Partnership, except as specifically
provided in this Agreement.
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<PAGE>
(f) The Partners acknowledge and agree that the Limited Partner's
general partnership interest in the Project Partnership has been pledged to the
General Partner pursuant to a General Partnership Interest Pledge and Security
Agreement between the General Partner and the Limited Partner dated as of August
1, 1986, as amended by the First Amendment to General Partnership Interest
Pledge Security Agreement between the General Partner and Limited Partner dated
as of October 7, 1986 (as so amended, the "Security Agreement"). The Partners
hereby consent (i) to the amendment, effective as of the date hereof, of the
Security Agreement to effect the substitution of the Limited Partner's interest
in the Partnership as the security pledged thereunder and (ii) to the pledge
described therein.
2.02 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings ascribed to them in this Section 2.02:
(a) "Capital Account" means a separate account maintained for each
Partner and adjusted in accordance with Regulations under Section 704 of the
Internal Revenue Code of 1986, as amended (the "Code"). To the extent consistent
with such Regulations, the adjustments to such accounts shall include the
following: There shall be credited to each Partner's Capital Account the amount
of any cash or the net fair market value of any property actually contributed by
such Partner to the capital of the Partnership and such Partner's share of the
Net Profits of the Partnership and of any items in the nature of income or gain
separately allocated to the Partners; and there shall be charged against each
Partner's Capital Account the amount of any cash and the net fair market value
of any property distributed to such Partner and such Partner's share of the Net
Losses of the Partnership and of any items in the nature of losses or deductions
separately allocated to the Partners.
(b) "Carrying Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, provided, however, that in the
circumstances described in Treasury Regulation Section 1.704-1(b)(2)(iv)(d) and
(f), the Carrying Value of an asset shall be adjusted to such asset's fair
market value and shall thereafter be adjusted in accordance with the provisions
of Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(c) "Excess Negative Balance" for a Partner means the excess, if any,
of (i) the negative balance in a Partner's Capital Account after reducing such
balance 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
-4-
<PAGE>
made to such Partner, over (ii) the sum of (A) the amount, if any, which the
Partner is required to restore to the Partnership upon liquidation of such
Partner's interest in the Partnership (or which is so treated pursuant to
Treasury Regulations Section 1.704-1(b)(2)(ii)(c)), and (B) that portion of any
indebtedness of the Partnership (other than "partner nonrecourse debt" as
defined in Treasury Regulation Section 1.704-2(d)) 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 Carrying 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 (A) above, were used to pay the Partnership's liabilities.
(d) "Net Profits" and "Net Losses" mean the taxable income or loss,
as the case may be, as determined in accordance with Code Section 703(a) (for
this purpose, all items of income, gain, loss, or deduction required to be
separately stated pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss) computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be computed
based upon the Carrying Values of the Partnership's assets (in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g))
rather than upon the assets' adjusted bases for federal income tax
purposes;
(ii) Any tax-exempt income received by the Partnership shall
be included as an item of gross income;
(iii) The amount of any adjustments to the Carrying Values of
any assets of the Partnership pursuant to Code Section 743 shall not
be taken into account; and
(iv) Any expenditure of the Partnership described in Code
Section 705(a)(2)(B) (including any expenditures treated as being
described in Section 705(a)(2)(B) pursuant to Treasury Regulations
under Code Section 704(b)) shall be treated as a deductible expense.
2.03 General Allocations of Net Profits and Net Losses. Except as
-------------------------------------------------
provided in Sections 2.04 and 2.05 below (which shall be applied first), the Net
Profits and Net Losses of the Partnership for any year shall be allocated among
the Partners as follows:
General Partner 5.0%
Limited Partner 95.0%
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<PAGE>
2.04 Allocations of Nonrecourse Deductions and Minimum Gain.
------------------------------------------------------
Notwithstanding the provisions of Section 2.03 above, if at any time the
Partnership incurs any "nonrecourse debt" (i.e. debt that is treated as
nonrecourse for purposes of Treasury Regulation Section 1.1001-2), the following
provisions will apply notwithstanding anything to the contrary expressed
elsewhere in this Agreement:
(i) "Nonrecourse deductions" (as defined in Treasury Regulation
Sections 1.704-2(b) and (c)) other than deductions attributable to "partner
nonrecourse debt" (as defined in Treasury Regulation Section 1.704-2(b)(4))
shall be allocated in the same manner as are Net Profits or Net Losses;
(ii) Nonrecourse deductions attributable to partner nonrecourse debt
shall be specially allocated to the Partner or Partners that bear the
economic risk of loss associated with the debt;
(iii) If in any year there is a net decrease in "partnership minimum
gain" (as defined in Treasury Regulation Section 1.704-2(d)) or "partner
nonrecourse debt minimum gain" (as defined in Treasury Regulation Section
1.704-2(i)(3), Partners will be specially allocated items of income or gain
for such year (and/or subsequent years to the extent necessary) in
accordance with the "minimum gain chargeback" provisions of Treasury
Regulation Section 1.704-2(f) and/or Treasury Regulation Section 1.704-
2(i)(5); and
(iv) For purposes of calculating a Partner's Excess Negative
Balance, the Partner's share of minimum gain and of partner nonrecourse
debt minimum gain (as determined pursuant to Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5), respectively) shall be treated as additional
amounts that the Partner is obligated to contribute to the Partnership.
2.05 Overriding Allocations of Net Profits and Net Losses. Notwithstanding
----------------------------------------------------
the provisions of Section 2.03 above, but subject to the provisions of Section
2.04 above, the following allocations of Net Profits and Net Losses and items
thereof shall be made:
(a) If, during any year a Partner receives any adjustment, allocation
or distribution described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), and, as a result of such adjustment, allocation
or distribution, such Partner's Capital Account has an Excess Negative Balance,
then items of gross income (computed with the adjustments set forth in
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<PAGE>
clauses (i), (ii) and (iii) of Section 2.02(d) hereof) for such year (and, if
necessary, subsequent years) shall be allocated to such Partner in an amount
equal to such Partner's Excess Negative Balance.
(b) In no event shall Net Losses of the Partnership be allocated to a
Partner if such allocation would cause or increase an Excess Negative Balance in
such Partner's Capital Account.
(c) In the event that Net Profits, Net Losses or items thereof are
allocated to one or more Partners pursuant to paragraphs (a) or (b) above,
subsequent Net Profits and Net Losses will be allocated (subject to the
provisions of paragraphs (a) and (b)) to the Partners in a manner designed to
result in each Partner having a Capital Account balance equal to what it would
have been had the original allocation of Net Profits, Net Losses or items
thereof pursuant to paragraphs (a) or (b) not occurred.
(d) Except as provided in Section 2.04 and Sections 2.05(a) and (b),
the interest of the General Partner in each item of Partnership income, gain,
loss, deduction, or credit will be equal to at least one percent (1%) of each of
those items at all times during the existence of the Partnership.
(e) Except as otherwise provided herein or as required by Code
Section 704, for tax purposes, all items of income, gain, loss, deduction or
credit shall be allocated to the Partners in the same manner as are Net Profits
and Net Losses; provided, however, that if the Carrying Value of any property of
the Partnership differs from its adjusted basis for tax purposes, then items of
income, gain, loss, deduction or credit related to such property for tax
purposes shall be allocated among the Partners so as to take account of the
variation between the adjusted basis of the property for tax purposes and its
Carrying Value in the manner provided for under Code Section 704(c).
ARTICLE III
CASH DISTRIBUTIONS
3.01 Definitions. For purposes of this Agreement, the term "Distributable
-----------
Cash" means, with respect to any fiscal period, the excess of all cash receipts
of the Partnership from any source whatsoever, including distributions from the
Project Partnership, cash from normal operations, sales of assets, proceeds of
borrowings, capital contributions of the Partners, proceeds from a capital
transaction, and any and all other sources over the sum of cash disbursements
for all items which are customarily considered to be "operating expenses".
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<PAGE>
3.02 Distribution of Distributable Cash and Net Proceeds Upon Liquidation.
--------------------------------------------------------------------
Except as provided in Section 7.02(b) below, Distributable Cash of the
Partnership shall be distributed to the Partners, at such times and in such
amounts as the General Partner may determine, as follows: 5% to the General
Partner and 95% to the Limited Partner.
ARTICLE IV
MANAGEMENT
4.01 Management of the Partnership.
-----------------------------
(a) The management and control of the business and affairs of the
Partnership shall be vested solely in the General Partner. Specifically, but
not by way of limitation, the General Partner shall be authorized in the name of
and on behalf of the Partnership, or in its own name and on its own behalf, as
appropriate:
(i) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon such terms as it may
determine and upon such evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim, including taxes, either in favor of
or against the Partnership;
(ii) to pay all organizational expenses and general and
administrative expenses of the Partnership;
(iii) 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 purposes of the Partnership;
(iv) to pay any and all fees and to make any and all
expenditures which it, in its sole discretion, deems necessary or appropriate in
connection with the organization of the Partnership, the management of the
affairs of the Partnership, and the carrying out of its obligations and
responsibilities under this Agreement;
(v) to exercise all powers and authority granted by the Act to
general partners, except as otherwise provided in this Agreement;
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<PAGE>
(vi) to cause to be obtained and continued in force all
policies of insurance required by any mortgage, lease or other agreement
relating to the Partnership's business or any part thereof, or determined by the
General Partner to be in the best interest of the Partnership; and
(vii) to cause to be paid any and all taxes, charges and
assessments that may be levied, assessed or imposed upon any of the assets of
the Partnership, unless the same are contested by the General Partner.
The General Partner shall be authorized, in the name and on behalf of the
Partnership, to hire, employ, deal with, or otherwise engage in business with
itself or any of its Affiliates, but only with the prior approval of the Limited
Partner. For purposes of this Agreement, the term "Affiliate" shall mean, with
respect to any specified person of entity, (i) any person or entity that
directly or indirectly controls, is controlled by, or is under common control
with such specified person or entity; (ii) any person or entity that directly or
indirectly controls 10% or more of the outstanding equity securities of the
specified entity or of which the specified person or entity is directly or
indirectly the owner of 10% or more of any class of equity securities; (iii) any
person or entity that is an officer of, director of, partner in, or trustee of,
or serves in a similar capacity with respect to, the specified person or of
which the specified person or entity is an officer, director, partner or
trustee, or with respect to which the specified person or entity serves in a
similar capacity; or (iv) any person that is a member of the immediate family of
the specified person ("immediate family" as used herein shall mean spouse,
mother, father, brother, sister or lineal descendant).
(b) Notwithstanding the foregoing, the General Partner shall not take
any of the following actions without the prior approval of the Limited Partner:
(i) Authorizing the Partnership to authorize or cause the
Project Partnership to admit any person or entity to the Project
Partnership as an additional or substitute general partner;
(ii) Admitting to the Partnership any person or entity as an
additional or substitute Partner of the Partnership;
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<PAGE>
(iii) Approving any transaction by the Project Partnership, the
effect of which would be to decrease the interest of the Partnership
therein to a greater proportionate degree than the interest of any
other partner of the Project Partnership would be decreased in
connection with such transaction, whether the proposed transaction is
with an unrelated, third party or with an Affiliate (as defined in the
Partnership Agreement of the Project Partnership) of any partner;
(iv) Authorizing or causing the Partnership to withdraw from
the Project Partnership; or
(v) Authorizing the Partnership to consent to the sale of all
or substantially all of the project owned by the Project Partnership
to an Affiliate of the General Partner.
(c) The General Partner shall be the tax matters partner for the
Partnership pursuant to Code Sections 6221 through 6231.
(d) The General Partner shall make available to the Limited Partner,
as soon as it is available, any annual business plan or annual management plan
prepared in connection with the project owned by the Project Partnership, and
shall keep the Limited Partner informed of any decisions made by the managing
general partner of the Project Partnership having a material effect on the
project as a whole. Whenever reasonably requested by the Limited Partner, the
General Partner shall render a just and faithful account of all dealings and
transactions relating to the business of the Partnership and the Project
Partnership.
4.02 Authority to Execute and Deliver Documents. With respect to all of
------------------------------------------
its obligations, powers, and responsibilities under this Agreement, the General
Partner 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.
4.03 Services of the General Partner. During the existence of the
-------------------------------
Partnership, the General Partner shall devote sufficient time, attention and
effort to the Partnership business as is necessary to provide for the management
of the Partnership's business in a prudent, reasonable and businesslike manner
and to promote adequately the interests of the Partnership and the mutual
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<PAGE>
interests of the Partners; however, it is specifically understood and agreed
that the General Partner shall not be required to devote full time to
Partnership business and that the General Partner may at any time and from time
to time engage in and possess an interest in other business ventures of any and
every type and description, including, without limitation, the ownership,
operation, financing, and management of ventures which may compete with the
Partnership, independently or with others, and neither the Partnership nor any
Partner shall by virtue of this Agreement have any right, title or interest in
or to such independent ventures.
4.04 Liability of the General Partner; Indemnification. The General
-------------------------------------------------
Partner and its Affiliates shall not have any liability to the Partnership or to
any Partner for any loss suffered by the Partnership which arises out of any
action or inaction of any General Partner or its Affiliates if such course of
conduct did not constitute gross negligence or willful misconduct of such
General Partner or its Affiliates and such General Partner or its Affiliates, as
the case may be, in good faith, determined that such course of conduct was in
the best interests of the Partnership. The General Partner and its Affiliates
shall be indemnified by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
it with respect to actions taken by the General Partner or its Affiliates on
behalf of the Partnership, provided that the same were not the result of gross
negligence or willful misconduct on the part of such General Partner or its
Affiliates. Notwithstanding the foregoing, neither the General Partner, nor its
Affiliates nor any person acting as a broker-dealer, shall be indemnified for
any losses, liabilities or expenses arising from or out of a violation of
federal or state securities laws or any other intentional or criminal
wrongdoing. Any indemnity under this Section 4.04 shall be paid from, and only
to the extent of, Partnership assets, and no Partner shall have any personal
liability on account thereof. The Partnership shall not incur the cost of that
portion of any insurance, other than public liability insurance, which insures
any party against any liability as to which such party is herein prohibited from
being indemnified.
4.05 Limitations on Limited Partners. Except as otherwise expressly
-------------------------------
provided herein, no Limited Partner shall: (a) be permitted to take part in the
control of the business or affairs of the Partnership; (b) have any voice in the
management or operation of the Partnership's business or property; or (c) have
the authority or power in its capacity as a Limited Partner to act as an agent
for or on behalf of the Partnership or any other partner, to do any act which
would be binding on the Partnership or any other Partner, or to incur any
expenditures on behalf of or with respect to the Partnership.
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<PAGE>
4.06 Liability of Limited Partners. So long as they comply with the
-----------------------------
provisions of Section 4.05, the liability of the Limited Partners for the
losses, debts and obligations of the Partnership shall be limited to their
capital contributions.
4.07 Certain Fees and Expenses. All out-of-pocket expenses incurred by
-------------------------
the General Partner in connection with the Partnership's business (other than
overhead and similar expenses of the General Partner) shall be paid by the
General Partner with no reimbursement by the Partnership.
ARTICLE V
BOOKS, RECORDS AND BANK ACCOUNTS
5.01 Books and Records. The General Partner shall keep just and true
-----------------
books of account with respect to the operations of the Partnership. Such books
shall be maintained at the Partnership's principal place of business, or at such
other place as the General Partner shall determine, and all Partners, and their
duly authorized representatives, shall at all reasonable times have access to
such books as well as any information required to be made available to the
Partners under the Act. The General Partner shall not be required to deliver or
mail copies of the Partnership's Certificate of Limited Partnership or copies of
certificates of amendment thereto or cancellation thereof to the Limited
Partner, although such documents shall be available for review and/or copying by
the Limited Partner at the Partnership's principal place of business.
5.02 Accounting Basis and Fiscal Year. The Partnership's books shall be
--------------------------------
kept on the accrual method of accounting, or on such other method of accounting
as the General Partner (with the consent of the Limited Partner) may from time
to time determine, and shall be closed and balanced at the end of each
Partnership year. The same method of accounting shall be used for both
Partnership accounting and tax purposes. The fiscal year of the Partnership
shall be the calendar year, or such other fiscal year as the General Partner
(with the consent of the Limited Partner) may from time to time determine.
5.03 Bank Accounts. The General Partner shall be responsible for causing
-------------
one or more accounts to be maintained in a bank (or banks), which accounts shall
be used for the payment of the expenditures incurred by the General Partner in
connection with the business of the Partnership, and in which shall be deposited
any and all cash receipts. All deposits and funds not
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<PAGE>
needed for the operations of the Partnership may be invested in such short-term
investments as the General Partner may determine. All such amounts shall be and
remain the property of the Partnership, and shall be received, held and
disbursed by the General Partner for the purposes specified in this Agreement.
There shall not be deposited in any of said accounts any funds other than funds
belonging to the Partnership, and no other funds shall in any way be commingled
with such funds.
5.04 Reports. Within 120 days after the end of each fiscal year, the
-------
General Partner shall cause to be prepared and sent to all Partners a financial
report of the Partnership, including a balance sheet and a profit and loss
statement, and, if such profit and loss statement is not prepared on a cash
basis, a statement of changes in financial position, none of which need be
certified by an independent certified public accountant. Within 90 days after
the end of each fiscal year, the General Partner shall furnish all Partners with
such information as may be needed to enable the Partners to file their federal
income tax returns and any required state income tax return. The cost of all
such reporting shall be paid by the General Partner. Any Partner may, at any
time, at its own expense, cause an audit of the Partnership books to be made by
a certified public accountant of its own selection. All expenses incurred by
such accountant shall be borne by such Partner.
ARTICLE VI
TRANSFERS OF INTERESTS OF PARTNERS
6.01 Substitution and Assignment of Partner's Interest.
-------------------------------------------------
(a) Except as described in Section 2.01(f), no Partner may sell,
transfer, assign, pledge, or otherwise dispose of all or any part of its
interest in the Partnership (whether voluntarily, involuntarily or by operation
of law) unless all other Partners shall have previously consented to such
assignment in writing, the granting or denying of which consent shall be in the
other Partners' absolute discretion.
6.02 Additional or Substituted Partners. Additional or substituted
----------------------------------
Partners may be admitted to the Partnership at any time upon the written consent
of all Partners.
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<PAGE>
ARTICLE VII
DISSOLUTION AND TERMINATION
7.01 Events of Dissolution.
---------------------
(a) The Partnership shall be dissolved:
(i) on a date designated in writing by all Partners;
(ii) upon the occurrence of an event of withdrawal (as
defined in the Act) with respect to a General Partner;
(iii) upon the sale or other disposition of all of the
Partnership's assets; or
(iv) in any event, at 12:00 midnight on December 31, 2046.
(b) Notwithstanding the occurrence of an event specified in Section
7.01(a)(ii), the Partnership shall not be dissolved and its business and affairs
shall not be discontinued, and the Partnership shall remain in existence as a
limited partnership under the laws of the Commonwealth of Massachusetts, if the
remaining General Partner, or, if there be none, all of the Limited Partners
elect within 90 days after such occurrence to continue the Partnership and the
Partnership business. If such election to continue the Partnership and its
business is made by the Limited Partners, they shall also choose a new General
Partner or General Partners.
(c) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the Partnership's Certificate of Limited Partnership shall
have been cancelled and the assets of the Partnership shall have been
distributed as provided herein. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement. The remaining General Partner or, if
there be none, a liquidator appointed by the Limited Partners, shall liquidate
the assets of the Partnership, and distribute the proceeds thereof as
contemplated by this Agreement and cause the cancellation of the Partnership's
Certificate of Limited Partnership.
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<PAGE>
7.02 Distributions Upon Liquidation.
------------------------------
After payment of liabilities owing to creditors, the General Partner
or liquidator shall cause the remaining net assets of the Partnership to be
distributed to all Partners with positive Capital Account balances (after such
balances have been adjusted to reflect the allocation of Net Profits or Net
Losses arising from such event pursuant to Sections 2.03, 2.04 and 2.05), in
proportion to and to the extent of such positive balances. In the event that
any part of such net assets consists of notes or accounts receivable or other
non-cash assets, the General Partner or liquidator may take whatever steps it
deems appropriate to convert such assets into cash or into any other form which
would facilitate the distribution thereof. If any assets of the Partnership are
to be distributed in kind, such assets shall be distributed on the basis of
their fair market value net of any liabilities.
ARTICLE VIII
MISCELLANEOUS
8.01 Notices. Any and all notices, requests, elections, consents or
-------
demands permitted or required to be made under this Agreement shall be in
writing, signed by the Partner giving such notice, request, election, consent or
demand, and shall be delivered personally, or sent by registered or certified
mail, or by overnight mail, Federal Express or other similar commercial
overnight courier, to the Partnership or to any other Partner or Partners, at
their respective addresses set forth in Article I hereof, or at such other
address as may be supplied by written notice given in conformity with the terms
of this Section 8.01. The date of personal delivery, or the date of mailing or
delivery to an overnight courier, as the case may be, shall be the date of such
notice.
8.02 Successors and Assigns. Subject to the restrictions on transfer set
----------------------
forth herein, this Agreement, and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
-15-
<PAGE>
8.03 Amendments. Amendments may be made to this Agreement from time to
----------
time by a writing duly executed by all Partners.
8.04 Partition. The Partners hereby agree that no Partner nor any
---------
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of himself,
his successors, representatives, heirs, and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of his interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
8.05 No Waiver. The failure of any Partner to insist upon strict
---------
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Partner's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
8.06 Entire Agreement. This Agreement constitutes the full and complete
----------------
agreement of the parties hereto with respect to the subject matter hereof.
8.07 Captions. Titles or captions of Articles or sections contained in
--------
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
8.08 Counterparts. This Agreement may be executed in a number of
------------
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Partners notwithstanding that all Partners have
not signed the same counterpart.
8.09 Applicable Law. This Agreement and the rights and obligations of the
--------------
parties hereunder shall be governed by and interpreted, construed and enforced
in accordance with the laws of the Commonwealth of Massachusetts.
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<PAGE>
8.10 Gender, Etc. In the case of all terms used in this Agreement, the
-----------
singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires.
8.11 Creditors. None of the provisions of this Agreement shall be for the
---------
benefit of or enforceable by any creditor of any Partner or of the Partnership
other than a Partner who is such a creditor of the Partnership.
8.12 Attorneys' Fees. If any proceeding is brought by one Partner against
---------------
the other to enforce, or for breach of, any of the provisions of this Agreement,
the prevailing Partner shall be entitled in such proceeding to recover
reasonable attorneys' fees, together with the costs of such proceedings therein
incurred.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL PARTNER:
NEW ENGLAND PENSION PROPERTIES IV; A REAL ESTATE LIMITED PARTNERSHIP, a
Massachusetts limited partnership
By: Fourth Copley Corp., a Massachusetts corporation, its Managing General
Partner
By: /s/ Wesley M. Gardiner, JR
--------------------------------------
Name: WESLEY M. GARDINER, JR
------------------------------------
Title: Vice President
-----------------------------------
LIMITED PARTNER:
LEE-OXFORD LIMITED PARTNERSHIP, a Maryland limited partnership
By: OAMCO XIII, L.L.C., a Maryland limited liability company, its General
Partner
By: /s/ James K. Lowe
--------------------------------------
Name: James K. Lowe
------------------------------------
Title: Vice President
-----------------------------------
By: /s/ Leo E. Zickler
-----------------------------------------
Leo E. Zickler, its General Partner
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<PAGE>
CONSENT OF GUARANTOR
--------------------
The undersigned ("Guarantor") hereby consents to the formation of the
Partnership and to the terms of the foregoing Limited Partnership Agreement and
reaffirms its obligations under that Guarantee Agreement between Guarantor and
New England Life Pension Properties IV; A Real Estate Limited Partnership dated
as of August 1, 1986 (the "Guarantee") and reaffirms its waiver of each and
every one of the defenses to such obligations as set forth in the Guarantee. The
Guarantee is subject to satisfaction and discharge in accordance with the terms
of that Payment Agreement of even date by and between the General Partner and
the Limited Partner.
OXFORD DEVELOPMENT CORPORATION, an
Indiana corporation
By: /s/ Mark E. Schifrin
---------------------------
Name: Mark E. Schifrin
-------------------------
Title: Executive Vice President
------------------------
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<PAGE>
PAYMENT AGREEMENT
-----------------
This Agreement is made as of May 14, 1996 by and between New England Life
Pension Properties IV; A Real Estate Limited Partnership, a Massachusetts
limited partnership ("NELPP") and Lee-Oxford Limited Partnership, a Maryland
limited partnership ("Oxford").
WHEREAS, NELPP and Oxford are the sole partners of Lee Partners, a Maryland
general partnership (the "Partnership");
WHEREAS, NELPP made a loan to Oxford in the principal amount of up to
$5,790,000 (the "Loan"), evidenced by a Promissory Note from Oxford to NELPP
dated August 15, 1986, as amended by an Allonge to Promissory Note between
Oxford and NELPP, dated as of October 7, 1986, a Second Allonge to Promissory
Note between Oxford and NELPP, dated as of March 30, 1990, and a Second Allonge
to Promissory Note between Oxford and NELPP, dated as of May 1, 1992, which Loan
is guaranteed by Oxford Development Corporation, an Indiana corporation (the
"Guarantor") pursuant to a Guarantee Agreement dated as of August 1, 1986 (the
"Guaranty");
WHEREAS, NELPP has entered into that certain Amended and Restated Pooling
Agreement, dated as of December 1, 1995 (the "Pooling Agreement"), with Largo-
Oxford Associates Limited Partnership, Montgomery-Oxford Associates Limited
Partnership and Waters Landing-Oxford Associates Limited Partnership, a copy of
the form of which Pooling Agreement is attached hereto as Exhibit A; and
---------
WHEREAS, NELPP and Oxford wish to provide for the release of the Guaranty
upon the receipt by NELPP of certain payments.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and in consideration of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Concurrently with executing this Agreement, Oxford shall pay NELPP by
wire transfer the sum of $250,000.
2. Upon the receipt by NELPP of both of (a) the $250,000 payment described
in paragraph 1 above and (b) an aggregate of an additional $400,000 pursuant to
Section 1(a) of the Pooling Agreement, the Guarantor shall be released and
discharged from its obligations under the Guaranty and the Guaranty shall be
cancelled and of no further force and effect.
<PAGE>
3. The obligations owed by Oxford in connection with the Loan shall
remain outstanding in accordance with their terms.
4. This Agreement constitutes the complete and exclusive statement of the
agreement between the parties hereto regarding the subject matter hereof.
5. This Agreement shall be construed and enforced in accordance with the
laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NEW ENGLAND LIFE PENSION
PROPERTIES IV; A REAL ESTATE
LIMITED PARTNERSHIP
By: Fourth Copley Corp.
By: /s/ Wesley M. Gardiner Jr.
---------------------------
LEE-OXFORD LIMITED PARTNERSHIP
By: OAMCO XIII, L.L.C.
By: /s/ James K. Lowe
-----------------------
James K. Lowe,
Vice President
OXFORD DEVELOPMENT CORPORATION
By: /s/ Mark E. Schifrin
----------------------------
Mark E. Schifrin
Executive Vice President
<PAGE>
EXHIBIT 10TT
Tenancy in Common Agreement dated as of December 30, 1996 by and among the
Registrant and Hewson Properties, Inc.
<PAGE>
EXHIBIT 10TT
TENANCY-IN-COMMON AGREEMENT
---------------------------
THIS TENANCY-IN-COMMON AGREEMENT (this "Agreement"), dated as of the 30th
day of December, 1996, is made by and between New England Life Pension
Properties IV; A Real Estate Limited Partnership, a Massachusetts limited
partnership ("New England"), and Hewson Properties, Inc., a California
corporation ("HPI") (individually, a "Tenant" and collectively, the "Tenants").
RECITALS
--------
A. The Tenants are co-owners of all of the undivided interest in that
certain real property and related improvements located in Phoenix, Arizona, as
more particularly described in Exhibit A, attached hereto and incorporated
herein (the "Property").
B. The Tenants desire to set forth certain terms that will govern, in
part, the Tenants' undivided interests in the Property.
NOW, THEREFORE, in consideration of the mutual promises and covenants of
the parties, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Tenants hereby agree as
follows:
1. INTEREST. The Tenants hereby agree that their interests in the
--------
Property shall be governed by this Agreement. The respective interests of the
Tenants in the Property are as follows:
New England 66.16%
HPI 38.84%
2. TITLE TO THE PROPERTY. Title to the Property shall be held by the
---------------------
Tenants as tenants-in-common in proportion to their undivided interests in the
Property.
3. TERM. This Agreement shall commence on the date hereof and shall
----
continue until terminated in accordance with this Agreement.
4. RIGHTS OF TENANTS. Except as otherwise specifically provided herein,
-----------------
this Agreement shall not be construed to limit any rights given to each Tenant
as a tenant in common under applicable law.
<PAGE>
5. PROPERTY MANAGEMENT. The Tenants have executed an agreement (the
-------------------
"Management Agreement") dated as of _______________, 1996 under which HPI shall
serve as property manager (the "Manager"). Either Tenant may elect to terminate
the Management Agreement upon sixty (60) days prior written notice to the other
Tenant.
6. DISTRIBUTIONS. Funds resulting from the ownership, operation, sale or
-------------
refinancing of the Property shall be distributed by the Manager to the Tenants
as provided in the Management Agreement, it being understood that the Manager
may retain from either Tenant's distribution any sums such Tenant is required to
pay pursuant to Section 7, provided that in the event the Management Agreement
is terminated or expires, then from and after such termination or expiration,
such funds shall be distributed to each Tenant in accordance with such Tenant's
proportionate interest.
7. OBLIGATIONS OF TENANTS. Each Tenant shall pay a share equal to the
----------------------
Tenant's interest in the Property, of any and all expenses associated with the
ownership and operation of the Property immediately upon receipt of a written
notice from the Manager or, in the event the Management Agreement is terminated
or expires, upon receipt of a written notice from another Tenant (or a
subsequently appointed Manager), accompanied by documentation showing the amount
of such expenses owed. In addition, upon expiration of the insurance policy
covering the Property as of the date hereof, each Tenant shall procure insurance
coverage on such Tenant's interest in the Property in form and substance similar
to the insurance policy covering the Property on the date hereof and otherwise
reasonably acceptable to each of the other Tenants.
8. REMEDIES. If a Tenant fails to pay such Tenant's share of any amounts
--------
required to be paid pursuant to this Agreement within ten (10) days after
written notice from the Manager that such payment is due (or, if the Management
Agreement is terminated or expires, within ten (10) days after such written
notice from another Tenant or subsequently appointed Manager), such failure
shall constitute a default under this Agreement. In the event of such default,
the non-defaulting Tenant shall have all rights and remedies available at law or
equity or under this Agreement as a result of such failure, including the right
to pay such sums, which
2
<PAGE>
sums will accumulate interest at a rate of interest per annum which is two
percent (2%) greater than the "prime rate" then in effect at Citibank, N.A., New
York, New York, from the date paid by such non-defaulting Tenant until such sums
are paid by the defaulting Tenant to the non-defaulting Tenant.
9. NO PARTNERSHIP. The Tenants do not intend to create, and this
--------------
Agreement shall not be deemed or construed to create, a partnership or joint
venture between the Tenants with respect to the Property. Notwithstanding the
foregoing, in the event that a partnership or joint venture is determined to
exist for federal, state or local income tax purposes, each Tenant hereby agrees
that such organization shall be excluded from the provisions of Subchapter K of
Chapter 1 of the Internal Revenue Code of 1986, as amended (the "Code"), and any
comparable provisions of any applicable state or local tax statutes for all tax
years. Each Tenant further covenants and agrees to report on such Tenant's
federal and state income tax returns the Tenant's share of all items and income,
deduction and credit from the Property consistent with the inapplicability of
Subchapter K of Chapter 1 of the Code.
10. GENERAL LIMITATION ON TRANSFER. Anything to the contrary in this
------------------------------
Agreement notwithstanding, at law or in equity, no Tenant shall transfer or
otherwise deal with any interest in the Property in a way that would cause a
default under any material agreement relating to the Property or by which
Tenants are bound.
11. TERMINATION. This agreement shall immediately terminate upon the
-----------
occurence of any of the following events:
(a) the decision of all of the Tenants that it is in the best
interest of all of the Tenants that this Agreement be terminated; or
(b) the acquisition of all legal and beneficial interests in the
Property by a single entity.
Upon termination of this Agreement as provided in Section 13(a) above, the
Tenants shall hold the Property as tenants-in-common and shall be governed by
the laws of the State of Arizona or such other jurisdiction as may be required
by law without reference to the terms of this Agreement, unless they decide in
writing on another form of ownership.
3
<PAGE>
12. NOTICES. All notices or other communications hereunder shall be in
-------
writing and shall be deemed duly furnished if delivered by hand (with receipt
therefor) or by a recognized overnight delivery service or by certified or
registered mail, return receipt requested, first-class postage prepaid,
(a) if to New England at:
c/o AEW Capital Management, L.P.
225 Franklin Street
Boston, Massachusetts 02110
Attn: General Counsel
with a copy (which shall not constitute notice) to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02110
Attn: Joseph J. Christian, Esquire
(b) if to HPI at:
c/o The Hewson Company
4636 East University Drive
Suite 265
Phoenix, Arizona 85034
with a copy (which shall not constitute notice) to:
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004
Attn: Jay D. Wiley, Esquire
unless notice of a change of address is furnished pursuant to the provisions of
this Section 12. Any notice sent in compliance with this paragraph shall be
deemed furnished on the date of delivery in the case of hand-delivery, on the
earlier of the date of receipt or three (3) days after mailing in the case of
mailing, or on the next business day in the case of a recognized overnight
delivery service.
4
<PAGE>
13. REPRESENTATIONS AND WARRANTIES. Each Tenant hereby represents and
------------------------------
warrants to each of the other Tenants as follows:
(a) Such Tenant has received independent tax and legal advice from
attorneys of such Tenant's choice with respect to the advisability of executing
and delivering this Agreement;
(b) Such Tenant has made such investigation of the facts pertaining
to this Agreement, and all of the matters pertaining thereto, as such Tenant
deems necessary or appropriate;
(c) Except as expressly stated in this Agreement, such Tenant has
made no statement or representation to any other Tenant regarding any fact
relied upon by any other Tenant in entering into this Agreement, and such Tenant
specifically does not rely upon any statement, representation or promise of any
other Tenant in executing this Agreement, except as expressly stated herein.
(d) Such Tenant will not take any action which would interfere with
the performance of this Agreement by any of the other Tenants or which would
adversely affect any of the rights or remedies provided for herein.
(e) Such Tenant has taken all actions and obtained all
authorizations, consents and approvals as are conditions precedent to such
Tenant's authority to execute this Agreement, to the extent applicable.
14. MATERIALITY OF ALL TERMS. Each Tenant acknowledges and agrees that
------------------------
each and every term and condition of this Agreement is a material part of the
Agreement, and constitutes a material part of the bargained-for consideration
which has induced each Tenant to enter into this Agreement.
15. FURTHER ASSURANCES. Each Tenant hereby agrees to promptly execute and
------------------
deliver any additional instruments or documents which are necessary or
appropriate to carry out the purposes of this Agreement.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
State of Arizona.
5
<PAGE>
17. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
----------------------
benefit of the parties hereto and their respective heirs, executors,
administrators, successors, assigns and personal representatives.
18. RECORDING. Neither this Agreement nor any notice or memorandum hereof
---------
shall be recorded in any public record. A violation of this prohibition shall
constitute a material breach of this Agreement.
19. TIME OF THE ESSENCE. Time is of the essence of this Agreement, and of
-------------------
each covenant, agreement and condition hereof which provides for notice to be
given or action taken on a specific date or within a specified period of time.
20. HEADINGS. The headings preceding the text of the Sections hereof are
--------
inserted solely for convenience of reference and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
21. COUNTERPARTS. This Agreement may be executed simultaneously in
------------
counterparts, each of which shall constitute one and the same instrument.
22. AMENDMENTS. This Agreement may be amended or modified only by a
----------
writing executed by all Tenants.
23. SEVERABILITY. In the event that any provision of this Agreement shall
------------
be deemed unenforceable or inoperative, the remaining provisions hereof shall
not be affected thereby but shall remain in full force and effect.
24. SECTION REFERENCES. Except where the context clearly indicates to the
------------------
contrary, all references to the term "Section" are references to the
corresponding Sections of this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
NEW ENGLAND LIFE PENSION PROPERTIES
IV, A REAL ESTATE LIMITED
PARTNERSHIP, a Massachusetts limited
partnership
By: Fourth Copley Corp., a
Massachusetts corporation
By: /s/ Sandra H. O'Connor
--------------------------------
Name: SANDRA H. O'CONNOR
---------------------------
Title: Investment Officer
--------------------------
HEWSON PROPERTIES, INC., a
California corporation
By: /s/ Ernest F. Modzelewski
---------------------------------
Name: ERNEST F. MODZELEWSKI
-------------------------------
Title: PRES
------------------------------
7
<PAGE>
EXHIBIT A
---------
Lots 21 through 28, inclusive, CAVECREEK INDUSTRIAL CENTER UNIT II, according to
Book 227 of Maps, Page 10, records of Maricopa County, Arizona.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,045,964
<SECURITIES> 2,726,532
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,772,496
<PP&E> 42,938,391
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,710,887
<CURRENT-LIABILITIES> 175,621
<BONDS> 3,333,754
0
0
<COMMON> 0
<OTHER-SE> 47,201,512
<TOTAL-LIABILITY-AND-EQUITY> 50,710,887
<SALES> 7,210,109
<TOTAL-REVENUES> 7,582,119
<CGS> 1,557,362
<TOTAL-COSTS> 1,557,362
<OTHER-EXPENSES> 1,632,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,392,513
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,392,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,392,513
<EPS-PRIMARY> 45.78
<EPS-DILUTED> 45.78
</TABLE>
