<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------------------------------------
For Quarter Ended June 30, 1998 Commission File Number 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 Identification No.)
incorporation or organization)
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
- ----------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1998
PART I
FINANCIAL INFORMATION
-----------------------
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $16,047,855 $15,879,130
Property, net 14,672,556 15,139,147
----------- -----------
30,720,411 31,018,277
Cash and cash equivalents 6,949,194 4,017,473
Short-term investments - 2,889,753
----------- -----------
$37,669,605 $37,925,503
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 99,124 $ 152,095
Accrued management fee 34,212 39,859
Deferred management and
disposition fees 4,274,414 4,205,989
----------- -----------
Total liabilities 4,407,750 4,397,943
----------- -----------
Partners' capital (deficit):
Limited partners ($524
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 33,331,839 33,594,888
General partners (69,984) (67,328)
----------- -----------
Total partners' capital 33,261,855 33,527,560
----------- -----------
$37,669,605 $37,925,503
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 834,263 $1,652,565 $1,405,293 $ 2,774,125
Property operating expenses (328,450) (702,231) (563,781) (1,058,252)
Depreciation and amortization (155,403) (308,811) (251,533) (505,237)
--------- ---------- ---------- -----------
350,410 641,523 589,979 1,210,636
Joint venture earnings 422,650 726,629 355,692 662,728
Amortization (1,327) (2,654) (1,327) (2,654)
--------- ---------- ---------- -----------
Total real estate operations 771,733 1,365,498 944,344 1,870,710
Interest on cash equivalents
and short term investments 87,637 174,749 90,811 181,191
--------- ---------- ---------- -----------
Total investment activity 859,370 1,540,247 1,035,155 2,051,901
--------- ---------- ---------- -----------
Portfolio Expenses
Management fee 68,425 136,849 90,918 181,834
General and administrative 83,090 171,223 87,289 176,352
--------- ---------- ---------- -----------
151,515 308,072 178,207 358,186
--------- ---------- ---------- -----------
Net Income $ 707,855 $1,232,175 $ 856,948 $ 1,693,715
========= ========== ========== ===========
Net income per limited
partnership unit $ 7.38 $ 12.84 $ 8.93 $ 17.65
========= ========== ========== ===========
Cash distributions per
limited partnership unit $ 7.21 $ 15.61 $ 9.58 $ 21.44
========= ========== ========== ===========
Number of limited partnership
units outstanding during
the period 94,997 94,997 94,997 94,997
========= ========== ========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
---------------------- -------------------- -------------------- --------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
period $(70,145) $33,315,991 $(67,328) $33,594,888 $(163,493) $47,063,727 $(160,481) $47,361,993
Cash
distributions (6,918) (684,928) (14,978) (1,482,902) (9,193) (910,071) (20,573) (2,036,736)
Net income 7,079 700,776 12,322 1,219,853 8,569 848,379 16,937 1,676,778
-------- ----------- -------- ----------- --------- ----------- --------- -----------
Balance at
end of period $(69,984) $33,331,839 $(69,984) $33,331,839 $(164,117) $47,002,035 $(164,117) $47,002,035
======== =========== ======== =========== ========= =========== ========= ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1998 1997
------- --------
<S> <C> <C>
Net cash provided by operating
activities $ 1,501,792 $ 1,908,912
----------- -----------
Cash flows from investing activities:
Payment of note payable to venture partner - (64,000)
Investment in property (47,339) (150,977)
Decrease in short-term
investments, net 2,838,711 1,888,189
Loan repayment by joint venture partner 136,437 -
----------- -----------
Net cash provided by
investing activities 2,927,809 1,673,212
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,497,880) (2,057,309)
----------- -----------
Net increase in
cash and cash equivalents 2,931,721 1,524,815
Cash and cash equivalents:
Beginning of period 4,017,473 5,045,964
----------- -----------
End of period $ 6,949,194 $ 6,570,779
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of June 30, 1998 and December 31, 1997 and the results of
its operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 1998 and 1997. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1997 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
New England Life Pension Properties 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 four real estate investments it currently owns prior to the end of
1987. It intends to dispose of the investments within eight to 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 Partnership has engaged AEW Real Estate
Advisors, Inc. (the "Advisor") to provide asset management services.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
Ownership of the Columbia Gateway Corporate Park joint venture has been
restructured whereby the Partnership and its affiliate obtained full control
over the business of the joint venture effective January 1, 1998.
The following summarized financial information is presented in the
aggregate for the Partnership's two joint ventures.
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation
of $2,500,513 and
$2,321,074, respectively $20,048,541 $19,858,721
Other 970,080 958,432
----------- -----------
21,018,621 20,817,153
Liabilities 266,708 240,284
----------- -----------
Net Assets $20,751,913 $20,576,869
=========== ===========
</TABLE>
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Six Months ended June 30,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
Revenue
Rental income $1,418,150 $1,318,227
Other income 8,815 8,296
---------- ----------
1,426,965 1,326,523
---------- ----------
Expenses
Operating expenses 320,829 301,690
Depreciation and amortization 187,318 187,318
---------- ----------
508,147 489,008
---------- ----------
Net income $ 918,818 $ 837,515
========== ==========
</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.
NOTE 3 - PROPERTY
- -----------------
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 was allocated to land, building and improvements and other net
operating assets.
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 final payment of $136,437 was received
during the first quarter of 1998. The first payment was accounted for as a
reduction of previously accrued investment income. The second and third
payments were accounted for as a reduction of the Partnership's investment in
the property.
Effective January 1, 1996, the Metro Business Center joint venture
agreement was amended to grant the Partnership full control over management
decisions, beginning July 1, 1996. Since that date, the investment has been
accounted for as a wholly-owned property. The carrying value of the joint
venture investment at conversion was allocated to land, buildings and
improvements, and other net operating assets. 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.
<PAGE>
On February 28, 1998, the Partnership executed a purchase and sale
agreement to purchase the tenancy-in-common interest of the Developer in Metro
Business Center. The Partnership finalized the acquisition on July 17, 1998.
The purchase price was $7,113,255 and was paid by the Partnership as follows:
(i) A portion of the purchase price was paid through the discharge of all
outstanding amounts, including but not limited to accrued but unpaid interest,
owed by the Developer to the Partnership under the loan made by the Partnership
to the Developer in connection with the original acquisition of the property and
(ii) the Partnership paid the remainder of the purchase price in cash. The cash
payment was $2,210.
The following is a summary of the Partnership's two wholly-owned
investments:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- ------------------
<S> <C> <C>
Land $ 3,451,272 $ 3,451,272
Buildings and improvements
and other capitalized costs 12,559,320 12,648,418
Accumulated depreciation and
amortization (1,180,444) (886,418)
Net operating liabilities (157,592) (74,125)
----------- -----------
$14,672,556 $15,139,147
=========== ===========
</TABLE>
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended June
30, 1998 were made on July 30, 1998 in the aggregate amount of $691,847 ($7.21
per limited partnership unit).
<PAGE>
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
- ---------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited partnership
interest in December, 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. Five investments have been sold: one each in 1988, 1993,
1994, 1996 and 1997. As a result of the sales, capital of $45,218,572 ($476 per
limited partnership unit) has been returned to the limited partners through June
30, 1998.
At June 30, 1998, the Partnership had $6,949,194 in cash and cash
equivalents, of which $691,847 was used for cash distributions to partners on
July 30, 1998; 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 invested cash and
cash equivalents. Distributions of cash from operations for the first and
second quarters of 1998 were made at the annualized rate of 5.5% on the adjusted
capital contribution. Distributions of cash from operations relating to the
first and second quarters of 1997 were made at the annualized rate of 5% on the
adjusted capital contribution. The distribution rate was lower in 1997 in
anticipation of cash requirements related to lease rollovers.
The carrying value of real estate investments in the financial statements
is at depreciated cost, or if the investment's carrying value is determined not
to be recoverable through expected undiscounted future cash flows, the carrying
value is reduced to the 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 June 30, 1998, appraised values exceeded the related carrying values
by an aggregate of approximately $9,100,000. 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 Advisor and independent appraisers. Because of the
subjectivity inherent in the valuation process, the estimated current appraised
value may differ significantly from that which could be realized if the real
estate were actually offered for sale in the marketplace.
Results of Operations
- ---------------------
At June 30, 1998, two of the investments in the portfolio are structured as
joint ventures, one with a real estate development/management firm, and the
other with an affiliate of the Partnership. The Reflections Apartments and Metro
Business Center investments are wholly-owned properties.
<PAGE>
Operating Factors
Overall occupancy at Columbia Gateway Corporate Park remained at 100%
during the second quarter of 1998 compared to 95% at June 30, 1997. Ownership of
the Columbia Gateway Corporate Park joint venture has been restructured to give
the Partnership and its affiliate full control over the business of the joint
venture. This restructuring was effective January 1, 1998. One lease is due to
expire in October, 1998 but an existing tenant has expressed an interest in
exercising its right of first refusal to expand into this space upon the lease
expiration.
Occupancy at Reflections Apartments ended the second quarter of 1998 at
94%, up from 93% at June 30, 1997. Occupancy and rental rates are both slightly
above budget.
Occupancy at Metro Business Center at June 30, 1998 was at 100%, up from
87% at June 30, 1997. With only one vacancy upcoming during 1998, Metro
Business Center is expected to retain a high occupancy level.
Occupancy at 270 Technology Center increased to 100% at June 30, 1998
compared to 70% at March 31, 1998 due to the signing of a three year lease for
22,059 square feet effective April 15, 1998.
Occupancy at Palms Business Center was 99% at June 30, 1997. This property
was sold on October 24, 1997, and the Partnership recognized a gain of
$10,482,458. At the time of sale, the property was 86% leased.
Investment Activity
Interest on cash equivalents and short-term investments decreased by
approximately $6,400 or 4% between the first six-month periods of 1998 and 1997
due to lower investment balances.
Real estate operating activity for the first six months of 1998 was
$1,365,498 compared to $1,870,710 for the comparable six months of 1997. The
decrease is primarily due to the sale of Rancho Road in October, 1997, partially
offset by increases in operating performance by Reflections and Metro Business
Center due to higher occupancy and market rates.
Operating cash flow decreased $407,120 between the first six month periods
of 1998 and 1997, which is consistent with the decrease in operating activity
discussed above.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
The management fee decreased between the first six-month periods of 1998
and 1997 due to a decrease in distributable cash flow from operations. General
and administrative expenses did not change significantly between the respective
six-month periods.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1998
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
June 30, 1998.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 12, 1998
/s/ Wesley M. Gardiner, Jr.
-------------------------------
Wesley M. Gardiner, Jr.
President, Chief Executive Officer
and Director of the Managing General Partner,
Fourth Copley Corp.
August 12, 1998
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,540,031
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,540,031
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,540,031
<CURRENT-LIABILITIES> 30,775
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,509,256
<TOTAL-LIABILITY-AND-EQUITY> 5,540,031
<SALES> 0
<TOTAL-REVENUES> 148,982
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 106,659
<INCOME-TAX> 0
<INCOME-CONTINUING> 106,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,659
<EPS-PRIMARY> 3.05
<EPS-DILUTED> 3.05
</TABLE>
