<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, 1997
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, 1997, the Partnership had investments in the four
real properties described in A., B., D. and E. below. In December 1988, the
Partnership sold one of its investments and received sale proceeds of
$10,577,476 which were substantially reinvested. Four 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 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. A third
investment located in Decatur, Georgia was sold on October 10, 1996, resulting
in sale proceeds of $9,333,325. On October 24, 1996, capital of $9,214,709 ($97
per unit) was distributed to the Limited Partners. Finally, a fourth investment
located in Las Vegas, Nevada was sold on October 24, 1997, resulting in sale
proceeds of $22,983,007. On November 25, 1997, the Partnership made a capital
distribution of $22,989,274 ($242 per limited partnership unit) from the
proceeds of the sale and prior4 sales proceeds previously held in reserves.
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,
1997, 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, 1997. 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 would
accrue and compound at a rate of 10.5% per annum. 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.
<PAGE>
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
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, 1997.
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 92%
occupied as of December 31, 1997.
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, 1997, 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, 1997. 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. The Partnership's control over any
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 note was subsequently amended to mature on March 31, 1998. 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.
On February 28, 1998, the Partnership executed a purchase and sale
agreement to purchase the tenancy-in-common interest of the Developer. The
partnership expects to close on the sale on May 29, 1998. The purchase price is
$6,927,000 and shall be payable by the Partnership as follows: (i) A portion of
the purchase price will be paid with all outstanding amounts, including but not
limited to accrued but unpaid interest, owed by the Developer to the Partnership
under the aforementioned loan. (ii) The Partnership shall pay the remainder of
the purchase price in excess of the outstanding loan amounts. The Partnership
expects this amount to be nominal at the time of the closing.
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 100% leased as
of December 31, 1997.
C. Office, Industrial and Retail Buildings in Las Vegas, Nevada
------------------------------------------------------------
("Palms Business Center").
-------------------------
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
<PAGE>
to increase its maximum commitment from $15,300,000 to $15,840,000. As of the
date of sale, discussed below, 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 entitled the
Partnership to receive a preferred cumulative compounded return of 11% per annum
on its capital contribution, of which 9.5% per annum was due currently and up to
1.5% per annum could be accrued if sufficient cash was 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 received 40% of the excess cash
flow above a specified level until its cash investment of $360,000 was repaid in
full, at which time the Partnership was entitled to all cash flow. The venture
partner was paid in full as of the date of sale, discussed below. Unpaid
preferred returns of $2,936,919 were added to the Partnership's capital account.
Future preferred return payments were to be made monthly in the amount of
$121,125. Monthly payments were made to the extent operating revenues or
extraordinary cash flows were available. To the extent such payments could not
be made from such sources when due, payments could accrue at a rate of 9.5% per
annum, compounded monthly, until paid.
The joint venture owned 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 the
time of sale, approximately 86% 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 had not collected on or recognized the judgment as of the date of
sale.
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 was not collectible at
the time of sale.
On October 24, 1997, the Palms Business Center was sold. The
Partnership received proceeds of $22,983,007. On November 25, 1997, the
Partnership made a distribution to the Limited Partners of $22,989,274 ($242 per
Unit) from the proceeds of this sale and from reserves established with the
proceeds of prior sales.
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, 1997, 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. Ownership of the joint venture has been restructured
whereby the Partnership and the Affiliate will obtain full control over the
business of the joint venture. The restructuring will be effective January 1,
1998.
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
<PAGE>
commenced in the spring of 1994 in which a building totaling 46,000 square feet
was constructed and leased to a single tenant for a term of ten years. As of
December 31, 1997, the project was 98% 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, 1997, 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 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, 1997, the buildings
were approximately 70% 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
TENANTS
ESTIMATED WITH 10% NAME(S) SQUARE FEET
1998 OR MORE OF OF OF
PROPERTY REALTY TAXES GLA TENANT(S) EACH TENANT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL $191,000 N/A N/A N/A
Office/R&D Buildings in Columbia, MD $163,974 4 Wiltel 27,480
Columbia 45,951
National
EVI, Inc. 38,225
Avnet 21,991
Office/R&D Buildings in Frederick, MD $ 55,967 3 Great West 16,143
Life Annuity
Stulz America 9,933
Science 10,996
Applications
Office/Industrial Buildings in Phoenix, AZ $ 95,004 1 FW Bell 19,259
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL
CONTRACT
RENT PER
SQUARE LEASE RENEWAL LINE OF BUSINESS
PROPERTY FOOT EXPIRATION OPTIONS OF PRINCIPAL TENANTS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL N/A N/A N/A N/A
Office/R&D Buildings in Columbia, MD $10.50 November, 2007 Two for 5 Years Telecommunications
$ 8.95 August, 2004 Two for 5 Years Home Mortgages
$ 9.57 February, 2006 One for 5 Years Environmental/Testing
$ 8.20 October, 1999 One for 5 Years Telecommunications
Office/R&D Buildings in Frederick, MD $12.79 February, 2002 None Insurance
$ 7.39 December, 1999 None HVAC Manufacturing
13.44 August, 1998 None Technology
Office/Industrial Buildings in Phoenix, AZ $ 6.60 April, 1998 One for 5 Years Light
Assembly/Distribution
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following table sets forth for each of the last five years the
gross leasable area, occupancy rates, rental revenue and net effective rent for
the Partnership's properties:
<TABLE>
<CAPTION>
NET
RENTAL EFFECTIVE
GROSS LEASABLE YEAR-END REVENUE RENT
PROPERTY AREA OCCUPANCY RECOGNIZED ($/SF/YR)*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartment Complex in Fort Myers, FL
- -----------------------------------
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
1997 250,810 92% $1,822,350 $ 7.26
Office, Ind. & Retail Buildings in
Las Vegas, NV (1)
- ----------------------------------
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
1997 224,474 86% $1,613,215 $ 9.54
Office/R&D Buildings in Columbia, MD
- ------------------------------------
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
1997 188,649 98% $1,953,704 $10.82
Office/R&D Buildings in Frederick, MD
- -------------------------------------
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
1997 73,360 70% $ 728,065 $11.99
Office/Industrial Buildings in Phoenix, AZ
- -------------------------------------------
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
1997 109,930 100% $1,057,024 $10.50
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Net Effective Rent calculation is based on average occupancy during the
respective year.
(1) This property was sold on October 24, 1997.
<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, 1997:
<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
- --------------------
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
2007 N/A N/A N/A N/A
Office/Industrial
Buildings in Phoenix, AZ
- ------------------------
1998 6 36,970 $250,584 29%
1999 8 28,593 $218,448 26%
2000 5 17,486 $149,004 17%
2001 4 19,383 $158,676 19%
2002 2 7,498 $ 73,788 9%
2003 0 0 $ 0 0%
2004 0 0 $ 0 0%
2005 0 0 $ 0 0%
2006 0 0 $ 0 0%
2007 0 0 $ 0 0%
Office/R&D Buildings in
Columbia, MD
- -----------------------
1998 1 8,781 $ 93,077 5%
1999 2 32,570 $270,257 15%
2000 1 14,825 $146,026 8%
2001 0 0 $ 0 0%
2002 2 20,987 $245,855 14%
2003 0 0 $ 0 0%
2004 1 45,951 $411,261 23%
2005 0 0 $ 0 0%
2006 4 38,225 $350,904 19%
2007 1 27,480 $288,540 16%
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office/R&D Buildings in Frederick, MD
- -------------------------------------
1998 6 18,157 $212,435 38%
1999 3 9,933 $ 73,931 13%
2000 0 0 $ 0 0%
2001 2 6,885 $ 73,543 13%
2002 1 16,143 $206,463 36%
2003 0 0 $ 0 0%
2004 0 0 $ 0 0%
2005 0 0 $ 0 0%
2006 0 0 $ 0 0%
2007 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>
Industrial Buildings, Phoenix, AZ
- ---------------------------------
Building & Improvements $ 4,819,444 3.18% SL 31.5 $1,347,674
Building Improvements 329,439 2.56% SL 39 8,019
----------- ----------
Total Depreciable Assets $ 5,148,883 $1,355,693
Office/Research and Development Buildings, Frederick, MD
- --------------------------------------------------------
Building $ 4,199,372 3.18% SL 31.5 $1,324,797
Land Improvements 727,147 2.56% SL 39 13,717
Land Improvements 100,000 10.00% SL 15 19,303
----------- ----------
Total Depreciable Assets $ 5,026,519 $1,357,817
Apartment Complex, Fort Myers, FL
- ---------------------------------
Building $ 9,155,671 3.64% SL 27.5 $2,817,104
----------- ----------
Total Depreciable Assets $ 9,155,671 $2,817,104
Office/Research and Development Buildings, Columbia, MD
- -------------------------------------------------------
Building $ 7,829,962 3.18% SL 31.5 $1,945,532
Land Improvements 3,685,504 2.56% SL 39 50,196
Land Improvements 94,022 N/A 150%DB 15 28,050
----------- ----------
Total Depreciable Assets $11,609,488 $2,023,778
Total Depreciable Assets $30,940,561 $7,554,392
=========== ==========
- --------------------------------------------------------------------------------------------------------------------------
</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, FL
- ----------------------------------------
Reflections is located in the city of Fort Myers in Lee County. Employment in
Lee County is concentrated in the services and trade sectors, which represent
nearly 60% of the market's total employment. The area has experienced abundant
commercial and industrial activity due to the influences of a strong
transportation network, availability of reasonably priced land and proximity to
an institute of higher learning. With over 1 million square feet of office
space, this area should continue to generate substantial demand for multifamily
housing. The impact of these employment generators should continue to have a
major impact on demand for rental housing in the Lee County market.
Office/Industrial Buildings in Phoenix, AZ
- ------------------------------------------
The property is located in the metropolitan Phoenix market, which has steadily
outperformed most other western metro areas, adding jobs at over twice the
national rate of expansion. Attracting both service and high-tech firms, Phoenix
continues to diversify its industrial base, which has achieved sufficient size
to begin attracting additional firms on its own. New office supply in the metro
area during 1997 totaled 1.0 million square feet, a 2.3% increase to existing
stock. Office demand growth during 1997 was approximately 2.4%, effectively
unchanged from the 2.5% recorded in 1996. In turn, the office vacancy rate for
1997 decreased slightly to 9.4% from 9.5% at year-end 1996.
Office/R&D Buildings in Columbia, MD
- ------------------------------------
The property is located within the Howard County R&D submarket, which has a base
of 8.9 million square feet and a 6.3% vacancy rate as of year-end 1997. Due to
limited space in the marketplace, tenants continue to seek space that will
accommodate their growth needs and are moving from Washington, D.C. to the
Baltimore suburbs. The Columbia flex submarket contains 6.8 million square feet
of space and a 6.5% vacancy rate. Planned construction of 300,000 square feet
of speculative office space in this market is showing offering rates on new
product that are setting new highs. As a result, 1997 rents for Howard County
averaged in the $10.00 - $10.50 range.
R&D/Office Buildings in Frederick, MD
- -------------------------------------
The property is located in the Frederick County office/flex and light industrial
market. The Frederick R&D/office market contains approximately 4.9 million
square feet of space with a vacancy rate of approximately 16%. Current market
rents range from $8.50 to $10.00 per square foot for R&D and $9.50 to $12.00 per
square foot for office. Due to build-to-suit activity during 1997, which
limited new large tenants to fill vacated space, the market is currently out of
balance. While the office-using sector in Frederick County is expected to
remain stable over the near term, rents are expected to remain flat through
1998.
<PAGE>
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 judgements against two former tenants for
defaults under leases. See Item 1.C.
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, 1997, there were 16,983 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, 1997, cash distributions
paid in 1997 or distributed after year end with respect to 1997 to the Limited
Partners as a group totaled $26,517,463, including $22,989,274 ($242 per
Limited Partnership Unit) from the proceeds of a property sale and proceeds from
reserves established from the proceeds of previous sales. 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.
Cash distributions exceeded net income in 1997 and 1996 and, therefore,
resulted in a reduction of partners' capital. Reference is made to the
Partnership's Statement of 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
12/31/97(1) 12/31/96(2) 12/31/95(3) 12/31/94(4) 12/31/93(5)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $16,837,755 $ 7,582,119 $ 5,906,735 $ 4,576,435 $ 3,784,731
Net Income (Loss) $13,211,159 $ 4,392,513 $ 3,912,897 $ 3,752,101 $ (378,545)
Net Income (Loss) per Unit of
Limited Partnership Interest $ 137.68 $ 45.78 $ 40.78 $ 39.10 $ (3.94)
Total Assets $37,925,503 $50,710,887 $59,991,655 $67,145,010 $67,471,037
Total Cash Distributions per
Units of Limited Partnership
Interest, including amounts
distributed after year end
with respect to such year $ 279.14 $ 147.71 $ 60.12 $ 105.49 $ 126.22
</TABLE>
(1) Net income includes a gain on the sale of property of $10,482,458. Cash
distributions include a return of capital of $242.00 per Limited
Partnership Unit.
(2) 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.
(3) 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.
(4) 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.
(5) 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. Five investments have
been sold; one each in 1988, 1993, 1994, 1996 and 1997. Capital of
$45,218,572 ($476 per limited partnership unit) has been returned to the
limited partners through December 31, 1997.
On October 10, 1996, the Partnership sold its interest in the Decatur
TownCenter II joint venture to its partner for $9,540,860. The Partnership
received net sale proceeds of $9,333,325 and after closing costs recognized
a gain of $1,055,591 ($11.00 per limited partnership unit). 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.
On October 24, 1997, the Palms Business Center property was sold to an
institutional buyer which is unaffiliated with the Partnership for
$23,200,000. The Partnership received net proceeds of $22,983,007, after
closing costs and repayment of a loan from the venture partner. The
Partnership recognized a gain of $10,482,458 ($109.24 per limited
partnership unit). A disposition fee of $696,000 was accrued but not paid
to AEW. On November 25, 1997, the Partnership made a capital distribution
of $22,989,274 ($242 per limited partnership unit) from the proceeds of the
sale and prior sales proceeds held in reserves. This distribution reduced
the adjusted capital contribution to $524 per limited partnership unit.
At December 31, 1997, the Partnership had $ 6,907,226 in cash, cash
equivalents and short-term investments, of which $806,035 was used for cash
distributions to partners on January 29, 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 short-term investments. Quarterly distributions of cash
from operations relating to 1997 were made at the annualized rate of 5% on
the weighted average adjusted capital contribution. Quarterly
distributions of cash from operations related to 1996 were made at the
annualized rate of 6% on the weighted average adjusted capital
contribution.
The carrying value of real estate investments in the financial
statements at December 31, 1997 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, 1997, the appraised values of certain investments exceeded the
related carrying values by an aggregate of $5,500,000.
<PAGE>
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 AEW 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.
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including among other things, a temporary
inability to process transactions or engage in normal business operations.
The Managing General Partner and its affiliates are assessing the
modifications or replacements of its software that may be necessary for its
computer systems to function properly with respect to the dates in the year
2000 and thereafter. The Managing General Partner and its affiliates do not
believe that the cost of either modifying existing software or converting
to new software will be significant or that the Year 2000 Issue will pose
significant operational problems.
Results of Operations
---------------------
Form of Real Estate Investments
At December 31, 1997, two of the investments in the portfolio are
structured as joint ventures with real estate development/management firms,
and in one case, with an affiliate of the Partnership. The Palms Business
Center ( which was sold October 24, 1997), Reflections Apartments and Metro
Business Center investments were originally structured as joint ventures.
However, effective January 1, 1995, April 1, 1996 and July 1, 1996,
respectively, the Partnership was granted full control over management
decisions and the investments have been accounted for as wholly-owned
properties since those dates.
Operating Factors
As previously discussed, the Palms Business Center was sold on October
24, 1997 and the Partnership recognized a gain of $10,482,458. At the time
of the sale the Palms Business Center was 86% leased compared to 98% and
96% at December 31, 1996 and December 31, 1995, respectively.
Overall occupancy at Columbia Gateway Corporate Park was 98% at
December 31, 1997, up from 94% at December 31, 1996. Ownership of the
Columbia Gateway Corporate Park joint venture has been restructured whereby
the Partnership and its affiliate will obtain full control over the
business of the joint venture. The restructuring will be effective January
1, 1998.
Occupancy at Reflections Apartments at December 31, 1997 was 92%, up
from 88% at December 31, 1996. Current rental rates are at the high end of
the market range.
Occupancy at Metro Business Center at December 31, 1997 was at 100%,
up from 92% at December 31, 1996.
<PAGE>
Occupancy at 270 Technology Center was 70% at December 31, 1997, down
from 89% at December 31, 1996 and 98% at December 31, 1995. This decrease
in occupancy is primarily due to the expiration of a lease whose tenant
occupied 30% of the space. This space is currently being marketed.
Investment Activity
1997 Compared to 1996
Interest on cash equivalents and short-term investments increased by
approximately $102,000 compared to 1996, primarily due to higher average
investment balances as a result of the temporary investment of the receipt
of the Palms Business Center sales proceeds and to higher yields.
Exclusive of 1996 operating results at Decatur TownCenter ($220,428),
total real estate operations were $2,925,862 and $3,558,278 for the twelve
months ended December 31, 1997 and 1996, respectively. The decrease of
$632,416, is primarily due to a decrease in joint venture earnings in 270
Technology Center due to higher vacancy and a write off of tenant
improvements. The decrease is also attributable to the decrease in
operations from Palms Business Center due to the October, 1997 sale. These
decreases were offset by improved operating results at both Metro Business
Center and Reflections, both of which experienced higher occupancy rates
during 1997.
Operating cash flow in 1997 decreased $1,463,739. Cash flow in 1996
included $250,000 received pursuant to a loan guarantee from one of the
Partnership's joint venture partners, relating to previously accrued
investment income. Exclusive of this item, operating cash flow decreased
$1,213,739 between 1996 and 1997. The change primarily stems from the
change in Partnership operating results discussed above, increases in
working capital and the timing of cash distributions from joint ventures.
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>
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.
1997 Compared to 1996
General and administrative expenses decreased approximately $14,000 or
4%, primarily due to a decrease in professional fees for 1997 which were
the result of a reduction in accounting fees and lower legal fees in 1997.
Legal fees in 1996 had included expenses incurred for the two investment
restructurings. Management fees decreased in 1997 compared to 1996 due to a
decrease in distributable cash flow and a corresponding decrease in
operating distributions to partners.
1996 Compared to 1995
General and administrative expenses decreased approximately $18,000 as
a result of lower legal expenses. The management fee decreased due to an
decrease in distributable cash flow from operations. This decrease is
primarily attributable to the discretionary reduction in the Partnership's
cash reserves in 1995.
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 General Partner and the age and position held by each
of them as of December 31, 1997.
<TABLE>
<CAPTION>
Name Position(s) with the Managing General Partner Age
- ---- --------------------------------------------- ---
<S> <C> <C>
Wesley M. Gardiner, Jr. President, Chief Executive Officer and Director 39
Pamela J. Herbst Vice President and Director 42
J. Grant Monahon Vice President and Director 52
James J. Finnegan Vice President 37
Karin J. Lagerlund Treasurer and Principal Financial and Accounting Officer 33
</TABLE>
(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:
Wesley M. Gardiner, Jr. joined AEW Real Estate Advisors, Inc. ("AEW") ,
formerly known as Copley Real Estate Advisors, Inc., in 1990 and has been a Vice
President at AEW since January, 1994. AEW is a subsidiary of AEW Capital
Management, L.P. ("AEW Capital Management"). 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, 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.
<PAGE>
Pamela J. Herbst directs AEW Capital Management's Portfolio Advisory
Services, with oversight responsibility for the asset and portfolio management
areas. Ms. Herbst is a member of AEW Capital Management's Investment Policy
Group and Management Committee. She came to AEW Capital Management in December
1996 as a result of the firm's merger with Copley Real Estate Advisors, Inc.,
where she held various senior level positions in asset and portfolio management,
acquisitions, and corporate operations since 1982. Ms. Herbst is a graduate of
the University of Massachusetts (B.A.) and Boston University (M.B.A.).
J. Grant Monahon is AEW Capital Management's General Counsel and a member
of the firm's Management Committee and Investment Policy Group. He has over 25
years of experience in real estate law and investments. Prior to joining AEW
Capital Management in 1987, Mr. Monahon was a partner with a major Boston law
firm. As the head of that firm's real estate finance department, he represented
a wide variety of institutional clients, both domestic and international, in
complex equity and debt transactions. He is the former Chairman of the General
Counsel section of the National Association of Real Estate Investment Managers.
Mr. Monahon is a graduate of Dartmouth College (B.A.) and Georgetown University
Law Center (J.D.).
James J. Finnegan is the Assistant General Counsel 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 AEW'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.).
Karin J. Lagerlund directs the Advisory Services Portfolio Accounting
Group at AEW Capital Management, overseeing portfolio accounting, performance
measurement and client financial reporting for AEW's private equity investment
portfolios. Ms. Lagerlund is a Certified Public Accountant and has over ten
years experience in real estate consulting and accounting. Prior to joining AEW
Capital Management in 1994, she was an Audit Manager at EY/Kenneth Leventhal
LLP. Ms. Lagerlund is a graduate of Washington State University (B.A.).
(f) Involvement in Certain Legal Proceedings.
----------------------------------------
None.
<PAGE>
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, 1997.
<TABLE>
<CAPTION>
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
<S> <C> <C>
General Partners Share of Distributable Cash $ 38,959
AEW Real Estate Advisors, Inc. Management Fees and
(formerly known as Copley Real Reimbursement of Expenses 367,468
Estate Advisors, Inc.)
New England Securities Corporation Servicing Fees and
Reimbursement of Expenses 25,155
--------
TOTAL $431,582
========
</TABLE>
For the year ended December 31, 1997 the Partnership
allocated $156,581 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, 1997. 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 General
Partner.
(b) Security Ownership of Management.
--------------------------------
An affiliate of the General Partner of the Partnership
owned 1,648 Units as of December 31, 1997.
(c) Changes in Control.
------------------
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The Partnership has no relationships or transactions to
report other than as reported in Item 11 above.
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K.
-------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements and Schedule and Financial
Statement Index No. 2 are filed as part of this Annual Report.
(2) Financial Statement Schedule--The Financial Statement
Schedule listed on the accompanying Index to Financial Statements and
Schedule is filed as part of this Annual Report.
(3) Exhibits--The Exhibits listed in the accompanying Exhibit
Index are filed as a part of this Annual Report and incorporated in this
Annual Report as set forth in said Index.
(b) Reports on Form 8-K. On November 10, 1997, the Partnership filed one
Current Report on Form 8-K disclosing the sale of the Palms Business Center
property on October 24, 1997.
<PAGE>
New England Life Pension Properties IV;
A Real Estate Limited Partnership
Financial Statements
* * * * * * *
December 31, 1997
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
--------------------------------------
A REAL ESTATE LIMITED PARTNERSHIP
---------------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
------------------------------------------
Report of Independent Accountants
Financial Statements:
Balance Sheets - December 31, 1997 and 1996
Statements of Operations - Years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital (Deficit) - Years ended December 31, 1997,
1996 and 1995
Statements of Cash Flows - Years ended December 31, 1997,1996 and 1995
Notes to Financial Statements
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
In our opinion, based on our audits and the reports of other auditors for the
years ended December 31, 1997, 1996 and 1995, 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, 1997 and 1996, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, 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 and 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 these ventures aggregated $1,415,605 and $1,371,477
for the years ended December 31, 1996 and 1995, 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 and 1995.
Operating income for these investments was $809,714 for the year ended December
31, 1996, and equity in joint venture income was $339,763 and $1,045,307 for
the years ended December 31, 1996 and 1995, 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 and 1995. Operating income for
this investment was $1,806,638 and $1,770,345 for the years ended December 31,
1996 and 1995. 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 and 1995, 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 and 1995 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, 1997, 1996 and 1995 provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------------
Boston, Massachusetts
March 24, 1998
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $15,879,130 $15,733,520
Property, net 15,139,147 27,204,871
----------- -----------
31,018,277 42,938,391
Cash and cash equivalents 4,017,473 5,045,964
Short-term investments 2,889,753 2,726,532
----------- -----------
$37,925,503 $50,710,887
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 152,095 $ 119,344
Accrued management fee 39,859 56,277
Deferred management and disposition fees 4,205,989 3,333,754
----------- -----------
Total liabilities 4,397,943 3,509,375
----------- -----------
Partners' capital (deficit):
Limited partners ($524 and $766 per unit,
respectively; 120,000 units authorized,
94,997 units issued and outstanding) 33,594,888 47,361,993
General partners (67,328) (160,481)
----------- -----------
Total partners' capital 33,527,560 47,201,512
----------- -----------
$37,925,503 $50,710,887
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 4,981,451 $ 4,173,714 $2,379,352
Property operating expenses (2,028,830) (1,557,362) (609,007)
Depreciation and amortization (921,501) (805,522) (444,790)
----------- ----------- ----------
2,031,120 1,810,830 1,325,555
Joint venture earnings 900,050 1,980,804 3,096,796
Amortization (5,308) (12,928) (19,377)
----------- ----------- ----------
Total real estate operations 2,925,862 3,778,706 4,402,974
Gain on sales of property 10,482,458 1,055,591 -
----------- ----------- ----------
Total real estate activity 13,408,320 4,834,297 4,402,974
Interest on cash equivalents
and short-term investments 473,796 372,010 430,587
----------- ----------- ----------
Total investment activity 13,882,116 5,206,307 4,833,561
----------- ----------- ----------
PORTFOLIO EXPENSES
Management fee 352,468 481,249 570,551
General and administrative 318,489 332,545 350,113
----------- ----------- ----------
670,957 813,794 920,664
----------- ----------- ----------
NET INCOME $13,211,159 $ 4,392,513 $3,912,897
=========== =========== ==========
Net income per limited
partnership unit $137.68 $45.78 $40.78
=========== =========== ==========
Cash distributions per limited
partnership unit $282.60 $148.80 $115.94
=========== =========== ==========
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
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,211,159 $ 4,392,513 $ 3,912,897
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 926,809 818,450 464,167
Equity in joint venture earnings (900,050) (1,980,804) (3,096,796)
Cash distributions from joint ventures 749,133 2,350,903 3,928,414
Gain on sales of property (10,482,458) (1,055,591) -
Decrease (increase) in investment income
and other receivables (22,023) 20,992 (24,016)
Increase in deferred leasing commissions (79,163) (58,972) -
Decrease (increase) in property working capital (144,177) 138,293 148,652
Increase in operating liabilities 192,568 225,753 181,550
Payment of deferred management fee - - (175,374)
------------ ------------ ------------
Net cash provided by operating activities 3,451,798 4,851,537 5,339,494
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of property 22,287,007 9,333,325 -
Deferred disposition fees 696,000 286,226 -
Payment of note payable to venture partner (130,000) (100,000) (130,000)
Investment in property (306,987) (72,441) (51,768)
Decrease (increase) in short-term
investments, net (141,198) 617,015 (2,403,566)
Loan repayment by joint venture partner - 263,563 -
------------ ------------ ------------
Net cash provided by (used in) investing
activities 22,404,822 10,327,688 (2,585,334)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions to partners (26,885,111) (14,185,260) (11,072,428)
------------ ------------ ------------
Net cash used in financing activity (26,885,111) (14,185,260) (11,072,428)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (1,028,491) 993,965 (8,318,268)
Cash and cash equivalents:
Beginning of year 5,045,964 4,051,999 12,370,267
------------ ------------ ------------
End of year $ 4,017,473 $ 5,045,964 $ 4,051,999
============ ============ ============
</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
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $(160,481) $ 47,361,993 $(154,702) $ 57,148,961 $(135,355) $ 64,289,145
Cash distributions (38,959) (26,846,152) (49,704) (14,135,556) (58,476) (11,013,952)
Net income 132,112 13,079,047 43,925 4,348,588 39,129 3,873,768
--------- ------------ --------- ------------ --------- ------------
Balance at end
of year $ (67,328) $ 33,594,888 $(160,481) $ 47,361,993 $(154,702) $ 57,148,961
========= ============ ========= ============ ========= ============
</TABLE>
(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
four 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. 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. At the end of
1997, NEIC completed a restructuring plan under which it contributed all of its
operations to a newly formed private partnership, NEIC Operating Partnership,
L.P., in exchange for a general partnership interest in the newly formed entity.
As such, at December 31, 1997, AEW Capital Management, L.P. is wholly owned by
NEIC Operating Partnership, L.P.. AEW is a subsidiary of AEW Capital
Management, L.P..
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.
At December 31, 1997 and 1996, an affiliate of the Managing General Partner
owned 1,648 and 1,613 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 $2,511,107 and $2,334,875 at December 31, 1997 and 1996, respectively. AEW
is also
<PAGE>
reimbursed for expenses incurred in connection with administering the
Partnership ($15,000 in 1997, $15,146 in 1996 and $13,874 in 1995). Acquisition
fees paid were based on 2% of the gross proceeds from the offering. Disposition
fees are limited to the lesser of 3% of the selling price of the property, or
50% of the standard real estate commission customarily charged by an independent
real estate broker. Payments of disposition fees are subject to the prior
receipt by the limited partners of their capital contributions plus a stipulated
return thereon. Deferred disposition fees were $1,694,879 and $998,879 at
December 31, 1997 and 1996, respectively.
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 $25,155, $24,040, and $21,543
in 1997, 1996 and 1995, 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. 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.
<PAGE>
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 held for
sale, the impairment loss also includes estimated costs of sale. Property held
for sale is not depreciated during the holding period.
The carrying value of an investment may be more or less than its current
appraised value. At December 31, 1997 and 1996, the appraised values of certain
investments exceeded the related carrying values by an aggregate of $5,500,000
and $10,000,000, respectively; and the appraised values of the remaining
investments were less than the related carrying values by an aggregate of
$1,200,000 at December 31, 1996. At December 31, 1997, no appraised values were
less than the related carrying values.
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 AEW 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, 1997
and 1996 all investments were in commercial paper with less than seven months
and three 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.
Effective January 1, 1998, the Partnership adopted FAS 128 "Earnings per
Share," which simplifies the standards of reporting earnings per share (EPS)
previously found in APB No. 15. It provides guidance on the computation and
disclosure of basic and diluted EPS and requires restatement of prior periods
for comparative purposes. The adoption of FAS 128 did not have a material
impact on the Partnership's financial statements
<PAGE>
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 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 1997 1996
- ----------- ------------ --------- ------ ------
<S> <C> <C> <C> <C>
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
</TABLE>
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. Ownership of the
Columbia Gateway Corporate Park joint venture has been restructured whereby the
Partnership and its affiliate will obtain full control over the business of the
joint venture effective January 1, 1998. The minimum future rentals due to the
venture under non-cancelable operating leases are: $1,510,900 in 1998,
$1,408,027 in 1999, $707,156 in 2000, $602,419 in 2001, and $475,580 in 2002.
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: $480,576 in 1998, $306,660 in 1999,
$232,729 in 2000, $213,029 in 2001 and $34,411 in 2002.
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
<PAGE>
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% per annum. 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. (The "Developer"), 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 is
secured by a recorded deed-of-trust which provides that the note is due upon the
sale of the collateral. The note was subsequently amended to mature on March
31, 1998. 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.
On February 28, 1998, the Partnership executed a purchase and sale
agreement to purchase the tenancy-in-common interest of the Developer. The
partnership expects to close on the sale on May 29, 1998. The purchase price is
$6,927,000 and shall be payable by the Partnership as follows: (i) A portion of
the purchase price will be paid with all outstanding amounts, including but not
limited to accrued but unpaid interest, owed by the Developer to the Partnership
under the aforementioned loan. (ii) The Partnership shall pay the remainder of
the purchase price in excess of the outstanding loan amounts. The Partnership
expects this amount to be nominal at the time of the closing.
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).
<PAGE>
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).
Summarized Financial Information
- --------------------------------
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation
of $2,321,074 and
$2,882,980, respectively $19,858,721 $19,857,292
Other 958,432 466,934
----------- -----------
20,817,153 20,324,226
Liabilities 240,284 76,032
----------- -----------
Net assets $20,576,869 $20,248,194
=========== ===========
</TABLE>
Results of Operations
---------------------
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
Rental income $2,691,155 $4,926,504 $7,364,285
Other income 3,233 138,669 173,436
---------- ---------- ----------
2,694,388 5,065,173 7,537,721
---------- ---------- ----------
Expenses
Operating expenses 596,471 1,690,232 2,491,930
Depreciation and amortization 854,025 1,038,931 1,583,687
---------- ---------- ----------
1,450,496 2,729,163 4,075,617
---------- ---------- ----------
Net income $1,243,892 $2,336,010 $3,462,104
========== ========== ==========
</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 Decatur TownCenter II investment was sold on October 10, 1996. The
Reflections and Metro Business Center investments were converted to wholly-owned
properties on April 1, 1996 and July 1, 1996, respectively. The above amounts
include results of operations through those dates.
<PAGE>
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 was 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 received 40% of the
excess cash flow above a specified level until the initial obligation of
$360,000 was repaid in full. The obligation was paid in full as of the date of
sale (see discussion below).
The buildings and improvements (fifteen office/industrial buildings in Las
Vegas, Nevada) were being depreciated over 25 years, beginning January 1, 1995.
The Palms Business Center was sold on October 24, 1997 to an institutional
buyer, which is unaffiliated with the Partnership for $23,200,000. The
Partnership received net proceeds of $22,983,007, after closing costs and payoff
of the remaining initial obligation due to the venture partner, and recognized a
gain of $10,482,458 ($109.24 per limited partnership unit). A disposition fee
of $696,000 was accrued but not paid to AEW. On November 25, 1997, the
partnership made a distribution to the limited partners in the aggregate amount
of $22,989,274 ($242 per limited partnership unit) with proceeds from this sale
and partially from reserves established from the proceeds of previous sales.
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.
<PAGE>
The following is a summary of the Partnership's investment in properties (two
in 1997 and three in 1996):
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land $ 3,451,272 $ 6,523,605
Buildings and improvements
and other capitalized costs 12,648,418 22,122,254
Accumulated depreciation and
Amortization (886,418) (1,171,576)
Payable to venture partner - (130,000)
Net operating liabilities (74,125) (139,412)
----------- -----------
$15,139,147 $27,204,871
=========== ===========
</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 the Partnership's remaining properties are as follows: $730,000 in 1998;
$488,000 in 1999; $283,000 in 2000; $138,000 in 2001, and $38,000 in 2002.
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,
------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Net income per financial
statements $13,211,159 $4,392,513 $3,912,897
Timing differences:
Joint venture earnings 335,601 539,479 978,808
Depreciation and amortization 926,809 230,922 125,347
Expenses 176,233 253,552 28,383
Gain (loss) on sale 1,008,333 (173,256) -
----------- ---------- ----------
Taxable income $15,658,135 $5,243,210 $5,045,435
=========== ========== ==========
</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, to
$766 in 1996 and to $524 in 1997. 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.
<PAGE>
Note 7 - Subsequent Event
- -------------------------
Distributions of cash from operations relating to the quarter ended December
31, 1997 were made on January 29, 1998 in the aggregate amount of $806,035
($8.40 per limited partnership unit).
<PAGE>
NEW ENGLAND PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
Schedule III
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Costs Subsequent Gross amount at which
the Partnership to Acquisition Carried at Close of Period
------------------------------------------------------------------ ---------------------------------------
Other Net Change in Other Net
Buildings & Operating Working Buildings & Operating
Description Land Improvements Liabilities Improvements Capital Land Improvements Liabilities
- ----------- ------ ------------ ------------ ------------ --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50% interest in
Morf VI Venture.
Owner of two single
story office/research --------------------------------- See Note B ---------------------------------------------------------------
and development
buildings in
Frederick, Maryland
34.75% interest in
Gateway 51 Partnership --------------------------------- See Note B ---------------------------------------------------------------
which 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) $ 51,768 $ 484,212 $3,072,333 $9,780,823 $ 202,788
Fort Meyers, FL
-Lee Partners 1,571,173 8,653,313 245,029 113,877 (575,391) 1,571,173 8,767,190 (330,366)
Phoenix, AZ
-Copley/Hewson
Northwest 1,880,099 3,879,241 129,921 265,551 (103,244) 1,880,099 4,144,792 26,677
-----------------------------------------------------------------------------------------------------------
Total Wholly-Owned
Properties 6,523,605 22,261,609 93,526 431,196 (194,423) 6,523,605 22,692,805 (100,901)
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Disposal Accumulated Date of Date Depreciable
of Assets Total Depreciation Construction Acquired Life
--------- ------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
50% interest in
Morf VI Venture.
Owner of two single $ 4,608,034 N/A 1987 12/22/87 50 years
story office/research
and development
buildings in
Frederick, Maryland
34.75% interest in
Gateway 51 Partnership
which has constructed $11,271,096 N/A 1992 12/21/87 50 years
six office and research
and development
buildings, and owns
land in Columbia,
Maryland
-----------
Total Joint Ventures $15,979,130
===========
Las Vegas, NV
-Rancho Road
Associates ($13,044,108) $11,836 $ 0 1988 12/29/86 25 years
Converted to
wholly-owned 1/1/95
Fort Meyers, FL
-Lee Partners 10,007,997 (596,964) 1987 8/1/86 25 years
Converted to
wholly-owned 4/1/96
Phoenix, AZ
-Copley/Hewson
Northwest 6,051,568 (335,290) 1987 9/15/86 25 years
Converted to
wholly-owned 7/1/96
------------- -------------------------
Total Wholly-Owned
Properties (13,044,108) 16,071,401 (932,254)
------------------------------------------
</TABLE>
<PAGE>
NEW ENGLAND PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION - WHOLLY OWNED PROPERTY
SCHEDULE III NOTE A
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Balance Conversion to Additions to
as of Wholly-Owned Lease Additions to Write Down
Description 12/31/94 Property Commissions Property of Property
- ----------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates 0 12,519,964 0 51,768 0
-------------------------------------------------------------------------------------------
Total Wholly-Owned Property $0 $12,519,964 $0 $51,768 $0
===========================================================================================
<CAPTION>
Balance Conversion to Additions to
as of Wholly-Owned Lease Additions to Write Down
Description 12/31/95 Property Commissions Property of Property
- ----------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners $0 $10,469,511 $0 $42,591 $0
Las Vegas, NV
-Rancho Road Associates 12,553,080 0 37,164 0 0
Phoenix, AZ
-Copley/Hewson Northwest 0 5,889,261 21,808 29,850 0
-------------------------------------------------------------------------------------------
Total Wholly-Owned Property $12,553,080 $16,358,772 $58,972 $72,441 $0
===========================================================================================
<CAPTION>
Balance Conversion to Additions to
as of Wholly-Owned Lease Additions to Write Down
Description 12/31/96 Property Commissions Property of Property
- ----------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners $ 9,906,024 $0 $0 $ 71,286 $0
Las Vegas, NV
-Rancho Road Associates 12,761,488 0 41,347 0 0
Phoenix, AZ
-Copley/Hewson Northwest 5,787,671 0 37,816 235,701 0
-------------------------------------------------------------------------------------------
Total Wholly-Owned Property $28,455,183 $0 $79,163 $306,987 $0
===========================================================================================
<CAPTION>
12/31/94
Change in Balance Accumulated
Property Working Disposal of as of Depreciation and
Description Capital Asset 12/31/95 Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates (18,652) 0 $12,553,080 0
-------------------------------------------------------------------------------------------
Total Wholly-Owned Property ($18,652) $0 $12,553,080 $0
===========================================================================================
<CAPTION>
12/31/95
Change in Balance Accumulated
Property Working Disposal of as of Depreciation and
Description Capital Asset 12/31/96 Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners ($606,078) $0 $ 9,906,024 $0
Las Vegas, NV
-Rancho Road Associates 171,244 0 $12,761,488 444,790
Phoenix, AZ
-Copley/Hewson Northwest (153,248) 0 $ 5,787,671 0
------------------------------------------------------------------------------------
Total Wholly-Owned Property ($588,082) $0 $28,455,183 $444,790
====================================================================================
<CAPTION>
12/31/96
Change in Balance Accumulated
Property Working Disposal of as of Depreciation and
Description Capital Asset 12/31/97 Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners $ 30,687 $0 $10,007,997 $257,265
Las Vegas, NV
-Rancho Road Associates 253,109 (13,044,108) $ 11,836 894,659
Phoenix, AZ
-Copley/Hewson Northwest (9,620) 0 $ 6,051,568 98,388
--------------------------------------------------------------------------------------
Total Wholly-Owned Property $274,176 ($13,044,108) $16,071,401 $1,250,312
======================================================================================
<CAPTION>
1995 12/31/95 12/31/95
Depreciation Depreciation and 1995 Accumulated
and Amortization Amortization Disposal of Depreciation and
Description Expense Subtotal Asset Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Las Vegas, NV
-Rancho Road Associates (444,790) $444,790 $0 $444,790
--------------------------------------------------------------------------------------
Total Wholly-Owned Property $(444,790) $444,790 $0 $444,790
======================================================================================
<CAPTION>
1996 12/31/96 12/31/96
Depreciation Depreciation and 1996 Accumulated
and Amortization Amortization Disposal of Depreciation and
Description Expense Subtotal Asset Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners ($257,265) $257,265 $0 $257,265
Las Vegas, NV
-Rancho Road Associates (449,869) $894,659 0 $894,659
Phoenix, AZ
-Copley/Hewson Northwest (98,388) $ 98,388 0 $ 98,388
------------------------------------------------------------------------------------
Total Wholly-Owned Property ($805,522) $1,250,312 $0 $1,250,312
====================================================================================
<CAPTION>
1997 12/31/97 12/31/97
Depreciation Depreciation and 1997 Accumulated
and Amortization Amortization Disposal of Depreciation and
Description Expense Subtotal Asset Amortization
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fort Meyers, FL
-Lee Partners ($339,699) $ 596,964 $0 $596,964
Las Vegas, NV
-Rancho Road Associates (344,900) $1,239,559 (1,239,559) $0
Phoenix, AZ
-Copley/Hewson Northwest (236,902) $ 335,290 0 $335,290
--------------------------------------------------------------------------------------
Total Wholly-Owned Property ($921,501) $2,171,813 ($1,239,559) $932,254
$932,254
======================================================================================
</TABLE>
``
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
SCHEDULE III NOTE B
REAL ESTATE AND ACCUMULATED DEPRECIATION-JOINT VENTURES
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENT BLANCE INVESTMENT EQUITY IN 1995 AMORTIZATION
OF AS OF IN JOINT INCOME/ OF DEFERRED
DESCRIPTION OWNERSHIP 12/31/94 VENTURES (LOSS) ACQUISITION FEES
- ----------- --------- -------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Lee Partners 60% $10,957,237 $0 $ 650,904 ($6,201)
Copley/Hewson Northwest Associates 80% 6,265,191 0 394,403 (4,010)
Rancho Road Associates 60% 12,519,964 0 0 0
MORF VI Venture 50% 4,749,674 0 523,836 (1,840)
Decatur TownCenter II Associates 60% 8,399,498 0 680,012 (5,418)
Gateway 51 Partnership 34.75% 10,946,222 0 847,641 (1,908)
-----------------------------------------------------------------------
$53,837,786 $0 $3,096,796 ($19,377)
=======================================================================
<CAPTION>
PERCENT BLANCE INVESTMENT EQUITY IN 1996 AMORTIZATION
OF AS OF IN JOINT INCOME/ OF DEFERRED
DESCRIPTION OWNERSHIP 12/31/95 VENTURES (LOSS) ACQUISITION FEES
- ----------- --------- -------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Lee Partners 60% $10,659,267 $0 $ 161,081 ($1,550)
Copley/Hewson Northwest Associates 80% 5,832,584 0 178,682 (2,005)
MORF VI Venture 50% 4,691,768 0 594,788 (1,840)
Decatur TownCenter II Associates 60% 8,325,253 0 225,436 (4,064)
Gateway 51 Partnership 34.75% 10,957,955 0 820,817 (3,469)
-----------------------------------------------------------------------
$40,466,827 $0 $1,980,804 ($12,928)
=======================================================================
<CAPTION>
PERCENT BLANCE INVESTMENT EQUITY IN 1997 AMORTIZATION
OF AS OF IN JOINT INCOME/ OF DEFERRED
DESCRIPTION OWNERSHIP 12/31/96 VENTURES (LOSS) ACQUISITION FEES
- ----------- --------- -------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
MORF VI Venture 50% 4,722,717 0 107,157 (1,840)
Gateway 51 Partnership 34.75% 11,010,803 0 783,507 (3,468)
-----------------------------------------------------------------------
$15,733,520 $0 $890,664 ($5,308)
=======================================================================
<CAPTION>
CASH
DISTRIBUTION CONVERSION TO BALANCE
FROM WHOLLY-OWNED 1995 AS OF
DESCRIPTION JOINT VENTURE PROPERTY DISPOSALS 12/31/95
- ----------- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Lee Partners ($942,673) $0 $0 $10,659,267
Copley/Hewson Northwest Associates (823,000) 0 0 5,832,584
Rancho Road Associates 0 (12,519,964) 0 0
MORF VI Venture (579,902) 0 0 4,691,768
Decatur TownCenter II Associates (748,839) 0 0 8,325,253
Gateway 51 Partnership (834,000) 0 0 10,957,955
-------------------------------------------------------------------------------
($3,928,414) ($12,519,964) $0 $40,466,827
===============================================================================
<CAPTION>
CASH
DISTRIBUTION CONVERSION TO BALANCE
FROM WHOLLY-OWNED 1996 AS OF
DESCRIPTION JOINT VENTURE PROPERTY DISPOSALS 12/31/96
- ----------- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Lee Partners ($349,287) ($10,469,511) $0 $0
Copley/Hewson Northwest Associates (120,000) (5,889,261) 0 0
MORF VI Venture (561,999) 0 0 4,722,717
Decatur TownCenter II Associates (555,117) 0 (7,991,508) 0
Gateway 51 Partnership (764,500) 0 0 11,010,803
-------------------------------------------------------------------------------
($2,350,903) ($16,358,772) ($7,991,508) $15,733,520
===============================================================================
<CAPTION>
CASH
DISTRIBUTION CONVERSION TO BALANCE
FROM WHOLLY-OWNED 1997 AS OF
DESCRIPTION JOINT VENTURE PROPERTY DISPOSALS 12/31/97
- ----------- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
MORF VI Venture (220,000) 0 0 4,608,034
Gateway 51 Partnership (519,746) 0 0 11,271,096
-------------------------------------------------------------------------------
($739,746) $0 $0 $15,879,130
===============================================================================
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
OF GATEWAY 51 PARTNERSHIP
Independent Auditor's Report of Wolpoff and Company, LLP
Balance Sheet - December 31, 1997 and 1996
Statement of Income - For the Years ended December 31, 1997, 1996 and 1995
Statement of Partners' Capital - For the Years ended
December 31, 1997, 1996 and 1995
Statement of Cash Flows - For the Years ended December 31, 1997, 1996 and
1995
Notes to Financial Statements
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
FINANCIAL REPORT
DECEMBER 31,1997
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
CONTENTS
--------
DECEMBER 31, 1997
-----------------
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance Sheet 2-3
Statement of Income 4
Statement of Partners' Capital 5
Statement of Cash Flows 6
Notes to Financial Statements 7-10
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION 11
SUPPLEMENTARY INFORMATION
Schedule of Partners' Capital 12
Schedule of Changes in Partners' Capital - Income
Tax Basis 13
<PAGE>
[WOLPOFF & COMPANY, LLP LOGO 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 31,1997 and 1996, and the related statements of
income, partners' capital, and cash flows for each of the three years in the
period ended December 31,1997,1996, and 1995. 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 31,1997 and 1996, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31,1997, 1996, and 1995, in conformity with generally accepted
accounting principles.
/s/ Wolpoff & Company, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 12,1998
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
200 SAINT PAUL PLACE . SUITE 2300 . BALTIMORE, MARYLAND 21202 .
(410) 837-3770 . FAX (410) 752-2369
P.O. BOX 470 . 1301 WEST WASHINGTON STREET . HAGERSTOWN, MARYLAND 21741
(301) 733-7200 . FAX (301) 797-3153
- --------------------------------------------------------------------------------
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
PROPERTY, AT COST - Notes 1 and 4
Land $ 4,966,738 $ 4,966,738
Building and Improvements 11,614,717 11,358,960
Preliminary Development Costs 42,247 42,247
Deferred Costs 663,719 1,131,070
----------- -----------
17,287,421 17,499,015
Less Accumulated Depreciation and Amortization 1,630,022 1,921,732
----------- -----------
PROPERTY, NET 15,657,399 15,577,283
----------- -----------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 558,136 195,955
----------- -----------
Receivables From Tenants
Rents and Expense Billings -0- 37,166
Tenant Improvement Loans - Note 3 -0- 688
Deferred Rent Receivable - Note 1 73,447 44,947
----------- -----------
73,447 82,801
----------- -----------
Prepaid Expenses 107,442 42,572
----------- -----------
TOTAL OTHER ASSETS 739,025 321,328
----------- -----------
$16,396,424 $15,898,611
=========== ===========
</TABLE>
- ----------------
The notes to financial statements are an integral part of this statement.
-2-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
BALANCE SHEET
-------------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES
Accounts Payable and Accrued Expenses $ 34,935 $ 41,112
Tenant Security Deposits 15,193 2,409
Prepaid Tenant Reimbursements 142,688 -0-
----------- -----------
TOTAL LIABILITIES 192,816 43,521
PARTNERS' CAPITAL - Notes 1 and 2 16,203,608 15,855,090
----------- -----------
$16,396,424 $15,898,611
=========== ===========
</TABLE>
- ----------------
The notes to financial statements are an integral part of this statement.
-3-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
STATEMENT OF INCOME
-------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE - Notes 1 and 6
Gross Rent Potential $1,775,359 $1,684,997 $1,676,953
Less Vacancies 80,444 108,412 133,073
---------- ---------- ----------
Net Rental Income 1,694,915 1,576,585 1,543,880
Expense Reimbursements From Tenants 258,789 364,873 326,449
Other Income 20 18,163 23,511
---------- ---------- ----------
TOTAL REVENUE 1,953,724 1,959,621 1,893,840
---------- ---------- ----------
OPERATING EXPENSES
Real Property Taxes 211,967 207,855 191,439
Building and Grounds Maintenance 142,678 157,314 121,868
Management Fees - Note 4 61,036 57,542 57,915
Utilities 27,297 24,890 21,545
General and Administrative 12,229 25,856 13,558
Insurance 6,573 9,292 9,992
---------- ---------- ----------
TOTAL OPERATING EXPENSES 461,780 482,749 416,317
---------- ---------- ----------
OPERATING INCOME 1,491,944 1,476,872 1,477,523
ADJUSTMENTS TO ARRIVE AT NET INCOME
Depreciation and Amortization (315,417) (302,585) (288,896)
Abandonment of Tenant
Improvements - Note 1 (80,178) (24,256) -0-
---------- ---------- ----------
(395,595) (326,841) (288,896)
---------- ---------- ----------
NET INCOME - Note 5 $1,096,349 $1,150,031 $1,188,627
========== ========== ==========
</TABLE>
- -----------
The notes to financial statements are an integral part of this statement.
-4-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
STATEMENT OF PARTNERS' CAPITAL
------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $ 20,267,826 $ 20,267,826 $ 20,267,826
------------ ------------ ------------
CAPITAL PLACEMENT FEE -
Notes 1 and 2
Prior Years (202,678) (202,678) (202,678)
------------ ------------ ------------
DISTRIBUTIONS
Prior Years (8,048,893) (6,948,893) (5,748,893)
Current Year (747,831) (1,100,000) (1,200,000)
------------ ------------ ------------
(8,796,724) (8,048,893) (6,948,893)
------------ ------------ ------------
ACCUMULATED INCOME
Prior Years 3,838,835 2,688,804 1,500,177
Current Year 1,096,349 1,150,031 1,188,627
------------ ------------ ------------
4,935,184 3,838,835 2,688,804
------------ ------------ ------------
TOTAL PARTNERS' CAPITAL $ 16,203,608 $ 15,855,090 $ 15,805,059
============ ============ ============
</TABLE>
- -------------
The notes to financial statements are an integral part of this statement.
-5-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,096,349 $1,150,031 $1,188,627
---------- ---------- ----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization 315,417 302,585 288,896
Abandonment of Tenant Improvements 80,178 24,256 -0-
Change in Receivables From Tenants 8,667 (41,033) 53,222
Increase in Prepaid Expenses (64,870) (6,302) (15,334)
Change in Accounts Payable and Accrued Expenses (6,176) 16,526 19,400
Increase in Prepaid Tenant Reimbursements 142,688 -0- -0-
---------- ---------- ----------
Total Adjustments 475,904 296,032 346,184
---------- ---------- ----------
Net Cash Provided by Operating Activities 1,572,253 1,446,063 1,534,811
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Building and Improvement Costs (359,189) (258,309) (180,668)
Leasing Costs (116,524) (80,786) (125,830)
Change in Tenant Security Deposits 12,784 -0- (6,771)
Decrease in Tenant Improvement Loans 688 32,057 73,871
Land Costs -0- -0- (6,400)
---------- ---------- ----------
Net Cash Used by Investing Activities (462,241) (307,038) (245,798)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Partners (747,831) (1,100,000) (1,200,000)
---------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 362,181 39,025 89,013
CASH AND CASH EQUIVALENTS, BEGINNING 195,955 156,930 67,917
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, ENDING $ 558,136 $ 195,955 $ 156,930
========== ========== ==========
</TABLE>
- -----------
The notes to financial statements are an integral part of this statement.
-6 -
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
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 buildings, with two
placed into service in August 1994. Plans call for a seventh building
with approximately 15,000 square feet of space.
In 1996, the Partnership adopted Statement of Financial Accounting
Standards (SFAS) NO. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS No.121 requires
that real estate assets be evaluated for impairment if impairment
indicators are present. An impairment writedown to fair value would
occur only if the estimated undiscounted cash flows from the asset were
less than the carrying amount of the asset. At December 31, 1997, the
Partnership does not hold any assets that meet the impairment criteria of
SFAS No.121.
All property is recorded at cost. Information regarding the buildings is
as follows:
<TABLE>
<CAPTION>
Occupancy
Square Date Placed ----------------------------
Building Footage into Service Tenants 12/31/97 12/31/96 12/31/95
- -------------- ------- ------------ ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
A 46,840 3/1/91 Multiple 92% 92% 92%
B 21,991 9/1/90 AVNET 100% 100% 100%
C 38,182 7/15/91 EVI, Inc. 100% 100% 76%
F 35,532 2/1/92 Multiple 100% 82% 82%
D-E 45,951 8/8/94 Columbia National 100% 100% 100%
------- -------- -------- --------
188,496 98% 94% 90%
======= ======== ======== ========
</TABLE>
Carrying costs, operating expenses, and depreciation begin as a charge
against operations on the date the buildings were placed into service.
During 1997, tenant improvements completed in prior years were demolished
in order to build out the space for new tenants. The loss on abandonment
of tenant improvements is calculated as follows:
Acquired Value $ 127,688
Accumulated Depreciation (47,510)
--------
Abandonment of Tenant Improvements $ 80,178
========
-7-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
-------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1997
-----------------
Note 1 - Use of Estimates
----------------
(Cont.) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Cash and Cash Equivalents
-------------------------
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 insurance 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:
Amortization
Amount Period
-------- ------------
Organization Costs $ 13,555 Complete
Leasing Costs and Commissions 650,164 Lease Terms
--------
$663,719
========
Income Taxes
------------
Partnerships, as such, are not subject to income taxes. The partners
are required to report their respective shares of partnership income
and other tax items on their 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).
-8-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
-------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1997
-----------------
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. As of
December 31, 1997,1996, and 1995, 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 $747,831, $1,100,000, and $1,200,000 during
1997,1996, and 1995, respectively. As of December 31,1997, 1996, and
1995, unpaid priority returns amounted to $9,127,936, $6,888,115, and
$5,427,949, 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 LOAN RECEIVABLE
The Partnership had made several tenant improvement loans to tenants.
The remaining loan required monthly principal and interest payments,
with the final payment in 1997. Pertinent terms were as follows:
Original Balance Due
Loan Interest ------------------
Tenant Amount Rate Due Date 12/31/97 12/31/96
- -------------- -------- -------- -------- -------- --------
Pediatric Care $16,580 12.00% 3/31/97 $ -0- $ 688
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 provides for a management fee equal
to 3% of rent and tenant expense billings.
Leasing Commissions
-------------------
Leasing commissions in the amount of $105,387, $80,786, and $74,448
were paid to related parties during 1997,1996, and 1995, respectively.
-9-
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31,1997
----------------
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 $1,096,349 $3,838,835 $4,935,184
Additional Depreciation (116,239) (641,227) (757,466)
Lease-Up Period Items
Capitalized for GAAP -0- 4,264 4,264
Deferred Rent Receivable (28,500) (44,947) (73,447)
Prepaid Property Taxes (65,556) (39,470) (105,026)
Prepaid Tenant Reimbursements 142,688 -0- 142,688
---------- ---------- ----------
Taxable Income $1,028,742 $3,117,455 $4,146,197
========== ========== ==========
</TABLE>
Note 6 - LEASES
The following is a schedule of future minimum lease payments to be
received under noncancelable operating leases at December 31,1997:
<TABLE>
<CAPTION>
<S> <C>
Year Ending December 31, 1998 $1,510,900
1999 1,408,027
2000 707,156
2001 602,419
2002 475,580
----------
$4,704,082
==========
</TABLE>
-10-
<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 12, 1998
- 11 -
<PAGE>
GATEWAY 51 PARTNERSHIP
----------------------
(A MARYLAND GENERAL PARTNERSHIP)
------------------------------
SCHEDULE OF PARTNERS' CAPITAL
-----------------------------
DECEMBER 31, 1997
-----------------
<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 (5,449,955) (2,598,938) -0- (8,048,893)
Current Year (519,743) (228,088) -0- (747,831)
-------------- ------------- ------------ ------------
(5,969,698) (2,827,026) -0- (8,796,724)
-------------- ------------- ------------ ------------
ACCUMULATED INCOME
Prior Years 2,667,993 1,170,842 -0- 3,838,835
Current Year 761,963 334,386 -0- 1,096,349
-------------- ------------- ------------ ------------
3,429,956 1,505,228 -0- 4,935,184
-------------- ------------- ------------ ------------
PARTNERS' CAPITAL,
12/31/97 $ 11,439,970 $ 4,763,638 $ -0- $ 16,203,608
============== ============= ============ ============
</TABLE>
- -------------
See Independent Auditor's Report on Supplementary Information.
-12-
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
-------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
------------------------------------------------------------
DECEMBER 31, 1997
-----------------
<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 (5,449,955) (2,598,938) -0- (8,048,893)
Current Year (519,743) (228,088) -0- (747,831)
-------------- ------------- ------------ ------------
(5,969,698) (2,827,026) -0- (8,796,724)
-------------- ------------- ------------ ------------
ACCUMULATED INCOME
Prior Years 2,168,803 948,652 -0- 3,117,455
Current Year 714,976 313,766 -0- 1,028,742
-------------- ------------- ------------ ------------
2,883,779 1,262,418 -0- 4,146,197
-------------- ------------- ------------ ------------
PARTNERS' CAPITAL,
12/31/97 $ 10,893,793 $ 4,520,828 $ -0- $ 15,414,621
-------------- ------------- ------------ ------------
</TABLE>
- ---------
See Independent Auditor's Report on Supplementary Information.
-13-
<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>
EXHIBIT INDEX
-------------
<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.
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------- ------
<S> <C> <C>
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.
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.
27. Financial Data Schedule
</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 30, 1998 By: /s/ Wesley M. Gardiner, Jr.
---------------------------
Wesley M. Gardiner, Jr.
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
--------- ----- ----
/s/ Wesley M. Gardiner, Jr. President, Chief March 30, 1998
- ----------------------------- Executive Officer and
Wesley M. Gardiner, Jr. Director
/s/ Pamela J. Herbst Vice President and March 30, 1998
- ----------------------------- Director
Pamela J. Herbst
/s/ J. Grant Monahon Vice President and March 30, 1998
- ----------------------------- Director
J. Grant Monahon
/s/ James J. Finnegan Vice President March 30, 1998
- -----------------------------
James J. Finnegan
/s/ Karin J. Lagerlund Treasurer and Principal March 30, 1998
- ----------------------------- Financial and Accounting
Karin J. Lagerlund Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,017,473
<SECURITIES> 2,889,753
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,907,226
<PP&E> 31,018,277
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,925,503
<CURRENT-LIABILITIES> 191,954
<BONDS> 4,205,989
0
0
<COMMON> 0
<OTHER-SE> 33,527,560
<TOTAL-LIABILITY-AND-EQUITY> 37,925,503
<SALES> 5,881,501
<TOTAL-REVENUES> 16,837,755
<CGS> 2,028,830
<TOTAL-COSTS> 2,028,830
<OTHER-EXPENSES> 1,597,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,211,159
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,211,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,211,159
<EPS-PRIMARY> 137.68
<EPS-DILUTED> 137.68
</TABLE>
