<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------------------------------------
For Quarter Ended June 30, 1999 Commission File Number 0-15429
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2893298
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
- ----------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1999
PART I
FINANCIAL INFORMATION
-----------------------
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $15,626,635 $15,666,643
Property, net - 9,106,457
Property held for disposition 8,903,583 -
Other assets 15,440 -
----------- -----------
24,545,658 24,773,100
Cash and cash equivalents 6,027,260 5,932,931
----------- -----------
$30,572,918 $30,706,031
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 107,787 $ 145,103
Accrued management fee 28,803 32,314
Deferred management and
disposition fees 4,287,003 4,229,398
----------- -----------
Total liabilities 4,423,593 4,406,815
----------- -----------
Partners' capital (deficit):
Limited partners ($422
per unit; 120,000 units
authorized, 94,997 units
issued and outstanding) 26,193,538 26,341,929
General partners (44,213) (42,713)
----------- -----------
Total partners' capital (deficit) 26,149,325 26,299,216
----------- -----------
$30,572,918 $30,706,031
=========== ===========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999 June 30, 1998 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 500,816 $1,026,922 $ 834,263 $1,652,565
Property operating expenses (289,681) (552,567) (328,450) (702,231)
Depreciation and amortization - (83,830) (155,403) (308,811)
--------- ---------- --------- ----------
211,135 390,525 350,410 641,523
Joint venture earnings 443,249 819,686 422,650 726,629
Amortization (1,327) (2,654) (1,327) (2,654)
--------- ---------- --------- ----------
Total real estate operations 653,057 1,207,557 771,733 1,365,498
Interest on cash equivalents
and short term investments 71,194 140,309 87,637 174,749
--------- ---------- --------- ----------
Total investment activity 724,251 1,347,866 859,370 1,540,247
--------- ---------- --------- ----------
Portfolio Expenses
Management fee 57,605 115,211 68,425 136,849
General and administrative 86,483 146,624 83,090 171,223
--------- ---------- --------- ----------
144,088 261,835 151,515 308,072
--------- ---------- --------- ----------
Net Income $ 580,163 $1,086,031 $ 707,855 $1,232,175
========= ========== ========= ==========
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Net income per limited
partnership unit $ 6.05 $ 11.32 $ 7.38 $ 12.84
======= ======= ======= =======
Cash distributions per
limited partnership unit $ 6.07 $ 12.88 $ 7.21 $ 15.61
======= ======= ======= =======
Number of limited partnership
units outstanding during
the period 94,997 94,997 94,997 94,997
======= ======= ======= =======
(See accompanying notes to unaudited financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999 June 30, 1998 June 30, 1998
-------------------- ---------------- ------------------ ----------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
---------- ------------ ----------- ------------ ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
period $ (44,189) $26,195,808 $ (42,713) $26,341,929 $ (70,145) $ 33,315,991 $ (67,328) $ 33,594,888
Cash
distributions (5,825) (576,632) (12,360) (1,223,562) (6,918) (684,928) (14,978) (1,482,902)
Net income 5,801 574,362 10,860 1,075,171 7,079 700,776 12,322 1,219,853
---------- ------------ ----------- ------------ ----------- ------------- ---------- -------------
Balance at
end of period $ (44,213) $26,193,538 $ (44,213) $26,193,538 $ (69,984) $ 33,331,839 $ (69,984) $ 33,331,839
========== ============ =========== ============ =========== ============= ========== =============
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1999 1998
----------- -----------
Net cash provided by operating
activities $ 1,330,251 $ 1,501,792
----------- -----------
Cash flows from (used in) investing activities:
Investment in property - (47,339)
Decrease in short-term
investments, net - 2,838,711
Loan repayment by joint venture partner - 136,437
----------- -----------
Net cash provided by
investing activities - 2,927,809
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,235,922) (1,497,880)
----------- -----------
Net increase in
cash and cash equivalents 94,329 2,931,721
Cash and cash equivalents:
Beginning of period 5,932,931 4,017,473
----------- -----------
End of period $ 6,027,260 $ 6,949,194
=========== ===========
(See accompanying notes to unaudited financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of June 30, 1999 and December 31, 1998 and the results of
its operations, its cash flows and partners' capital (deficit) for the three and
six months ended June 30, 1999 and 1998. These adjustments are of a normal
recurring nature.
See notes to unaudited financial statements included in the Partnership's
1998 Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
New England Life Pension Properties IV; A Real Estate Limited Partnership
(the "Partnership") is a Massachusetts limited partnership organized for the
purpose of investing primarily in newly constructed and existing income
producing real properties. It primarily serves as an investment for qualified
pension and profit sharing plans and other organizations intended to be exempt
from federal income tax. The Partnership commenced operations in May, 1986 and
acquired the three real estate investments it currently owns prior to the end of
1987. It intends to dispose of the investments within eight to twelve years of
their acquisition, and then liquidate; however, the managing general partner
could extend the investment period if it is considered to be in the best
interest of the limited partners. The Partnership has engaged AEW Real Estate
Advisors, Inc. (the "Advisor") to provide asset management advisory services.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The following summarized financial information is presented in the
aggregate for the Partnership's two joint ventures.
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation
of $2,930,994 and
$2,743,676, respectively $19,898,843 $19,830,637
Other 651,409 888,075
----------- -----------
20,550,252 20,718,712
Liabilities 194,090 339,188
----------- -----------
Net Assets $20,356,162 $20,379,524
=========== ===========
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Results of Operations
<TABLE>
<CAPTION>
Six Months ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Revenue
Rental income $1,569,247 $1,418,150
Other income 13,331 8,815
---------- ----------
1,582,578 1,426,965
---------- ----------
Expenses
Operating expenses 356,622 320,829
Depreciation and amortization 187,318 187,318
---------- ----------
543,940 508,147
---------- ----------
Net income $1,038,638 $ 918,818
========== ==========
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures.
NOTE 3 - PROPERTY
- -----------------
Effective April 1, 1996, the Reflections joint venture was restructured,
whereby the Partnership's venture partner became an indirect limited partner.
Accordingly, the investment has been accounted for as a wholly-owned property
since that date. The carrying value of the joint venture investment at
conversion was allocated to land, building and improvements and other net
operating assets.
In connection with the ownership restructuring, the Partnership agreed to
release an affiliate of the venture partner from its guarantee upon payment to
the Partnership of $650,000. The Partnership received $250,000 at the time the
agreement was executed. During the third quarter of 1996, the Partnership
received an additional $263,563. The final payment of $136,437 was received
during the first quarter of 1998. The first payment was accounted for as a
reduction of previously accrued investment income. The second and third
payments were accounted for as a reduction of the Partnership's investment in
the property.
In mid June 1999, a Purchase and Sale agreement was executed by the owning
partnership to sell the Reflections investment. Although there can be no
assurance that this sale will occur, it is expected to be concluded during the
third quarter of 1999. This investment has been classified as Property Held for
Disposition at June 30, 1999.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
The following is a summary of the Partnership's wholly-owned investment:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- ------------------
<S> <C> <C>
Land $ - $ 1,538,883
Buildings and improvements
and other capitalized costs - 8,383,001
Accumulated depreciation and
amortization - (932,007)
Net operating liabilities - 116,580
Property, held for disposition 8,903,583 -
------------- --------------
$ 8,903,583 $ 9,106,457
============= ==============
</TABLE>
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended June
30, 1999 were made on July 29, 1999 in the aggregate amount of $582,456 ($6.07
per limited partnership unit).
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
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. Six investments have been sold: one each in 1988, 1993,
1994, 1996, 1997 and 1998. As a result of the sales, capital of
$54,908,266($578 per limited partnership unit) has been returned to the limited
partners through June 30, 1999.
At June 30, 1999, the Partnership had $6,027,260 in cash and cash
equivalents, of which $582,456 was used for cash distributions to partners on
July 29, 1999; the remainder will primarily be used for working capital
reserves. The source of future liquidity and cash distributions to partners will
be cash generated by the Partnership's real estate and invested cash and cash
equivalents. Distributions of cash from operations for the first and second
quarters of 1999 were made at the annualized rate of 5.75% on the adjusted
capital contribution of $422 per limited partnership unit. Distributions of cash
from operations relating to the first and second quarters of 1998 were made at
the annualized rate of 5.5% on the adjusted capital contribution of $524 per
limited partnership unit.
The carrying value of real estate investments in the financial statements
is at depreciated cost, or if the investment's carrying value is determined not
to be recoverable through expected undiscounted future cash flows, the carrying
value is reduced to the estimated fair market value. The fair market value of
such investments is further reduced by the estimated cost of sale for properties
held for sale. Carrying value may be greater or less than current appraised
value. At June 30, 1999, appraised values exceeded the related carrying values
by an aggregate of approximately $5,400,000. The current appraised value of
real estate investments has been estimated by the managing general partner and
is generally based on a combination of traditional appraisal approaches
performed by the Advisor and independent appraisers. Because of the
subjectivity inherent in the valuation process, the estimated current appraised
value may differ significantly from that which could be realized if the real
estate were actually offered for sale in the marketplace.
Year 2000 Readiness Disclosure
- ------------------------------
The Year 2000 Issue is a result of computer programs being written using
two digits rather than four to define the applicable year. 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.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
The Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services, which are dependent on the
use of computers. The Partnership has obtained assurances from AEW Capital
Management that:
. AEW Capital Management has developed a Year 2000 Plan (the "Plan")
consisting of five phases: inventory, assessment, testing,
remediation/repair and certification.
. As of September 30, 1998, AEW Capital Management had completed the
inventory and assessment phases of this Plan and had commenced the
testing and remediation/repair of internal systems.
. AEW Capital Management concluded the internal testing,
remediation/repair and certifications of its Plan in June 1999.
The Partnership also relies on joint venture partners and/or property
managers to supply financial and other data with respect to its real properties.
The Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements. To date, the
Partnership is not aware of any problems that would materially impact its
results of operations, liquidity or capital resources. However, the Partnership
has not yet obtained written assurances that these providers would be Year 2000
compliant.
The Partnership is developing a contingency plan in the event of a
particular provider or system not being Year 2000 compliant. The inability of
one of these providers to complete its Year 2000 resolution process could
materially impact the Partnership. In addition, the Partnership is also subject
to external forces that might generally affect industry and commerce, such as
utility or transportation company Year 2000 compliance failures and related
service interruptions. Given the nature of its operations, the Partnership will
not incur any costs associated with Year 2000 compliance. All such costs are
borne by AEW Capital Management and the property managers.
Results of Operations
- ---------------------
At June 30, 1999, two of the investments in the portfolio are structured as
joint ventures with a real estate development/management firm, one of which is
with an affiliate of the Partnership. The Reflections Apartments is a wholly-
owned property. Metro Business Center, which was sold in September 1998, was a
wholly-owned property.
Operating Factors
Columbia Gateway Corporate Park was 100% occupied at June 30, 1999 and June
30, 1998.
Occupancy at Reflections Apartments ended the second quarter of 1999 at
94%, which is consistent with the quarter ended June 30, 1998.
Metro Business Center was sold on September 23, 1998 and the Partnership
recognized a gain of $3,706,950. At the time of sale the property was 100%
leased.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
Occupancy at 270 Technology Center was 100% at June 30, 1999 and June 30,
1998.
Investment Activity
Interest on cash equivalents and short-term investments for the three and
six months ended June 30, 1999, was $71,194 and $140,309, respectively, compared
to $87,637 and $174,749 for the same periods in 1998. The decreases of
approximately $16,000 and $ 34,000 for the comparative three and six month
periods are primarily due to lower average investment balances in 1999 as a
result of the sale of Metro Business Park in September 1998.
For the three and six months ended June 30, 1999, operating results from
real estate operations were $653,057 and $1,207,557, respectively, compared to
$771,733 and $1,365,498 for the comparable periods in 1998. The decreases of
$118,676 and $157,941 for the comparative three and six month periods are
primarily due to the sale of Metro Business Center in September, 1998. This is
partially offset by increases in operating performance by Columbia Gateway and
270 Technology Center due to fewer rent concessions in 1999 and higher
occupancy, respectively.
Operating cash flow decreased $171,541 between the six months ended June
30, 1998 and June 30, 1999, which is consistent with the decrease in operating
activity discussed above.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
For the three and six months ended June 30, 1999, management fees were
$57,605 and $115,211, respectively, compared to $68,425 and $136,849 for the
comparable periods in 1998. The decreases in management fees for the respective
three and six month periods are due to lower operational cash distributions as a
result of the sale of Metro Business Center in September 1998.
General and administrative expenses for the three and six months ended June
30, 1999 were $86,483 and $146,624, respectively, compared to $83,090 and
$171,223 for the same periods in 1998. The increase of approximately $3,300 or
4% for the three month periods is primarily due to an increase in accounting
fees, in the second quarter of 1999, associated with the 1998 audit of Metro
Business Center, which was sold in September 1998. For the respective six month
periods, expenses decreased approximately $25,000 or 14% due primarily to
decreases in legal, printing and investor servicing fees.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1999
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on
Form 8-K were filed during the quarter ended
June 30, 1999.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 11, 1999
/s/ Alison Husid Cutler
-------------------------------
Alison Husid Cutler
President, Chief Executive Officer
and Director of the Managing General Partner,
Fourth Copley Corp.
August 11, 1999
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Copley Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,027,260
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,027,260
<PP&E> 24,545,658
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,572,918
<CURRENT-LIABILITIES> 136,590
<BONDS> 4,287,003
0
0
<COMMON> 0
<OTHER-SE> 26,149,325
<TOTAL-LIABILITY-AND-EQUITY> 30,572,918
<SALES> 1,846,608
<TOTAL-REVENUES> 1,986,917
<CGS> 552,567
<TOTAL-COSTS> 552,567
<OTHER-EXPENSES> 348,319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,086,031
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,086,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,086,031
<EPS-BASIC> 11.32
<EPS-DILUTED> 11.32
</TABLE>
