<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1999
Commission File No. 0-15429
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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
1
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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, 1999, the Partnership had an investment in the real
property described in E. below. In December 1988, the Partnership sold another
one of its investments and received sale proceeds of $10,577,476 which were
substantially reinvested. Seven 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. 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 prior sales proceeds previously held in
reserves. A fifth investment located in Phoenix, Arizona was sold on September
23, 1998, resulting in net sale proceeds of $9,680,132. On October 29, 1998, the
Partnership made a capital distribution of $9,689,694 ($102 per Limited
Partnership Unit) from the proceeds of the sale and prior sales proceeds
previously held in reserves. A sixth investment located in Fort Myers, Florida
was sold on September 23, 1999, resulting in net proceeds of $12,773,052. On
October 28, 1999, the Partnership made a capital distribution of $12,522,505
($131.82 per Limited Partnership Unit) from the proceeds of the sale. A seventh
investment located in Columbia, Maryland was sold on December 20, 1999 resulting
in net proceeds of $13,423,827. On January 27, 2000 the Partnership made a
capital distribution of $13,204,583 ($139.00 per Limited Partnership Unit) from
the proceeds of the sale.
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, 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,
1998, 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
entitled 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, 1998. Interest only on the loan was payable monthly at the
rate of 10.5% per annum. The entire outstanding principal balance of the loan
was to mature in December, 1999 or would be due on the sale of all or
substantially all of the assets of the Joint Venture or the sale of
2
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Lee-Oxford's interest in the Joint Venture. Lee-Oxford would apply any cash flow
received from operations of the Joint Venture to interest payments on the loan
and would 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 was 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 was secured by Lee-Oxford's interest in the Joint
Venture and by a guarantee of Oxford Development Corporation, an affiliate of
Lee-Oxford.
The joint venture was restructured in the second quarter of 1996;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 held 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 the final payment of $136,437 was
paid during the first quarter of 1998.
The Joint Venture owned approximately 12.63 acres of land located in Fort
Myers, Florida and had constructed a 282-unit apartment complex, consisting of
12 2- and 3-story buildings, thereon. The complex was approximately 94% occupied
at the time of sale, discussed below.
On August 21, 1998 the Partnership sold a parcel of land to the City of
Fort Myers. The Partnership received net proceeds totaling $67,881 and
recognized a gain of $35,591.
The Joint Venture sold the Reflections Apartments on September 23, 1999,
and the Partnership recognized a gain of $3,474,005 ($36.20 per Limited
Partnership Unit). A disposition fee of $393,000 was accrued but not paid to AEW
Real Estate Advisors, Inc.. On October 28, 1999, the Partnership made a capital
distribution of $12,522,505 ($131.82 per Limited Partnership Unit) from the
proceeds of the sale.
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 was payable monthly at
the rate of 10.5% per annum. The loan had a ten-year term and was not
prepayable. The Developer was required to apply any cash flow received from
operations of the joint venture to interest payments on the loan and to apply
proceeds of refinancings or sales received from the joint venture to payments of
interest on and principal of the loan. The loan was 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 were 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 was encumbered by the aforementioned loan. The note
was amended to mature on February 1, 1997 and was secured by a recorded deed of
trust. The note was subsequently amended to mature on March 31, 1998. 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.
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On February 28, 1998, the Partnership executed a purchase and sale
agreement to purchase the tenancy-in-common interest of the Developer. The
Partnership finalized the acquisition on July 17, 1998. The purchase price was
$7,113,255 and was paid by the Partnership as follows: (i) A portion of the
purchase price was paid through the discharge of all outstanding amounts,
including but not limited to accrued but unpaid interest, owed by the Developer
to the Partnership under the loan made by the Partnership to the Developer in
connection with the original acquisition of the property and (ii) the
Partnership paid the remainder of the purchase price in cash in the amount of
$2,210.
On September 23, 1998, the Partnership sold the Metro Business Center. The
Partnership received net proceeds totaling $9,680,132. On October 29, 1998, the
Partnership made a capital distribution of $9,689,694 ($102 per Limited
Partnership Unit) from the proceeds of the sale.
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 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 all of its commitment 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 become entitled to receive 40% of
the excess cash flow above a specified level until its cash investment of
$360,000 was repaid in full, after which the Partnership would become entitled
to all cash flow. 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. 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 recorded in 1995. The Joint Venture 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
4
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between the Partnership and the Affiliate. As of December 31, 1998, 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 entitled 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 would be payable currently until the
Partnership and the Affiliate had received an aggregate of $8,865,000;
thereafter, if sufficient cash flow was not available therefore, the preferred
return would accrue and bear interest at the rate of 10.5% per annum, compounded
monthly. The joint venture agreement also entitled 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 had been restructured
whereby the Partnership and the Affiliate obtained full control over the
business of the joint venture. The restructuring was effective January 1, 1998.
The joint venture owned approximately 20.85 acres of land in the Columbia
Gateway Corporate Park in Columbia, Maryland. The intended development plan for
this land was for a two-stage development of seven office and research and
development buildings. The first phase of this development was completed by 1992
and included the construction of four, one-story buildings containing 142,545
square feet. The second phase of this development commenced in the spring of
1994 in which a building totaling 46,000 square feet was constructed and leased
to a single tenant for a term of ten years. At the time of sale, the project was
100% leased.
On December 20, 1999, the Joint Venture sold its property. The Partnership
received its 69.5% share of the net proceeds totaling $13,423,827. On January
27, 2000 the Partnership made a capital distribution of $13,204,583 ($139.00 per
Limited Partnership Unit) from the proceeds of the sale.
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,
1998, 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, 1999, the buildings were
approximately 100% leased.
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Item 2. Properties.
The following table sets forth the annual realty taxes for the
Partnership's last remaining property and information regarding tenants who
occupy 10% or more of gross leasable area (GLA) in the Partnership's last
remaining property.
<TABLE>
<CAPTION>
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Number
of Square Annual
Estimated Tenants Feet Contract
2000 with 10% Name(s) of Rent Per
Realty or more of Each Square Lease Renewal Line of Business
Property Taxes of GLA Tenant(s) Tenant Foot Expiration Options of Principal Tenants
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office/R&D Buildings in Frederick, MD $57,455 3 Great West 16,143 $12.79 February, 2002 None Insurance
Life Annuity
Science 10,996 $12.25 August, 2002 None Technology
Applications
Bechtel 22,059 $10.76 April, 2001 None Engineering
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</TABLE>
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The following table sets forth for each of the last five years the gross
leasable area, occupancy rates, rental revenue and net effective rent for the
Partnership's last remaining property:
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Net
Rental Effective
Gross Leasable Year-End Revenue Rent
Property Area Occupancy Recognized ($/sf/yr)*
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Office/R&D Buildings in
Frederick, MD
1995 73,360 98% $762,212 $10.66
1996 73,360 89% $769,262 $11.43
1997 73,360 70% $728,065 $11.99
1998 73,360 100% $827,808 $12.20
1999 73,360 100% $965,459 $13.16
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* Net Effective Rent calculation is based on average occupancy during the
respective year.
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Following is a schedule of lease expirations for each of the next ten
years for the Partnership's last remaining property based on the annual contract
rent in effect at December 31, 1999:
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TENANT AGING REPORT
Percentage
Total of
# of Total Annual Gross
Lease Square Contract Annual
Property Expirations Feet Rent Rental
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Office/R&D Buildings in Frederick, MD
2000 0 0 $0 0%
2001 2 26,660 $290,634 41%
2002 3 31,195 $384,532 54%
2003 0 0 $0 0%
2004 1 3,105 $35,708 5%
2005 0 0 $0 0%
2006 0 0 $0 0%
2007 0 0 $0 0%
2008 0 0 $0 0%
2009 0 0 $0 0%
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The following table sets forth for the Partnership's last remaining
property 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>
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Rate of Life Accumulated
Entity / Property Tax Basis Depreciation Method in years Depreciation
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Office/Research and Development Buildings, Frederick, MD
Building $3,534,881 3.18% SL 31.5 $1,450,934
Land Improvements 794,171 2.56% SL 39 52,725
Land Improvements 100,000 6.66% SL 15 32,635
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Total Depreciable Assets $4,429,052 $1,536,294
========== ==========
====================================================================================================================
</TABLE>
SL= Straight Line
DB= Declining Balance
9
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Following is information regarding the competitive market conditions for
the Partnership's last remaining property. 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.
R&D/Office Buildings in Frederick, MD
The Frederick R&D market contains approximately 5 million square feet of office
and r&d space with a vacancy hovering around 9%. The more competitive and
narrower submarket for 270 Technology Park includes approximately 40 buildings
in 2.3 million square feet with a reported vacancy of 11%. Current market rents
range from $9.50 to $11.25 per square foot NNN for R&D and $10.00 to $13.30 per
square foot NNN for office deals. This represents a 5-7% increase over levels
one year ago primarily due to the strong absorption of space and land for build
to suit project. By far the project which has had the most significant impact on
our asset is the Bechtel 400-500,000 square feet build to suit, as Bechtel
vacated over 35,000 square feet in MORF III & MORF VI. Other build to suit
projects under development include MCI (50,000 square feet at 270 Technology
Park) and First Nationwide (35,000 square feet at MIE).
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, 1999, there were 16,276 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, 1999, cash distributions
paid in 1999 or distributed after year end with respect to 1999 to the Limited
Partners as a group totaled $30,184,347, including $9,689,694 ($102 per Limited
Partnership Unit) from the proceeds of property sales. For the year ended
December 31, 1998, cash distributions paid in 1998 or distributed after year end
with respect to 1998 to the Limited Partners as a group totaled $13,030,738,
including $9,689,694 ($102 per Limited Partnership Unit) from the proceeds of a
property sale.
Cash distributions exceeded net income in 1999 and 1998 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.
10
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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:
12/31/99(1) 12/31/98(2) 12/31/97(3) 12/31/96(4) 12/31/95(5)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 8,913,259 $ 8,561,528 $16,837,755 $ 7,582,119 $ 5,906,735
Net Income $ 7,256,381 $ 5,988,711 $13,211,159 $ 4,392,513 $ 3,912,897
Net Income per
Unit of
Limited
Partnership
Interest $ 75.62 $ 62.41 $ 137.68 $ 45.78 $ 40.78
Total Assets $22,303,963 $30,706,031 $37,925,503 $50,710,887 $59,991,655
Total Cash
Distributions
per Unit of
Limited
Partnership
Interest,
including
amounts
distributed after
year end with
respect to such
year $ 317.74 $ 137.17 $ 279.14 $ 147.71 $ 60.12
</TABLE>
(1) Net income includes a gain on the sales of properties of $7,510,818. Cash
distributions include a return of capital of $285.00 per Limited Partnership
Unit.
(2) Net income includes a gain on the sale of property of $3,742,541. Cash
distributions include a return of capital of $102.00 per Limited Partnership
Unit.
(3) 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.
(4) 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.
(5) 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.
11
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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. Eight investments have been sold: one each in 1988, 1993,
1994, 1996, 1997, 1998 and two in 1999. Capital of $67,430,770 ($709.82 per
Limited Partnership Unit) has been returned to the limited partners through
December 31, 1999.
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 Real Estate Advisors Inc. ("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.
On August 21, 1998, the Reflections joint venture sold a parcel of land to
the City of Fort Myers. The Partnership received net proceeds totaling $67,881
and recognized a gain of $35,591.
On September 23, 1998, the Metro Business Center in Phoenix Arizona was
sold to an institutional buyer which is unaffiliated with the Partnership. The
gross sale price was $9,900,000. The Partnership received net proceeds totaling
$9,680,132, after closing costs and recognized a gain of $3,706,950 ($38.63 per
Limited Partnership Unit). A disposition fee of $297,000 was accrued but not
paid to AEW. On October 29, 1998, the Partnership made a capital distribution of
$9,689,694 ($102 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 $422 per Limited Partnership Unit.
On September 23, 1999, the Reflections Apartments in Fort Myers, Florida
was sold to a third party which is unaffiliated with the Partnership. The gross
sale price was $13,100,000. The Partnership received net proceeds totaling
$12,773,052, after closing costs and recognized a gain of $3,474,005 ($36.20 per
Limited Partnership Unit). A disposition fee of $393,000 was accrued but not
paid to AEW Real Estate Advisors, Inc. On October 28, 1999, the Partnership made
a capital distribution of $12,522,505 ($131.82 per Limited Partnership Unit)
from the proceeds of the sale. This distribution reduced the adjusted capital
contribution to $290.18 per Limited Partnership Unit.
On December 20, 1999, the Columbia Gateway Corporate Park joint venture in
which the Partnership and an affiliate own a 69.5% and 30.5% interest,
respectively, sold its property to an unaffiliated third party for gross
proceeds of $19,850,000, of which the Partnership's share was $13,795,750.
The Partnership received its 69.5% share of the net proceeds, $13,423,827 after
closing costs, and recognized a gain of $1,927,893 ($20.09 per Limited
Partnership Unit) on the sale. A disposition fee of $413,872 was accrued but not
paid to AEW Real Estate Advisors, Inc.. On January 27, 2000 the Partnership made
a capital distribution of $13,204,583 ($139.00 per Limited Partnership Unit)
from the proceeds of the sale.
At December 31, 1999, the Partnership had $ 17,597,405 in cash and cash
equivalents, of which $15,044,857 was used for cash distributions to partners on
January 27, 1999; the remainder will primarily be used for working capital
reserves. The source of future liquidity and cash distributions to partners will
be cash distributions from the Partnership's joint venture 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 for the third and fourth quarter of 1999 were made at the
annualized rate of 6.25% on the adjusted capital contribution of $422 per
Limited Partnership Unit and the weighted average adjusted capital contribution
of $328.87 per Limited Partnership Unit, respectively. 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
12
<PAGE>
Partnership Unit. Distributions of cash from operations for the third and fourth
quarter of 1998 were made at the annualized rate of 6% on the adjusted capital
contribution of $524 per Limited Partnership Unit and the weighted average
adjusted capital contribution of $453.73 per Limited Partnership Unit,
respectively. The fluctuation in distribution rates are a result of both the
sales of the Partnership's real estate investments and the timing of cash flow
from the Partnership's real estate investments held at the time of the
distributions.
The carrying value of real estate investments in the financial statements
at December 31, 1999 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, 1999, the appraised value of the
remaining investment exceeded the related carrying value by an aggregate of
approximately $1,400,000. The current appraised value of real estate investments
has been estimated by the Managing General Partner and is generally based on a
combination of traditional appraisal approaches performed by 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.
Results of Operations
Form of Real Estate Investments
At December 31, 1999, the remaining investment in the portfolio is
structured as a joint venture with a real estate development/management firm.
The Palms Business Center, 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 had been
accounted for as wholly-owned properties since those dates. As previously
stated, the Palms Business Center, the Metro Business Center and Reflections
Apartments were sold on October 24, 1997, September 23, 1998 and September 23,
1999, respectively.
Operating Factors
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.
As mentioned above, the Columbia Gateway Corporate Park joint venture, in
which the Partnership and an affiliate own a 69.5% and 30.5% interest,
respectively, sold its property on December 20,1999. The Partnership recognized
its share of the gain of $1,927,893. The property was 100% leased at the time of
sale, consistent with December 31, 1998. At December 31, 1997 the property was
98% leased.
As discussed above, the Reflections Apartments investment was sold on
September 23, 1999, and the Partnership recognized a gain of $3,474,005. At the
time of the sale, occupancy at Reflections Apartments was 94%, consistent with
occupancy at December 31, 1998 and December 31, 1997.
As discussed above, 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 consistent with December 31, 1997.
Occupancy at 270 Technology Center was 100% at December 31, 1999 and 1998,
up from 70% at December31, 1997.
Investment Activity
1999 Compared to 1998
Interest on cash equivalents and short-term investments decreased by
approximately $34,000 or 8% compared to 1998, primarily due to lower average
investment balances as a result of sales in both 1999 and 1998.
13
<PAGE>
Total real estate operations were $2,108,920 and $2,509,656 for the twelve
months ended December 31, 1999 and 1998, respectively. The decrease of $400,736
is primarily due to a decrease in operating income from wholly owned properties
of $547,746, primarily due to the sales of Metro Business Center in 1998 and
Reflections Apartments in 1999. These decreases are partially offset by an
increase in operating performance at Columbia Gateway Corporate Park
attributable to decreases in rent concessions and the recovery of the prior year
write off of bad debt. Operating performance at 270 Technology Center improved
as well due to fewer rent concessions in 1999 and higher average occupancy for
1999.
The decrease in operating cash flow of approximately $1,188,000 between
1998 and 1999 is primarily due to the sales of Columbia Gateway Corporate Park
and Reflections Apartments in 1999 and a decrease in operating liabilities.
1998 Compared to 1997
Interest on cash equivalents and short-term investments decreased by
approximately $78,000 or 16% compared to 1997, primarily due to lower average
investment balances as a result of sales in both 1998 and 1997.
Total real estate operations were $2,509,656 and $2,925,862 for the twelve
months ended December 31, 1998 and 1997, respectively. The decrease of $416,206
is primarily due to a decrease in operating income from wholly -owned properties
of $1,031,189, primarily due to the sale of Metro Business Center, offset by an
increase of $614,983 in joint venture earnings, primarily due to improved
performance at Columbia Gateway Corporate Park and 270 Technology Park
The decrease in operating cash flow of approximately $972,000 between 1997
and 1998 is primarily due to the sale of Rancho Road in October 1997 and a
decrease in operating liabilities.
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.
1999 Compared to 1998
General and administrative expenses decreased approximately $20,000 or 6%
primarily due to decreases in legal, printing and appraisal fees. Management
fees decreased in 1999 compared to 1998 by approximately $23,000 due to a
decrease in distributable cash flow and a corresponding decrease in operating
distributions to partners as a result of the sale of investments.
1998 Compared to 1997
General and administrative expenses increased approximately $7,400 or 2%,
primarily due to an increase in legal fees for 1998 which was the result of fees
incurred with the potential sale of Reflections Apartments. Offsetting this is a
reduction in investor servicing fees. Management fees decreased in 1998 compared
to 1997 by approximately $19,000 due to a decrease in distributable cash flow
and a corresponding decrease in operating distributions to partners as a result
of the sale of investments.
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
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
14
<PAGE>
The Partnership was not party to derivative financial instruments or
derivative commodity instruments at or during the year ended December 31, 1999.
The Partnership's only other financial instruments (as defined by Financial
Accounting Standards Board Statement No. 107) are its cash and cash equivalents
for which cost approximates market value.
Item 8. Financial Statements and Supplementary Data.
The independent auditor's reports, financial statements and financial
statement schedule listed in the accompanying index are filed as part of this
report. See Index to the Financial Statements and Financial Statement Schedules
on page 20.
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.
15
<PAGE>
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, 1999
<TABLE>
<CAPTION>
Name Position(s) with the Managing General Partner Age
- ---- --------------------------------------------- ---
<S> <C> <C>
Alison Husid Cutler President, Chief Executive Officer and Director 37
Pamela J. Herbst Vice President and Director 44
J. Grant Monahon Vice President and Director 54
James J. Finnegan Vice President 39
Karin J. Lagerlund Treasurer and Principal Financial and Accounting Officer 35
</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:
Alison Husid Cutler is a Portfolio Manager in AEW Institutional Real
Estate Services, with responsibility for several real estate equity portfolios
representing approximately $800 million in client capital. She has over 12 years
of experience in real estate finance and investment management. Ms. Cutler
joined the predecessor of AEW Capital Management, L.P. ("AEW Capital
Management") in 1987 as Controller for a portfolio management team responsible
for the acquisition, management, restructuring and disposition of client assets
in New England and the western U.S. She later served as Asset Manager for a
portfolio of assets in Arizona and the West Coast. Prior to joining AEW, Ms.
Cutler worked for several years as a Senior Auditor with Peat Marwick, Main &
Co. She is a Certified Public Accountant and a graduate of the University of
Massachusetts (B.A.).
Pamela J. Herbst directs AEW Capital Management L.P.'s ("AEW Capital
Management") Institutional Real Estate Services, with oversight responsibility
for direct equity investing and the asset and portfolio management of existing
core and core-plus commingled funds and separate accounts.. Ms. Herbst is a
member of AEW Capital Management's Investment Policy Group and Operating
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 Chief Operating Officer 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
the predecessor of 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 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
16
<PAGE>
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 Institutional Real Estate 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.
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, 1999.
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
General Partners Share of Distributable Cash $ 33,020
AEW Real Estate Advisors, Inc. Management Fees and
(formerly known as Copley Real Reimbursement of Expenses 325,709
Estate Advisors, Inc.)
New England Securities Servicing Fees and
Corporation Reimbursement of Expenses 29,089
--------
TOTAL $387,818
========
For the year ended December 31, 1999 the Partnership allocated $(6,429) of
taxable loss to the General Partners.
17
<PAGE>
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, 1999. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited
and, in some circumstances, are subject to the prior receipt of certain opinions
of counsel or judicial decisions.
Except as expressly provided in the Partnership Agreement, the right to
manage the business of the Partnership is vested exclusively in the Managing
General Partner.
(b) Security Ownership of Management.
An affiliate of the General Partners of the Partnership owned 1,648 Units
as of December 31, 1999.
(c) Changes in Control.
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
The Partnership has no relationships or transactions to report other than
as reported in Item 11 above.
PART IV
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements and Schedule, Financial
Statement Index No. 2 and Financial Statement Index No. 3 are filed as
part of this Annual Report.
(2) Financial Statement Schedule--The Financial Statement Schedule listed
on the accompanying Index to Financial Statements and Schedule is filed as
part of this Annual Report.
(3) Exhibits--The Exhibits listed in the accompanying Exhibit Index are
filed as a part of this Annual Report and incorporated in this Annual
Report as set forth in said Index.
(b) Reports on Form 8-K. During the last quarter of the year ended
December 31, 1999, the Partnership filed one Current Report on Form 8-K
dated October 7, 1999 reporting on Item No. 2 (Acquisition or Disposition
of Assets) and Item No. 7 (Financial Statements and Exhibits), relating in
both cases to the September 23, 1999 sale of Reflections Apartments.
(c) Reports on Form 8-K/A. The partnership filed one Current Report on
Form 8-K/A dated December 7, 1999 reporting on Items No. 2 (Acquisition or
Disposition of Assets) and No. 7 (Financial Statements and Exhibits),
relating in both cases to the September 23, 1999 sale of Reflections
Apartments.
18
<PAGE>
New England Life Pension Properties IV;
A Real Estate Limited Partnership
Financial Statements
* * * * * * *
December 31, 1999
19
<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, 1999 and 1998
Statements of Operations - Years ended December 31, 1999, 1998 and 1997
Statements of Partners' Capital (Deficit) - Years ended December 31, 1999,
1998 and 1997
Statements of Cash Flows - Years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1999
All other schedules are omitted because they are not applicable.
20
<PAGE>
Report of Independent Accountants
To the Partners of New England Life Pension Properties IV; A Real Estate Limited
Partnership:
In our opinion, 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, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States. In addition, in our opinion, the financial statement schedule listed in
the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and the financial statement
schedule are the responsibility of Fourth Copley Corp., the Managing General
Partner of the Partnership (the "Managing General Partner"); our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, 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 provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 21, 2000
21
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
December 31,
----------------------------
1999 1998
------------ ------------
Assets
Real estate investments:
Joint ventures $ 4,608,955 $ 15,666,643
Property, net -- 9,106,457
------------ ------------
4,608,955 24,773,100
Cash and cash equivalents 17,597,405 5,932,931
Other net assets 97,603 --
------------ ------------
$ 22,303,963 $ 30,706,031
============ ============
Liabilities and Partners' Capital
Accounts payable $ 112,183 $ 145,103
Accrued management fee 24,390 32,314
Deferred management and disposition fees 4,436,165 4,229,398
------------ ------------
Total liabilities 4,572,738 4,406,815
------------ ------------
Partners' capital (deficit):
Limited partners ($290.18 and $422 per unit,
respectively; 120,000 units authorized,
94,997 units issued and outstanding) 17,734,394 26,341,929
General partners (3,169) (42,713)
------------ ------------
Total partners' capital 17,731,225 26,299,216
------------ ------------
$ 22,303,963 $ 30,706,031
============ ============
(See accompanying notes to financial statements)
22
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
Year ended December 31,
------------------------------------------
1999 1998 1997
------------ ------------ ------------
Investment Activity
Property rentals $ 1,487,638 $ 2,907,757 $ 4,981,451
Property operating expenses (951,623) (1,358,566) (2,028,830)
Depreciation and amortization (83,830) (549,260) (921,501)
------------ ------------ ------------
452,185 999,931 2,031,120
Joint venture earnings 1,661,176 1,515,033 900,050
Amortization (4,441) (5,308) (5,308)
------------ ------------ ------------
Total real estate operations 2,108,920 2,509,656 2,925,862
Gain on sale of joint venture 1,927,893 -- --
Gain on sales of property 3,474,005 3,742,541 10,482,458
------------ ------------ ------------
Total real estate activity 7,510,818 6,252,197 13,408,320
Interest on cash equivalents
and short-term investments 362,547 396,197 473,796
------------ ------------ ------------
Total investment activity 7,873,365 6,648,394 13,882,116
------------ ------------ ------------
Portfolio Expenses
Management fee 310,709 333,771 352,468
General and administrative 306,275 325,912 318,489
------------ ------------ ------------
616,984 659,683 670,957
------------ ------------ ------------
Net Income $ 7,256,381 $ 5,988,711 $ 13,211,159
============ ============ ============
Net income per limited
partnership unit $ 75.62 $ 62.41 $ 137.68
============ ============ ============
Cash distributions per limited
partnership unit $ 166.23 $ 138.76 $ 282.60
============ ============ ============
Number of limited partnership units
outstanding during the year 94,997 94,997 94,997
============ ============ ============
(See accompanying notes to financial statements)
23
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------ ------------ ------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,256,381 $ 5,988,711 $ 13,211,159
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 88,271 554,568 926,809
Equity in joint venture earnings (1,661,176) (1,515,033) (900,050)
Cash distributions from joint ventures 1,632,361 1,722,212 749,133
Gain on sales of property (3,474,005) (3,742,541) (10,482,458)
Gain on sale of joint ventures (1,927,893) -- --
Decrease (increase) in investment income
and other receivables -- 51,042 (22,023)
Increase in property deferred leasing costs -- (35,241) (79,163)
Decrease (increase) in property working capital 18,977 (256,107) (144,177)
Increase (decrease) in operating liabilities (640,949) (288,128) 192,568
------------ ------------ ------------
Net cash provided by operating activities 1,291,967 2,479,483 3,451,798
------------ ------------ ------------
Cash flows from investing activities:
Net proceeds from sales of property 12,380,052 9,451,013 22,287,007
Net proceeds from sale of joint venture 13,009,955 -- --
Deferred disposition fees 806,872 297,000 696,000
Loan to venture partner -- -- (130,000)
Investment in property -- (70,131) (306,987)
Decrease (increase) in short-term
investments, net -- 2,838,711 (141,198)
Loan repayment by joint venture partner -- 136,437 --
------------ ------------ ------------
Net cash provided by investing
activities 26,196,879 12,653,030 22,404,822
------------ ------------ ------------
Cash flows from financing activity:
Distributions to partners (15,824,372) (13,217,055) (26,885,111)
------------ ------------ ------------
Net cash used in financing activity (15,824,372) (13,217,055) (26,885,111)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 11,664,474 1,915,458 (1,028,491)
Cash and cash equivalents:
Beginning of year 5,932,931 4,017,473 5,045,964
------------ ------------ ------------
End of year $ 17,597,405 $ 5,932,931 $ 4,017,473
============ ============ ============
</TABLE>
(See accompanying notes to financial statements)
24
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------- --------------------- ----------------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $(42,713) $ 26,341,929 $(67,328) $ 33,594,888 $(160,481) $ 47,361,993
Cash distributions (33,020) (15,791,352) (35,272) (13,181,783) (38,959) (26,846,152)
Net income 72,564 7,183,817 59,887 5,928,824 132,112 13,079,047
-------- ------------ -------- ------------ --------- ------------
Balance at end
of year $ (3,169) $ 17,734,394 $(42,713) $ 26,341,929 $ (67,328) $ 33,594,888
======== ============ ======== ============ ========= ============
</TABLE>
(See accompanying notes to financial statements)
25
<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 one real estate investment it currently owns prior to the end of
1987. The Partnership intended to dispose of its investments within twelve years
of their acquisition, and then liquidate; however, the Managing General Partner
extended the holding period, having determined it 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. 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. Accordingly, at
December 31, 1998, AEW Capital Management, L.P. was wholly owned by NEIC
Operating Partnership, L.P.. AEW is a subsidiary of AEW Capital Management, L.P.
Effective April 1, 1998, NEIC changed its name to Nvest, L.P. and NEIC Operating
Partnership, L.P. changed its name to Nvest Companies, 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, 1999 and 1998, an affiliate of the Managing General
Partner owned 1,648 units of limited partnership interest, 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. Deferred management fees were
$1,637,414 and $2,237,519 at December 31, 1999 and 1998, respectively. During
1999, the Partnership paid $918,738 of current and deferred management fees. AEW
is also reimbursed for expenses incurred in connection with administering the
Partnership
26
<PAGE>
($15,000 in 1999, $15,000 in 1998 and $15,000 in 1997). 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 $2,798,751 and $1,991,879 at December
31, 1999 and 1998, 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 $29,089, $37,823, and $25,155
in 1999, 1998 and 1997, respectively.
Note 2 - Summary of Significant Accounting Policies
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Managing General Partner to make
estimates affecting the reported amounts of assets and liabilities, and of
revenues and expenses. In the Partnership's business, certain estimates require
an assessment of factors not within management's control, such as the ability of
tenants to perform under long-term leases and the ability of the properties to
sustain their occupancies in changing markets. Actual results, therefore, could
differ from those estimates.
Real Estate Joint Ventures
Investments in joint ventures, including loans made to venture partners,
which are in substance real estate investments, are stated at cost plus (minus)
equity in undistributed joint venture income (losses). Allocations of joint
venture income (losses) were made to the Partnership's venture partners as long
as they had substantial economic equity in the project. Economic equity is
measured by the excess of the appraised value of the property over the
Partnership's total cash investment plus accrued preferential returns thereon.
Currently, the Partnership records an amount equal to 100% of the operating
results of each joint venture, after the elimination of all inter-entity
transactions, except for the one venture jointly owned by an affiliate of the
Partnership, which has substantial economic equity in the project. Joint
ventures are consolidated with the accounts of the Partnership if, and when, the
venture partner no longer shares in the control of the business.
Property
Property includes land and buildings and improvements, which are stated at
cost less accumulated depreciation, plus other operating net assets
(liabilities). The Partnership's initial carrying value of a property previously
owned by a joint venture equals the Partnership's carrying value of the
predecessor investment on the conversion date.
Capitalized Costs, Depreciation and Amortization
Maintenance and repair costs are expensed as incurred. Significant
improvements and renewals are capitalized. Depreciation is computed using the
straight-line method based on estimated useful lives of the buildings and
improvements. Leasing costs are also capitalized and amortized over the related
lease terms.
Acquisition fees have been capitalized as part of the cost of real estate
investments. Amounts not related to land are being amortized using the
straight-line method over the estimated useful lives of the underlying property.
Certain tenant leases provide for rental increases over the respective
lease terms. Rental revenue is being recognized on a straight-line basis over
the lease terms.
27
<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. Investments are
considered to be held for disposition at the time management commits the
Partnership to a plan to dispose of the investment.
Cash Equivalents
Cash equivalents are stated at cost plus accrued interest. The Partnership
considers all highly liquid investments purchased with a maturity of ninety days
or less to be cash equivalents; otherwise, they are classified as short-term
investments.
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.
Segment Data
Effective January 1, 1998, the Partnership adopted Financial Accounting
Standards Board Statement No. 131, "Disclosure about Segments on an Enterprise
and Related Information" (FAS 131). Based on the criteria established in FAS
131, the Managing General Partner has determined that the Partnership operates
in one operating segment: investing in real estate properties which are
domiciled in the United States of America.
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.
28
<PAGE>
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:
Preferential December 31
Investment/ Rate of Ownership --------------------
Location Return Interest 1999 1998
-------- ------ -------- ---- ----
Columbia Gateway Corp. Park
Columbia, Maryland 10.5% 68.11% $ -- $12,580,704
270 Technology Center
Frederick, Maryland 10.0% 50% $ 4,857,000 $ 4,857,000
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 New England Pension
Properties V (the "Affiliate") collectively had a 50% interest in the joint
venture. Ownership of the Columbia Gateway Corporate Park joint venture was
restructured to give the Partnership and its Affiliate obtained additional
voting rights in the joint venture effective January 1, 1998, and are entitled
to 69.5% and 30.5%, respectively of the operating activity of the joint venture.
On December 20, 1999, the Columbia Gateway Corporate Park joint venture
investment in which the Partnership and an affiliate own a 68.11% and 29.89%
interest, respectively, sold its property to an unaffiliated third party for
gross proceeds of $19,850,000, of which the Partnership's share was $13,795,750.
The Partnership received its 69.5% share of the net proceeds, $13,423,827 after
closing costs, and recognized a gain of $1,927,893 ($20.09 per Limited
Partnership Unit) on the sale. A disposition fee of $413,872 was accrued but not
paid to AEW Real Estate Advisors Inc.. On January 27, 2000 the Partnership made
a capital distribution of $13,204,583 ($139.00 per Limited Partnership Unit)
from the proceeds of the sale.
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 Partnership has a 50% interest in the joint venture.
The minimum future rentals due to the venture under non-cancelable operating
leases are: $716,204 in 2000, $553,154 in 2001, $211,774 in 2002, $37,928 in
2003 and $15,965 in 2004.
Reflections
On August 1, 1986, the Partnership entered into a joint venture with an
affiliate of Oxford Development Corporation to construct and operate a
multi-family apartment complex. The Partnership's commitment is for a total cash
investment of $14,475,000, $5,790,000 of which is a loan to the venture partner.
In May 1992, the Partnership agreed to extend the maturity of the loan from
August, 1996 to December, 1999 and the venture partner agreed to pay interest at
a minimum of 7% per annum with the unpaid amount subject to compounding at 10.5%
per annum. The loan was 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.)
29
<PAGE>
In connection with the ownership restructuring, the Partnership agreed to
release the affiliate of the venture partner from its guarantee upon payment to
the Partnership of $650,000. The Partnership received $250,000 at the time the
agreement was executed. During the third quarter of 1996, the Partnership
received an additional $263,563. The final payment of $136,437 was received
during the first quarter of 1998. The first payment was accounted for as a
reduction of previously accrued investment income. The second and third payments
were accounted for as a reduction of the Partnership's investment in the
property. (See Note 4.)
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 Developer was encumbered by the aforementioned loan. The note
was amended to mature on February 1, 1997 and was secured by a recorded
deed-of-trust which provided that the note would be 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 finalized the acquisition on July 17, 1998. The purchase price was
$7,113,255 and was paid by the Partnership as follows: (i) A portion of the
purchase price was paid through the discharge of all outstanding amounts,
including but not limited to accrued but unpaid interest, owed by the Developer
to the Partnership under the loan made by the Partnership to the Developer in
connection with the original acquisition of the property and (ii) the
Partnership paid the remainder of the purchase price in cash in the amount of
$2,210.
On September 23, 1998, the Metro Business Center was sold to an
institutional buyer which is unaffiliated with the Partnership. The gross sale
price was $9,900,000. The Partnership received net proceeds totaling $9,680,132,
after closing costs and recognized a gain of $3,706,950 ($38.63 per Limited
Partnership Unit). A disposition fee of $297,000 was accrued but not paid to
AEW. On October 29, 1998, the Partnership made a capital distribution of
$9,689,694 ($102 per Limited Partnership Unit) from the proceeds of the sale.
30
<PAGE>
Summarized Financial Information
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
----------------------
December 31,
------------------------------
1999 1998
----------- -----------
Assets
Real property, at cost less
accumulated depreciation of
$1,039,331 and $2,743,676,
respectively $ 3,939,825 $19,830,637
Other 634,949 888,075
----------- -----------
$ 4,574,774 20,718,712
Liabilities 136,869 339,188
----------- -----------
Net assets $ 4,437,905 $20,379,524
=========== ===========
Results of Operations
---------------------
Year ended December 31,
----------------------------------------
1999 1998 1997
---------- ---------- ----------
Revenue
Rental income $2,959,645 $3,047,719 $2,691,155
Other income 118,802 119,729 3,233
---------- ---------- ----------
3,078,447 3,167,448 2,694,388
---------- ---------- ----------
Expenses
Operating expenses 662,137 723,908 596,471
Depreciation and amortization 318,707 488,068 854,025
---------- ---------- ----------
980,844 1,211,976 1,450,496
---------- ---------- ----------
Net income $2,097,603 $1,955,472 $1,243,892
========== ========== ==========
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 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 was entitled to
received 40% of the excess cash
31
<PAGE>
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 Real Estate Advisors, Inc.. 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.
On August 21, 1998 the Partnership sold a parcel of land to the City of
Fort Myers. The gross sale price was $74,731. The Partnership received net
proceeds totaling $67,881 and recognized a gain of $35,591.
The buildings and improvements (a multi-family apartment complex in Fort
Meyers, Florida) were being depreciated over 25 years, beginning April 1, 1996.
On September 23, 1999, the Reflections Apartments was sold to a third
party which is unaffiliated with the Partnership. The gross sale price was
$13,100,000. The Partnership received net proceeds totaling $12,773,052, after
closing costs, and recognized a gain of $3,474,005 ($36.20 per Limited
Partnership Unit). A disposition fee of $393,000 was accrued but not paid to AEW
Real Estate Advisors, Inc. On October 28, 1999, the Partnership made a capital
distribution of $12,522,505 ($131.82 per Limited Partnership Unit) from the
proceeds of the sale.
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.
As described above the Partnership sold the Metro Business Center on
September 23, 1998 and recognized a gain of $3,706,950.
The buildings and improvements (four office/warehouse buildings in
Phoenix, Arizona) were being depreciated over 25 years, beginning July 1, 1996.
The following is a summary of the Partnership's investment in property:
32
<PAGE>
Assets and Liabilities
----------------------
December 31,
---------------------------
1999 1998
----------- -----------
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
----------- -----------
-- $ 9,106,457
=========== ===========
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:
Year ended December 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
Net income per financial
statements $ 7,256,381 $ 5,988,712 $13,211,159
Timing differences:
Joint venture earnings 169,210 775,991 335,601
Depreciation and amortization (53,730) 549,260 926,809
Expenses (282,938) (244,327) 176,233
Gain (loss) on sale (4,722,636) (4,687,593) 1,008,333
----------- ----------- -----------
Taxable income $ 2,366,287 $ 2,382,043 $15,658,135
=========== =========== ===========
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
to $524 in 1997 to $422 in 1998 and to $290.18 in 1999. No capital distributions
have been made to the general partners. Income from a sale is allocated in
proportion to the distribution of related proceeds, provided that the general
partners are allocated at least 1%. Income or losses from a sale, if there are
no residual proceeds after the repayment of the related debt, will be allocated
99% to the limited partners and 1% to the general partners.
Note 7 - Subsequent Event
Distributions of cash from operations relating to the quarter ended
December 31, 1999 were made on January 27, 2000 in the aggregate amount of
$493,217 ($5.14 per Limited Partnership Unit). In addition, a special capital
distribution was made on January 27, 2000 funded from original working capital
totaling $1,347,057 ($14.18 per Limited Partnership Unit). As discussed above,
the Partnership also made a capital distribution of $13,204,583 ($139.00 per
Limited Partnership Unit) from the proceeds of the Columbia Gateway Corporate
Park sale.
33
<PAGE>
NEW ENGLAND PENSION PROPERTIES IV;
A REAL ESTATE LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
Schedule III
AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial Cost to Costs Subsequent
the Partnership to Acquisition
-------------------------------------------------------------------------
Change in
Buildings & Other Net Working
Description Land Improvements Operating Liabilities Improvements Capital
- ----------- ---- ------------ --------------------- ------------ -------
<S> <C> <C> <C> <C> <C>
50% Interest in
Morf VI Venture.
Owner of two single story See Note B
office/research and --------------------------------------------------------------------------
development buildings in
Frederick, Maryland.
68.11% 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 $472,376
Fort Myers, FL
-Lee Partners 1,571,173 8,653,313 245,029 129,689 (547,424)
Phoeniz, AZ
-Copley/Hewson Northwest 1,880,099 3,879,241 129,921 319,870 16,558
---------------------------------------------------------------------------
Total Wholly-Owned Properties $6,523,605 $22,261,609 $93,526 $501,327 ($58,490)
---------------------------------------------------------------------------
<CAPTION>
Gross amount at which
Carried at Close of Period
-----------------------------------------------
Buildings & Other Net Disposal Accumulated
Description Land Improvements Operating Liabilities of Asset Total Depreciation
- ----------- ---- ------------ --------------------- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
50% Interest in
Morf VI Venture.
Owner of two single story $4,261,455 N/A
office/research and -------------------------------------------------
development buildings in
Frederick, Maryland.
68.11% interest in
Gateway 51 Partnership $347,500 N/A
which has constructed -------------------------------------------------
six office and research and
development buildings, and owns
land in Columbia, Maryland
----------------------------------------------------------------- -----------
Total Joint Ventures $4,608,955
================================================================= ===========
Las Vegas, NV
-Rancho Road Associates $3,072,333 $9,780,823 $190,952 ($13,044,108) $0 $0
Fort Myers, FL
-Lee Partners 1,571,173 8,783,022 (302,399) (9,954,173) 97,603 0
Phoeniz, AZ
-Copley/Hewson Northwest 1,880,099 4,199,111 146,479 (6,255,689) 0 0
--------------------------------------------------------------------------------------------
Total Wholly-Owned Properties $6,523,605 $22,762,936 $35,032 ($29,223,970) $97,603 $0
--------------------------------------------------------------------------------------------
<CAPTION>
Date of Date Depreciable
Description Construction Acquired Life
- ----------- ------------ -------- ----
<S> <C> <C> <C>
50% Interest in
Morf VI Venture.
Owner of two single story 1987 12/22/87 50 Years
office/research and
development buildings in
Frederick, Maryland.
68.11% interest in
Gateway 51 Partnership 1992 12/21/87 50 years
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 1988 12/29/1986 25 Years
Converted to
wholly-owned 1/1/95
Fort Myers, FL 08/01/1986 25 Years
-Lee Partners 1987 Converted to
wholly-owned 4/1/96
Phoeniz, AZ
-Copley/Hewson Northwest 1987 09/15/1986 25 Years
Converted to
wholly-owned 7/1/96
Total Wholly-Owned Properties
</TABLE>
34
<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, 1999
<TABLE>
<CAPTION>
Balance Conversion to Additions to Change in
as of Wholly-Owned Lease Additions to Write Down Property Working
Description 12/31/1996 Property Commissions Property of Property Capital
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners $9,906,024 $0 $0 $71,286 $0 $30,687
Las Vegas, NV.
-Rancho Road Associates 12,761,488 0 41,347 0 0 253,109
Phoenix, AZ
-Copley/Hewson Northwest 5,787,671 0 37,816 235,701 0 (9,620)
-----------------------------------------------------------------------------------------------
Total Wholly-Owned Property $28,455,183 $0 $79,163 $306,987 $0 $274,176
===============================================================================================
<CAPTION>
12/31/1996 1997 12/31/1996
Balance Accumulated Depreciation Accumulated
Disposal of as of Depreciation and and Amortization Dep/Amort
Description Asset 12/31/1997 Amortization Expense Subtotal
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners $0 $10,007,997 $257,265 ($339,699) $596,964
Las Vegas, NV.
-Rancho Road Associates (13,044,108) $11,836 894,659 (344,900) $1,239,559
Phoenix, AZ
-Copley/Hewson Northwest 0 $6,051,568 98,388 (236,902) $335,290
--------------------------------------------------------------------------------
Total Wholly-Owned Property ($13,044,108) $16,071,401 $1,250,312 ($921,501) $2,171,813
================================================================================
<CAPTION>
12/31/1996
1997 Accumulated
Disposal of Depreciation and
Description Asset Amortization
- -------------------------------------------------------------
<S> <C> <C>
Fort Myers, FL
-Lee Partners $0 $596,964
Las Vegas, NV.
-Rancho Road Associates (1,239,559) $0
Phoenix, AZ
-Copley/Hewson Northwest $335,290
-------------------------------
Total Wholly-Owned Property ($1,239,559) $932,254
===============================
</TABLE>
<TABLE>
<CAPTION>
Balance Conversion to Additions to Change in
as of Wholly-Owned Lease Additions to Write Down Property Working
Description 12/31/1997 Property Commissions Property of Property Capital
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners $10,007,997 $0 $0 $15,812 ($136,437) $167,941
Las Vegas, NV.
-Rancho Road Associates 11,836 0 0 0 0 (11,836)
Phoinix, AZ
-Copley/Hewson Northwest 6,051,568 0 35,241 54,319 0 100,002
----------------------------------------------------------------------------------------------
Total Wholly-Owned Property $16,071,401 $0 $35,241 $70,131 ($136,437) $256,107
==============================================================================================
<CAPTION>
12/31/1997 1998 12/31/1998
Balance Accumulated Depreciation Accumulated
Disposal of as of Depreciation and and Amortization Dep/Amort
Description Asset 12/31/1998 Amortization Expense Subtotal
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners ($32,290) $10,023,023 $596,964 ($335,043) $932,007
Las Vegas, NV.
-Rancho Road Associates 0 $0 0 0 $0
Phoinix, AZ
-Copley/Hewson Northwest (6,225,689) $15,441 335,290 (214,217) $549,507
--------------------------------------------------------------------------------
Total Wholly-Owned Property ($6,257,979) $10,038,464 $932,254 ($549,260) $1,481,514
================================================================================
<CAPTION>
12/31/1998
1998 Accumulated
Disposal of Depreciation and
Description Asset Amortization
- ----------------------------------------------------------
<S> <C> <C>
Fort Myers, FL
-Lee Partners $0 $932,007
Las Vegas, NV.
-Rancho Road Associates 0 $0
Phoinix, AZ
-Copley/Hewson Northwest (549,507) $0
-----------------------------
Total Wholly-Owned Property ($549,507) $932,007
=============================
</TABLE>
<TABLE>
<CAPTION>
Balance Conversion to Additions to Change in
as of Wholly-Owned Lease Additions to Write Down Property Working
Description 12/31/1998 Property Commissions Property of Property Capital
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners $10,023,023 $0 $0 $0 $0 ($3,537)
Phoenix, AZ
-Copley/Hewson Northwest 15,441 0 0 0 0 (15,441)
-----------------------------------------------------------------------------------------------
Total Wholly-Owned Property $10,038,464 $0 $0 $0 $0 ($18,978)
===============================================================================================
<CAPTION>
12/31/1998 1999 12/31/1999
Balance Accumulated Depreciation Accumulated
Disposal of as of Depreciation and and Amortization Dep/Amort
Description Asset 12/31/1999 Amortization Expense Subtotal
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fort Myers, FL
-Lee Partners ($9,921,884) $97,602 $932,007 ($83,830) $1,015,837
Phoenix, AZ
-Copley/Hewson Northwest 0 $0 0 0 $0
--------------------------------------------------------------------------------
Total Wholly-Owned Property ($9,921,884) $97,602 $932,007 ($83,830) $1,015,837
================================================================================
<CAPTION>
12/31/1999
1999 Accumulated
Disposal of Depreciation and
Description Asset Amortization
- --------------------------------------------------------------
<S> <C> <C>
Fort Myers, FL
-Lee Partners ($1,015,837) $0
Phoenix, AZ
-Copley/Hewson Northwest 0 $0
---------------------------------
Total Wholly-Owned Property ($1,015,837) $0
=================================
</TABLE>
35
<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 31,1999
<TABLE>
<CAPTION>
CASH
CASH
PERCENT BALANCE INVESTMENT EQUITY IN 1997 AMORTIZATION DISTRIBUTION
OF AS OF IN JOINT INCOME/ OF DEFERRED FROM
DESCRIPTION OWNERSHIP 12/31/96 VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE
---------------------- --------- ------------ ---------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MORF VI Venture 50% $4,722,717 $0 $107,157 ($1,840) ($220,000)
Gateway 51 Partnership 34.75% 11,010,803 0 783,507 (3,468) (519,746)
------------ ---------- ---------- --------------- ------------
$15,733,520 $0 $890,664 ($5,308) ($739,746)
============ ========== ========== =============== ============
PERCENT BALANCE INVESTMENT EQUITY IN 1998 AMORTIZATION DISTRIBUTION
OF AS OF IN JOINT INCOME/ OF DEFERRED FROM
DESCRIPTION OWNERSHIP 12/31/97 VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE
---------------------- --------- ------------ ---------- ---------- ---------------- -------------
MORF VI Venture 50% $4,608,034 $0 $511,405 ($1,840) ($741,000)
Gateway 51 Partnership 34.75% 11,271,096 0 1,003,628 (3,468) (981,212)
------------ ---------- ---------- --------------- ------------
$15,879,130 $0 $1,515,033 ($5,308) ($1,722,212)
============ ========== ========== =============== ============
PERCENT BALANCE INVESTMENT EQUITY IN 1999 AMORTIZATION DISTRIBUTION
OF AS OF IN JOINT INCOME/ OF DEFERRED FROM
DESCRIPTION OWNERSHIP 12/31/98 VENTURES (LOSS) ACQUISITION FEES JOINT VENTURE
---------------------- --------- ------------ ---------- ---------- ---------------- -------------
MORF VI Venture 50% $4,376,599 $0 $666,696 ($1,840) ($780,000)
Gateway 51 Partnership 68.11% 11,290,044 0 994,480 (2,601) (934,080)
------------ ---------- ---------- --------------- ------------
$15,666,643 $0 $1,661,176 ($4,441) ($1,714,080)
============ ========== ========== =============== ============
<CAPTION>
CONVERSION TO BALANCE
WHOLLY-OWNED 1997 AS OF
DESCRIPTION PROPERTY DISPOSALS 12/31/97
---------------------- ------------- ------------ -----------
<S> <C> <C> <C>
MORF VI Venture $0 $0 $4,608,034
Gateway 51 Partnership 0 0 11,271,096
------------- ------------ -----------
$0 $0 $15,879,130
============= ============ ===========
CONVERSION TO BALANCE
WHOLLY-OWNED 1998 AS OF
DESCRIPTION PROPERTY DISPOSALS 12/31/98
---------------------- ------------- ------------ -----------
MORF VI Venture $0 $0 $4,376,599
Gateway 51 Partnership 0 0 11,290,044
------------- ------------ -----------
$0 $0 $15,666,643
============= ============ ===========
CONVERSION TO BALANCE
WHOLLY-OWNED 1999 AS OF
DESCRIPTION PROPERTY DISPOSALS 12/31/99
---------------------- ------------- ------------ -----------
MORF VI Venture $0 $0 $4,261,455
Gateway 51 Partnership 0 (11,000,343) 347,500
------------- ------------ -----------
$0 ($11,000,343) $4,608,955
============= ============ ===========
</TABLE>
36
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
Auditor's Report and Financial Statements
of Morf 6 Venture
Independent Auditor's Report of Wolpoff and Company, LLP
Balance Sheet - December 31, 1999 and 1998
Statement of Income - For the Years ended December 31, 1999, 1998 and 1997
Statement of Partners' Capital - For the Years ended December 31, 1999, 1998 and
1997
Statement of Cash Flows - For the Years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
37
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
FINANCIAL REPORT
DECEMBER 31, 1999
WALPERT & WOLPOFF, LLP
Certified Public Accountants
----------------------------
38
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
CONTENTS
DECEMBER 31, 1999
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Balance Sheet
Statement of Income
Statement of Partners' Capital
Statement of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
SUPPLEMENTARY INFORMATION
Schedule of Partners' Capital
Schedule of Changes in Partners' Capital - Income Tax Basis
39
<PAGE>
[LETTERHEAD OF WALPERT & WOLPOFF, LLP]
To the Partners
MORF 6 Venture
(A Maryland General Partnership)
Columbia, Maryland
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
We have audited the balance sheet of MORF 6 Venture (A Maryland General
Partnership) as of December 31, 1999 and 1998, and the related statements of
income, partners' capital, and cash flows for each of the three years ended
December 31, 1999, 1998, and 1997. 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 MORF 6 Venture (A Maryland
General Partnership) as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years ended December 31,
1999, 1998, and 1997, in conformity with generally accepted accounting
principles.
/s/ Walpert & Wolpoff, LLP
WALPERT & WOLPOFF, LLP
Baltimore, Maryland
January 12, 2000
40
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
BALANCE SHEET
ASSETS
December 31,
--------------------------
1999 1998
----------- -----------
PROPERTY, AT COST - Note 1
Buildings and Improvements $ 4,155,969 $ 4,088,945
Land and Land Improvements 630,335 630,335
Deferred Costs - Note 3 192,852 143,782
----------- -----------
4,979,156 4,863,062
Less Accumulated Depreciation and Amortization (1,039,331) (914,049)
----------- -----------
PROPERTY, NET 3,939,825 3,949,013
----------- -----------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 64,047 113,865
----------- -----------
Receivable From Tenants 24,307 24,973
Allowance for Doubtful Accounts (22,740) (22,870)
----------- -----------
1,567 2,103
----------- -----------
Prepaid Expenses 29,367 29,294
----------- -----------
TOTAL OTHER ASSETS 94,981 145,262
----------- -----------
$ 4,034,806 $ 4,094,275
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts Payable and Accrued Expenses $ 89,598 $ 40,088
Tenant Security Deposits 25,638 22,445
Rents Received in Advance 13,208 12,076
----------- -----------
TOTAL LIABILITIES 128,444 74,609
PARTNERS' CAPITAL - Note 2 3,906,362 4,019,666
----------- -----------
$ 4,034,806 $ 4,094,275
=========== ===========
- ----------
The notes to financial statements are an integral part of this statement.
41
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Gross Rent Potential - Notes 1 and 5 $ 808,690 $ 801,491 $ 784,015
Less Vacancies 9,502 66,464 132,236
--------- --------- ---------
Net Rental Income 799,188 735,027 651,779
Expense Reimbursements From Tenants 166,271 92,781 76,286
Interest and Other Income 2,854 11,139 3,213
--------- --------- ---------
TOTAL REVENUE 968,313 838,947 731,278
--------- --------- ---------
OPERATING EXPENSES
Real Property Tax 56,695 55,967 41,093
Building and Grounds Maintenance 48,135 31,584 32,009
Management Fees - Note 3 29,100 24,585 22,507
General and Administrative 24,688 15,720 21,836
Utilities 14,059 11,434 17,246
Bad Debts 3,658 23,789 -0-
--------- --------- ---------
TOTAL OPERATING EXPENSES 176,335 163,079 134,691
--------- --------- ---------
OPERATING INCOME 791,978 675,868 596,587
--------- --------- ---------
OTHER EXPENSES
Depreciation and Amortization (125,282) (111,321) (116,945)
Abandonment of Tenant Improvements - Note 1 -0- (53,142) (372,485)
--------- --------- ---------
TOTAL OTHER EXPENSES (125,282) (164,463) (489,430)
--------- --------- ---------
NET INCOME - Note 4 $ 666,696 $ 511,405 $ 107,157
========= ========= =========
</TABLE>
- ----------
The notes to financial statements are an integral part of this statement.
42
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
Year Ended December 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $ 4,857,000 $ 4,857,000 $ 4,857,000
----------- ----------- -----------
CAPITAL PLACEMENT FEE - Notes 1 and 2 (38,250) (38,250) (38,250)
----------- ----------- -----------
DISTRIBUTIONS - Note 2
Prior Years (5,308,931) (4,567,931) (4,347,931)
Current Year (780,000) (741,000) (220,000)
----------- ----------- -----------
(6,088,931) (5,308,931) (4,567,931)
----------- ----------- -----------
ACCUMULATED INCOME
Prior Years 4,509,847 3,998,442 3,891,285
Current Year 666,696 511,405 107,157
----------- ----------- -----------
5,176,543 4,509,847 3,998,442
----------- ----------- -----------
TOTAL PARTNERS' CAPITAL $ 3,906,362 $ 4,019,666 $ 4,249,261
=========== =========== ===========
- ----------
The notes to financial statements are an integral part of this statement.
43
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 666,696 $ 511,405 $ 107,157
--------- --------- ---------
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 125,282 111,321 116,945
Abandonment of Tenant Improvements -0- 53,142 372,485
Decrease in Tenant Receivables, Net of Allowance 536 13,014 5,455
Increase in Prepaid Expenses (73) (491) (13,647)
Accounts Payable and Accrued Expenses 49,510 15,065 12,946
Increase in Rents Received in Advance 1,133 4,250 -0-
--------- --------- ---------
Total Adjustments 176,388 196,301 494,184
--------- --------- ---------
Net Cash Provided by Operating Activities 843,084 707,706 601,341
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property Improvements (67,024) -0- (262,947)
Leasing Commissions (49,071) (36,154) (54,802)
Security Deposits 3,193 -0- 2,017
--------- --------- ---------
Net Cash Used by Investing Activities (112,902) (36,154) (315,732)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Partner (780,000) (741,000) (220,000)
--------- --------- ---------
Net Cash Used by Financing Activities (780,000) (741,000) (220,000)
--------- --------- ---------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (49,818) (69,448) 65,609
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 113,865 183,313 117,704
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 64,047 $ 113,865 $ 183,313
========= ========= =========
</TABLE>
- ----------
The notes to financial statements are an integral part of this statement.
44
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
MORF 6 Venture (A Maryland General Partnership) (the Partnership) was
formed on December 22, 1987, under the Maryland Uniform Partnership Act.
The Partnership purchased all of the land and buildings from M.O.R.F. 6
Associates Limited Partnership, a general partner. The buildings were in
service and partially leased upon date of purchase.
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
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 exceeded the FDIC
insurance limitation.
Property
The Partnership owns and operates two office buildings in Frederick,
Maryland, containing approximately 73,000 square feet of leasable area.
All property is recorded at cost. Information regarding the buildings is
as follows:
Occupancy
Square ----------------------------
Building Feet Tenants 12/31/99 12/31/98 12/31/97
-------- ---- ------- -------- -------- --------
1 45,000 Multiple 100% 100% 51%
2 28,000 Multiple 100% 100% 100%
------
73,000 100% 100% 70%
====== === === ===
During 1998 and 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:
1999 1998 1997
-------- -------- ---------
Cost $ -0- $ 65,466 $ 480,157
Accumulated Depreciation -0- (12,324) (107,672)
-------- -------- ---------
Abandonment of Tenant Improvements $ -0- $ 53,142 $ 372,485
======== ======== =========
45
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
Note 1 - Depreciation (Cont.)
Building costs are being depreciated using the straight-line method over
the estimated useful lives of 50 years. Beginning in January 1998, the
Partnership changed depreciation methods for tenant improvements. Tenant
improvements are being depreciated using the straight-line method over the
life of the tenants' lease; in prior years the improvements were
depreciated over 50 years.
Amortization
Various deferred costs are being amortized as follows:
Amortization
1999 1998 Period
-------- -------- ------------
Leasing Commissions $185,134 $136,064 1 - 5 Years
Organization Costs 7,718 7,718 Complete
-------- --------
$192,852 $143,782
======== ========
Rental Income
Rental income for major leases is being recognized on a straight-line
basis over the term of the lease. The excess of the rental income
recognized over the amount stipulated in the lease is shown as deferred
rent receivable.
Income Taxes
Partnerships, as such, are not subject to income taxes. The individual
partners are required to report their respective shares of partnership
income and other tax items on their respective income tax returns.
Capital Placement Fee
The cost incurred for arranging the Partnership's equity has been treated
as a reduction of partners' capital (see Note 2).
Use of Estimates
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.
Note 2 - PARTNERS' CAPITAL
Capital Investment
New England Life Pension Properties IV (NELPP IV) has agreed to provide
equity up to an amount of $5,150,000 to the Partnership. Of this amount,
$5,004,841 was contributed, and in 1991, $293,000 was returned from
proceeds of a 1990 land sale. An additional $175,060 was contributed in
1994, and in 1995, capital contributions of $29,901 were returned.
Contributed capital totaled $4,857,000, at December 31, 1999, 1998, and
1997.
46
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
Note 2 - (Cont.)
NELPP IV is entitled to a cumulative priority return of 10%, compounded
monthly, on invested capital. During 1999, 1998, and 1997, NELPP IV was
paid $780,000, $741,000, and $220,000, respectively, under this agreement.
As of December 31, 1999, 1998, and 1997, the unpaid priority return was
$-0-, $-0-, and $228,089, respectively.
Capital Placement Fee
The Partnership incurred fees of $38,250 with Paine Webber Mortgage
Finance, Inc. with respect to capital raised by the Partnership. This
amount has been charged against capital.
Note 3 - RELATED PARTY TRANSACTIONS
Management Fees
The Partnership has entered into an agreement with Manekin, LLC, an
affiliated entity, to act as management agent for the property. The
management agreement provides for fees equal to 3% of rent and tenant
expense billings. For the years ended December 31, 1999, 1998, and 1997,
management fees of $29,100, $24,585, and $22,507, respectively, were
incurred.
Leasing Commissions
Leasing commissions of $16,667, $20,583, and $54,802, were paid to related
parties during 1999, 1998, and 1997, respectively.
Note 4 - TAX ACCOUNTING
Tax accounting differs from financial accounting as follows:
Current Prior
Year Years Total
--------- ---------- ----------
Financial Income $ 666,696 $4,509,847 $5,176,543
Additional Depreciation (49,590) (591,163) (640,753)
Real Property
Taxes Expensed for Tax -0- (28,347) (28,347)
Prepaid Tenant Reimbursements 52,673 31,211 83,884
Rents Received in Advance (7,788) 12,076 4,288
Additional Gain on Sale
of Land Recognized for Tax -0- 30,594 30,594
Allowance for Doubtful Accounts (130) 22,870 22,740
--------- ---------- ----------
Taxable Income $ 661,861 $3,987,088 $4,648,949
========= ========== ==========
47
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
Note 5 - FUTURE MINIMUM LEASE PAYMENTS
The following is a schedule of future minimum lease payments to be
received under noncancelable operating leases at December 31, 1999:
Year Ending December 31, 2000 $ 716,204
2001 553,154
2002 211,774
2003 37,928
2004 15,965
----------
Total $1,535,025
==========
48
<PAGE>
[LETTERHEAD OF WALPERT & WOLPOFF, LLP]
To the Partners
MORF 6 Venture
(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 11 and 12 is presented for the purpose 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/ Walpert & Wolpoff, LLP
WALPERT & WOLPOFF, LLP
Baltimore, Maryland
January 12, 2000
49
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
SCHEDULE OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1999
M.O.R.F. 6
New England Associates
Life Pension Limited
Properties IV Partnership Total
------------- ----------- -----
OWNERSHIP PERCENTAGE 50% 50% 100%
=========== ===== ===========
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $ 4,857,000 $ -0- $ 4,857,000
----------- ----- -----------
CAPITAL PLACEMENT FEE - Notes 1 and 2 (38,250) -0- (38,250)
----------- ----- -----------
DISTRIBUTIONS - Note 2
Prior Years (5,308,931) -0- (5,308,931)
Current Year (780,000) -0- (780,000)
----------- ----- -----------
(6,088,931) -0- (6,088,931)
----------- ----- -----------
ACCUMULATED INCOME
Prior Years 4,509,847 -0- 4,509,847
Current Year 666,696 -0- 666,696
----------- ----- -----------
5,176,543 -0- 5,176,543
----------- ----- -----------
TOTAL PARTNERS' CAPITAL $ 3,906,362 $ -0- $ 3,906,362
=========== ===== ===========
- ----------
See Independent Auditor's Report on Supplementary Information.
50
<PAGE>
MORF 6 VENTURE
(A MARYLAND GENERAL PARTNERSHIP)
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
YEAR ENDED DECEMBER 31, 1999
M.O.R.F. 6
New England Associates
Life Pension Limited
Properties IV Partnership Total
------------- ----------- -----
OWNERSHIP PERCENTAGE 50% 50% 100%
=========== ===== ===========
CAPITAL CONTRIBUTIONS - Note 2
Prior Years $ 4,857,000 $ -0- $ 4,857,000
----------- ----- -----------
CAPITAL PLACEMENT FEE - Notes 1 and 2 (38,250) -0- (38,250)
----------- ----- -----------
DISTRIBUTIONS - Note 2
Prior Years (5,308,931) -0- (5,308,931)
Current Year (780,000) -0- (780,000)
----------- ----- -----------
(6,088,931) -0- (6,088,931)
----------- ----- -----------
ACCUMULATED INCOME - Note 4
Prior Years 3,987,088 -0- 3,987,088
Current Year 661,861 -0- 661,861
----------- ----- -----------
4,648,949 -0- 4,648,949
----------- ----- -----------
TOTAL PARTNERS' CAPITAL $ 3,378,768 $ -0- $ 3,378,768
=========== ===== ===========
- ----------
See Independent Auditor's Report on Supplementary Information.
51
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 3
Auditor's Report and Financial Statements
of Gateway 51 Partnership
Independent Auditor's Report of Wolpoff and Company, LLP
Balance Sheet - December 31, 1998 and 1997
Statement of Income - For the Years ended December 31, 1998, 1997 and 1996
Statement of Partners' Capital - For the Years ended December 31, 1998, 1997 and
1996
Statement of Cash Flows - For the Years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
52
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
FINANCIAL REPORT
DECEMBER 31, 1998
53
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
CONTENTS
DECEMBER 31, 1998
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Balance Sheet
Statement of Income
Statement of Partners' Capital
Statement of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
SUPPLEMENTARY INFORMATION
Schedule of Partners' Capital
Schedule of Changes in Partners' Capital - Income Tax Basis
54
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP]
To the Partners
Gateway 51 Partnership (A Maryland General Partnership)
Columbia, Maryland
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
We have audited the balance sheet of Gateway 51 Partnership (A Maryland General
Partnership) as of December 31, 1998 and 1997, and the related statements of
income, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1998, 1997, and 1996. 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, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, 1997, and 1996, in conformity with generally accepted
accounting principles.
/s/ Wolpoff & Company, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 13, 1999
55
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
BALANCE SHEET
ASSETS
December 31,
--------------------------
1998 1997
------------ -----------
PROPERTY, AT COST - Note 1
Land $ 4,966,738 $ 4,966,738
Building and Improvements 11,892,943 11,614,717
Preliminary Development Costs 42,247 42,247
Deferred Costs - Note 3 809,323 663,719
------------ -----------
17,711,251 17,287,421
Less Accumulated Depreciation and Amortization 1,984,627 1,630,022
------------ -----------
PROPERTY, NET 15,726,624 15,657,399
------------ -----------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 421,833 558,136
------------ -----------
Receivables From Tenants
Rents and Expense Billings 106,282 -0-
Deferred Rent Receivable - Note 1 202,228 73,447
Allowance for Doubtful Accounts (95,174) -0-
------------ -----------
213,336 73,447
------------ -----------
Prepaid Expenses 107,644 107,442
------------ -----------
TOTAL OTHER ASSETS 742,813 739,025
------------ -----------
$ 16,469,437 $16,396,424
============ ===========
- ----------
The notes to financial statements are an integral part of this statement.
56
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
BALANCE SHEET
LIABILITIES AND PARTNERS' CAPITAL
December 31,
--------------------------
1998 1997
----------- -----------
LIABILITIES
Accounts Payable and Accrued Expenses $ 67,398 $ 34,935
Tenant Security Deposits 150,000 15,193
Prepaid Tenant Reimbursements 47,181 142,688
----------- -----------
TOTAL LIABILITIES 264,579 192,816
PARTNERS' CAPITAL - Notes 1 and 2 16,204,858 16,203,608
----------- -----------
$16,469,437 $16,396,424
=========== ===========
- ----------
The notes to financial statements are an integral part of this statement.
57
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE - Notes 1 and 5
Gross Rent Potential $ 1,943,734 $ 1,775,359 $ 1,684,997
Less Vacancies and Free Rent 72,135 80,444 108,412
----------- ----------- -----------
Net Rental Income 1,871,599 1,694,915 1,576,585
Expense Reimbursements From Tenants 441,093 258,789 364,873
Other Income 15,809 20 18,163
----------- ----------- -----------
TOTAL REVENUE 2,328,501 1,953,724 1,959,621
----------- ----------- -----------
OPERATING EXPENSES
Real Property Taxes 211,009 211,967 207,855
Building and Grounds Maintenance 144,004 142,678 157,314
Bad Debts 95,174 -0- -0-
Management Fees - Note 3 62,338 61,036 57,542
Utilities 26,165 27,297 24,890
General and Administrative 17,966 12,229 25,856
Insurance 4,173 6,573 9,292
----------- ----------- -----------
TOTAL OPERATING EXPENSES 560,829 461,780 482,749
----------- ----------- -----------
OPERATING INCOME 1,767,672 1,491,944 1,476,872
----------- ----------- -----------
ADJUSTMENTS TO ARRIVE AT NET INCOME
Depreciation and Amortization (354,605) (315,417) (302,585)
Abandonment of Tenant Improvements - Note 1 -0- (80,178) (24,256)
----------- ----------- -----------
(354,605) (395,595) (326,841)
----------- ----------- -----------
NET INCOME-Note 4 $ 1,413,067 $ 1,096,349 $ 1,150,031
=========== =========== ===========
</TABLE>
The notes to financial statements are an integral part of this statement.
58
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
Year Ended December 31,
1998 1997 1996
------------ ------------ ------------
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 (8,796,724) (8,048,893) (6,948,893)
Current Year (1,411,817) (747,831) (1,100,000)
------------ ------------ ------------
(10,208,541) (8,796,724) (8,048,893)
------------ ------------ ------------
ACCUMULATED INCOME
Prior Years 4,935,184 3,838,835 2,688,804
Current Year 1,413,067 1,096,349 1,150,031
------------ ------------ ------------
6,348,251 4,935,184 3,838,835
------------ ------------ ------------
TOTAL PARTNERS' CAPITAL $ 16,204,858 $ 16,203,608 $ 15,855,090
============ ============ ============
- ----------
The notes to financial statements are an integral part of this statement.
59
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,413,067 $ 1,096,349 $ 1,150,031
----------- ----------- -----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization 354,605 315,417 302,585
Abandonment of Tenant Improvements -0- 80,178 24,256
Change in Receivables From Tenants (139,889) 8,667 (41,033)
Increase in Prepaid Expenses (202) (64,870) (6,302)
Change in Accounts Payable and Accrued Expenses 32,463 (6,176) 16,526
Change in Prepaid Tenant Reimbursements (95,507) 142,688 -0-
----------- ----------- -----------
Total Adjustments 151,470 475,904 296,032
----------- ----------- -----------
Net Cash Provided by Operating Activities 1,564,537 1,572,253 1,446,063
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Building and Improvement Costs (278,227) (359,189) (258,309)
Leasing Costs (145,603) (116,524) (80,786)
Increase in Tenant Security Deposits 134,807 12,784 -0-
Decrease in Tenant Improvement Loans -0- 688 32,057
----------- ----------- -----------
Net Cash Used by Investing Activities (289,023) (462,241) (307,038)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Partners (1,411,817) (747,831) (1,100,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (136,303) 362,181 39,025
CASH AND CASH EQUIVALENTS, BEGINNING 558,136 195,955 156,930
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 421,833 $ 558,136 $ 195,955
=========== =========== ===========
</TABLE>
- ----------
The notes to financial statements are an integral part of this statement.
60
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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.
The partnership agreement was amended and restated effective January 1,
1998, whereby M.O.R. Gateway 51, Limited Partnership (M.O.R.) transferred
34.055% and 14.945% to New England Life Pension Properties IV (NELPP IV)
and New England Pension Properties V (NEPP V), respectively. Subsequently,
NELPP IV transferred a 0.695% partnership interest, NEPP V transferred a
0.305% partnership interest, and M.O.R. transferred a 1% partnership
interest to NE/Gateway 51 Limited Partnership (NE/Gateway), bringing the
ownership as of January 1, 1998, to the following:
NELPP IV 68.11%
NEPP V 29.89%
NE/Gateway 2.00%
Property
The Partnership owns 21 acres of land in Howard County, Maryland. The
property has been developed with six office/research buildings. Plans call
for a seventh building with approximately 15,000 square feet of space.
All property is recorded at cost. Information regarding the buildings is
as follows:
Occupancy
Square Date Placed ----------------------------
Building Footage Into Service Tenants 12/31/98 12/31/97 12/31/96
- -------- ------- ------------ ------- -------- -------- --------
A 46,840 3/1/91 Multiple 100% 92% 92%
B 21,991 9/1/90 AVNET 100% 100% 100%
C 38,225 7/15/91 EVI, Inc. 100% 100% 100%
F 35,812 2/1/92 Multiple 100% 100% 82%
D-E 45,951 8/8/94 Columbia National 100% 100% 100%
-------
188,819 100% 98% 94%
=======
Carrying costs, operating expenses, and depreciation begin as a charge
against operations on the date the buildings were placed into service.
61
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
Note 1 - (Cont.)
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:
Cost $ 127,688
Accumulated Depreciation (47,510)
---------
Abandonment of Tenant Improvements $ 80,178
=========
Use of Estimates
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 are being depreciated using the straight-line method over
the estimated useful lives of 50 years. Beginning in January 1998, the
Partnership changed depreciation methods for tenant improvements. Tenant
improvements are being depreciated using the straight-line method over the
life of the tenants' lease; in prior years, the improvements were
depreciated over 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 795,767 Lease Terms
--------
$809,322
========
62
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
Note 1 - (Cont.)
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 4).
Capital Placement Fee
Costs incurred for arranging the Partnership's equity have been treated as
a reduction of partners capital (see Note 2).
Note 2 - PARTNERS' CAPITAL
Capital Investment
NELPP IV and NEPP V have agreed to provide equity of $14,598,000 and
$6,402,000, respectively, totaling $21,000,000. As of December 31, 1998,
1997, and 1996, total capital contributions amounted to $20,267,826.
Cumulative Priority Return
NELPP IV and NEPP V are entitled to cumulative priority returns of 10.5%,
compounded monthly on capital invested. The Partnership paid priority
returns totaling $1,411,817, $747,831, and $1,100,000 during 1998, 1997,
and 1996, respectively. As of December 31, 1998, 1997, and 1996, unpaid
priority returns amounted to $10,855,114, $9,127,936, and $6,888,115,
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 - 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 $145,603, $105,387, and $80,786 were
paid to related parties during 1998, 1997, and 1996, respectively.
63
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
Note 4 - TAX ACCOUNTING
Tax accounting differs from financial accounting as follows:
Current Year Prior Years Total
------------ ----------- -----------
Financial Income $ 1,413,067 $ 4,935,184 $ 6,348,251
Additional Depreciation (87,820) (757,466) (845,286)
Lease-Up Period Items
Capitalized for GAAP -0- 4,264 4,264
Allowance for Doubtful Accounts 95,174 -0- 95,174
Deferred Rent Receivable (128,781) (73,447) (202,228)
Prepaid Property Taxes (956) (105,026) (105,982)
Prepaid Tenant Reimbursements (95,507) 142,688 47,181
----------- ----------- -----------
Taxable Income $ 1,195,177 $ 4,146,197 $ 5,341,374
=========== =========== ===========
Note 5 - LEASES
The following is a schedule of future minimum lease payments to be
received under noncancelable operating leases at December 31, 1998:
Year Ending December 31, 1999 $1,524,603
2000 827,454
2001 726,557
2002 736,016
2003 745,758
----------
$3,814,630
==========
64
<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 the purpose 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 13, 1999
65
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
SCHEDULE OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NE/ M.O.R. 51
New England New England Gateway 51 Gateway
Life Pension Pension Limited Limited
Properties IV Properties V Partnership Partnership Total
------------- ------------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
OWNERSHIP PERCENTAGE
Through December 31, 1997 34.75% 15.25% 0.00% 50.00% 100.00%
============ =========== ======= ======= ============
As of January 1, 1998 68.11% 29.89% 2.00% 0.00% 100.00%
============ =========== ======= ======= ============
CAPITAL CONTRIBUTIONS
Prior Years $ 14,086,139 $ 6,181,687 $ -0- $ -0- $ 20,267,826
------------ ----------- ------- ------- ------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- -0- (202,678)
------------ ----------- ------- ------- ------------
DISTRIBUTIONS - Note 2
Prior Years (5,969,698) (2,827,026) -0- -0- (8,796,724)
Current Year (981,211) (430,606) -0- -0- (1,411,817)
------------ ----------- ------- ------- ------------
(6,950,909) (3,257,632) -0- -0- (10,208,541)
------------ ----------- ------- ------- ------------
ACCUMULATED INCOME
Prior Years 3,429,956 1,505,228 -0- -0- 4,935,184
Current Year 982,082 430,985 -0- -0- 1,413,067
------------ ----------- ------- ------- ------------
4,412,038 1,936,213 -0- -0- 6,348,251
------------ ----------- ------- ------- ------------
PARTNERS' CAPITAL, 12/31/98 $ 11,440,841 $ 4,764,017 $ -0- $ -0- $ 16,204,858
============ =========== ======= ======= ============
</TABLE>
- ----------
See Independent Auditor's Report on Supplementary Information.
66
<PAGE>
GATEWAY 51 PARTNERSHIP
(A MARYLAND GENERAL PARTNERSHIP)
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NE/ M.O.R. 51
New England New England Gateway 51 Gateway
Life Pension Pension Limited Limited
Properties IV Properties V Partnership Partnership Total
------------- ------------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
OWNERSHIP PERCENTAGE
Through December 31, 1997 34.75% 15.25% 0.00% 50.00% 100.00%
============ =========== ======= ======= ============
As of January 1, 1998 68.11% 29.89% 2.00% 0.00% 100.00%
============ =========== ======= ======= ============
CAPITAL CONTRIBUTIONS
Prior Years $ 14,086,139 $ 6,181,687 $ -0- $ -0- $ 20,267,826
------------ ----------- ------- ------- ------------
CAPITAL PLACEMENT FEE
Prior Years (106,427) (96,251) -0- -0- (202,678)
------------ ----------- ------- ------- ------------
DISTRIBUTIONS - Note 2
Prior Years (5,969,698) (2,827,026) -0- -0- (8,796,724)
Current Year (981,211) (430,606) -0- -0- (1,411,817)
------------ ----------- ------- ------- ------------
(6,950,909) (3,257,632) -0- -0- (10,208,541)
------------ ----------- ------- ------- ------------
ACCUMULATED INCOME
Prior Years 2,883,779 1,262,418 -0- -0- 4,146,197
Current Year 830,648 364,529 -0- -0- 1,195,177
------------ ----------- ------- ------- ------------
3,714,427 1,626,947 -0- -0- 5,341,374
------------ ----------- ------- ------- ------------
PARTNERS' CAPITAL, 12/31/98 $ 10,743,230 $ 4,454,751 $ -0- $ -0- $ 15,197,981
============ =========== ======= ======= ============
</TABLE>
- ----------
See Independent Auditor's Report on Supplementary Information.
67
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Number
- ------ ------
10M. Promissory Note dated September 15, 1986 in the amount *
of $3,720,000 from Hewson Properties, Inc. to the Registrant.
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.
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.
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.
27. Financial Data Schedule
- --------
*Previously filed and incorporated herein by reference
68
<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 29, 2000 By: /s/ Alison Husid Cutler
----------------------------
Alison Husid Cutler
President of the
Managing General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief
/s/ Alison Husid Cutler Executive Officer and
- --------------------------- Director of the March 29, 2000
Alison Husid Cutler Managing General Partner
/s/ Pamela J. Herbst Vice President and
- --------------------------- Director of the March 29, 2000
Pamela J. Herbst Managing General Partner
/s/ J. Grant Monahon Vice President and
- --------------------------- Director of the March 29, 2000
J. Grant Monahon Managing General Partner
/s/ James J. Finnegan
- --------------------------- Vice President of the March 29, 2000
James J. Finnegan Managing General Partner
/s/ Karin J. Lagerlund Treasurer and Principal
- --------------------------- Financial and Accounting
Karin J. Lagerlund Officer of the March 29, 2000
Managing General Partner
69
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 17,597,405
<SECURITIES> 0
<RECEIVABLES> 97,603
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,695,008
<PP&E> 4,608,955
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,303,963
<CURRENT-LIABILITIES> 136,573
<BONDS> 4,436,165
0
0
<COMMON> 0
<OTHER-SE> 17,731,225
<TOTAL-LIABILITY-AND-EQUITY> 22,303,963
<SALES> 3,148,814
<TOTAL-REVENUES> 8,913,259
<CGS> 951,623
<TOTAL-COSTS> 951,623
<OTHER-EXPENSES> 705,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,256,381
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,256,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,256,381
<EPS-BASIC> 75.62
<EPS-DILUTED> 75.62
</TABLE>
