SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
Commission File Number 0-15680
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2921566
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
200 Berkeley Street, Boston, MA 02117
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (800) 722-5457
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of
Investor Limited Partnership Interest
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 is not contained herein, and will not be contained,
to the best of the 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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable, since securities are non-voting.
Documents incorporated by reference. None.
Exhibit Index on Pages 23 - 27
Page 1 of 46
<PAGE>
TABLE OF CONTENTS
PART I
Item 1 Business 3
Item 2 Properties 6
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote
of Security Holders 7
PART II
Item 5 Market for the Partnership's Securities and Related
Security Holder Matters 7
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8 Financial Statements and Supplementary Data 17
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 17
PART III
Item 10 Directors and Executive Officers of the Partnership 17
Item 11 Executive Compensation 20
Item 12 Security Ownership of Certain Beneficial Owners
and Management 22
Item 13 Certain Relationships and Related Transactions 23
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 13
Signatures 28
2
<PAGE>
Part I
Item 1 - Business
The Registrant, John Hancock Realty Income Fund Limited Partnership (the
"Partnership"), is a limited partnership organized on June 12, 1986 under
the provisions of the Massachusetts Uniform Limited Partnership Act. As of
December 31, 1994, the partners in the Partnership consisted of John
Hancock Realty Equities, Inc. (the "General Partner"), John Hancock Realty
Funding, Inc. (the "John Hancock Limited Partner"), and 4,201 Investor
Limited Partners (the "Investors") owning 91,647 Units of Investor Limited
Partnership Interests (the "Units"). The John Hancock Limited Partner and
the Investors are collectively referred to as the Limited Partners. The
initial capital of the Partnership was $2,000 representing capital
contributions of $1,000 from the General Partner and $1,000 from the John
Hancock Limited Partner. During the offering period, the John Hancock
Limited Partner made additional capital contributions of $7,330,760. There
were no changes in the number of Units outstanding subsequent to the
termination of the offering period. The Amended Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement") authorized the
sale of up to 100,000 Units of Investor Limited Partnership Interests at
$500 per Unit.
The Units were offered and sold to the public during the period from
September 9, 1986 to September 9, 1987, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Partnership
sold the Units for $500 per Unit. No established public market exists on
which the Units may be traded.
The Partnership is engaged in the business of acquiring, improving,
operating, holding for investment and disposing of existing,
income-producing, commercial and industrial properties on an all-cash
basis, free and clear of mortgage indebtedness. Although the Partnership's
properties were acquired and are held free and clear of mortgage
indebtedness, the Partnership may incur mortgage indebtedness on its
properties under certain circumstances, as described in the Partnership
Agreement. The Partnership's principal objectives are to:
(1) preserve the capital investment of the Limited Partners;
(2) provide quarterly distributions of cash from operations on a
partially tax-deferred basis;
(3) protect the Limited Partners' investment against inflation;
and
(4) obtain long-term appreciation in the market value of its
properties.
The latest date on which the Partnership is due to terminate is December
31, 2016, unless it is sooner terminated in accordance with the terms of
the Partnership Agreement. It is expected that in the ordinary course of
the Partnership's business, the properties of the Partnership will be
disposed of, and the Partnership terminated, before December 31, 2016.
3
<PAGE>
Item 1 - Business (continued)
The Partnership's equity real estate investments are subject to various
risk factors. Although the risks of equity investing are reduced when
properties are acquired on an unleveraged basis, the major risk of owning
income-producing properties is the possibility that the properties will not
generate income sufficient to meet operating expenses and to fund adequate
reserves for repair, replacements and contingencies. The income from
properties may be affected by many factors, including: i) adverse changes
in general economic conditions and local conditions, such as competitive
over-building, a decrease in employment, or adverse changes in real estate
zoning laws, which may reduce the desirability of real estate in the area
or ii) other circumstances over which the Partnership may have little or no
control, such as fires, earthquakes and floods. To the extent that the
Partnership's properties are leased in any substantial portion to a
specific retail, industrial or office tenant, the financial failure of any
such major tenant, resulting in the termination of the tenant's lease or
non-payment of rentals due, would likely cause at least a temporary
reduction in cash flow from any such property and might result in a
decrease in the market value of that property.
On October 24, 1986, the Partnership acquired 1300 North Dutton Avenue, an
office/industrial facility located in Santa Rosa, California. During May
1994, the tenant occupying the property notified the Partnership that it
would not be renewing its lease, which expired on January 31, 1995. The
General Partner has been offering aggressive rental packages in order to
secure a new tenant for this property. Market conditions in Santa Rosa for
office/industrial space have declined since the Partnership acquired the
1300 North Dutton Avenue property. Currently, market conditions for
office/industrial property in Santa Rosa remain competitive.
On February 17, 1987, the Partnership acquired the Marlboro Square Shopping
Center, a neighborhood shopping center located in Marlboro, Massachusetts.
Market conditions in Marlboro have weakened since the Partnership acquired
the property and have remained depressed. An excess of supply over demand
for retail rental space has resulted in continued high vacancy rates and
competitive pricing for leasing space in the area in which Marlboro Square
is located. In addition, a proposed new retail development within close
proximity to Marlboro Square is scheduled for completion during Spring
1996. As a result, the General Partner anticipates that absorption of
existing retail space will remain sluggish during 1995 in the area in which
Marlboro Square is located. The General Partner will continue to offer
competitive lease rates and concessions at Marlboro Square in an effort to
lease the remaining vacant space at the property.
On November 20, 1987, the Partnership acquired the Crossroads Square
Shopping Center, a neighborhood shopping center located in Jacksonville,
Florida. Real estate market conditions for retail properties in
Jacksonville have declined since the Partnership acquired the property due
to over-building and slow economic growth which have caused declines in
occupancy and rental rates. However, occupancy levels and rental rates
stabilized during 1993 and increased duing 1994. As a result, the General
Partner anticipates favorable retail market conditions in Jacksonville and
the property during 1995.
4
<PAGE>
Item 1 - Business (continued)
On December 22, 1987, the Partnership acquired the Carnegie Center, a
multi-tenant office/industrial facility located in Cincinnati, Ohio. Since
the Partnership acquired the Carnegie Center, the Cincinnati industrial
real estate market has experienced an oversupply of office\industrial
rental space, which has resulted in a decline in rental rates and an
increase in vacancy rates. The Carnegie Center property experienced a
significant decrease in average occupancy during 1994. A tenant that had
occupied approximately 45% of the space at the property did not renew its
leases and vacated its space during 1994. As a result, at December 31,
1994, the occupancy at the Carnegie Center was 35%. During the first
quarter of 1995, a new tenant executed a lease for 14,375 square feet of
space, or 11% of the property, for a three year term which commenced in
March 1995. The General Partner anticipates that market conditions in
Cincinnati will remain competitive during 1995 and, therefore, it will
continue to offer competitive rental rates and concession packages in an
effort to increase occupancy at Carnegie Center.
On February 25, 1988, the Partnership acquired the Warner Plaza Shopping
Center, a neighborhood shopping center located in Chandler, Arizona. The
Partnership acquired Warner Plaza exclusive of areas owned by a non-
affiliate of the Partnership which were occupied by a supermarket, two
branch offices of local banks and a restaurant. During the fourth quarter
of 1992, the supermarket tenant vacated its space. During 1994, the non-
affiliated owner of that space secured two replacement tenants for the
space. This vacancy of this space did not have a significant negative
impact on the Partnership's operations. Although real estate market
conditions have declined in Chandler as compared to when the Partnership
acquired the property, population, employment and retail sales have
increased in recent years. These factors indicate a positive future
outlook for retail markets in Chandler and for Warner Plaza.
On September 13, 1988, the Partnership completed its investment portfolio
with the acquisition of the J.C. Penney Credit Operations Center, an
office/service center located in Albuquerque, New Mexico. The property is
100% leased to J.C. Penney under a lease that was scheduled to expire
during 1996. However, during the first quarter of 1995, the General
Partner, on behalf of the Partnership, negotiated an extension of the lease
through 2006. The tenant has been granted an option to terminate the lease
during the year 2001 upon the payment of $710,325. The General Partner
anticipates stable income performance from this property during 1995.
Within the power accorded to the General Partner under the terms of the
Partnership Agreement, the General Partner contracted, effective as of
January 1, 1992, with Hancock Realty Investors Incorporated ("HRI"), a
wholly-owned, indirect subsidiary of John Hancock Mutual Life Insurance
Company ("John Hancock"), to assist the General Partner in the performance
of its management duties as enumerated in the Partnership Agreement.
Effective May 28, 1993, HRI subcontracted with John Hancock to assist HRI
in the performance of its duties as enumerated in the January 1, 1992
contract. The Partnership has not incurred any additional costs or
expenses as a result of these agreements. The General Partner is further
described in Item 10 ("Directors and Executive Officers of the
Partnership") of this Report.
Industry segment information has not been provided since the Partnership is
engaged in only one industry segment.
5
<PAGE>
Item 2 - Properties
As of December 31, 1994, the Partnership held the following properties in
its portfolio:
1300 North Dutton Avenue Office Complex
---------------------------------------
On October 24, 1986, the Partnership purchased the 1300 North Dutton Avenue
office building ("1300 North Dutton Avenue"), located in Santa Rosa,
California, from a non-affiliated seller. The property consists of one
building with 24,120 rentable square feet of office space. The building
and two adjacent buildings comprise "Park Campus", an association which in
common owns a 5.9 acre parcel with landscaping and parking serving all
three buildings. 1300 North Dutton Avenue's allocation of interest in Park
Campus is approximately 32% and includes the exclusive right to use 95
parking spaces.
At December 31, 1994, the building was 100% leased to North American
Mortgage Company ("NAMC") under a lease agreement which expired on January
31, 1995. During May 1994, NAMC notified the Partnership that it would not
be renewing its lease upon its expiration. The General Partner has been
actively seeking a replacement tenant for the property.
Marlboro Square Shopping Center
-------------------------------
On February 17, 1987, the Partnership purchased the Marlboro Square
Shopping Center ("Marlboro Square"), located in Marlboro, Massachusetts,
from a non-affiliated seller. The property consists of two freestanding
buildings. One of the buildings contains 39,150 rentable square feet, and
the other building contains 3,000 rentable square feet, for a total of
42,150 rentable square feet of space.
For the year ended December 31, 1994, the average occupancy of Marlboro
Square was 81%.
Crossroads Square Shopping Center
---------------------------------
On November 20, 1987, the Partnership purchased the Crossroads Square
Shopping Center ("Crossroads Square"), located in Jacksonville, Florida,
from a non-affiliated seller. Crossroads Square contains 174,196 rentable
square feet of space with a total land area in excess of 18.5 acres.
For the year ended December 31, 1994, the average occupancy of Crossroads
Square was 94%.
Carnegie Center Office/Warehouse
--------------------------------
On December 22, 1987, the Partnership purchased Carnegie Center, located in
Cincinnati, Ohio, from a non-affiliated seller. The property consists of
two buildings containing an aggregate of 128,059 rentable square feet with
a total land area of approximately 7.8 acres.
For the year ended December 31, 1994, the average occupancy of Carnegie
Center was 65%. However, actual occupancy at December 31, 1994 was 35%,
due to the fact that a tenant that had occupied 45% of the property vacated
its space upon expiration of its leases in 1994.
6
<PAGE>
Item 2 - Properties (continued)
Warner Plaza Shopping Center
----------------------------
On February 25, 1988, the Partnership purchased 92,848 rentable square feet
of the Warner Plaza Shopping Center ("Warner Plaza") (which consists of a
total of 148,410 rentable square feet), located in Chandler, Arizona, from
a non-affiliated seller.
For the year ended December 31, 1994, average occupancy, for the portion of
Warner Plaza which is owned by the Partnership, was 97%.
J.C. Penney Credit Operations Center
------------------------------------
On September 13, 1988, the Partnership purchased the J.C. Penney Credit
Operations Center, located in Albuquerque, New Mexico, from a
non-affiliated seller. The property, constructed in 1981, consists of one
building with 69,300 square feet of rentable office space.
The property is 100% leased to J.C. Penney Company, Inc. under a fifteen
year lease which was scheduled to expire in June 1996. During the first
quarter of 1994, the General Partner negotiated a lease extension with this
tenant through June 2006.
The foregoing properties are described more fully in Items 1, 2 and 7 and
Note 4 to the Financial Statements included in Item 8 of this Report.
Item 3 - Legal Proceedings
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Partnership, to which
the Partnership is a party or to which any of its properties is subject.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders of the
Partnership during the fourth quarter of 1994.
Part II
Item 5 - Market for the Partnership's Securities and Related Security
Holder Matters
(a) Market Information
The Partnership's outstanding securities consist of 91,647 Units originally
sold for $500 per Unit. The Units were offered and sold to the public
during the period from September 9, 1986 to September 9, 1987. No
established public market exists on which the Units may be traded.
Consequently, holders of Units may not be able to liquidate their
investments in the event of an emergency, or for any other reason.
Additionally, the assignment or other transfer of Units would be subject to
compliance with the minimum investment and suitability standards imposed by
the Partnership or by applicable law, including state "Blue Sky" laws.
7
<PAGE>
Item 5 - Market for the Partnership's Securities and Related Security
Holder Matters (continued)
(b) Number of Security Holders
Number of Number of Units
record holders as of outstanding as of
Title of Class December 31, 1994 December 31, 1994
-------------- ----------------- ----------------
Units of
Investor Limited
Partnership
Interests 4,201 91,647
(c) Dividend History and Restrictions
During the fiscal years ended December 31, 1994 and 1993, the Partnership
distributed cash in the aggregate amount of $2,314,318 and $2,661,465,
respectively, from Distributable Cash from Operations. These amounts were
allocated 1% to the General Partner and 99% to the Limited Partners, in
accordance with the terms of the Partnership Agreement.
The following table reflects cash distributions made during 1993 and 1994:
<TABLE>
<CAPTION>
Amount Paid to
Date of Amount of Amount Paid to John Hancock Amount Paid Distribution
Distribution Distribution General Partner Limited Partner to Investors Per Unit
------------ ------------ --------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
February 12, 1993 $694,295 $6,943 $- $687,352 $7.50
May 14, 1993 694,296 6,943 - 687,353 7.50
August 13, 1993 694,296 6,943 - 687,353 7.50
November 15, 1993 578,578 5,785 - 572,793 6.25
February 15, 1994 578,579 5,786 - 572,793 6.25
May 13, 1994 578,580 5,786 - 572,794 6.25
August 15, 1994 578,580 5,786 - 572,794 6.25
November 15, 1994 578,579 5,785 - 572,794 6.25
</TABLE>
During 1993, a substantial portion of the Partnership's working capital
reserves was used to fund leasing costs incurred at the Crossroads Square,
Warner Plaza, Carnegie Center and Marlboro Square properties. Given this
use of working capital reserves in 1993 as well as the projected level of
future leasing costs and capital expenditures expected to be incurred at
the Partnership's properties, the General Partner reduced cash
distributions to Investors commencing with the November 15, 1993
distribution, from an annualized rate of 6% to an annualized rate of 5%, in
order to replenish working capital reserves and satisfy the Partnership's
general liquidity requirements. Cash distributions during the year ended
December 31, 1994 continued to reflect this 5% annualized rate. The
General Partner anticipates that the Partnership will make cash
distributions in 1995 in an amount comparable to that distributed in 1994.
For a further discussion on the financial condition and results of
operations of the Partnership see Item 7 of this Report.
8
<PAGE>
Item 6 - Selected Financial Data
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results for the five year
period ended December 31, 1994. This information should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements and Notes
thereto, which are included in Items 7 and 8, respectively, of this Report.
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental income $3,618,826 $3,519,445 $3,648,457 $3,498,811 $3,494,335
Interest income 110,982 71,557 87,970 116,495 241,905
Net income/(loss) 1,497,221 1,684,608 1,095,594 192,632 (2,606,459)
Net income/(loss) per Unit (b) 17.02 18.95 12.49 2.79 (27.38)
Ordinary tax income (a) 2,128,148 1,826,365 2,042,510 1,679,542 1,875,090
Ordinary tax income per Unit (b) 23.61 20.35 22.68 18.81 20.99
Cash distribution per Unit 25.00 28.75 30.00 31.25 35.00
Cash and cash equivalents at
December 31 3,124,999 2,359,803 2,552,370 2,403,717 2,529,491
Total assets at December 31 34,325,239 35,150,707 36,092,419 37,863,010 40,413,657
(a) The ordinary tax income for the Partnership was allocated as follows:
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
General Partner $21,281 $18,263 $20,425 $16,795 $18,751
John Hancock Limited Partner (56,684) (56,684) (56,684) (61,010) (67,067)
Investors 2,163,551 1,864,786 2,078,769 1,723,757 1,923,406
---------- ---------- ---------- ---------- ----------
Total $2,128,148 $1,826,365 $2,042,510 $1,679,542 $1,875,090
========== ========== ========== ========== ==========
</TABLE>
(b) The actual ordinary tax income per Unit has not been presented because
the actual ordinary tax income/(loss) is allocated between tax-exempt
and tax-paying entities based upon the respective number of Units held
by each group at December 31, 1994, 1993, 1992, 1991 and 1990. The
ordinary tax income per Unit as presented was computed by dividing the
Investors' share of ordinary tax income by the number of Units
outstanding at December 31, 1994, 1993, 1992, 1991 and 1990,
respectively.
9
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
-------
During the offering period from September 9, 1986 to September 9, 1987, the
Partnership sold 91,647 Units representing gross proceeds (exclusive of the
John Hancock Limited Partner's contribution which was used to pay sales
commissions, acquisition fees and organizational and offering expenses) of
$45,823,500. The proceeds of the offering were used to acquire investment
properties and fund reserves. These properties are described more fully in
Item 2 and Note 4 to the Financial Statements included in Item 8 of this
Report.
Liquidity and Capital Resources
-------------------------------
At December 31, 1994, the Partnership had $3,124,999 in cash and cash
equivalents, $22,457 in restricted cash and $22,166 in long-term restricted
cash.
The Partnership has established a working capital reserve with a current
balance of approximately 5% of the offering proceeds. During 1993, a
substantial portion of the Partnership's working capital reserves was used
to fund leasing costs incurred at the Crossroads Square, Warner Plaza,
Carnegie Center and Marlboro Square properties. Given this use of working
capital reserves in 1993, as well as the projected level of future leasing
costs and capital expenditures expected to be incurred at the Partnership's
properties, the General Partner reduced cash distributions to Investors
commencing with the November 15, 1993 distribution, from an annualized rate
of 6% to an annualized rate of 5%, in order to replenish working capital
reserves and satisfy the Partnership's general liquidity requirements.
Cash distributions during the year ended December 31, 1994 continued to
reflect this 5% annualized rate. Liquidity would, however, be materially
adversely affected by a significant reduction in revenues, unanticipated
operating costs or unanticipated capital expenditures. If any or all of
these events were to occur, to the extent that working capital reserves
would be insufficient to satisfy the cash requirements of the Partnership,
it is anticipated that additional funds would be obtained through a further
reduction of cash distributions to Investors, bank loans, short-term loans
from the General Partner or its Affiliates, or the sale or financing of
Partnership properties.
During 1994, cash from working capital reserves was used for the payment of
leasing costs in the amount of $38,920 incurred at the Warner Plaza,
Crossroads Square, Carnegie Center and Marlboro Square properties. The
General Partner estimates that the Partnership will incur approximately
$900,000 of leasing costs at its properties during 1995. Of this amount,
approximately $429,000 and $254,000 are expected to be incurred at the
Carnegie Center and 1300 North Dutton Avenue properties, respectively, in
connection with the Partnership's efforts to secure new tenants at these
properties. The General Partner anticipates that the current balance in
the working capital reserve should be sufficient to pay such costs.
10
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
During the second quarter of 1994, a tenant occupying 45% of the Carnegie
Center property notified the Partnership of its intention not to renew its
leases. This tenant had leased 10% of the property on a month-to-month
basis, which it terminated during May 1994, and had leased 35% of the
property under leases which expired in September 1994. A new tenant has
executed a lease for 14,375 square feet of space, or 11% of the property,
for a three year term which commenced in March 1995. The Partnership will
incur approximately $76,000 in leasing costs during 1995 in connection with
this lease. The General Partner is actively seeking additional replacement
tenants for the remaining vacant space. Should additional replacement
tenants not be located to take occupancy in the near future, the
Partnership's liquidity will be materially adversely affected. Rental
rates and concessions are priced competitively in order to secure new
tenants for the property. For the years ended December 31, 1994 and 1993,
the leases held by this former tenant represented 9% and 11%, respectively,
of the rental income earned by the Partnership.
The tenant that leases all of the rentable space at the 1300 North Dutton
Avenue property notified the Partnership during May 1994 that it would not
renew its lease, which expired on January 31, 1995. The General Partner
has been actively seeking a replacement tenant for the property. However,
should a replacement tenant not be located to take occupancy of the
property before the fourth quarter of 1995, the Partnership's liquidity may
be adversely affected. For the year ended December 31, 1994 and 1993, the
1300 North Dutton Avenue property generated approximately 11% and 10%,
respectively, of the rental income earned by the Partnership.
The former anchor tenant at Warner Plaza discontinued operations at the
property and vacated its space during the fourth quarter of 1992. The
premises which this tenant occupied is owned by a non-affiliate of the
Partnership. During 1994, the non-affiliated owner secured two replacement
tenants for this space. One of these tenants took occupancy in April 1994
and the other took occupancy in May 1994. The vacancy of this space did
not have a significant negative impact on the Partnership's operations.
During the years ended December 31, 1994 and 1993, approximately $86,000
and $93,000, respectively, of cash from operations was used to fund non-
recurring maintenance and repair costs incurred at the Partnership's
properties. The General Partner estimates that the Partnership will incur
approximately $117,000 of non-recurring maintenance and repair costs at its
properties during 1995. These costs will be funded from the operations of
the Partnership's properties and are not expected to have a significant
impact on the Partnership's liquidity.
Cash in the amount of $2,314,318 generated from the Partnership's
operations was distributed to the General Partner and the Limited Partners
during 1994. The General Partner anticipates that the Partnership will
make comparable distributions during 1995. Cash distributions to the
General and Limited Partners are further described in Item 5(c) of this
Report.
11
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
During the second quarter of 1994, the General Partner had the Crossroads
Square property independently appraised. Based upon the appraiser's
investigation and analysis, the property's market value was estimated to be
approximately $10,550,000 as compared to the Partnership's cumulative
investment in the property of approximately $14,567,000. The net book
value of the Crossroads Square property of $9,978,881 at December 31, 1994
was evaluated in comparison to its recent independent appraisal and, based
upon such evaluation, the General Partner determined that no permanent
impairment in value exists and that a write-down in value was not required
as of December 31, 1994.
During the third quarter of 1994, the General Partner had the Warner Plaza
property independently appraised. Based upon the appraiser's investigation
and analysis, the property's market value was estimated to be approximately
$5,600,000 as compared to the Partnership's cumulative investment in the
property of approximately $7,900,000. The net book value of the Warner
Plaza property of $5,431,656 at December 31, 1994 was evaluated in
comparison to its recent independent appraisal and, based upon such
evaluation, the General Partner determined that no permanent impairment in
value exists and that a write-down in value was not required as of December
31, 1994.
The decrease in value of these properties relative to their respective
costs of acquisition reflects the fact that the real estate markets in
which these properties are located have weakened since the time of the
Partnership's acquisition of these properties.
The General Partner evaluated the carrying value of the Carnegie Center
property during the third quarter of 1994 by comparing it to future
undiscounted cash flows and a recent internal appraisal in order to
determine whether a permanent impairment in value existed. Based on such
evaluation, the General Partner determined that a write-down of $512,000
was required at that time to reflect the estimated permanent impairment in
the value of the Carnegie Center property. Lower rental rates and weak
absorption for available office/industrial properties in Cincinnati, Ohio,
in general, have resulted in a decline in this property's market value.
The net book value of the Carnegie Center property of $5,227,178 at
December 31, 1994 was evaluated in comparison to the estimated future cash
flows and a recent internal appraisal and, based upon such evaluation, the
General Partner determined that no further permanent impairment in value
exists and, therefore, an additional write-down in value was not required
as of December 31, 1994.
The General Partner also evaluated the carrying value of each of the
Partnership's other properties as of December 31, 1994 by comparing it to
the future undiscounted cash flows and the most recent independent or
internal appraisals. Based on such evaluations, the General Partner
determined that no permanent impairment in values exist with respect to
these properties and no additional write-downs were recorded as of December
31, 1994. The General Partner will continue to conduct property
valuations, using internal or independent appraisals, in order to determine
whether a permanent impairment in value exists on any of the Partnership's
properties.
12
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
---------------------
Net income for the year ended December 31, 1994 was $1,497,221 as compared
to $1,684,608 in 1993 and $1,095,594 in 1992. Included in the results for
1994 and 1992 are property write-downs of $512,000 and $719,000,
respectively. No write-downs in value were recorded during 1993.
Average occupancy for the Partnership's properties was as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
1300 North Dutton Avenue Office Complex 100% 100% 100%
Marlboro Square Shopping Center 81% 85% 80%
Crossroads Square Shopping Center 94% 76% 80%
Carnegie Center Office/Industrial 65% 86% 99%
Warner Plaza Shopping Center 97% 93% 92%
J.C. Penney Credit Operations Center 100% 100% 100%
</TABLE>
Rental income for the year ended December 31, 1994 increased by $99,381, or
3%, as compared to 1993 and decreased by $29,631, or 1%, as compared to
1992. During 1994 the Crossroads Square Shopping Center and 1300 North
Dutton Avenue properties generated increased rental income, however, these
increases were offset by a decrease in rental income at the Carnegie Center
property. Rental income from the Crossroads Square property increased in
1994 as compared to both 1993 and 1992 due to an increase in occupancy.
Rental income at the 1300 North Dutton Avenue property increased during
1994 as compared to 1993 and 1992 due to an increase in the sole tenant's
rental rate which became effective during February 1994, in accordance with
the terms of its lease. These increases in rental income were offset by
decreases in rental income at the Carnegie Center property during 1994 as
compared to both 1993 and 1992 due to decreases in average occupancy.
Rental income from the Marlboro Square property decreased slightly in 1994
as compared to 1993 due to a decrease in occupancy, and increased as
compared to 1992 due to an increase in occupancy. Rental income from the
Warner Plaza and J.C. Penney properties were consistent between periods.
Interest income for the year ended December 31, 1994 increased by $39,425,
or 55%, and $23,012, or 26%, as compared to 1993 and 1992, respectively.
These increases are primarily due to an increase in the Partnership's
working capital reserves and interest rates earned on such reserves during
1994.
13
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
---------------------
Property operating expenses for the year ended December 31, 1994 decreased
by $98,197, or 24%, as compared to 1993, and by $104,013, or 25%, as
compared to 1992. The decrease in 1994 as compared to 1993 and 1992 is
primarily due to decreases in property operating expenses at the Crossroads
Square, 1300 North Dutton Avenue and Warner Plaza properties. Property
operating expenses decreased at the Crossroads Square property in 1994 as
compared to 1993 and 1992 primarily due to an increase in the average
occupancy at the property and, therefore, an increase in tenant
reimbursements for such expenses. The tenant occupying the 1300 North
Dutton Avenue property notified the Partnership in May 1994 that it would
not renew its lease upon its expiration date of January 31, 1995 and
proceeded to vacate its space during 1994. As a result, only minor routine
maintenance expenses were incurred subsequent to the tenant vacating the
space, resulting in a decrease in property operating expenses. In
addition, property operating expenses decreased in 1994 and 1993 as
compared to 1992 as a result of costs of approximately $72,000 incurred in
1992 to replace the roof at the 1300 North Dutton Avenue property. Warner
Plaza's property operating expenses decreased in 1994 as compared to both
1993 and 1992 primarily due to a decline in real estate taxes paid on the
property as a result of the applicable taxing authority reducing the
assessed value of the property. These decreases were partially offset by
an increase in property operating expenses at the Carnegie Center property.
Property operating expenses increased at the Carnegie Center property in
1994 as compared to 1993 and 1992 primarily due to a decrease in average
occupancy at the property and, therefore, a decrease in tenant
reimbursements for such expenses. Also, property operating expenses
increased at Carnegie Center due to an increase in maintenance and repair
expenses incurred to maintain the property's competitive position in the
market. These increases in property operating expenses at Carnegie Center
were partially offset by a decrease in real estate taxes in 1994 due to a
successful appeal of the assessed value of the property for real estate tax
purposes.
General and administrative expenses in 1994 decreased by $12,864, or 6%, as
compared to 1993, and by $16,366, or 7%, as compared to 1992. The decrease
in 1994 as compared to 1993 was primarily due to a decrease in legal fees
incurred in connection with Securities and Exchange Commission reporting
requirements. The decrease in 1994 as compared to 1992 was primarily due
to decreases in audit fees and computer costs.
Amortization of deferred expenses in 1994 decreased by $64,353, or 30%, as
compared to 1993, and by $35,382, or 19%, as compared to 1992. This
reduction in 1994 from both 1993 and 1992 was primarily due to the full
amortization of a significant portion of such expenses relating to leasing
costs incurred at the Carnegie Center property and the inclusion in
amortization for 1993 of a non-recurring $17,903 write-off of unamortized
leasehold expenses relating to tenants who vacated their space at this
property prior to their lease termination dates. The decreases in
amortization was partially offset by an increase in the amortization of
deferred expenses relating to leasing costs incurred at the Crossroads
Square property and by the Partnership's reduction during the third quarter
of 1993 in the amortization period for its deferred acquisition costs from
thirty years, the estimated useful life of the buildings owned by the
Partnership, to four and one-half years, the then estimated remaining life
of the Partnership.
14
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
---------------------
As referred to above, during 1994, the General Partner determined that the
value of the Carnegie Center property had been permanently impaired. As a
result, the carrying value of the property was reduced by $512,000 and this
amount was charged directly to operations. During 1992, the carrying value
of the Marlboro Square property was reduced by $719,000. No property write-
downs were recorded during 1993.
Management fee expense paid to the General Partner during the year ended
December 31, 1994 decreased by $5,162, or 6%, as compared to 1993, and by
$20,915, or 20%, as compared to 1992. These decreases are due to the
decline in Cash from Operations (as defined in the Partnership Agreement).
Cash from Operations decreased during 1994 as compared to both 1993 and
1992 as a result of an increase in the amount of funds from the
Partnership's operations used to replenish working capital reserves during
1994.
The General Partner believes that inflation has had no significant impact
on the Partnership's operations during the last three fiscal years, and the
General Partner anticipates that inflation will not have a significant
impact during 1995.
15
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash Flow
---------
The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations for the five years ended December 31,
1994, which are calculated in accordance with Section 17 of the Partnership
Agreement:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities (a) $3,118,434 $2,853,183 $2,907,816 $3,031,476 $2,959,815
Net change in operating assets
and liabilities (a) 7,210 17,432 83,153 (353,708) (24,280)
---------- ---------- ---------- ---------- ----------
Cash provided by operations (a) 3,125,644 2,870,615 2,990,969 2,677,768 2,935,535
Increase in working capital
reserves (811,326) (324,865) (213,789) - -
Add: Accrual basis Partnership
management fee 83,939 89,101 104,854 97,121 106,470
---------- ---------- ---------- ---------- ----------
Cash from operations (b) 2,398,257 2,634,851 2,882,034 2,774,889 3,042,005
Decrease in working capital
reserves - - - 98,420 301,465
Less: Accrual basis Partnership
management fee (83,939) (89,101) (104,854) (97,121) (106,470)
---------- ---------- ---------- ---------- ----------
Distributable cash from
operations (b) $2,314,318 $2,545,750 $2,777,180 $2,776,188 $3,237,000
========== ========== ========== ========== ==========
Allocation to General Partner $23,143 $25,458 $27,772 $26,778 $29,355
Allocation to John Hancock
Limited Partner - - - - -
Allocation to Investors 2,291,175 2,520,292 2,749,408 2,749,410 3,207,645
---------- ---------- ---------- ---------- ----------
Distributable cash from
operations (b) $2,314,318 $2,545,750 $2,777,180 $2,776,188 $3,237,000
========== ========== ========== ========== ==========
</TABLE>
(a) Net cash provided by operating activities, net change in operating
assets and liabilities, and cash provided by operations are as
calculated in the Statements of Cash Flows included in Item 8 of
this Report.
(b) As defined in the Partnership Agreement. Distributable Cash from
Operations should not be considered as an alternative to net income
(i.e. not an indicator of performance) or to reflect cash flows or
availability of discretionary funds.
16
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash Flow (continued)
---------
On February 15, 1995, the Partnership made a cash distribution of $572,793,
representing a 5% annualized return, to all Investors of record at December
31, 1994, based on the Distributable Cash from Operations for the quarter
then ended. The General Partner anticipates that the Partnership will make
cash distributions in each of the four quarters of 1995 comparable to those
made during 1994.
Item 8 - Financial Statements and Supplementary Data
The response to this Item appears beginning on page F-1 of this Report.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
No events requiring disclosure under this Item have occurred.
Part III
Item 10 - Directors and Executive Officers of the Partnership
(a-b) Identification of Directors and Executive Officers
By virtue of its organization as a limited partnership, the Partnership has
no directors or executive officers. As indicated in Item 1 of this Report,
the General Partner of the Partnership is John Hancock Realty Equities,
Inc., a Delaware corporation. Pursuant to the terms of the Partnership
Agreement, the General Partner is solely responsible for the management of
the Partnership's business. The names and ages of the directors and
executive officers of the General Partner are as follows:
Name Title Age
---- ----- ---
William M. Fitzgerald President and Director 51
Malcolm G. Pittman, III Director 43
Susan M. Shephard Director 42
Richard E. Frank Treasurer (Chief
Accounting Officer) 33
17
<PAGE>
Item 10 - Directors and Executive Officers of the Partnership (continued)
(c) Identification of certain significant persons
The General Partner is responsible for the identification, analysis,
purchase, operation, and disposal of specific Partnership real estate
investments. The General Partner has established a Real Estate Investment
Committee utilizing senior real estate personnel of John Hancock and its
Affiliates to review each proposed investment. The members of the Real
Estate Investment Committee are designated each year at the annual meeting
of the Board of Directors of John Hancock Realty Equities, Inc. The
current members of the committee are as follows:
Name Title Age
---- ----- ---
Edward P. Dowd Senior Vice President of 52
John Hancock's Real Estate
Investment Group
Kevin McGuire Vice President of John Hancock's 48
Real Estate Investment Group,
President of John Hancock Realty
Services Corp. and subsidiaries
(d) Family relationships
There exist no family relationships among any of the foregoing directors or
officers of the General Partner.
(e) Business experience
William M. Fitzgerald (age 51) joined John Hancock in 1968. He has been
President and a Director of the General Partner, and a Senior Investment
Officer of John Hancock, since June 1993 and a Managing Director of Hancock
Realty Investors Incorporated since November 1991. His term as a Director
of the General Partner expires in May 1995. From 1987 to 1991, Mr.
Fitzgerald was a Senior Vice President of John Hancock Properties, Inc.
Prior to that time, he held a number of positions including Senior Real
Estate Management Officer and Real Estate Management Officer of John
Hancock. He holds an M.B.A. from Boston University and a B.A. from Boston
College.
Malcolm G. Pittman III (age 43) joined John Hancock in 1986 as an Assistant
Counsel. He has been a Director of the General Partner since November
1991. His term as a Director of the General Partner expires in May 1995.
Mr. Pittman has been Counsel of John Hancock's Mortgage and Real Estate Law
Division since 1993. From 1989 to 1993, he was an Associate Counsel of
John Hancock. He holds a J.D. from Yale Law School and a B.A. from Oberlin
College.
Susan M. Shephard (age 42) joined John Hancock in 1985 as an Attorney. She
has been a Director of the General Partner since November 1991. Her term
as a Director of the General Partner expires in May 1995. Ms. Shephard has
been a Mortgage Investment Officer of John Hancock since 1991. From 1988
to 1991, she was an Associate Counsel of John Hancock and from 1987 to
1988, she was an Assistant Counsel of John Hancock. She holds a J.D. from
Georgetown University Law Center and a B.A. from the University of Rhode
Island.
18
<PAGE>
Item 10 - Directors and Executive Officers of the Partnership (continued)
(e) Business experience (continued)
Richard E. Frank (age 33) joined John Hancock in 1983. He has been
Treasurer of the General Partner and a Senior Financial Administrator of
John Hancock since June 1993. From 1991 to 1993, Mr. Frank was an
Associate of Hancock Realty Investors Incorporated; from 1990 to 1991, he
held the position of Assistant Treasurer of John Hancock Realty Services
Corp.; and from 1987 to 1990, he was a Senior Accountant of John Hancock
Realty Services Corp. He holds a B.S. from Stonehill College.
Edward P. Dowd (age 52) joined John Hancock in 1970. He has been a
Director of Hancock Realty Investors, Incorporated since 1991, and a
Director of John Hancock Realty Services Corp. and subsidiaries and John
Hancock Property Investors Corp. since 1987. Mr. Dowd has been a Senior
Vice President of John Hancock since 1991. From 1989 to 1990, he was a
Vice President of John Hancock and from 1986 to 1989, he was a Second Vice
President of John Hancock. Prior to that time, he held a number of
positions including Senior Real Estate Investment Officer and Real Estate
Investment Officer of John Hancock. From July 1982 to May 1986, Mr. Dowd
was President of the General Partner. He holds an A.B. from Boston
College.
Kevin McGuire (age 48) joined John Hancock in 1968. He has been a Vice
President of John Hancock since June 1993 and President of John Hancock
Realty Services Corp. and subsidiaries since July 1993. He has been a
Managing Director and a Director of Hancock Realty Investors Incorporated
since 1991, and a Director of John Hancock Property Investors Corp. since
1987. Mr. McGuire served as an interim basis President of the General
Partner from May 1991 to November 1991 and was President of John Hancock
Properties, Inc. from 1987 to 1991. Prior to that time, he held a number
of positions including Second Vice President, Senior Real Estate Investment
Officer and Real Estate Investment Officer of John Hancock. He holds an
M.B.A. from Babson College and a B.A. from Boston College.
(f) Involvement in certain legal proceedings
None
Compliance with Section 16(a) of the Exchange Act
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
General Partner's directors and executive officers, as well as any person
holding more than ten percent of the Units, are required to report their
initial ownership of Units and any subsequent change in such ownership to
the Securities and Exchange Commission and the Partnership (such
requirements hereinafter referred to as "Section 16(a) filing
requirements"). Specific time deadlines for Section 16(a) filing
requirements have been established.
To the Partnership's knowledge, no officer or director of the General
Partner has or had an ownership interest in the Partnership at any time
during the 1994 fiscal year or as of the date hereof. In addition, the
Massachusetts State Teachers and Employees Retirement System, the greater
than ten percent holder of the Units, informed the Partnership that it was
not required to file any reports relating to Section 16(a) filing
requirements during the 1994 fiscal year.
19
<PAGE>
Item 11 - Executive Compensation
None of the officers or directors of the General Partner or any of the Real
Estate Investment Committee members referred to in Item 10(c) receive any
current or proposed direct remuneration in their capacities as officers,
directors or Real Estate Investment Committee members, pursuant to any
standard arrangements or otherwise, from the Partnership nor is any such
remuneration currently proposed. In addition, the Partnership has not
given and does not propose to give any options, warrants or rights,
including stock appreciation rights, to any such persons in such
capacities. No long-term incentive plan exists with any such persons in
such capacities and no remuneration plan or arrangement exists with any
such persons resulting from resignation, retirement or any other
termination. Therefore, tables relating to these topics have been omitted.
For its activities occurring during the offering period, which terminated
on September 9, 1987, the General Partner and/or its Affiliates, as defined
in the Partnership Agreement, received certain acquisition fees and
reimbursement for certain organizational, offering and acquisition
expenses, in accordance with the terms of the Partnership Agreement.
In accordance with the terms of the Partnership Agreement, the General
Partner and/or its Affiliates are entitled to the following types of
compensation, fees, profits/(losses), expense reimbursements and
distributions:
The General Partner is entitled to receive a Partnership Management Fee, as
defined in the Partnership Agreement, for managing the normal operations of
the Partnership in an amount equal to 3.5% of Cash Flow from Operations.
The General Partner was paid a Partnership Management Fee totaling $83,939,
$89,101 and $104,854 during the years ended December 31, 1994, 1993 and
1992, respectively.
An Affiliate of the General Partner is entitled to receive a Property
Management Fee, as defined in the Partnership Agreement, for providing
property management services to the Partnership's properties. The
Partnership is obligated to pay a fee equal to the amount customarily
charged in arms-length transactions by other entities rendering services in
an area where the Partnership's properties are located, but in no event may
such fees exceed 6% of the gross receipts of any property under management.
To date, no Affiliate of the General Partner has provided property
management services to the Partnership's properties, therefore, the
Partnership did not pay any such fees during the years ended December 31,
1994, 1993 and 1992.
The General Partner and its Affiliates are entitled to receive
reimbursement for expenses relating to the administrative services
necessary to the prudent operation of the Partnership, such as legal,
accounting, computer, transfer agent and other services. The amounts
charged to the Partnership for such administrative services may not exceed
the lesser of the General Partner's or such Affiliates' costs or 90% of
those which the Partnership would be required to pay to independent parties
for comparable services in the same or comparable geographic locations.
The Partnership reimbursed the General Partner for $118,293, $133,054 and
$130,071 of such expenses during the years ended December 31, 1994, 1993
and 1992, respectively.
20
<PAGE>
Item 11 - Executive Compensation (continued)
Upon disposition of any property, the General Partner is entitled to a
Subordinated Disposition Fee, as defined in the Partnership Agreement, in
the amount of 3% of the sales price of each property sold. However, no
such Subordinated Disposition Fees may be paid to the General Partner
unless and until the Investors and the John Hancock Limited Partner have
received a return of their total Invested Capital, as defined in the
Partnership Agreement, plus the Cumulative Return on Investment, as defined
in the Partnership Agreement, of 12% per annum for all fiscal years ended
prior to the date of payment. Such Subordinated Disposition Fees may not
exceed 50% of the competitive real estate commission in the area where the
property is located or, together with any other brokerage commission
payable to or by any other person, exceed 6% of the contract sales price of
such property. The Partnership did not consummate the sale of any
properties during 1992, 1993 or 1994. Accordingly, the Partnership did not
pay any such fees to the General Partner during the years ended December
31, 1994, 1993 and 1992.
A share of the Partnership's Distributable Cash from Operations, as defined
in the Partnership Agreement, may be distributed to the General Partner and
the John Hancock Limited Partner. Distributable Cash from Operations is
distributable 1% to the General Partner and the remaining 99% among the
Investors, the General Partner and the John Hancock Limited Partner, in
accordance with Section 8 of the Partnership Agreement (as described more
fully in Note 3 to the Financial Statements included in Item 8 of this
Report). The General Partner's Share of Distributable Cash from Operations
was $23,143, $25,458 and $27,772 for the years ended December 31, 1994,
1993 and 1992, respectively. In accordance with the Partnership Agreement,
the John Hancock Limited Partner was not entitled to receive any such
distributions during the 1994, 1993 and 1992 fiscal years.
A share of Cash from Sales or Financings, as defined in the Partnership
Agreement, is distributed to the General Partner and the John Hancock
Limited Partner is distributable in accordance with Section 8 of the
Partnership Agreement (as described more fully in Note 3 to the Financial
Statements included in Item 8 of this Report). In accordance with the
terms of the Partnership Agreement, the General Partner and the John
Hancock Limited Partner were not entitled to receive any such distributions
during the years ended December 31, 1994, 1993 and 1992.
A share of the Partnership's profits or losses for tax purposes, as defined
in the Partnership Agreement, is allocable to the General Partner and the
John Hancock Limited Partner. Such allocation generally approximates,
insofar as practicable, their percentage share of Distributable Cash from
Operations and of Cash from Sales or Financings. The General Partner is
generally allocated 1% of the Partnership's losses for tax purposes, while
the John Hancock Limited Partner is allocated tax losses associated with
the Partnership's sales commissions funded by the John Hancock Limited
Partner's Capital Contributions. The General Partner's share of such
profits and losses were profits of $21,281, $18,263 and $20,425 during the
years ended December 31, 1994, 1993 and 1992, respectively. The John
Hancock Limited Partner's share of such profits or losses were losses of
$56,684 in each of the three years ended December 31, 1994.
21
<PAGE>
Item 11 - Executive Compensation (continued)
The following table reflects compensation, fees, profits/(losses), expense
reimbursements or distributions from the Partnership to the General Partner
and/or its Affiliates:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Partnership management
fee expense $83,939 $89,101 $104,854
Reimbursement for operating
expenses 118,293 133,054 130,071
General Partner's share of
Distributable Cash from Operations 23,143 25,458 27,772
General Partner's share of profits
for tax purposes 21,281 18,263 20,425
John Hancock Limited Partner's share
of losses for tax purposes (56,684) (56,684) (56,684)
</TABLE>
Compensation Committee Interlocks and Insider Participation:
The Partnership did not have a Compensation Committee in 1994 and does not
currently have such a committee. During the 1994 fiscal year, no current
or former officer or employee of the General Partner or its Affiliates
participated in deliberations regarding the General Partner's compensation
as it relates to the Partnership.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
No person or group, including the General Partner, is known by the
General Partner to own beneficially more than 5% of the Partnership's
91,647 outstanding Units as of December 31, 1994, except as follows:
<TABLE>
<CAPTION>
Title Amount and Percent
of Name and Address Nature of of
Class of Beneficial Owner Beneficial Ownership Class
----- ------------------- -------------------- -----
<S> <C> <C> <C>
Units of Massachusetts State 10,000 Units 10.91%
Investor Teachers and Employees owned directly
Limited Retirement System
Partnership Mass Fiduciary Advisors
Interests One Ashburton Place
Boston, MA
</TABLE>
22
<PAGE>
Item 12 - Security Ownership of Certain Beneficial Owners and Management
(continued)
(b) Security ownership of management
By virtue of its organization as a Limited Partnership, the
Partnership has no officers or directors. Neither the General Partner
nor any officer or director of the General Partner possesses the right
to acquire a beneficial ownership of Units.
(c) Changes in control
The Partnership does not know of any arrangements the operations of
which may at a subsequent date result in a change of control of the
Partnership.
Item 13 - Certain Relationships and Related Transactions
See Note 5 of the Notes to the Financial Statements included in Item 8 of
this Report for a description of certain transactions and related amounts
paid by the Partnership to the General Partner and its Affiliates during
1994, 1993 and 1992.
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) - Listed on Index to Financial Statements and Financial
Statement Schedules.
(3) - Listing of Exhibits
Exhibit Number Page Number or
Under Incorporation by
Regulation S-K Description Reference
4 Instruments defining the rights
of security holders
4.1 Amended Agreement of Limited Exhibit A to the
Partnership* final Prospectus
dated September 4,
1986, filed under
the Partnership's
Form S-11
Registration
Statement
(File 33-6451)
4.2 The Seventeenth Amendment and Exhibit 4.2 to the
Restatement of Certificate of Partnership's
Limited Partnership filed with Report on
the Massachusetts Secretary of Form 10-K dated
State on September 15, 1987* December 31, 1987
(File 0-15680)
23
<PAGE>
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
10 Material contracts and other
documents
10.1 Form of Escrow Agreement* Exhibit 10.1 to
the Partnership's
Form S-11
Registration
Statement
(File 33-6451)
10.2 Letter from John Hancock Exhibit 10.1 to
Subsidiaries, Inc. containing the Partnership's
undertaking as to the net Form S-11
worth of the General Partner* Registration
Statement
(File 33-6451)
10.3 Documents relating to
1300 North Dutton Avenue
(a) Agreement of Purchase and Sale Exhibit 10.3(a) to
dated September 30, 1986, and the Post-Effective
First Amendment to Agreement of Amendment No. 1 to
Purchase and Sale dated the Partnership's
October 22, 1986, between Form S-11
Park Campus Associates and Registration
John Hancock Realty Income Fund Statement
Limited Partnership* (File 33-6451)
(b) Lease dated June 12, 1986, and Exhibit 10.3(b) to
First Amendment to Lease dated the Post-Effective
June 12, 1986, between Amendment No. 1 to
Park Campus Associates and the Partnership's
Mag Media Ltd.* Form S-11
Registration Statement
(File 33-6451)
(c) Amended and Restated Statements Exhibit 10.3(c) to
of Development Policy and the Post-Effective
Declarations of Restrictions of Amendment No. 1 to
Santa Rosa Business Park dated the Partnership's
June 5, 1986* Form S-11
Registration
Statement
(File 33-6451)
24
<PAGE>
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(d) Declaration of Covenants, Exhibit 10.3(d) to
Conditions and Restrictions of the Post-Effective
Park Campus dated October 2, Amendment No. 1 to
1986* the Partnership's
Form S-11
Registration
Statement
(File 33-6451)
10.4 Documents relating to
Marlboro Square Shopping Center
(a) Agreement of Purchase and Sale Exhibit 10.4(a) to
dated January 17, 1987, between the Post-Effective
Marlborough GLR Realty Trust Amendment No. 2 to
and John Hancock Realty Equities, the Partnership's
Inc.* Form S-11
Registration
Statement
(File 33-6451)
10.5 Documents relating to
Crossroads Square Shopping Center
(a) Agreement of Purchase and Sale Exhibit 1 to the
dated November 20, 1987, between Partnership's
Crossroads Square Limited Report on
Partnership and John Hancock Form 8-K dated
Realty Income Fund Limited December 8, 1987
Partnership* (File 0-15680)
(b) Limited Warranty Deed dated Exhibit 2 to the
November 20, 1987, relating Partnership's
to Crossroads Square Shopping Report on
Center* Form 8-K dated
December 8, 1987
(File 0-15680)
(c) Master Lease Agreement Exhibit 3 to the
dated November 18, 1987, Partnership's
relating to Crossroads Square Report on
Shopping Center* Form 8-K dated
December 8, 1987
(File 0-15680)
25
<PAGE>
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
10.6 Documents relating to Carnegie
Center Office/Warehouse
(a) Agreement of Purchase and Sale Exhibit 1 to the
between Carnegie Properties Partnership's
Partnership, Carnegie Properties Report on
Partnership II and John Hancock Form 8-K dated
Realty Income Fund Limited January 22, 1988
Partnership* (File 0-15680)
(b) General Warranty Deed dated Exhibit 2 to the
December 22, 1987, between Partnership's
Carnegie Properties Partnership Report on
and John Hancock Realty Income Form 8-K dated
Fund Limited Partnership* January 22, 1988
(File 0-15680)
(c) General Warranty Deed dated Exhibit 3 to the
December 22, 1987, between Partnership's
Carnegie Properties Partnership Report on
II and John Hancock Realty Income Form 8-K dated
Fund Limited Partnership* January 22, 1988
(File 0-15680)
10.7 Documents relating to Warner
Plaza Shopping Center
(a) Agreement of Purchase and Sale Exhibit 1 to the
between First Republic bank Partnership's
Dallas, N.A., and John Hancock Report on
Realty Income Fund Limited Form 8-K dated
Partnership* March 17, 1988
(File 0-15680)
(b) Special Warranty Deed dated Exhibit 2 to the
February 24, 1988, between Partnership's
First Republic bank, Dallas, Report on
N.A., and John Hancock Form 8-K dated
Realty Income Fund Limited March 17, 1988
Partnership* (File 0-15680)
10.8 Documents relating to
J.C. Penney Credit Operations
Center
(a) Agreement of Purchase and Sale Exhibit 1 to the
between Noro-Rocky Mountains Partnership's
B.V., a Netherlands Corporation, Report on
and John Hancock Realty Income Form 8-K dated
Fund Limited Partnership* November 17, 1988
(File 0-15680)
26
<PAGE>
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(b) Warranty and Guaranty dated Exhibit 2 to the
August 18, 1988, between Partnership's
Noro-Rocky Mountains Report on
B.V., a Netherlands Corporation, Form 8-K dated
and John Hancock Realty Income November 17, 1988
Fund Limited Partnership* (File 0-15680)
10.9 Documents relating to
Management Agreement
(a) Management Agreement dated Exhibit 10.9(a) to the
January 1, 1992, between Partnership's Report on
Hancock Realty Investors Form 10-K dated
Incorporated and John Hancock December 31, 1992
Realty Equities, Inc.* (File 0-15680)
(b) Agreement Concerning Subcontracting Exhibit 10.9(b) to the
of Management Services Pertaining to Partnership's Report on
John Hancock Realty Income Fund Form 10-K dated
Limited Partnership dated May 28, 1993 December 31, 1993
between John Hancock Realty Equities, (File 0-15680)
Inc., Hancock Realty Investors,
Incorporated and John Hancock Mutual
Life Insurance Company*
10.10 Documents relating to Executive
Compensation Plans and
Arrangements
(a) Amended Agreement of Exhibit A to the
Limited Partnership* Final Prospectus
dated September 4,
1986, filed under the
Partnership's Form
S-11 Registration
Statement
(File 33-6451)
(b) No reports on Form 8-K were filed during the quarter ended December
31, 1994.
(c) Exhibits - See Item 14 (a) (3) of this Report.
(d) Financial Statement Schedules - The response to this portion of Item
14 is submitted as a separate section of this Report commencing on
Page F-15.
------------------------------------
+Filed herewith
*Incorporated by reference
27
<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, on the
31th day of March, 1995.
JOHN HANCOCK REALTY INCOME FUND
LIMITED PARTNERSHIP
By: John Hancock Realty Equities, Inc.
General Partner
By: WILLIAM M. FITZGERALD
-------------------------------
William M. Fitzgerald, President
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 indicated on the 31th day of March, 1995.
Signatures Title
---------- -----
President (Principal Executive Officer)
and Director of John Hancock Realty
Equities, Inc. (General Partner of
WILLIAM M. FITZGERALD Registrant)
----------------------
William M. Fitzgerald
Treasurer (Chief Accounting Officer)
of John Hancock Realty Equities, Inc.
RICHARD E. FRANK (General Partner of Registrant)
----------------------
Richard E. Frank
Director of John Hancock Realty
Equities, Inc. (General Partner of
MALCOLM G. PITTMAN, III Registrant)
----------------------
Malcolm G. Pittman, III
Director of John Hancock Realty
Equities, Inc. (General Partner of
SUSAN M. SHEPHARD Registrant)
----------------------
Susan M. Shephard
28
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a) (1) AND (2), (c) AND (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
BOSTON, MASSACHUSETTS
F-1
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(ITEMS 8 AND 14(a)(1) AND (2))
1. Financial Statements: Page
Report of Independent Auditors F-3
Balance Sheets at December 31, 1994 and 1993 F-4
Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 F-5
Statements of Partners' Equity for the Years
Ended December 31, 1994, 1993 and 1992 F-6
Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 F-7
Notes to Financial Statements F-9
2. Financial Statement Schedules:
Schedule III: Real Estate and Accumulated
Depreciation F-15
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
F-2
<PAGE>
Report of Independent Auditors
To the Partners
John Hancock Realty Income Fund Limited Partnership
We have audited the accompanying balance sheets of John Hancock Realty
Income Fund Limited Partnership as of December 31, 1994 and 1993, and the
related statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion
on these financial statements and schedules 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 John Hancock Realty
Income Fund Limited Partnership at December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
ERNST & YOUNG LLP
February 3, 1995,
except for Note 8, as
to which the date is
February 15, 1995
F-3
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS
ASSETS
December 31,
1994 1993
---- ----
Current assets:
Cash and cash equivalents $3,124,999 $2,359,803
Restricted cash 22,457 18,808
Other current assets 68,354 74,365
---------- ----------
Total current assets 3,215,810 2,452,976
Investment in property:
Land 8,934,077 8,959,677
Buildings and improvements 29,174,904 29,661,304
---------- ----------
38,108,981 38,620,981
Less: accumulated depreciation (7,453,459) (6,485,966)
---------- ----------
30,655,522 32,135,015
Long-term restricted cash 22,166 20,965
Deferred expenses, net of accumulated
amortization of $673,932 in 1994 and
$525,002 in 1993 431,741 541,751
---------- ----------
Total assets $34,325,239 $35,150,707
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $251,976 $257,184
Accounts payable to affiliates 47,965 51,128
---------- ----------
Total current liabilities 299,941 308,312
Partners' equity/(deficit):
General Partner (193,008) (184,837)
Limited Partners 34,218,306 35,027,232
---------- ----------
Total partners' equity 34,025,298 34,842,395
---------- ----------
Total liabilities and
partners' equity $34,325,239 $35,150,707
=========== ===========
See Notes to Financial Statements
F-4
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income:
Rental income $3,618,826 $3,519,445 $3,648,457
Interest income 110,982 71,557 87,970
---------- ---------- ----------
Total income 3,729,808 3,591,002 3,736,427
Expenses:
Depreciation 967,493 972,724 992,063
Property operating expenses 317,961 416,158 421,974
General and administrative 202,264 215,128 218,630
Amortization of deferred expenses 148,930 213,283 184,312
Property write-down 512,000 - 719,000
Management fee 83,939 89,101 104,854
---------- ---------- ----------
Total expenses 2,232,587 1,906,394 2,640,833
---------- ---------- ----------
Net income $1,497,221 $1,684,608 $1,095,594
========== ========== ==========
Allocation of net income:
General Partner $14,972 $16,846 $10,956
John Hancock Limited Partner (77,909) (69,198) (60,487)
Investors 1,560,158 1,736,960 1,145,125
---------- ---------- ----------
$1,497,221 $1,684,608 $1,095,594
========== ========== ==========
Net income per Unit $17.02 $18.95 $12.49
========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Partners' equity/(deficit) at
January 1, 1992
(91,647 Units outstanding) ($158,046) $37,659,093 $37,501,047
Less: Cash distributions (27,979) (2,749,410) (2,777,389)
Add: Net income 10,956 1,084,638 1,095,594
-------- ----------- -----------
Partners' equity/(deficit) at
December 31, 1992
(91,647 Units outstanding) (175,069) 35,994,321 35,819,252
Less: Cash distributions (26,614) (2,634,851) (2,661,465)
Add: Net income 16,846 1,667,762 1,684,608
-------- ----------- -----------
Partners' equity/(deficit) at
December 31, 1993
(91,647 Units outstanding) (184,837) 35,027,232 34,842,395
Less: Cash distributions (23,143) (2,291,175) (2,314,318)
Add: Net income 14,972 1,482,249 1,497,221
-------- ----------- -----------
Partners' equity/(deficit) at
December 31, 1994
(91,647 Units outstanding) ($193,008) $34,218,306 $34,025,298
======== =========== ===========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $1,497,221 $1,684,608 $1,095,594
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred expenses 148,930 213,283 184,312
Depreciation 967,493 972,724 992,063
Property write-down 512,000 - 719,000
---------- ---------- ----------
3,125,644 2,870,615 2,990,969
Changes in operating assets and liabilities:
Decrease/(increase) in restricted cash (4,850) 18,872 4,649
Decrease/(increase) in other current assets 6,011 (71,449) 994
Increase/(decrease) in accounts payable and
accrued expenses (5,208) 34,021 (87,172)
Increase/(decrease) in accounts payable
to affiliates (3,163) 1,124 (1,624)
---------- ---------- ----------
Net cash provided by operating
activities 3,118,434 2,853,183 2,907,816
Investing activities:
Investment in property - - 91,800
Increase in deferred expenses (38,920) (384,285) (73,574)
---------- ---------- ----------
Net cash provided by/(used in)
investing activities (38,920) (384,285) 18,226
</TABLE>
Continued on Next Page
F-7
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Financing activities:
Cash distributed to Partners (2,314,318) (2,661,465) (2,777,389)
---------- ---------- ----------
Net cash used in financing activities (2,314,318) (2,661,465) (2,777,389)
---------- ---------- ----------
Net increase/(decrease) in cash and
cash equivalents 765,196 (192,567) 148,653
Cash and cash equivalents at
beginning of year 2,359,803 2,552,370 2,403,717
---------- ---------- ----------
Cash and cash equivalents at
end of year $3,124,999 $2,359,803 $2,552,370
========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-8
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1.
Organization of Partnership
---------------------------
John Hancock Realty Income Fund Limited Partnership (the
"Partnership") was formed under the Massachusetts Uniform Limited
Partnership Act on June 12, 1986. As of December 31, 1994, the
Partnership consisted of John Hancock Realty Equities, Inc. (the
"General Partner"), a wholly-owned, indirect subsidiary of John
Hancock Mutual Life Insurance Company; John Hancock Realty Funding,
Inc. (the "John Hancock Limited Partner"); and 4,201 Investor Limited
Partners (the "Investors"), owning 91,647 Units of Investor Limited
Partnership Interests (the "Units"). The John Hancock Limited Partner
and the Investors are collectively referred to as the Limited
Partners. The initial capital of the Partnership was $2,000,
representing capital contributions of $1,000 from the General Partner
and $1,000 from the John Hancock Limited Partner. The Amended
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") authorized the issuance of up to 100,000 Units of Limited
Partnership Interests at $500 per unit. During the offering period,
which terminated on September 9, 1987, 91,647 Units were sold and the
John Hancock Limited Partner made additional capital contributions of
$7,330,760. There have been no changes in the number of Units
outstanding subsequent to the termination of the offering period. The
Partnership is engaged in the business of acquiring, improving,
operating, holding for investment and disposing of existing, income-
producing, commercial and industrial properties on an all-cash basis,
free and clear of mortgage indebtedness. Although the Partnership's
properties were acquired and are held free and clear of mortgage
indebtedness, the Partnership may incur mortgage indebtedness on its
properties under certain circumstances, as described in the
Partnership Agreement.
The latest date on which the Partnership is due to terminate is
December 31, 2016, unless it is sooner terminated in accordance with
the terms of the Partnership Agreement. It is expected that in the
ordinary course of the Partnership's business, the properties of the
Partnership will be disposed of, and the Partnership terminated,
before December 31, 2016.
2. Significant Accounting Policies
-------------------------------
The Partnership maintains its accounting records and recognizes rental
revenue on the accrual basis.
Cash equivalents are highly liquid investments with maturities of
three months or less when purchased. These investments are recorded
at cost plus accrued interest, which approximates market value.
Restricted cash represents funds restricted for tenant security
deposits and other escrows, and has been designated as short or long-
term based upon the term of the related lease agreement.
Investments in property are recorded at cost less any property write-
downs for permanent impairment in values. Cost includes the initial
purchase price of the property plus acquisition and legal fees, other
miscellaneous acquisition costs, and the cost of significant
improvements.
F-9
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (continued)
-------------------------------
Depreciation has been provided on a straight-line basis over the
estimated useful lives of the various assets: thirty years for the
buildings and five years for related improvements. Maintenance and
repairs are charged to operations as incurred.
Deferred expenses relating to tenant improvements and lease
commissions are amortized on a straight-line basis over the various
lease terms. During 1993, the Partnership reduced the period over
which its remaining deferred acquisition fees are amortized from
thirty years, the estimated useful life of the buildings owned by the
Partnership, to four and one-half years, the then estimated remaining
life of the Partnership.
The net income per Unit for each year is computed by dividing the
Investors' share of net income by the number of Units outstanding at
the end of each year.
No provision for income taxes has been made in the financial
statements since such taxes are the responsibility of the individual
partners and not of the Partnership.
Certain 1993 and 1992 amounts have been reclassified to be consistent
with the 1994 presentation.
3. The Partnership Agreement
-------------------------
Distributable Cash from Operations, as defined in the Partnership
Agreement, is distributed 99% to the Limited Partners and 1% to the
General Partner. The Limited Partners' share of Distributable Cash
from Operations is distributed as follows: first, to the Investors
until they receive a 7% non-cumulative, non-compounded annual cash
return on their Invested Capital, as defined in the Partnership
Agreement; second, to the John Hancock Limited Partner until it
receives a 7% non-cumulative, non-compounded annual cash return on its
Invested Capital; and third, to the Investors and the John Hancock
Limited Partner in proportion to their respective Capital
Contributions, as defined in the Partnership Agreement. However, any
Distributable Cash from Operations which is available as a result of
the reduction of working capital reserves funded by Capital
Contributions of the Investors will be distributed 100% to the
Investors.
F-10
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. The Partnership Agreement (continued)
-------------------------
Profits for tax purposes from the normal operations of the Partnership
for each fiscal year are allocated to the Limited Partners and General
Partner in the same amounts as Distributable Cash from Operations for
that year. If such profits are less than Distributable Cash from
Operations for any year, they are allocated in proportion to the
amounts of Distributable Cash from Operations for that year. If such
profits are greater than Distributable Cash from Operations for any
year, they are allocated 99% to the Limited Partners and 1% to the
General Partner, with the allocation made between the John Hancock
Limited Partner and the Investors in proportion to their respective
Capital Contributions. Losses for tax purposes from the normal
operations of the Partnership are allocated 99% to the Limited
Partners and 1% to the General Partner, with the allocation made
between the John Hancock Limited Partner and the Investors in
proportion to their respective Capital Contributions. However, tax
deductions arising from the Initial Expenses, as defined in the
Partnership Agreement, which are paid by the Partnership from the
Capital Contributions made by the John Hancock Limited Partner and all
other tax aspects of the Partnership's payment of the Initial
Expenses, as defined in the Partnership Agreement, are allocated 1% to
the General Partner and 99% to the John Hancock Limited Partner, and
not to the Investors. Depreciation deductions are allocated 1% to the
General Partner and 99% to the Investors, and not to the John Hancock
Limited Partner.
4. Investment in Property
----------------------
Investment in property at cost and reduced by write-downs consists of
managed, fully-operating, commercial real estate as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
1300 North Dutton Avenue Office Complex $2,835,779 $2,835,779
Marlboro Square Shopping Center 3,183,643 3,183,643
Crossroads Square Shopping Center 12,266,920 12,266,920
Carnegie Center Office/Warehouse 6,844,991 7,356,991
Warner Plaza Shopping Center 6,473,889 6,473,889
J.C. Penney Credit Operations Center 6,503,759 6,503,759
----------- -----------
Total $38,108,981 $38,620,981
=========== ===========
</TABLE>
The net realizable value of a real estate investment held for long-
term investment purposes is measured by the recoverability of the
investment through expected future cash flows on an undiscounted
basis, which may exceed the properties current market value.
F-11
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Investment in Property (continued)
----------------------
During the year ended December 31, 1994, the Partnership reduced the
carrying value of the Carnegie Center property by $512,000. During
the year ended December 31, 1992, the Partnership reduced the carrying
value of the Marlboro Square Shopping Center by $719,000.
The Partnership leases its properties to non-affiliated tenants under
primarily long-term operating leases.
At December 31, 1994, future minimum rentals on non-cancelable leases
relating to the above properties were as follows:
1995 $2,848,154
1996 2,248,791
1997 1,717,551
1998 1,580,574
1999 1,379,551
Thereafter 9,481,311
-----------
Total $19,255,932
===========
5. Transactions with the General Partner and Affiliates
----------------------------------------------------
Fees and expenses incurred or paid by the General Partner or its
affiliates during the three years ended December 31, 1994, and to
which the General Partner or its affiliates are entitled to
reimbursement from the Partnership were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating expenses $118,293 $133,054 $130,071
Partnership management fee 83,939 89,101 104,854
-------- -------- --------
Total $202,232 $222,155 $234,925
======== ======== ========
</TABLE>
These expenses are included in expenses on the Statements of
Operations.
Accounts payable to affiliates represents amounts due to the General
Partner and its affiliates for various services provided to the
Partnership.
The General Partner currently serves in a similar capacity for three
other affiliated real estate limited partnerships.
F-12
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Deferred Expenses
-----------------
Deferred expenses consist of the following:
<TABLE>
<CAPTION>
Unamortized Balance at
December 31,
1994 1993
---- ----
<S> <C> <C>
$114,494 of acquisition fees paid to the General
Partner. This amount was amortized over a period
of thirty years prior to June 30, 1993. Subsequent
to June 30, 1993, the unamortized balance is
amortized over a period of fifty-four months. $64,244 $85,659
$628,160 of tenant improvements. These amounts
are amortized over the terms of the leases to which
they relate. 235,367 299,919
$363,019 of lease commissions. These amounts
are amortized over the terms of the leases to
which they relate. 132,130 156,173
-------- --------
$431,741 $541,751
======== ========
</TABLE>
F-13
<PAGE>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Federal Income Taxes
--------------------
A reconciliation of the net income reported in the Statements of
Operations to the net income reported for federal income tax purposes
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income per Statements of
Operations $1,497,221 $1,684,608 $1,095,594
Add/(deduct): Excess of tax depreciation
over book depreciation (31,514) (23,148) (2,158)
Excess of book amortization
over tax amortization 67,356 173,595 167,618
Other income/(loss) - (51,042) 1,166
Reduction of property carrying
values 512,000 - 719,000
Other expenses 83,085 42,352 61,290
---------- ---------- ----------
Net income for federal income tax purposes $2,128,148 $1,826,365 $2,042,510
========== ========== ==========
</TABLE>
8. Subsequent Event
----------------
On February 15, 1995, the Partnership made a cash distribution of
$572,793, representing a 5% annualized return to all Investors of
record at December 31, 1994, based on the Distributable Cash from
Operations for the quarter then ended.
F-14
<PAGE>
<TABLE>
<CAPTION>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
Costs
Capitalized
Initial Costs to Subsequent to Gross Amount
Partnership Acquisition At Which Carried at Close of Period
----------------------- ----------------------- -----------------------------------
Buildings Buildings
and and
Description Encumbrances Land Improvements ImprovementsWrite-down (1) Land Improvements Total (2)
----------- ------------ ---- ------------ -------------------------- ---- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1300 North Dutton Avenue
Office Complex
Santa Rosa, CA - $655,000 $2,560,555 $162,054 ($541,830) $541,216 $2,294,563 $2,835,779
Marlboro Square Shopping
Center Marlboro, MA - 1,700,000 3,431,725 121,775 (2,069,857) 1,057,221 2,126,422 3,183,643
Crossroads Square
Shopping Center
Jacksonville, FL - 3,910,000 10,582,095 74,825 (2,300,000) 3,266,000 9,000,920 12,266,920
Carnegie Center
Office/Warehouse
Cincinnati, OH - 400,000 6,824,894 132,097 (512,000) 374,400 6,470,591 6,844,991
Warner Plaza Shopping
Center
Chandler, AZ - 2,800,000 5,069,990 30,035 (1,426,136) 2,272,330 4,201,559 6,473,889
J.C. Penney Credit
Operations Center
Albuquerque, NM - 1,440,000 5,138,062 - (74,303) 1,422,910 5,080,849 6,503,759
---- ----------- ----------- -------- ---------- ---------- ----------- -----------
Total - $10,905,000 $33,607,321 $520,786($6,924,126) $8,934,077 $29,174,904 $38,108,981
==== =========== =========== ======== ========== ========== =========== ===========
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
Life on Which
Depreciation in
Latest Statement
Accumulated Date of Date of Operations
Description Depreciation (5) Construction Acquired is Computed
----------- ---------------- ------------ -------- -----------
<S> <C> <C> <C> <C>
1300 North Dutton Avenue
Office Complex
Santa Rosa, CA $661,266 1983 10/24/86 30 Years (3)
Marlboro Square Shopping
Center Marlboro, MA 772,968 1986 2/17/87 30 Years (3)
15 Years (4)
Crossroads Square
Shopping Center
Jacksonville, FL 2,288,039 1986 11/20/87 30 Years (3)
Carnegie Center
Office/Warehouse
Cincinnati, OH 1,617,813 1986 12/22/87 30 Years (3)
Warner Plaza
Shopping Center
Chandler, AZ 1,042,233 1985 2/25/88 30 Years (3)
J.C. Penney Credit
Operations Center
Albuquerque, NM 1,071,140 1981 9/13/88 30 Years (3)
----------
Total $7,453,459
==========
(1) These write-downs represent a deterioration in the values of
the properties based upon the General Partner's estimates.
For a further discussion relating to the determination of
property write-downs, please see "Management's Discussion and Analysis of Financial
Condition" included in Item 7 of this Report.
(2)The Partnership's properties' aggregate cost for federal
income tax purposes at December 31, 1994 are as follows:
Property Amount
-------- ------
1300 North Dutton Avenue $3,416,719
Marlboro Square Shopping Center 5,262,190
Crossroads Square Shopping Center 14,611,574
Carnegie Center Office/Warehouse 7,411,041
Warner Plaza Shopping Center 7,962,866
J.C. Penney Credit Operations Center 6,578,062
-----------
Total $45,242,452
===========
The Partnership's aggregate cost for federal income tax
purposes may differ from the aggregate cost for Financial
Statement purposes.
(3) Estimated useful life for buildings
(4) Estimated useful life for land improvements
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
(5) Reconciliation of real estate and accumulated depreciation:
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Investment in Real Estate
Balance at beginning of year $38,620,981 $38,620,981 $39,431,781
Improvements - - (91,800)
Reduction of carrying value (512,000) - (719,000)
----------- ----------- -----------
Balance at end of year $38,108,981 $38,620,981 $38,620,981
=========== =========== ===========
Accumulated Depreciation
Balance at beginning of year $6,485,966 $5,513,242 $4,521,179
Additions charged to costs and expenses 967,493 972,724 992,063
----------- ----------- -----------
Balance at end of year $7,453,459 $6,485,966 $5,513,242
=========== =========== ===========
F-17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000795196
<NAME> JOHN HANCOCK REALTY INCOME FUND, LP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,169,622
<SECURITIES> 0
<RECEIVABLES> 68,354
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,215,810
<PP&E> 38,108,981
<DEPRECIATION> 7,453,459
<TOTAL-ASSETS> 34,325,239
<CURRENT-LIABILITIES> 299,941
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 34,025,298
<TOTAL-LIABILITY-AND-EQUITY> 34,325,239
<SALES> 0
<TOTAL-REVENUES> 3,729,808
<CGS> 0
<TOTAL-COSTS> 317,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,497,221
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,497,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,497,221
<EPS-PRIMARY> 17.02
<EPS-DILUTED> 17.02
</TABLE>
