-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DgY8M8A2weUyrX/GhgL4OTtD+1pcaj7TWH91EmgrBjrp+IJNTcFZaRAAjMHkXM7u HnQjnlmhoH67/c1g9ZvZhg== 0000927016-97-000938.txt : 19970401 0000927016-97-000938.hdr.sgml : 19970401 ACCESSION NUMBER: 0000927016-97-000938 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND LIFE PENSION PROPERTIES CENTRAL INDEX KEY: 0000711417 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042774875 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-11884 FILM NUMBER: 97568766 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6175781200 MAIL ADDRESS: STREET 2: 399 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission File No. 0-11884 --------------------------- NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2774875 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 225 Franklin Street, 25th Floor Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 261-9000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] No voting stock is held by non-affiliates of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE None Page 1 of ____ pages (including exhibits). Exhibit Index on Page ____. PART I ------ Item 1. Business. -------- New England Life Pension Properties; A Real Estate Limited Partnership (the "Partnership") was organized under the Uniform Limited Partnership Act of the Commonwealth of Massachusetts on December 17, 1982, to invest primarily in newly-constructed and existing income-producing real properties. The Partnership was initially capitalized with contributions of $2,000 from Copley Properties Company, Inc. (the "General Partner") and $10,000 from NELRECO Troy, Inc. (the "Initial Limited Partner"). On December 23, 1982 the Partnership filed a Registration Statement on Form S-11 (the "Registration Statement") with the Securities and Exchange Commission with respect to the public offering of 20,000 units of limited partnership interest at a purchase price of $1,000 per unit (the "Units") with an option to sell up to an additional 10,000 Units (an aggregate of $30,000,000). The Registration Statement was declared effective on March 22, 1983. On June 29, 1983 the Partnership sold all 30,000 Units, and the Partnership admitted 3,193 investors as limited partners (the "Limited Partners"), with $29,652,760 being contributed to the capital of the Partnership. At the same time, the Initial Limited Partner withdrew its contribution from the Partnership. The Partnership does not have any employees. Services are performed for the Partnership by the General Partner and by affiliates of the General Partner. At December 31, 1996 the Partnership owned the two real estate investments described in A. and C. below. In 1985 a joint venture in which the Partnership was a partner sold its interest in a third real estate investment. In May, 1991, the Partnership sold a fourth real estate investment that resulted in a capital distribution of $50.00 per Unit. In June 1994, a fifth investment, an industrial building in Ontario, California, was sold, resulting in a capital distribution of $193.34 per Unit. In October 1996, the Partnership sold a sixth investment, an office building in Decatur, Georgia, that resulted in a capital distribution of $186.66 per Unit. The Partnership and its affiliate, New England Life Pension Properties, II have provided the ground lessee of one of the Partnership's properties, the Willows Shopping Center in Concord, California, with a $2.5 million leasehold mortgage loan for the purpose of completing the renovation of the Center. New England Life Pension Properties I will fund $625,000, with the balance funded by New England Life Pension Properties II. The Partnership has no other current plan to renovate, improve or further develop any of its real property. In the opinion of the General Partner of the Partnership, the properties are adequately covered by insurance. A. Research and Development Facility in Columbia, Maryland ("Rivers ---------------------------------------------------------------- Corporate Park"). ---------------- In 1984 the Partnership consummated a land purchase-leaseback and leasehold mortgage loan investment totaling $5,100,000 in a 75,500 square foot research and development facility located in Rivers Corporate Park, Columbia, Maryland. The ground lease provides that the Partnership will receive an annual rental of $126,500 plus 50% of the ground lessee's gross revenues from the building in excess of a base amount. The mortgage loan matured on March 31, 1994 and bears interest at the rate of 11.5% per annum. The lease for the space in the building gives the tenant occupying the building a right of first offer during the period which began in September, 1992 and continues through November, 2004. The property was 100% occupied at December 31, 1996. However, on September 27, 1996, the sole tenant filed for chapter 11 bankruptcy protection and ceased paying rent. As part of the bankruptcy, the tenant has sold its assets to another company. Lease negotiations are proceeding with the purchaser; however, the outcome cannot be predicted. The Partnership has not received ground rent payments or interest payments currently on the mortgage loan since the bankruptcy filing, and believes that a portion of the mortgage amount may not be collected. In October 1996, the Partnership reached an agreement in principle with the borrower on the mortgage loan, whereby the maturity date will be extended to December 1997. In addition, the fixed interest and ground rental payments will be reduced, but the Partnership's rate of participation in revenue from the underlying property will be increased. These changes will be retroactive to January 1, 1996; however, any adjustment to amounts previously recognized by the Partnership is expected to be insignificant. Further, the Partnership will be able to cause a sale of the property. Execution of the amended loan agreement is dependent upon the borrower's leasing the property to a suitable tenant and the ability to meet the payment terms of the loan. B. Office Building in Decatur, Georgia ("Decatur TownCenter"). ---------------------------------------------------------- In 1985 the Partnership acquired a 3.28 acre parcel of land in Decatur, Georgia, for $1,675,000 and leased it back to the seller. Situated on the land was a four-story, 79,855 square foot office building. The Partnership also fully funded its $5,825,000 non-recourse mortgage loan commitment to the ground lessee. The loan was secured by a first mortgage of the building and the leasehold interest in the land. The Partnership also made an additional loan of $633,076 to fund tenant improvements. This loan was secured by a second mortgage of the building and the leasehold interest in the land. On October 10, 1996, the property was sold at which time the Partnership received proceeds of $6,573,178 in satisfaction of its mortgage loan and ground lease. Of the proceeds, $970,000 was held at the Partnership level in order to augment reserves, and $5,599,800 was distributed to the Limited Partners as a capital distribution in the amount of $186.66 per Unit on October 25, 1996. C. Shopping Center in Concord, California ("Willows Shopping Center"). ------------------------------------------------------------------ On July 30, 1984, the Partnership and an affiliate of the Partnership (the "Affiliate") jointly made land purchase-leaseback and leasehold mortgage loan investments aggregating $15,719,317 in a 24.8 acre shopping center located in Concord, California, known as the Willows Shopping Center. The Partnership's share of the investments aggregated $3,929,829, giving the Partnership a 25% interest in each component of the investment held in common with the Affiliate. The investments entitled the Partnership and the Affiliate jointly to receive an annual interest return of 13% on the $10,719,317 ten-year mortgage, together with an annual fixed rental under the ground lease equal to a 12.2% return on the $5,000,000 land purchase price plus an annual percentage rental equal to 50% of the ground tenant's annual gross revenues in excess of specified base amounts. On August 15, 1985, the Partnership and the Affiliate consented to a sale by the ground tenant, Willows Concord Venture ("Willows Concord"), of the ground tenant's ownership interest in the buildings and leasehold interest in the land to an affiliate of VMS Realty, Inc., an Illinois corporation. In conjunction with the sale, the ground lease was amended to provide that the Partnership and the Affiliate would no longer participate in excess rental revenues from the Shopping Center or in net appreciation from the sale of the property. The mortgage loan was also amended to increase the principal amount by $3,880,683 to $14,600,000, to extend the maturity date one year to August, 1995, and to lower the interest rate from 13% per annum to a stepped rate beginning at 9% per annum and increasing to 12% over six years. Under the terms of the original ground lease, the joint ground lessors were entitled to 50% of the net proceeds from a sale. The Partnership received cash of $1,071,875 and an interest in the incremental mortgage loan amount equal to $970,171, 50% of which was payable to the former ground lessee upon full payment of the loan principal by the new mortgagor. The joint mortgagees also entered into a Collection and Disbursement Agreement pursuant to which Willows Concord was entitled to share in 50% of interest paid under the new note in excess of the interest that would have been payable under the original note. The Partnership and the Affiliate had not received interest payments currently on the mortgage loan since the payment due in March, 1990, and as a result, the Partnership and the Affiliate began foreclosure proceedings to take possession of the property. On October 4, 1990, Pacific First Bank, the second leasehold mortgagee, filed an involuntary bankruptcy petition in the United States Bankruptcy Court for the Northern District of California against the ground lessee/debtor, to which filing the ground lessee/debtor subsequently consented. The ground lessee/debtor later consented to relief from stay of foreclosure proceedings. The Partnership and its Affiliate sold their interest in the leasehold mortgage loan to Willows Concord on June 14, 1991. In return, the Partnership and the Affiliate took back a note in the amount of $14,863,206. On June 18, 1991, Willows Concord foreclosed on the leasehold mortgage. The Partnership, the Affiliate and Willows Concord entered into a replacement promissory note in the principal amount of $14,863,206, effective June 18, 1991. The new loan is secured by the leasehold interest, bears interest at the rate of 9.323% per annum and provides for a reduction in principal if the note is paid prior to maturity. The Partnership, the Affiliate and Willows Concord also entered into a new ground lease which provides for annual rent in the amount of $550,000 plus an annual percentage rent equal to 70% of the ground lessee's annual gross revenues in excess of a specified amount. The Partnership has a 25% share of such rent. To the extent that operating cash flow from the shopping center is not sufficient to pay the ground rent, such rent was accruable until June 1996, at which time Willows Concord is obligated to pay all unpaid accrued rent and to pay all future ground rent on a current basis. The Partnership and the Affiliate have permitted the accrual of additional ground rent, and are currently in the process of evaluating various alternatives. On January 1, 1995 the Partnership and the Affiliate provided a $2.5 million construction loan to the ground lessee to fund the renovation of the Center. The Partnership committed to fund $625,000 of this amount. The loan bears interest at 11% per annum, provides for amortization on a 15-year schedule, and matures on December 31, 1997. In addition, the ground lease was amended to provide the Partnership and the Affiliate with the sole right to cause a sale on or after January 1, 1996. Item 2. Properties. ---------- The following table sets forth the annual realty taxes for the Partnership's properties and information regarding tenants who occupy 10% or more of gross leasable area (GLA) in the Partnership's properties:
- ------------------------------------------------------------------------------------------------------------------------------------ Estimated Number of Annual 1997 Tenants Square Contract Annual with 10% Feet of Rent Realty or More Name(s) of Each per Lease Renewal Line of Business Property Taxes of GLA Tenant(s) Tenant Sq. Ft. Expiration Options of Principal Tenants - ------------------------------------------------------------------------------------------------------------------------------------ Shopping Center $340,686 2 Comp USA 26,000 $15.50 10/2011 Three 5 Computer Retail in Concord, CA year options REI 29,486 $ 5.50 5/2003 Two 5 Specialty Retail year options R&D Building in $ 86,361 1 Biosys (1) 75,500 $ 8.64 11/2004 Two 5 Biotechnology Columbia, MD year options - ------------------------------------------------------------------------------------------------------------------------------------
(1) Biosys declared bankruptcy in 1996, see Item 1 A. The following table sets forth for each of the last five years the gross leasable area, occupancy rates, rental revenue and net effective rent for the Partnership's properties:
Gross Leasable Year-End Rental Net Effective Property Area Occupancy Revenue Rent ($/sf/yr)* Recognized - ------------------------------------------------------------------------------------------------------- Shopping Center in Concord, CA - -------------------------------------- 1992 274,488 70% $2,346,938 $12.39 1993 274,488 78% $2,612,770 $12.52 1994 251,531 91% $2,595,391 $12.39 1995 251,531 91% $3,099,701 $13.54 1996 248,193 94% $3,139,424 $13.75 Office Building in Decatur, GA (1) - -------------------------------------- 1992 79,855 82% $1,263,302 $18.50 1993 79,855 88% $1,080,745 $16.11 1994 79,855 90% $1,200,783 $16.90 1995 79,855 90% $1,143,642 $15.52 1996 N/A N/A $1,288,112 $16.63 R&D Building in Columbia, MD - -------------------------------------- 1992 75,500 100% $1,050,205 $13.91 1993 75,500 100% $677,374 $8.97 1994 75,500 100% $677,374 $8.97 1995 75,500 100% $677,374 $8.97 1996 75,500 100% $677,374 $8.97 - -------------------------------------------------------------------------------------------------------
* Net effective rent calculation is based on average occupancy during the respective years. (1) Property was sold October 10, 1996. Following is a schedule of lease expirations for each of the next ten years for the Partnership's properties based on the annual contract rent in effect at December 31, 1996:
------------------------------------------------------------------------------------------------------ TENANT AGING REPORT - ------------------------------------------------------------------------------------------------------ Property # of Lease Total Total Percentage of Expirations Square Feet Annual Gross Annual Rental Rental* - ------------------------------------------------------------------------------------------------------ Shopping Center in Concord, CA (1) - -------------------------------------- 1997 5 13,146 $84,036 3% 1998 0 0 $0 0% 1999 3 23,650 $262,572 10% 2000 2 10,520 $128,748 5% 2001 2 10,690 $113,136 4% 2002 2 21,031 $231,456 9% 2003 4 44,779 $385,920 14% 2004 0 0 $0 0% 2005 6 49,494 $596,616 22% 2006 0 0 $0 0% R&D Building in Columbia, MD (2) - -------------------------------------- 1997 0 0 $0 0% 1998 0 0 $0 0% 1999 0 0 $0 0% 2000 0 0 $0 0% 2001 0 0 $0 0% 2002 0 0 $0 0% 2003 0 0 $0 0% 2004 1 75,500 $653,075 100% 2005 0 0 $0 0% 2006 0 0 $0 0% - ------------------------------------------------------------------------------------------------------
(1) Remaining leases do not expire within 10 years. (2) The sole tenant declared bankruptcy in 1996, see Item 1 A. * Does not include expenses paid by tenants. Following is information regarding the competitive market conditions for each of the Partnership's properties. This information has been gathered from sources deemed reliable. However, the Partnership has not independently verified the information and, as such, cannot guarantee its accuracy or completeness. A. R&D in Columbia, MD. -------------------- The property is located within the Howard County R&D market which contains approximately 8.8 million square feet in a total of 179 buildings. As of September 30, 1996, the Howard County market exhibited a vacancy rate of approximately 5.6%, which represents an improvement from 1995, 1994, and 1993 when overall vacancy was 8.7%, 12%, and 18%, respectively. The Columbia R&D submarket contains a total of approximately 6.9 million square feet and, at September 30, 1996, had a vacancy rate of approximately 5.3%. The market has strengthened to the point where speculative R&D construction is now underway in Howard County and in the Columbia market. B. Shopping Center in Concord, CA. ------------------------------- This neighborhood shopping center lies within the Central Contra Costa County market which incorporates several cities along the I-680 corridor including Walnut Creek, Concord, Pleasant Hill and Martinez. The property's competitive market includes a total of approximately 2 million square feet in eight shopping centers. Within this competitive set, overall occupancy ranged from a high of 100% to a low of 90% with an average of 97%. This is up slightly from a year ago when overall occupancy was approximately 95%. Due to a scarcity of space, new retail construction within central Contra Costa County has been limited. However, two retail developments are presently under construction in nearby Pleasant Hill and a new community center just opened four miles southwest of the property in Walnut Creek. Item 3. Legal Proceedings. ----------------- The Partnership is not a party to, nor are any of its properties subject to, any material pending legal proceedings, other than the bankruptcy proceeding for the tenant at Rivers Corporate Park as described in Item 1 A. Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K. PART II ------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. --------------------------------------------------------------------- There is no active market for the Units. Trading in the Units is sporadic and occurs solely through private transactions. As of December 31, 1996, there were 3,354 holders of Units. The Partnership's Amended and Restated Agreement of Limited Partnership dated June 29, 1983, as amended (the "Partnership Agreement"), requires that any Distributable Cash (as defined therein) be distributed quarterly to the Partners in specified proportions and priorities. There are no restrictions on the Partnership's present or future ability to make distributions of Distributable Cash. For the year ended December 31, 1996 cash distributions paid in 1996 or distributed after year end with respect to 1996 to the Limited Partners as a group totaled $6,461,100 including $5,599,800 ($186.66 per limited partnership unit) representing a return of capital from the proceeds of a property sale. For the year ended December 31, 1995 cash distributions paid in 1995 or distributed after year end with respect to 1995 to the Limited Partners as a group totaled $984,000. Cash distributions exceeded net income in 1996, and therefore resulted in a reduction in partners' capital. Cash distributions were less than net income in 1995. Distributions of operating cash flow were less than cash provided by operating activities in both years. Reference is made to the Partnership's Statement of Changes in Partners' Capital and Statement of Cash Flows in Item 8 hereof. The general partner decided not to make a quarterly distribution of cash flow from operations related to the fourth quarter of 1996. The uncertainty as to cash flow from one of the Partnership's two remaining investments has warranted an increase in working capital reserves. Item 6. Selected Financial Data. ------------------------
For Year For Year For Year For Year For Year Ended or Ended or Ended or Ended or Ended or As of As of: As of As of: As of: 12/31/96\(4)\ 12/31/95\(3)\ 12/31/94\(2)\ 12/31/93\(1)\ 12/31/92 ----------- ----------- ----------- ----------- ----------- Revenues $ 1,712,474 $ 2,104,802 $ 3,691,109 $ 2,675,255 $ 3,246,472 Net Income (Loss) $ 539,500 $ 1,569,268 $ 3,129,077 $ (899,024) $ 2,191,885 Net Income (Loss) per Unit of Limited Partnership Interest $ 17.80 $ 51.79 $ 103.26 $ (29.67) $ 72.33 Total Assets $13,431,421 $19,239,985 $18,681,253 $22,682,389 $24,935,668 Total Cash Distributions per Limited Partnership Unit, including amounts distributed after year end with respect to the previous year $215.37 $32.80 $236.54 $51.80 $59.20
(1) The Partnership recorded a provision of $2,800,000 ($92.40 per Unit) for impaired mortgage loans during 1993. (2) The Partnership consummated a sale in 1994 which increased Net Income by $1,385,562 ($45.72 per Unit) and capital distributions by $5,800,200 ($193.34 per Unit). The Partnership also recorded a credit of $200,000 ($6.60 per Unit) related to impaired mortgage loans during 1994. (3) The Partnership recorded a credit of $260,000 ($8.58 per Unit) related to impaired mortgage loans during 1995. (4) The Partnership consummated a sale in 1996 which resulted in capital distributions of $5,599,800 ($186.66 per Unit). The Partnership also recorded a provision of $409,592 ($13.52 per Unit) for impaired mortgage loans during 1996. Item 7. - ------- Management's Discussion and Analysis of Financial Condition and Results of - -------------------------------------------------------------------------- Operations - ---------- Liquidity and Capital Resources - ------------------------------- The Partnership completed its offering of units of limited partnership interest in June 1983. A total of 30,000 units were sold. The Partnership received proceeds of $27,253,251, net of selling commissions and other offering costs, which were invested in real estate, used to pay related acquisition costs, or retained as working capital reserves. The Partnership currently owns the two real estate investments described in Item 1 hereof. In addition, four investments have been sold, one in each of 1985, 1991, 1994 and 1996. As a result of these sales and similar transactions, capital of $19,200,000 ($640 per limited partnership unit) has been returned to the limited partners through December 31, 1996. On October 10, 1996, the Decatur TownCenter investment was sold and the Partnership received net proceeds of $6,573,178. The resulting capital distribution to limited partners of $5,599,800 on October 25, 1996 ($186.66 per limited partnership unit) reduced the adjusted capital contribution to $360.00 per unit. At December 31, 1996, the Partnership had $2,300,885 in cash and cash equivalents which is primarily being retained as working capital reserves. The Partnership also has a commitment to fund the balance of its share of the renovation of the Willows Shopping Center, which approximates $316,000. As a result of the bankruptcy of the sole tenant at Rivers Corporate Park and the uncertainty concerning the Partnership's future cash flow from this investment, the general partner determined that it is prudent to augment working capital reserves. Accordingly, no distribution of cash from operations was made relating to the fourth quarter of 1996. Distributions of cash from operations for the first three quarters of 1996 were made at an annualized rate of 7% on the adjusted capital contribution. Distributions of cash from operations for the four quarters of 1995 were made at the annualized rate of 6% on the adjusted capital contribution. The increase in the cash distribution rate for the first three quarters of 1996 was due to the attainment of appropriate cash reserve levels and the stabilization of property operations. The carrying value of the real estate investments in the financial statements at December 31, 1996, other than impaired mortgage loans (Rivers Corporate Park), is at depreciated cost, or if the investment's carrying value is determined not to be recoverable through expected undiscounted future cash flows, the carrying value is reduced to estimated fair market value. The fair market value of such investments is further reduced by the estimated cost of sale for properties held for sale. Carrying value may be greater or less than current appraised value. At December 31, 1996, the appraised value of Willows Shopping Center exceeded its carrying value by approximately $240,000. The current appraised value of real estate investments has been estimated by the general partner and is generally based on a correlation of traditional appraisal approaches performed by the Partnership's advisor and independent appraisers. Because of the subjectivity inherent in the valuation process, the estimated current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. Results of Operations - --------------------- Form of Real Estate Investments The Willows Shopping Center is structured as a ground lease/mortgage loan investment. However, for financial reporting purposes it is accounted for as a jointly-owned property. Rivers Corporate Park is structured and accounted for as ground lease/ mortgage loan investment. Operating Factors At December 31, 1996, the Willows Shopping Center was 94% leased, compared to approximately 91% at the end of 1995 and 1994. The ground lessee/borrower has substantially completed the full rehabilitation of the Center. The Partnership's share of the remaining cost is approximately $316,000 at December 31, 1996 which largely relates to the renovation of space occupied by a significant new anchor tenant which began operating in October 1996. In October 1996, the Decatur TownCenter investment was sold. The Partnership received proceeds of $6,573,178 which were used to repay the ground lease investment and the carrying value of the mortgage loans. Since the mortgage loans were impaired, their carrying value had been previously reduced to estimated fair market value, less anticipated costs of sale and thus no gain or loss on the sale was recognized. The total valuation allowance was $2,349,592 at the time of the sale, which included a disposition fee of $196,775 payable to the advisor. Rivers Corporate Park was 100% occupied at December 31, 1996 and 1995. However, on September 27, 1996, the sole tenant filed for chapter 11 bankruptcy protection and ceased paying rent. As part of the bankruptcy, the tenant has sold its assets to another company. Lease negotiations are proceeding with the purchaser; however, the outcome cannot be predicted. The Partnership has not received ground rent payments and interest payments on its mortgage loan since the bankruptcy filing. The mortgage loan matured in 1994. In October 1996, the Partnership reached an agreement in principle with the borrower, whereby the maturity date will be extended to December 1997. In addition, the fixed interest and ground rental payments will be reduced, but the Partnership's rate of participation in revenue from the underlying property will be increased. These changes will be retroactive to January 1, 1996; however, any adjustment to amounts previously recognized by the Partnership is expected to be insignificant. Further, the Partnership will be able to cause a sale of the property. Execution of the amended loan agreement is dependent upon the borrower's leasing the property to a suitable tenant and the ability to meet the payment terms on the loan. Investment Results The Partnership determined that the mortgage loan on Rivers Corporate Park was impaired and recognized a provision for impaired mortgage loans of $400,000 which was charged to operations in the fourth quarter of 1996. In 1993, the Partnership determined that the mortgage loans to the Decatur TownCenter were impaired. During 1994 and 1995, the estimated market value of the loan collateral increased and the valuation allowance was reduced by $200,000 and $260,000, respectively, through a credit to operating results. During 1996, a valuation provision of $9,592 was recognized to adjust the carrying value to the amount of sale proceeds received, less disposition costs. The sale of the Ontario Distribution Center in June 1994 resulted in the recognition of a gain of $1,385,562. 1996 Compared to 1995 Exclusive of the credit from (provision for) impaired mortgage loans, and the operating results from Decatur TownCenter ($341,585 in 1996 and $602,256 in 1995), real estate operating results for 1996 were $669,507, a decrease from $788,778 in 1995. The change was primarily caused by a decline in the amount of interest income from Rivers Corporate Park. Interest on cash equivalents and short-term investments decreased between 1996 and 1995 primarily due to lower average investment balances held during the first nine months of 1996. Operating cash flow decreased approximately $353,000 between 1996 and 1995. This decrease is primarily due to the above mentioned changes in operating results, increased leasing costs at the Willows and changes in net working capital. 1995 Compared to 1994 Exclusive of the credit related to the allowance for impaired mortgage loans and revenue from the Ontario Distribution Center, real estate operating results for 1995 were $1,391,034, a slight increase compared to $1,359,953 in 1994. The increase primarily stemmed from results at Willows Shopping Center which increased by $40,000, partially offset by a decrease in operating income generated by Decatur TownCenter. Interest income on short-term investments and cash equivalents increased during 1995 due to an increase in interest rates. Operating cash flow, exclusive of Ontario Distribution Center, decreased approximately $57,000 between 1994 and 1995. This change differs from the change in operating results primarily due to an increase in working capital items. Portfolio Expenses The Partnership management fee is 9% of distributable cash flow from operations after any increase or decrease in working capital reserves as determined by the general partner. General and administrative expenses primarily consist of real estate appraisal, printing, legal, accounting and investor servicing fees. 1996 Compared to 1995 The Partnership management fee decreased approximately $12,000 due to the suspension of cash distributions for the fourth quarter of 1996, partially offset by an increase in distributable cash flow for the first three quarters of 1996. General and administrative expenses decreased between 1996 and 1995 primarily due to legal fees incurred in 1995 relating to the matured mortgage loan investment. 1995 Compared to 1994 The Partnership management fee decreased approximately $31,000 due to the decrease in distributable cash flow. General and administrative expenses increased 2% due to an increase in legal fees, partially offset by a decrease in printing and accounting fees. Inflation - --------- By their nature, real estate investments tend not to be adversely affected by inflation. Inflation may result in appreciation in the value of the Partnership's real estate investments over time, if rental rates and replacement costs increase. Declines in real property values, during the period of Partnership operations, due to market and economic conditions, have overshadowed the positive effect inflation may have on the value of the Partnership's investments. Item 8. Financial Statements and Supplementary Data. ------------------------------------------- See the Financial Statements of the Partnership included as a part of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and ----------------------------------------------------------------- Financial Disclosure. --------------------- The Partnership has had no disagreements with its accountants on any matters of accounting principles or practices or financial statement disclosure. PART III -------- Item 10. Directors and Executive Officers of the Registrant. -------------------------------------------------- (a) and (b) Identification of Directors and Executive Officers. --------------------------------------------------- The following table sets forth the names of the directors and executive officers of the General Partner and the age and position held by each of them as of December 31, 1996, as well as subsequent changes through January 24, 1997.
Name Position(s) with the General Partner Age - ----- ---------------------------------------------------- --- Joseph W. O'Connor President, Chief Executive Officer and Director 50 Daniel J. Coughlin Managing Director and Director 44 Peter P. Twining (1) Managing Director, General Counsel and Director 50 Wesley M. Gardiner, Jr. Vice President 38 Daniel C. Mackowiak Principal Financial and Accounting Officer 45 James J. Finnegan (2) Managing Director, General Counsel and Director 36
(1) Through January 24, 1997 only. (2) As of January 25, 1997. Mr. O'Connor and Mr. Coughlin have served in an executive capacity since the organization of the General Partner on December 16, 1982. Mr. Gardiner and Mr. Twining have served in their capacities since June 1994, and Mr. Mackowiak has served in his capacity since January 1, 1996. All of these individuals will continue to serve in such capacities until their successors are elected and qualify. (c) Identification of Certain Significant Employees. ------------------------------------------------ None. (d) Family Relationships. --------------------- None. (e) Business Experience. -------------------- The General Partner was incorporated in Massachusetts on December 16, 1982. The background and experience of the executive officers and directors of the General Partner are as follows: Joseph W. O'Connor has been President, Chief Executive Officer and a Director of AEW Real Estate Advisors, Inc. ("AEW"), formerly known as Copley Real Estate Advisors, Inc. since January, 1982. He was a Principal of AEW from 1985 to 1987 and has been a Managing Director of AEW since January 1, 1988. He has been active in real estate for 28 years. From June, 1967, until December, 1981, he was employed by New England Mutual Life Insurance Company ("The New England"), which has been merged with and into Metropolitan Life Insurance Company, most recently as a Vice President in which position he was responsible for The New England's real estate portfolio. He received a B.A. from Holy Cross College and an M.B.A. from Harvard Business School. Daniel J. Coughlin was a Principal of AEW from 1985 to 1987 and has been a Managing Director of AEW since January 1, 1988 and a Director of AEW since July 1994. Mr. Coughlin has been active in financial management and control for 22 years. From June, 1974 to December, 1981, he was Real Estate Administration Officer in the Investment Real Estate Department at The New England. Since January, 1982, he has been in charge of the asset management division of AEW. Mr. Coughlin is a Certified Property Manager and a licensed real estate broker. He received a B.A. from Stonehill College and an M.B.A. from Boston University. Peter P. Twining was a Managing Director and General Counsel of AEW until January 24, 1997 when he resigned from all offices and directorships. As such, he was responsible for general legal oversight and policy with respect to AEW and its investment portfolios. Before being promoted to this position in January 1994, he was a Vice President/Principal and senior lawyer responsible for assisting in the oversight and management of AEW's legal operations. Before joining AEW in 1987, he was a senior member of the Law Department at The New England and was associated with the Boston law firm, Ropes and Gray. Mr. Twining is a graduate of Harvard College and received his J.D. in 1979 from Northeastern University. Wesley M. Gardiner, Jr. joined AEW in 1990 and has been a Vice President at AEW since January, 1994. From 1982 to 1990, he was employed by Metric Realty, a nationally-known real estate investment advisor and syndication firm, as a portfolio manager responsible for several public and private limited partnerships. His career at AEW has included asset management responsibility for the company's Georgia and Texas holdings. Presently, as a Vice President and Team Leader, Mr. Gardiner has overall responsibility for all the partnerships advised by AEW whose securities are registered under the Securities and Exchange Act of 1934. He received a B.A. in Economics from the University of California at San Diego. Daniel C. Mackowiak has been a Vice President of AEW since January 1989 and has been a Vice President and the Principal Financial and Accounting Officer of the Managing General Partner since January 1996. Mr. Mackowiak previously held the offices of Chief Accounting Officer of AEW from January 1989 through April 1994 and Vice President and Principal Financial and Accounting Officer of the Managing General Partner between January 1989 and May 1994. From 1975 until joining AEW, he was employed by the public accounting firm of Price Waterhouse, most recently as a Senior Audit Manager. He is a certified public accountant and has been active in the field of accounting his entire business career. He received a B.S. from Nichols College and an M.B.A. from Cornell University. James J. Finnegan is the Assistant General Counsel of AEW Capital Management, L.P. ("AEW Capital Management") and has succeeded Peter Twining as Managing Director, General Counsel and Director of AEW, a subsidiary of AEW Capital Management. Mr. Finnegan served as Vice President and Assistant General Counsel of Aldrich, Eastman & Waltch, L.P., a predecessor to AEW Capital Management. Mr. Finnegan has over ten years of experience in real estate law, including seven years of experience in private practice with major New York City and Boston law firms. Mr. Finnegan also serves as AEW's securities and regulatory compliance officer. Mr. Finnegan is a graduate of the University of Vermont (B.A.) and Fordham University School of law (J.D.). Mr. O'Connor is a director of Evans Withycombe Residential, Inc., a Maryland corporation organized as a real estate investment trust which is listed for trading in the New York Stock Exchange. None of the other directors of the Managing General Partner is a director of a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. All of the directors and officers of the General Partner also serve as directors and officers of one or more corporations which serve as general partners of publicly-traded real estate limited partnerships which are affiliated with the General Partner. (f) Involvement in Certain Legal Proceedings. ----------------------------------------- None. Item 11. Executive Compensation. ----------------------------- Under the Partnership Agreement, the General Partner and its affiliates are entitled to receive various fees, commissions, cash distributions, allocations of taxable income or loss and expense reimbursements from the Partnership. See Notes 1, 2 and 6 of Notes to Financial Statements. The following table sets forth the amounts of the fees and cash distributions and reimbursements for out-of-pocket expenses which the Partnership paid to or accrued for the account of the General Partner and its affiliates for the year ended December 31, 1996. Cash distributions to the General Partner include amounts distributed after year end with respect to 1996.
Amount of Compensation Receiving Entity Type of Compensation and Reimbursement - ---------------- --------------------- -------------------------- General Partner Share of Distributable Cash $ 8,700 AEW Real Estate Advisors, Inc. Management Fees 86,044 (formerly known as Copley Real Estate Advisors, Inc.) New England Securities Servicing Fees and Out of Corporation Pocket Reimbursements 5,231 ---------------- TOTAL $99,975 ================
For the year ended December 31, 1996, the Partnership allocated $(17,441) of taxable loss to the General Partner. Item 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------- (a) Security Ownership of Certain Beneficial Owners. ------------------------------------------------ No person or group is known by the Partnership to be the beneficial owner of more than 5% of the outstanding Units at December 31, 1996. Under the Partnership Agreement, the voting rights of the Limited Partners are limited and, in some circumstances, are subject to the prior receipt of certain opinions of counsel or judicial decisions. Except as expressly provided in the Partnership Agreement, the right to manage the business of the Partnership is vested exclusively in the General Partner. (b) Security Ownership of Management. --------------------------------- An affiliate of the General Partner of the Partnership owned 1,094 Units at December 31, 1996. (c) Changes in Control. ------------------- There exists no arrangement known to the Partnership the operation of which may at a subsequent date result in a change in control of the Partnership. Item 13. Certain Relationships and Related Transactions. ----------------------------------------------- The Partnership has no relationships or transactions to report other than as reported in Item 11, above. PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. --------------------------------------------------------------- (a) The following documents are filed as part of this report: (1) Financial Statements--The Financial Statements listed on the accompanying Index to Financial Statements and Schedules, Financial Statements Index No. 2, Financial Statements Index No. 3 and Financial Statements Index No. 4 are filed as part of this Annual Report. (2) Financial Statement Schedules--The Financial Statement Schedules listed on the accompanying Index to Financial Statements and Schedules are filed as part of this Annual Report. (3) Exhibits--The Exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report and incorporated in this Annual Report as set forth in said Index. (b) Reports on Form 8-K. The Partnership filed one Current Report on Form 8-K dated October 22, 1996 reporting on Item No. 2 (Acquisition or Disposition of Assets). NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP Financial Statements * * * * * * * December 31, 1996 NEW ENGLAND LIFE PENSION PROPERTIES; ------------------------------------ A REAL ESTATE LIMITED PARTNERSHIP --------------------------------- INDEX TO FINANCIAL STATEMENTS AND SCHEDULES ------------------------------------------- Page Report of Independent Accountants.................................... Financial Statements: Balance Sheet - December 31, 1996 and 1995..................... Statement of Operations - Years ended December 31, 1996, 1995 and 1994..................................................... Statement of Changes in Partners' Capital - Years ended December 31, 1996, 1995 and 1994............................. Statement of Cash Flows - Years ended December 31, 1996, 1995 and 1994..................................................... Notes to Financial Statements.................................. Financial Statement Schedules: Schedule III - Real Estate and Accumulated Depreciation at December 31, 1996............................................ Schedule IV - Mortgage Loans on Real Estate at December 31, 1996............................................ All other schedules have been omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto. Report of Independent Accountants --------------------------------- To the Partners New England Life Pension Properties; A Real Estate Limited Partnership In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of New England Life Pension Properties; A Real Estate Limited Partnership (the "Partnership") at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Copley Properties Company, Inc., the General Partner of the Partnership; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the General Partner, and evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse, LLP Boston, Massachusetts March 24, 1997 NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEET
December 31, ----------------------------------- 1996 1995 --------------- --------------- Assets Real estate investments: Ground leases and mortgage loans, net $ 4,722,880 $ 11,508,875 Property, net 5,588,459 5,117,318 Deferred leasing costs and other assets, net 269,876 176,007 --------------- --------------- 10,581,215 16,802,200 Cash and cash equivalents 2,300,885 1,204,043 Short-term investments 498,869 1,109,814 Interest, rent and other receivables 50,452 123,928 --------------- --------------- $ 13,431,421 $ 19,239,985 =============== =============== Liabilities and Partners' Capital Accounts payable $ 437,083 $ 239,062 Accrued management fee - 24,575 Deferred disposition fees 654,543 457,768 --------------- --------------- Total liabilities 1,091,626 721,405 --------------- --------------- Partners' capital: Limited partners ($360.00 and $546.66 per unit, respectively; 30,000 units authorized, issued and outstanding) 12,294,711 18,467,706 General partner 45,084 50,874 --------------- --------------- Total partners' capital 12,339,795 18,518,580 --------------- --------------- $ 13,431,421 $ 19,239,985 =============== ===============
(See accompanying notes to financial statements) NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS Year ended December 31, --------------------------------------- 1996 1995 1994 --------- ---------- ---------- Investment Activity Property rentals $ 788,265 $ 780,127 $ 658,875 Property operating expenses (343,067) (354,550) (300,700) Depreciation and amortization (234,316) (230,712) (222,518) --------- ---------- ---------- 210,882 194,865 135,657 Ground rentals and interest on mortgage loans 800,210 1,196,169 1,534,014 (Provision for) credit from impaired mortgage loans (409,592) 260,000 200,000 --------- ---------- ---------- Total real estate operations 601,500 1,651,034 1,869,671 Gain on sale of investment - - 1,385,562 --------- ---------- ---------- Total real estate activity 601,500 1,651,034 3,255,233 Interest on cash equivalents and short-term investments 123,999 128,506 112,658 --------- ---------- ---------- Total investment activity 725,499 1,779,540 3,367,891 --------- ---------- ---------- Portfolio Expenses Management fee 86,044 98,302 129,471 General and administrative 99,955 111,970 109,343 --------- ---------- ---------- 185,999 210,272 238,814 --------- ---------- ---------- Net Income $ 539,500 $1,569,268 $3,129,077 ========= ========== ========== Net income per limited partnership unit $ 17.80 $ 51.79 $ 103.26 ========= ========== ========== Cash distributions per limited partnership unit $ 223.57 $ 32.80 $ 241.29 ========= ========== ========== Number of limited partnership units outstanding during the year 30,000 30,000 30,000 ========= ========== ==========
(See accompanying notes to financial statements) NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL
Year ended December 31, --------------------------------------------------------------------------------- 1996 1995 1994 ------------------------- ------------------------ ------------------------- General Limited General Limited General Limited Partner Partners Partner Partners Partner Partners -------- ----------- ------- ----------- -------- ----------- Balance at beginning of year $ 50,874 $18,467,706 $45,121 $17,898,131 $ 28,359 $22,039,045 Cash distributions (11,185) (6,707,100) (9,940) (984,000) (14,529) (7,238,700) Net income 5,395 534,105 15,693 1,553,575 31,291 3,097,786 -------- ----------- ------- ----------- -------- ----------- Balance at end of year $ 45,084 $12,294,711 $50,874 $18,467,706 $ 45,121 $17,898,131 ======== =========== ======= =========== ======== ===========
(See accompanying notes to financial statements) NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS
Year ended December 31, ------------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Cash flows from operating activities: Net income $ 539,500 $ 1,569,268 $ 3,129,077 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 234,316 230,712 222,518 Provision for (credit from) impaired mortgage loans 409,592 (260,000) (200,000) Gain on sale of investment - - (1,385,562) Increase in deferred leasing costs and other assets (116,164) (22,623) (122,075) Decrease (increase) in operating receivables 73,476 (88,234) 71,383 Increase (decrease) in operating liabilities (81,166) (16,596) 64,447 ----------- ----------- ----------- Net cash provided by operating activities 1,059,554 1,412,527 1,779,788 ----------- ----------- ----------- Cash flows from investing activities: Net proceeds from sale of investment 2,267,919 - 3,052,295 Repayment of mortgage loan investment 4,108,484 - 3,170,000 Capital expenditures on owned property and property collateralizing ground lease/ mortgage loan investments (428,550) (550,779) (594,054) Decrease (increase) in short-term investments, net 610,945 (1,094,854) 1,045,544 Increase in deferred disposition fees 196,775 - 192,442 ----------- ----------- ----------- Net cash provided by (used in) investing activities 6,755,573 (1,645,633) 6,866,227 ----------- ----------- ----------- Cash flows from financing activity: Distributions to partners (6,718,285) (993,940) (7,253,229) ----------- ----------- ----------- Net cash used in financing activity (6,718,285) (993,940) (7,253,229) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 1,096,842 (1,227,046) 1,392,786 Cash and cash equivalents: Beginning of year 1,204,043 2,431,089 1,038,303 ----------- ----------- ----------- End of year $ 2,300,885 $ 1,204,043 $ 2,431,089 =========== =========== ===========
(See accompanying notes to financial statements) NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and Business - ---------------------------------- General New England Life Pension Properties; A Real Estate Limited Partnership (the "Partnership") is a Massachusetts limited partnership organized for the purpose of investing primarily in newly constructed and existing income producing real properties. It primarily serves as an investment for qualified pension and profit sharing plans and other entities intended to be exempt from federal income tax. The Partnership commenced operations in June 1983, and acquired six real estate investments through 1985, four of which have been sold as of December 31, 1996. It intends to dispose of its investments within twelve years of their acquisition, and then liquidate; however, the general partner could extend the investment period if it is in the best interest of the limited partners. The general partner of the Partnership is Copley Properties Company, Inc., a wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"), formerly known as Copley Real Estate Advisors, Inc. ("Copley"). Subject to the general partner's overall authority, the business of the Partnership is managed by AEW pursuant to an advisory contract. On December 10, 1996, Copley's parent, New England Investment Companies, Limited Partnership ("NEIC"), a publicly traded master limited partnership, acquired certain assets subject to then existing liabilities from Aldrich Eastman & Waltch, Inc. and its affiliates and principals (collectively, "the AEW operations"). Simultaneously, a new entity, AEW Capital Management L.P., was formed into which NEIC contributed its interest in Copley and its affiliates. As a result, the AEW operations were combined with Copley to form the business operations of AEW Capital Management, L.P. This transaction is not expected to have a material effect on the operations of the Partnership. Prior to August 30, 1996, New England Mutual Life Insurance Company ("The New England") was NEIC's principal unit holder and owner of all of the outstanding stock of NEIC's general partner. On August 30, 1996, The New England merged with and into Metropolitan Life Insurance Company ("Met Life"). Met Life is the surviving entity and, therefore, through a wholly-owned subsidiary, became the owner of the units of partnership interest previously owned by The New England and of the stock of NEIC's general partner. This transaction is not expected to have a material effect on the operations of the Partnership. At December 31, 1996 and 1995 an affiliate of the general partner owned 1,094 units of limited partnership interest, which were repurchased from certain qualified plans, within specified annual limitations provided for in the Partnership Agreement. Management AEW, as advisor, is entitled to receive stipulated fees from the Partnership in consideration of services performed in connection with the management of the Partnership and the acquisition and disposition of Partnership investments in real property. Partnership management fees are 9% of distributable cash flow from operations, as defined, before deducting such fees. Acquisition fees were paid in an amount equal to 2% of the gross proceeds from the offering available for investment. Disposition fees are generally 3% of the selling price of the property, but are subject to the prior receipt by the limited partners of their capital contributions plus a stipulated return thereon. New England Securities Corporation ("NESC"), an indirect subsidiary of Met Life, is engaged by the Partnership to act as its unit holder servicing agent. Fees and out-of-pocket expenses for such services totaled $5,231, $4,719 and $6,985 in 1996, 1995 and 1994, respectively. Note 2 - Summary of Significant Accounting Policies - --------------------------------------------------- Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the general partner to make estimates affecting the reported amounts of assets and liabilities, and of revenues and expenses. In the Partnership's business, certain estimates require an assessment of factors not within management's control, such as the ability of tenants to perform under long-term leases and the ability of the properties to sustain their occupancies in changing markets. Actual results, therefore, could differ from those estimates. Ground Leases and Mortgage Loans While the related land and loan investments are legally separable, the terms thereof have been negotiated jointly and the investment performance is evaluated on a combined basis. They are, therefore, presented together in the accompanying balance sheet and statement of operations. Investments in land subject to ground leases are stated at cost, plus accrued revenue. Investments in mortgage loans to the related ground lessees are originally stated at cost, plus accrued interest. If the investment is subject to ownership accounting (see below), cost is adjusted for the accumulated cost recovery allowance. If the mortgage loan is impaired (see "Impaired Mortgage Loans" below), the carrying amount is adjusted to the estimated market value of the underlying collateral less anticipated costs of sale. Accrual of contractual ground rent and loan interest is discontinued if the total of the Partnership's invested cash and such accrual approximates the appraised value of the investment. Under this condition, the Partnership applies ownership accounting whereby revenue is recognized only to the extent of net operating income generated by the underlying property, before depreciation, to which the Partnership is entitled. In addition, the cost of the investment related to depreciable property is subject to a recovery allowance similar to depreciation, which is computed using the straight-line method based on estimated useful lives. The Partnership, however, retains a priority claim to all unrecognized contractual revenue. If a mortgage loan is determined to be impaired, the Partnership recognizes revenue only to the extent of operating cash flow generated by the collateral underlying the loan and no longer recognizes a cost recovery allowance. Impaired Mortgage Loans The Partnership considers a loan to be impaired when it is probable that it will be unable to collect all amounts due under the contractual terms of the loan agreement. Factors that the Partnership considers in determining whether a loan is impaired include its past due status, fair value of the underlying collateral and economic prospects of the borrower. When a loan is impaired, its carrying value is periodically adjusted, through a valuation allowance, to its estimated market value which is based on the appraised value of the underlying collateral less anticipated costs of sale. Changes in the valuation allowance are reported in the Statement of Operations. Property The Partnership and an affiliate share common ownership of an investment. The form of the investment is a combination ground lease and mortgage loan, as described above; however, in this case (Willows Shopping Center), substantial economic risks of property ownership rest with the Partnership and its affiliate. Accordingly, the investment is accounted for as owned property, although the Partnership and its affiliate have a priority claim to all unrecognized contractual revenue. The Partnership's financial statements include its proportionate ownership share (25%) of the individual assets, liabilities, revenue and expenses related to the property. Land and buildings and improvements (net of accumulated depreciation) are classified as property in the balance sheet. Capitalized Costs, Depreciation and Amortization Maintenance and repair costs are expensed as incurred. Significant improvements and renewals are capitalized. Depreciation is computed using the straight-line method based on estimated useful lives of the buildings and improvements. Leasing costs are also capitalized and amortized over the related lease terms. Acquisition fees have been capitalized as part of the cost of real estate investments. Amounts not related to land are being amortized using the straight-line method over the terms of the mortgage loans or the estimated useful lives of the property. Leases provide for rental increases over the respective lease terms. Rental revenue is being recognized on a straight-line basis over the lease terms. Realizability of Real Estate Investments The Partnership considers a real estate investment, other than a mortgage loan, to be impaired when it determines the carrying value of the investment is not recoverable through estimated undiscounted cash flows generated from the operations and disposition of the property. The impairment loss is based on the excess of the investment's carrying value over its estimated fair market value. For investments being held for sale, impairment loss also includes estimated costs of sale. Property held for sale is not depreciated during the holding period. The carrying value of an investment may be more or less than its current appraised value. At December 31, 1996, the appraised value of Willows Shopping Center exceeded its carrying value by approximately $240,000, while at December 31, 1995 the carrying value exceeded its appraised value by approximately $390,000. At December 31, 1995 the Partnership had one other investment which was not an impaired mortgage loan, the appraised value of which exceeded its related carrying value by $46,000. The current appraised value of real estate investments has been estimated by the general partner and is generally based on a correlation of traditional appraisal approaches performed by the Partnership's advisor and independent appraisers. Because of the subjectivity inherent in the valuation process, the estimated current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. Cash Equivalents and Short-Term Investments Cash equivalents are stated at cost, plus accrued interest. The Partnership considers all highly liquid debt instruments purchased with a maturity of ninety days or less to be cash equivalents; otherwise, they are classified as short-term investments. The Partnership has the positive intent and ability to hold all short-term investments to maturity; therefore, short-term investments are carried at cost plus accrued interest, which approximates market value. At December 31, 1996 and 1995, all investments were in commercial paper with less than three and six months, respectively, remaining to maturity. Deferred Disposition Fees Disposition fees due to AEW related to sales or restructuring of investments are included in the determination of gains or losses resulting from such transactions. According to the terms of the advisory contract, payment of such fees has been deferred until the limited partners first receive their capital contributions, plus stipulated returns thereon. Income Taxes A partnership is not liable for income taxes and, therefore, no provision for income taxes is made in the financial statements of the Partnership. A proportionate share of the Partnership's income is reportable on each partner's tax return. Per Unit Computations Per unit computations are based on the number of units of limited partnership interest outstanding during the year. The actual per unit amount will vary by partner depending on the date of admission to, or withdrawal from, the Partnership. Reclassifications Certain amounts in prior year financial statements have been reclassified to conform with the current year presentation. Note 3 - Investments in Ground Leases and Mortgage Loans - -------------------------------------------------------- The following is a summary of the Partnership's investments in ground leases and mortgage loans:
Fixed Rental/ Investment/ Acquisition Interest December 31, Location Date Rate 1996 1995 - ----------- ----------- -------- ----------- ------------ Rivers Corporate Park 1984 11.50% (L) $1,100,000 $ 1,100,000 Columbia, MD 11.50% (M) 4,000,000 4,000,000 Decatur TownCenter 1985 12.00% (L) - 1,675,000 Decatur, GA 8.50% (M) - 5,825,000 1986-1989 12.00% (M) - 633,076 ----------- ------------ $5,100,000 $13,233,076 =========== ============ (L) Ground lease (M) Mortgage loan December 31, ----------------------------------- 1996 1995 ---------- ----------- Cash invested $5,100,000 $13,233,076 Unamortized closing costs and acquisition fees, net 22,880 57,447 Accrued ground lease and mortgage loan receivables - 717,767 Capital expenditures - 235,000 Cost recovery allowance - (394,415) Valuation allowance for impaired mortgage loans (400,000) (2,340,000) ---------- ----------- $4,722,880 $11,508,875 ========== ===========
Ground leases have terms of fifty to sixty years and provide for additional rent equal to a percentage, ranging from 50% to 60%, of gross revenues in excess of a base amount from the rental of the buildings situated on the land. Percentage rent totaled $18,750, $7,413, and $22,643 in 1996, 1995 and 1994, respectively. The Partnership is also entitled to that same percentage of the net proceeds from the sale of the entire property after it has recovered its cash investment in the land and mortgage loan. The lease agreements require the lessee to pay all operating expenses related to the subject land. The lease for the space in the Rivers Corporate Park building gives the tenant occupying the building the right of first refusal to purchase the building and a right to request the purchase of the land through November 2004 at fair market value. Generally, interest on the mortgage loans is payable monthly. The loans are secured by first mortgages on the buildings and by the ground leasehold interests. Sale of Ontario Distribution Center The Ontario Distribution Center in Ontario, California was sold on June 17, 1994. The net sale proceeds received by the Partnership fully repaid its ground lease and mortgage loan investment and resulted in a gain of $1,385,562 ($45.72 per limited partnership unit), net of the disposition fee of $192,442 payable to the advisor. On July 28, 1994, the Partnership made a capital distribution to the limited partners in the aggregate amount of $5,800,200 ($193.34 per limited partnership unit) with the proceeds from this sale. Sale of Decatur TownCenter Decatur TownCenter in Decatur, Georgia was sold on October 10, 1996. The net sale proceeds received by the Partnership were used to repay the ground lease investment and the carrying value of the mortgage loans. Since the mortgage loans were impaired, their carrying value had been previously reduced to estimated fair market value, less anticipated costs of sale and thus no gain or loss on the sale was recognized. The total valuation allowance at the date of sale was $2,349,592, including $ 9,592 provided in 1996, which included a disposition fee of $196,775 payable to the advisor. On October 25, 1996, the Partnership made a capital distribution to the limited partners in the aggregate amount of $5,599,800 ($186.66 per limited partnership unit) with proceeds from this sale. Rivers Corporate Park The mortgage loan on Rivers Corporate Park matured on March 31, 1994. In October 1996, the Partnership reached an agreement in principle with the borrower, whereby the maturity date will be extended to December 1997. In addition, the fixed interest and ground rental payments will be reduced, but the Partnership's rate of participation in revenue from the underlying property will be increased. These changes will be retroactive to January 1, 1996; however, any adjustment to amounts previously recognized by the Partnership is expected to be insignificant. Further, the Partnership will be able to cause a sale of the property. The tenancy at this property has become uncertain, with the sole tenant's filing for bankruptcy in September 1996 and the successor company not yet affirming or abandoning the lease. Execution of the amended agreement is dependent upon the borrower's leasing the property to a suitable tenant and its ability to meet the payment terms on the loan. During the fourth quarter of 1996, the Partnership determined that the Rivers Corporate Park mortgage loan was impaired and recorded a valuation allowance of $400,000. Valuation Allowance The activity in the valuation allowance during 1995 and 1996, together with the related recorded and carrying value of the impaired mortgage loans at the beginning and end of each year, are summarized in the table below.
Recorded Valuation Carrying Value Allowance Value ---------- ------------ ---------- Balance at January 1, 1995 $6,646,927 $(2,600,000) $4,046,927 ========== =========== ========== Increase in estimated fair market value of collateral 260,000 ----------- Balance at December 31, 1995 6,781,928 (2,340,000) 4,441,928 ========== ----------- ========== Reduction in estimated fair market value of collateral, net (9,592) Additional impaired loan (400,000) Sale of collateral 2,349,592 ----------- Balance at December 31, 1996 $4,000,000 $ (400,000) $3,600,000 ========== =========== ==========
Except for the effect of sales, the average recorded value of the impaired mortgage loans did not differ materially from the balances at the end of the period, except for reductions due to sales. Note 4 - Investments in Property - -------------------------------- The Willows Shopping Center investment (the "Willows"), acquired in 1984, is owned jointly with an affiliate of the Partnership (the "Affiliate"); the Partnership has a 25% ownership share. The ground lessee/mortgagor stopped paying interest on the mortgage loan as of March 1990. As a result, the Partnership and its Affiliate began foreclosure proceedings to take possession of the property. A protracted series of legal interactions ensued, including the filing of an involuntary bankruptcy petition by the second leasehold mortgagee. In June 1991, the Partnership and its Affiliate sold the mortgage note to the original owner of the Willows, who in turn undertook and completed the foreclosure action. The Partnership and its Affiliate received 31 a new mortgage note; the principal related to the Partnership's share is $3,715,802. The note bears interest at 9.323% per annum, payable monthly; however, it may accrue with interest compounded at 11%. The loan matures on June 18, 2001. The original owner also assumed the ground lease. The ground lease provides for annual rental payments to the Partnership of $137,500. Rental payments were accruable through June 1996, with interest compounding at 11%; however, the Partnership has permitted additional accrual beyond that date as it evaluates various alternatives. The ground lease also provides for participation rentals at 70% of gross revenues in excess of a base amount to the Partnership and its Affiliate. Under this investment arrangement, the Partnership and its Affiliate are bearing substantial economic risks of ownership; accordingly, the investment is being accounted for as a jointly owned property. In connection with a major renovation of the property, on January 1, 1995, the Partnership and its Affiliate committed to make a construction loan to the ground lessee in the amount of $2,500,000. This loan is also being accounted for as an investment in property. The Partnership's share is $625,000 of which $309,181 has been funded as of December 31, 1996. Interest accrues at 11% compounded monthly; debt service payments began on January 1, 1996, including principal payments based upon a 15-year amortization schedule. The note matures on December 31, 1997. In addition, the ground lease was amended, whereby after January 1, 1996, the Partnership and the Affiliate may, at their sole discretion, offer the entire property for sale. At December 31, 1996 and 1995, the Partnership's proportionate share of the carrying value of the property was comprised of land of $1,250,000 and building and improvements of $4,338,459 and $3,867,318, respectively (net of accumulated depreciation of $978,975 and $766,954, respectively). The buildings are being depreciated on a straight-line basis with an estimated useful life ranging from 20 to 25 years. The Partnership's proportionate share of future minimum rentals under non- cancelable operating leases are: $679,250 in 1997; $675,000 in 1998; $661,750 in 1999; $629,750 in 2000; $591,250 in 2001; and $3,655,750 thereafter. 32 Note 5 - Income Taxes - --------------------- The Partnership's income for federal income tax purposes differs from that reported in the accompanying statement of operations as follows:
Year ended December 31, ----------------------------------------- 1996 1995 1994 ---- ---- ---- Net income per financial statements $ 539,500 $1,569,268 $3,129,077 Timing differences: Ground rent and mortgage loan interest (1) 947,478 688,074 602,941 (Loss) gain on sale (3,631,081) - 223,483 Valuation allowance 400,000 (260,000) (200,000) ----------- ---------- ---------- Taxable (loss) income $(1,744,103) $1,997,342 $3,755,501 =========== ========== ==========
(1) Represents additional contractual revenue recognized for tax purposes related to the Willows Shopping Center in. Note 6 - Partners' Capital - -------------------------- Allocations of net income (losses) from operations and distributions of distributable cash from operations, as defined, are in the ratio of 99% to the limited partners and 1% to the general partner. Cash distributions are made quarterly. Net sales proceeds and financing proceeds are allocated first to limited partners to the extent of their contributed capital plus a stipulated return thereon, as defined, second to pay disposition fees, and then 85% to the limited partners and 15% to the general partner. As a result of such transactions, the adjusted capital contribution per limited partnership unit was reduced from $1,000 to $790 during 1985, from $790 to $740 during 1991, from $740 to $546.66 during 1994. and from $546.66 to $360 during 1996. Income from a sale is allocated in proportion to the distribution of related proceeds, provided that the general partner is allocated at least 1%. Income or losses from a sale, if there are no residual proceeds after the repayment of the related debt, will be allocated 99% to the limited partners and 1% to the general partner. Note 7 - Subsequent Event - ------------------------- The general partner decided not to make a quarterly distribution of cash flow from operations related to the fourth quarter of 1996. The uncertainty as to cash flow from Rivers Corporate Park due to the bankruptcy of the sole tenant has warranted an increase in working capital reserves. 33
NEW ENGLAND PENSION PROPERTIES A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AT DECEMBER 31, 1996 Costs Subsequent Gross Amount at Which Initial Costs to Partnership to Acquisitions Carried at Close of Period ------------------------------------------- ----------------------------------------------------- Encum- Buildings & Improve- Buildings & Description brance Land Improvements ments Land Improvements - ----------------------- --------- ---------- -------------- --------- ---------- -------------- Research and Development Facility Columbia, Maryland Note A 1,122,880 -- -- 1,122,880 -- 25% interest in Shopping Center Concord, California Note A 1,250,000 3,298,795 2,018,639 1,250,000 5,317,434 ------- ---------- --------- ----------- ---------- --------- Total $2,372,880 $3,298,795 $2,018,639 $2,372,880 $5,317,434 =============================================================================================== Accrued Accumulated Date of Date Depreciable Description Ground Rent Total Depreciation Construction Acquired Life - ----------------------- ------------ ---------- -------------- ------------ ---------- -------------- Research and Development Facility Columbia, Maryland -- 1,122,880 -- -- 03/28/84 -- 25% interest in Shopping Center Concord, California -- 6,567,434 (978,975) - (L) 07/10/84 (B) 06/18/91 25 years ------------ ---------- -------------- ------------ ---------- -------------- Total $0 $7,690,314 ($978,975) ===============================================================================================
(L) Land (B) Buildings and Improvements Notes: (A) All senior mortgages on the properties are held by New England Life Pension Properties (B) Reconciliation of real estate owned: Balance at beginning of year $8,951,218 Acquisitions 683,162 Dispositions (1,944,066) ----------- Balance at end of year $7,690,314 =========== Accumulated depreciation at beginning of year $766,954 Depreciation expense 1996 212,021 ----------- Accumulated depreciation at end of year $978,975 ===========
NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE AT DECEMBER 31, 1996
Valuation Final Periodic Cost allowance Accrued Deferred Carrying Interest Maturity Payment Face Amount Recovery for impaired Interest Acquisition Amount of Description Rate Date Terms of Mortgage Allowance Mortgage loans Receivable Fees Mortgage - ----------- -------- -------- -------- ----------- --------- -------------- ---------- --------- --------- Research and Development Facility Interest Columbia, Maryland 11.50% 03/28/94 Monthly 4,000,000 -- (400,000) -- -- $3,600,000 (See Note 3) Principal at Maturity -------------------------------------------------------------------------------------------------------- Total $4,000,000 $0 ($400,000) $0 $0 $3,600,000 ========================================================================================================
Balance at beginning of year $8,441,928 Valuation allowance for impaired loans (409,592) increase in accrued ground lease/mortgage loan receivables 0 Amortization of deferred acquisition fees 0 Disposition (4,432,336) ------------ 3,600,000 ============
FINANCIAL STATEMENTS INDEX NO. 2 Auditor's Report and Financial Statements of Decatur TownCenter Associates, L.L.C. (Formerly Decatur TownCenter Associates, Ltd.) Page # Independent Auditor's Report of Duggan & Massey, P.C. ...................... Balance Sheet - October 9, 1996 ............................................ Statement of Income - For the Short Period Ended October 9, 1996 .......................................................... Statement of Changes in Partner's Capital - For the Short Period Ended October 9, 1996 ....................................... Statement of Cash Flows - For the Short Period Ended October 9, 1996 .......................................................... Notes to Financial Statements .............................................. DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) FINANCIAL STATEMENTS OCTOBER 9, 1996 [LETTERHEAD OF DUGGAN & MASSEY, P.C. APPEARS HERE] INDEPENDENT AUDITOR'S REPORT ---------------------------- To The Members Decatur TownCenter Associates, L.L.C. We have audited the accompanying balance sheet of Decatur TownCenter Associates, L.L.C. (formerly Decatur TownCenter Associates, Ltd.) as of October 9, 1996 and the related statements of income, members' capital and cash flows for the short year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides 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 Decatur TownCenter Associates, L.L.C. as of October 9, 1996 and the results of its operations and its cash flows for the short year then ended, in conformity with generally accepted accounting principles. /s/ Duggan & Massey, PC November 21, 1996 DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) BALANCE SHEETS OCTOBER 9, 1996 ASSETS ------
Current Assets Cash $ 71,396 Accounts receivable - tenants (Net of allowance for doubtful accounts of $6,506) 127,026 Accounts receivable - others 14,624 Escrow account 679,379 Prepaid expenses 102,196 ----------- Total Current Assets $ 994,621 Land 1,262,000 Building and Improvements (Net of accumulated depreciation of $3,260,582) 12,360,209 Other Assets Loan costs (Net of accumulated amortization of $100,000) 104,811 Commissions and procurement fees (net of accumulated amortization of $121,916) 432,962 Accrued Rents Receivable 66,667 ----------- Total Other Assets 604,440 ----------- Total Assets $15,221,270 ===========
LIABILITIES AND MEMBERS' CAPITAL -------------------------------- Current Liabilities Accounts payable $ 58,749 Deferred income 159,541 Tenant allowance payable 210,238 Security deposit 1,964 ------------- Total Current Liabilities $ 430,492 Long-Term Liabilities Mortgage payable 12,650,000 ------------- Total Liabilities 13,080,492 Partners' Capital 2,140,778 ------------- Total Liabilities and Partners' Capital $ 15,221,270 =============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) STATEMENT OF INCOME PERIOD ENDED OCTOBER 9, 1996 Rental Income $ 1,002,257 --------------- Expenses Amortization $ 76,536 Bad debts 2,049 Depreciation 192,167 Donations 475 General building maintenance 86,839 Insurance 8,243 Interest 561,018 Legal and accounting 36,040 Management fees and commissions 62,887 Office 5,131 Parking deck 10,488 Professional fees 8,778 Salary reimbursement 22,589 Security 21,972 Taxes and licenses 109,801 Utilities 98,578 ------------- Total Expenses 1,303,591 --------------- Operating Loss (301,334) Other Income and Expenses Interest income 865 --------------- Loss Before Extraordinary Item (300,469) Extraordinary Item Debt Forgiveness Income 3,257,821 --------------- Net Income $ 2,957,352 ===============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) STATEMENT OF MEMBERS' CAPITAL PERIOD ENDED OCTOBER 9, 1996 Balance, beginning of period $ (6,080,274) Contributions to capital 5,263,700 Net income for the period 2,957,352 ------------ Balance, end of period $ 2,140,778 ============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) STATEMENT OF CASH FLOWS PERIOD ENDED OCTOBER 9, 1996
Cash Flows From Operating Activities: Net Income $ 2,957,352 Adjustments to reconcile net income to net cash provided by operating activities: Gain on extraordinary item $ (3,257,821) Depreciation and amortization 268,703 (Increase) Decrease in assets: Accounts receivable - tenants (39,524) Accounts receivable - others (8,796) Prepaid expenses (75,816) Escrow from loan closing (679,379) Increase (Decrease) in Liabilities: Accounts payable and accrued liabilities (564,701) (4,357,334) ------------ ------------ Net cash provided by operating activities (1,399,982) Cash Flows From Investing Activities: Capital expenditures (127,181) Purchase of interest in Decatur TownCenter II (9,540,860) Purchase of land - Phase I (1,262,000) Distribution on termination of Decatur TownCenter II 49,279 ------------ Net Cash Used By Investing Activities (10,880,762) Cash Flows From Financing Activities: Loan costs (104,811) Proceeds from mortgage note 12,650,000 Payment on mortgage note (4,694,140) Contributions to capital 4,400,000 ------------ Net Cash Provided By Financing Activities 12,251,049 ------------ Net decrease in cash and cash equivalents (29,695) Cash and cash equivalents at beginning of year 101,091 ------------ Cash and cash equivalents at end of period $ 71,396 ============ Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 398,355 ============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Operations ------------------------- Decatur TownCenter Associates, Ltd. was formed on March 8, 1984 as a partnership between A.J. Land, Jr., Daniel B. Pattillo and Lawrence P. Kelly. A.J. Land, Jr. was the general partner of the project. The partnership was established to construct, manage, and lease an office building in Decatur, Georgia. On October 9, 1996, Decatur TownCenter Associates, Ltd. changed its name to Decatur TownCenter Associates, L.L.C. In addition to the name change, the Partnership accepted three new members on October 9, 1996. These new members are Hempel & Lenz, Inc., SHB Partners, III and Pinehill Decatur, G.P. The original Partners contributed their interest to DTC Holdings, L.L.C. Allocation of Income and Loss ----------------------------- All income or loss from January 1, 1996 through October 9, 1996 is allocated 100% to the members of DTC Holdings, L.L.C. individually. Thereafter, all income generated after October 9, 1996 is allocated as follows: A) A preferred cumulative return on members invested capital of 12% per annum as shown below: DTC Holdings, L.L.C. 13.63% Pinehill Decatur, G. P. 31.82% SHB Partners III 15.91% Hempel & Lenz 38.64% B) Any excess income after the preference return is allocated as follows: DTC Holdings, L.L.C. 22.27% Pinehill Decatur, G. P. 28.64% SHB Partners III 14.32% Hempel & Lenz 34.77% Any loss generated after October 9, 1996 is allocated based upon the same allocation percentage as income allocated after preferred returns as noted in (B) above. Building and Improvements ------------------------- Building and improvements are carried at cost. Depreciation on the building is computed using the straight-line method over a thirty year period. Tenant improvements are being depreciated using the straight-line method over the lives of the related tenant leases. Expenditures for maintenance, repairs, renewals and improvements which do not materially extend the useful lives of the assets are charged to current earnings. Intangible Assets ----------------- Loan costs are being amortized using the straight-line method over the life of the loan. DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 Commissions and procurement fees are being amortized using the straight- line method over the lives of the related leases. Income Taxes ------------ These financial statements do not reflect a provision or expense for income taxes. Each member's pro rata share of income or loss is reported on their individual income tax return. Cash and Cash Equivalents ------------------------- For purposes of the statements of cash flows, the Limited Liability Company considers all highly liquid debt instruments purchased with a maturity of twelve months or less together with accrued interest to be cash equivalents. 2. BUILDING AND IMPROVEMENTS The investment in building and improvements consists of the following:
October 9, 1996 ------------- PHASE I - ------- Construction period interest and taxes $ 338,060 Building 3,973,681 Landscape and lobby 116,102 Furniture and equipment 9,067 Tenant and capital improvements 1,838,888 Less: accumulated depreciation ( 3,260,582) ------------ Total Building and Improvements $ 3,015,216 ============ October 9, 1996 ------------ PHASE II - -------- Building $ 8,208,510 Landscaping 100,655 Furniture and equipment 7,272 Tenant and capital improvements 1,028,556 ------------ $ 9,344,993 ============
3. FIRST MORTGAGE PAYABLE New England Life Pension Properties held a first mortgage secured by all of the real property and improvements of the partnership. The total proceeds were $5,825,000. Monthly payments of interest only began April 1, 1985 and continued until October 9, 1996. Interest expense amounted to $498,497 for the short year ended October 9, 1996. The first mortgage was retired in conjunction with the refinancing through NationsBank. (See Note 8). DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 4. SECOND MORTGAGE PAYABLE New England Life Pension Properties ($633,076) and Decatur TownCenter Associates, Ltd. partners ($422,040) held a second leasehold mortgage secured by all of the real property and improvements of the Partnership. The total proceeds were $1,055,116. Interest expense amounted to $58,876 for the short year ended October 9, 1996. The second mortgage was retired in conjunction with the refinancing through NationsBank. (See Note 8). 5. RELATED PARTY TRANSACTIONS The Partnership has contracted with related parties for the performance of various management, leasing and construction services. The Decatur TownCenter Associates, L.L.C. members have common ownership and management control with Land Realty Services, Land & Property In-Town, Pope and Land Enterprises, and Decatur TownCenter II Associates. Amounts involving related parties are summarized as follows:
October 9, 1996 ---------- Capital improvements $32,713 Construction-tenant finishes 88,817 Office expense 978 General maintenance 21,640 Commissions 54,967 Management fees 29,579 Salaries 22,589
6. LEASE COMMITMENTS Land - Building Site -------------------- The Partnership sold to and leased back from New England Life Pension Properties the land on which the Phase I building is located. The Partnership was committed to a sixty-year lease beginning February 20, 1985. The lease covers property of approximately one acre under the building. In addition, the partnership owned approximately one and one- half acres on which the parking lot is located. On October 9, 1996, the Partnership exercised its option to buy back the land and parking lot at the time the first mortgage was satisfied. The purchase price of the land and parking lot was $1,262,000. (See Note 8). DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 7. PURCHASE OF LAND AND RETIREMENT OF DEBT On October 9,1996 Decatur TownCenter Associates, L.L.C. entered into an agreement with New England Pension Properties to purchase the land on which the limited liability company's building is located and retire all debt owed to New England Pension Properties. The terms of the agreement were as follows:
Accrued ground lease $ 603,000 (See Note 11) Land 1,262,000 Payment of indebtedness 4,694,140 (See Note 11) Miscellaneous costs of acquisition 44,600 Less: Transfer tax credits ( 1,262) Less: Disbursement to other parties ( 41,000) ---------- Amount paid to New England Pension Properties $6,561,478 ==========
8. NOTE PAYABLE - NATIONSBANK On October 9, 1996, Decatur TownCenter Associates, L.L.C. took out a note from NationsBank to finance the purchase of the Decatur TownCenter (Phase I) land, purchase the interest in Decatur TownCenter II Associates and to replace the NELP financing on Phase I building. The principal amount of the note is $12,650,000 and is secured by all of the real property and improvements of the Limited Liability Company, interest payments commence November 1, 1996 and continue through October 1, 1998. Principal and interest payments commence November 1, 1998 and continue to maturity. The maturing date of this note is September 10, 1999 with the extended maturity to September 10, 2000 or September 10, 2001 at the option of Decatur TownCenter Associates, L.L.C. The interest rate on this note is variable and calculated based on various indices at the election of Decatur TownCenter Associates, L.L.C. 9. CAPITAL CONTRIBUTIONS On October 9, 1996, notes previously due to A. J. Land, Jr., Larry Kelly and Daniel Patillo as well as previously accrued interest were deemed to be contributions to the capital of Decatur TownCenter Associates, L.L.C.
Principal Value Interest Accrued Total Value of Member Value of Note on Note Contribution -------------- ---------------- ------------------ ---------------- A. J. Land, Jr. $224,718 $235,166 $459,884 Larry Kelly 52,604 55,049 107,653 Daniel Patillo 144,718 151,445 296,163 ---------------- ------------------ ---------------- Totals $422,040 $441,660 $863,700 ================ ================== ================
DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 Additionally, capital contributions were made by the new members of the Limited Liability Company as follows:
CONTRIBUTED MEMBER CAPITAL - ------ --------------- DTC Holdings, L.L.C. $ 600,000 Hampel & Lenz, Inc. 1,700,000 SHB III Partners 700,000 Pine Hill Decatur, G.P. 1,400,000 --------------- $4,400,000 ===============
Total contributions to capital for the short year ended October 9, 1996 were $5,263,700. 10. TECHNICAL TERMINATION DISTRIBUTION On October 9, 1996, Decatur TownCenter Associates, L.L.C. purchased the remaining interest in Decatur TownCenter II Associates from New England Pension Life Pension Properties IV. This caused a technical termination of the Joint Venture by operation of law. Decatur TownCenter Associates, L.L.C. succeeded to all the assets and liabilities of the terminated Joint Venture as the sole remaining Joint Venturer.
Cash $ 49,279 Prepaid expenses 60,442 Accounts receivable 79,419 Building and property 9,344,993 Intangible assets 339,259 Other operating assets 66,666 Less other operating liabilities ( 359,526) --------------- Total Investment in Assets of Decatur TownCenter, II Associates due to Technical Termination $9,580,532
=============== 11. EXTRAORDINARY INCOME - FORGIVENESS OF DEBT In conjunction with the purchase of land and retirement of debt held by New England Pension Properties, Decatur TownCenter Associates, L.L.C. recognized income from the forgiveness of debt. DECATUR TOWNCENTER ASSOCIATES, L.L.C. (FORMERLY DECATUR TOWNCENTER ASSOCIATES, LTD.) NOTES TO FINANCIAL STATEMENTS OCTOBER 9, 1996 First Mortgage Payable $ 5,825,000 Second Mortgage Payable 633,076 Accrued Interest First Mortgage 28,865 Accrued Interest Second Mortgage 722,995 Accrued Ground Lease 1,345,025 Less Ground Lease Paid ( 603,000) Less payment on First/Second Mortgage ( 4,694,140) --------------- Extraordinary Income-Forgiveness of Debt $ 3,257,821 ===============
12. RENTALS UNDER OPERATING LEASES Minimum future rental income on noncancellable operating leases as of October 9, 1996 is:
Year Ending Minimum Future December 31 Rentals ----------- -------------- 1997 $2,684,759 1998 2,458,274 1999 2,036,803 2000 1,719,678 2001 1,442,635 Thereafter 4,454,935 ------------- Total $ 14,797,084 -------------
13. CONTINGENCY At December 31, 1995, the partnership was negotiating with New England Life Pension Properties to purchase the land and retire the debt to NELP. Had these negotiations been unsuccessful, NELP had the option to offer the property for sale at its sole discretion. The purchase of the land and the refinancing has alleviated this contingency. FINANCIAL STATEMENTS INDEX NO. 3 Auditor's Report and Financial Statements of Decatur TownCenter Associates, Ltd. Page # Independent Auditor's Report of Duggan & Massey, P.C ..................... Balance Sheet - December 31, 1995 and 1994 ............................... Statement of Income - For the Years Ended December 31, 1995, 1994 and 1993 ....................................... Statement of Changes in Partner's Capital - For the Years Ended December 31, 1995, 1994 and 1993 ....................................... Statement of Cash Flows - For the Years Ended December 31, 1995, 1994 and 1993 ....................................... Notes to Financial Statements ............................................ DECATUR TOWNCENTER ASSOCIATES, LTD. FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994, AND 1993 [LETTERHEAD OF DUGGAN & MASSEY, P.C. APPEARS HERE] INDEPENDENT AUDITOR'S REPORT ---------------------------- To The Partners Decatur TownCenter Associates, Ltd. We have audited the accompanying balance sheets of Decatur TownCenter Associates, Ltd. as of December 31, 1995 and 1994 and the related statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides 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 Decatur TownCenter Associates, Ltd. as of December 31, 1995 and 1994 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. The Partnership's significant cash deficits and operating losses raise substantial doubt about its ability to continue as a going concern. The Partnership's ability to continue as a going concern is dependent on attaining future positive cash flow and/or additional financing. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Duggan & Massey, PC January 15, 1996 DECATUR TOWNCENTER ASSOCIATES, LTD. BALANCE SHEETS ASSETS ------
December 31 --------------------------------- 1995 1994 -------------- --------------- Current Assets Cash $ 101,091 $ 15,024 Accounts receivable - tenants (Net of allowance for doubtful accounts of $340 and $1,072) 8,422 20,376 Accounts receivable - others 9,810 3,955 Prepaid expenses 2,826 1,860 -------------- --------------- Total Current Assets 122,149 41,215 -------------- --------------- Building and Improvements (Net of accumulated depreciation of $3,059,894 and $2,818,534) 2,978,833 3,161,332 -------------- --------------- Other Assets Loan costs (Net of accumulated amortization of $100,000 and $98,349) -0- 1,650 Commissions and procurement fees (Net of accumulated amortization of $141,934 and $89,770) 123,638 156,906 Investment in Decatur TownCenter II Associates 1 1 -------------- --------------- Total Other Assets 123,639 158,557 -------------- --------------- Total Assets $ 3,224,621 $ 3,361,104 ============== ===============
LIABILITIES AND PARTNERS' CAPITAL ---------------------------------
December 31 -------------------------------- 1995 1994 -------------- -------------- Current Liabilities First mortgage payable $ 5,825,000 $ 5,825,000 Second mortgage payable 1,055,116 1,055,116 Accrued interest expense 1,190,277 994,535 Accrued ground rent expense 1,189,250 988,250 Accounts payable 42,200 40,356 Rents received in advance 1,088 1,536 Security deposit 1,964 1,964 -------------- -------------- Total Current Liabilities 9,304,895 8,906,757 -------------- -------------- Partners' Capital (6,080,274) (5,545,653) -------------- -------------- Total Liabilities and Partners' Capital $ 3,224,621 $ 3,361,104 ============== ==============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF INCOME
Years Ended December 31 ----------------------------------------------------------- 1995 1994 1993 ---------------- ----------------- ------------------ Rental Income $ 1,143,642 $ 1,200,783 $ 1,080,745 ---------------- ----------------- ------------------ Expenses Advertising and promotion 3,433 4,480 857 Amortization 65,084 69,133 58,240 Bad debts 9,524 (530) 620 Depreciation 230,092 224,828 213,102 Donations 100 248 120 General building maintenance 112,535 104,466 100,522 Ground rent 201,000 201,000 201,000 Insurance 10,336 6,611 10,635 Interest 621,739 621,734 655,714 Legal and accounting 11,717 9,762 8,735 Management fees and commissions 75,201 65,888 62,854 Miscellaneous rental expense -0- 1,337 971 Office 5,355 5,324 3,864 Parking deck 11,465 12,783 10,417 Salary reimbursement 36,263 37,716 27,622 Security 21,208 18,599 17,501 Taxes and licenses 142,618 123,490 131,827 Utilities 119,980 122,336 122,318 ---------------- ----------------- ------------------ Total Expenses 1,677,650 1,629,205 1,626,919 ---------------- ----------------- ------------------ Operating Loss (534,008) (428,422) (546,174) ---------------- ----------------- ------------------ Other Income and Expenses Interest income 307 845 3,956 Penalty (920) -0- -0- ---------------- ----------------- ------------------ Total Other Income and Expenses (613) 845 3,956 ---------------- ----------------- ------------------ Net Loss $ (534,621) $ (427,577) $ (542,218) ================ ================= ==================
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31 ----------------------------------------------------- 1995 1994 1993 -------------- -------------- -------------- Balance, beginning of period $ (5,545,653) $ (5,118,076) $ (4,575,858) Net loss for the period (534,621) (427,577) (542,218) -------------- -------------- -------------- Balance, end of period $ (6,080,274) $ (5,545,653) $ (5,118,076) ============== ============== ==============
DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF CASH FLOWS
Years Ended December 31 ------------------------------------------ 1995 1994 1993 ------------ ------------ ------------ Cash Flows From Operating Activities: Net loss $ (534,621) $ (427,577) $ (542,218) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 295,176 293,961 271,342 (Increase) Decrease in assets: Accounts receivable - tenants 11,954 10,072 (11,785) Accounts receivable - others (5,855) (3,955) 6,965 Prepaid expenses (966) 722 11,578 Increase (Decrease) in Liabilities: Accounts payable and accrued liabilities 398,586 238,464 265,679 Rents received in advance (448) (4,964) 6,500 ------------ ------------ ------------ Net cash provided by operating activities 163,826 106,723 8,061 Cash Flows From Investing Activities: Capital expenditures (77,759) (155,176) (294,623) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 86,067 (48,453) (286,562) Cash and cash equivalents at beginning of year 15,024 63,477 350,039 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 101,091 $ 15,024 $ 63,477 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 425,996 $ 577,822 $ 599,154 ============ ============ ============
See accompanying notes and accountant's report. DECATUR TOWNCENTER ASSOCIATES, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Operations ------------------------- Decatur TownCenter Associates, Ltd. was formed on March 8, 1984 as a partnership between A.J. Land, Jr., Daniel B. Pattillo and Lawrence P. Kelly. A.J. Land, Jr. is the general partner of the project. The partnership was established to construct, manage, and lease an office building in Decatur, Georgia. Building and Improvements ------------------------- Building and improvements are carried at cost. Depreciation on the building is computed using the straight-line method over a thirty year period. Tenant improvements are being depreciated using the straight-line method over the lives of the related tenant leases. Expenditures for maintenance, repairs, renewals and improvements which do not materially extend the useful lives of the assets are charged to current earnings. Intangible Assets ----------------- Loan costs are being amortized using the straight-line method over a ten year period. Commissions and procurement fees are being amortized using the straight- line method over the lives of the related leases. Income Taxes ------------ These financial statements do not reflect a provision or expense for income taxes. Each partner's pro rata share of income or loss is reported on their individual income tax return. Reclassifications ----------------- Certain amounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. Cash and Cash Equivalents ------------------------- For purposes of the statements of cash flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of twelve months or less together with accrued interest to be cash equivalents. DECATUR TOWNCENTER ASSOCIATES, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 2. BUILDING AND IMPROVEMENTS The investment in building and improvements consists of the following:
December 31 --------------------------- 1995 1994 ------------ ---------- Construction period interest and taxes $ 338,060 $ 338,060 Building 3,863,063 3,863,063 Landscape and lobby 116,102 116,102 Furniture and equipment 9,067 9,067 Tenant and capital improvements 1,712,435 1,653,574 Less: accumulated depreciation (3,059,894) ( 2,818,534) ----------- ------------ Total Building and Improvements $ 2,978,833 $ 3,161,332 =========== ============
3. FIRST MORTGAGE PAYABLE New England Life Pension Properties holds a first mortgage secured by all of the real property and improvements of the partnership. The total proceeds were $5,825,000. Monthly payments of interest only began April 1, 1985 and continue until maturity. On February 19, 1995, the maturity date of the note was changed from February 19, 1995 to December 31, 1996. On the maturity date, the loan shall be due and payable in full, including any unpaid interest. Annual interest expense amounted to $495,125 for the year ended December 31, 1995, $495,125 for the year ended December 31, 1994, and $529,100 for the year ended December 31, 1993. Interest in the amount of $84,498, $15,369 and $98,072 was accrued but unpaid at December 31, 1995, 1994 and 1993, respectively. There are no binding agreements to refinance on or after the maturity date. The promissory note was amended March 1, 1993 to reduce the interest rate from 12% to 8.5% per annum. 4. SECOND MORTGAGE PAYABLE New England Life Pension Properties ($633,076) and Decatur TownCenter Associates, Ltd. partners ($422,040) hold a second leasehold mortgage secured by all of the real property and improvements of the Partnership. The total proceeds were $1,055,116. The loan bears interest at twelve percent per year, beginning March 10, 1986 until maturity. On February 19, 1995, the maturity date of the note was changed from February 19, 1995 to December 31, 1996. On the maturity date, the loan shall be due and payable including accrued interest. There are no binding agreements to refinance on or after the maturity date. Annual interest expense amounted to $126,614 for each of the years ended December 31, 1995, 1994, and 1993. Interest in the amount of $1,105,779, $979,165 and $852,551 was accrued but unpaid at December 31, 1995, 1994 and 1993, respectively. DECATUR TOWNCENTER ASSOCIATES, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 5. RELATED PARTY TRANSACTIONS The Partnership has contracted with related parties for the performance of various management, leasing and construction services. The Decatur TownCenter Associates, Ltd. partners have common ownership and management control with Land Realty Services, Land & Property In-Town, Pope and Land Enterprises, and Decatur TownCenter II Associates. Amounts involving related parties are summarized as follows:
1995 1994 1993 -------- -------- -------- Accounts receivable $10,149 $ 3,955 $ -0- Accounts payable 25,355 1,416 34,149 Capital improvements -0- 4,996 21,789 Construction-tenant finishes 46,076 89,273 119,978 Entertainment -0- -0- 14 General maintenance 34,923 10,556 4,919 Interest expense 50,646 50,646 50,646 Lease buy-outs -0- 26,637 122,024 Commissions 34,912 26,022 22,609 Management fees 33,361 35,743 38,453 Salaries 36,392 37,716 27,622
Other related party items include a portion of the second mortgage funded by partners in the amount of $422,040 (See Note 4) and the accrued interest due to the partners on the second mortgage for the years ended December 31, 1995, 1994 and 1993 of $442,311, $391,665 and $341,020, respectively. 6. LEASE COMMITMENTS Land - Building Site -------------------- The Partnership sold to and leased back from New England Life Pension Properties the land on which the building is located. The Partnership is committed to a sixty-year lease beginning February 20, 1985. The lease covers property of approximately one acre under the building. Annual ground lease expense amounted to $201,000 for each of the years ended December 31, 1995, 1994 and 1993. At December 31, 1995, 1994 and 1993, a total of $1,189,250, $988,250 and $787,250 was accrued but unpaid. DECATUR TOWNCENTER ASSOCIATES, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 The lease amount is comprised of a fixed annual rental and a participation rental. The fixed annual rental is $16,750 per month. The participation rental is a sum equal to sixty percent (60%) of gross receipts (as defined in the lease agreement) in excess of the base amount attributable to the current lease year. Gross receipts did not exceed the stated base amounts for the years ended December 31, 1995, 1994 and 1993; therefore, no participation rental was owed. Minimum future rental payments are as follows: 1996 $ 201,000 1997 201,000 1998 201,000 1999 201,000 2000 201,000 Thereafter 8,877,500 ---------- Total Minimum Future Rental Payments $9,882,500 ----------
The Partnership has an option to repurchase the land on the date the first mortgage is repaid. Land - Parking Lot ------------------ The Partnership owns approximately one and one-half acres on which the parking lot is located; however, in conjunction with the sale-leaseback described above, this land was leased to and subleased back from New England Life Pension Properties. The primary lease is for a term of ninety-nine years, beginning February 20, 1985. The annual rent income amount is $1. The terms of the sublease are identical to those of the primary lease, with the annual rent expense amount being $1. 7. INVESTMENT IN DECATUR TOWNCENTER II ASSOCIATES Decatur Town Center Associates, Ltd. entered into a joint venture on December 31, 1987 with New England Life Pension Properties IV to build an office building on the Leasehold Tract - Clairmont Road Property. The joint venture will lease and manage the property until December 31, 2047 unless sooner dissolved or terminated. No losses from the joint venture have been allocated to Decatur TownCenter Associates, Ltd. since operating deficiencies are funded by New England Life Pension Properties IV. DECATUR TOWNCENTER ASSOCIATES, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 8. RENTALS UNDER OPERATING LEASES Minimum future rental income on noncancellable operating leases as of December 31, 1995 is:
Year Ending Minimum Future December 31 Rentals ----------- -------------- 1996 $ 844,474 1997 720,270 1998 514,765 1999 357,896 2000 170,415 Thereafter 12,254 ---------- Total $2,620,074 ----------
9. CONTINGENCY The Partnership is negotiating with New England Life Pension Properties to purchase the land and retire the debt in Decatur TownCenter Associates, Ltd. If these negotiations are unsuccessful, New England Life Pension Properties has the option to offer the property for sale at its sole discretion as granted in the amended ground lease dated February 19, 1995. FINANCIAL STATEMENTS INDEX NO. 4 Auditor's Report and Financial Statements of M.O.R. XVIII Associates Limited Partnership (referred to elsewhere herein as Rivers Corporate Park) Page # Independent Auditor's Report of Wolpoff & Company.......................... Balance Sheet - December 31, 1996 and 1995 ................................ Statement of Income - For the Years Ended December 31, 1996, 1995 and 1994 ........................................ Statement of Partners' Capital - For the Years Ended December 31, 1996, 1995 and 1994 ........................................ Statement of Cash Flows - For the Years Ended December 31, 1996, 1995 and 1994 ........................................ Notes to Financial Statements ............................................. M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP FINANCIAL REPORT DECEMBER 31, 1996 M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- CONTENTS -------- DECEMBER 31, 1996 ----------------- ACCOUNTANT'S REVIEW REPORT 1 FINANCIAL STATEMENTS Balance Sheet 2 - 3 Statement of Income 4 Statement of Partners' Capital 5 Statement of Cash Flows 6 - 7 Notes to Financial Statements 8 - 11 ACCOUNTANT'S REPORT ON SUPPLEMENTARY INFORMATION 12 SUPPLEMENTARY INFORMATION Schedule of Changes in Partners' Capital - Income Tax Basis 13 Supplemental Ground Rent 14 To the Partners M.O.R. XVIII Associates Limited Partnership Columbia, Maryland We have reviewed the balance sheet of M.O.R. XVIII Associates Limited Partnership as of December 31, 1996 and 1995, and the related statements of income, partners' capital, and cash flows for the three years ended December 31, 1996, 1995 and 1994, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of M.O.R. XVIII Associates Limited Partnership. A review consists principally of inquiries of Partnership personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. WOLPOFF & COMPANY, LLP Baltimore, Maryland January 20, 1997 M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- BALANCE SHEET ------------- ASSETS ------
December 31, ------------------------------ 1996 1995 ------------------------------ PROPERTY AT COSTS - Notes 1 and 2 Land, 5.3 Acres (11 Acres are Leased - See Note 5) $ 762,452 $ 762,452 Building No. 1 2,449,170 2,449,170 Tenant Improvements 1,138,724 1,138,724 Construction in Progress - Building No. 2 2,597,015 227,713 Deffered Costs 620,740 403,059 ----------- ----------- 7,568,101 4,981,118 Less Accumulated Depreciation and Amortization (1,316,878) (1,250,349) ----------- ----------- PROPERTY, NET 6,251,223 3,730,769 ----------- ----------- OTHER ASSETS Cash and Cash Equivalents - Note 1 0 1,494 Restricted Funds 47,199 152,556 Receivables from Tenant Rent and Expense Reimbursements 134,952 0 Deferred Rent Receivable - Notes 1 and 4 0 644,037 Receivable, Affiliates - Note 3 40,512 40,512 Receivable, Partner 0 150,000 Prepaid Taxes 6,573 0 ----------- ----------- TOTAL OTHER ASSETS 229,236 988,599 ----------- ----------- $ 6,480,459 $ 4,719,368 =========== ===========
____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement. -2- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- BALANCE SHEET ------------- LIABILITIES AND PARTNERS' CAPITAL ---------------------------------
December 31, ------------------------------ 1996 1995 ------------------------------ LIABILITIES Mortgage Payable - Note 2 $ 4,000,000 $ 4,000,000 Construction Mortgage Payable - Note 2 1,793,887 0 Accrued Interest Payable 65,531 38,333 Tenant Security Deposits 43,161 43,161 Payable, Affiliates - Note 3 585,924 360,261 Accounts Payable and Accrued Expenses 951,093 1,271 ----------- ----------- TOTAL LIABILITIES 7,439,596 4,443,026 COMMITMENTS AND CONTINGENCY - Note 5 PARTNERS' CAPITAL - Note 1 (959,137) 276,342 ----------- ----------- $ 6,480,459 $ 4,719,368 =========== ===========
____________________ See Accountants' Review Report. The notes to financial statements are an integral part of this statement. -3- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- STATEMENT OF INCOME -------------------
Year Ended December 31, -------------------------------------------- 1996 1995 1994 ------------ -------------- ----------- REVENUE - Notes 1 and 4 Rental Income $ 677,374 $ 677,374 $ 677,374 Interest and Other Income 15,563 4,072 22,808 ---------- ---------- ---------- TOTAL REVENUE 692,937 681,446 700,182 ---------- ---------- ---------- EXPENSES - Note 4 General and Administrative 409 7,342 4,449 Property Taxes 6,602 9,751 10,194 Legal and Accounting 15,560 3,700 3,818 Management Fees - Note 3 19,045 19,232 5,266 Bad Debt - Note 4 668,335 0 0 ---------- ---------- ---------- TOTAL EXPENSES 709,951 40,025 23,727 ---------- ---------- ---------- OPERATING INCOME (17,014) 641,421 676,455 ---------- ---------- ---------- MORTGAGE INTEREST AND GROUND RENT Interest on Permanent Mortgage - Note 2 380,000 460,000 460,000 Land Mortgage Interest 0 0 68,944 Ground Rent - Note 5 105,822 154,538 126,500 ---------- ---------- ---------- 485,822 614,538 655,444 ---------- ---------- ---------- INCOME (LOSS) BEFORE DEPRECIATION (502,836) 26,883 21,011 DEPRECIATION AND AMORTIZATION (66,529) (74,666) (81,324) ---------- ---------- ---------- NET LOSS - Notes 1 and 6 $ (569,365) $ (47,783) $ (60,313) ========== ========== ==========
____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement. -4- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- STATEMENT OF PARTNERS' CAPITAL ------------------------------
Year Ended December 31, -------------------------------------------- 1996 1995 1994 ------------ -------------- ----------- CAPITAL CONTRIBUTIONS Prior Years $ 1,489,546 $ 1,489,546 $ 414,406 Current Year 220,626 0 1,075,140 ----------- ----------- ----------- 1,710,172 1,489,546 1,489,546 ----------- ----------- ----------- DISTRIBUTIONS Prior Years (788,241) (788,241) (788,241) Current Year (886,740) 0 0 ----------- ----------- ----------- (1,674,981) (788,241) (788,241) ----------- ----------- ----------- ACCUMULATED LOSSES Prior Years (424,963) (377,180) (316,867) Current Year (569,365) (47,783) (60,313) ----------- ----------- ----------- (994,328) (424,963) (377,180) ----------- ----------- ----------- TOTAL PARTNERS' CAPITAL (DEFICIT) $ (959,137) $ 276,342 $ 324,125 =========== =========== ===========
____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement. -5- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- STATEMENT OF CASH FLOWS -----------------------
Year Ended December 31, -------------------------------------------- 1996 1995 1994 ------------ -------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (569,365) $ (47,783) $ (60,313) ----------- ---------- ----------- Adjustments to Reconcile Net Loss to Net Cash Provided (Used) by Operating Activities Depreciation and Amortization 66,529 74,666 81,324 Change in Accounts Payable and Accrued Expenses 27,169 1,271 (192,363) Change in Prepaid Expenses (6,573) 20,625 0 Change in Receivables from Tenant 509,085 (22,519) (149,901) Increase in Receivables, Affiliates 0 0 (25,286) Change in Restricted Funds 105,357 (6,983) (842) ----------- ---------- ----------- Total Adjustments 701,567 67,060 (287,068) ----------- ---------- ----------- Net Cash Provided (Used) by Operating Activities 132,202 19,277 (347,381) ----------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction Costs, Net of Accounts Payable (1,419,451) 0 0 Change in Receivable, Affiliates 0 0 (15,226) Leasing Commissions (217,681) 0 0 Change in Receivable, Partner 150,000 0 0 ----------- ---------- ----------- Net Cash Used by Investing Activites (1,487,132) 0 (15,226) ----------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in Payable, Affiliates 225,663 (19,347) 379,608 Capital Contributions 220,626 0 0 Principal Payments on Land Mortgage 0 0 (18,080) Distributions to Partners (886,740) 0 0 Proceeds from Construction Loan 1,793,887 0 0 ----------- ---------- ----------- Net Cash Provided (Used) by Financing Activities 1,353,436 (19,347) 361,528 ----------- ---------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,494) (70) (1,079) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,494 1,564 2,643 ----------- ---------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 0 $ 1,494 $ 1,564 =========== ========== ===========
*Reclassified to conform to current year's presentation. (Continued) ____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement. -6- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- STATEMENT OF CASH FLOWS -----------------------
Year Ended December 31, ------------------------------------------- 1996 1995 1994 ------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During the Year for Interest Expensed $ 458,625 $ 539,244 $ 539,244 Capitalized $ 10,759 $ 0 $ 0 =========== =========== ============= SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: Assumption of Land Mortgage by Partners $ 0 $ 0 $ 1,075,140 =========== =========== =============
____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement. -7- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1996 ----------------- Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization ------------ M.O.R. XVIII Associates Limited Partnership (the Partnership) was formed in 1982 pursuant to an agreement under the Maryland Uniform Limited Partnership Act. Property -------- The Partnership owns a leasehold interest in a 75,000-square-foot office/warehouse building (Building #1) in Columbia (Howard County), Maryland. See Note 5 regarding the related land lease. The development of the property, which is 100% leased to Crop Genetics International Corporation (see Note 4), was completed and operations commenced in February 1984. During 1996, the Partnership constructed a building containing 35,000 square feet of leasable space on 5.3 acres of land adjacent to Building #1. The building is 100% leased GTS/Duratek and became operational in January 1997. Carrying costs and expenses incurred during the construction of Building #2 were capitalized and included in construction in progress. Depreciation ------------ Building and improvement costs are being depreciated using the straight-line method over the estimated useful life of 50 years. Amortization ------------ Various deferred costs are being amortized as follows: Amortization Amount Period ------ ------------- Leasing Costs $ 345,216 3 - 10 Years Mortgage Costs 258,785 4 - 10 Years Organization Costs 16,739* 5 Years --------- $ 620,740 ========= *Fully amortized. Rental Income ------------- Rental income is recognized on a straight-line basis over the term of the lease. The excess of resulting rental income over the rent stipulated in the lease is reflected as deferred rent receivable. Cash and Cash Equivalents -------------------------- The Partnership considers all highly liquid debt instruments purchased with a maturity of 3 months or less to be cash equivalents. -8- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- NOTES TO FINANCIAL STATEMENTS - CONTINUED ----------------------------------------- DECEMBER 31, 1996 ----------------- Note 1 - Income Taxes ------------ (Cont.) Partnerships, as such, are not subject to income taxes. The partners are required to report their respective shares of partnership income or loss on their respective income tax returns (see Note 6). Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Note 2 - DEBT SERVICE Mortgage Financing - Building No. 1 ----------------------------------- On March 28, 1984, the Partnership obtained permanent financing on the leasehold interest from New England Life Pension Properties in the amount of $4,000,000. Pertinent terms of the mortgage are as follows: Mortgage Amount $4,000,000 Date Settled 3/28/84 Interest Rate 9.5% Total Annual Payments (Interest Only) $380,000 Term December 31, 1997 An agreement in principle was reached with the mortgagor that effective January 1, 1996, the loan was amended to reduce the interest rate to 9.5% from 11.5%, reduce interest only payments to $380,000 from $460,000, and extend the maturity date from March 1994 to December 1997. These financial statements have incorporated the amended terms. The amended terms remain in effect through December 31, 1997. Construction Mortgage - Building No. 2 -------------------------------------- In September 1996, the Partnership obtained a construction loan commitment in the amount of $3,075,000 from First Union National Bank of Maryland for Building #2. The building has been leased to GTS/Duratek which occupied the building in January 1997. During the construction period, interest only is payable monthly at the LIBOR rate plus 225 basis points. Principal payments begin upon completion of tenant improvements and are based on a 20-year amortization. The Partnership is required to make additional principal payments annually equal to the net cash flow of the property. The loan is personally guaranteed by certain partners of MRU Limited Partnership. Note 3 - RELATED PARTY TRANSACTIONS Management Fees --------------- The Partnership has entered into an agreement with Manekin Corporation, an affiliated entity, to act as management agent for the property. The management agreement provides for management fees equal to 3% of rent and tenant expense billings collected. Management fees totaled $19,045, $19,232 and $5,266 in 1996, 1995 and 1994, respectively. -9- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- NOTES TO FINANCIAL STATEMENTS - CONTINUED ----------------------------------------- DECEMBER 31, 1996 ----------------- Note 3 - Payable, Affiliates ------------------- (Cont.) The Partnership participates in a central disbursing cash account with various entities affiliated with the Partnership. As of December 31, 1996 and 1995, funds used by the Partnership in excess of the Partnership's cash balance amounted to $585,924 and $360,261, respectively, and is reflected as payable, affiliates. The funds bear interest at the applicable federal rate. Receivable, Affiliates ---------------------- As of December 31, 1996 and 1995, the Partnership had amounts due from various affiliated entities totaling $40,512. Construction Contracts During 1996, the Partnership entered into contracts with Manekin Corporation, an affiliated entity, a company controlled by the partners of MRU Limited Partnership, for the construction of a 35,000 square foot building and related tenant improvements. The contracts amounted to approximately $2,286,000. As of December 31, 1996, $949,851 was payable to Manekin Corporation and is included in accounts payable. Note 4 - LEASE Crop Genetics International Corporation entered into a lease agreement with the Partnership in September 1992 and moved into the space on December 1, 1992. Real property taxes, insurance and most operating expenses are paid directly by the tenant. The lease is for a twelve-year, three-month term and provided for six months of free rent. The average annual rent is $653,076. During 1996, Crop Genetics filed for Bankruptcy under Chapter 11. In December 1996, the company sold its assets to Thermotrilogy Corporation. The Partnership is currently negotiating the lease terms with Thermotrilogy Corporation. The Partnership does not anticipate collecting receivables from Crop Genetics in the amount of $668,335. GTS/Duratek entered into a lease for building No. 2 effective January 1, 1997. The lease is for a ten year period for an average annual rent of $438,866. Future minimum rents to be received under the noncancellable term of the lease are as follows: 1997 $ 424,548 1998 424,548 1999 424,548 2000 424,548 2001 424,548 Thereafter 2,704,788 -10- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- NOTES TO FINANCIAL STATEMENTS - CONTINUED ----------------------------------------- DECEMBER 31, 1996 ----------------- Note 5 - LAND SALE AND LEASEBACK On March 28, 1984, the Partnership entered into a sale-leaseback agreement through December 31, 1995, with New England Life Pension Properties (a real estate limited partnership). Pursuant to this agreement, the Partnership sold 11 acres of land for $1,100,000 in exchange for a 60-year net leasehold interest in the land. The annual rent is $126,500 plus 50% of all gross revenues as defined in excess of $597,000. An agreement in principle was reached with the land lessor whereby, effective January 1, 1996, the annual rent was reduced to $104,500 plus 80% of all gross revenues in excess of $597,000. These financial statements incorporate the amended terms. Effective January 1997, the additional rent is adjusted to 80% of revenues greater than $508,095. Additional ground rent in the amount of $1,322 and $28,038 was incurred for 1996 and 1995, respectively. No additional ground rent was incurred in 1994. Note 6 - TAX ACCOUNTING The taxable loss of the Partnership differs from financial reporting as follows:
Current Prior Year Years Total ----------- ----------- ------------ Net Loss as Reported $ (569,365) $ (424,963) $ (994,328) Depreciation Adjustments (155,473) (1,779,595) (1,935,068) Amortization of Interest and Taxes 0 (269,005) (269,005) Capitalized Interest and Taxes on Undeveloped Land 0 98,316 98,316 Deferred Rent 644,037 (644,037) 0 Prepaid Taxes (6,753) 0 (6,753) ----------- ----------- ------------ Taxable Loss $ (87,554) $(3,019,284) $(3,106,838)
-11- To the Partners M.O.R. XVIII Associates Limited Partnership Columbia, Maryland ACCOUNTANT'S REPORT ON SUPPLEMENTARY INFORMATION ------------------------------------------------ The accompanying supplementary information contained on pages 13 and 14 is presented for purposes of additional analysis. Such information has not been subjected to the same inquiries and analytical procedures applied in the review of the basic financial statements, but has been compiled from information that is the representation of the management of M.O.R. XVIII Associates Limited Partnership, without audit or review. Accordingly, we do not express an opinion or any other form of assurance on such supplementary information. WOLPOFF & COMPANY, LLP Baltimore, Maryland January 20, 1997 -12- M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP ------------------------------------------- SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS ----------------------------------------------------------- YEAR ENDED DECEMBER 31, 1996 ----------------------------
Partners' Partners' Partners' Capital Capital Ownership (Deficit) Capital Current (Deficit) Percentage 12/31/95 Contribution Distributions Year Loss 12/31/96 ----------- -------- ------------ ------------- --------- ------------ GENERAL PARTNER RA & DM, Inc. 1.00% $ (38,154) $ 2,206 $ (8,867) $ (875) $ (45,690) LIMITED PARTNER MRU Limited Partnership 99.00% (2,269,577) 218,420 (877,873) (86,679) (3,015,709) ------ ------------ --------- ---------- --------- ------------ 100.00% $ (2,307,731) $ 220,626 $ (886,740) $ (87,554) $ (3,061,399) ====== ============ ========== ========== ========= ============
__________ See Accountant's Review Report on Supplementary Information. -13- MOR XVIII --------- SUPPLEMENTAL GROUND RENT ------------------------ DECEMBER 31, 1996 -----------------
1996 1995 1994 ----------- ----------- ----------- Rental Income $ 677,374 $ 677,374 $ 677,374 ----------- ----------- ----------- Deferred Rent Receivable Current Year (668,336) (644,037) (619,738) Prior Year 644,037 619,738 471,557 ----------- ----------- ----------- (24,299) (24,299) (148,181) ----------- ----------- ----------- Rent Receivable Current Year (54,423) 0 0 Prior Year 0 0 0 ----------- ----------- ----------- (54,423) 0 0 ----------- ----------- ----------- Net Rent 598,652 653,075 529,193 Base Rent 597,000 597,000 597,000 ----------- ----------- ----------- Excess Net Rent Over Base Rent 1,652 56,075 (67,807) Supplemental Ground Rent Rate 80.0% 50.0% 50.0% ----------- ----------- ----------- Supplemental Ground Rent $ 1,322 $ 28,038 $ 0 =========== =========== ===========
__________ See Accountant's Review Report on Supplementary Information. -14-
EXHIBIT INDEX ------------- EXHIBIT NO. EXHIBIT PAGE NO. - ---------- ------- -------- 4. Amended and Restated Agreement of Limited * Partnership of the Registrant, dated June 29, 1983 (filed as Exhibit 4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983 [the "1983 Annual Report"]). 10A. Form of Escrow Deposit Agreement among the * Registrant, NEL Equity Services Corporation and The First National Bank of Boston (filed as Exhibit 10A to the Registrant's Registration Statement on Form S-11, dated December 22, 1982, file no. 2-81059 [the "Registration Statement"]). 10B. Advisory Contract dated March 22, 1983, between * the Registrant and Copley Real Estate Advisors, Inc. (filed as Exhibit 10 to the 1983 Annual Report). 10C. Form of Agreement between the Registrant and * Copley Properties Company, Inc. relating to organizational expenses (filed as Exhibit 10C to the Registration Statement). 10D. Purchase Agreement and Deposit Receipt dated * April 14, 1983 between Doyle Development Company and NBS Investment Corporation, which assigned its rights and obligations thereunder to the Registrant (filed as Exhibit 10 to Current Report on Form 8-K dated June 29, 1983, as filed on July 14, 1983). 10E. Purchase and Sale Agreement dated December 1984, * as amended by First Addendum to Purchase and Sale Agreement dated as of January 10, 1985 (filed as Exhibit 28 to Current Report on Form 8-K dated January 23, 1985). 10F. Amended and Restated Secured Promissory Note * dated August 20, 1985, by VMS 1984-133, Ltd., for the benefit of the Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
EXHIBIT INDEX ------------- Exhibit Number Page Number - -------------- ----------- 10G. Amended and Restated Ground Lease dated * August 20, 1985 between the Registrant, New England Life Pension Properties II; A Real Estate Limited Partnership and VMS 1984-133, Ltd. 10H. Amended and Restated Memorandum of Ground * Lease dated August 20, 1985 by and among the Registrant, New England Life Pension Properties II; A Real Estate Limited Partnership and VMS 1984-133, Ltd. 10I. Contract of Sale dated as of March 30, 1984 by * and between Decatur TownCenter Associates, Ltd., and the Registrant. 10J. Three Party Agreement dated as of March 30, 1984 * by and among Decatur Town Center Associates, the Registrant and the Citizens and Southern National Bank. 10K. Promissory Note dated February 20, 1985, in the * principal amount of $5,825,000 from the Registrant to Decatur Town Center Associates, Ltd. 10L. Ground Lease dated February 20, 1985 between * the Registrant and Decatur Town Center Associates, Ltd. 10M. First Consolidated Amendatory Agreement dated * December 29, 1988 by and between Decatur TownCenter Associates, Ltd. and the Registrant.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
EXHIBIT INDEX ------------- Exhibit Number Page Number - -------------- ----------- 10N. Purchase and Sale Agreement dated September 27, * 1990 by and between New England Mutual Life Insurance Company, a Massachusetts corporation, and Tom Hennig Co., Inc., a California corporation, as amended by Letter dated December 12, 1990. 10O. Letter Agreement between New England Life * Pension Properties II; A Real Estate Limited Partnership, the Registrant and Willows Concord Venture dated June 14, 1991. 10P. Promissory Note dated June 14, 1991, in the * principal amount of $14,863,206.38 from Willows Concord Venture to New England Life Pension Properties II; A Real Estate Limited Partnership and the Registrant. 10Q. Assignment of Note and Liens Including Deed of * Trust dated as of June 13, 1991 by New England Life Pension Properties II; A Real Estate Limited Partnership and the Registrant to Willows Concord Venture. 10R. Assignment of VMS Loan Documents dated June 14, * 1991 by Willows Concord Venture to New England Life Pension Properties II; A Real Estate Limited Partnership and the Registrant. 10S. Deed of Trust and Security Agreement dated June 13, * 1991 between Willows Concord Venture, as Trustor, Chicago Title Company, as Trustee, and New England Life Pension Properties II; A Real Estate Limited Partnership and the Registrant, as Beneficiary. 10T. Assignment of Leases and Rents dated June 13, 1991 * by Willows Concord Venture to New England Life Pension Properties II; A Real Estate Limited Partnership and the Registrant. 10U. Amended and Completely Restated Ground Lease * dated effective as of June 18, 1991 between Registrant, New England Life Pension Properties II; A Real Estate Limited Partnership and Willows Concord Venture.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
EXHIBIT INDEX ------------- Exhibit Number Page Number - -------------- ----------- 10V. Amended and Restated Secured Promissory Note * effective as of June 14, 1991, in the principal amount of $14,863,206.38 from Willows Concord Venture to the Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership. 10W. Modification Agreement and First Amendment to * Loan Documents dated August 13, 1991, by and between Willows Concord Venture, the Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership. 10X. Modification Agreement and Second Amendment to * Loan Documents dated September 12, 1991, by and between Willows Concord Venture, the Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership. 10Y. Modification Agreement and Third Amendment to * Loan Documents dated October 15, 1991, by and between Willows Concord Venture, the Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership. 10Z. Fourth Amendment to Loan Documents dated * December 17, 1992 by and between Willows Concord Venture, Registrant and New England Life Pension Properties II; A Real Estate Limited Partnership. 10AA. Amendment to Promissory Note executed as of * March 1, 1993 made by Decatur TownCenter Associates, Ltd. in favor of Registrant. 10BB. First Amendment to First Consolidated * Amendatory Agreement executed as of March 1, 1993 made by and between the Registrant and Decatur TownCenter Associates, Ltd.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
EXHIBIT INDEX ------------- Exhibit Number Page Number - -------------- ----------- 10CC. Fee Transfer and Lien Release Agreement dated * June 1, 1994 by and between New England Life Pension Properties, A Real Estate Limited Partnership. a Massachusetts limited partnership and 5141 E. Santa Ana Property Company, a California Limited Partnership. 10DD. Construction Loan Agreement dated January 1, 1995 * by and between Willows Concord Venture, A California Limited Partnership as Borrower, and New England Life Pension Properties; A Real Estate Limited Partnership as Lender. 10EE. Second Amendment to Promissory Note dated as of * February 19, 1995 between the Registrant and Decatur TownCenter Associates, Ltd. ("Decatur"). 10FF. Second Amendment to Ground Lease dated as of * February 19, 1995 between the Registrant and Decatur. 10GG. Second Amendment to First Consolidated Amendatory * Agreement dated as of February 19, 1995 between the Registrant and Decatur. 10HH. Third Amendment to Participation Agreement dated as * of February 19, 1995 among the Registrant, A.J. Land, Jr., David B. Pattillo and Lawrence P. Kelly.
------------------------------------------------------ * Previously filed and incorporated herein by reference. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP Date: March 31, 1997 By: /s/ Joseph W. O'Connor ---------------------- Joseph W. O'Connor President of the General Partner Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- President, Principal Executive Officer and Director of the /s/ Joseph W. O'Connor General Partner March 31, 1997 - ------------------------ Joseph W. O'Connor Principal Financial and Accounting Officer of the /s/ Daniel C. Mackowiak General Partner March 31, 1997 - ------------------------- Daniel C. Mackowiak Director of the /s/ Daniel J. Coughlin General Partner March 31, 1997 - ------------------------ Daniel J. Coughlin Director of the /s/ James J. Finnegan General Partner March 31, 1997 - ----------------------- James J. Finnegan
EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1996 DEC-31-1996 2,300,885 498,869 50,452 0 0 2,850,206 10,311,339 0 13,431,421 437,083 654,543 0 0 0 12,339,795 13,431,421 1,588,475 1,712,474 343,067 343,067 420,315 409,592 0 539,500 0 539,500 0 0 0 539,500 17.80 17.80
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