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:
(1) Biosys declared bankruptcy in 1996, see Item 1 A.

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.

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.

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.

Item 6. Selected Financial Data. ------------------------
(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.

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.

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.

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.

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.
(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.

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.
For the year ended December 31, 1996, the Partnership allocated $(17,441) of taxable loss to the General Partner.
Item 12.

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.

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.

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
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(See accompanying notes to financial statements)
NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(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:
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.
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
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.
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:
(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.
(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:
NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE AT DECEMBER 31, 1996
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 ------
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
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
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
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:
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:
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:
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.
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:
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. ===============
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
12. RENTALS UNDER OPERATING LEASES
Minimum future rental income on noncancellable operating leases as of October 9, 1996 is:
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 ------
LIABILITIES AND PARTNERS' CAPITAL ---------------------------------
See accompanying notes and accountant's report.
DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF INCOME
See accompanying notes and accountant's report.
DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF PARTNERS' CAPITAL
DECATUR TOWNCENTER ASSOCIATES LTD. STATEMENTS OF CASH FLOWS
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:
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:
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:
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:
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 ------
____________________ See Accountant's Review Report. The notes to financial statements are an integral part of this statement.
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
BALANCE SHEET -------------
LIABILITIES AND PARTNERS' CAPITAL ---------------------------------
____________________
See Accountants' Review Report. The notes to financial statements are an integral part of this statement.
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
STATEMENT OF INCOME -------------------
____________________
See Accountant's Review Report. The notes to financial statements are an integral part of this statement.
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
STATEMENT OF PARTNERS' CAPITAL ------------------------------
____________________
See Accountant's Review Report. The notes to financial statements are an integral part of this statement.
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
STATEMENT OF CASH FLOWS -----------------------
*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.
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
STATEMENT OF CASH FLOWS -----------------------
____________________
See Accountant's Review Report. The notes to financial statements are an integral part of this statement.
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.
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.
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
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:
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
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP -------------------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS -----------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 ----------------------------
__________
See Accountant's Review Report on Supplementary Information.
MOR XVIII ---------
SUPPLEMENTAL GROUND RENT ------------------------
DECEMBER 31, 1996 -----------------
__________
See Accountant's Review Report on Supplementary Information.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
------------------------------------------------------ * Previously filed and incorporated herein by reference.
------------------------------------------------------ * 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.