SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File Number 0-20126
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3035851
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
399 Boylston Street, 13th Fl.
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART I
FINANCIAL INFORMATION
BALANCE SHEET
(Unaudited)
March 31, 1996 December 31, 1995
-------------- -----------------
Assets
Real estate investments:
Joint ventures $ 13,373,719 $ 13,489,028
Property, net 11,495,839 11,574,071
----------- -----------
24,869,558 25,063,099
Cash and cash equivalents 3,132,250 3,194,992
Short-term investments 1,571,268 1,524,276
----------- -----------
$ 29,573,076 $ 29,782,367
=========== ==========
Liabilities and Partners' Capital
Accounts payable $ 47,421 $ 86,646
Accrued management fee 60,950 57,713
Deferred disposition fees 478,108 478,108
----------- ----------
Total liabilities 586,479 622,467
----------- ----------
Partners' capital (deficit):
Limited partners ($892 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 29,014,444 29,186,014
General partners (27,847) (26,114)
----------- -----------
Total partners' capital 28,986,597 29,159,900
----------- -----------
$ 29,573,076 $ 29,782,367
=========== ===========
<FN>
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
------------------------
1996 1995
------- ------
Investment Activity
Property rentals $ 430,711 $ 67,163
Property operating expenses (175,754) (5,156)
Depreciation and amortization (87,743) (22,411)
----------- ------------
167,214 39,596
Joint venture earnings 293,592 282,759
----------- ------------
Total real estate operations 460,806 322,355
Gain on sale of property by
joint venture - 181,974
----------- ------------
Total real estate activity 460,806 504,329
Interest on cash equivalents
and short-term investments 58,874 268,642
----------- ------------
Total investment activity 519,680 772,971
----------- ------------
Portfolio Expenses
Management fees 60,950 56,578
General and administrative 48,495 51,106
----------- ------------
109,445 107,684
----------- ------------
Net Income $ 410,235 $ 665,287
=========== ============
Net income per limited
partnership unit $ 9.65 $ 15.65
=========== ============
Cash distributions per limited
partnership unit $ 13.73 $ 37.70
=========== ============
Number of limited partnership
units outstanding during
the period 42,076 42,076
=========== ============
<FN>
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN
PARTNERS' CAPITAL (Deficit)
(Unaudited)
Quarter ended March 31,
------------------------------------------------
1996 1995
---------------------- --------------------
General Limited General Limited
Partners Partners Partners Partners
--------- -------- -------- --------
Balance at
beginning $(26,114) $29,186,014 $ (23,295) $33,841,011
of period
Cash
Distributions (5,835) (577,703) (5,823) (1,586,265)
Net income 4,102 406,133 6,653 658,634
--------- ----------- --------- ----------
Balance at end
of period $(27,847) $29,014,444 $(22,465) $32,913,380
========= =========== ========= ===========
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter ended March 31,
-------------------------------
1996 1995
---------- ----------
Net cash provided by operating
activities $ 558,042 $ 392,153
----------- -----------
Cash flows from investing activities:
Investment in property (2,714) -
Decrease (increase) in short-term
investments, net (34,532) 2,714,653
Investment in joint venture - (79,190)
Net proceeds from sale of investment - 181,974
Deposits and deferred property
acquisition costs - (150,109)
---------- -----------
Net cash provided by (used in)
investing activities (37,246) 2,667,328
----------- -----------
Cash flows from financing activity:
Distributions to partners (583,538) (1,592,088)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (62,742) 1,467,393
Cash and cash equivalents:
Beginning of period 3,194,992 13,419,447
----------- -----------
End of period $3,132,250 $14,886,840
=========== ===========
<FN>
(See accompanying notes to financial statements)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Partnership's financial position as of March 31, 1996 and December 31,
1995 and the results of its operations, its cash flows and changes in
partners' capital (deficit) for the interim periods ended March 31, 1996
and 1995. These adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1995
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
Note 1 - Organization and Business
Copley Pension Properties VII; 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 March 1989. It acquired four of the five real estate investments it
currently owns prior to 1991, and a fifth property in 1995. The
Partnership intends to dispose of its investments within eight to twelve
years of their acquisition, and then liquidate.
Note 2 - Real Estate Joint Ventures
The following summarized financial information is presented in the
aggregate for the Partnership's joint ventures:
Assets and Liabilities
-----------------------
March 31, 1996 December 31, 1995
--------------- ------------------
Assets
Real property, at cost less
accumulated depreciation of
$6,706,200 and $6,395,506,
respectively $23,070,667 $23,455,289
Other 1,431,683 1,421,726
------------ -------------
24,502,350 24,877,015
Liabilities 277,997 358,871
------------- -------------
Net assets $24,224,353 $24,518,144
============ ============
Results of Operations
Quarter ended March 31,
1996 1995
----------- -----------
Revenue
Rental income $1,165,487 $ 1,116,799
Other 565 987
------------ ------------
1,166,052 1,117,786
------------ ------------
Expenses
Operating expenses 399,230 319,783
Depreciation and amortization 274,618 276,320
------------ ------------
673,848 596,103
------------ ------------
Net income $ 492,204 $ 521,683
============ ============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to two joint ventures) its affiliates on
behalf of their various financing arrangements with the joint ventures.
Note 3 - Property
On April 14, 1995, the Partnership acquired a 174-unit apartment complex
in Sherman Oaks, California, known as Regency Court Apartments, for a
total price of $9,605,021. The purchase and sale agreement requires the
seller to supplement the monthly rental income generated from the property
to the extent such income is less than $125,000 per month during the one
year period ending April 13, 1996, but not to exceed $300,000 in total.
The shortfall through March 31, 1996 was $108,994, of which $65,941 has
been credited against the purchase price; the remainder will be so
credited upon receipt.
The following is a summary of the Partnership's property investments:
March 31, 1996 December 31, 1995
------------- -----------------
Land $2,190,969 $ 2,190,969
Buildings and improvements 9,829,005 9,826,291
Accumulated depreciation (456,208) (371,106)
Other net liabilities (67,927) (72,083)
----------- ------------
$11,495,839 $11,574,071
=========== ============
In February, 1995, the Partnership entered into a purchase and sale
agreement for the purchase of a research and development facility located
in Tempe, Arizona. After completing its due diligence review and further
negotiating with the seller, a final agreement could not be reached and
the Partnership abandoned the transaction in the second quarter.
Note 4 - Subsequent Event
Distributions of cash from operations relating to the quarter ended March
31, 1996 were made on April 25, 1996 in the aggregate amount of $616,265
($14.50 per limited partnership unit).
Management's Discussion and Analysis of Financial Condition
- - -----------------------------------------------------------
and Results of Operations
- - -------------------------
Liquidity and Capital Resources
The Partnership's offering of units of limited partnership interest
was completed as of September 30, 1990. A total of 42,076 units were
sold. The Partnership received proceeds of $36,522,542, net of selling
commissions and other offering costs, which have been used for investment
in real estate, the payment of related acquisition costs, and for working
capital reserves. The Partnership made seven real estate investments, one
of which was sold in 1991 and another in 1994. Through March 31, 1996,
capital of $4,544,208 has been returned to the limited partners as a
result of these sales.
At March 31, 1996, the Partnership had $4,703,518 in cash, cash
equivalents and short-term investments, of which $616,265 was used for
operating cash distributions to partners on April 25, 1996. The source of
future liquidity and cash distributions to partners will primarily be cash
flow generated by the Partnership's short-term and real estate investments
and proceeds from the sale of such investments. The adjusted capital
contribution was reduced from $996 to $972 per limited partnership unit
during the first quarter of 1995, and then to $892 during the fourth
quarter of 1995, with the distribution of proceeds from the sale of
Kachina Apartments in 1994. The sales transaction also resulted in the
payment of previously accrued, but deferred, management fees of $203,452
to the advisor. Distributions of cash from operations relating to the
first quarter of 1996 were made at an annualized rate of 6.5% on the
adjusted capital contribution. Distributions of cash from operations
relating to the first quarter of 1995 were made at an annualized rate of
5.5% on the weighted average adjusted capital contribution. The increase
in the distribution rate results from the attainment of appropriate cash
reserve levels and the improvement in cash flow from operations.
The carrying value of real estate investments in the financial
statements is at depreciated cost, or if the investment's carrying value
is determined not to be recoverable through expected undiscounted future
cash flows, the carrying value is reduced to estimated fair market value.
The fair market value of such investments is further reduced by estimated
cost of sale for properties held for sale. Carrying value may be greater
or less than current appraised value. At March 31, 1996, the appraised
value of each real estate investment exceeded its carrying value; the
aggregate excess was approximately $4,000,000. The current appraised
value of real estate investments has been estimated by the managing
general partner and is generally based on a combination of traditional
appraisal approaches performed by the advisor and independent appraisers.
Because of the subjectivity inherent in the valuation process, the
estimated current appraised value may differ significantly from that which
could be realized if the real estate were actually offered for sale in the
marketplace.
Results of Operations
Form of Real Estate Investment
Three of the investments in the portfolio are structured as joint
ventures; Drilex and Regency Court Apartments are wholly-owned properties.
The Kachina Apartments investment, which was sold in 1994, was a joint
venture.
Operating Factors
The Partnership's two industrial properties, Drilex and Prentiss
Copystar, were 100% leased at March 31, 1996, as they were at December 31,
1995 and March 31, 1995.
The Partnership's two multi-family residential properties, Waterford
Apartments and Regency Court Apartments, ended the first quarter of 1996
with an occupancy level of 94% and 95%, respectively, unchanged from
December 31, 1995. Occupancy at Waterford Apartments was also 94% at
March 31, 1995.
Occupancy at Parkmoor Plaza was 93% at March 31, 1995. It increased
to 100% in the second quarter of 1995.
Investment Results
Interest on short-term investments and cash equivalents decreased
significantly between the first quarter of 1995 and the first quarter of
1996 due to a decrease in the average investment balance as a result of
the distribution of sale proceeds from the Kachina sale and the investment
in Regency Court Apartments in 1995.
During the first quarter of 1995, the Partnership received an
additional $181,974 in connection with the final settlement of the Kachina
joint venture activities, which was recognized as a gain on sale of
property by joint venture in the accompanying statement of operations.
Exclusive of the results from Regency Court Apartments in 1996
($121,782), total real estate operations for the first quarter of 1996 and
1995 were $339,024 and $322,355, respectively. This increase is primarily
due to improved operating results at Parkmoor Plaza as a result of an
increase in rental revenue. Operating results from the remainder of the
Partnership's investments were relatively unchanged between the respective
quarterly periods.
Exclusive of the payment of deferred management fees of $203,452 in
1995, cash flow from operations decreased by approximately $38,000 between
the respective first quarters. This change was primarily due to the
reduction in short-term investment interest, partially offset by the
addition of cash flow from Regency Court and the timing of cash
distributions from joint ventures.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative
expenses primarily consist of real estate appraisal, printing, legal,
accounting and investor servicing fees.
The Partnership management fee increased between the first quarter of
1996 and 1995 due to an increase in distributable cash flow. General and
administrative expenses did not change significantly between the
respective quarters.
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on Form 8-K
were filed during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
May 9, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining
Managing Director and General Counsel
Managing General Partner,
Seventh Copley Corp.
May 9, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.