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 September 30, 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 SEPTEMBER 30, 1996
PART I
FINANCIAL INFORMATION
BALANCE SHEET
(Unaudited)
September 30, 1996 December 31, 1995
------------------ -----------------
Assets
Real estate investments:
Joint ventures $ 13,180,411 $ 13,489,028
Property, net 11,289,534 11,574,071
----------- -----------
24,469,945 25,063,099
Cash and cash equivalents 3,779,822 3,194,992
Short-term investments 1,020,568 1,524,276
----------- -----------
$ 29,270,335 $ 29,782,367
=========== ===========
Liabilities and Partners' Capital
Accounts payable $ 72,944 $ 86,646
Accrued management fee 60,950 57,713
Deferred disposition fees 478,108 478,108
----------- ----------
Total liabilities 612,002 622,467
----------- ----------
Partners' capital (deficit):
Limited partners ($892 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 28,689,463 29,186,014
General partners (31,130) (26,114)
----------- -----------
Total partners' capital 28,658,333 29,159,900
----------- -----------
$ 29,270,335 $ 29,782,367
=========== ===========
<FN>
(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1996 September 30, 1996 September 30, 1995 September 30, 1995
------------------ ------------------- ------------------ -------------------
Investment Activity
Property rentals $ 436,716 $1,292,961 $ 447,007 $ 868,365
Property operating expenses (161,651) (505,156) (188,113) (303,081)
Depreciation and amortization (87,744) (263,230) (86,883) (186,499)
---------- ---------- ---------- -----------
187,321 524,575 172,011 378,785
Joint venture earnings 325,427 927,077 292,756 839,498
---------- ----------- ----------- -----------
Total real estate operations 512,748 1,451,652 464,767 1,218,283
Gain on sale of property by
joint venture - - - 195,295
---------- ----------- ----------- -----------
Total real estate activity 512,748 1,451,652 464,767 1,413,578
Interest on cash equivalents
and short-term investments 62,084 180,515 112,403 517,978
---------- ----------- ----------- ----------
Total investment activity 574,832 1,632,167 577,170 1,931,556
---------- ----------- ----------- ----------
Portfolio Expenses
Management fees 60,950 182,849 61,286 174,063
General and administrative 41,850 134,817 48,066 167,020
----------- ------------ ------------- ----------
102,800 317,666 109,352 341,083
----------- ------------ ------------- ----------
Net Income $ 472,032 $1,314,501 $ 467,818 $ 1,590,473
========== =========== =========== ==========
Net income per limited partnership
unit $ 11.11 $ 30.93 $ 11.01 $ 37.42
========== =========== =========== ==========
Cash distributions per limited
partnership unit $ 14.50 $ 42.73 $ 13.37 $ 64.53
========== =========== =========== ==========
Number of limited partnership units
outstanding during the period 42,076 42,076 42,076 42,076
========== =========== =========== ==========
<FN>
(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Deficit)
(Unaudited)
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1996 September 30, 1996 September 30, 1995 September 30, 1995
------------------- ------------------- --------------------- ----------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
--------- -------- -------- -------- -------- --------- -------- ---------
Balance at
beginning $ (29,688) $ 28,832,254 $ (26,114) $ 29,186,014 $(23,612) $ 32,799,831 $(23,295) $33,841,011
of period
Cash
distributions (6,163) (610,102) (18,161) (1,797,907) (5,682) (562,557) (17,226) (2,715,165)
Net income 4,721 467,311 13,145 1,301,356 4,678 463,140 15,905 1,574,568
--------- ----------- --------- ---------- --------- ----------- --------- -----------
Balance at end
of period $ (31,130) $ 28,689,463 $ (31,130) $ 28,689,463 $(24,616) $ 32,700,414 $(24,616) $32,700,414
========= =========== ========= =========== ========== =========== ========= ==========
<FN>
(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1996 1995
---------- ----------
Net cash provided by operating
activities $ 1,860,190 $ 1,774,543
----------- -----------
Cash flows from investing activities:
Investment in property 32,744 (9,802,304)
Decrease in short-term
investments, net 507,964 4,077,009
Investment in joint venture - (79,190)
Net proceeds from sale of investment - 195,295
---------- -----------
Net cash provided by (used in)
investing activities 540,708 (5,609,190)
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,816,068) (2,732,391)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 584,830 (6,567,038)
Cash and cash equivalents:
Beginning of period 3,194,992 13,419,447
----------- -----------
End of period $ 3,779,822 $ 6,852,409
=========== ===========
<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 September 30, 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 September 30,
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. It 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
-----------------------
September 30, 1996 December 31, 1995
--------------- ------------------
Assets
Real property, at cost less
accumulated depreciation of
$7,243,426 and $6,395,506,
respectively $ 22,533,441 $23,455,289
Other 1,396,044 1,421,726
----------- -----------
23,929,485 24,877,015
Liabilities 225,589 358,871
----------- -----------
Net assets $ 23,703,896 $24,518,144
=========== ===========
Results of Operations
----------------------
Nine Months Ended September 30,
1996 1995
----------- -----------
Revenue
Rental income $ 3,538,186 $ 3,355,459
Other 3,498 59,628
------------ ------------
3,541,684 3,415,087
------------ ------------
Expenses
Operating expenses 1,161,795 1,084,332
Depreciation and amortization 824,300 825,795
------------ ------------
1,986,095 1,910,127
------------ ------------
Net income $ 1,555,589 $ 1,504,960
============ ============
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 required the
seller to supplement the monthly rental income generated from the property
to the extent such income was less than $125,000 per month during the one-
year period ending April 13, 1996, such supplement not to exceed $300,000
in total. The shortfall was $115,323, of which $101,399 has been credited
against the purchase price; the remainder will be credited upon receipt.
The following is a summary of the Partnership's property investments:
September 30, 1996 December 31, 1995
------------------ -----------------
Land $ 2,190,969 $2,190,969
Buildings and improvements 9,793,547 9,826,291
Accumulated depreciation (626,412) (371,106)
Other net liabilities (68,570) (72,083)
----------- -----------
$11,289,534 $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 the Partnership completed its due diligence
review and negotiated further with the seller, a final agreement could not
be reached and the Partnership abandoned the transaction in the second
quarter of 1995.
Note 4 - Subsequent Event
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1996 were made on October 24, 1996 in the aggregate amount
of $616,265 ($14.50 per limited partnership unit). Additionally, a
capital distribution of $336,608 ($8 per limited partnership unit) was
made from accumulated cash reserves.
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 September 30,
1996, capital of $4,544,208 has been returned to the limited partners as a
result of these sales. On October 24, 1996, the Partnership distributed
capital of $336,608 ($8 per limited partnership unit) which represented a
reduction of accumulated cash reserves. This capital distribution reduces
the adjusted capital contribution to $884 per unit.
At September 30, 1996, the Partnership had $4,800,390 in cash, cash
equivalents and short-term investments, of which $616,265 was used for
operating cash distributions to partners on October 24, 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, second and third quarters 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 and second quarters of 1995 were made at
an annualized rate of 5.5% on the weighted average adjusted capital
contribution. Distributions of cash from operations relating to the third
quarter of 1995 were made at an annualized rate of 6% on the adjusted
capital contribution. The increase in the distribution rate results from
the attainment of appropriate cash reserve levels.
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 the
estimated cost of sale for properties held for sale. Carrying value may
be greater or less than current appraised value. At September 30, 1996,
the appraised value of each real estate investment exceeded its carrying
value; the aggregate excess was approximately $4,200,000. 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, each by a single tenant, at September 30,
1996, as they were at December 31, 1995 and September 30, 1995.
The Partnership's two multi-family residential properties, Waterford
Apartments and Regency Court Apartments, ended the third quarter of 1996
with occupancy levels of 94% and 95%, respectively. Occupancy at
Waterford Apartments remained in the mid 90% range during the first nine
months of 1996, which is consistent with the prior year. Occupancy at
Regency Court increased to the mid 90% range from June 30, 1996.
Occupancy at Parkmoor Plaza was 100% at September 30, 1996 where it
has remained since the second quarter of 1995.
Investment Results
Interest on short-term investments and cash equivalents decreased
significantly between the first nine months of 1995 and the first nine
months 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 the second quarter of 1995.
During the first nine months of 1995, the Partnership received an
additional $195,295 in 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 ($371,430 in
1996 and $251,648 in 1995), real estate operations for the first nine
months of 1996 and 1995 were $1,080,222 and $966,635, 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 periods.
Exclusive of the payment of deferred management fees of $203,452 in
1995, cash flow from operations decreased by approximately $118,000
between the first nine months of 1996 and 1995. This change was primarily
due to the reduction in short-term investment interest and changes in
property working capital, partially offset by the addition of cash flow
from Regency Court and Parkmoor Plaza.
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 nine
months of 1996 and 1995 due to an increase in distributable cash flow.
General and administrative expenses decreased between the respective nine
month periods due to professional fees incurred in 1995 related to due
diligence performed in connection with an abandoned property acquisition.
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 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 September 30, 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)
November 12, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Seventh Copley Corp.
November 12, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.