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, 2000 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)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
==============================================================================
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, 2000
PART I
FINANCIAL INFORMATION
2
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 2000 December 31, 1999
(Unaudited) (Audited)
-------------- -----------------
Assets
Real estate investments:
Joint venture $ 801,295 $ 820,724
Property, net 2,392,956 2,065,242
Joint venture held for disposition, net 8,010,353 8,093,276
----------- -----------------
11,204,604 10,979,242
Cash and cash equivalents 3,667,472 4,169,397
----------- -----------------
$14,872,076 $15,148,639
=========== =================
Liabilities and Partners' Capital
Accounts payable $ 57,865 $ 82,971
Accrued management fee 31,021 47,793
Deferred disposition fees 1,033,108 1,033,108
----------- -----------------
Total liabilities 1,121,994 1,163,872
----------- -----------------
Partners' capital:
Limited partners ($454.22 per unit;
160,000 units authorized,
42,076 units issued
and outstanding) 13,746,095 13,978,434
General partners 3,987 6,333
----------- -----------------
Total partners' capital 13,750,082 13,984,767
----------- -----------------
$14,872,076 $15,148,639
=========== =================
(See accompanying notes to unaudited financial statements)
3
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
---------------------------
2000 1999
-------- ----------
INVESTMENT ACTIVITY
Property rentals $127,324 $ 488,236
Property operating expenses (51,425) (189,826)
Depreciation and amortization (35,644) (21,505)
-------- ----------
40,255 276,905
Joint venture earnings 233,891 275,015
-------- ----------
Total real estate operations 274,146 551,920
Gain on sale of property - 3,302,085
-------- ----------
Total real estate activity 274,146 3,854,005
Interest on cash equivalents 51,126 55,494
-------- ----------
Total investment activity 325,272 3,909,499
-------- ----------
PORTFOLIO EXPENSES
Management fees 31,021 46,784
General and administrative 45,700 54,527
-------- ----------
76,721 101,311
-------- ----------
Net income $248,551 $3,808,188
======== ==========
Net income per limited partnership
unit $ 5.85 $ 89.60
======== ==========
Cash distributions per limited
partnership unit $ 11.37 $ 13.06
======== ==========
Number of limited partnership units
outstanding during the period 42,076 42,076
======== ==========
(See accompanying notes to unaudited financial statements)
4
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Three Months Ended March 31,
-----------------------------------------------
2000 1999
---------------------- ----------------------
General Limited General Limited
Partners Partners Partners Partners
-------- ----------- -------- -----------
Balance at beginning $ 6,333 $13,978,434 $(25,669) $22,923,845
of period
Cash distributions (4,832) (478,404) (5,551) (549,513)
Net income 2,486 246,065 38,082 3,770,106
------- ----------- -------- -----------
Balance at end
of period $ 3,987 $13,746,095 $ 6,862 $26,144,438
======= =========== ======== ===========
(See accompanying notes to unaudited financial statements)
5
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
---------------------------
2000 1999
---------- -----------
Net cash provided by operating activities $ 10,737 $ 477,681
---------- -----------
Cash flows from investing activities:
Investment in property (29,426) -
Net proceeds from sale of investment - 12,109,900
Deferred disposition fees - 391,500
---------- -----------
Net cash provided by (used in)
investing activities (29,426) 12,501,400
---------- -----------
Cash flows from financing activity:
Distributions to partners (483,236) (555,064)
---------- -----------
Net increase (decrease) in cash
and cash equivalents (501,925) 12,424,017
Cash and cash equivalents:
Beginning of period 4,169,397 3,985,403
---------- -----------
End of period $3,667,472 $16,409,420
========== ===========
(See accompanying notes to unaudited financial statements)
6
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
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, 2000 and December 31, 1999 and the results of its
operations, its cash flows and partners' capital for the three months ended
March 31, 2000 and 1999. These adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1999 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
the three real estate investments it currently owns prior to 1991. The
Partnership intends to dispose of its investments within eight to twelve years
of their acquisition, and then liquidate; however, the Managing General Partner
could extend the investment period if it is considered to be in the best
interest of the limited partners. The Partnership has engaged AEW Real Estate
Advisors, Inc. (the "Advisor") to provide asset management advisory services.
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, 2000 December 31, 1999
-------------- -----------------
Assets
Real property, at cost less
accumulated depreciation of
$2,984,999 and $2,901,209,respectively $8,903,438 $ 9,018,328
Other 1,048,985 1,075,246
---------- -----------
9,952,423 10,093,574
Liabilities 245,912 230,935
---------- -----------
Net assets $9,706,511 $ 9,862,639
========== ===========
7
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Results of Operations
Three Months Ended March 31,
2000 1999
-------- --------
Revenue
Rental income $418,272 $531,759
-------- --------
418,272 531,759
-------- --------
Expenses
Operating expenses 113,316 112,506
Depreciation and amortization 90,254 90,183
-------- --------
203,570 202,689
-------- --------
Net income $214,702 $329,070
======== ========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliates on behalf of
their various financing arrangements with the joint ventures.
On February 29, 2000, the Partnership executed a Purchase and Sale Agreement to
sell the Parkmoor Plaza investment. Although there can be no assurance that
this sale will occur, it is expected to be concluded during the second quarter
of 2000. This investment is classified as Joint Venture Held for Disposition on
the Balance Sheets. During the three months ended March 31, 2000 and 1999, the
Partnership recognized $252,635 and $251,898 in joint venture earnings from this
investment, respectively.
Note 3 - Property
On April 14, 1995, the Partnership acquired, through a limited partnership it
controlled, 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 ended April 13, 1996, with such supplement not
to exceed $300,000 in total. The supplemental rental income was $115,323, which
has been applied to reduce the purchase price in 1995 and 1996.
The buildings and improvements were being depreciated over 30 years using the
straight-line method.
8
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
On March 25, 1999, the Partnership sold the Regency Court Apartments to an
unaffiliated third party for a gross sale price of $13,050,000. The Partnership
received net proceeds of $12,486,618 and recognized a gain of $3,287,303 ($77.35
per limited partnership unit). A disposition fee was accrued but not paid to
the Advisor. On April 29, 1999, the Partnership made a capital distribution of
$12,033,736 ($286 per limited partnership unit) from the proceeds of the sale.
The following is a summary of the Partnership's remaining investment in
property:
March 31, 2000 December 31, 1999
--------------- ------------------
Land $ 244,346 $ 244,346
Buildings and improvements 2,406,403 2,376,977
Lease Commissions 197,757 131,838
Accumulated depreciation (514,686) (494,916)
Accumulated amortization (20,170) (4,981)
Other net assets (liabilities) 79,306 (188,022)
---------- ----------
$2,392,956 $2,065,242
========== ==========
Note 4 - Subsequent Event
Distributions of cash from operations relating to the quarter ended March 31,
2000 were made on April 27, 2000 in the aggregate amount of $313,657 ($7.38 per
limited partnership unit).
9
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
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 and the
payment of related acquisition costs, or retained as working capital reserves.
The Partnership made seven real estate investments, one of which was sold in
each of 1991, 1994, 1998 and 1999. Through March 31, 2000, capital of
$22,964,239 ($545.78 per limited partnership unit) has been returned to the
limited partners; $22,005,748 as a result of sales, $336,608 in 1996 as a
result of a discretionary reduction of cash reserves and $621,883 as a result of
a distribution of original working capital. As a result of sales and similar
transactions, the adjusted capital contribution was reduced to $454.22.
On March 25, 1999, the Partnership sold the Regency Court Apartments to an
unaffiliated third party for a gross sale price of $13,050,000. The Partnership
received net proceeds of $12,486,618 and recognized a gain of $3,287,303 ($77.35
per limited partnership unit). A disposition fee was accrued but not paid to
the Advisor. On April 29, 1999, the Partnership made a capital distribution of
$12,033,736 ($286 per limited partnership unit) from the proceeds of the sale.
At March 31, 2000, the Partnership had $3,667,472 in cash and cash
equivalents, of which $313,657 was used for operating cash distributions to
partners on April 27, 2000. The remainder is being retained as working capital
reserves. The source of future liquidity and cash distributions to partners
will primarily be cash generated by the Partnership's real estate investments,
and proceeds from the sale of such investments. Distributions of cash from
operations for the first quarter of 2000 were made at an annualized rate of 6.5%
on the adjusted capital contribution of $454.22. Distributions of cash from
operations for the first quarter of 1999 were made at the annualized rate of 6%
on the adjusted capital contribution of $742.12 per limited partnership unit.
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, 2000, the appraised value of each real estate investment exceeded its
carrying value; the aggregate of such excess was approximately $3,440,000. 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.
10
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Results of Operations
- ---------------------
Form of Real Estate Investment
The Drilex investment is a wholly-owned property. The remaining real estate
investments in the portfolio, Prentiss Copystar and Parkmoor Plaza, are
structured as joint ventures.
The Regency Court Apartments, which was sold in March 1999, was structured as
a wholly-owned property.
Operating Factors
One of the Partnership's two industrial properties, Drilex, was 100% leased at
March 31, 2000 and March 31, 1999. The other industrial property, Prentiss
Copystar was vacant at March 31, 2000, compared to 100% leased at March 31,
1999. Subsequent to quarter end, the Partnership negotiated a long-term lease
with a single tenant, which is expected to commence on August 1, 2000, upon
completion of tenant improvements.
As previously discussed, the Regency Court Apartments was sold on March 25,
1999, and the Partnership recognized a gain of $3,287,303. At the time of the
sale, the Regency Court Apartments was 97% leased.
Occupancy at Parkmoor Plaza was 100% at March 31, 2000 where it has
remained since the second quarter of 1995. On February 29, 2000, the
Partnership executed a Purchase and Sale Agreement to sell the Parkmoor Plaza
investment. Although there can be no assurance that this sale will occur, it is
anticipated to be concluded during the second quarter of 2000.
Investment Results
Interest on cash equivalents remained relatively stable between the first
quarter of 1999 and 2000.
Real estate operating results for the first quarter of 2000 and 1999 were
$274,146 and $551,920, respectively. The decrease of $277,774 is primarily due
to the sale of the Regency Court Apartments and the vacancy at Prentiss
Copystar. Partially offsetting this is an increase in operating results at
Drilex of approximately $45,000 due to a reimbursement of 1999 taxes received
and recognized in 2000. Operating results from the Partnership's remaining
investment were relatively unchanged between the respective periods.
Cash flow from operations decreased by approximately $467,000 between the
respective three month periods. The decrease is primarily due to the decrease in
distributions from joint ventures due to the vacancy at Prentiss Copystar, as
well as the sale of the Regency Court Apartments.
11
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
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 decreased approximately $16,000 between the
comparable first quarters of 2000 and 1999 due to a decrease in distributions as
a result of the sale of the Regency Court Apartments in 1999. General and
administrative expenses decreased approximately $9,000 between the comparable
first quarters of 2000 and 1999 primarily due to lower taxes.
12
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2000
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: (27) Financial Data Schedule
b. Reports on Form 8-K: No Current Reports on Form 8-K
were filed during the quarter ended March 31, 2000.
13
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 12, 2000
/s/ Alison Husid Cutler
-------------------------------
Alison Husid Cutler
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
May 12, 2000
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
14