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, 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)
World Trade Center East
Two Seaport Lane, 16th Floor
Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
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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, 2000
PART I
FINANCIAL INFORMATION
2
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
September 30, 2000 December 31, 1999
(Unaudited) (Audited)
------------------- -----------------
ASSETS
Real estate investments:
Joint venture $ 892,748 $ 820,724
Property, net 2,343,839 2,065,242
Joint venture held for disposition, net - 8,093,276
------------ --------------
3,236,587 10,979,242
Cash and cash equivalents 3,658,947 4,169,397
------------ --------------
$ 6,895,534 $ 15,148,639
============ ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 74,632 $ 82,971
Accrued management fee - 47,793
Deferred disposition fees 1,384,858 1,033,108
------------ --------------
Total liabilities 1,459,490 1,163,872
------------ --------------
Partners' capital:
Limited partners ($201.44 and
$454.22 per unit, respectively;
160,000 units authorized, 42,076
units issued and outstanding) 5,408,839 13,978,434
General partners 27,205 6,333
------------ --------------
Total partners' capital 5,436,044 13,984,767
------------ --------------
$ 6,895,534 $ 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 Nine Months Ended Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000 September 30, 1999 September 30, 1999
------------------- ------------------- ------------------- -------------------
INVESTMENT ACTIVITY
Property rentals $ 82,120 $ 240,978 $ 75,371 $ 636,162
Property operating expenses 2,730 (56,223) (3,425) (245,095)
Depreciation and amortization (37,449) (108,685) (21,506) (64,516)
--------- ----------- ---------- -----------
47,401 76,070 50,440 326,551
Joint venture earnings 144,703 530,482 182,449 733,955
--------- ----------- ---------- -----------
Total real estate operations 192,104 606,552 232,889 1,060,506
Gain on sale of property (103,770) 2,501,169 - 3,302,085
--------- ----------- ---------- -----------
Total real estate activity 88,334 3,107,721 232,889 4,362,591
Interest on cash equivalents 104,354 211,852 54,018 204,521
--------- ----------- ---------- -----------
Total investment activity 192,688 3,319,573 286,907 4,567,112
--------- ----------- ---------- -----------
4
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000 September 30, 1999 September 30, 1999
------------------ ------------------ ------------------ ------------------
PORTFOLIO EXPENSES
Management fees - 54,896 33,543 110,381
General and administrative 46,344 139,129 47,459 136,589
---------- ----------- ----------- -----------
46,344 194,025 81,002 246,970
---------- ----------- ----------- -----------
Net Income $ 146,344 $ 3,125,548 $ 205,905 $ 4,320,142
========== =========== =========== ===========
Net income per limited partnership
unit $ 3.44 $ 73.54 $ 4.85 $ 101.65
========== =========== =========== ===========
Cash distributions per limited
partnership unit $ 5.68 $ 277.21 $ 7.15 $ 317.34
========== =========== =========== ===========
Number of limited partnership units
outstanding during the period 42,076 42,076 42,076 42,076
========== =========== =========== ===========
(See accompanying notes to unaudited financial statements)
5
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000 September 30, 1999 September 30, 1999
----------------------- ------------------------ ------------------------ ------------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- ----------- -------- ------------ -------- ------------ -------- ------------
Balance at beginning $ 28,156 $5,502,950 $ 6,333 $ 13,978,434 $ 5,192 $13,945,385 $(25,669) $ 22,923,845
of period
Cash distributions (2,414) (238,992) (10,383) (11,663,888) (3,039) (300,843) (13,320) (13,352,398)
Net income 1,463 144,881 31,255 3,094,293 2,059 203,846 43,201 4,276,941
-------- ----------- -------- ------------ -------- ------------ -------- ------------
Balance at end
of period $ 27,205 $ 5,408,839 $ 27,205 $ 5,408,839 $ 4,212 $ 13,848,388 $ 4,212 $ 13,848,388
======== =========== ======== ============ ======== ============ ======== ============
(See accompanying notes to unaudited financial statements)
6
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
Net cash provided by operating activities $ 348,213 $ 1,205,183
------------ ------------
Cash flows from investing activities:
Net proceeds from sale of investment 10,648,672 12,109,900
Deferred disposition fees 351,750 391,500
Investment in property (29,426) -
Investment in joint venture (155,388) -
------------ ------------
Net cash provided by investing activities 10,815,608 12,501,400
------------ ------------
Cash flows from financing activity:
Distributions to partners (11,674,271) (13,365,718)
------------ ------------
Net (decrease) increase in cash
and cash equivalents (510,450) 340,865
Cash and cash equivalents:
Beginning of period 4,169,397 3,985,403
------------ ------------
End of period $ 3,658,947 $ 4,326,268
============ ============
(See accompanying notes to unaudited financial statements)
7
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 September 30, 2000 and December 31, 1999 and the
results of its operations and partners' capital for the three and nine month
periods ended September 30, 2000 and 1999 and its cash flows for the nine month
periods ended September 30, 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. We prepared the unaudited financial statements following
the requirements of the SEC for interim reporting. As permitted under those
rules, certain footnotes or other financial information that are normally
required by generally accepted accounting principles can be condensed or
omitted.
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 two real estate investments it currently owns prior to 1991. The Partnership
intends to dispose of its investments within 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
- -----------------------------------
On May 31, 2000, the South Bay/Parkmoor Plaza joint venture in which the
Partnership held a 75% interest, sold its property to an unaffiliated third
party for gross proceeds of $11,725,000. The Partnership received net proceeds
of $11,000,422 after closing costs and recognized an initial gain on the sale of
$2,604,939, which, due to an additional cash distribution offset by an
adjustment made to depreciation recogized during the third quarter of 2000, the
gain was decreased to $2,501,169 ($58.85 per limited partnership unit). Net
proceeds includes a return of capital and accrued priority return totaling
$9,867,883. A disposition fee was accrued but not paid to the Advisor. On June
28, 2000, the Partnership made a capital distribution of $10,635,971 ($252.78
per limited partnership unit) from the proceeds of the sale.
8
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
The following summarized financial information is presented in the
aggregate for the Partnership's joint ventures (one at September 30, 2000 and
two at December 31, 1999):
Assets and Liabilities
----------------------
September 30, 2000 December 31, 1999
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation of
$472,085 and $432,764,
respectively $ 2,757,571 $ 2,386,939
Other 132,113 11,877
Property held for disposition, net - 7,574,762
----------- -----------
2,889,684 9,973,578
Liabilities 442,039 110,939
----------- -----------
Net assets $ 2,447,645 $ 9,862,639
=========== ===========
Results of Operations
---------------------
Nine Months Ended September 30,
-------------------------------
2000 1999
-------- --------
Revenue
Rental income $777,616 $1,586,773
-------- ----------
777,616 1,586,773
-------- ----------
Expenses
Operating expenses 227,499 355,986
Depreciation and amortization 39,321 271,156
-------- ----------
266,820 627,142
-------- ----------
Net income $510,796 $ 959,631
======== ==========
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.
9
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
The 2000 Results of Operations (above) include activity from the Parkmoor
Plaza investment through the date of sale, May 31, 2000. The Partnership
recognized net income of $544,224 and $665,922 from this investment for the nine
months ended September 30, 2000 and 1999, respectively.
Note 3 - Property
- -----------------
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 last remaining investment in
property:
September 30, 2000 December 31, 1999
------------------ -----------------
Land $ 244,346 $ 244,346
Buildings and improvements 2,406,403 2,376,977
Lease Commissions 241,134 131,838
Accumulated depreciation (554,226) (494,916)
Accumulated Amortization (52,301) (4,981)
Other net assets (liabilities) 58,483 (188,022)
---------- ----------
$2,343,839 $2,065,242
========== ==========
Note 4 - Subsequent Events
- --------------------------
Distributions of cash from original working capital reserves were made on
October 26, 2000 relating to the quarter ended September 30, 2000 in the
aggregate amount of $1,491,173 ($35.44 per limited partnership unit).
10
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, 1999 and 2000. Through September 30, 2000, capital of
$33,600,210 ($798.56 per limited partnership unit) has been returned to the
limited partners: $32,641,719 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 these transactions,
the adjusted capital contribution was reduced to $201.44.
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.
On May 31, 2000, the South Bay/Parkmoor Plaza joint venture in which
the Partnership held a 75% interest, sold its property to an unaffiliated third
party for gross proceeds of $11,725,000. The Partnership received net proceeds
of $11,000,422 after closing costs and recognized an initial gain on the sale of
$2,604,939, which, due to an additional cash distribution offset by an
adjustment made to depreciation recogized during the third quarter of 2000, the
gain was decreased to $2,501,169 ($58.85 per limited partnership unit). Net
proceeds includes a return of capital and accrued priority return totaling
$9,867,883. A disposition fee was accrued but not paid to the Advisor. On June
28, 2000, the Partnership made a capital distribution of $10,635,971 ($252.78
per limited partnership unit) from the proceeds of the sale.
11
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
At September 30, 2000, the Partnership had $3,658,947 in cash and cash
equivalents, of which $1,491,173 was used for capital cash distributions of
original working capital reserves to partners on October 26, 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 invested cash and cash equivalents and real estate investments,
and proceeds from the sale of such investments. Distributions of cash from
operations relating to 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 relating to the second quarter of 2000 were made at an
annualized rate of 5% on the adjusted capital contribution of $454.22. The rate
decrease in the second quarter of 2000 is primarily due to a decrease in cash
available for distribution due to the sale of Parkmoor Plaza on May 31, 2000.
There were no distributions of cash from operations relating to the third
quarter of 2000 due to insufficient cash flow resulting from the sale of
Parkmoor Plaza, Prentiss Copystar being vacant during the first eight months of
2000 and the Drilex having reduced its cash flow to the Partnership due to
payments of capital expenditures. Distributions of cash from operations
relating to the first quarter of 1999 were made at an annualized rate of 6% on
the adjusted capital contribution of $742.12. Cash distributions relating to
the second quarter of 1999 were made at an annualized rate of 5.25% on the
weighted average adjusted capital contribution of $545.10. Cash distributions
relating to the third quarter of 1999 were made at an annualized rate of 7.00%
on the adjusted capital contribution of $456.12.
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
September 30, 2000, the appraised value of each real estate investment exceeded
its carrying value; the aggregate excess was approximately $580,000. The
current appraised value of real estate investments has been estimated by the
managing general partner and is generally based on a correlation 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
The Drilex investment is a wholly-owned property. The other remaining real
estate investment, Prentiss Copystar, is structured as a joint venture.
12
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Operating Factors
As mentioned above, The Parkmoor Plaza investment was sold on May 31, 2000
and the Partnership recognized an initial gain of $2,629,738, however during the
third quarter of 2000, it was decreased to 2,501,169 due to a depreciation
adjustment. The property was 100% leased at the time of sale.
As mentioned above, the Regency Court Apartments investment was sold on
March 25, 1999. The Partnership recognized a gain of $3,287,303. Regency Court
was 97% leased at the time of sale.
Both of the Partnership's industrial properties were 100% leased by a
single tenant at September 30, 2000, as they were at September 30, 1999.
Investment Results
For the three and nine months ended September 30, 2000, real estate
operations were $192,104 and $606,552, respectively, compared to $232,889 and
$1,060,506 for the comparable periods in 1999. The decreases of $40,785 and
$453,954 for the comparative three and nine month periods are due to a decrease
in both joint venture earnings as well as property operations. Both the three
and nine month decreases in joint venture earnings are a result of the Parkmoor
Plaza sale on May 31, 2000 and the vacancy at Prentiss Copystar during the first
eight months of 2000. The three month decrease in property operations for the
period ended September 30, 2000 is due to an increase in depreciation offset by
higher rental income and lower operating expenses as a result of a refund
received for duplicate payment of 1999 real estate taxes, as well as an increase
in earnings due to an adjustment in depreciation related to Parkmoor Plaza. The
nine month decrease in property operations is due to a reimbursement of property
taxes at Drilex and the sale of Regency Court in March 1999.
Interest on cash equivalents for the three and nine months ended September
30, 2000, was $104,354 and $211,852, respectively, compared to $54,018 and
$204,521 for the same periods in 1999. The increase of $50,336 for the
comparative three month periods is primarily due to a higher average investment
due to the temporary investment of proceeds from the sale of Parkmoor Plaza
before distribution to the limited partners. The overall comparative nine month
activity remained relatively stable.
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.
13
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
For the three and nine months ended September 30, 2000, management fees
were $0 and $54,896, respectively, compared to $33,543 and $110,381 for the
comparable periods in 1999. The decreases in management fees for the respective
three and nine month periods are due to lower operational distributions as a
result of a decrease in distributions received from joint ventures due to the
vacancy at Prentiss Copystar for the first eight months of 2000 and the sales of
Regency Court Apartments in 1999 and Parkmoor Plaza in 2000.
14
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2000
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, 2000.
15
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 13, 2000
/s/ Alison L. Husid
-------------------------
Alison L. Husid
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
November 13, 2000
/s/ Jem A. Hudgins
--------------------------
Jem A. Hudgins
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
16