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, 2001 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
==============================================================================
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, 2001
PART I
FINANCIAL INFORMATION
2
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 2001 December 31, 2000
(Unaudited) (Audited)
-------------- -----------------
Assets
Real estate investments:
Joint venture held for disposition $ - $ 938,614
Property held for disposition 2,311,126 2,318,455
---------- ----------
2,311,126 3,257,069
Other assets 41,922 -
Cash and cash equivalents 2,415,361 2,215,637
---------- ----------
$4,768,409 $5,472,706
========== ==========
Liabilities and Partners' Capital
Accounts payable $ 89,437 $ 88,687
Deferred disposition fees 1,427,406 1,384,858
---------- ----------
Total liabilities 1,516,843 1,473,545
---------- ----------
Partners' capital:
Limited partners ($138.00 and $166.00
per unit, respectively; 160,000
units authorized, 42,076 units
issued and outstanding) 3,219,513 3,971,413
General partners 32,053 27,748
---------- ----------
Total partners' capital 3,251,566 3,999,161
---------- ----------
$4,768,409 $5,472,706
========== ==========
(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,
----------------------------
2001 2000
-------- --------
INVESTMENT ACTIVITY
Property rentals $108,599 $127,324
Property operating expenses (8,554) (51,425)
Depreciation and amortization - (35,644)
-------- --------
100,045 40,255
Joint venture earnings 7,491 233,891
-------- --------
Total real estate operations 107,536 274,146
Gain on sale of joint venture 330,165 -
-------- --------
Total real estate activity 437,701 274,146
Interest on cash equivalents 32,824 51,126
-------- --------
Total investment activity 470,525 325,272
-------- --------
PORTFOLIO EXPENSES
Management fees - 31,021
General and administrative 39,992 45,700
-------- --------
39,992 76,721
-------- --------
Net income $430,533 $248,551
======== ========
Net income per limited partnership
unit $10.13 $5.85
======== ========
Cash distributions per limited
partnership unit $28.00 $11.37
======== ========
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,
----------------------------------------------
2001 2000
--------------------- ---------------------
General Limited General Limited
Partners Partners Partners Partners
-------- ---------- -------- -----------
Balance at beginning $27,748 $ 3,971,413 $ 6,333 $13,978,434
of period
Cash distributions - (1,178,128) (4,832) (478,404)
Net income 4,305 426,228 2,486 246,065
------- ----------- ------- -----------
Balance at end
of period $32,053 $ 3,219,513 $ 3,987 $13,746,095
======= =========== ======= ===========
(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,
----------------------------
2001 2000
-------- --------
Net cash provided by operating activities $ 100,956 $ 10,737
---------- ----------
Cash flows from investing activities:
Investment in property - (29,426)
Investment in joint venture (19,500)
Net proceeds from sale of investment 1,253,848 -
Deferred disposition fees 42,548 -
---------- ----------
Net cash provided by (used in)
investing activities 1,276,896 (29,426)
---------- ----------
Cash flows from financing activity:
Distributions to partners (1,178,128) (483,236)
---------- ----------
Net increase (decrease) in cash
and cash equivalents 199,724 (501,925)
Cash and cash equivalents:
Beginning of period 2,215,637 4,169,397
---------- ----------
End of period $2,415,361 $3,667,472
========== ==========
(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, 2001 and December 31, 2000 and the results of
its operations, its cash flows and partners' capital for the three months ended
March 31, 2001 and 2000. These adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 2000 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 real estate investment 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
On February 26, 2001, the Prentiss Copystar joint venture investment in
which the Partnership and an affiliate are entitled to 31% and 69%,
respectively, of the operating activity, sold its property to an unaffiliated
third party for gross proceeds of $4,575,000, of which the Partnership's share
was $1,418,250. The Partnership received its 31% share of the net proceeds,
$1,296,396 after closing costs, and recognized a gain of $330,165 ($7.77 per
limited partnership unit) on the sale. A disposition fee of $42,548 was accrued
but not paid to the Advisor. On March 29, 2001, the Partnership made a capital
distribution of $1,178,128 ($28.00 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 and a gain of $2,501,169 ($58.85 per limited partnership unit).
A disposition fee of $351,750 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.
7
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 (two at December 31, 2000 and one
at March 31, 2001):
Assets and Liabilities
----------------------
March 31, 2001 December 31, 2000
-------------- -----------------
Assets
Real property, at cost less
accumulated depreciation of
$2,901,209 $ - $2,746,869
Other 158,280 73,107
-------- ----------
158,280 2,819,976
Liabilities - 106,201
-------- ----------
Net assets $158,280 $2,713,775
======== ==========
Results of Operations
Three Months Ended March 31,
----------------------------
2001 2000
-------- --------
Revenue
Rental income $87,305 $418,272
------- --------
87,305 418,272
------- --------
Expenses
Operating expenses 63,140 113,316
Depreciation and amortization 12,151 90,254
------- --------
75,291 203,570
------- --------
Net income $12,014 $214,702
======= ========
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.
8
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Note 3 - Property
In February 2001, the Partnership executed a Purchase and Sale Agreement to
sell the Drilex investment. On April 6, 2001, this investment was sold and the
Partnership recognized a gain of approximately $54,321.
This investment is classified as Property held for disposition on the
balance sheet at March 31, 2001 and December 31, 2000. During the years ended
December 31, 2000, the Partnership recognized $132,174 in net income from this
investment.
The following is a summary of the Drilex investment in property:
March 31, 2001 December 31, 2000
-------------- -----------------
Land $ - $ -
Buildings and improvements - -
Lease Commissions - -
Accumulated depreciation - -
Accumulated amortization - -
Other net assets (liabilities) - -
Property held for disposition, net 2,311,126 2,318,455
---------- ----------
$2,311,126 $2,318,455
========== ==========
Note 4 - Subsequent Event
On April 26, 2001, a capital distribution was made from original working
capital reserves in the amount of $1,136,052 ($27.00 per limited partnership
unit). Also on that date, the Partnership made a capital distribution relating
to the sale proceeds of Drilex received subsequent to March 31, 2001 (see Note
3) in the amount of $2,272,104 ($54.00 per limited partnership unit).
See Note 3 for discussion of investment sale on April 6, 2001.
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, 1999, 2000 and 2001. Through March 31, 2001, capital
of $36,269,511 ($862.00 per limited partnership unit) has been returned to the
limited partners; $33,819,847 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 $138.00.
At March 31, 2001, the Partnership had $2,415,361 in cash and cash
equivalents, of which $1,136,052 was used for a capital distribution from
original working capital reserves to limited partners on April 26, 2001. 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 remaining investment, and proceeds from the sale of such
investment. There were no distributions of cash from operations for the first
quarter of 2001 due to the sale of Prentiss Copystar and insufficient cash flow
from Drilex. 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.
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, 2001, the appraised value of the last remaining investment exceeded
its related carrying value by approximately $190,000. The current appraised
value of the real estate investment reflects the purchase price per the Purchase
and Sale Agreement dated February 2001.
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 Prentiss Copystar
real estate investment was structured as a joint venture. Prentiss Copystar was
sold on February 26, 2001.
Operating Factors
As mentioned above, the Prentiss Copystar joint venture investment in which
the Partnership and an affiliate were entitled to 31% and 69% of the operating
activity, respectively, sold its property on February 26, 2001. The Partnership
recognized its 31% share of the gain of $330,165. At the time of the sale,
Prentiss Copystar was 100% leased, while it was vacant at March 31, 2000.
As mentioned above, The Parkmoor Plaza investment was sold on May 31, 2000
and the Partnership recognized a gain $2,501,16. The property was 100% leased
at the time of sale.
The Partnership's remaining property, Drilex, was 100% leased at March 31,
2001 and March 31, 2000.
Investment Results
Interest on cash equivalents decreased approximately $18,000 between the
first quarter of 2001 and 2000 primarily due to lower average investment
balances as a result of the sale of Parkmoor Plaza in May 2000.
Real estate operating results for the first quarter of 2001 and 2000 were
$107,536 and $274,146, respectively. The decrease of $166,610 is due to a
decrease in joint venture activity offset by an increase in property activity.
The decrease in joint venture activity is primarily due to the sale of Parkmoor
Plaza in May 2000. The increase in property activity is due to lower operating
expenses in 2001 as a result of an approximate $45,000 tax expense taken in 2000
as well as no depreciation and amortization expense taken due to the property
being held for disposition.
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.
11
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
The Partnership did not incur a management fee during the three months
ended March 31, 2001 due to the suspension of cash distributions since the third
quarter of 2000. General and administrative expenses decreased approximately
$5,700 between the comparable first quarters of 2001 and 2000 due to lower taxes
and investor servicing fees.
12
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2001
PART II
OTHER INFORMATION
Item 6. Reports on Form 8-K
Reports on Form 8-K: During the quarter ended March 31, 2001, one
Current Report on Form 8-K was filed on March 12, 2001 reporting
on Item No. 2 (Acquisition or Disposition of Assets) and Item No.
7 (Financial statements and Exhibits), relating in both cases to
the February 26, 2001 sale of Prentiss Copystar.
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 14, 2001
/s/ Alison L. Husid
-------------------------------
Alison L. Husid
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
May 14, 2001
/s/ Jonathan Martin
--------------------------------
Jonathan Martin
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
14