SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File No. 0-17807
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2988542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Trade Center East
Two Seaport Lane
Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 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 ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
No voting stock is held by nonaffiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I
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Item 1. Business.
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Copley Pension Properties VI; A Real Estate Limited Partnership (the
"Partnership") (formerly New England Pension Properties VI; A Real Estate
Limited Partnership) was organized under the Uniform Limited Partnership
Act of the Commonwealth of Massachusetts on October 16, 1987, to invest
primarily in newly constructed and existing income-producing real
properties.
The Partnership was initially capitalized with contributions of $2,000
in the aggregate from Sixth Copley Corp. (the "Managing General Partner")
and GCOP Associates Limited Partnership (the "Associate General Partner")
(collectively, the "General Partners") and $10,000 from Copley Real Estate
Advisors, Inc. (the "Initial Limited Partner"). The Partnership filed a
Registration Statement on Form S-11 (the "Registration Statement") with the
Securities and Exchange Commission on October 26, 1987, with respect to a
public offering of 80,000 units of limited partnership interest at a price
of $1,000 per unit (the "Units") with an option to sell up to an additional
80,000 Units (an aggregate of $160,000,000). The Registration Statement was
declared effective on January 20, 1988.
The first sale of Units occurred on July 28, 1988, at which time the
Initial Limited Partner withdrew its contribution from the Partnership.
Investors were admitted to the Partnership thereafter at monthly closings;
the offering terminated and the last group of subscription agreements was
accepted by the Partnership on December 31, 1988. At the termination of the
offering, a total of 48,788 Units had been sold, a total of 6,396 investors
had been admitted as limited partners (the "Limited Partners") and a total
of $48,511,620 net of discounts had been contributed to the capital of the
Partnership. The remaining 111,212 Units were de-registered on February 10,
1989.
The Partnership has no employees. Services are performed for the
Partnership by the Managing General Partner and affiliates of the Managing
General Partner.
As of December 31, 2001 the Partnership had disposed of all its real
estate property investments. The Partnership plans to liquidate and
dissolve in 2002. The Partnership sold its last two remaining assets in
2001, as described below. The Partnership sold seven real estate
investments between 1990 and 2001. The principal terms of these sales are
set forth in the following table:
Date Net Sale Distribution Distribution
Investment Sold Proceeds Per Unit Date
---------- ---- -------- -------- ----
Wilmington Industrial 8/01 $ 7,914,742 $144.00 9/01
Prentiss Copystar 2/01 $ 3,049,698 $ 55.00 3/01
Waterford Apartments 8/98 $16,338,750 $334.29 8/98
White Phonic 6/98 $ 4,279,751 $ 87.72 7/98
Stemmons Industrial 9/97 $ 4,334,193 $ 88.84 10/97
Lakewood Apartments 8/94 $ 9,131,207 $182.85 10/94
Payne Ranch 6/90 $ 8,199,836 $ 48.17 7/90
Industrial Building in Carson, California ("Wilmington Industrial").
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On July 18, 1988, the Partnership acquired a 60% interest in a joint
venture with an affiliate of The Hewson Company. On November 15, 1989, the
Partnership agreed to increase its maximum commitment from $6,685,000 to
$7,285,000. On February 1, 1991, the Partnership agreed to further increase
its maximum commitment to $8,085,000. The Partnership made capital
contributions totaling $7,774,402. As of December 31, 1991, because of the
developer partner's inability to fund its share of capital contributions,
the Partnership assumed 100% ownership of the joint venture's assets, which
consisted primarily of approximately 5.77 acres of land in Carson,
California and a 115,732 square foot multi-tenant industrial building
located thereon.
2
On August 8, 2001, the Partnership sold its Wilmington Industrial
investment to an unaffiliated third party for gross proceeds of $8,217,781.
The Partnership received net proceeds of $7,914,742. On September 28, 2001,
the Partnership made a capital distribution of $7,025,472 ($144.00 per
Unit) from the proceeds of the sale. At the time of sale, the building was
100% leased.
Industrial Building in Itasca, Illinois ("Prentiss Copystar").
-------------------------------------------------------------
On May 23, 1991, the Partnership acquired a 51.75% interest in a joint
venture formed with Copley Pension Properties VII; A Real Estate Limited
Partnership, an affiliate of the Partnership (the "Affiliate") with a
23.25% interest, and with an affiliate of Prentiss Properties, Ltd (the
"Developer"). As of December 31, 2000, the Partnership had contributed
$2,739,013 to the capital of the joint venture, which included default
contributions made on behalf of the Developer, of which $63,563 had been
returned to the Partnership. Of the capital contributed and not returned,
$1,542,848 was characterized as Senior Capital, $690,000 was characterized
as Junior Capital and $442,602 was characterized as Deficit and Default
Contributions. The joint venture agreement entitled the Partnership to
receive a preferred compounded monthly return of 11% per annum on capital
contributed. The return on Senior Capital was payable currently, the return
on Junior Capital, Deficit and Default Contributions accrued and compounded
monthly if sufficient cash flow was not available therefor. If the Senior
Capital was repaid prior to the termination of the joint venture, the
Partnership was entitled to receive a return on the Senior Capital at the
lesser of 11% per annum or the interest rate for treasury bonds having a
maturity date coinciding with the termination of the joint venture, plus 75
basis points. The joint venture agreement also entitled the Partnership to
receive 51.75% of the net proceeds of sales and financings after return of
its capital and 51.75% of cash flow remaining after payment of the
preferred return, both of which were adjusted to 61.64% as a result of its
Default Contributions, in accordance with the joint venture agreement.
The joint venture owned approximately 3.75 acres of land in Itasca,
Illinois and during 1991 completed construction thereon of an approximately
70,535 square foot single-story industrial building.
On February 26, 2001, the Prentiss Copystar joint venture investment
in which the Partnership and the Affiliate were entitled to 69% and 31%,
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 $3,156,750 ($64.06 per Unit). The Partnership
received its 69% share of the net proceeds in the amount of $3,049,698
after closing costs. On March 29, 2001, the Partnership made a capital
distribution of $2,683,340 ($55.00 per Unit) from the proceeds of the sale.
At the time of sale, the building was 100% leased.
Item 2. Properties
----------
The Partnership has disposed of all its real property investments.
Item 3. Legal Proceedings.
-----------------
The Partnership is not a party to, nor are any of its properties
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.
PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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There is no active market for the Units. Trading in the Units is
sporadic and occurs solely through private transactions.
As of December 31, 2001, there were 6,045 holders of Units.
3
The Partnership's Amended and Restated Agreement of Limited
Partnership dated July 28, 1988, as amended to date (the "Partnership
Agreement"), requires that any Distributable Cash (as defined therein) be
distributed quarterly to the partners in specified proportions and priorities.
For the year ended December 31, 2001, cash distributions paid in 2001 or
distributed after year end with respect to 2001 to the Limited Partners totaled
$11,215,873, including $9,708,812 of returned capital from the proceeds of sales
of real property and $1,507,061, of returned capital from original working
capital and operating reserves. There were no cash distributions paid that
related to the year ended December 31, 2000 due to insufficient cash flows from
the properties.
Cash distributions in 2001 exceeded net income in 2001 and therefore
resulted in a reduction of partners' capital. Distributions of operating cash
flow exceeded cash generated by operating activities. There were no cash
distributions paid in 2000 that relate to the year ended December 31, 2000. Net
income in 2000 resulted in an increase in partners' capital. Reference is made
to the Partnership's Statements of Partners' Capital and Statements of Cash
Flows in Item 8 hereof.
4
Item 6. Selected Financial Data.
-----------------------
For Year For Year For Year For Year For Year
Ended or Ended or Ended or Ended or Ended or
as of : as of : as of : as of : as of :
12/31/01(1) 12/31/00 12/31/99 12/31/98 (2) 12/31/97(3)
----------------------------------------------------------------------------------------
Revenues $ 5,967,495 $ 945,048 $ 992,399 $ 9,098,258 $ 2,688,336
Net Income $ 5,336,695 $ 369,763 $ 365,739 $ 8,384,390 $ 1,588,309
Net Income
per Limited
Partnership Unit $ 108.29 $ 7.50 $ 7.42 $ 170.13 $ 32.23
Total Assets $ 1,050,427 $ 8,202,862 $ 7,962,054 $ 8,497,702 $ 22,706,302
Total Cash
Distributions
per Limited
Partnership
Unit, including
amounts
distributed
after year end
with respect to
such year $ 229.89 $ 0.00 $ 16.65 $ 468.47 $ 166.26
(1) Revenues and net income in 2001 include gains of $953,693 and $3,702,297 on
the sales of the Prentiss Copystar and Wilmington Industrial investments,
respectively, as well as $656,290 of other income resulting from an
adjustment of deferred disposition fees.
(2) Revenues and net income in 1998 include a gain of $7,563,334 on the sales
of the White Phonic and Waterford Apartments investments.
(3) Revenues and net income in 1997 include a gain of $248,172 on the sale of
the Stemmons Industrial property.
See the audited financial statements for details of significant transactions.
5
Item 7.
- ------
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
- ----------
Accounting Policies
- -------------------
Revenue Recognition
The Partnership recognizes rental revenue on a straight-line basis
over the lease terms.
The Partnership accounts for its investments in joint ventures using
the equity method of accounting. Under the equity method of accounting, the net
equity investment of the Partnership is reflected on the balance sheets, and the
Partnership's share of net income or loss from the joint ventures is included in
the statements of operations.
The Partnership records real estate sales at the time a sale is
consummated. A sale is consummated when the parties are bound by the terms of a
contract, all consideration has been exchanged, all conditions precedent to
closing have been met, and title has passed from seller to buyer.
Liquidation Basis of Accounting
The Partnership adopted a plan of liquidation on December 31, 2001,
and, as a result, the Partnership also adopted the liquidation basis of
accounting which, among other things, requires that assets and liabilities be
stated at their estimated net realizable value and that estimated costs of
liquidating the Partnership be provided to the extent that they are reasonably
determinable. Accrued expenses for liquidation as of December 31, 2001 include
estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimates of legal fees,
accounting fees, tax preparation and filing fees and other professional
services. The actual costs could vary from the related provisions due to the
uncertainty related to the length of time required to complete the liquidation
and dissolution of the Partnership. The accrued expenses do not take into
consideration possible litigation arising from the customary representations and
warranties made as part of each sale. Such costs, if any, are unknown and are
not estimable at this time. Similarly, there can be no assurance as to the
timing of a distribution of the Partnership's assets or the amount of assets
that will be distributed to the Partnership's Unit holders.
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of Units in December 1988 and a
total of 48,788 units were sold. The Partnership received proceeds of
$43,472,858, net of selling commissions and other offering costs, which have
been used for investment in real estate, for the payment of related acquisition
costs or retained as working capital reserves. As of December 31, 2001, the
Partnership had sold all of its real estate investments: one investment was sold
in each of 1990, 1994 and 1997, two investments were sold in 1998 and two
investments were sold in 2001. Through December 31, 2001, capital of $48,788,000
($1,000.00 per Unit) has been returned to the limited partners: $45,903,165 as a
result of sales and $2,884,835 as a result of a discretionary reduction of
original working capital previously held in reserves.
At December 31, 2001, the Partnership had $1,008,448 in cash and cash
equivalents which is being retained primarily as a reserve in connection with
the liquidation of the Partnership. A capital distribution of original working
capital previously held in reserves was made on April 26, 2001 in the amount of
$24.49 per Unit. A distribution of operational cash previously held in reserves
was made on July 26, 2001 in the amount of $6.40 per Unit. There were no cash
distributions paid in 2000 that relate to the year ended December 31, 2000 due
to insufficient cash flow from the properties. One property had just become
fully occupied during the third quarter of 2000 and the other remaining property
had reduced its cash flow to the Partnership due to payments of capital
expenditures.
Results of Operations
- ---------------------
Form of Real Estate Investments
The Wilmington Industrial investment, which was structured as a
wholly-owned property, was sold on August 8, 2001. The Prentiss Copystar
investment, which was structured as a joint venture, was sold on February 26,
2001.
Operating Factors
As mentioned above, the Wilmington Industrial investment was sold on
August 8, 2001 and the Partnership recognized a gain of $3,702,297. Wilmington
Industrial was 100% leased at the time of the sale, as it was on December 31,
2000.
As mentioned above, the Prentiss Copystar joint venture investment in
which the Partnership and an affiliate were entitled to 69% and 31% of the
operating activity, respectively, sold its property on February 26, 2001. The
Partnership recognized its 69% share of the gain of $953,693. Prentiss Copystar
was 100% leased at the time of the sale as it was on December 31, 2000.
Investment Activity
Interest income on cash and cash equivalents in 2001 decreased by
approximately $24,000 or 19% compared to 2000 primarily due to lower average
investment balances as a result of the sales of Prentiss Copystar in February
2001 and Wilmington Industrial in August 2001 as well as the distributions
during 2001 of cash previously held in reserves. Interest income on cash and
cash equivalents in 2000 decreased by approximately $14,000 or 10% compared to
1999 due primarily due to lower average investment balances as a result of the
joint venture's property being vacant for eight months of 2000 versus three
months of vacancy in 1999.
6
2001 Compared to 2000
Total real estate operations for 2001 was $235,133, a decrease from
$425,789 for the comparable period of 2000. The decrease of approximately
$191,000, or 45%, is primarily due to the sale of Wilmington Industrial in
August 2001.
The Partnership recognized $656,290 in revenue during 2001, which was
attributable to an adjustment of previously accrued disposition fees, in
accordance with the Partnership agreement.
2000 Compared to 1999
Total real estate operations for 2000 was $425,789, a decrease from
$457,162 for the comparable period of 1999. The decrease of approximately
$30,000, or 7%, is due to lower joint venture earnings due to Prentiss Copystar
being vacant for eight months of 2000 versus three months of vacancy in 1999
offset by an overall increase in Wilmington Industrial's operations. The
increase in Wilmington Industrial's operations is due to an increase in
occupancy and lower operating expenses offset by an increase in depreciation and
amortization expenses.
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
consist primarily of real estate appraisal, printing, legal, accounting and
investor servicing fees.
2001 Compared to 2000
The Partnership incurred management fees in 2001 of $31,193 as a
result of a distribution of operational cash previously held in reserves.
General and administrative expenses in 2001 were $164,562 compared to $180,335
for the comparable period in 2000. The decrease of $15,773 is due to lower
investor servicing and appraisal fees during 2001.
2000 Compared to 1999
The Partnership did not incur management fees during the year ended
December 31, 2000 due to the suspension of cash distributions as a result of the
joint venture's property being vacant during the first eight months of 2000 and
the other remaining property having reduced its cash flow to the Partnership due
to payments of capital expenditures. General and administrative expenses in 2000
remained relatively stable in comparison to 1999.
Inflation
- ---------
By their nature, real estate investments tend not to be adversely
affected by inflation. Inflation may result in appreciation in the value of real
estate investments over time if rental rates and replacement costs increase.
Declines in property values during the period of Partnership operations, due to
market and economic conditions, have overshadowed the positive effect inflation
may have on the value of the Partnership's investments.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The Partnership was not party to derivative financial instruments or
derivative commodity instruments at or during the years ended December 31, 2001
and 2000.
7
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The independent auditor's report and financial statements listed in
the accompanying index are filed as part of this report. See Index to the
Financial Statements on page 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure.
--------------------
The Partnership has had no disagreements with its accountants on any
matters of accounting principles or practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
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(a) and (b) Identification of Directors and Executive Officers.
--------------------------------------------------
The following table sets forth the names of the directors and
executive officers of the Managing General Partner and the age and position held
by each of them as of December 31, 2001.
Name Position(s) with the Managing General Partner Age
- ---- --------------------------------------------- ---
Alison L. Husid President, Chief Executive Officer and Director 39
Pamela J. Herbst Vice President and Director 46
J. Grant Monahon Vice President 56
James J. Finnegan Vice President 41
Jonathan Martin Treasurer and Principal Financial and Accounting Officer 31
(c) Identification of Certain Significant Employees.
-----------------------------------------------
None.
(d) Family Relationships.
--------------------
None.
(e) Business Experience.
-------------------
The Managing General Partner was incorporated in Massachusetts on
October 13, 1987. The background and experience of the executive officers and
directors of the Managing General Partner are as follows:
Alison L. Husid is a Portfolio Manager in the Direct Investments group
of AEW Capital Management, L.P. ("AEW"), with responsibility for several real
estate equity portfolios representing approximately $700 million in client
capital. She has over 17 years of experience in real estate finance and
investment management. Alison joined AEW in 1987 as Controller for a portfolio
management team responsible for the acquisition, management, restructuring and
disposition of client assets in New England and the western U.S. She later
served as Asset Manager for a portfolio of assets in Arizona and the West Coast.
Prior to joining AEW, Alison worked for several years as a Senior Auditor with
Peat Marwick, Main & Co. She is a member of New England Women in Real Estate
(NEWIRE), a Certified Public Accountant and a graduate of the University of
Massachusetts (B.A.).
8
Pamela J. Herbst is Head of AEW's Direct Investments group, with oversight
responsibility for approximately $4 billion of client assets. With over 20 years
of direct real estate experience, Pam is a Principal of AEW, and a member of
AEW'S Management Committee, Investment Committee and Investment Policy Group.
Since joining AEW in 1982, Pam has held various senior level positions in
investment management, acquisitions and corporate operations. In addition to
holding a number of industry certifications, she is a member of various real
estate industry trade organizations and sits on the Board of Directors of the
National Association of Real Estate Investment Managers (NAREIM). Pam is a
graduate of the University of Massachusetts (B.A.) and Boston University
(M.B.A.).
J. Grant Monahon is a Principal of AEW focused primarily on expanding AEW's
activities in a variety of global real estate markets. Grant is a member of
AEW's Management Committee, Investment Committee and Investment Policy Group. He
has over 25 years of experience in real estate law and investments and formerly
has served as AEW's Chief Operating Officer and as General Counsel. Prior to
joining AEW in 1987, Grant was a partner with a major Boston law firm. As the
head of that firm's real estate finance department, he represented a wide
variety of institutional clients, both domestic and international, in complex
equity and debt transactions. He is the former Chairman of the General Counsel
section of the National Association of Real Estate Investment Managers. Grant is
a graduate of Dartmouth College (B.A.) and Georgetown University Law Center
(J.D.).
James J. Finnegan is AEW's General Counsel. He has over fifteen years of
experience in real estate, including seven years in private practice with major
New York City and Boston law firms. Jay has extensive experience in creating and
implementing real estate investment and portfolio management strategies for
institutional investors. Jay joined AEW in 1992 and has been actively involved
in various aspects of AEW's investment activities, including public and private
debt and equity investments. He also serves as AEW's securities and regulatory
compliance officer, and is the Principal of AEW Securities, L.P., AEW's
affiliated broker/dealer. Jay is a member of the General Counsel section of the
National Association of Real Estate Investment Managers. He is a graduate of the
University of Vermont (B.A.) and Fordham University School of Law (J.D.).
Jonathan Martin is the Director of Portfolio Accounting for AEW's Direct
Investment group, with responsibility for overseeing all accounting, performance
measurement and financial reporting matters for the firm's direct equity
investment portfolios. Prior to joining AEW, Jon worked for nine years as a
Senior Manager with PricewaterhouseCoopers, LLP where he was an auditor and
financial consultant specializing in the real estate and mortgage banking
industries. A Certified Public Accountant and a member of NCREIF's Accounting
Committee, Jon is a graduate of the University of Notre Dame (B.A.).
(f) Involvement in Certain Legal Proceedings.
----------------------------------------
None.
Item 11. Executive Compensation.
------------------------
Under the Partnership Agreement, the General Partners and their affiliates
are entitled to receive various fees, commissions, cash distributions,
allocations of taxable income or loss and expense reimbursements from the
Partnership. See Notes 1, 2 and 7 of Notes to Financial Statements.
9
The following table sets forth the amounts of the fees and reimbursements
for out-of-pocket expenses which the Partnership paid to or accrued for the
account of the General Partners and their affiliates for the year ended December
31, 2001:
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
General Partners Share of Distributable Cash $ 3,154
AEW Real Estate Advisors, Inc. Management Fees and
Expense Reimbursements 54,293
-------------
TOTAL: $ 57,447
=============
For the year ended December 31, 2001, the Partnership allocated $20,323 of
taxable income to the General Partners. See Note 1 to the audited financial
statements for additional information about transactions between the Partnership
and the General Partner and their affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
As of December 31, 2001, Archon Partners owned approximately 5.6% of the
total number of Units outstanding. No other person or group is known by the
Partnership to be the beneficial owner of more than 5% of the outstanding Units
at December 31, 2001. Under the Partnership Agreement, the voting rights of the
Limited Partners are limited and, in some circumstances, are subject to the
prior receipt of certain opinions of counsel or judicial decisions.
Except as expressly provided in the Partnership Agreement, the right to
manage the business of the Partnership is vested exclusively in the Managing
General Partner.
(b) Security Ownership of Management.
---------------------------------
The General Partners of the Partnership owned no Units at December 31, 2001.
(c) Changes in Control.
-------------------
There exists no arrangement known to the Partnership the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
The Partnership has no relationships or transactions to report other than
as reported in Item 11, above.
10
PART IV
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K.
-------------------------------------------------------
(a) The following documents are filed as part of this report:
Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements and Financial Statements
Index No. 2 are filed as part of this Annual Report.
(b) Reports on Form 8-K. No Current Reports on Form 8-K were filed during
the last quarter of the year ended December 31, 2001.
11
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
Financial Statements
* * * * * * * * * * * *
December 31, 2001
12
COPLEY PENSION PROPERTIES VI;
-----------------------------
A REAL ESTATE LIMITED PARTNERSHIP
---------------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Report of Independent Accountants
Financial Statements (in liquidation as of December 31, 2001):
Balance Sheets - December 31, 2001 and 2000
Statements of Operations - Years ended December 31, 2001, 2000 and
1999
Statements of Partners' Capital - Years ended December 31, 2001, 2000
and 1999
Statements of Cash Flows - Years ended December 31, 2001, 2000 and
1999
Notes to Financial Statements
All schedules are omitted because they are not applicable.
13
Report of Independent Accountants
To the Partners of Copley Pension Properties VI; A Real Estate Limited
Partnership:
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Copley
Pension Properties VI; A Real Estate Limited Partnership (the
"Partnership") at December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are
the responsibility of Sixth Copley Corp., the Managing General Partner of
the Partnership (the "Managing General Partner"); our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by the Managing General
Partner, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 2 to the financial statements, the Partnership adopted
a plan of liquidation on December 31, 2001 and as a result changed its
basis of accounting for periods subsequent to December 31, 2001 from the
going concern basis to the liquidation basis of accounting.
/s/ PricewaterhouseCoopers LLP
Boston, MA
March 18, 2002
14
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
(in liquidation as of December 31, 2001)
December 31,
-----------------------------------
2001 2000
--------------- ---------------
Assets
Real estate investments:
Property, net $ - $ 4,284,794
Joint Venture held for disposition - 1,864,405
Cash and cash equivalents 1,008,448 2,053,663
Other assets 41,979 -
--------------- ---------------
$ 1,050,427 $ 8,202,862
=============== ===============
Liabilities and Partners' Capital
Accounts payable $ 82,604 $ 98,555
Accrued expenses for liquidation 115,425 -
Deferred disposition fees - 1,369,577
--------------- ---------------
Total liabilities 198,029 1,468,132
--------------- ---------------
Partners' capital:
Limited partners ($0 and $223.49 per Unit, at
December 31, 2001 and 2000, respectively
160,000 units authorized; 48,788 units
issued and outstanding) 788,661 6,721,206
General partners 63,737 13,524
--------------- ---------------
Total partners' capital 852,398 6,734,730
--------------- ---------------
$ 1,050,427 $ 8,202,862
=============== ===============
(See accompanying notes to financial statements)
15
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in liquidation as of December 31, 2001)
Year ended December 31,
---------------------------------------------------------
2001 2000 1999
-------------- --------------- ----------------
Investment Activity
Property rentals $ 517,320 $ 779,807 $ 726,612
Property operating expenses (224,715) (221,323) (268,902)
Depreciation and amortization (94,905) (173,627) (128,053)
-------------- --------------- ----------------
197,700 384,857 329,657
Joint venture earnings 37,433 40,932 127,505
-------------- --------------- ----------------
Total real estate operations 235,133 425,789 457,162
Gain on sale of joint venture investment 953,693 - -
Gain on sale of property 3,702,297 - -
Reversal of deferred disposition fees 656,290 - -
-------------- --------------- ----------------
Total real estate activity 5,547,413 425,789 457,162
Interest on cash equivalents 100,462 124,309 138,282
-------------- --------------- ----------------
Total investment activity 5,647,875 550,098 595,444
-------------- --------------- ----------------
Portfolio Expenses
Management fee 31,193 - 58,195
Estimated liquidation period expenses 115,425 - -
General and administrative 164,562 180,335 171,510
-------------- --------------- ----------------
311,180 180,335 229,705
-------------- --------------- ----------------
Net Income $ 5,336,695 $ 369,763 $ 365,739
============== =============== ================
Net income per limited
partnership unit $ 108.29 $ 7.50 $ 7.42
============== =============== ================
Cash distributions per limited
partnership unit $ 229.89 $ 2.81 $ 17.45
============== =============== ================
Number of limited partnership
units outstanding during the year 48,788 48,788 48,788
============== =============== ================
(See accompanying notes to financial statements)
16
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(in liquidation as of December 31, 2001)
Year ended December 31,
---------------------------------------------------------------------------------------
2001 2000 1999
---- ---- ----
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- --------
Balance at beginning
of year $ 13,524 $ 6,721,206 $ 11,211 $ 6,492,235 $ 13,832 $ 6,981,503
Cash distributions (3,154) (11,215,873) (1,385) (137,094) (6,278) (851,350)
Net income 53,367 5,283,328 3,698 366,065 3,657 362,082
----------- ------------ ----------- ----------- --------- -----------
Balance at end
of year $ 63,737 $ 788,661 $ 13,524 $ 6,721,206 $ 11,211 $ 6,492,235
=========== ============ =========== =========== ========= ===========
(See accompanying notes to financial statements)
17
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in liquidation as of December 31, 2001)
Year ended December 31,
------------------------------------------------------------------
2001 2000 1999
---------------------- -------------- ----------
Cash flows from operating activities:
Net income $ 5,336,695 $ 369,763 $ 365,739
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 94,905 173,627 128,053
Equity in joint venture earnings (37,433) (40,932) (127,505)
Cash distributions from joint venture - - 184,210
Gain on sale of joint venture (953,693) - -
Gain on sale of property (3,702,297) - -
Increase in property deferred leasing costs
and other assets (30,208) (118,224) (4,860)
Decrease (increase) in property working capital (13,070) 30,810 58,488
Reversal of deferred disposition fees (656,290) - -
Increase (decrease) in liabilities 99,474 9,524 (43,759)
----------------- ---------------- ------------
Net cash provided by operating activities 138,083 424,568 560,366
----------------- ---------------- ------------
Cash flows from investing activities:
Deferred disposition fees 94,703 - -
Investment in joint venture (99,464) (227,905) (2,841)
Investment in property (21,258) (309,904) -
Net proceeds from sale of investments 10,869,737 - -
Payment of disposition fees (807,989) - -
----------------- ---------------- ----------------
Net cash provided (used) by
investing activities 10,035,729 (537,809) (2,841)
----------------- ---------------- ----------------
Cash flows from financing activity:
Distributions to partners (11,219,027) (138,479) (857,628)
----------------- ---------------- ----------------
Net cash used in financing activity (11,219,027) (138,479) (857,628)
----------------- ---------------- ----------------
Net decrease in cash and
cash equivalents (1,045,215) (251,720) (300,103)
Cash and cash equivalents:
Beginning of year 2,053,663 2,305,383 2,605,486
----------------- ---------------- ----------------
End of year $ 1,008,448 $ 2,053,663 $ 2,305,383
================= ================ ================
(See accompanying notes to financial statements)
18
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and Business
- ----------------------------------
General
-------
Copley Pension Properties VI; 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 organizations intended to be exempt from federal
income tax. The Partnership commenced operations in July 1988 and had disposed
of all of its investments as of December 31, 2001. On December 31, 2001, the
Partnership adopted a plan of liquidation and intends to liquidate in 2002.
The Managing General Partner of the Partnership is Sixth Copley Corp., a
wholly-owned subsidiary of AEW Real Estate Advisors, Inc. (the "Advisor"),
formerly known as Copley Real Estate Advisors, Inc. ("Copley"). The associate
general partner is GCOP Associates Limited Partnership, a Massachusetts limited
partnership. Subject to the Managing General Partner's overall authority, the
business of the Partnership is managed by the Advisor pursuant to an advisory
contract.
The Advisor is a wholly-owned subsidiary of AEW Capital Management, L.P., a
wholly-owned subsidiary of Nvest Companies, L.P. (the "Company"). On October 30,
2000, Paris-based CDC IXIS Asset Management ("CDCIAM") acquired the Company and
its affiliated partnership, Nvest, L.P. (the "Acquisition"). Subsequently, the
Company's name was changed to CDC IXIS Asset Management North America, LP.
CDCIAM is the investment management arm of France's CDC IXIS, a subsidiary of
Caisse des Depots Group ("CDC").
The Acquisition was accomplished through CDCIAM's wholly owned subsidiary,
CDC IXIS Asset Management US Corporation ("CDCIAM US Corp."), which has a 99%
direct limited partnership interest in the Company and is the sole owner of the
Company's 1% general partner, CDC IXIS Asset Management US, LLC.
Prior to the Acquisition, the Company was owned by Nvest, L.P. ("Nvest"), a
publicly traded limited partnership with an approximate 15 percent interest, and
by private unitholders. The general partner of Nvest and the managing general
partner of the Company was a wholly-owned subsidiary of Metropolitan Life
Insurance Company ("MetLife"). In total, MetLife owned approximately 48% of the
partnership units of the Company at October 30, 2000 (including those owned
indirectly through ownership of Nvest units). Upon the consummation of the
Acquisition on October 30, 2000, all unitholders received cash in exchange for
each unit owned. Nvest, whose primary asset was its ownership of Nvest
Companies' units, was merged with and into the Company on December 31, 2000,
with the Company as the surviving entity.
Management
----------
The Advisor is entitled to receive stipulated fees from the Partnership in
consideration of services performed in connection with the management of the
Partnership and the acquisition and disposition of Partnership investments in
real property. Partnership management fees are 9% of distributable cash from
operations, as defined, before deducting such fees. The deferred management fees
of $112,441 incurred through 1990 were paid to AEW in September 1994 with a
portion of the proceeds from the sale of Lakewood Apartments. AEW is also
reimbursed for expenses incurred in connection with administering the
Partnership ($17,000 in each of 2001, 2000 and 1999 respectively). Acquisition
fees were paid in an amount equal to 2% of the gross proceeds from the offering,
at the time commitments were initially funded. Disposition fees are limited to
the lesser of 3% of the selling price of the property, or 50% of the standard
real estate commission customarily charged by an independent real estate broker.
Payments of disposition fees are subject to the prior receipt by the
19
limited partners of their capital contributions plus a stipulated return
thereon. Based on the Partnership's returns to date and the sale of the
Partnership's last two remaining investments during 2001, the Managing General
Partner determined that, in accordance with the Partnership agreement, a portion
of such previously accrued fees, $656,290, would be reversed in 2001, while the
remainder of the accrued fees, $807,989, was paid to the Advisor on November 26,
2001. Deferred disposition fees were $0 and $1,369,577 at December 31, 2001 and
2000, respectively.
New England Securities Corporation ("NESC"), an indirect subsidiary
of Met Life during 2000 and 1999, was engaged by the Partnership to act as its
unitholder servicing agent. Fees and out-of-pocket expenses for such services
totaled $11,376 and $11,187 in 2000 and 1999, respectively.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Revenue Recognition
-------------------
The Partnership recognizes rental revenue on a straight-line basis
over the lease terms.
The Partnership accounts for its investments in joint ventures using
the equity method of accounting. Under the equity method of accounting, the net
equity investment of the Partnership is reflected on the balance sheets, and the
Partnership's share of net income or loss from the joint ventures is included in
the statements of operations.
The Partnership records real estate sales at the time a sale is
consummated. A sale is consummated when the parties are bound by the terms of a
contract, all consideration has been exchanged, all conditions precedent to
closing have been met, and title has passed from seller to buyer.
Liquidation Basis of Accounting
--------------------------------
In connection with its adoption of a plan of liquidation on December
31, 2001, the Partnership also adopted the liquidation basis of accounting
which, among other things, requires that assets and liabilities be stated at
their estimated net realizable value and that estimated costs of liquidating the
Partnership be provided to the extent that they are reasonably determinable.
Accounting Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Managing General Partner to make
estimates affecting the reported amounts of assets and liabilities, and of
revenues and expenses. In the Partnership's business, certain estimates require
an assessment of factors not within management's control, such as the ability of
tenants to perform under long-term leases and the ability of the properties to
sustain their occupancies in changing markets. Actual results, therefore, could
differ from those estimates.
Real Estate Joint Ventures
--------------------------
Investments in joint ventures, including loans, (which are in
substance real estate investments), were stated at cost plus (minus) equity in
undistributed joint venture income (losses). Allocations of joint venture income
(losses) were made to the Partnership's venture partners as long as they had
substantial economic equity in the project. Economic equity was measured by the
excess of the appraised value of the property over the Partnership's total cash
investment plus accrued preferential returns thereon. The Partnership recorded
an amount equal to 100% of the operating results of each joint venture, after
the elimination of all inter-entity transactions, except for the venture which
included an affiliate of the Partnership, which had substantial economic equity
in its project.
Property
--------
Property included land and buildings, which were stated at cost less
accumulated depreciation, and other operating net assets (liabilities). The
Partnership's initial carrying value of a property previously owned by a joint
venture equaled the Partnership's carrying value of the prior investment on the
conversion date.
Capitalized Costs, Depreciation and Amortization
------------------------------------------------
Maintenance and repair costs were expensed as incurred. Significant
improvements and renewals were capitalized. Depreciation was computed using the
straight-line method based on estimated useful lives of the buildings and
improvements. Leasing costs were also capitalized and amortized over the related
lease term.
20
Acquisition fees have been capitalized as part of the cost of real
estate investments. Amounts not related to land were being amortized using the
straight-line method over the estimated useful lives of the underlying property.
Leases provided for rental increases over the respective lease terms.
Rental revenue was being recognized on a straight-line basis over the lease
terms.
Realizability of Real Estate Investments
----------------------------------------
The Partnership considered a real estate investment to be impaired
when it determined the carrying value of the investment was not recoverable
through expected undiscounted cash flows generated from the operations and
disposition of the property. The impairment loss was based on the excess of the
investment's carrying value over its estimated fair market value. For
investments held for sale, the impairment loss also included estimated costs of
sale. Property held for sale was not depreciated during the holding period.
Investments were considered to be held for disposition at the time management
committed the Partnership to a plan to dispose of the investment.
Cash Equivalents
----------------
Cash equivalents are stated at cost, plus accrued interest. The
Partnership considers all highly liquid instruments purchased with a maturity of
ninety days or less to be cash equivalents; otherwise, they are classified as
short-term investments.
Deferred Disposition Fees
-------------------------
Disposition fees due to the Advisor related to sales of investments
are included in the determination of gains or losses resulting from such
transactions. According to the terms of the advisory contract, payment of such
fees was deferred until the limited partners first received their capital
contributions, plus stipulated returns thereon. See Note 1 for discussion of the
reduction and payment of such fees.
Income Taxes
------------
A partnership is not liable for income taxes and, therefore, no
provision for income taxes is made in the financial statements of the
Partnership. A proportionate share of the Partnership's income is reportable on
each partner's tax return.
Per Unit Computations
---------------------
Per unit computations are based on the number of units of limited
partnership interest outstanding during the year. The actual per unit amount
will vary by partner depending on the date of admission to, or withdrawal from,
the Partnership.
Segment Data
------------
Effective January 1, 1998, the Partnership adopted Financial Accounting
Standards Board Statement No. 131, "Disclosure about Segments on an Enterprise
and Related Information" (FAS 131). Based on the criteria established in FAS
131, the Managing General Partner has determined that the Partnership operates
in one operating segment: investing in real estate properties which are
domiciled in the United States of America.
21
Note 3 - Accrued Expenses for Liquidation
- -----------------------------------------
Accrued expenses for liquidation as of December 31, 2001 include
estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimates of legal fees,
accounting fees, tax preparation and filing fees and other professional
services. As of December 31, 2001 the Partnership accrued $115,425 for such
expenses.
The actual costs could vary from the related provisions due to the
uncertainty related to the length of time required to complete the liquidation
and dissolution of the Partnership. The accrued expenses do not take into
consideration possible litigation arising from the customary representations and
warranties made as part of each sale. Such costs, if any, are unknown and are
not estimable at this time.
Note 4 - Real Estate Joint Ventures
- -----------------------------------
The Partnership had invested in seven real estate joint ventures,
organized as general partnerships with a real estate management/development firm
and, in three cases, with an affiliate of the Partnership. One joint venture
sold its property in 1990; another joint venture investment was restructured
into a wholly-owned property in 1991. During 1994, the Lakewood joint venture
sold its property and the Stemmons Industrial investment was converted to a
wholly-owned property; the latter property was subsequently sold in 1997. In
1998, the White Phonic and Waterford Apartments joint ventures sold their
properties in July and August, respectively. The Prentiss Copystar investment
was sold in February 2001. The Partnership committed to make capital
contributions to the ventures, which were generally subject to preferential cash
distributions at a specified rate and to priority distributions with respect to
sale or refinancing proceeds. The joint venture agreements provided for the
funding of cash flow deficits by the venture partners in proportion to ownership
interests, and for the dilution of their ownership share in the event a venture
partner did not contribute proportionately.
The respective real estate management/development firm was
responsible for day-to-day development and operating activities, although
overall authority and responsibility for the business was shared by the
venturers. The real estate management/development firm, or its affiliates, also
provided various services to the respective joint venture for a fee.
The following is a summary of cash invested in Prentiss Copystar, net
of returns of capital and excluding acquisition fees:
Preferential
Investment/ Rate of Ownership December 31,
Location Return Interest 2001 2000
-------- ------ -------- ------ ------
Prentiss Copystar 11.0% 61.64% - $ 2,675,450
Itasca, IL
Prentiss Copystar
-----------------
On May 23, 1991, the Partnership entered into a joint venture with an
affiliate of Prentiss Properties, Ltd., and an affiliate of the Partnership (the
"Affiliate"), to develop and operate an industrial facility. The Partnership and
its Affiliate initially had a collective 75% interest in the joint venture. The
Partnership committed to make a maximum capital contribution of $2,300,000 but
subsequently made additional contributions classified as deficit contributions
as well as contributions on behalf of the affiliate of Prentiss Properties,
classified as Default Contributions. The Default Contributions subsequently
increased the Partnership and its Affiliate's collective interest to 89.34% as
of December 31, 2000. The preferential return related to $690,000 was payable
currently only to the extent of available cash flow. If $1,610,000, or any
portion thereof, was returned to the Partnership between the second and tenth
anniversary of the joint venture agreement, the return would be increased by an
amount sufficient to preserve the stipulated rate of return through the tenth
anniversary.
22
On February 26, 2001, the Prentiss Copystar joint venture investment
in which the Partnership and the Affiliate were entitled to 69% and 31%,
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 $3,156,750. The Partnership received its 69% share of the net proceeds,
$3,049,698 after closing costs, and had recognized a gain on the sale of
$953,693. ($19.35 per Unit). A disposition fee of $94,703 was accrued but not
paid to the Advisor. In accordance with the Partnership agreement, a portion of
this previously accrued fee was reversed during the third quarter of 2001,
decreasing the fee to $44,826. On March 29, 2001, the Partnership made a capital
distribution of $2,683,340 ($55.00 per Unit) from the proceeds of the sale.
Summarized Financial Information
- --------------------------------
The following summarized financial information is presented in the
aggregate for Prentiss Copystar:
Assets and Liabilities
----------------------
December 31,
-------------------------------------------------
2001 2000
------ ------
Assets
Real property, at cost less
accumulated depreciation
of $0 and $496,142 at
December 31, 2001 and
2000, respectively $ - $ 2,746,869
Other 9,500 73,107
-------------- --------------
9,500 2,819,976
Liabilities 9,500 106,201
-------------- --------------
Net assets $ - $ 2,713,775
============== ==============
Results of Operations
---------------------
Year ended December 31,
----------------------------------------------------
2001 2000 1999
------------ ----------- ------------
Revenue:
Rental income $ 98,875 $ 220,715 $ 367,942
Expenses:
Operating expenses 44,623 98,891 109,644
Depreciation and amortization 12,151 62,211 65,787
-------------- ----------- ------------
56,774 161,102 175,431
-------------- ----------- ------------
Net income $ 42,101 $ 59,613 $ 192,511
============== =========== ============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and its affiliates on behalf of their various financing arrangements
with the joint venture.
This investment was classified as Joint Venture held for disposition
on the Balance Sheet at December 31, 2000. During the years ended December 31,
2001 and 2000, the Partnership recognized equity in joint venture earnings of
$37,433 and $40,932 from this investment, respectively.
23
Note 5 - Property
- -----------------
On July 18, 1988, the Partnership entered into a joint venture with
an affiliate of The Hewson Company to acquire and operate an industrial building
known as Wilmington Industrial in Carson, California. The Partnership made
capital contributions totaling $7,774,402. In 1991, when the venture partner did
not fund its proportionate share of the cash flow deficit, the Partnership's
ownership interest increased to 100%.
On August 8, 2001, the Partnership sold its Wilmington Industrial
investment to an unaffiliated third party for gross proceeds of $8,217,781. The
Partnership received net proceeds of $7,914,742 and had recognized a gain on the
sale of $3,702,297 ($75.13 per Unit). On September 28, 2001, the Partnership
made a capital distribution of $7,025,472 ($144.00 per Unit) from the proceeds
of the sale.
The following is a summary of the Partnership's investment in
Wilmington Industrial:
December 31,
---------------------------------------------
2001 2000
------------ ------------------
Land $ - $ 2,770,056
Buildings, improvements and
other capitalized costs - 5,336,205
Impairment provision - (1,500,000)
Accumulated depreciation and
amortization - (2,350,377)
Net operating assets 41,979 28,910
--------------- ----------------
$ 41,979 $ 4,284,794
=============== ================
The Wilmington Industrial building was being depreciated over 30
years and capitalized improvements were being depreciated over seven years. The
$1,500,000 impairment provision was recorded in 1995.
Note 6 - Income Taxes
- ---------------------
The Partnership's income for federal income tax purposes differs from
that reported in the accompanying statement of operations as follows:
Year ended December 31,
----------------------------------------------------------
2001 2000 1999
------------------ ------------------- ---------------
Net income per financial
statements $ 5,336,695 $ 369,763 $ 365,739
Timing differences:
Joint venture earnings (1,645,942) (24,089) (1,666)
Property rentals - 37,899 71,247
Depreciation (83,672) 35,655 27,078
Expenses - (16,001) -
Gain on sale (1,574,759) - -
---------------- ---------------- -----------------
Taxable income $ 2,032,322 $ 403,227 $ 462,398
================ ================ =================
24
Note 7 - Partners' Capital
- --------------------------
Allocation of net income (losses) from operations and distributions
of distributable cash from operations, as defined, are in the ratio of 99% to
the limited partners and 1% to the general partners.
Net sale proceeds and financing proceeds are allocated first to
limited partners to the extent of their contributed capital plus a stipulated
return thereon, as defined, second to pay disposition fees, and then 85% to the
limited partners and 15% to the general partners. The adjusted capital
contribution per Unit was reduced from $1,000 to $951.83 during 1990, from
$951.83 to $768.98 during 1994, from $768.98 to $660.29 during 1997, from
$660.29 to $228.20 during 1998, from $228.20 to $223.49 during 1999, and from
$223.49 to $0 in 2001. Income from a sale is allocated in proportion to the
distribution of related proceeds, provided that the general partners are
allocated at least 1%. Losses from a sale, and income from a sale if there are
no residual proceeds after the repayment of the related debt, will be allocated
99% to the limited partners and 1% to the general partners.
25
FINANCIAL STATEMENTS
INDEX NO. 2
Auditor's Report and Financial Statements
of Prentiss/Copley Itasca Associates
Report of Independent Accountants from PricewaterhouseCoopers LLP
Balance Sheets - December 31, 2000 and 1999
Statements of Operations - For the Years ended December 31, 2000, 1999
and 1998
Statements of Partners' Equity - For the Years ended December 31, 2000,
1999 and 1998
Statements of Cash Flows - For the Years ended December 31, 2000, 1999
and 1998
Notes to Financial Statements
26
Report of Independent Accountants
To the Partners of
Prentiss/Copley Itasca Associates:
In our opinion, the accompanying balance sheets and the related statements of
operations, of partners' equity and of cash flows present fairly, in all
material respects, the financial position of Prentiss/Copley Itasca Associates
(the "Partnership") at December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
March 21, 2001
-27-
PRENTISS/COPLEY ITASCA ASSOCIATES
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(dollars in thousands)
- --------------------------------------------------------------------------------
2000 1999
------ ------
ASSETS
Real estate, net $2,334 $2,387
Deferred charges, net 413 -
Accruable rental income 30 -
Accounts receivable 12 -
Cash and cash equivalents 31 12
------ ------
Total assets $2,820 $2,399
====== ======
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 106 $ 74
Amounts due to affiliates 209 37
------ ------
Total liabilities 315 111
====== ======
Partners' equity 2,505 2,288
------ ------
Total liabilities and partners' equity $2,820 $2,399
====== ======
The accompanying notes are an integral part of the financial statements.
28
PRENTISS/COPLEY ITASCA ASSOCIATES
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(dollars in thousands)
- --------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
Rental operations:
Rental income $ 221 $ 368 $ 468
Property operating expenses (99) (110) (126)
----- ----- -----
122 258 342
----- ----- -----
Interest expense 397 356 355
Depreciation 53 52 53
Amortization 10 14 18
----- ----- -----
Net loss $(338) $(164) $ (84)
===== ===== =====
The accompanying notes are an integral part of the financial statements.
29
PRENTISS/COPLEY ITASCA ASSOCIATES
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(dollars in thousands)
- -------------------------------------------------------------------------------------------------
Developer CPP6 CPP7 Total
--------- --------- --------- ---------
Partners' equity (deficit), December 31, 1997 $ (195) $ 1,827 $ 819 $ 2,451
Net loss (21) (43) (20) (84)
-------- -------- -------- ---------
Partners' equity (deficit), December 31, 1998 (216) 1,784 799 2,367
Contributions - 59 26 85
Net loss (41) (85) (38) (164)
-------- -------- -------- ---------
Partners' equity (deficit), December 31, 1999 (257) 1,758 787 2,288
Contributions 383 172 555
Net loss (57) (194) (87) (338)
-------- -------- -------- ---------
Partners' equity (deficit), December 31, 2000 $ (314) $ 1,947 $ 872 $ 2,505
======== ======== ======== =========
The accompanying notes are an integral part of the financial statements.
30
PRENTISS/COPLEY ITASCA ASS0CIATES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(dollars in thousands)
- -------------------------------------------------------------------------------
2000 1999 1998
-------- --------- --------
Cash flows from operating activities:
Net loss $ (338) $ (164) $ (84)
Adjustment to reconcile net loss to cash
Provided by (used in) operating activities:
Depreciation and amortization 63 66 71
Non-cash interest 225 85 -
Changes in operating assets and liabilities:
Accruable rental income (30) 9 2
Accounts receivable (12) 1 4
Accounts payable and other liabilities 32 (13) -
Amounts due to Affiliates 172 7 (5)
-------- --------- --------
Net cash provided by (used in) operating
activities 112 (9) (12)
-------- --------- --------
Cash flows from investing activities:
Additions to deferred charges (423) - -
-------- --------- --------
Net cash used in investing activities (423) - -
-------- --------- --------
Cash flows from financing activities:
Cash contributions from partners 330 - -
-------- --------- --------
Net cash provided by financing activities 330 - -
-------- --------- --------
Net increase (decrease) in cash and cash equivalents 19 (9) (12)
Cash and cash equivalents, beginning of year 12 21 33
-------- --------- --------
Cash and cash equivalents, end of year $ 31 $ 12 $ 21
======== ========= ========
Supplemental information:
Interest paid $ - $ 264 $ 355
======== ========= ========
The accompanying notes are an integral part of the financial statements.
31
PRENTISS/COPLEY ITASCA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Prentiss/Copley Itasca Associates (the "Partnership") was formed effective
May 20, 1991, pursuant to a general partnership agreement between Prentiss
Properties Itasca, L.P. (the "Developer") (25%), as managing partner;
Copley Pension Properties VI, a Real Estate Limited Partnership ("CPP 6")
(51.75%); and Copley Pension Properties VII, a Real Estate Limited
Partnership ("CPP 7") (23.25%), for the purpose of owning, constructing and
operating an industrial building in Itasca, Illinois. The interests of each
partner change as default capital contributions are made. See Note 5 for
further discussion of default capital contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real estate
Real estate is carried at the lower of depreciated cost or net realizable
value. Management of the Partnership periodically reviews the carrying
value of the property to determine if circumstances exist indicating an
impairment in the carrying value of the investment in real estate or that
depreciation periods should be modified. If facts or circumstances support
the possibility of impairment, management of the Partnership will prepare a
projection of the undiscounted future cash flows, without interest charges,
of the property and determine if the investment in real estate is
recoverable based on the undiscounted future cash flows. Management of the
Partnership does not believe that there are any factors or circumstances
indicating impairment of the property. Depreciation on the building and
improvements is provided under the straight-line method over an estimated
useful life of 35 years.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
Deferred charges
Tenant improvements and leasing charges are deferred and amortized on a
straight-line basis over the term of the related lease. Accumulated
amortization was $10 at December 31, 2000.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents consists of
cash on hand and investments with maturities of three months or less when
purchased.
Leases
The Partnership, as a lessor, has retained substantially all of the risks
and benefits of ownership and accounts for the lease as an operating lease.
Rental income is recognized on a straight-line basis over the term of the
lease as it is earned. Accruable rental income represents rental income
earned in excess of rent payments received pursuant to the terms of the
lease agreement.
32
PRENTISS/COPLEY ITASCA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
- --------------------------------------------------------------------------------
Income taxes
No provision for income taxes is necessary in the financial statements of
the Partnership because, as a partnership, it is not subject to income tax
and the tax effect of its activities accrues to the individual partners.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. REAL ESTATE
Real estate is comprised of the following at December 31:
2000 1999
------- --------
Land $ 983 $ 983
Building and improvements 1,837 1,837
------- -------
2,820 2,820
Accumulated depreciation (486) (433)
------- -------
$ 2,334 $ 2,387
======= =======
4. LEASING ACTIVITIES
In August 2000, a single tenant commenced a 15-year lease for 100% of the
building. The future minimum lease payments to be received by the
Partnership under the noncancelable lease are as follows:
2001 $ 391
2002 402
2003 413
2004 425
2005 436
4,887
Subsequent to 2005 -------
$ 6,954
=======
33
PRENTISS/COPLEY ITASCA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
The operations of the Partnership are managed by an affiliate of the
Developer in accordance with a management agreement. Management fees
charged to the Partnership during the years ended December 31, 2000 and
1999, totaled approximately $4 and $8, respectively.
The partnership agreement provides for a priority return, which has been
reflected in the financial statements as a payment of interest, on the
capital contributions made by CPP 6 and CPP 7; interest is charged at a
rate of 11% per annum. The partnership agreement provides for a senior and
a junior priority return. As prescribed by the partnership agreement the
senior priority return is paid annually and, if necessary, funded from
deficit contributions while the junior return may accrue. The junior
priority return has been accrued by the Partnership since September 1999
and is reflected in amounts due to affiliates at December 31, 2000 and
1999 as shown in the table below.
If a partner fails to make a deficit contribution within the time
specified, the remaining partners may contribute the funds necessary to
meet the Partnership's obligations. Such contributions are referred to as
default capital contributions. If default capital contributions are made,
the interest of each partner is recalculated in accordance with the
partnership agreement.
During 2000 and 1999, CPP 6 and CPP 7 contributed a total of $555 and $85,
respectively, which are being treated as deficit and default capital
contributions. Per the partnership agreement, the deficit and default
capital contributions earn an 11% return which may accrue should the
property not have enough cash flow to pay the return. At December 31,
2000, CPP 6 and CPP 7 earned approximately $32 on these contributions.
This amount is reflected in amounts due to affiliates as shown below.
Amounts due to affiliates is comprised of the following at December 31:
2000 1999
---- ----
Accrued Junior Priority Return $157 $ 37
Accrued Senior Priority Return 20 -
Accrued Priority Return on Deficit and Default
Contributions 32 -
---- ----
$209 $ 37
==== ====
6. SUBSEQUENT EVENT
The property was sold to an unrelated third party for a sales price of
$4.58 million on February 26, 2001.
34
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 VI;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 29, 2002 By: /s/ Alison L. Husid
----------------------------
Alison L. Husid
President of the
Managing General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief
Executive Officer and
/s/ Alison L. Husid Director of the Managing March 29, 2002
- -------------------------------- General Partner
Alison L. Husid
Vice President and
/s/ Pamela J. Herbst Director of the Managing March 29, 2002
- --------------------------------- General Partner
Pamela J. Herbst
Vice President and
/s/ J. Grant Monahon Director of the Managing March 29, 2002
- ---------------------------------- General Partner
J. Grant Monahon
/s/ James J. Finnegan Vice President of the Managing March 29, 2002
- ------------------------------------ General Partner
James J. Finnegan
Treasurer and Principal Financial
/s/ Jonathan Martin and Accounting Officer of the March 29, 2002
- ---------------------------------- Managing General Partner
Jonathan Martin
35