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, 2002 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, 16/th/ 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, 2002
PART I
FINANCIAL INFORMATION
2
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF NET ASSET IN LIQUIDATION
March 31, 2002 December 31, 2001
(Unaudited) (Audited)
-------------- -----------------
Assets
Cash and cash equivalents $ 686,083 $ 743,747
----------- -----------
$ 686,083 $ 743,747
=========== ===========
Liabilities and Partners' Capital
Accounts payable $ 28,244 $ 84,212
Accrued expenses for liquidation 104,554 109,000
----------- ----------
Total liabilities 132,798 193,212
----------- ----------
Net assets in liquidation:
Limited partners ($57.00 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 514,132 511,410
General partners 39,153 39,125
----------- -----------
Total partners' capital 553,285 550,535
----------- -----------
$ 686,083 $ 743,747
=========== ===========
(See accompanying notes to unaudited financial statements)
3
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
(Unaudited)
Three Months Ended
March 31, 2002
------------------
Net Assets in liquidation at
beginning of period $ 550,535
------------------
Increase during period:
Operating Activities
Interest Income 2,750
------------------
Net change in net assets in liquidation 2,750
------------------
Net assets in liquidation at
end of period $ 553,285
==================
(See accompanying notes to unaudited financial statements)
4
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
March 31, 2001
------------------
INVESTMENT ACTIVITY
Property rentals $ 108,599
Property operating expenses (8,554)
----------
100,045
Joint venture earnings 7,491
----------
Total real estate operations 107,536
Gain on sale of joint venture 330,165
----------
Total real estate activity 437,701
Interest on cash equivalents 32,824
----------
Total investment activity 470,525
----------
PORTFOLIO EXPENSES
General and administrative 39,992
----------
39,992
----------
Net income $ 430,533
==========
Net income per limited partnership
unit $ 10.13
==========
Cash distributions per limited
partnership unit $ 28.00
==========
Number of limited partnership units
outstanding during the period 42,076
==========
(See accompanying notes to unaudited financial statements)
5
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 2001
-------------------
Net cash provided by operating activities $ 100,956
-----------
Cash flows from investing activities:
Investment in joint venture (19,500)
Net proceeds from sale of investment 1,253,848
Deferred disposition fees 42,548
-----------
Net cash provided by
investing activities 1,276,896
-----------
Cash flows from financing activity:
Distributions to partners (1,178,128)
-----------
Net increase in cash
and cash equivalents 199,724
Cash and cash equivalents:
Beginning of period 2,215,637
-----------
End of period $ 2,415,361
===========
(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, 2002 and December 31, 2001 and its changes of
net assets in liquidation and the results of its operations for the three month
periods ended March 31, 2002 and 2001, respectively, and its cash flows for the
three months ended March 31, 2001. These adjustments are of a normal recurring
nature.
See notes to financial statements included in the Partnership's 2001
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 and had disposed
of all its real estate investments as of December 31, 2001. The Partnership sold
its last remaining asset in April 2001. On December 31, 2001, the Partnership
adopted a plan of liquidation and intends to liquidate and dissolve in 2002.
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.
Note 2 - Real Estate Joint Ventures
- -----------------------------------
On February 26, 2001, the Prentiss Copystar joint venture investment in
which the Partnership and an affiliate were 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,
$1,364,298 after closing costs, and recognized a gain on the sale of $321,632
($7.57 per limited partnership unit) on the sale. A disposition fee of $42,548
was accrued but not paid to AEW Real Estate Advisors, Inc. In accordance with
the Partnership agreement, this fee was reversed during the second quarter of
2001. 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.
7
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
The following summarized financial information is presented in the
aggregate for the Prentiss Copystar joint venture:
Assets and Liabilities
----------------------
March 31, 2002 December 31, 2001
-------------- -----------------
Assets
Other $ - $ 9,500
--------------- ------------
- 9,500
Liabilities - 9,500
--------------- ------------
Net assets $ - $ 0
=============== ============
Results of Operations
Three Months Ended March 31,
2002 2001
----------- -----------
Revenue
Rental income $ - $ 87,305
-------------- ------------
- 87,305
-------------- ------------
Expenses
Operating expenses - 63,140
Depreciation and amortization - 12,151
-------------- ------------
- 75,291
-------------- ------------
Net income $ - $ 12,014
=============== ============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and its affiliate on behalf of their various financing arrangements
with the joint venture.
8
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Note 3 - Property
- -----------------
On April 6, 2001, the Partnership sold its Drilex investment to an
unaffiliated third party for gross proceeds of $2,500,000. The Partnership
received net proceeds of $2,361,968 and recognized a gain of $68,290 ($1.61 per
Unit) on the sale. On April 26, 2001, the Partnership made a capital
distribution of $2,272,104 ($54.00 per Unit) from the proceeds of the sale.
Note 4 - Accrued expenses for liquidation
- -----------------------------------------
Accrued expenses for liquidation as of March 31, 2002 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 fees, filing fees and other professional services. During the three
months ended March 31, 2002, the Partnership incurred $4,446 of 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 are unknown and are not
estimable at this time.
9
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
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'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 and two of which were sold in 2001.
Through March 31, 2002, capital of $39,677,668 ($943.00 per limited partnership
unit) has been returned to the limited partners; $36,091,951 as a result of
sales, $3,249,109 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 $57.00 per limited partnership unit.
10
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
At March 31, 2002, the Partnership had $686,083 in cash and cash
equivalents, which is being retained as a reserve in connection with the
liquidation of the Partnership. There have been no distributions of cash from
operations since the second quarter of 2000 due to Prentiss Copystar's vacancy
from September 1999 to August 2000 and its subsequent sale in February 2001 and
insufficient cash flow from Drilex and the subsequent sale of Drilex in April
2001. However, a capital distribution of original working capital previously
held in reserves was made on April 26, 2001 in the amount of $27.00 per Unit and
a distribution of operational cash previously held in reserves was made on July
26, 2001 in the amount of $12.45 per Unit.
Results of Operations
- ---------------------
Form of Real Estate Investment
The Drilex investment was a wholly-owned property and was sold on April
6, 2001. 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 $321,632. At the time of the
sale, Prentiss Copystar was 100% leased.
As mentioned above, the Drilex property was sold on April 6, 2001 and
the Partnership recognized a gain of $68,290. The property was 100% leased at
the time of sale.
Investment Results
The investment results for the three month periods ended March 31, 2002
and 2001 are not comparable due to the sale of the Partnership's last two
remaining properties in 2001, as discussed above.
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. The Partnership did not incur a
management fee during the three month periods ended March 31, 2002 or 2001 due
to the suspension of cash distributions since the third quarter of 2000.
General and administrative expenses primarily consist of real estate
appraisal, printing, legal, accounting and investor servicing fees. General and
administrative expenses were $39,992 for the three month period ended March 31,
2001.
Costs to dissolve and liquidate the Partnership include legal fees,
accounting fees, tax preparation fees, filing fees and other professional
services. During the three months ended March 31, 2002, the Partnership incurred
$4,446 of such expenses.
11
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2002
PART II
OTHER INFORMATION
Item 6. Reports on Form 8-K
Reports on Form 8-K: No Current Reports on Form 8-K were filed
during the quarter ended March 31, 2002.
12
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 10, 2002
/s/ Alison L. Husid
-------------------------------
Alison L. Husid
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
May 10, 2002
/s/ Jonathan Martin
-------------------------------
Jonathan Martin
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
13