SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended March 31, 1997 Commission File Number 0-18735
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3058134
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve (12) months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART I
FINANCIAL INFORMATION
BALANCE SHEET
(Unaudited)
March 31, 1997 December 31, 1996
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Assets
Real estate joint ventures $ 6,558,408 $ 6,619,560
Cash and cash equivalents 1,161,678 941,045
Short-term investments 494,851 711,740
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$ 8,214,937 $ 8,272,345
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Liabilities and Partners' Capital
Accounts payable $ 29,406 $ 52,294
Accrued management fee 18,653 18,653
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Total liabilities 48,059 70,947
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Partners' capital (deficit):
Limited partners ($963 per unit;
100,000 units authorized, 11,931
units issued and outstanding) 8,177,674 8,211,849
General partners (10,796) (10,451)
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Total partners' capital 8,166,878 8,201,398
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$ 8,214,937 $ 8,272,345
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(See accompanying notes to financial statements)
STATEMENT OF OPERATIONS (Unaudited)
Quarter Ended March 31,
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1997 1996
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Investment Activity
Joint venture earnings $ 175,726 $ 125,198
Interest on cash equivalents
and short-term investments 21,156 20,329
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196,882 145,527
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Portfolio Expenses
General and administrative 22,282 20,309
Management fee 18,653 18,653
Amortization 1,861 1,861
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42,796 40,823
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Net Income $ 154,086 $ 104,704
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Net income per limited partnership unit $ 12.79 $ 8.69
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Cash distributions per limited
partnership unit $ 15.65 $ 13.24
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Number of limited partnership units
outstanding during the period 11,931 11,931
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(See accompanying notes to financial statements)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended March 31,
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1997 1996
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General Limited General Limited
Partners Partners Partners Partners
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Balance at beginning
of period $ (10,451) $ 8,211,849 $ (7,314) $ 8,522,348
Cash distributions (1,886) (186,720) (1,596) (157,966)
Net income 1,541 152,545 1,047 103,657
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Balance at end
of period $ (10,796) $ 8,177,674 $ (7,863) $ 8,468,039
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(See accompanying notes to financial statements)
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
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1997 1996
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Net cash provided by operating activities $ 198,489 $ 124,076
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Cash flows from investing activity:
Decrease (increase) in short-term
investments, net 210,750 (194,287)
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Cash flows from financing activity:
Distributions to partners (188,606) (159,562)
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Net increase (decrease) in cash and cash
equivalents 220,633 (229,773)
Cash and cash equivalents:
Beginning of period 941,045 1,362,861
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End of period $ 1,161,678 $ 1,133,088
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(See accompanying notes to financial statements)
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, 1997 and December 31, 1996 and the results of
its operations, its cash flows and changes in partners' capital (deficit) for
the interim periods ended March 31, 1997 and 1996. These adjustments are of a
normal recurring nature.
See notes to financial statements included in the Partnership's 1996
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
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Copley Realty Income Partners 4; A 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 commenced operations in September 1989, and acquired the two real
estate investments it currently owns prior to 1992. It intends to dispose of its
investments within six to nine years of their acquisition, and then liquidate.
NOTE 2 - REAL ESTATE JOINT VENTURES
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The following summarized financial information is presented in the
aggregate for the two joint ventures:
Assets and Liabilities
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March 31, 1997 December 31, 1996
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Assets
Real property, at cost less
accumulated depreciation of
$2,423,936 and $2,282,330 $ 11,546,009 $ 11,648,017
Other 488,907 651,527
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12,034,916 12,299,544
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Liabilities
Note payable (a) 1,079,916 1,084,418
Other 245,702 271,985
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1,325,618 1,356,403
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Net assets $ 10,709,298 $10,943,141
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(a) Note payable to an insurance company, secured by one building
within the Newhew joint venture, accrues interest at 9.25% per
annum. Principal and interest installments of $9,848 are due
monthly until July 1, 1999, at which time the principal balance
and any unpaid interest will be due and payable.
Results of Operations
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Quarter Ended March 31,
1997 1996
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Revenue
Rental income $ 554,476 $ 492,085
Other income 2,419 226
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556,895 492,311
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Expenses
Operating expenses 118,336 93,962
Depreciation and amortization 156,097 149,800
Interest expense 25,043 25,439
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299,476 269,201
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Net income $ 257,419 $ 223,110
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Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures.
NOTE 3 - SUBSEQUENT EVENTS
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Distributions of cash from operations relating to the quarter ended
March 31, 1997 were made on April 24, 1997 in the aggregate amount of $188,606
($15.65 per limited partnership unit).
On May 1, 1997, the Partnership sold Hohokam Corporate Center (Newhew
Phase I) for cash in an amount which exceeded the carrying value of the
investment. This transaction will be accounted for in the second quarter of
1997.
Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Liquidity and Capital Resources
The Partnership completed its offering of units of limited
partnership interest in December 1990 and a total of 11,931 units were sold. The
Partnership received proceeds of $10,097,962, net of selling commissions and
other offering costs, which have been used for investment in real estate and to
pay related acquisition costs, or retained as working capital reserves. In July
1995, the Partnership reduced its working capital reserves by making a capital
distribution of $441,447 ($37 per limited partnership unit). After the
distribution, the Partnership's adjusted capital contribution was $963 per unit.
At March 31, 1997, the Partnership had $1,656,529 in cash, cash
equivalents, and short-term investments, of which $188,606 was used for cash
distributions to the partners on April 24, 1997; the remainder is being retained
for working capital reserves. The source of future liquidity and cash
distributions to partners will be cash generated by the Partnership's real
estate and short-term investments. Distributions of cash from operations related
to the first quarter of 1996 and 1997 were made at the annualized rate of 6.5%
on the adjusted capital contribution.
The carrying value of real estate investments in the financial
statements at March 31, 1997 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 the estimated
cost of sale for properties held for sale. Carrying value may be greater or less
than current appraised value. At March 31, 1997, the appraised values of the
Newhew and Shasta Way investments exceeded their carrying values by $1,800,000
and $700,000, respectively. The current appraised value of real estate
investments has been determined by the managing general partner and is generally
based on a combination of traditional appraisal approaches performed by the
Partnership's advisor and independent appraisers. Because of the subjectivity
inherent in the valuation process, the current appraised value may differ
significantly from that which could be realized if the real estate were actually
offered for sale in the marketplace.
Results of Operations
Form of Real Estate Investments
The Newhew investment is structured as a joint venture with a real
estate management/development firm. The Shasta Way investment had been
structured as a joint venture with a real estate management/development firm and
an affiliate of the Partnership. As of January 1, 1996, the Shasta Way joint
venture was restructured, and the management/development firm's interest was
assigned to the Partnership and its affiliate in proportion to their respective
ownership interests. The Partnership's ownership percentage increased to 42%.
Operating Factors
Occupancy decreased slightly to 97% at Hohokam Corporate Center
(Newhew's Phase I investment) during the first quarter of 1997. The property was
99% leased at December 31, 1996 and 100% at March 31, 1996. Fairmont Commerce
Center (Newhew's Phase II investment) has been 100% leased to two tenants since
May 1992.
The Partnership sold the two Phase I buildings on May 1, 1997 for a
price which exceeded their carrying value. This transaction will be accounted
for in the second quarter of 1997.
Shasta Way is 100% occupied by a single tenant under a lease which
expires December 31, 1998.
Investment Results
Interest income on cash equivalents and short-term investments for
the three months ended March 31, 1997 increased 4% as compared to the
corresponding period of 1996, due to higher average invested balances.
Joint venture earnings were $175,726 and $125,198 for the three
months ended March 31, 1997 and 1996, respectively. The 1997 amount is comprised
of operating income of $116,927 at Newhew and $58,799 at Shasta Way; the 1996
amount was comprised of $54,655 at Newhew and $70,543 at Shasta Way. The
improvement at Newhew is primarily due to increased rental income at Hohokam,
partially offset by increased operating expenses. The revenue increase was
caused by the final settlement of tenant reimbursements.
Operating cash flow increased by approximately $74,000 between the
first three months of 1996 and 1997, while net income increased by approximately
$49,000. The difference is primarily due to the timing of distributions from
both Shasta Way and Newhew.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
increased by $2,000, or 10%, between the first three months of 1996 and 1997 as
increases in professional and accounting fees were partially offset by a
decrease in appraisal fees.
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.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on Form 8-K
were filed during the quarter ended March 31, 1997.
SIGNATURES
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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 REALTY INCOME PARTNERS 4; A LIMITED
PARTNERSHIP
(Registrant)
May 12, 1997 /s/ James J. Finnegan
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James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Fourth Income Corp.
May 12, 1997 /s/ Daniel C. Mackowiak
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Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Income Corp.