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 June 30, 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 JUNE 30, 1997
PART I
FINANCIAL INFORMATION
BALANCE SHEETS
(Unaudited)
June 30, 1997 December 31, 1996
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Assets
Real estate joint ventures $ 4,689,779 $ 6,619,560
Cash and cash equivalents 1,145,686 941,045
Accounts receivable 49,881 -
Short-term investments 491,966 711,740
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$ 6,377,312 $ 8,272,345
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Liabilities and Partners' Capital
Accounts payable $ 41,338 $ 52,294
Accrued management fee 16,996 18,653
Deferred disposition fees 89,700 -
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Total liabilities 148,034 70,947
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Partners' capital (deficit):
Limited partners ($729 and $963 per
unit, respectively; 100,000 units
authorized, 11,931 units issued
and outstanding) 6,231,532 8,211,849
General partners (2,254) (10,451)
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Total partners' capital 6,229,278 8,201,398
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$ 6,377,312 $ 8,272,345
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(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
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Investment Activity
Joint venture earnings $ 81,038 $ 256,764 $ 156,856 $ 282,054
Interest on cash equivalents
and short-term investments 32,641 53,797 19,882 40,211
Gain on sale of property 973,919 973,919 - -
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1,087,598 1,284,480 176,738 322,265
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Portfolio Expenses
General and administrative 26,093 48,375 22,271 42,580
Management fee 16,997 35,650 18,654 37,307
Amortization 1,648 3,509 1,862 3,723
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44,738 87,534 42,787 83,610
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Net Income $ 1,042,860 $ 1,196,946 $ 133,951 $ 238,655
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Net income per limited partnership unit $ 86.53 $ 99.32 $ 11.11 $ 19.80
========== ========== ======== ========
Cash distributions per limited
partnership unit $ 249.65 $ 265.30 $ 15.65 $ 28.89
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Number of limited partnership units
outstanding during the period 11,931 11,931 11,931 11,931
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(See accompanying notes to financial statements)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
---------------------- ---------------------- --------------------------- ---------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
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Balance at beginning
of period $(10,796) $ 8,177,674 $(10,451) $ 8,211,849 $(7,863) $8,468,039 $(7,314) $8,522,348
Cash distributions (1,886) (2,978,574) (3,772) (3,165,294) (1,886) (186,720) (3,482) (344,686)
Net income 10,428 1,032,432 11,969 1,184,977 1,340 132,611 2,387 236,268
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Balance at end
of period $ (2,254) $ 6,231,532 $ (2,254) $ 6,231,532 $(8,409) $8,413,930 $(8,409) $8,413,930
======== =========== ======== =========== ============= =========== ======== ==========
(See accompanying notes to financial statements)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
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1997 1996
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Net cash provided by operating activities $ 332,067 $ 335,889
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Cash flows from investing activities:
Net proceeds from sale of property 2,736,433 -
Increase in deferred disposition fees 89,700 -
Decrease (increase) in short-term
investments, net 215,507 (193,354)
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Net cash provided by (used in) investing
activities 3,041,640 (193,354)
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Cash flows from financing activity:
Distributions to partners (3,169,066) (348,168)
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Net increase (decrease) in cash
and cash equivalents 204,641 (205,633)
Cash and cash equivalents:
Beginning of period 941,045 1,362,861
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End of period $ 1,145,686 $1,157,228
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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 June 30, 1997 and December 31, 1996 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 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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On May 1, 1997, the Hohokam property within the Newhew joint venture was sold
for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to the
advisor. On May 29, 1997, the Partnership made a capital distribution of
$2,791,854 ($234 per limited partnership unit) from the proceeds of the sale.
The following summarized financial information is presented in the aggregate
for the two joint ventures:
Assets and Liabilities
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June 30, 1997 December 31, 1996
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Assets
Real property, at cost less
accumulated depreciation of
$2,206,745 and $2,282,330 $ 9,696,518 $11,648,017
Other 352,370 651,527
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10,048,888 12,299,544
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Liabilities
Note payable (a) 1,075,308 1,084,418
Other 181,627 271,985
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1,256,935 1,356,403
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Net assets $ 8,791,953 $10,943,141
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(a) Note payable to an insurance company, secured by the remaining
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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Six Months Ended June 30,
1997 1996
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Revenue
Rental income $978,592 $1,035,887
Other income 3,056 1,762
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981,648 1,037,649
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Expenses
Operating expenses 223,700 230,045
Depreciation and amortization 297,075 304,472
Interest expense 49,981 50,782
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570,756 585,299
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Net income $410,892 $ 452,350
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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 EVENT
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Distributions of cash from operations relating to the quarter ended June
30, 1997 were made on July 24, 1997 in the aggregate amount of $171,855 ($14.26
per limited partnership unit).
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.
On May 1, 1997, the Hohokam property within the Newhew joint venture was
sold for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to the
advisor. On May 29, 1997, the Partnership made a capital distribution of
$2,791,854 ($234 per limited partnership unit) from the proceeds of the sale.
The distribution reduced the adjusted capital contribution to $729 per unit.
At June 30, 1997, the Partnership had $1,637,652 in cash, cash
equivalents, and short-term investments, of which $171,855 was used for cash
distributions to the partners on July 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 each of the first two quarters of 1996 and 1997 were made at the
annualized rate of 6.5% on the adjusted capital contribution; the second quarter
1997 distribution rate was based on a weighted average adjusted capital
contribution.
The carrying value of real estate investments in the financial statements
at June 30, 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 June 30, 1997, the appraised values of the Newhew
and Shasta Way investments exceeded their carrying values by $1,000,000 and
$800,000, 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
As discussed above, the Partnership sold the two Newhew Phase I buildings
(Hohokam Corporate Center) on May 1, 1997 and recognized a gain of $973,919.
Occupancy at Hohokam increased from 97% at March 31, 1997 to 100% as of the sale
date. The property was 99% leased at December 31, 1996 and 100% at June 30,
1996.
Fairmont Commerce Center (Newhew's Phase II investment) has been 100%
leased to two tenants since May 1992.
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 six
months ended June 30, 1997 increased $14,000 or 34% as compared to the
corresponding period of 1996, primarily due to higher short-terms yields.
Exclusive of operating results at Hohokam of $77,216 in 1997 and $101,014
in 1996, joint venture earnings were $179,548 and $181,040 for the six months
ended June 30, 1997 and 1996, respectively. The 1997 amount is comprised of
operating income of $68,684 at Fairmont and $110,864 at Shasta Way; the 1996
amount was comprised of operating income of $58,440 at Fairmont and $122,600 at
Shasta Way. The improvement at Fairmont is primarily due to increased expense
reimbursement income, partially offset by increased amortization of tenant
improvements. The decrease at Shasta Way is due primarily to lower income as a
result of non-recurring prior year expense reimbursement settlements.
Operating cash flow decreased by approximately $4,000 between the first
six months of 1996 and 1997, while net income, exclusive of the gain on sale,
decreased by approximately $16,000. 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 $6,000, or 14%, between the first six 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. Management fees decreased between
the two six-month periods due to the decrease in distributable cash flow.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: The Partnership filed one current report on
Form 8-K dated May 1, 1997, reporting on Item No. 2. (Acquisition
or Disposition of Assets).
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)
August 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.
August 12, 1997 /s/ Karin J. Lagerlund
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Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Income Corp.