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 September 30, 1997 Commission File Number 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 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 - -------------------------------------------------------------------------------- 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 VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1997 PART I FINANCIAL INFORMATION 2 BALANCE SHEETS (Unaudited) September 30, 1997 December 31, 1996 ------------------ ----------------- Assets Real estate investments: Joint ventures $15,154,452 $15,479,056 Property, net 4,250,888 8,350,231 ----------- ----------- 19,405,340 23,829,287 Cash and cash equivalents 8,061,884 3,076,103 Short-term investments 1,466,372 2,194,290 ----------- ----------- $28,933,596 $29,099,680 =========== =========== Liabilities and Partners' Capital Accounts payable $ 90,313 $ 86,347 Accrued management fee 124,530 51,517 Deferred disposition fees 717,677 582,677 ----------- ----------- Total liabilities 932,520 720,541 ----------- ----------- Partners' capital (deficit): Limited partners ($768.98 per unit; 160,000 units authorized; 48,788 units issued and outstanding) 28,041,021 28,415,303 General partners (39,945) (36,164) ----------- ----------- Total partners' capital 28,001,076 28,379,139 ----------- ----------- $28,933,596 $29,099,680 =========== =========== (See accompanying notes to financial statements) 3 STATEMENTS OF OPERATIONS (Unaudited) Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996 ------------------- ------------------- ------------------- ------------------- Investment Activity Property rentals $205,847 $ 620,879 $187,566 $ 577,408 Property operating expenses (87,410) (284,912) (99,985) (312,241) Depreciation and amortization (75,761) (227,255) (71,958) (214,929) -------- ---------- -------- ---------- 42,676 108,712 15,623 50,238 Joint venture earnings 342,905 1,000,444 314,860 829,809 -------- ---------- -------- ---------- Total real estate operations 385,581 1,109,156 330,483 880,047 Gain on sale of investment 248,172 248,172 - - -------- ---------- -------- ---------- Total real estate activity 633,753 1,357,328 330,483 880,047 Interest on cash equivalents and short-term investments 71,515 206,148 67,339 200,107 -------- ---------- -------- ---------- Total investment activity 705,268 1,563,476 397,822 1,080,154 -------- ---------- -------- ---------- Portfolio Expenses Management fee 124,530 227,564 51,517 154,552 General and administrative 45,003 151,281 47,248 155,047 -------- ---------- -------- ---------- 169,533 378,845 98,765 309,599 -------- ---------- -------- ---------- Net income $535,735 $1,184,631 $299,057 $ 770,555 ======== ========== ======== ========== Net income per limited partnership unit $ 10.87 $ 24.04 $ 6.07 $ 15.64 ======== ========== ======== ========== Cash distributions per limited partnership unit $ 10.57 $ 31.71 $ 10.57 $ 33.64 ======== ========== ======== ========== Number of limited partnership units outstanding during the period 48,788 48,788 48,788 48,788 ======== ========== ======== ========== (See accompanying notes to financial statements) 4 STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) (Unaudited) Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996 ----------------------- ----------------------- ----------------------- ----------------------- General Limited General Limited General Limited General Limited Partners Partners Partners Partners Partners Partners Partners Partners --------- ------------ --------- ------------ --------- ------------ --------- ------------ Balance at beginning of period $(40,093) $28,026,332 $(36,164) $28,415,303 $(32,892) $28,739,192 $(26,238) $29,397,948 Cash distributions (5,209) (515,689) (15,627) (1,547,067) (5,209) (515,689) (16,578) (1,641,228) Net income 5,357 530,378 11,846 1,172,785 2,991 296,066 7,706 762,849 -------- ----------- -------- ----------- -------- ----------- -------- ----------- Balance at end of period $(39,945) $28,041,021 $(39,945) $28,041,021 $(35,110) $28,519,569 $(35,110) $28,519,569 ======== =========== ======== =========== ======== =========== ======== =========== (See accompanying notes to financial statements) 5 SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 1997 1996 ---------------- --------------- Net cash provided by operating activities $ 1,502,628 $ 1,444,001 ----------- ----------- Cash flows from investing activities: Net proceeds from sale of investment 4,199,193 - Deferred disposition fees 135,000 - Investment in property - (134,203) Decrease in short-term investments, net 711,654 692,626 ----------- ----------- Net cash provided by investing activities 5,045,847 558,423 ----------- ----------- Cash flows from financing activity: Distributions to partners (1,562,694) (1,657,806) ----------- ----------- Net increase in cash and cash equivalents 4,985,781 344,618 Cash and cash equivalents: Beginning of period 3,076,103 2,997,934 ----------- ----------- End of period $ 8,061,884 $ 3,342,552 =========== =========== (See accompanying notes to financial statements) 6 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 September 30, 1997 and December 31, 1996 and its operations, its cash flows and partners' capital (deficit) for the interim periods ended September 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 - ---------------------------------- 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 acquired the four real estate investments it currently owns prior to the end of 1991. It intends to dispose of its investments within eight to twelve years of their acquisition, and then liquidate. The Partnership has engaged AEW Real Estate Advisors, Inc. (the "Advisor") to provide asset management services. Note 2 - Investments in Joint Ventures - -------------------------------------- Summarized Financial Information The following summarized financial information is presented in the aggregate for the Partnership's joint ventures: Assets and Liabilities ---------------------- September 30, 1997 December 31, 1996 ------------------ ----------------- Assets Real property, at cost less accumulated depreciation of $6,721,363 and $6,158,575, respectively $16,631,115 $17,199,404 Other 806,190 739,700 ----------- ----------- 17,437,305 17,939,104 Liabilities 146,851 235,655 ----------- ----------- Net assets $17,290,454 $17,703,449 =========== =========== 7 Results of Operations --------------------- Nine Months Ended September 30, 1997 1996 --------------- -------------- Revenue: Rental income $2,892,117 $2,749,886 Other income 5,203 3,891 ---------- ---------- 2,897,320 2,753,777 ---------- ---------- Expenses: Operating expenses 1,035,934 1,020,926 Depreciation and amortization 574,550 670,932 ---------- ---------- 1,610,484 1,691,858 ---------- ---------- Net income $1,286,836 $1,061,919 ========== ========== Liabilities and expenses exclude amounts owed and attributable to the Partnership and (with respect to two joint ventures) its affiliates on behalf of their various financing arrangements with the joint ventures. Note 3 - Property - ----------------- On September 29, 1997, Stemmons Industrial located in Farmers Branch, Texas was sold. The total sales price was $4,500,000. The Partnership received net proceeds of $4,334,193, after closing costs, and recognized a gain of $248,172 ($5.04 per limited partnership unit). A disposition fee of $135,000 was accrued but not paid to the Advisor. On October 30, 1997, the Partnership made a capital distribution of $4,334,326 ($88.84 per limited partnership unit) from the proceeds of the sale. The following is a summary of the Partnership's wholly-owned properties (one in 1997 and two in 1996): September 30, 1997 December 31, 1996 ------------------- ------------------ Land $ 2,770,056 $ 3,408,203 Buildings, improvements and other capitalized costs 4,894,641 8,869,433 Investment valuation allowance (1,500,000) (1,500,000) Accumulated depreciation and amortization (1,884,877) (2,330,843) Net operating liabilities (28,932) (96,562) ----------- ----------- $ 4,250,888 $ 8,350,231 =========== =========== 8 During the second quarter of 1995, as a result of a revision to long-term rental assumptions, the managing general partner determined that the carrying value of the Wilmington Industrial property would not be recovered through expected future undiscounted cash flows. Accordingly, the carrying value was reduced to the estimated net fair market value through the recognition of an investment valuation allowance of $1,500,000. Note 4 - Subsequent Event - ------------------------- Distributions of cash from operations relating to the quarter ended September 30, 1997 were made on October 30, 1997 in the aggregate amount of $520,898 ($10.57 per limited partnership unit). An additional distribution of cash from operations was made in the aggregate amount of $738,227 ($14.98 per limited partnership unit), representing excess operating cash previously retained in working capital reserves. Additionally, the Partnership made two capital distributions, $4,334,326 ($88.84 per limited partnership unit) was made from proceeds from the sale of Stemmons Industrial and $968,442 ($19.85 per limited partnership unit) was made from accumulated cash reserves. 9 Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------- Results of Operations - --------------------- Liquidity and Capital Resources - ------------------------------- The Partnership completed its offering of units of limited partnership interest on December 31, 1988. 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 and for the payment of related acquisition costs, or retained as working capital reserves. The Partnership made seven real estate investments; one was sold in each of 1990, 1994, and 1997. As a result of these sales, capital of $11,271,004 has been returned to the limited partners ($231.02 per limited partnership unit) through September 30, 1997. On October 30, 1997, the Partnership distributed total capital of $5,302,768 ($108.69 per limited partnership unit) which represents proceeds from the sale of Stemmons Industrial and a reduction of accumulated cash reserves. This capital distribution reduces the adjusted capital contribution to $660.29 per unit. On September 29, 1997, Stemmons Industrial located in Farmers Branch, Texas was sold. The total sales price was $4,500,000. The Partnership received net proceeds of $4,334,193, after closing costs, and recognized a gain of $248,172 ($5.04 per limited partnership unit). A disposition fee of $135,000 was accrued but not paid to the Advisor. At September 30, 1997, the Partnership had $9,528,256 in cash, cash equivalents and short-term investments, of which $1,259,125 was used for operating cash distributions, and $5,302,768 for capital distributions to partners on October 30, 1997; the remainder is being retained as working capital reserves. The source of future liquidity and cash distributions to partners will primarily be cash flow generated by the Partnership's short-term and real estate investments and proceeds from the sale of such investments. Based on an adjusted capital contribution of $768.98 per limited partnership unit, distributions of cash from operations relating to the first, second and third quarters of 1997 and 1996 were made at the annualized rate of 5.5%. The carrying value of real estate investments in the financial statements is at depreciated cost, or if the investment's carrying value is determined not to be recoverable through expected undiscounted future cash flows, the carrying value is reduced to estimated fair market value. The fair market value of such investments is further reduced by the estimated cost of sale for properties held for sale. Carrying value may be greater or less than current appraised value. At September 30, 1997, the appraised value of each of the Partnership's investments exceeded its related carrying value by an aggregate of $6,400,000. The current appraised value of real estate investments has been estimated by the managing general partner and is generally based on a correlation of traditional appraisal approaches performed by the Partnership's Advisor and independent appraisers. Because of the subjectivity inherent in the valuation process, the estimated current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. 10 Results of Operations - --------------------- Form of Real Estate Investments The Wilmington Industrial investment is a wholly-owned property. The Stemmons Industrial investment, which was sold in September 1997, was also a wholly-owned property. The other three real estate investments in the portfolio are joint ventures. Operating Factors The Partnership's three industrial properties (Prentiss Copystar, Wilmington and White Phonic) were 100% leased at September 30, 1997, as they were at September 30, 1996. Wilmington was 73% leased at June 30, 1996. As discussed above, the Partnership sold its Stemmons Industrial investment on September 29, 1997, and recognized a gain of $248,172. Stemmons Industrial was vacant at the time of sale, as it had been since February 1996, with the expiration of a short term lease for 82% of the space. Occupancy at Waterford Apartments, the Partnership's multi-family residential property, remained in the mid 90% range during the first nine months of 1997, which is consistent with the prior year. Investment Results - ------------------ Interest income on cash equivalents and short-term investments increased slightly between the first nine months of 1996 and 1997, due primarily to higher average investment balances. Exclusive of the results from Stemmons Industrial of $(158,557) in 1997 and $(192,983) in 1996, as well as the gain on sale in 1997, total real estate activity for the first nine months of 1997 was $1,267,713, an increase from $1,073,030 for the comparable period of 1996. Operating results at Waterford Apartments increased by $114,000 primarily due to higher rental rates combined with a decrease in depreciation expense related to personal property that became fully depreciated. Operating results at Prentiss also improved, by approximately $36,000, due to a reduction in real estate taxes combined with a decrease in amortization expense related to leasing commissions that became fully amortized. In addition, operating income at Wilmington improved $24,000 primarily due to higher average occupancy during the first nine months of 1997 as compared to 1996. Cash flow from operations increased by approximately $59,000 between the first nine months of 1996 and 1997. This increase is primarily attributable to changes in working capital offset by the timing of distributions from White Phonic. 11 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. The Partnership management fee increased between the first nine months of 1996 and 1997 due to an increase in the distributable cash flow. General and administrative expenses were relatively unchanged during the comparative nine month periods. 12 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1997 PART II OTHER INFORMATION Items 1-5. Not applicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits: (27) Financial Data Schedule b. Reports on Form 8-K: No Current Reports on Form 8-K were filed during the quarter ended September 30, 1997. 13 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) November 12, 1997 /s/ James J. Finnegan ------------------------------- James J. Finnegan Vice President of Managing General Partner, Sixth Copley Corp. November 12, 1997 /s/ Karin J. Lagerlund -------------------------------- Karin J. Lagerlund Principal Financial and Accounting Officer of Managing General Partner, Sixth Copley Corp. 14