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 0-20126
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)
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 [_]
1
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1997
PART I
FINANCIAL INFORMATION
2
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996
----------- -----------
Assets
Real estate investments:
Joint ventures $12,831,128 $13,073,326
Property, net 10,977,762 11,224,191
----------- -----------
23,808,890 24,297,517
Cash and cash equivalents 3,254,787 3,030,587
Short-term investments 1,174,933 1,430,515
----------- -----------
$28,238,610 $28,758,619
=========== ===========
Liabilities and Partners' Capital
Accounts payable $ 79,244 $ 77,888
Accrued management fee 65,026 60,529
Deferred disposition fees 478,108 478,108
----------- -----------
Total liabilities 622,378 616,525
----------- -----------
Partners' capital (deficit):
Limited partners ($884 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 27,654,418 28,175,021
General partners (38,186) (32,927)
----------- -----------
Total partners' capital 27,616,232 28,142,094
----------- -----------
$28,238,610 $28,758,619
=========== ===========
(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 $ 474,593 $1,390,832 $ 436,716 $1,292,961
Property operating expenses (197,428) (539,698) (161,651) (505,156)
Depreciation and amortization (87,701) (263,101) (87,744) (263,230)
--------- ---------- --------- ----------
189,464 588,033 187,321 524,575
Joint venture earnings 330,607 975,545 325,427 927,077
--------- ---------- --------- ----------
Total real estate activity 520,071 1,563,578 512,748 1,451,652
Interest on cash equivalents
and short-term investments 59,145 173,554 62,084 180,515
--------- ---------- --------- ----------
Total investment activity 579,216 1,737,132 574,832 1,632,167
--------- ---------- --------- ----------
Portfolio Expenses
Management fees 65,026 195,080 60,950 182,849
General and administrative 40,593 140,918 41,850 134,817
--------- ---------- --------- ----------
105,619 335,998 102,800 317,666
--------- ---------- --------- ----------
Net Income $ 473,597 $1,401,134 $ 472,032 $1,314,501
========= ========== ========= ==========
Net income per limited partnership
unit $ 11.14 $ 32.97 $ 11.11 $ 30.93
========= ========== ========= ==========
Cash distributions per limited
partnership unit $ 15.47 $ 45.34 $ 14.50 $ 42.73
========= ========== ========= ==========
Number of limited partnership units
outstanding during the period 42,076 42,076 42,076 42,076
========= ========== ========= ==========
(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 $(36,347) $27,836,473 $(32,927) $28,175,021 $(29,688) $28,832,254 $(26,114) $29,186,014
Cash distributions (6,575) (650,916) (19,270) (1,907,726) (6,163) (610,102) (18,161) (1,797,907)
Net income 4,736 468,861 14,011 1,387,123 4,721 467,311 13,145 1,301,356
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Balance at end
of period $(38,186) $27,654,418 $(38,186) $27,654,418 $(31,130) $28,689,463 $(31,130) $28,689,463
======== =========== ======== =========== ======== =========== ======== ===========
(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 $ 1,897,662 $ 1,860,190
----------- -----------
Cash flows from investing activities:
Investment in property - 32,744
Decrease in short-term
investments, net 253,534 507,964
----------- -----------
Net cash provided by
investing activities 253,534 540,708
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,926,996) (1,816,068)
----------- -----------
Net increase in cash
and cash equivalents 224,200 584,830
Cash and cash equivalents:
Beginning of period 3,030,587 3,194,992
----------- -----------
End of period $ 3,254,787 $ 3,779,822
=========== ===========
(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 the results of 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 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. It acquired
four of the five real estate investments it currently owns prior to 1991, and a
fifth property in 1995. 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 - Real Estate Joint Ventures
- -----------------------------------
The following summarized financial information is presented in the aggregate for
the Partnership's three joint ventures:
Assets and Liabilities
----------------------
September 30, 1997 December 31, 1996
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation of
$8,165,691 and $7,454,395,
respectively $21,698,323 $22,409,515
Other 1,502,001 1,359,304
----------- -----------
23,200,324 23,768,819
Liabilities 198,259 242,965
----------- -----------
Net assets $23,002,065 $23,525,854
=========== ===========
7
Results of Operations
Nine Months Ended September 30,
1997 1996
--------------- --------------
Revenue
Rental income $3,704,717 $3,538,186
Other 4,890 3,498
---------- ----------
3,709,607 3,541,684
---------- ----------
Expenses
Operating expenses 1,225,093 1,161,795
Depreciation and amortization 730,234 824,300
---------- ----------
1,955,327 1,986,095
---------- ----------
Net income $1,754,280 $1,555,589
========== ==========
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
- -----------------
The following is a summary of the Partnership's two wholly-owned properties:
September 30, 1997 December 31, 1996
------------------ -----------------
Land $ 2,190,969 $ 2,190,969
Buildings and improvements 9,811,682 9,811,682
Accumulated depreciation (982,905) (727,728)
Other net liabilities (41,984) (50,732)
----------- -----------
$10,977,762 $11,224,191
=========== ===========
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 $657,491
($15.47 per limited partnership unit).
8
Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
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 1991 and another in 1994. Capital of $4,880,816 ($116 per
limited partnership unit) has been returned to the limited partners
as a result of these sales and the reduction of cash reserves.
At September 30, 1997, the Partnership had $4,429,720 in
cash, cash equivalents and short-term investments, of which
$657,491 was used for operating cash distributions to partners on
October 30, 1997. 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. The adjusted capital
contribution was reduced from $892 to $884 per limited partnership
unit during the fourth quarter of 1996, with a distribution of a
portion of cash reserves. Distributions of cash from operations
relating to the first, second and third quarters of 1997 were made
at an annualized rate of 7% on the adjusted capital contribution.
Distributions of cash from operations relating to the first, second
and third quarters of 1996 were made at an annualized rate of 6.5%
on the adjusted capital contribution. The increase in the
distribution rate results from the attainment of appropriate cash
reserve levels and the improvement of cash flow from operations.
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 real estate investment exceeded its carrying value;
the aggregate excess was approximately $5,700,000. 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.
Results of Operations
Form of Real Estate Investment
The Drilex and Regency Court investments are wholly-owned
properties. The other three of the investments in the portfolio are
structured as joint ventures.
Operating Factors
The Partnership's two industrial properties, Drilex and
Prentiss Copystar, were 100% leased, each by a single tenant, at
September 30, 1997, as they were at December 31, 1996 and September
30, 1996.
The Partnership's two multi-family residential properties,
Waterford Apartments and Regency Court Apartments, ended the third
quarter of 1997 with occupancy levels of 93% and 97%, respectively.
Occupancy at Waterford Apartments remained in the mid 90% range
during the first nine months of 1997, which is consistent with the
prior year. Occupancy at Regency Court has remained in the high 90%
range since September 30, 1996.
Occupancy at Parkmoor Plaza was 100% at September 30, 1997
where it has remained since the second quarter of 1995.
9
Investment Results
Interest on short-term investments and cash equivalents decreased slightly
between the first nine months of 1996 and 1997, due to lower average investment
balances.
Total real estate activity for the first nine months of 1997 and 1996 was
$1,563,578 and $1,451,652, respectively. This increase is due to improved
operating income at Regency Court Apartments of approximately $67,000 as a
result of increased rental revenues due to higher average occupancy during the
first nine months of 1997 as compared to 1996, slightly offset by increased
marketing expenses and earthquake insurance premiums. Operating results at
Waterford Apartments increased approximately $38,000 due to higher rental rates
combined with a decrease in depreciation expense related to personal property
that became fully depreciated. In addition, operating results at Prentiss
Copystar improved by approximately $16,000 due to a reduction in real estate
taxes combined with a decrease in amortization expense related to leasing
commissions that became fully amortized. Operating results at the two remaining
properties were relatively unchanged between the respective periods.
Cash flow from operations increased approximately $38,000 between the
respective nine month periods. This change is less than the increase in
operating results at Regency Court discussed above due to a reduction in the
cash flow from Parkmoor Plaza as a result of the timing of distributions in
1996.
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
primarily consist 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 distributable cash flow. General and
administrative expenses increased between the respective nine month periods
primarily due to an increase in accounting fees.
10
COPLEY PENSION PROPERTIES VII;
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.
11
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)
November 12, 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Vice President
of Managing General Partner,
Seventh Copley Corp.
November 12, 1997
/s/ Karin J. Lagerlund
------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
12