SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No. 0-17810
_________________
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2961376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Franklin Street, 25th Floor 02110
Boston, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(617) 261-9000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
No voting stock is held by nonaffiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None
PART I
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Item 1. Business.
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Copley Realty Income Partners 2; A Limited Partnership (the
"Partnership") was organized under the Uniform Limited Partnership Act of the
Commonwealth of Massachusetts on January 16, 1987, to invest primarily in newly
constructed and existing income-producing real properties.
The Partnership was initially capitalized with contributions of $2,000
in the aggregate from Second Income Corp. (the "Managing General Partner") and
ECOP Associates Limited Partnership (the "Associate General Partner")
(collectively, the "General Partners") and $10,000 from Copley Real Estate
Advisors, Inc. (the "Initial Limited Partner"). The Partnership filed a
Registration Statement on Form S-11 (the "Registration Statement") with the
Securities and Exchange Commission on January 26, 1987, with respect to a public
offering of 40,000 units of limited partnership interest at a purchase price of
$1,000 per unit (the "Units") with an option to sell up to an additional 60,000
Units (an aggregate of $100,000,000). The Registration Statement was declared
effective on April 13, 1987.
The first sale of Units occurred on October 15, 1987, at which time the
Initial Limited Partner withdrew its contribution from the Partnership.
Investors were admitted to the Partnership thereafter at monthly closings; the
offering terminated, and the last group of initial investors was admitted to the
Partnership on April 26, 1988. As of April 26, 1988, a total of 32,997 Units
had been sold, a total of 2,206 investors had been admitted as limited partners
(the "Limited Partners") and a total of $32,756,650 had been contributed to the
capital of the Partnership. The remaining 67,003 Units were de-registered on
June 30, 1988.
As of December 31, 1997, the Partnership is invested in one real
property investment. In addition, two properties have been sold, and a fourth
investment was transferred by a deed in lieu of foreclosure in 1994. The
Partnership has no current plan to renovate, improve or further develop its real
property. In the opinion of the Managing General Partner of the Partnership, the
property is adequately covered by insurance. The principal terms of the sales of
the Partnership's investments are set forth in the following table:
Distribution
INVESTMENT Month/Year of Sale Net Sale Proceeds Distribution/Unit Month/Year
Investment Two 5/97 $3,958,248 $120.00 5/97
Investment Three 12/97 $3,260,761 $ 99.00 12/97
The Partnership has no employees. Services are performed for the
Partnership by the Managing General Partner and affiliates of the Managing
General Partner.
A. Research and Development Building in La Mirada, California
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("La Mirada") and Research and Development Building in
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Rancho Dominguez, California ("Rancho Dominguez").
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On November 12, 1987, the Partnership acquired a 70% interest in a
joint venture formed with an affiliate of The Muller Company (the "Developer").
On November 2, 1988, the Partnership increased its maximum commitment from
$15,850,000 to $20,465,000, all of which the Partnership had contributed to the
capital of the joint venture. As of January 1, 1991, because of the Developer's
inability to fund its share of capital contributions, the Partnership assumed
100% ownership of the joint venture's assets.
As successor in interest to the joint venture, the Partnership owns
approximately 7.02 acres of land in La Mirada, California and a 135,269 square
foot research and development building located thereon. Genisco Technology
Corporation ("Genisco") had initially leased the entire building for a term of
ten years. In the third quarter of 1990, Genisco abandoned the property, ceased
making lease payments, and the joint venture terminated the lease. The building
is now 100% leased to Babcock Engineering, which executed a lease for 74% of the
building in June 1994. The lease was amended in January 1995 to include the
entire facility.
As successor in interest to the joint venture, the Partnership also
owned approximately 6.06 acres of land in Rancho Dominguez, California and a
research and development facility located thereon containing approximately
100,325 square feet, which the joint venture acquired from Genisco. The entire
building was leased by Engineered Magnetics, Inc. In 1995, the lease was amended
to include a deferral of rent in exchange for a two-year extension of the term
through April 2004. In the second quarter of 1996, the Partnership further
amended the lease by shortening the term to eighteen months, through November
1997, at a reduced rental rate. The Partnership had the option to terminate the
lease with a ninety day notice. In consideration, the tenant agreed to pay the
Partnership a total of $1,600,000, all of which was paid prior to December 31,
1997.
At the time this building was acquired from Genisco, the property
contained hazardous materials and Genisco entered into a contractual obligation
with the joint venture to remediate the environmental contamination. Genisco
breached its contractual obligation to remediate, the cost of which the
Partnership initially estimated to range between $500,000 to $750,000. Based on
a revised engineering estimate in 1995, the remediation cost was then expected
to total $267,000, all of which has been recorded in the Partnership's financial
statements. As a result of the December 15, 1997 sale of the property and a
sucessful independent environmental inspection, the Partnership has no remaining
obligations with respect to the remediation costs.
As part of the two acquisitions, the joint venture also assumed
Genisco's lease obligations related to a 57,000 square foot research and
development building in Cypress, California. When Genisco defaulted under its
lease obligations at the La Mirada property, the joint venture ceased to make
rent payments on behalf of Genisco for the Cypress property. As part of the
settlement described below, the Partnership, as successor in interest to the
joint venture, has no further obligations with respect to this property.
On July 25, 1990, the joint venture filed a lawsuit against Genisco in
the Superior Court of the State of California for the County of Los Angeles. The
joint venture made claims against Genisco for, among other things, breach of its
lease obligations and breach of its obligations to remediate the environmental
problems at the Rancho Dominguez property. The joint venture succeeded in
obtaining a pre-judgment attachment of all of Genisco's assets. As a result,
Sanwa Bank, Genisco's secured lender, reduced its loan to Genisco by
capitalizing a substantial portion of debt and agreed, together with Genisco, to
a settlement agreement as of September 30, 1991. The terms of the agreement,
effective February 3, 1992, are summarized below. The lawsuit filed against
Genisco was dismissed on February 7, 1992.
Under the terms of the settlement, the Partnership, as successor in
interest to the joint venture, received 3,850,000 shares of Series B Convertible
Preferred Stock of Genisco and 350,000 shares of Series C Convertible Preferred
Stock of Genisco. All such preferred stock is convertible at the Partnership's
election to 2,100,000 shares of voting Common Stock of Genisco. In exchange for
this stock, the Partnership released claims of approximately $1.4 million for
the lease default and estimated claims of $700,000 for environmental damages.
Sanwa Bank agreed to exchange $4.0 million of Genisco's debt for
8,000,000 shares of Series A Convertible Preferred Stock of Genisco. This
preferred stock is convertible at Sanwa Bank's election to
4,000,000 shares of voting Common Stock of Genisco and, except as explained
below, holds a senior repayment priority to the Series B and C Preferred Stock
of Genisco in the event the assets of Genisco are liquidated. All series of
preferred stock, i.e. Series A, B and C, are otherwise treated identically with
respect to stock rights and preferences, such as those in connection with
dividends, stock splits, reverse stock splits, stock dividends, etc. The Series
C Preferred Stock automatically converts to unsecured subordinated debt of
Genisco upon any default by Genisco in the payment of the remaining $5.0 million
of secured debt to Sanwa Bank. The Partnership believes the stock currently has
nominal, if any, value due to the Chapter 11 bankruptcy filing by Genisco as
further discussed below.
With respect to environmental claims, Genisco agreed, in exchange for a
release by the Partnership of such claims, to permit the Partnership to use
Genisco's Environmental Protection Agency identification number for the purpose
of disposing of any contamination and to sign other documentation requested by
the Partnership. If the Partnership (or its successors or assigns) is ever the
subject of any demand, claim or lawsuit by any regulatory agency or private
party, other than Genisco, with respect to these environmental conditions,
Genisco agreed to reimburse the Partnership on demand for environmental expenses
and costs as follows:
(1) First, a credit against such expenses of the Partnership equal to
the greater of $150,000 or the then fair market value of 800,000
shares of Common Stock of Genisco.
(2) Second, $150,000 in cash.
(3) Third, the next $700,000, two-thirds in cash and one-third in
shares of Common Stock of Genisco based upon the then fair market
value of such shares; and in case there is no public market for
such Common Stock, all in cash.
(4) Fourth, any additional environmental expenses, all in cash.
Payment by Genisco is subject to Sanwa Bank's approval if the loan is
then outstanding.
In September, 1994, Sanwa Bank filed a complaint against Genisco for
breach of promissory note and possession of collateral. Sanwa obtained a
stipulated judgment in its favor on this matter. On February 15, 1995, Sanwa
Bank moved to enforce the stipulated judgment and to liquidate the assets of
Genisco. On February 17, 1995, Genisco filed for protection pursuant to Chapter
11 of the Bankruptcy Code. The Partnership filed a Proof of Claim with the
Central District Court of California in October 1995. On July 11, 1997, the
bankruptcy proceedings were concluded and the settlement amount was fixed at
$175,000. The likelihood of the Partnership receiving this settlement is low
since the liquidation value of Genisco appears to be significantly less than the
amount owed its secured creditor, Sanwa Bank.
As stated above, the Partnership sold the Rancho Dominguez building on
December 15, 1997.
Item 2. Properties.
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The following table sets forth the annual realty taxes for the
Partnership's remaining property and information regarding the sole tenant which
occupies 100% of the gross leasable area (GLA) of the property:
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ESTIMATED ANNUAL
1998 NUMBER OF SQUARE CONTRACT
ANNUAL TENANTS FEET OF RENT
REALTY WITH 10% OR NAME(S) OF EACH PER LEASE RENEWAL LINE OF BUSINESS
PROPERTY TAXES MORE OF GLA TENANT (S) TENANT SQ. FT. EXPIRATIONS OPTIONS OF PRINCIPAL TENANTS
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R & D Building
in La Mirada, CA $69,268 1 Babcock 135,269 $5.25 5/2004 2-5 Year Aerospace, Electronics
Engineering Options Manufacturer
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The following table sets forth for each of the last five years the
gross leasable area, occupancy rates, rental revenue and net effective rent for
the Partnership's remaining property:
Gross Rental Net Effective
LEASEABLE YEAR-END REVENUE RENT
PROPERTY AREA OCCUPANCY RECOGNIZED ($/SF/YR)*
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R & D Building in La Mirada, CA
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1993 135,269 0% $ 0 $0.00
1994 135,269 74% $454,453 $5.76
1995 (1) 135,269 100% $876,246 $6.48
1996 135,269 100% $796,736 $5.89
1997 135,269 100% $810,195 $5.99
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* Net Effective Rent calculation is based on average occupancy for the
respective year.
(1) Includes adjustment for property tax reimbursements.
Set forth below is a schedule of lease expirations for each of the
next ten years for the Partnership's remaining property based on the annual
contract rent in effect at December 31, 1997:
TENANT AGING REPORT
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PROPERTY # of Lease Total Total Percentage of
Expirations Square Feet Annual Contract Gross Annual
Rental Rental*
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R & D Building in La Mirada, CA
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1998 0 0 $ 0 0%
1999 0 0 $ 0 0%
2000 0 0 $ 0 0%
2001 0 0 $ 0 0%
2002 0 0 $ 0 0%
2003 0 0 $ 0 0%
2004 1 135,269 $710,162 100%
2005 0 0 $ 0 0%
2006 0 0 $ 0 0%
2007 0 0 $ 0 0%
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* Does not include expenses paid by tenant.
The following table sets forth for the Partnership's remaining property
the: (i) federal tax basis, (ii) rate of depreciation, (iii) method of
depreciation, (iv) life claimed and (v) accumulated depreciation, with respect
to each component thereof for purposes of depreciation.
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Depreciable Assets
Rate of Life Accumulated
Entity / Property Tax Basis Depreciation Method in years Depreciation
La Mirada
- ----------------------------
Building & Improvements $7,538,733 3.17% SL 31.5 $2,056,355
Building 163,717 2.56% SL 39 16,960
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Total Depreciable Assets $7,702,450 $2,073,315
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SL = Straight Line
Following is information regarding the competitive market conditions
for the Partnership's remaining property. This information has been gathered
from sources deemed reliable. However, the Partnership has not independently
verified the information and, as such, cannot guarantee its accuracy or
completeness:
Research and Development Building in La Mirada, California
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This property is located in Los Angeles County in the city of La
Mirada. Industrial demand in the Los Angeles County metropolitan area during
1997 was 1.8%, a decrease from the 3.1% recorded in 1996. The 1997 industrial
vacancy rate at year-end 1997 was 6.7%, an improvement from the 8.2% rate
recorded at the close of 1996. Also indicative of the metro area's improving
economy is a falling jobless rate, which recently fell to 6.3%. La Mirada, a
part of the Mid-Counties sub-market that has experienced significant activity
since 1995, experienced an uptick in vacancy from 7.6% in 1996 to 9.0% in 1997.
The Mid-Counties stability has prompted an increase in speculative development
and more aggressive institutional investment.
Item 3. Legal Proceedings.
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The Partnership is not a party to, nor are any of its properties
subject to, any material pending legal proceedings. As described in Item 1
hereof, the Partnership is a stockholder of Genisco Technology Corporation,
which filed for protection pursuant to Chapter 11 of the Bankruptcy Code.
Item 4. Submission of Matters to a Vote of Security Holders.
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No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.
PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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There is no active market for the Units. Trading in the Units is
sporadic and occurs solely through private transactions.
As of December 31, 1997, there were 2,199 holders of Units.
The Partnership's Amended and Restated Agreement of Limited
Partnership dated October 15, 1987, as amended to date (the "Partnership
Agreement"), requires that any Distributable Cash (as defined therein) be
distributed quarterly to the Partners in specified proportions and priorities.
There are no restrictions on the Partnership's present or future ability to make
distributions of Distributable Cash. Cash distributions paid in 1997, or
distributed after year end with respect to 1997, to the Limited Partners as a
group totaled $12,244,369, including $7,182,093 ($219 per limited partnership
unit), representing proceeds from the sales of two properties. Cash
distributions paid in 1996, or distributed after year end with respect to 1996,
to the Limited Partners as a group totaled $1,231,800.
Largely due to the capital distributions mentioned above, total cash
distributions exceeded net income in 1997 and reduced partners' capital
accordingly. Regular cash distributions from operations were slightly higher
than cash provided by operations in 1997. Reference is made to the Partnership's
Statement of Partners' Capital (Deficit) and Statement of Cash Flows in Item 8
hereof.
Item 6. Selected Financial Data.
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For Year For Year For Year For Year For Year
Ended Ended Ended Ended Ended
or as of or as of or as of or as of or as of
12/31/97 (4) 12/31/96 (3) 12/31/95 12/31/94 (2) 12/31/93 (1)
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Revenues $ 1,741,986 $ 3,571,724 $ 2,265,542 $ 1,933,320 $ 1,055,619
Net Income
(Loss) $ 1,042,339 $ (911,331) $ 1,309,989 $ (481,123) $ (4,531,836)
Net Income
(Loss) per
weighted
average
Limited
Partnership
Unit $ 31.46 $ (27.47) $ 39.48 $ (14.50) $ (136.49)
Total Assets $ 8,202,897 $19,387,293 $21,124,057 $19,810,159 $ 21,175,621
Total Cash
Distributions
per Limited
Partnership
Unit, including
amounts
distributed
after year end
with respect
to such
year. $ 373.38 $ 37.50 $ 0.00 $ 7.50 $ 15.00
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(1) Net Loss in 1993 includes investment valuation allowances totaling
$4,400,000.
(2) Net Loss in 1994 includes an investment valuation allowance of
$1,865,248, and an extraordinary item - gain from extinguishment of joint
venture debt of $665,248.
(3) Net Loss in 1996 includes investment valuation allowances totaling
$3,350,000 and a lease termination fee of $1,600,000.
(4) Net Income in 1997 includes gains from the sales of two properties
totaling $517,693. Cash distributions include returns of capital totaling
$219.00 per Limited Partnership Unit.
ITEM 7.
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Management's Discussion and Analysis of Financial Condition and Results of
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Operations
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Liquidity and Capital Resources
The Partnership completed its offering of units of limited partnership
interest in April 1988, and a total of 32,997 units were sold. The Partnership
received proceeds of $29,379,522, net of selling commissions and other offering
costs, which have been invested in real estate, used to pay related acquisition
costs or retained as working capital reserves.
On May 2, 1997, the Medlock Oaks buildings, which were owned by the
Partnership (43%) and an affiliate (57%), were sold for a total sales price of
$9,402,779. The Partnership received its 43% share of the net proceeds in the
amount of $3,958,248, after closing costs, and recognized a gain of $387,990
($11.70 per limited partnership unit) on the sale. A disposition fee of
$121,260 was accrued but not paid to AEW. On May 29, 1997, the Partnership made
a capital distribution of $3,938,160 ($120 per limited partnership unit) from
the proceeds of the sale. The distribution reduced the adjusted capital
contribution to $880 per unit.
On December 15, 1997, the Rancho Dominguez building was sold for
$3,486,000. The Partnership received net proceeds of $3,260,761, after closing
costs, and recognized a gain of $129,703 ($3.96 per limited partnership unit).
A disposition fee of $104,580 was accrued but not paid to AEW. On December 30,
1997, the Partnership made a capital distribution of $3,243,933 ($99 per limited
partnership unit) from the proceeds. The distribution reduced the adjusted
capital contribution to $781 per unit.
At December 31, 1997, the Partnership had $1,680,155 in cash, cash
equivalents and short-term investments, of which $291,289 was used for cash
distributions to partners on January 29, 1998; the remainder is being retained
for working capital reserves. The Managing General Partner suspended operating
cash distributions as of the second quarter of 1994 as a result of the
uncertainty concerning the Partnership's future cash flow from the Rancho
Dominguez investment. After the attainment of an adequate level of cash
reserves and the restructuring of the Rancho Dominguez lease, the Managing
General Partner resumed distributions of cash from operations as of the second
quarter of 1996, at an annualized rate of 5.0% on a capital contribution of
$1,000 per unit. The first quarter 1997 distribution includes $1,137,359
related to the first installment of a lease termination fee which was received
in 1996 and retained previously in working capital reserves. The second quarter
1997 distribution was based on the weighted average adjusted capital
contribution. The distribution rate remained at 5.0% through the second quarter
of 1997. The third and fourth quarter 1997 distributions were made at an
annualized rate of 4.0% on the adjusted capital contribution of $880. The
fourth quarter 1997 distribution includes $2,581,879 comprised of the final
portion of the aforementioned lease termination fee, and Partnership reserves.
The distribution rate was decreased during the third quarter of 1997 due to the
sale of Medlock Oaks. The source of future liquidity and cash distributions to
partners will primarily be cash generated by the Partnership's real estate and
short-term investments.
The Partnership maintains a fund for the purpose of repurchasing
limited partnership units. Two percent of cash flow, as defined, is designated
for this fund which had a balance of $41,551 and $10,087 at December 31, 1997
and 1996, respectively. Through December 31, 1997, the Partnership had
repurchased and retired 230 limited partnership units for an aggregate cost of
$177,945.
The carrying value of real estate investments in the financial
statements at December 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 December 31, 1997, the appraised value of the
La Mirada investment exceeded its carrying value by $700,000. The current
appraised value of real estate investments has been estimated by the Managing
General Partner and is generally based on a combination of traditional appraisal
approaches performed by AEW 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.
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in normal business operations. The Managing General Partner and its
affiliates are assessing the modifications or replacements of its software that
may be required due to the Year 2000 Issue. The Managing General Partner and its
affiliates do not believe that the cost of either modifying existing software or
converting to new software will be significant or that the Year 2000 Issue will
pose significant operational problems.
RESULTS OF OPERATIONS
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Form of Real Estate Investments
The La Mirada investment is wholly-owned by the Partnership. The Rancho
Dominguez investment, which was sold on December 15, 1997, was also a wholly-
owned property. The Medlock Oaks investment, which was sold on May 2, 1997, was
structured as a joint venture with an affiliate of the Partnership.
Operating Factors
At Medlock Oaks, occupancy was 100%, 97%, and 95% at May 2, 1997,
December 31, 1996, and December 31, 1995, respectively. In the first quarter of
1996, the Managing General Partner determined that the Partnership would be
unable to recover the carrying value of this investment and, accordingly, the
carrying value was reduced by $350,000 through a charge to operations. As
mentioned above, the Partnership and its affiliate sold the Medlock Oaks
buildings on May 2, 1997; the Partnership's share of the gain was $509,250
($15.37 per limited partnership unit).
The Rancho Dominguez property was 100% leased to a single tenant
through December 15, 1997. During the second quarter of 1994, the tenant
notified the Partnership that it was experiencing financial difficulty and
desired to restructure its lease. A lease amendment was executed during 1995
which provided for a two-year extension of the lease and the deferral of 1995
rental payments totaling $400,000. The deferred amount would be payable based
upon the tenant's achieving a specified level of operating revenues. Since this
threshold was not achieved, the deferral was permanently abated. In December
1995, the tenant's former parent company, which had guaranteed the lease, paid
the Partnership $275,000 in full satisfaction of its obligations under the
guarantee, which was recorded as rental revenue in 1995. The tenant paid rent
based on the reduced rate through June 30, 1996.
During the second quarter of 1996, the Partnership further amended the
lease. The remaining lease term was shortened to eighteen months (along with an
option for the Partnership to terminate the lease with a ninety day notice) and
the rental rate was reduced, in consideration for which the tenant agreed to pay
two lump sum amounts: one of $1,250,000 which was received July 1996, and
another of $350,000, which was received in December 1997, at the termination of
the lease. The entire lease termination fee was recognized as revenue in 1996.
As a result of new lease terms and current market conditions, the Managing
General Partner determined that the carrying value of the Rancho Dominguez
property was impaired. Accordingly, the carrying value was reduced to estimated
fair market value with an investment valuation allowance of $3,000,000 which was
also recognized in 1996. An environmental remediation project was undertaken at
the Rancho Dominguez building, due to contamination caused by a former tenant.
The Partnership had taken a charge to operations in prior years totaling
$500,000 relating to this matter. During 1995, based on a revised engineering
estimate, the Partnership reduced its accrual for future costs by $200,000 which
was recorded as a credit to property operating expenses.
On December 15, 1997, the Rancho Dominguez building was sold for
$3,486,000, at which time the remaining environmental accrual of $49,811 was
reversed based on the successful results of an independent environmental
inspection completed concurrent with the sale of the property. The Partnership
has no remaining remediation cost obligations with respect to the Rancho
Dominguez building. The Partnership received net proceeds of $3,260,761, after
closing costs, and recognized a gain of $129,703 ($3.96 per limited partnership
unit) on the sale.
The La Mirada investment had been vacant from August 1990 through
January 1994, and has been fully occupied under a long term lease since January
1, 1995. As a result of the then protracted vacancy period and weakness in the
local market which had depressed rental rates, the Managing General Partner
determined in 1993 that the carrying value of the La Mirada building exceeded
its net realizable value. The carrying value was reduced by $3,000,000 in 1993.
Due to a further deterioration in market conditions, the carrying value was
further reduced by $1,200,000 in 1994.
The tenants in the La Mirada and Rancho Dominguez properties each
contributed more than 10% of the rental revenue from the Partnership's
investments (collectively 90%) for 1997. The tenant at La Mirada was current
with regard to lease payments at December 31, 1997. Management is not aware of
any impairment in this tenant's ability to perform in accordance with the terms
of its lease.
Investment Results
Excluding the impact of the valuation allowances and the lease
termination fee, investment income was $1,647,366, $1,068,825, and $1,428,575
for the years ended December 31, 1997, 1996 and 1995, respectively.
Real estate operations for the wholly-owned properties in 1997
increased by $200,482 as compared to 1996. The increase resulted from lower
depreciation and amortization expenses of $273,000 at Rancho Dominguez caused by
the write-off of tenant improvements and other net assets in 1996. Operating
expenses at Rancho Dominguez were also lower in 1997. This increase in
operations was partially offset by lower rental revenue as a result of the
related lease restructuring at Rancho Dominguez. Wholly-owned operating results
declined by approximately $494,000 in 1996 compared to 1995, primarily due to
significant rental reductions at Rancho Dominguez in 1996, as well as the
aforementioned environmental accrual adjustment in 1995. These decreases in 1996
were partially offset by lower depreciation and amortization expenses as a
result of the reduction in carrying value of the real estate assets discussed
above.
Joint venture earnings were $54,694, $210,976 and $180,667 for the
years ended December 31, 1997, 1996 and 1995, respectively, all related to the
Medlock Oaks investment. The decrease in earnings in 1997 stems from the sale of
the investment in May 1997. The increase in 1996 compared to 1995 is primarily
due to the increase in the average occupancy rate, in addition to improved
rental rates.
Interest on cash equivalents and short-term investments increased
approximately $17,000 in 1997 as compared to 1996 as a result of an increase in
the average investment balance due to the temporary investment of sale proceeds
prior to distribution, as well as an increase in short-term rates. Interest
income increased approximately $104,000 in 1996 compared to 1995 as a result of
an increase in average investment balances from the receipt of the lump sum
termination payment ($1,250,000) in the third quarter of 1996, partially offset
by a decrease in interest rates.
Exclusive of the lease termination payments of $1,250,000 and $350,000
from Rancho Dominguez in 1996 and 1997, respectively, cash provided by operating
activities decreased by $660,000 between the two years. The decline is
attributable to decreased distributions from Medlock Oaks, declines in operating
activity at Rancho Dominguez, and an increase in Partnership management fees as
a result of increased cash distributions to Partners, as discussed above.
Exclusive of the aforementioned lease termination payment from Rancho Dominguez
in 1996, operating cash flow decreased by approximately $182,000 in 1996
compared to 1995, primarily due to the lease restructuring at Rancho Dominguez,
partially offset by decreases in working capital and distributions from Medlock
Oaks.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and investor servicing agent fees. These
expenses decreased approximately $8,000, or 7% between 1996 and 1997, primarily
due to decreases in appraisal and accounting fees. General and administrative
expenses decreased approximately $11,000, or 10% in 1996 compared to 1995
primarily due to lower professional and legal 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 increased in 1997 as compared to 1996 due to the
increase in distributable cash flow, and a corresponding increase in
distributions to Partners. The management fee in 1996 resulted from the
resumption of operating cash distributions as of the second quarter. There was
no management fee in 1995 since no cash distributions were made to the partners.
Inflation
By their nature, real estate investments tend not to be adversely
affected by inflation. Inflation may result in appreciation in the value of the
Partnership's real estate investments over time, if rental rates and replacement
costs increase. Declines in real property values during the period of
Partnership operations, due to market and economic conditions, have overshadowed
the overall positive effect inflation may have on the value of the Partnership's
investments.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
See the Financial Statements of the Partnership included as a part of
this Annual Report on Form 10-K.
Item 9. Disagreements on Accounting and Financial Disclosure.
----------------------------------------------------
The Partnership has had no disagreements with its accountants on any
matters of accounting principles or practices or financial statement disclosure.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
------------------------------------------------------
(a) and (b) Identification of Directors and Executive Officers.
---------------------------------------------------
The following table sets forth the names of the directors and executive
officers of the Managing General Partner and the age and position held by each
of them as of December 31, 1997.
Name Position(s) with the Managing General Partner Age
- ----------------------------- ------------------------------------------------------------ ---------
Wesley M. Gardiner, Jr. President, Chief Executive Officer and Director 39
Pamela J. Herbst Vice President and Director 42
J. Grant Monahon Vice President and Director 52
James J. Finnegan Vice President 37
Karin J. Lagerlund Treasurer and Principal Financial and Accounting Officer 33
(c) Identification of Certain Significant Employees.
------------------------------------------------
None.
(d) Family Relationships.
---------------------
None.
(e) Business Experience.
--------------------
The Managing General Partner was incorporated in Massachusetts on
January 16, 1987. The background and experience of the executive officers and
directors of the Managing General Partner are as follows:
Wesley M. Gardiner, Jr. joined AEW Real Estate Advisors, Inc. ("AEW") ,
formerly known as Copley Real Estate Advisors, Inc., in 1990 and has been a Vice
President at AEW since January, 1994. AEW is a subsidiary of AEW Capital
Management, L.P. ("AEW Capital Management"). From 1982 to 1990, he was employed
by Metric Realty, a nationally-known real estate investment advisor and
syndication firm, as a portfolio manager responsible for several public and
private limited partnerships. His career at AEW has included asset management
responsibility for the company's Georgia and Texas holdings. Presently, Mr.
Gardiner has overall responsibility for all the partnerships advised by AEW
whose securities are registered under the Securities and Exchange Act of 1934.
He received a B.A. in Economics from the University of California at San
Diego.
Pamela J. Herbst directs AEW Capital Management's Portfolio Advisory
Services, with oversight responsibility for the asset and portfolio management
areas. Ms. Herbst is a member of AEW Capital Management's Investment Policy
Group and Management Committee. She came to AEW Capital Management in December
1996 as a result of the firm's merger with Copley Real Estate Advisors, Inc.,
where she held various senior level positions in asset and portfolio management,
acquisitions, and corporate operations since 1982. Ms. Herbst is a graduate of
the University of Massachusetts (B.A.) and Boston University (M.B.A.).
J. Grant Monahon is AEW Capital Management's General Counsel and a
member of the firm's Management Committee and Investment Policy Group. He has
over 25 years of experience in real estate law and investments. Prior to joining
AEW Capital Management in 1987, Mr. Monahon was a partner with a major Boston
law firm. As the head of that firm's real estate finance department, he
represented a wide variety of institutional clients, both domestic and
international, in complex equity and debt transactions. He is the former
Chairman of the General Counsel section of the National Association of Real
Estate Investment Managers. Mr. Monahon is a graduate of Dartmouth College
(B.A.) and Georgetown University Law Center (J.D.).
James J. Finnegan is the Assistant General Counsel of AEW Capital
Management. Mr. Finnegan served as Vice President and Assistant General Counsel
of Aldrich, Eastman & Waltch, L.P., a predecessor to AEW Capital Management.
Mr. Finnegan has over ten years of experience in real estate law, including
seven years of experience in private practice with major New York City and
Boston law firms. Mr. Finnegan also serves as AEW's securities and regulatory
compliance officer. Mr. Finnegan is a graduate of the University of Vermont
(B.A.) and Fordham University School of Law (J.D.).
Karin J. Lagerlund directs the Advisory Services Portfolio Accounting
Group at AEW Capital Management, overseeing portfolio accounting, performance
measurement and client financial reporting for AEW's private equity investment
portfolios. Ms. Lagerlund is a Certified Public Accountant and has over ten
years experience in real estate consulting and accounting. Prior to joining AEW
Capital Management in 1994, she was an Audit Manager at EY/Kenneth Leventhal
LLP. Ms. Lagerlund is a graduate of Washington State University (B.A.).
(f) Involvement in Certain Legal Proceedings.
-----------------------------------------
None.
Item 11. Executive Compensation.
----------------------
Under the Partnership Agreement, the General Partners and their
affiliates are entitled to receive various fees, commissions, cash
distributions, allocations of taxable income or loss and expense reimbursements
from the Partnership. See Notes 1 and 6 of Notes to the Financial Statements.
The following table sets forth the amounts of the fees and
reimbursements of out-of-pocket expenses which the Partnership paid to or
accrued for the account of the General Partners and their affiliates for the
year ended December 31, 1997. Cash distributions to General Partners include
amounts distributed after year-end with respect to 1997.
Amount of
Compensation and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
AEW Real Estate
Advisors, Inc. Management Fees and
Reimbursement of Expenses $ 525,360
General Partners Share of Distributable Cash 51,135
New England Securities
Corporation Servicing Fee and
Reimbursement of
Expenses 3,696
-----------
TOTAL $ 580,191
===========
For the year ended December 31, 1997, the Partnership allocated
$10,611 of taxable income to the General Partners. See Note 1 of Notes to
Financial Statements for additional information about transactions between the
Partnership and the General Partners and their affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at December 31, 1997. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited
and, in some circumstances, are subject to the prior receipt of certain opinions
of counsel or judicial decisions.
Except as expressly provided in the Partnership Agreement, the right
to manage the business of the Partnership is vested exclusively in the Managing
General Partner.
(b) Security Ownership of Management.
--------------------------------
The General Partners of the Partnership owned no Units at
December 31, 1997.
(c) Changes in Control.
------------------
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The Partnership has no relationships or transactions to report other
than as reported in Item 11, above.
PART IV
-------
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K.
--------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements are filed as part of
this Annual Report.
(2) Financial Statement Schedule--The Financial Statement Schedule
listed on the accompanying Index to Financial Statements and
Schedule is filed as part of this Annual Report.
(3) Exhibits--The Exhibits listed in the accompanying Exhibit Index
are filed as a part of this Annual Report and incorporated in
this Annual Report as set forth in said Index.
(b) Reports on Form 8-K. On December 30, 1997, the Partnership filed one
Current Report on Form 8-K disclosing the sale of the Rancho Dominguez
property on December 15, 1997.
COPLEY REALTY INCOME PARTNERS 2;
A Limited Partnership
Financial Statements
* * * * * * *
December 31, 1997
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets - December 31, 1997 and 1996
Statements of Operations - For the Years Ended December 31, 1997
1996 and 1995
Statement of Partners' Capital (Deficit) - For the Years Ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows - For the Years Ended December 31, 1997, 1996
and 1995
Notes to Financial Statements
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997, 1996 and 1995
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
In our opinion, based on our audits and the reports of other auditors for the
years ended December 31, 1997, 1996 and 1995, the financial statements listed in
the accompanying index present fairly, in all material respects, the financial
position of Copley Realty Income Partners 2; A Limited Partnership (the
"Partnership") at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Second Income Corp., the Managing
General Partner of the Partnership; our responsibility is to express an opinion
on these financial statements based on our audits. We did not audit the
financial statements of the Partnership's Medlock Oaks joint venture investee
for the years ended December 31, 1996 and 1995 which results of operations are
recorded using the equity method of accounting in the Partnership's financial
statements. Equity in joint venture income for Medlock Oaks was $210,976 and
$180,667 for the years ended December 31, 1996 and 1995, respectively. We also
did not audit the financial statements of MCV III, a wholly-owned property, for
the years ended December 31, 1996 and 1995, which statements reflect operating
income of $1,295,352 and $1,898,876, respectively. Those statements were audited
by other auditors whose reports thereon have been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for the
equity in joint venture income for Medlock Oaks for the years ended December 31,
1996 and 1995, and for the operating income for MCV III for the years ended
December 31, 1996 and 1995, is based solely on the reports of the other
auditors. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by the
Managing General Partner, and evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors for
the years ended December 31, 1997, 1996 and 1995 provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
- -----------------------
Boston, Massachusetts
March 11, 1998
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
BALANCE SHEETS
December 31,
------------------------
1997 1996
---------- -----------
ASSETS
Real estate investments:
Property, net $6,522,742 $10,221,007
Joint ventures - 3,543,935
---------- -----------
6,522,742 13,764,942
Cash and cash equivalents 1,083,887 3,560,038
Short-term investments 596,268 2,062,313
---------- -----------
$8,202,897 $19,387,293
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 53,995 $ 51,224
Accrued management fee 28,809 41,019
Deferred disposition fees 225,840 -
---------- -----------
Total liabilities 308,644 92,243
---------- -----------
Partners' capital (deficit):
Limited partners ($781 and $l,000 per unit,
respectively; 100,000 units authorized;
32,767 and 32,818 units, respectively,
issued and outstanding) $8,033,516 $19,392,367
General partners (139,263) (97,317)
---------- -----------
Total partners' capital 7,894,253 19,295,050
---------- -----------
$8,202,897 $19,387,293
========== ===========
(See accompanying notes to financial statements)
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
Year ended December 31,
-------------------------------------
1997 1996 1995
---------- ----------- ----------
Investment Activity
Property rentals $1,419,767 $ 1,509,871 $1,938,231
Depreciation and amortization (415,746) (688,380) (797,612)
Property operating expenses (196,567) (214,519) (39,355)
---------- ----------- ----------
807,454 606,972 1,101,264
Joint venture earnings 54,694 210,976 180,667
Lease termination fee - 1,600,000
Investment valuation allowances - (3,350,000) -
---------- ----------- ----------
Total real estate operations 862,148 (932,052) 1,281,931
Gain on sales of property 517,693 - -
---------- ----------- ----------
Total real estate activity 1,379,841 (932,052) 1,281,931
Interest on cash equivalents
and short-term investments 267,525 250,877 146,644
---------- ----------- ----------
Total investment activity 1,647,366 (681,175) 1,428,575
---------- ----------- ----------
PORTFOLIO EXPENSES
General and administrative 99,305 107,099 118,586
Management fee 505,722 123,057 -
---------- ----------- ----------
605,027 230,156 118,586
---------- ----------- ----------
NET INCOME (LOSS) $1,042,339 $ (911,331) $1,309,989
========== =========== ==========
Net income (loss) per weighted
average limited partnership unit $31.46 $(27.47) $39.48
========== =========== ==========
Cash distributions per limited
partnership unit outstanding for the
entire year $377.08 $25.00 $ -
========== =========== ==========
Weighted average number of limited
partnership units outstanding during
the year 32,806 32,848 32,848
========== =========== ==========
(See accompanying notes to financial statements)
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
Year ended December 31,
------------------------------------------------------------------------
1997 1996 1995
------------------------- --------------------- --------------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
---------- ------------- --------- ---------- --------- ----------
Balance at beginning of year $ (97,317) $ 19,392,367 $(79,910) $21,133,635 $(93,010) $19,836,746
Cash distributions (52,369) (12,366,593) (8,294) (821,200) - -
Repurchase of limited partnership units - (24,174) - (17,850) - -
Net income (loss) 10,423 1,031,916 (9,113) (902,218) 13,100 1,296,889
--------- ------------ -------- ----------- -------- -----------
Balance at end of year $(139,263) $ 8,033,516 $(97,317) $19,392,367 $(79,910) $21,133,635
========= ============ ======== =========== ======== ===========
(See accompanying notes to financial statements)
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------------------
1997 1996 1995
------------ ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,042,339 $ (911,331) $ 1,309,989
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization 415,746 688,380 797,612
Investment valuation allowances - 3,350,000 -
Equity in joint venture net income (54,694) (210,976) (180,667)
Cash distributions from joint ventures 152,012 396,881 319,499
Gain on sales of property (517,693) - -
Decrease (increase) in investment income
receivable 14,383 3,355 (18,703)
Decrease in accrued lease termination fee 350,000 (350,000) -
Increase in deferred leasing costs - - (34,618)
Increase (decrease) in operating liabilities (9,439) 21,912 3,909
Increase in property working capital (96,341) (132,043) (408,517)
------------ ---------- -----------
Net cash provided by operating activities 1,296,313 2,856,178 1,788,504
------------ ---------- -----------
Cash flows from investing activities:
Decrease (increase) in short-term investments,
net 1,451,663 (383,160) (1,200,110)
Investment in property - - (214,903)
Net proceeds from sales of property 6,993,169 - -
Deferred disposition fee 225,840 - -
------------ ---------- -----------
Net cash provided by (used in)
investing activities 8,670,672 (383,160) (1,415,013)
------------ ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (12,418,962) (829,494) -
Repurchase of limited partnership units (24,174) (17,850) -
------------ ---------- -----------
Net cash used in financing activities (12,443,136) (847,344) -
------------ ---------- -----------
Net increase (decrease) in cash and cash
equivalents (2,476,151) 1,625,674 373,491
Cash and cash equivalents:
Beginning of year 3,560,038 1,934,364 1,560,873
------------ ---------- -----------
End of year $ 1,083,887 $3,560,038 $ 1,934,364
============ ========== ===========
(See accompanying notes to financial statements)
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
General
- -------
Copley Realty Income Partners 2; 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. The Partnership commenced operations in October 1987, and acquired
the remaining real estate investment it currently owns prior to the end of 1988.
The Partnership intended to dispose of its investments within nine years of
their acquisition, and then liquidate; however, the Managing General Partner has
extended the investment period at least into 1998, having determined it to be in
the best interest of the limited partners.
The Managing General Partner of the Partnership is Second Income
Corp., a wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"),
formerly known as Copley Real Estate Advisors, Inc. ("Copley"), The associate
general partner is ECOP Associates Limited Partnership, a Massachusetts limited
partnership, the general partners of which are managing directors of AEW and/or
officers of the Managing General Partner. Subject to the Managing General
Partner's overall authority, the business of the Partnership is managed by AEW
pursuant to an advisory contract.
On December 10, 1996, Copley's parent, New England Investment
Companies, L. P. ("NEIC"), a publicly traded master limited partnership,
acquired certain assets subject to then existing liabilities from Aldrich
Eastman & Waltch, Inc. and its affiliates and principals (collectively, "the AEW
operations"). Simultaneously, a new entity, AEW Capital Management, L.P., was
formed into which NEIC contributed its interest in Copley and its affiliates.
As a result, the AEW operations were combined with Copley to form the business
operations of AEW Capital Management, L.P. At year end 1997, NEIC completed a
restructuring plan under which it contributed all of its operations to a newly
formed private partnership, NEIC Operating Partnership, L.P., in exchange for a
general partnership interest in the newly formed entity. As such, at December
31, 1997, AEW Capital Management, L.P. is wholly owned by NEIC Operating
Partnership, L.P.
Prior to August 30, 1996, New England Mutual Life Insurance Company
("The New England") was NEIC's principal unit holder and owner of all of the
outstanding stock of NEIC's general partner. On August 30, 1996, The New England
merged with and into Metropolitan Life Insurance Company ("Met Life"). Met Life
is the surviving entity and, therefore, through a wholly-owned subsidiary,
became the owner of the units of partnership interest previously owned by The
New England and of the stock of NEIC's general partner.
Management
- ----------
AEW, as advisor, is entitled to receive stipulated fees from the
Partnership in consideration of services performed in connection with the
management of the Partnership and acquisition and disposition of Partnership
investments in real property. Partnership management fees are 9% of
distributable cash from operations, as defined, before deducting such fees. AEW
is also reimbursed for expenses incurred in connection with administering the
Partnership ($19,638 in 1997, $17,000 in 1996, and $18,938 in 1995).
Acquisition fees were based on 3% of the gross proceeds from the offering and
were paid at the time commitments were initially funded. Disposition fees are
limited to the lesser of 3% of the selling price of the property, or 50% of the
standard real estate commission customarily charged by an independent real
estate broker. Payments of disposition fees are subject to the prior receipt by
the limited partners of their capital contributions plus a stipulated return
thereon.
New England Securities Corporation, an indirect subsidiary of Met Life,
is engaged by the Partnership to act as its unit holder servicing agent. Fees
and out-of-pocket expenses for such services totaled $3,696, $3,524 and $3,171
in 1997, 1996 and 1995, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Managing General Partner to make
estimates affecting the reported amounts of assets and liabilities, and of
revenues and expenses. In the Partnership's business, certain estimates require
an assessment of factors not within management's control, such as the ability of
tenants to perform under long-term leases and the ability of the properties to
sustain their occupancies in changing markets. Actual results, therefore, could
differ from those estimates.
Real Estate Joint Ventures
- --------------------------
Investments in joint ventures, including loans made to joint ventures,
which are in substance real estate investments, were stated at cost plus (minus)
equity in undistributed joint venture income (losses). Allocations of joint
venture income (losses) were made to the Partnership's venture partners as long
as they had substantial economic equity in the project. Economic equity is
measured by the excess of the appraised value of the property over the
Partnership's total cash investment plus accrued preferential returns and
interest thereon. For its former joint venture investment, the Partnership
recorded its ownership share of the operating results, after the elimination of
all inter-entity transactions, since its venture partner, an affiliate of the
Partnership, had substantial economic equity in the project. Joint ventures are
consolidated with the accounts of the Partnership if, and when, the venture
partner no longer shares in the control of the business.
Property
- --------
Property includes land, buildings and improvements, which are stated
at cost less accumulated depreciation, plus other operating net assets. The
Partnership's initial carrying value of a property previously owned by a joint
venture equals the Partnership's carrying value of the predecessor investment on
the conversion date.
Capitalized Costs, Depreciation and Amortization
- ------------------------------------------------
Maintenance and repair costs are expensed as incurred; significant
improvements and renewals are capitalized. Depreciation is computed using the
straight-line method based on the estimated useful lives of the buildings and
improvements.
Acquisition fees have been capitalized as part of the cost of real
estate investments. Amounts not related to land are being amortized using the
straight-line method over the estimated useful lives of the underlying real
property.
Leases
Leases are accounted for as operating leases. Leasing commissions are
amortized over the terms of the respective leases. Rental income is recognized
on a straight-line basis over the terms of the respective leases.
Realizability of Real Estate Investments
- ----------------------------------------
The Partnership considers a real estate investment to be impaired when
it determines the carrying value of the investment is not recoverable through
expected undiscounted cash flows from the operations and disposition of the
property. The impairment loss is based on the excess of the investment's
carrying value over its estimated fair market value. For investments being held
for sale, the impairment loss also includes estimated costs of sale. Property
held for sale is not depreciated during the holding period.
The carrying value of an investment may be more or less than its
current appraised value. At December 31, 1997, the appraised value of the
Partnership's remaining investment exceeded its carrying value by $700,000. At
December 31, 1996, the appraised values of two investments approximated their
respective carrying values after giving effect to 1996 valuation allowances.
The appraised value of the third investment was $300,000 less than its carrying
value.
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 AEW 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.
Cash Equivalents and Short-Term Investments
- -------------------------------------------
Cash equivalents are stated at cost, plus accrued interest. The
Partnership considers all highly liquid debt instruments purchased with a
maturity of ninety days or less to be cash equivalents; otherwise, they are
classified as short-term investments.
The Partnership has the positive intent and ability to hold all short-
term investments to maturity; therefore, short-term investments are carried at
cost, plus accrued interest, which approximates market value. At December 31,
1997 and 1996, all investments are in commercial paper with less than two months
and three months, respectively, remaining to maturity.
Income Taxes
- ------------
A partnership is not liable for income taxes and, therefore, no
provision for income taxes is made in the financial statements of the
Partnership. A proportionate share of the Partnership's income is reportable on
each partner's tax return.
Per Unit Computations
- ---------------------
Per unit computations are based on the weighted average number of
units of limited partnership interest outstanding during the year. The actual
per unit amount will vary by partner depending on the date of admission to, or
withdrawal from, the Partnership.
Effective January 1, 1998, the Partnership adopted FAS 128 "Earnings
per Share," which simplifies the standards of reporting earnings per share (EPS)
previously found in APB Opinion No. 15. It provides guidance on the computation
and disclosure of basic and diluted EPS and requires restatement of prior
periods for comparative purposes. The adoption of FAS 128 did not have a
material impact on the Partnership's financial statements.
NOTE 3 - INVESTMENT IN PROPERTY
- -------------------------------
The following is a summary of the Partnership's investment in property:
December 31,
--------------------------
1997 1996
------------ ------------
Land $ 4,711,859 $ 7,339,344
Buildings and improvements 7,855,152 12,235,440
Accrued lease termination fee - 350,000
Accumulated depreciation (2,440,345) (3,466,160)
Investment valuation allowance (4,200,000) (7,200,000)
----------- -----------
5,926,666 9,258,624
Other net assets 596,076 1,040,472
Accrued environmental
clean-up costs - (78,089)
----------- -----------
$ 6,522,742 $10,221,007
=========== ===========
On November 12, 1987, the Partnership entered into a joint venture
agreement with an affiliate of The Muller Company. The venture acquired an
industrial building (Rancho Dominguez, California) and a research and
development building (La Mirada, California). The Rancho Dominguez building was
sold in 1997, as discussed below. The Partnership contributed $20,465,000 to
the venture. Effective June 30, 1991, the investment was restructured to a
wholly-owned property as a result of the venture partner's inability to
proportionately fund cash deficits.
The buildings are being depreciated over 30 years. Tenant improvements
are being depreciated over the life of the underlying leases. Aggregate minimum
future rental payments for the La Mirada property are as follows: 1998-
$709,728; 1999- $760,429; 2000- $794,644; 2001- $801,879; 2002- $859,464;
thereafter - $1,217,574.
The tenant in the Rancho Dominguez building had been experiencing
financial difficulty, as a result of which the Partnership granted a rent
abatement of $400,000 in 1995. In December 1995, the tenant's former parent
company paid the Partnership $275,000 pursuant to its guarantee of a portion of
the lease obligation. In the second quarter of 1996, the Partnership amended
the lease. The remaining lease term was shortened to eighteen months (along
with an option for the Partnership to terminate the lease with a ninety day
notice) and the rental rate was reduced, in consideration for which the tenant
agreed to pay two lump sum amounts: one for $1,250,000, which was received in
July 1996, and another for $350,000, which was received in December 1997, at the
termination of the lease. This lease termination fee was recognized as revenue
in 1996. As a result of the new lease terms and current market conditions, the
Managing General Partner determined that the carrying value of the Rancho
Dominguez property was impaired. Accordingly, the carrying value was reduced to
estimated fair market value with an investment valuation allowance of $3,000,000
which was also recognized in 1996.
An environmental remediation project was undertaken at the Rancho
Dominguez building, due to contamination caused by a former tenant. The
Partnership had taken a charge to operations in prior years totaling $500,000
relating to this matter. During 1995, based on a revised engineering estimate,
the Partnership reduced its accrual for future costs by $200,000 which was
recorded as a credit to property operating expenses. As discussed below, the
Rancho Dominguez property was sold in December 1997, at which time the remaining
accrual of $49,811 was reversed based on the successful results of an
independent environmental inspection completed concurrent with the sale of the
property. The Partnership has no remaining remediation cost obligations with
respect to the Rancho Dominguez building.
On December 15, 1997, the Rancho Dominguez building was sold for
$3,486,000. The Partnership received net proceeds of $3,260,761, after closing
costs, and recognized a gain of $129,703 ($3.96 per limited partnership unit).
A disposition fee of $104,580 was accrued but not paid to AEW. On December 30,
1997, the Partnership made a capital distribution of $3,243,933 ($99 per limited
partnership unit) from the proceeds of the sale.
NOTE 4 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The Partnership had invested in two real estate joint ventures,
organized as general partnerships with a real estate management/development firm
and, in one case, with an affiliate of the Partnership. It made capital
contributions to the ventures, which were subject to preferential cash
distributions at a specified rate and to priority distributions with respect to
sale or refinancing proceeds. The Partnership also made loans to these
ventures, which have been accounted for as real estate investments due to the
attendant risks of ownership. The joint venture agreements provided for the
funding of cash flow deficits by the venture partners in proportion to ownership
interests, and for the dilution of ownership share in the event a venture
partner did not contribute proportionately.
The respective real estate management/development firms were
responsible for day-to-day development and operating activities, although
overall authority and responsibility for the business was shared by the
venturers. The real estate management/development firms, or their affiliates,
also provided various services to the joint ventures for a fee.
The following is a summary of cash invested in joint ventures, net of
returns of capital or principal, and excluding investment acquisition fees:
December 31,
Rate of Ownership ----------------
Investment/Location Return/Interest Interest 1997 1996
- --------------------- ---------------- ----------- ---- ----------
Medlock Oaks
Atlanta, Georgia 10.25% 43% (C) - $1,457,700
10.25% (L) - $3,658,843
(C) Capital contribution
(L) Loan
Medlock Oaks
- ------------
On December 4, 1987, the Partnership entered into a joint venture
agreement with an affiliate of the Partnership and with an affiliate of Hill
Properties, Ltd., to construct and operate five warehouse and service center
buildings located in Atlanta, Georgia. The Partnership made a capital
contribution of $1,457,700 to the venture which was subject to preferential
returns of 10.25% per annum. In addition, the Partnership made a
construction/permanent mortgage loan to the venture of $3,658,843, which bore
interest at 10.25% per annum.
On September 3, 1991, ownership of the investment was restructured as
a result of the management/ development firm's decision not to contribute its
required proportionate share of capital to fund operating deficits. Its
ownership interest was assigned pro rata to the Partnership and its affiliate.
As a result, the Partnership's ownership interest increased from 28.81% to 43%.
During the first quarter of 1996, the Managing General Partner
determined that the Partnership would be unable to recover the carrying value of
this investment and, accordingly, the carrying value was reduced by $350,000
through a charge to investment valuation allowances.
On May 2, 1997, the Medlock Oaks buildings were sold to an
institutional buyer, which is unaffiliated with the Partnership, for a total
sales price of $9,402,779. The Partnership received its 43% share of the net
proceeds in the amount of $3,958,248, after closing costs, and recognized a
gain of $387,990 ($11.70 per limited partnership unit) on the sale. A
disposition fee of $121,260 was accrued but not paid to AEW. On May 29, 1997,
the Partnership made a capital distribution of $3,938,160 ($120 per limited
partnership unit) from the proceeds of the sale.
Summarized Financial Information
- --------------------------------
The following summarized financial information is presented in the
aggregate for the Medlock Oaks joint venture.
Assets and Liabilities
----------------------
December 31,
-------------------------------
1997 1996
----------- ------------
Assets
Real property, at cost less accumulated
depreciation of $2,821,679 at
December 31, 1996 $ - $7,702,658
Other - 288,149
---------- ----------
- 7,990,807
Liabilities - 86,084
---------- ----------
Net assets $ - $7,904,723
========== ==========
Results of Operations
---------------------
Year ended December 31,
----------------------------------
1997 1996 1995
-------- ---------- ----------
Revenue
Rental income $358,009 $1,165,073 $1,101,894
Other 36,653 114,609 108,338
-------- ---------- ----------
394,662 1,279,682 1,210,232
-------- ---------- ----------
Expenses
Depreciation and amortization 156,941 454,305 447,470
Operating expenses 129,254 321,958 329,830
-------- ---------- ----------
286,195 776,263 777,300
-------- ---------- ----------
Net income $108,467 $ 503,419 $ 432,932
======== ========== ==========
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.
NOTE 5 - INCOME TAXES
- ---------------------
The Partnership's income (loss) for federal income tax purposes differs
from that reported in the accompanying statement of operations as follows:
Year ended December 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
Net income (loss) per
financial statements $1,042,339 $ (911,331) $1,309,989
Timing differences:
Joint venture earnings (95,036) (106,138) (84,982)
Rental revenue 251,204 (394,752) (683,600)
Expenses 385 2,485 1,570
Depreciation and amortization (137,824) 160,195 322,653
Valuation allowances - 3,350,000 -
---------- ---------- ----------
Taxable income $1,061,068 $2,100,459 $ 865,630
========== ========== ==========
NOTE 6 - PARTNERS' CAPITAL
- --------------------------
The Partnership maintains a repurchase fund for the purpose of
repurchasing limited partnership units, pursuant to the terms and conditions set
forth in the Partnership Agreement. Two percent of cash flow, as defined, is
designated for the repurchase fund which had a balance of approximately $41,551
and $10,087 at December 31, 1997 and 1996, respectively. Through December 31,
1997, the Partnership repurchased and retired 230 limited partnership units for
an aggregate cost of $177,945.
Allocation of net income (losses) from operations and distributions of
distributable cash from operations, as defined, are in the ratio of 99% to the
limited partners and 1% to the general partners. Cash distributions to partners
were suspended as of the second quarter of 1994. Since their reinstatement as
of the second quarter of 1996, cash distributions have been made quarterly.
Net sale proceeds and financing proceeds will be allocated first to
the limited partners to the extent of their contributed capital plus a
stipulated return thereon, as defined, second to pay disposition fees, and then
85% to the limited partners and 15% to the general partners. Income from sales
will be allocated in proportion to the distribution of related proceeds,
provided that the general partners are allocated at least 1%. Income or losses
from sales, if there are no residual proceeds after the repayment of the related
debt, will be allocated 99% to the limited partners and 1% to the general
partners.
NOTE 7 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
December 31, 1997 were made on January 29, 1998 in the aggregate amount of
$291,289 ($8.80 per limited partnership unit).
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
Costs Capitalized
Initial Cost to Subsequent to
the Partnership Acquisition
------------------------------------------------------ --------------------------------
Encum - Buildings & Other Carrying Additions
Description brances Land Improvements (Net) Costs (Dispositions)
- ---------------- ------- ---------- -------------- --------- ----------- --------------
An industrial and an R & D
building (235,594 sq.ft) on
13.08 acres of land in Note A $7,339,344 $10,665,340 $144,934 $0 $2,250,336
Rancho Dominguez and
La Mirada, California.
----------- ----------- ----------- ----------- -----------
Total Wholly-Owned $7,339,344 $10,665,340 $144,934 $0 $2,250,336
=========== =========== =========== =========== ===========
43% interest in Medlock Oaks
Associates. Owners of five
warehouse and service center
buildings (173,916 square feet) ------------------------------------------------- See Note B ----------------------------------
situated on 14.9 acres of land
in Atlanta, Georgia.
Cost
Capitalized
Subsequent to Gross amount at which
Acquisition Carried at Close of Period
------------ ----------------------------------------------------------------------------
Buildings & Valuation
Description Other Land Improvements Other Allowances Dispositions
- ----------- ------------ ---------- -------------- ------------ ------------ -------------
An industrial and an R & D
building (235,594 sq.ft) on
13.08 acres of land in ($2,324,606) $7,339,344 $12,915,676 ($2,179,672) ($7,200,000) ($3,545,207)
Rancho Dominguez and
La Mirada, California.
----------- ----------- ----------- ------------- ------------ -----------
Total Wholly-Owned ($2,324,606) $7,339,344 $12,915,676 ($2,179,672) ($7,200,000) ($3,545,207)
============ =========== =========== ============= ============ ============
43% interest in Medlock Oaks
Associates. Owners of five
warehouse and service center ($3,444,858)
buildings (173,916 square feet) --------------------------------------------------------------------------- ============
situated on 14.9 acres of land
in Atlanta, Georgia.
Gross amount
at which
Carried at
of Period
------------
Accumulated
Depreciation Date of Date Depreciable
Description Total & Amortization Construction Acquired Life
- ----------- ------------ --------------- ------------ -------- ----------
An industrial and an R & D
building (235,594 sq.ft) on
13.08 acres of land in $10,875,348 ($4,352,606) 1962 & 11/12/87 30 Years
Rancho Dominguez and 1987
La Mirada, California.
----------- -----------
Total Wholly-Owned $10,875,348 ($4,352,606)
=========== ============
43% interest in Medlock Oaks
Associates. Owners of five
warehouse and service center Phase I-1987
buildings (173,916 square feet) $0 N/A Phase II-1990 12/4/87 30/15 Years
situated on 14.9 acres of land
in Atlanta, Georgia.
COPLEY REALTY INCOME PARTNERS 2
NOTE A TO SCHEDULE III
Reconciliation of Real 1995 1995 1995
Estate Owned COST INVESTMENT INCREASE IN 1995 INCREASE INVESTMENT
AS OF IN DEFERRED IN PROPERTY VALUATION
DESCRIPTION 12/31/94 PROPERTY LEASING COSTS WORKING CAPITAL ALLOWANCE
- ------------------------- ------------ ------------ ------------- --------------- ------------
Rancho Dominguez, California
& La Mirada, California $16,019,545 $214,903 $34,618 $408,517 $0
============ ============= ============= =============== ============
1996 1996 1996
COST INVESTMENT INCREASE IN 1996 INCREASE INVESTMENT
AS OF IN DEFERRED IN PROPERTY VALUATION
12/31/95 PROPERTY LEASING COSTS WORKING CAPITAL ALLOWANCE
------------ ------------- ------------- --------------- ------------
Rancho Dominguez, California
& La Mirada, California $16,677,583 $0 $0 $482,043 ($3,000,000)
============ ============= ============= =============== ============
1997 1997 1997
COST INVESTMENT INCREASE IN 1997 INCREASE INVESTMENT
AS OF IN DEFERRED IN PROPERTY VALUATION
12/31/96 PROPERTY LEASING COSTS WORKING CAPITAL ALLOWANCE
------------ ------------ ------------- --------------- ------------
Rancho Dominguez, California
& La Mirada, California $14,159,626 $0 $0 $260,929 $0
============ ============= ============= =============== ============
Reconciliation of Real ACCUMULATED 1995 ACCUMULATED
Estate Owned COST AMORTIZATION & AMORTIZATION & AMORTIZATION & 12/31/95
BALANCE AT DEPRECIATION DEPRECIATION DEPRECIATION PROPERTY
DESCRIPTION 12/31/95 AS OF 12/31/94 EXPENSE AS OF 12/31/95 NET
--------------------------- ----------- ---------------- -------------- ---------------- -----------
Rancho Dominguez, California
& La Mirada, California $16,677,583 $2,463,092 $792,379 $3,255,471 $13,422,112
=========== =========== ============= ============= ============
ACCUMULATED 1996 ACCUMULATED
COST AMORTIZATION & AMORTIZATION & AMORTIZATION & 12/31/96
BALANCE AT DEPRECIATION DEPRECIATION DEPRECIATION PROPERTY
12/31/96 AS OF 12/31/95 EXPENSE AS OF 12/31/96 NET
----------- ---------------- -------------- ---------------- -----------
Rancho Dominguez, California
& La Mirada, California $14,159,626 $3,255,472 $683,147 $3,938,619 $10,221,007
=========== ============ =========== ============ ===========
ACCUMULATED 1997 ACCUMULATED
COST AMORTIZATION & AMORTIZATION & AMORTIZATION & 1997 12/31/97
BALANCE AT DEPRECIATION DEPRECIATION DEPRECIATION SALES PROPERTY
12/31/97 AS OF 12/31/96 EXPENSE AS OF 12/31/97 (R. DOMINGUEZ) NET
----------- ------------------ -------------- ---------------- --------------- ----------
Rancho Dominguez, California
& La Mirada, California $14,420,555 $3,938,619 $413,987 $4,352,606 ($3,545,207) $6,522,742
=========== =========== =========== =========== =========== ==========
COPLEY REALTY INCOME PARTNERS 2
NOTE B TO SCHEDULE III
1995
BALANCE 1995 INVESTMENT
PERCENT OF AS OF INVESTMENT 1995 EQUITY IN VALUATION
DESCRIPTION OWNERSHIP 12/31/94 IN PROPERTY INCOME (LOSS) ALLOWANCE
- ------------------- -------------- -------------- -------------- -------------- --------------
Medlock Oaks 43% $4,229,137 $0 $180,667 $0
-------------- ------------- ------------- -------------
$4,229,137 $0 $180,667 $0
============== ============= ============= =============
1996
BALANCE 1996 INVESTMENT
PERCENT OF AS OF INVESTMENT 1996 EQUITY IN VALUATION
OWNERSHIP 12/31/95 IN PROPERTY INCOME (LOSS) ALLOWANCE
-------------- -------------- -------------- -------------- --------------
Medlock Oaks 43% $4,085,073 $0 $209,076 ($350,000)
-------------- -------------- -------------- --------------
$4,085,073 $0 $209,076 ($350,000)
============== ============== ============== ==============
1997
BALANCE 1997 INVESTMENT
PERCENT OF AS OF INVESTMENT 1997 EQUITY IN VALUATION
OWNERSHIP 12/31/96 IN PROPERTY INCOME (LOSS) ALLOWANCE
-------------- -------------- -------------- -------------- --------------
Medlock Oaks 43% $3,543,935 $0 $54,055 $0
-------------- -------------- -------------- --------------
$3,543,935 $0 $54,055 $0
============== ============== ============== ==============
1995 1995
1995 CASH AMORTIZATION AMORTIZATION
RECEIVED OF OF BALANCE
FROM ACQUISITION DEFERRED AS OF
DESCRIPTION JOINT VENTURES FEES INTEREST 12/31/95
- ----------------- -------------- -------------- -------------- --------------
Medlock Oaks ($319,499) ($5,232) $0 $4,085,073
-------------- ----------- ------------ --------------
($319,499) ($5,232) $0 $4,085,073
=============== =========== ============ ===============
1996 1996
1996 CASH AMORTIZATION AMORTIZATION
RECEIVED OF OF BALANCE
FROM ACQUISITION DEFERRED AS OF
JOINT VENTURES FEES INTEREST 12/31/96
-------------- -------------- -------------- --------------
Medlock Oaks ($396,881) ($5,233) $1,900 $3,543,935
-------------- -------------- -------------- --------------
($396,881) ($5,233) $1,900 $3,543,935
============== =============== =============== ===============
1997 1997
1997 CASH AMORTIZATION AMORTIZATION
RECEIVED OF OF BALANCE
FROM ACQUISITION DEFERRED 1997 AS OF
JOINT VENTURES FEES INTEREST SALES 12/31/97
-------------- -------------- -------------- -------------- --------------
Medlock Oaks ($152,012) ($1,759) $639 ($3,444,858) $0
-------------- -------------- -------------- -------------- --------------
($152,012) ($1,759) $639 ($3,444,858) $0
============== ============== ============== ============== ==============
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER NUMBER
- -------- ------
10A. MCV III Associates ("MCV") General Partnership Agreement *
dated as of November 12, 1987 between Tri-Partners, the
Partnership.
10B. Lease agreement dated as of September 28, 1987 and Addendum *
dated as of October 12, 1987 by which MCV agrees to lease
to Genisco Technology Corporation ("Genisco") 7.02 acres
of land and a research and development building located thereon
in La Mirada, California.
10C. Lease Agreement dated as of November 12, 1987 by which MCV *
agrees to lease an industrial building located in Rancho
Dominguez, California to Engineering Magnetics.
10D. Agreement regarding Assignment and Assumption of Lease by and *
between MCV and Genisco dated as of November 12, 1987.
10E. Medlock Oaks Associates ("Medlock Oaks") Joint Venture *
Agreement dated as of December 4, 1987 by and between the
Partnership and Copley Realty Income Partners 1, a Limited
Partnership (collectively, the "Affiliates") and Hill Limited
#10, a Georgia limited partnership ("Hill").
10F. Promissory Note dated December 4, 1987 from Medlock Oaks to *
the Affiliates.
10G. Deed to Secure Debt and Security Agreement dated as of *
December 4, 1987 between Medlock Oaks and the Affiliates.
10H. Loan Agreement dated as of December 4, 1987 between Medlock *
Oaks and Affiliates.
10I. Assignment of Lease Agreements dated as of December 4, 1987 by *
between Hill and Medlock Oaks.
10J. Joint Venture Agreement of Sammis Horn Road Associates dated *
as of February 17, 1988 by and between the Registrant and
Sammis Rancho Cordova Associates.
10K. Construction Loan Agreement dated as of May 11, 1988 by and *
between Sammis Horn Road Associates, Borrower, and The First
National Bank of Chicago, Lender.
10L. Secured Promissory Note dated May 11, 1988 in the principal *
amount of $4,600,000 by Sammis Horn Road Associates to The
First National Bank of Chicago.
_______________________________________________
* PREVIOUSLY FILED AND INCORPORATED HEREIN BY REFERENCE.
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER NUMBER
- -------- ------
10M. Deed of Trust and Assignment of Rents dated as of May 11, 1988 *
by and among Sammis Horn Road Associates (Trustor), Stewart
Title Guaranty Company (Trustee), and The First National Bank
of Chicago (Beneficiary).
10N. Assignment of Rents, Leases, Income and Profits dated as of *
May 11, 1988 by Sammis Horn Road Associates (Assignor) to
The First National Bank of Chicago (Assignee).
10P. Second Amendment to General Partnership Agreement of MCV III *
Associates by and between the Registrant and Tri-Partners.
10Q. Second Amendment to Joint Venture Agreement of Medlock Oaks *
Associates ("Medlock Oaks"), dated as of January 1, 1990, by and
among the Registrant, Copley Realty Income Partners 1, A Limited
Partnership (collectively, the "Affiliates") and Hill Limited #10,
a Georgia limited partnership ("Hill").
10R. Amended and Restated Promissory Note dated as of January 1, *
1990, from Medlock Oaks to the Affiliates.
10S. First Amendment to Deed to Secure Debt and Security Agreement *
dated as of January 1, 1990 between Medlock Oaks and the Affiliates.
10T. First Amendment to Loan Agreement dated as of January 1, 1990 *
between Medlock Oaks and the Affiliates.
10U. Second Amendment to Joint Venture Agreement of Sammis Horn *
Road Associates effective as of April 1, 1989 by and between the
Registrant and Sammis Rancho Cordova Associates.
10V. Agreement for Dissolution, Distribution and Winding-Up of MCV *
III Associates dated May 31, 1991 by and between TRI-Partners,
a California general partnership and the Registrant.
10W. Transfer and Assignment of Joint Venture Interest in Medlock *
Oaks Associates made and entered into as of September 3, 1991
by and between Hill Limited #10, a Georgia limited partnership,
and Copley Realty Income Partners 1; A Limited Partnership, a
Massachusetts limited partnership and the Registrant.
10X. Incentive Property Management Agreement effective as of May 31, *
1991 by and between TRI-Partners, a California general partnership,
and the Registrant.
--------------------------------------------------------
* Previously filed and incorporated herein by reference.
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER NUMBER
- -------- ------
10Y. Agreement of Purchase and Sale and Joint Escrow Instructions made *
and entered into as of May 17, 1991 by and between Sammis Horn
Road Associates, a California general partnership ("Seller"), and
Rico's Draperies, Inc. ("Buyer").
10Z. Second Amendment to Loan Documents dated as of August 1, 1992 *
by and between Sammis Horn Road Associates and The First
National Bank of Chicago.
10AA. Second Amendment to Deed of Trust, Assignment of Rents and *
Other Security Documents dated as of August 1, 1992 by and
between Sammis Horn Road Associates, as Trustor, and
The First National Bank of Chicago, as Beneficiary.
10BB. Repayment Guaranty dated August 1, 1992 by the Registrant *
(the "Guarantor") The First National Bank of Chicago (the "Holder").
10CC. Completion Guaranty dated August 1, 1992 by the Registrant and *
CRIP2 Pool (collectively, the "Guarantors") in favor of The First
National Bank of Chicago (the "Holder").
10DD. First Amended and Completely Restated Joint Venture Agreement *
of Sammis Horn Road Associates, effective as of July 31, 1992
by and among the Registrant, CRIP 2 Pool, and Sammis Rancho
Cordova Associates.
10EE. Settlement Agreement dated October 24, 1994 by and between *
Sammis Horn Road Associates, the Registrant,
CRIP 2 Pool, Lee C. Sammis, Samuel G. Lindsay, John S. Hagestad,
Carl F. Willgeroth, "Guarantors", and The First National Bank of
Chicago and SCI Properties, "Transferee".
10FF. Lease dated February, 1994 by and between *
the Registrant, "Lessor", and Babcock, Inc., "Lessee".
10GG. First Amendment of Lease dated March 22, 1994 by and between *
the Registrant, "Lessor", and Babcock, Inc., "Lessee".
10HH. Second Amendment of Lease dated December 30, 1994 by and between *
the Registrant, "Lessor", and Babcock, Inc., "Lessee".
10II Third Amendment of Lease dated January 17, 1995 by and between *
the Registrant, "Lessor", and Babcock, Inc., "Lessee".
27. Financial Data Schedule
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 2;
A LIMITED PARTNERSHIP
Date: March 25, 1998 By: /s/ Wesley M. Gardiner, Jr.
---------------------------
Wesley M. Gardiner, Jr.
President of the
Managing General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Wesley M. Gardiner, Jr. President, Chief March 25, 1998
- ---------------------------- Executive Officer and
Wesley M. Gardiner, Jr. Director
/s/ Pamela J. Herbst Vice President and March 25, 1998
- --------------------- Director
Pamela J. Herbst
/s/ J. Grant Monahon Vice President and March 25, 1998
- --------------------- Director
J. Grant Monahon
/s/ James J. Finnegan Vice President March 25, 1998
- ----------------------
James J. Finnegan
/s/ Karin J. Lagerlund Treasurer and Principal March 25, 1998
- ----------------------- Financial and Accounting
Karin J. Lagerlund Officer