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 March 31, 1998 Commission File Number 0-18735
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3058134
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
- ----------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1998
PART I
FINANCIAL INFORMATION
BALANCE SHEETS
(Unaudited)
March 31, 1998 December 31, 1997
------------------ -------------------
Assets
Real estate joint ventures $ 3,608,084 $ 3,661,072
Cash and cash equivalents 1,535,432 1,081,267
Short-term investments - 472,710
Accounts receivable - 23,824
---------- ----------
$ 5,143,516 $ 5,238,873
========== ==========
Liabilities and Partners' Capital
Accounts payable $ 23,397 $ 37,784
Accrued management fee 11,705 12,813
Deferred disposition fees 197,700 197,700
---------- ----------
Total liabilities 232,802 248,297
---------- ----------
Partners' capital:
Limited partners ($561 per
unit; 100,000 units
authorized, 11,931 units issued
and outstanding) 4,906,110 4,985,173
General partners 4,604 5,403
---------- ----------
Total partners' capital 4,910,714 4,990,576
---------- ----------
$ 5,143,516 $ 5,238,873
========== ==========
(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended March 31,
1998 1997
------------ -----------
Investment Activity
Joint venture earnings $ 61,595 $ 175,726
Interest on cash equivalents
and short-term investments 19,804 21,156
------- --------
81,399 196,882
------- --------
Portfolio Expenses
General and administrative 18,819 22,282
Management fee 11,705 18,653
Amortization 1,183 1,861
------- --------
31,707 42,796
------- --------
Net Income $ 49,692 $ 154,086
======= ========
Net income per limited partnership unit $ 4.12 $ 12.79
======= ========
Cash distributions per limited
partnership unit $ 10.75 $ 15.65
======= ========
Number of limited partnership units
outstanding during the period 11,931 11,931
======= ========
(See accompanying notes to financial statements)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended March 31,
------------------------------
1998 1997
---------------------- ----------------------
General Limited General Limited
Partners Partners Partners Partners
-------- --------- -------- ----------
Balance at beginning
of period $ 5,403 $ 4,985,173 $ (10,451) $ 8,211,849
Cash distributions (1,296) (128,258) (1,886) (186,720)
Net income 497 49,195 1,541 152,545
-------- ---------- --------- ----------
Balance at end
of period $ 4,604 $ 4,906,110 $ (10,796) $ 8,177,674
======= =========== ========= =========
(See accompanying notes to financial statements)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
-------------------------------
1998 1997
---------- ----------
Net cash provided by operating activities $ 122,616 $ 198,489
---------- ----------
Cash flows from investing activity:
Decrease in short-term
investments, net 461,103 210,750
---------- ----------
Cash flows from financing activity:
Distributions to partners (129,554) (188,606)
---------- ----------
Net increase in cash
and cash equivalents 454,165 220,633
Cash and cash equivalents:
Beginning of period 1,081,267 941,045
---------- ----------
End of period $ 1,535,432 $ 1,161,678
========== ==========
(See accompanying notes to financial statements)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of March 31, 1998 and December 31, 1997 and the results of
its operations, its cash flows and partners' capital (deficit) for the interim
periods ended March 31, 1998 and 1997. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1997 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
Copley Realty Income Partners 4; A Limited Partnership (the "Partnership")
is a Massachusetts limited partnership organized for the purpose of investing
primarily in newly-constructed and existing income-producing real properties.
The Partnership commenced operations in September 1989, and acquired its
remaining real estate investment prior to 1991. The Partnership intends to
dispose of its investments within six to nine years of their acquisition, and
then liquidate. The Partnership has engaged AEW Real Estate Advisors, Inc.
("AEW") to provide asset management advisory services.
NOTE 2 - REAL ESTATE JOINT VENTURES
- -----------------------------------
On May 1, 1997, the Hohokam property within the Newhew joint venture was
sold for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to AEW.
On May 29, 1997, the Partnership made a capital distribution of $2,791,854 ($234
per limited partnership unit) from the proceeds of the sale.
On October 24, 1997, the Partnership sold Newhew's remaining property,
Fairmont Commerce Center, for $3,600,000, of which $1,139,082 was used to
discharge the related note payable. The Partnership received net proceeds of
$2,017,775, after closing costs, and recognized a gain of $958,056 ($80.30 per
limited partnership unit) on the sale. A disposition fee of $108,000 was accrued
but not paid to AEW. On November 24, 1997, the Partnership made a capital
distribution of $2,004,408 ($168 per limited partnership unit) from the proceeds
of the sale.
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
------------------------
March 31, 1998 December 31, 1997
-------------- -----------------
Assets
Real property, at cost less
accumulated depreciation of
$2,238,041 and $2,132,388 $ 7,460,342 $ 7,565,996
Other 152,490 165,813
------------ ------------
7,612,832 7,731,809
Liabilities 84,926 81,052
------------ ------------
Net assets $ 7,527,906 $ 7,650,757
============ ============
Results of Operations
---------------------
Quarter Ended March 31,
1998 1997
----------- ----------
Revenue
Rental income $ 301,755 $ 554,476
Other income - 2,419
---------- ----------
301,755 556,895
---------- ----------
Expenses
Operating expenses 39,410 118,336
Depreciation and amortization 115,196 156,097
Interest expense - 25,043
---------- ----------
154,606 299,476
---------- ----------
Net income $ 147,149 $ 257,419
========== ==========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures. Interest expense
in 1997 relates to a note payable to an insurance company, secured by the
Fairmont property. As discussed above, the note was repaid in full on October
24, 1997, concurrent with the sale of the property.
NOTE 3 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended March
31, 1998 were made on April 29, 1998 in the aggregate amount of $118,346 ($9.82
per limited partnership unit).
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited partnership
interest in December 1990 and a total of 11,931 units were sold. The Partnership
received proceeds of $10,097,962, net of selling commissions and other offering
costs, which have been used for investment in real estate and to pay related
acquisition costs, or retained as working capital reserves.
In July 1995, the Partnership reduced its working capital reserves by
making a capital distribution of $441,447 ($37 per limited partnership unit).
After the distribution, the Partnership's adjusted capital contribution was $963
per unit.
In connection with two sales during 1997, capital of $4,796,262 has been
returned to the limited partners. On May 29, 1997, the Partnership made a
capital distribution of $234 per limited partnership unit, which reduced the
adjusted capital contribution to $729 per unit. On November 24, 1997, the
Partnership made a capital distribution of $168 per limited partnership unit,
which reduced the adjusted capital contribution to $561 per unit.
At March 31, 1998, the Partnership had $1,535,432 in cash and cash
equivalents, of which $118,346 was used for cash distributions to the partners
on April 29, 1998; the remainder is being retained for working capital reserves.
The source of future liquidity and cash distributions to partners will be cash
generated by the Partnership's real estate and invested cash and cash
equivalents. Distributions of cash from operations related to the first quarter
of 1997 were made at the annualized rate of 6.5% on the adjusted capital
contribution of $963 per unit. Cash distributions from operations related to the
first quarter of 1998 were made at the annualized rate of 7.0% on the adjusted
capital contribution of $561 per unit.
The carrying value of the remaining real estate investment in the financial
statements at March 31, 1998 is at depreciated cost, or if the investment's
carrying value is determined not to be recoverable through expected undiscounted
future cash flows, the carrying value is reduced to estimated fair market value.
The fair market value of such investments is further reduced by the estimated
cost of sale for properties held for sale. Carrying value may be greater or less
than current appraised value. At March 31, 1998, the appraised value of the
Shasta Way investment exceeded its carrying value by approximately $1,200,000.
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.
Results of Operations
- ---------------------
Operating Factors
Shasta Way is 100% occupied by a single tenant under a lease which expires
December 31, 1998.
Investment Results
As discussed above, both Newhew investments (Hohokam and Fairmont), were
sold during 1997. Therefore, comparative real estate operating results are
presented for the Shasta Way investment only.
Joint venture earnings from Shasta Way were $58,799 and $61,595 for the
three months ended March 31, 1997 and 1998, respectively. The improvement is the
result of a decrease in accounting fees between the two periods.
Cash flow from operations decreased by approximately $76,000 in 1998 as
compared to the respective prior-year period, due to both the timing of
distributions from Shasta Way, and from a decrease in real estate operating
results due to the sale of both Newhew investments in 1997.
Interest on cash equivalents and short-term investments decreased by
$1,352, or 16%, between the first three months of 1997 and 1998, as a result of
a decrease in average investment balances, partially offset by higher short-term
rates.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
decreased by $3,463, or 16%, between the first three months of 1997 and 1998,
primarily due to decreases in appraisal and accounting fees.
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. Management fees decreased between
the two comparable periods due to the decrease in distributable cash flow.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1998
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 March 31, 1998.
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 REALTY INCOME PARTNERS 4; A LIMITED
PARTNERSHIP
(Registrant)
May 13, 1998
/s/ Wesley M. Gardiner, Jr.
-------------------------------
Wesley M. Gardiner, Jr.
President, Chief Executive Officer and
Director of Managing General Partner,
Fourth Income Corp.
May 13, 1998
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Treasurer and Principal Financial and
Accounting Officer of Managing General
Partner, Fourth Income Corp.