SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended June 30, 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
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1998
PART I
FINANCIAL INFORMATION
BALANCE SHEETS
(Unaudited)
June 30, 1998 December 31, 1997
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Assets
Real estate joint ventures $3,569,161 $3,661,072
Cash and cash equivalents 1,521,769 1,081,267
Short-term investments - 472,710
Accounts receivable - 23,824
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$5,090,930 $5,238,873
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Liabilities and Partners' Capital
Accounts payable $ 27,716 $ 37,784
Accrued management fee 11,705 12,813
Deferred disposition fees 197,700 197,700
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Total liabilities 237,121 248,297
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Partners' capital:
Limited partners ($561 per
unit; 100,000 units
authorized, 11,931 units issued
and outstanding) 4,849,775 4,985,173
General partners 4,034 5,403
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Total partners' capital 4,853,809 4,990,576
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$5,090,930 $5,238,873
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(See accompanying notes to financial statements)
STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
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Investment Activity
Joint venture earnings $71,029 $132,624 $ 81,038 $ 256,764
Interest on cash equivalents
and short-term investments 19,944 39,748 32,641 53,797
Gain on sale of property - - 973,919 973,919
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90,973 172,372 1,087,598 1,284,480
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Portfolio Expenses
General and administrative 16,645 35,464 26,093 48,375
Management fee 11,704 23,409 16,997 35,650
Amortization 1,183 2,366 1,648 3,509
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29,532 61,239 44,738 87,534
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Net Income $61,441 $111,133 $1,042,860 $1,196,946
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Net income per limited partnership unit $ 5.10 $ 9.22 $ 86.53 $ 99.32
======= ======== ========== ==========
Cash distributions per limited
partnership unit $ 9.82 $ 20.57 $ 249.65 $ 265.30
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Number of limited partnership units
outstanding during the period 11,931 11,931 11,931 11,931
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(See accompanying notes to financial statements)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
------------------ ------------------ ------------------ ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- -------- -------- --------
Balance at
beginning of
period $ 4,604 $4,906,110 $ 5,403 $4,985,173 $(10,796) $8,177,674 $(10,451) $8,211,849
Cash
distributions (1,184) (117,162) (2,480) (245,420) (1,886) (2,978,574) (3,772) (3,165,294)
Net income 614 60,827 1,111 110,022 10,428 1,032,432 11,969 1,184,977
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Balance at
end of period $ 4,034 $4,849,775 $ 4,034 $4,849,775 $(2,254) $6,231,532 $(2,254) $6,231,532
======== ========== ======== ========== ======== ========== ======== ============
(See accompanying notes to financial statements)
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1998 1997
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Net cash provided by operating activities $ 227,300 $ 332,067
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Cash flows from investing activities:
Net proceeds from sale of property - 2,736,433
Increase in deferred disposition fees - 89,700
Decrease in short-term
investments, net 461,102 215,507
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Net cash provided by investing
activities 461,102 3,041,640
Cash flows from financing activity:
Distributions to partners (247,900) (3,169,066)
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Net increase in cash
and cash equivalents 440,502 204,641
Cash and cash equivalents:
Beginning of period 1,081,267 941,045
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End of period $1,521,769 $ 1,145,686
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(See accompanying notes to financial statements)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the Partnership's financial
position as of June 30, 1998 and December 31, 1997 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 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
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Copley Realty Income Partners 4; A Limited Partnership (the "Partnership") is
a Massachusetts limited partnership organized for the purpose of investing
primarily in newly-constructed and existing income-producing real properties.
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
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On May 1, 1997, the Hohokam property within the Newhew joint venture was sold
for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to
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.
The following summarized financial information is presented in the aggregate
for the joint ventures (one at June 30, 1998 and December 31, 1997 and two at
June 30, 1997):
Assets and Liabilities
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June 30, 1998 December 31, 1997
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Assets
Real property, at cost less
accumulated depreciation of
$2,343,697 and $2,132,388 $7,354,687 $7,565,996
Other 146,202 165,813
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7,500,889 7,731,809
Liabilities 62,347 81,052
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Net assets $7,438,542 $7,650,757
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Results of Operations
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Six Months Ended June 30,
1998 1997
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Revenue
Rental income $630,823 $978,592
Other income - 3,056
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630,823 981,648
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Expenses
Operating expenses 83,669 223,700
Depreciation and amortization 230,393 297,075
Interest expense - 49,981
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314,062 570,756
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Net income $316,761 $410,892
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Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures. Interest expense
in 1997 relates to a note payable to an insurance company, secured by the
Fairmont property. The note was repaid in full on October 24, 1997, concurrent
with the sale of the property.
NOTE 3 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended June 30,
1998 were made on July 30, 1998 in the aggregate amount of $118,346 ($9.82 per
limited partnership unit).
Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Liquidity and Capital Resources
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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 (Hohokam and Fairmont) 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 $2,791,854 ($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
$2,004,408 ($168 per limited partnership unit), which reduced the adjusted
capital contribution to $561 per unit.
At June 30, 1998, the Partnership had $1,521,769 in cash and cash
equivalents, of which $118,346 was used for cash distributions to the partners
on July 30, 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 two
quarters of 1997 were made at the annualized rate of 6.5%; the first quarter
1997 distribution was based on the adjusted capital contribution of $963 per
unit; the second quarter 1997 distribution was based on the weighted average
adjusted capital contribution of $877.67. Cash distributions from operations
related to the first two quarters 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 June 30, 1998 is at depreciated cost. However, it is
the Partnership's policy that 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 an investment is further reduced by the estimated cost of sale for
properties held for sale. Carrying value may be greater or less than current
appraised value. At June 30, 1998, the appraised value of the Partnership's
remaining real estate investment exceeded its carrying value by approximately
$1,500,000. 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
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Operating Factors
Shasta Way is 100% occupied by a single tenant under a lease which expires
December 31, 1998. In February 1998, the tenant exercised its renewal option
for a 5-year term which commences on January 1, 1999.
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 $110,864 and $132,624 for the
six months ended June 30, 1997 and 1998, respectively. The improvement is the
result of a rental increase as of April 1, 1998, in addition to a favorable 1997
expense reimbursement adjustment this quarter. Accounting fees also decreased
between the two periods.
Cash flow from operations decreased by approximately $105,000 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
approximately $14,000, or 26%, between the first six months of 1997 and 1998, as
a result of a decrease in average investment balances, as well as the temporary
investment of Hohokam sales proceeds during May 1997.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
decreased by approximately $13,000, or 27%, between the first six months of 1997
and 1998, primarily due to decreases in accounting and appraisal fees.
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. Management fees decreased between
the two comparable periods due to the decrease in distributable cash flow.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 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 June 30, 1998.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COPLEY REALTY INCOME PARTNERS 4; A LIMITED
PARTNERSHIP
(Registrant)
August 12, 1998
/s/ Wesley M. Gardiner, Jr.
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Wesley M. Gardiner, Jr.
President, Chief Executive Officer and Director
of Managing General Partner,
Fourth Income Corp.
August 12, 1998
/s/ Karin J. Lagerlund
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Karin J. Lagerlund
Treasurer and Principal Financial and Accounting
Officer of Managing General Partner, Fourth
Income Corp.