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 June 30, 1998 Commission File Number 0-17807 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2988542 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 225 Franklin Street, 25th Fl. Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 261-9000 ---------------------------------------------------------------------------- Former name, former address and former fiscal year if changed since last report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 PART I FINANCIAL INFORMATION BALANCE SHEETS (Unaudited) June 30, 1998 December 31, 1997 ------------- ----------------- ASSETS Real estate investments: joint ventures $ 1,685,836 $14,966,370 property, net 4,166,835 4,201,553 ----------- ----------- 5,852,671 19,167,923 Joint ventures held for disposition 13,040,440 - Cash and cash equivalents 3,575,853 2,105,728 Short-term investments - 1,432,651 ----------- ----------- $22,468,964 $22,706,302 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 66,940 $ 92,737 Accrued management fee 50,299 53,028 Deferred disposition fees 717,677 717,677 ----------- ----------- Total liabilities 834,916 863,442 ----------- ----------- Partners' capital (deficit): Limited partners ($660.29 per unit; 160,000 units authorized, 48,788 units issued and outstanding) 21,684,637 21,891,360 General partners (50,589) (48,500) ----------- ----------- Total partners' capital 21,634,048 21,842,860 ----------- ----------- $22,468,964 $22,706,302 =========== =========== (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 ------------- ---------------- ------------- ---------------- INVESTMENT ACTIVITY Property rentals $173,530 $ 352,050 $195,744 $ 415,032 Property operating expenses (62,206) (108,140) (94,679) (197,502) Depreciation and amortization (36,327) (73,237) (75,763) (151,494) -------- ---------- -------- --------- 74,997 170,673 25,302 66,036 Joint venture earnings 373,036 779,993 303,545 657,539 -------- ---------- -------- --------- Total real estate activity 448,033 950,666 328,847 723,575 -------- ---------- -------- --------- Interest on cash equivalents and short-term investments 45,465 91,597 68,581 134,633 -------- ---------- -------- --------- Total investment activity 493,498 1,042,263 397,428 858,208 -------- ---------- -------- --------- PORTFOLIO EXPENSES Management fee 50,299 100,598 51,517 103,034 General and administrative 48,304 105,724 57,395 106,278 -------- ---------- -------- --------- 98,603 206,322 108,912 209,312 -------- ---------- -------- --------- Net income $394,895 $ 835,941 $288,516 $ 648,896 ======== ========== ======== ========= Net income per limited partnership unit $ 8.01 $ 16.96 $ 5.86 $ 13.17 ======== ========== ======== ========= Cash distributions per limited partnership unit $ 10.32 $ 21.20 $ 10.57 $ 21.14 ======== ========== ======== ========= Number of limited partnership units outstanding during the period 48,788 48,788 48,788 48,788 ======== ========== ======== ========= (See accompanying notes to financial statements) STATEMENTS 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 $(49,452) $21,797,183 $(48,500) $21,891,360 $(37,769) $28,256,390 $(36,164) $28,415,303 Cash distributions (5,086) (503,492) (10,448) (1,034,305) (5,209) (515,689) (10,418) (1,031,378) Net income 3,949 390,946 8,359 827,582 2,885 285,631 6,489 642,407 -------- ----------- -------- ----------- ------------- ----------- -------- ----------- Balance at end of period $(50,589) $21,684,637 $(50,589) $21,684,637 $(40,093) $28,026,332 $(40,093) $28,026,332 ======== =========== ======== =========== ============= =========== ======== =========== (See accompanying notes to financial statements) SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1998 1997 ------------- ------------ Net cash provided by operating activities $1,109,259 $ 976,073 ---------- ---------- Cash flows from investing activities: Decrease in short-term investments, net 1,405,619 917,029 ---------- ---------- Cash flows from financing activity: Distributions to partners (1,044,753) (1,041,796) ---------- ----------- Net increase in cash and cash equivalents 1,470,125 851,306 Cash and cash equivalents: Beginning of period 2,105,728 3,076,103 ---------- ----------- End of period $3,575,853 $ 3,927,409 ========== ============ (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 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 - ---------------------------------- Copley Pension Properties VI; A Real Estate Limited Partnership (the "Partnership") is a Massachusetts limited partnership organized for the purpose of investing primarily in newly constructed and existing income producing real properties. It primarily serves as an investment for qualified pension and profit sharing plans and other organizations intended to be exempt from federal income tax. The Partnership commenced operations in July 1988, and acquired the four real estate investments it currently owns prior to the end of 1991. It intends to dispose of its investments within eight to twelve years of their acquisition, and then liquidate; however, the managing general partner could extend the investment period if it is considered to be in the best interest of the limited partners. The Partnership has engaged AEW Real Estate Advisors, Inc. (the "Advisor") to provide asset management services. Note 2 - Investments in Joint Ventures - -------------------------------------- Summarized Financial Information The White Phonic and Waterford Apartments joint ventures were sold on July 14, 1998 and August 7, 1998, respectively (see Note 4). Therefore, these joint ventures have been reclassed as "Joint ventures held for disposition". The following summarized financial information is presented in the aggregate for the Partnership's joint ventures: Assets and Liabilities ---------------------- June 30, 1998 December 31, 1997 ------------- ----------------- Assets Real property, at cost less accumulated depreciation of $798,029 and $6,910,873 respectively $ 2,455,354 $16,461,895 Joint ventures held for disposition 14,133,866 -- Other 46,318 1,029,387 ----------- ----------- 16,635,538 17,491,282 Liabilities 92,368 379,809 ----------- ----------- Net assets $16,543,170 $17,111,473 =========== =========== Results of Operations --------------------- Six Months Ended June 30, 1998 1997 ------------ ----------- Revenue: Rental income $2,003,484 $1,908,905 Other income 5,078 2,701 ---------- ---------- 2,008,562 1,911,606 ---------- ---------- Expenses: Operating expenses 649,508 682,834 Depreciation and amortization 350,328 382,923 ---------- ---------- 999,836 1,065,757 ---------- ---------- Net income $1,008,726 $ 845,849 ========== ========== Liabilities and expenses exclude amounts owed and attributable to the Partnership and (with respect to two investments) its affiliates on behalf of their various financing arrangements with the joint ventures. Note 3 - Property - ----------------- The following is a summary of the Partnership's remaining wholly-owned property: June 30, 1998 December 31, 1997 -------------- ------------------ Land $ 2,770,056 $ 2,770,056 Buildings, improvements and other capitalized costs 4,894,641 4,894,641 Investment valuation allowance (1,500,000) (1,500,000) Accumulated depreciation and amortization (1,985,023) (1,918,953) Net operating liabilities (12,840) (44,191) ----------- ----------- $ 4,166,834 $ 4,201,553 =========== =========== Note 4 - Subsequent Events - ------------------------- Distributions of cash from operations relating to the quarter ended June 30, 1998 were made on July 30, 1998 in the aggregate amount of $508,578 ($10.32 per limited partnership unit). On July 14, 1998, the White Phonic property located in Petaluma, California, was sold for a gross sale price of $5,380,000. The Partnership received net proceeds of approximately $4,280,000 representing a return of capital and accrued interest plus its participation in net sales proceeds of approximately $966,000. In addition, on July 30, 1998, the Partnership made a capital distribution of $4,279,683 ($87.72 per limited partnership unit) from the sale proceeds of White Phonic discussed above. On August 7, 1998, Waterford Apartments, located in Frederick, Maryland, was sold for a gross sale price of $21,800,000. The Partnership received its 75% share of the proceeds in the amount of approximately $15,252,000. Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------- Results of Operations - --------------------- Liquidity and Capital Resources The Partnership completed its offering of units of limited partnership interest on December 31, 1988. A total of 48,788 units were sold. The Partnership received proceeds of $43,472,858, net of selling commissions and other offering costs, which have been used for investment in real estate and for the payment of related acquisition costs, or retained as working capital reserves. The Partnership made seven real estate investments; one investment was sold in each of 1990, 1994 and 1997. Through June 30, 1998, capital of $16,573,771 ($339.71 per limited partnership unit) has been returned to the limited partners; $15,605,329 as a result of sales and $968,442 in 1997, as a result of a discretionary reduction of original working capital previously held in reserves. At June 30, 1998, the Partnership had $3,575,853 in cash and cash equivalents, of which $508,578 was used for cash distributions to partners on July 30, 1998; the remainder is being retained as working capital reserves. The source of future liquidity and cash distributions to partners will primarily be cash generated by the Partnership's invested cash and cash equivalents and real estate investments, and proceeds from the sale of such investments. Based on an adjusted capital contribution of $660.29 per limited partnership unit, distributions of cash from operations relating to the first and second quarters of 1998 were made at the annualized rate of 6.25% while distributions of cash from operations relating to the first and second quarters of 1997 were made at the annualized rate of 5.5% on an adjusted capital contribution of $768.98. The carrying value of real estate investments in the financial statements is at depreciated cost, or if the investment's carrying value is determined not to be recoverable through expected undiscounted future cash flows, the carrying value is reduced to estimated fair market value. The fair market value of such investments is further reduced by the estimated cost of sale for properties held for sale. Carrying value may be greater or less than current appraised value. At June 30, 1998, the aggregate appraised value of the real estate investments exceeded their carrying value by approximately $9,756,000. The current appraised value of real estate investments has been estimated by the managing general partner and is generally based on a correlation of traditional appraisal approaches performed by the Advisor and independent appraisers. Because of the subjectivity inherent in the valuation process, the estimated current appraised value may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. Results of Operations Form of Real Estate Investments The Wilmington Industrial investment is a wholly-owned property. Effective July 1, 1994, the Stemmons Industrial joint venture was converted to a wholly- owned property and subsequently sold in September 1997. The other three real estate investments in the portfolio are structured as joint ventures. Operating Factors Three of the Partnership's four industrial properties (Prentiss Copystar, Wilmington and White Phonic) were 100% leased at June 30, 1998 and June 30, 1997. As discussed above, the Partnership sold its Stemmons Industrial investment on September 29, 1997, and recognized a gain of $248,172. Stemmons Industrial was vacant at the time of sale, as it had been since February 1996, with the expiration of a short-term lease for 82% of the space. Occupancy at Waterford Apartments, the Partnership's multi-family residential property, remained in the mid 90% range during the first six months of 1998, where it has been for the past several years. Investment Results Interest income on cash equivalents and short-term investments decreased approximately $43,000 or 32% between the first two quarters of 1997 and 1998 primarily due to lower investment balances. Exclusive of net losses from operations from Stemmons Industrial of approximately $97,000 in 1997, total real estate activity for the first six months of 1998 and 1997 was $950,666 and $820,936, respectively. This increase of approximately $130,000 or 16% is primarily due to improved operating results at Waterford Apartments of approximately $133,000 as a result of higher rental rates associated with improved market conditions and lower operating expenses for advertising and salaries. Operating results from the remainder of the Partnership's investments were relatively unchanged between the respective periods. Cash flow from operations increased by approximately $133,000 between the first six months of 1997 and 1998. This increase is primarily attributable to the increased operating results discussed above. Portfolio Expenses The Partnership management fee is 9% of distributable cash flow from operations after any increase or decrease in working capital reserves as determined by the managing general partner. General and administrative expenses consist primarily of real estate appraisal, printing, legal, accounting and investor servicing fees. The Partnership management fee decreased between the first two quarters of 1997 and 1998 due to a decrease in distributable cash flow. General and administrative expenses for the first six months of 1998 remained relatively unchanged compared to the same period in 1997. COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 PART II OTHER INFORMATION 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 ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) August 14, 1998 /s/ Wesley M. Gardiner, Jr. ------------------------------- Wesley M. Gardiner, Jr. President, Chief Executive Officer And Director of Managing General Partner, Sixth Copley Corp. August 14, 1998 /s/ Karin J. Lagerlund -------------------------------- Karin J. Lagerlund Principal Financial and Accounting Officer of Managing General Partner, Sixth Copley Corp.