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, 1999 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, 1999
PART I
FINANCIAL INFORMATION
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
BALANCE SHEETS
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
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Assets
Real estate joint ventures $3,468,313 $3,478,418
Cash and cash equivalents 1,309,889 1,498,022
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$4,778,202 $4,976,440
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Liabilities and Partners' Capital
Accounts payable $ 27,571 $ 40,674
Accrued management fee 9,190 11,705
Deferred disposition fees 197,700 197,700
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Total liabilities 234,461 250,079
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Partners' capital:
Limited partners ($561 per
unit; 100,000 units
authorized, 11,931 units issued
and outstanding) 4,542,805 4,723,600
General partners 936 2,761
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Total partners' capital 4,543,741 4,726,361
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$4,778,202 $4,976,440
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(See accompanying notes to unaudited financial statements)
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999 June 30, 1998 June 30, 1998
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Investment Activity
Joint venture earnings $ 92,758 $ 162,915 $ 71,029 $ 132,624
Interest on cash equivalents
and short-term investments 15,445 31,970 19,944 39,748
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108,203 194,885 90,973 172,372
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Portfolio Expenses
General and administrative 18,836 34,251 16,645 35,464
Management fee 9,190 28,392 11,704 23,409
Amortization 1,183 2,366 1,183 2,366
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29,209 65,009 29,532 61,239
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Net Income $ 78,994 $ 129,876 $ 61,441 $ 111,133
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Net income per limited partnership unit $ 6.55 $ 10.78 $ 5.10 $ 9.22
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Cash distributions per limited
partnership unit $ 16.11 $ 25.93 $ 9.82 $ 20.57
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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 unaudited financial statements)
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999 June 30, 1998 June 30, 1998
-------------------- -------------------- -------------------- ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
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Balance at
beginning of
period $ 2,087 $ 4,656,810 $ 2,761 $ 4,723,600 $ 4,604 $ 4,906,110 $ 5,403 $ 4,985,173
Cash
distributions (1,941) (192,209) (3,124) (309,372) (1,184) (117,162) (2,480) (245,420)
Net income 790 78,204 1,299 128,577 614 60,827 1,111 110,022
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Balance at
end of period $ 936 $ 4,542,805 $ 936 $ 4,542,805 $ 4,034 $ 4,849,775 $ 4,034 $ 4,849,775
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(See accompanying notes to unaudited financial statements)
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
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1999 1998
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Net cash provided by operating activities $ 124,363 $ 227,300
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Cash flows from investing activities:
Decrease in short-term
investments, net - 461,102
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Cash flows from financing activity:
Distributions to partners (312,496) (247,900)
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Net increase (decrease) in cash
and cash equivalents (188,133) 440,502
Cash and cash equivalents:
Beginning of period 1,498,022 1,081,267
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End of period $1,309,889 $1,521,769
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(See accompanying notes to unaudited financial statements)
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
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, 1999 and December 31, 1998 and the results of
its operations, its cash flows and partners' capital for the three and six month
periods ended June 30, 1999 and 1998. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1998
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 nine years of acquisition, and then
liquidate. The Partnership has engaged AEW Real Estate Advisors, Inc. (the
"Advisor") to provide asset management advisory services.
NOTE 2 - REAL ESTATE JOINT VENTURES
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The following summarized financial information is presented for the
joint venture in which the Partnership has an interest:
Assets and Liabilities
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June 30, 1999 December 31, 1998
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Assets
Real property, at cost less
accumulated depreciation of
$1,167,642 and $1,084,004 $ 7,062,557 $ 7,146,195
Other 165,868 153,318
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7,228,425 7,299,513
Liabilities 60,899 70,400
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Net assets $ 7,167,526 $ 7,229,113
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COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
Results of Operations
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Six Months Ended June 30,
1999 1998
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Revenue
Rental income $ 722,483 $630,823
Other income 2,110 -
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724,593 630,823
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Expenses
Operating expenses 105,318 83,669
Depreciation and amortization 230,390 230,393
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335,708 314,062
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Net income $ 388,885 $316,761
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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. In mid July, 1999, a Purchase and Sale agreement was
executed by the joint venture to sell the Shasta Way investment. Although there
can be no assurance that this sale will occur, it is expected to be concluded
during the third quarter of 1999.
NOTE 3 - SUBSEQUENT EVENT
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Distributions of cash from operations relating to the quarter ended
June 30, 1999 were made on July 29, 1999 in the aggregate amount of $92,917
($7.71 per limited partnership unit).
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial Condition and Results of
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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.
On May 29, 1997, the Partnership made a capital distribution of $2,791,854
($234 per limited partnership unit) from the sale proceeds of Hohokam, 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) from the sale proceeds of Fairmont, which reduced the
adjusted capital contribution to $561 per unit.
At June 30, 1999, the Partnership had $1,309,889 in cash and cash
equivalents, of which $92,917 was used for cash distributions to the partners on
July 29, 1999; 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 remaining real estate investment and invested
cash and cash equivalents. Distributions of cash 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. Cash distributions from
operations related to the first two quarters of 1999 were made at the annualized
rate of 5.5% on the adjusted capital contribution of $561 per unit. The
decrease in the 1999 distribution rate is due to lower projected cash flow from
the Shasta Way investment as a result of an anticipated 1999 sale.
The carrying value of the remaining real estate investment in the
financial statements at June 30, 1999 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, 1999, the appraised value of the Partnership's
remaining real estate investment exceeded its carrying value by approximately
$1,900,000. 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 the Advisor 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.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
Year 2000 Readiness Disclosure
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The Year 2000 Issue is a result of computer programs being written using
two digits rather than four to define the applicable year. 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 Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services which are dependent on the
use of computers. The Partnership has obtained assurances from AEW Capital
Management that:
. AEW Capital Management has developed a Year 2000 Plan (the "Plan")
consisting of five phases: inventory, assessment, testing,
remediation/repair and certification .
. As of September 30, 1998, AEW Capital Management had completed the
inventory and assessment phases of this Plan and had commenced the
testing and remediation/repair of internal systems.
. AEW Capital Management concluded the internal testing,
remediation/repair and certifications of its Plan in June 1999.
The Partnership also relies on joint venture partners and/or property
managers to supply financial and other data with respect to its real properties.
The Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements. To date, the
Partnership is not aware of any problems that would materially impact its
results of operations, liquidity or capital resources. However, the Partnership
has not yet obtained written assurances that these providers would be Year 2000
compliant.
The Partnership is developing a contingency plan in the event of a
particular provider or system not being Year 2000 compliant. The inability of
one of these providers to complete its Year 2000 resolution process could
materially impact the Partnership. In addition, the Partnership is also subject
to external forces that might generally affect industry and commerce, such as
utility or transportation company Year 2000 compliance failures and related
service interruptions. Given the nature of its operations, the Partnership will
not incur any costs associated with Year 2000 compliance. All such costs are
borne by AEW Capital Management and the property managers.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
Results of Operations
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Operating Factors
Shasta Way is 100% occupied by a single tenant under a lease that expires
December 31, 2003.
Investment Results
Joint venture earnings from Shasta Way were $92,758 and $162,915 for
the three and six-month periods ended June 30, 1999, respectively, compared to
$71,029 and $132,624 for the comparable periods ended June 30, 1998. The
increases of $21,729 and $30,291 are the result of a rental increase effective
June 30, 1998.
Cash flow from operations through June 30, 1999 decreased by approximately
$103,000 compared with the same period in 1998. The decrease is primarily a
result of a lease commission paid at Shasta Way in January of 1999.
Interest on cash and cash equivalents decreased by approximately
$4,500 and $7,700 between the three and six month periods ended June 30, 1999,
compared with the same period in 1998. The decrease is primarily due to lower
investment balances and lower yields in 1999.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
did not change significantly during the comparable three and six month periods
ended June 30, 1999, and 1998, respectively.
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 by $2,514
and increased by $4,983, respectively, between the comparable three and six
month periods ending June 30, 1999 and 1998. The decrease is a result of the
lower cash distribution rate. The increase is due to a special distribution
from the operating reserve made in April 1999.
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1999
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, 1999.
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 6, 1999
/s/ Alison Husid Cutler
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Alison Husid Cutler
President, Chief Executive Officer and
Director of Managing General Partner,
Fourth Income Corp.
August 6, 1999
/s/ Karin J. Lagerlund
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Karin J. Lagerlund
Treasurer and Principle Financial and
Accounting Officer of Managing General
Partner, Fourth Income Corp.