<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K/A-1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File No. 1-8927
_________________
COPLEY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2866555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Boylston Street, 13th FL.
Boston, Massachusetts 02116 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
------------------- -----------------------------------------
Common Stock, par value $1.00 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
year ended December 31, 1995 as set forth in the pages attached hereto:
Item 6. Selected Financial Data
Item 8. Financial Statements and Supplementary Data
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Results $4,797,501 $804,180 $615,552 ($719,213) $882,425
Portfolio Expenses ($2,408,201) ($1,341,125) ($926,534) ($803,525) ($878,728)
------------ ------------ ---------- ----------- ----------
Net Income (Loss) $2,389,300 ($536,945) ($310,982) ($1,522,738) $3,697
<CAPTION>
RESULTS PER WEIGHTED
AVERAGE SHARE
<S> <C> <C> <C> <C> <C>
Net Income (Loss) $.67 ($0.15) ($0.09) ($0.42) $0.00
Dividends $1.06 $0.94 $0.80 $0.80 $1.10
BALANCE SHEET
Total Assets $81,517,257 $99,384,812 $97,412,024 $ 53,470,974 $55,780,484
Total Liabilities $42,451,311 $58,908,834 $53,029,872 $ 5,910,398 $ 3,833,188
Net Book Value
Per Share $10.90 $11.29 $12.38 $13.27 $14.44
CASH FLOWS PROVIDED BY (USED IN):
Operating activities $3,450,436 $5,295,756 $4,596,582 $3,900,722 $4,124,579
Investing activities $18,102,152 $1,231,912 ($6,072,525) $4,228,722 ($1,369,283)
Financing activities ($17,327,842) ($6,937,904) ($2,867,442) ($2,863,982) ($4,974,234)
</TABLE>
-2-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
-3-
<PAGE>
COPLEY PROPERTIES, INC.
-----------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
<TABLE>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . .5
Financial Statements:
Consolidated Balance Sheets - December 31, 1995 and 1994 . . . . . . 6
Consolidated Statements of Operations and Cumulative Deficit -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . .7
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . .8
Notes to Consolidated Financial Statements . . . . . . . . . . . . ..9
Financial Statements Schedules:
Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1995 . . . . . . . . . . . . . . . . . . . . . ..25
Schedule IV - Mortgage Loans on Real Estate at
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . ..27
</TABLE>
All other schedules have been omitted because they are inapplicable, not
required or the information is included in the financial statements or notes
thereto.
-4-
<PAGE>
Report of Independent Public Accountants
To the Board of Directors
Copley Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Copley
Properties, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related statements of operations and cumulative deficit
and cash flows for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Copley Properties,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedules III and IV are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic consolidated financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
March 15, 1996
-5-
<PAGE>
COPLEY PROPERTIES, INC.
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1995 1994
------------- -------------
ASSETS
<S> <C> <C>
Real estate investments (Notes 3 and 4):
Property, net $ 72,396,765 $ 88,640,489
Joint ventures - 1,037,178
Investment in tenancies-in-common 2,310,781 -
Loans to joint ventures - 4,859,903
Ground lease - 1,187,000
Notes receivable 895,963 1,000,966
Other - 681,356
------------- -------------
Total real estate investments 75,603,509 97,406,892
Cash and cash equivalents 5,716,300 1,491,554
Deferred financing costs (Note 10) - 486,366
Other assets 197,448 -
------------- -------------
Total assets $ 81,517,257 $ 99,384,812
============= =============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Losses of joint ventures
in excess of investment $ - $ 3,261,463
Accounts payable and other liabilities 544,045 436,478
Accrued management advisory fees (Notes 9 and 14) 2,573,917 2,491,445
Line of credit borrowings - 3,500,000
Mortgage notes payable (Notes 2 and 5) 39,333,349 49,219,448
------------- -------------
Total liabilities 42,451,311 58,908,834
------------- -------------
Commitments (Note 3)
SHAREHOLDERS' EQUITY (Note 8):
Common stock, $1.00 par value;
authorized 20,000,000 shares;
issued 4,007,500 shares 4,007,500 4,007,500
Additional paid-in capital 69,625,444 69,625,444
Treasury stock; 423,150 shares
of common stock, at cost (4,895,726) (4,895,726)
Cumulative deficit (29,671,273) (28,261,241)
Class A common stock 1 1
------------- -------------
Total shareholders' equity 39,065,946 40,475,978
------------- -------------
Total liabilities and
shareholders' equity $ 81,517,257 $ 99,384,812
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE>
COPLEY PROPERTIES, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Operations and Cumulative Deficit
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY (Notes 2, 3 and 6):
Property operations, net $ 1,445,701 $ 1,452,003 $ 1,128,334
Share of real estate investment earnings
Operations 748,067 415,742 191,333
Lease termination charges (Note 6) - (1,770,471) -
Investment valuation allowance - - (900,000)
------------ ------------ ----------
Total real estate operations 2,193,768 97,274 419,667
Gain on sales of Properties 2,564,478 626,931 -
------------ ------------ ------------
Total real estate activity 4,758,246 724,205 419,667
Interest on short-term investments
and cash equivalents 39,255 79,975 195,885
------------ ------------ ------------
Total investment activity 4,797,501 804,180 615,552
------------ ------------ ------------
PORTFOLIO EXPENSES:
Management advisory fee 451,863 714,761 601,535
General and administrative 371,941 273,974 227,758
Professional fees (Note 13) 898,608 142,149 97,241
Interest expense 184,562 210,241 -
Write-off of deferred financing costs (Note 10) 501,227 - -
------------ ------------ ------------
2,408,201 1,341,125 926,534
------------ ------------ ------------
NET INCOME (LOSS) 2,389,300 (536,945) (310,982)
Common stock dividends (3,799,332) (3,369,229) (2,867,442)
CUMULATIVE DEFICIT:
Beginning of year (28,261,241) (24,355,067) (21,176,643)
------------ ------------ ------------
End of year $(29,671,273) $(28,261,241) $(24,355,067)
============ ============ ============
PER SHARE DATA:
Net Income (Loss) $ .67 $ (.15) $ (.09)
============ ============ ============
Dividends $ 1.06 $ .94 $ .80
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-7-
<PAGE>
COPLEY PROPERTIES, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,389,300 $ (536,945) $ (310,982)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Joint venture and tenancy-in-common operations (673,799) (352,606) 16,832
Lease termination charges - 1,770,471 -
Cash distributions from joint ventures
and tenancies-in-common 807,255 1,632,460 3,136,357
Property depreciation and amortization 3,735,914 3,999,341 810,305
Write-off of deferred financing costs 501,227 - -
Gain on sales of Property (2,564,478) (626,931) -
Investment valuation allowance - - 900,000
Increase in investment income receivable - (30,365) (211,559)
Increase in deferred leasing commissions (404,330) (519,173) (33,153)
(Increase) decrease in property working capital (374,311) (358,974) 133,263
Increase in accounts payable and
accrued management advisory fees 109,795 318,478 228,202
Other, net (76,137) (72,683) -
------------ ----------- -----------
Net cash provided by operating
activities 3,450,436 5,295,756 4,596,582
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in loans to joint ventures (6,436) (191,037) (42,290)
Reduction of loans to joint ventures - - 551,895
Investment in joint ventures (31,346) (143,494) (3,336,120)
Return of capital from joint ventures - - 25,119
Investment in Property (4,553,172) (3,928,552) (2,291,721)
Proceeds from sale of Property 22,864,250 1,082,925 -
Decrease (increase) in short-term investments, net - 1,967,451 (979,408)
Increase in other assets (280,570) - -
Decrease in notes receivable 109,426 2,444,619 -
------------ ----------- -----------
Net cash provided by (used in) investing
activities 18,102,152 1,231,912 (6,072,525)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in line of credit borrowings, net (3,500,000) 3,500,000 -
Proceeds from third-party mortgage note 3,250,000 - -
Principal payments on mortgage notes (13,136,099) (6,801,089) -
Dividends paid (3,799,332) (3,369,229) (2,867,442)
Financing costs (142,411) (267,586) -
------------ ----------- -----------
Net cash used in financing activities (17,327,842) (6,937,904) (2,867,442)
------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents 4,224,746 (410,236) (4,343,385)
CASH AND CASH EQUIVALENTS:
Beginning of year 1,491,554 1,901,790 6,245,175
------------ ----------- -----------
End of year $ 5,716,300 $ 1,491,554 $ 1,901,790
============ =========== ===========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 4,827,630 $ 4,784,473 $ 358,177
============ =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES (NOTES 3 AND 12)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-8-
<PAGE>
COPLEY PROPERTIES, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1 ORGANIZATION AND BUSINESS
Copley Properties, Inc. (the Company), a Delaware corporation, was
incorporated in May 1985 and operates as a qualified real estate investment
trust under applicable provisions of the Internal Revenue Code of 1986, as
amended. The Company acquires, develops, operates and owns industrial real
estate. The Company currently owns and operates, either directly or through
tenancy-in-common arrangements, 15 properties totaling over 2.5 million square
feet of net rentable area. Copley Real Estate Advisors, Inc. (the Advisor)
provides investment management and administrative services to the Company. The
Advisor is an indirect wholly owned subsidiary of New England Investment
Companies, L.P. (NEIC), a publicly traded limited partnership. New England
Mutual Life Insurance Company is the principal unitholder of NEIC.
As described in Note 14, in February 1996, the Company entered into an
Agreement and Plan of Merger, under which the Company will be merged into
EastGroup Properties.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying consolidated financial statements include the accounts of
the Company and its consolidated joint ventures as of and subsequent to the date
on which the Company acquired a controlling ownership interest therein. The
Company has several tenancies-in-common, and previously had several other joint
ventures, which are presented in these financial statements using the equity
method, since control of the business is shared with the respective co-tenant.
All interentity balances and transactions have been eliminated.
Under circumstances arising from the inability of certain of its venture
partners to perform under joint venture agreements, the Company assumed control
over the respective businesses. Upon restructuring, these investments have been
classified as Properties in the consolidated balance sheets and any third-party
mortgage financing is separately presented, and operating revenues and expenses
are separately classified in property operations. Prior to restructuring, the
real estate assets and third-party mortgage loans of joint ventures are
considered in the investment balances and operating results are reported as
share of investment earnings. The restructuring transactions do not affect the
Company's net income (loss) or shareholders' equity.
-9-
<PAGE>
Property
--------
Property includes land and buildings wholly owned by the Company or owned
by consolidated joint ventures. These investments are referred to herein as
"Properties" and are stated at cost less accumulated depreciation. The Company's
cost of a Property previously owned by a joint venture equals the Company's
carrying value of the prior investment on the conversion date. It is the
Company's policy to estimate the remaining useful life of real estate assets at
the conversion date. This balance sheet caption also includes deferred leasing
costs, incidental working capital items related to Properties, and the minority
interest related to a consolidated joint venture.
Tenancies-in-Common, Joint Ventures and Secured Loans
-----------------------------------------------------
The Company accounts for its investments in unconsolidated tenancies-in-
common using the equity method, under which the cost of the investment is
adjusted by the Company's share of the respective tenancy-in-common's results of
operations and reduced by certain cash distributions received.
The Company has had investments in unconsolidated joint ventures which were
also accounted for using the equity method as described above. In addition, the
Company made loans to joint ventures in which the Company had an ownership
interest.
Share of real estate investment earnings (losses) in the accompanying
consolidated statements of operations includes tenancy-in-common and joint
venture earnings (losses) allocated to the Company. Allocations of tenancy-in-
common earnings (losses) are made in accordance with the ownership interests of
the respective co-tenants. Allocations of joint venture earnings (losses) were
made to the Company's joint venture partners in accordance with the terms of the
respective joint venture agreements as long as they had economic equity in the
project. A joint venture partner is determined to have economic equity if the
appraised value of the property exceeds the Company's total cash investment plus
accrued preferential returns and interest thereon, or if the venture partner is
entitled to current operating cash distributions.
Depreciation and Capitalization
-------------------------------
Maintenance and repair costs are charged to operations 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. Leasing and financing costs are also capitalized
and amortized over the related agreement terms.
-10-
<PAGE>
Rental Revenues
---------------
Rental revenues from certain operating leases with fixed rent increases or
rent credits are recognized on a straight-line basis over the terms of the
leases. The difference between straight-line rental revenues and cash rents
received in accordance with the terms of the leases is recorded as accounts
receivable.
Realizability of Real Estate Investments
----------------------------------------
The carrying value of the Company's real estate investments is reduced to
net realizable value, if lower. Since the Company's intention is to hold
properties for long-term investment, net realizable value is measured by the
recoverability of the investment carrying value through expected undiscounted
future cash flows, net of the cost of third-party financing associated with the
investment. As of December 31, 1995 and 1994, the estimated net realizable value
of each real estate investment either exceeded or approximated its carrying
value.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long
Lived Assets and for Long Lived Assets to Be Disposed Of" (SFAS 121), which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. As required, the Company will adopt SFAS
121 in the first quarter of 1996. Based upon current circumstances, management
believes adoption will not have any effect on the financial position of the
Company.
Cash Equivalents and Short-term Investments
-------------------------------------------
Cash equivalents and short-term investments are stated at cost, plus
accrued interest, which approximates market. Such investments consist primarily
of certificates of deposit and commercial paper. The Company considers all
highly liquid debt instruments purchased with a maturity of 90 days or less to
be cash equivalents; otherwise, they are classified as short-term investments.
Financial Instruments
---------------------
Mortgage notes payable and notes receivable are considered the Company's
most significant financial instruments at December 31, 1995. Based on the
interest rates on these notes, some of which are variable and several of which
have recently been negotiated, the fair value of these instruments approximates
their carrying values.
Per Share Computations
----------------------
Net income (loss) per share is computed by dividing net income (loss),
after deducting any Class A dividends, by the weighted average number of shares
outstanding during each year (3,584,350 in 1995, 1994 and 1993).
-11-
<PAGE>
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
-----------------
Certain reclassifications have been made to prior year amounts to conform
with the 1995 presentation. There is no effect on net income (loss) or cash flow
from operations.
3 REAL ESTATE INVESTMENTS
The Company's real estate investments are either owned in their entirety or
jointly through tenancies-in-common or joint ventures. Wholly owned property
operations are under the oversight of local management companies. For jointly
owned property, the Company's co-tenants or venture partners are responsible for
day-to-day operating activities under separate property management agreements,
and they are entitled to fees for such services. The joint venture agreements
provide for the funding of cash flow deficits by the venture partners in
proportion to ownership interests, and for the dilution of ownership interest in
cases where a partner does not so contribute. Under the tenancy-in-common
agreements, each co-tenant is responsible for funding its proportionate share of
cash flow deficits.
The Company's cash investments in joint ventures are in two forms: a
capital contribution generally subject to preferential cash distributions at a
specified rate and to priority distributions with respect to sale or refinancing
proceeds; and secured, interest-bearing loans to certain ventures. When
converted to tenancy-in-common ownership, these loans and the corresponding
accrued interest were classified as part of the Company's contribution to the
capital of the new entity.
Acquisitions
------------
In July 1995, the Company purchased the Kingsview Industrial Center, an
83,000 square foot industrial building located in Carson, California. The total
purchase price was approximately $3,000,000.
The Company purchased an industrial building located in Tempe, Arizona, on
March 31, 1994, which is referred to as Broadway Industrial Center. The total
purchase price was approximately $2,350,000.
-12-
<PAGE>
Sales
-----
In November 1995, the Company sold its interest in the Peachtree Corners
Distribution Center investment for a purchase price of approximately
$10,000,000. After payment of selling expenses and the outstanding mortgage
loan, the Company received net cash proceeds of approximately $7,626,000,
including deposits of $125,000 and $1,165,000 received in March 1995 and June
1995. The outstanding principal balance of $2,250,000 on a $3,250,000 mortgage
note payable which the buyer issued to the Company in February 1995 was retired
as part of the closing. The loan had been secured by a first mortgage on the
Peachtree Corners Distribution Center and bore interest at the rate of 10% per
annum. In July 1995, the Company made a payment to reduce the outstanding
principal by $1,000,000. The Company recognized a gain on the sale of
approximately $1,806,000.
In June 1995, the Company sold all of its interests and rights, including
its ground lease position, related to the Park North Business Center investment
for approximately $18,500,000. Proceeds from the sale of approximately
$12,900,000, net of the assumption of debt associated with the ground lease
property, were used to pay off the mortgage notes payable to Wells Fargo Realty
Advisors and the revenue bonds, which were owed by the ground lessee and
guaranteed by the Company (Note 5). After settlement of the debt and payment of
selling expenses, the Company received net cash proceeds of approximately
$6,825,000, including a deposit of $125,000 received in March 1995. The Company
recognized a gain of approximately $758,000.
During 1994, the Company sold two buildings at the Baygreen Industrial
Park. Proceeds from the sales totaled $1,782,925, including a $700,000 purchase
money mortgage note. Under the terms of this note, interest only is due monthly
at the rate of 9% per annum, and the note matures January 1, 1997. The note is
included in Notes Receivable in the accompanying consolidated balance sheet at
December 31, 1995 and 1994. The Company recognized a gain on these sales of
approximately $627,000 in 1994.
Restructurings
--------------
In September 1995, the Company paid approximately $100,000 to terminate an
incentive property management agreement related to Broadway Industrial Center
and paid approximately $200,000 in October 1995 to terminate an incentive
property management agreement related to Baygreen Industrial Park. The
incentive property management agreements represented a contingent equity
interest in the properties granted at the date of acquisition, payable upon
sale, refinancing, or termination. Therefore, the termination fees paid have
been recorded as acquisition costs and added to the Company's carrying value of
the investments.
-13-
<PAGE>
In August 1995, the Company entered into agreements with certain of its co-
venture partners to restructure the ownership of their joint venture investments
as tenancies-in-common between the Company and the respective co-ventures.
Certain amounts previously recorded by the Company as loans to the joint
ventures and corresponding accrued interest have been reclassified at book
value, as part of the Company's capital contribution to its ownership interest
in the tenancies-in-common. These transactions did not generate a gain or loss
or have an impact on shareholders' equity. Subsequent to the establishment of
the tenancies-in-common, the respective ownership interests of the Company and
its co-tenants-in-common are substantially as follows:
<TABLE>
<CAPTION>
Company Co-tenant
--------------------------------
<S> <C> <C>
Central Distribution Center 57.38% 42.62%
West Side Business Park 75.49% 24.51%
Metro Business Park 69.03% 30.97%
Dominguez Properties 55.00% 45.00%
Columbia Place 78.00% 22.00%
270 Technology Park 61.00% 39.00%
</TABLE>
As discussed further in Note 14, subsequent to December 31, 1995, the
Company entered into agreements with its various co-tenants to exchange
ownership interests such that the Company would have a 100% ownership interest
in certain of the properties owned by the tenancies-in-common and no ownership
interest in the others.
As of January 1, 1994, the ownership of three partnerships that were formed
to own a portion of the Park North Business Center investment (the "Parknorth
Partnerships") was restructured whereby the Company became the controlling
venturer and increased its legal ownership percentage. On March 30, 1995, 100%
ownership of the property owned by the Parknorth Partnerships was transferred to
the Company. In addition, on March 30, 1995, the Company restructured its long-
term ground lease arrangement within the Park North Business Center. As
discussed under "Sales," the entire Park North Business Center investment was
sold on June 30, 1995.
-14-
<PAGE>
The following is a summary of the real estate investment structures at
December 31, 1995:
<TABLE>
<CAPTION>
Date
Consolidated Date
Legal or Converted Converted
Ownership from Joint to Tenancy-
Investment Share Venture in-Common
- ---------------------------- ------ ----------- ---------
<S> <C> <C> <C>
Broadway Industrial Center 100.00% 03/31/94 --
Central Distribution Center 57.38% -- 8/16/95
West Side Business Park 75.49% -- 8/16/95
Metro Business Park 69.03% -- 8/16/95
Carson Industrial Center (1) 50.00% -- 3/29/90
Dominguez Properties 55.00% -- 8/16/95
Los Angeles Corporate Center 100.00% 12/18/90 --
University Business Center 80.00% 11/01/93 --
Huntwood Associates 100.00% 12/31/93 --
Wiegman Associates (2) 80.00% 12/31/93 --
Baygreen Industrial Park 100.00% 10/26/93 --
Columbia Place 78.00% -- 8/16/95
270 Technology Park 61.00% -- 8/16/95
Sample\I-95 Business Park 100.00% 12/31/93 --
Kingsview Industrial Center 100.00% 07/14/95 --
</TABLE>
(1) The Company has a note receivable of approximately $177,000 from its co-
tenant which bears interest at 10% and is secured by the co-tenant's
interest in the property.
(2) The Company has a preferred capital investment which bears interest at 12%.
4 REAL ESTATE ASSETS AND LIABILITIES
The following is a summary of the assets and liabilities underlying the
Company's real estate investments:
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ -------------
<S> <C> <C>
PROPERTY
Land $21,655,181 $24,018,575
Buildings and improvements 52,400,189 66,402,879
Accumulated depreciation (5,752,574) (5,079,353)
Deferred leasing costs and other assets, net 1,162,722 1,332,458
Minority interest 1,509,970 1,471,483
----------- -----------
Total real estate assets 70,975,488 88,146,042
Accounts receivable 2,048,357 2,254,603
Accounts payable and other liabilities (627,080) (1,760,156)
----------- -----------
$72,396,765 $88,640,489
=========== ===========
Mortgage notes payable to third-parties (Note 5) $39,333,349 $49,219,448
=========== ===========
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
INVESTMENTS IN TENANCIES-IN-COMMON AND JOINT VENTURES
<S> <C> <C>
Land $ 8,246,048 $ 8,246,048
Buildings and improvements 33,965,653 35,542,264
Accumulated depreciation (11,791,003) (12,370,021)
Cash 511,717 346,176
Other, net 2,921,034 3,521,924
------------ ------------
Total assets 33,853,449 35,286,391
------------ ------------
Mortgage notes payable to third-parties (Note 5) 31,601,919 32,127,307
Other 632,950 1,913,431
------------ ------------
Total liabilities 32,234,869 34,040,738
------------ ------------
Net assets $ 1,618,580 $ 1,245,653
============ ============
Company's share:
Loans to joint ventures $ - $ 4,859,903
Capital 2,310,781 (2,224,285)
------------ ------------
$ 2,310,781 $ 2,635,618
============ ============
</TABLE>
As of December 31, 1994 assets of joint ventures exclude capitalized
interest or preferred returns to the Company and liabilities of joint ventures
exclude amounts owed to the Company in connection with secured loans, accrued
interest thereon, or accrued preferred returns. As part of the conversion to
tenancies-in-common as discussed in Note 3, these items were converted at book
value to the Company's ownership interest.
-16-
<PAGE>
5 MORTGAGE NOTES PAYABLE
Mortgage notes payable on Properties are summarized below. They are
collateralized by real estate and, in certain cases, the assignment of rents.
The mortgage notes are generally non-recourse to the other assets of the
Company.
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ ------------
University Business Center
--------------------------
<S> <C> <C>
CIGNA; interest at 9.06%, payable monthly; principal
payments based on a 20-year amortization schedule;
remainder due April 1, 2000 $ 9,353,947 $ 13,000,000
CIGNA; interest at 9.37%, payable monthly; principal
due January 1, 1997 10,000,000 10,000,000
Huntwood Associates
-------------------
Wells Fargo Bank; interest is a fixed rate option with
interest based on LIBOR plus 3.25% and a variable rate
option with interest based on the prime rate plus 1% (the
effective interest rate was 9.5% at December 31, 1995);
principal due January 15, 1997 2,292,993 2,350,292
Massachusetts Mutual Life Insurance Company; interest
at 9.875%, payable monthly; principal due June 1, 1996 10,000,000 10,000,000
Wiegman Associates
------------------
Massachusetts Mutual Life Insurance Company; interest
at 9.875%, payable monthly; principal due June 1, 1996 6,700,000 6,700,000
Allstate Insurance Company; interest at 8.75%, payable
monthly; principal due October 1, 1997 986,409 1,011,311
Park North Business Center
--------------------------
Wells Fargo Realty Advisors; interest at .65% over the
prime rate or 1.75% over LIBOR, payable monthly. Principal balance
was paid at maturity on June 30, 1995 - 3,362,692
Wells Fargo Realty Advisors; interest at .65% over
the prime rate or 1.75% over LIBOR, payable monthly.
Principal balance was paid at maturity on June 30, 1995 - 2,795,153
----------- -----------
$39,333,349 $49,219,448
=========== ===========
</TABLE>
-17-
<PAGE>
Mortgage notes payable to third-parties, based on contractual terms in
existence as of December 31, 1995, mature as follows:
<TABLE>
<CAPTION>
Year ended
December 31, Properties(1) Tenancies-in-Common (2)
- ------------ ------------- -----------------------
<S> <C> <C>
1996 $16,974,870 $ 4,280,310
1997 13,403,318 10,997,500
1998 228,070 5,203,115
1999 249,613 1,854,579
2000 8,477,478 309,903
Thereafter -- 8,956,512
----------- -----------
$39,333,349 $31,601,919
=========== ===========
</TABLE>
(1) Includes 100% of the joint venture debt.
(2) Amounts represent 100% of the tenancies-in-common debt. The Company's share
of notes payable is consistent with its respective ownership interest (Note 3)
except at West Side Business Park where the Company's share of the obligation
under the notes payable is 57.38%.
Mortgage notes payable at December 31, 1994 do not include revenue bonds at
Park North Business Center owed by the ground lessee, repayment of which was
guaranteed by the Company. The ground lease arrangement resulted from a
transaction in which the Company purchased land in a portion of Park North
Business Center for lease back to the seller for a term of 60 years.
Contractual rent was $142,440 per annum. The Company's guarantee of the revenue
bonds was extinguished in connection with the sale of the property in June 1995.
The Company guaranteed 50% of the outstanding obligation of the revenue
bonds at 270 Technology Park up to a maximum of $2,000,000. The outstanding
principal balance of the bonds at December 31, 1995 and 1994 was $3,713,011. As
discussed in Note 14, subsequent to December 31, 1995, the Company exchanged its
ownership interest in the 270 Technology Park property, and its guarantee of the
revenue bonds was extinguished.
-18-
<PAGE>
6 RESULTS OF REAL ESTATE INVESTMENTS
Operations
----------
The following is a summary of the operating results of the properties
underlying the Company's real estate investments:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994 1993
------------- -------------- -------------
<S> <C> <C> <C>
PROPERTY
Rentals $ 12,679,060 $ 13,338,097 $ 3,128,332
Interest expense (4,348,126) (4,696,303) (358,177)
Depreciation and amortization (3,735,914) (3,999,341) (810,305)
Minority interest (119,013) (117,890) (10,301)
------------- ------------- -------------
$ 1,445,701 $ 1,452,003 $ 1,128,334
============= ============= =============
INVESTMENTS IN TENANCIES-IN-COMMON
AND JOINT VENTURES
Rentals $ 6,856,262 $ 7,442,165 $ 14,850,192
Operating expenses (1,223,767) (1,136,267) (2,749,486)
Interest expense (2,857,655) (2,931,718) (7,615,524)
Depreciation and amortization (1,921,274) (4,551,781) (4,551,489)
------------- ------------ -------------
$ 853,566 $(1,177,601) $ (66,307)
============= ============ =============
Company share:
Interest on loans to joint ventures $ 74,268 63,136 $ 208,165
Equity in net income (losses) 673,799 (1,417,865) (16,832)
------------- ------------ -------------
$ 748,067 (1,354,729) $ 191,333
============= ============ =============
</TABLE>
Future minimum rentals under non-cancelable operating leases are as
follows:
<TABLE>
<CAPTION>
Year ended
December 31, Properties Tenancies-in-Common
------------ ---------- -------------------
<S> <C> <C>
1996 $ 9,051,444 $ 4,551,838
1997 8,702,558 2,833,264
1998 7,728,819 2,526,885
1999 6,890,149 2,389,048
2000 6,022,828 2,265,552
Thereafter 16,546,140 9,180,224
------------- ------------
$ 54,941,938 $ 23,746,811
============= ============
</TABLE>
Investment Valuation Allowance
------------------------------
The estimated net realizable value of the undeveloped land at Sample/I-95
Business Park declined significantly in 1993. In accordance with the Company's
policy, the carrying value was reduced to approximate estimated net realizable
value, resulting in an investment valuation allowance of $900,000 in 1993.
-19-
<PAGE>
Significant Lease Transactions
------------------------------
In September 1994, M.O.R. XXXVI Associates Limited Partnership, a
partnership in which the Company is a general partner (the "Partnership") and
the owner of Columbia Place, modified the existing terms of its sole lease and
mortgage loan agreements. BDM Federal, Inc. ("BDM"), the original tenant with a
lease expiring in March 1998, desired to vacate the building and Ceridian
Corporation ("Ceridian"), a new tenant, desired to occupy the building. BDM,
Ceridian, and the Partnership entered into a series of agreements (the
"Agreements") under which BDM is obligated for certain payments to the
Partnership through March 1998. The payments are contingent on future events and
are being recognized as income when the contingencies expire. In 1994,
approximately $864,000 was recognized as additional income from BDM as a result
of the transaction.
Ceridian entered into a lease with the Partnership which commenced
September 1994 and expires December 2009, subject to earlier termination options
in December 2004 and December 2006.
Ceridian was responsible for the cost of all of its tenant improvements and
chose to substantially re-fit this space. This resulted in the write-off by the
Partnership of approximately $2,635,000 of tenant improvements and other capital
costs in 1994.
In conjunction with the leasing transaction, the mortgage note payable to a
third- party lender of approximately $10,490,000 was restructured. The interest
rate was reduced from 10.125% to 8.875% per annum, effective December 1, 1994,
and the maturity date was extended from May 1998 to December 2009. The maturity
date may be accelerated if Ceridian exercises its termination options. The
revised mortgage note requires monthly payments of principal and interest based
on a 20-year amortization schedule.
The Partnership's costs of these transactions have been capitalized and are
being amortized over the life of the lease or loan as applicable.
In January 1996, the Company executed a lease agreement which increased the
occupancy of the Los Angeles Corporate Center property from 50% to 100%.
7 LINE-OF-CREDIT
At December 31, 1995, the Company had an unsecured line-of-credit agreement
with a bank which was due to expire on January 31, 1996. Under its terms, the
Company could borrow up to $5,000,000 at the prime rate of interest or LIBOR
plus 1.5%. The average outstanding balance on the line-of-credit during 1995 and
1994 was $2,091,644 and $3,402,000, respectively, and the weighted average
interest rate was 7.85% and 6.18%, respectively. There were no borrowings in
1993.
Subsequent to December 31, 1995, the bank agreed to extend the line-of-
credit agreement to July 31, 1996. All other terms and conditions are unchanged.
-20-
<PAGE>
8 SHAREHOLDERS' EQUITY
Increase in Authorized Shares
-----------------------------
The total number of authorized shares of the Company was increased from
8,000,000 to 20,000,000 effective June 14, 1994.
Class A Common Stock
--------------------
On June 3, 1985, the Company sold one share of Class A Common Stock (par
value of one dollar) to the Advisor for $50,000. As the holder of such share,
the Advisor is entitled to receive 10% of the Company's net gain (as defined)
from the disposition of properties, reduced by any accumulated net losses. Upon
termination of the Advisory Agreement, the Company will have an option to
purchase the share of Class A Common Stock for an amount equal to 10% of the net
gain which would be realized by the Company had all of the real estate owned by
the Company as of the date of termination been sold at its fair market value. If
the Company does not elect to purchase the Class A Common Stock, such share will
automatically convert to shares of common stock of the Company. See Note 14 for
further discussion of the Class A Common Stock.
Shareholders' Rights Plan
-------------------------
The Company's Board of Directors unanimously adopted a shareholders' rights
plan on June 28, 1990 applicable to shareholders of record on July 19, 1990.
The plan, as amended on September 20, 1995, provides for the dividend of a right
to buy one share of common stock for a stated amount determined in accordance
with the provisions of the plan for each share of common stock outstanding.
Rights would initially become exercisable on the earlier of (1) the tenth day
after the date on which a person has acquired beneficial ownership of 15% or
more of the Company's common stock or (2) the tenth business day after a person
commences a tender or exchange offer, the consummation of which would result in
such person owning 30% or more of the Company's common stock.
-21-
<PAGE>
9 MANAGEMENT ADVISORY FEES
The Company has an agreement with the Advisor, pursuant to which the
Advisor provides investment management and administrative services to the
Company. Fees for these services totaled $451,863, $714,761 and $601,535 for
1995, 1994 and 1993, respectively, and are determined as:
a. A base fee of 7.5% of net cash flow (as defined in the Advisory
Agreement) from sources other than short-term assets, as defined.
b. An incentive fee of 5% of net cash flow (as defined in the
Advisory Agreement) from sources other than short-term assets, as
defined.
c. A short-term investment fee of 0.25% of average annual short-term
assets, as defined.
At December 31, 1995 and 1994, payments of the incentive fees totaling
$2,573,917 and $2,473,054, respectively, have been deferred and become payable
only after the Company has achieved a specified return to shareholders, or
refinancing or sale proceeds are distributed to shareholders. Payment of the
deferred fee would also become payable upon termination or resignation of the
Advisor. See Note 14 for further discussion of the management advisory fee.
10 DEFERRED FINANCING COSTS
In 1994, the Company commenced the marketing of additional equity on a
private placement basis and incurred $501,227 in Deferred Financing Costs in
connection with pursuing the private placement and arranging for an increased
line of credit, which was contingent on additional equity. Discussions with
potential investors did not produce an agreement on the terms of an equity
investment and the Company wrote off the Deferred Financing Costs in 1995.
11 INCOME TAXES
The Company believes that it continues to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended. The
Company has distributed all of its taxable income for 1995, 1994 and 1993.
Accordingly, no provision for income taxes has been made in the accompanying
consolidated financial statements. For federal income tax purposes, the amounts
distributed as dividends were ordinary income, except for $1.06 per share, $.17
per share and $.06 per share in 1995, 1994 and 1993, respectively, which relate
to capital gains. No portion of the dividend in any of the years presented
relate to a return of capital.
-22-
<PAGE>
12 NONCASH INVESTING AND FINANCING ACTIVITIES
The restructuring of certain joint ventures, as more fully described in
Note 3, resulted in the following noncash investing and financing activities:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Conversion of loans to joint ventures and
accrued interest to Property and
tenancies-in-common $ 4,999,071 $ 4,109,037 $ 265,694
Conversion of investments in joint ventures
to Property - - 14,424,483
Conversion of losses of joint ventures in
excess of investment to Property - (2,095,608) -
Recording of third party mortgage notes - 9,310,914 46,864,843
----------- ------------ ------------
Total converted assets $ 4,999,071 $ 11,324,343 $ 61,555,020
=========== ============ ===========
</TABLE>
13 PROFESSIONAL FEES
Certain professional fees are costs incurred by the Company related to its
consideration of various strategic alternatives aimed at maximizing shareholder
value and subsequent solicitation of proposals to acquire the Company. Included
in professional fees for the year ended December 31, 1995 is approximately
$352,000 of investment advisory fees earned by Morgan Stanley and Co.
Incorporated (Morgan Stanley) and legal fees of $324,000 associated with this
process.
14 SUBSEQUENT EVENTS
Merger Agreement
----------------
In February 1996, the Company entered into an Agreement and Plan of Merger
under which the Company will be merged into EastGroup Properties (EastGroup).
In the merger, each share of the Company's common stock will be converted into
EastGroup shares of beneficial interest with a value of $15.60, subject to the
limitations described below.
-23-
<PAGE>
The value of EastGroup shares for purposes of calculating the ratio at
which the Company's shares will be converted into EastGroup shares in the merger
will be the average of the closing price of EastGroup shares on the New York
Stock Exchange on the 20 trading days immediately preceding the fifth trading
day prior to the effective date of the merger (the "EastGroup Stock Price");
however, the EastGroup Stock Price will be deemed to equal $20.25 if the average
price of EastGroup shares calculated above is less than or equal to $20.25, and
$23.00 if the average price of EastGroup shares is greater than or equal to
$23.00. The Company has the right, waivable by it, to terminate the merger
agreement without liability if the average closing price of EastGroup shares on
the New York Stock Exchange on the 20 trading days immediately preceding the
fifth trading day prior to (i) the date on which the Securities and Exchange
Commission declares EastGroup's Registration Statement with respect to the
merger effective or (ii) the date on which the Company's stockholders' meeting
with respect to the merger is held, is equal to or less than $18.25.
The merger is subject to several conditions including approval by the
shareholders of both the Company and EastGroup and registration of the shares to
be issued in the merger with the Securities and Exchange Commission. Upon the
consummation of the merger, the Company has committed to pay Morgan Stanley a
transaction fee equal to $1.5 million, against which approximately $350,000 of
other fees and expenses previously paid to Morgan Stanley will be credited.
Upon the event of merger, the Advisor agrees to the termination of the
Advisory Agreement and relinquishment of its right to, and interest in, the
Class A share in consideration of payment by the Company of 95% of the amount of
the unpaid incentive advisory fees.
February Exchange of Interests
------------------------------
Effective February 1, 1996, the Company exchanged its co-tenant interest in
the 270 Technology Park property to obtain 100% ownership of the Columbia Place
property. In addition, the Company received $50,000 in cash and a secured
promissory note of $180,000 bearing interest at 9.56% and maturing on February
1, 2000, with annual interest and principal payments of $56,250. The note is
secured by a second deed of trust on the 270 Technology Park property.
Effective February 2, 1996, the Company exchanged its co-tenant interests
in the Carson Industrial Center, Central Distribution Center, West Side Business
Park and the three El Presidio buildings (comprising a portion of the Dominguez
Properties) to obtain 100% ownership of the Metro Business Park tenancy-in-
common and the remaining building in the Dominguez Properties tenancy-in-common.
As part of the exchange, the Company paid $138,000 in cash and forgave its note
receivable from its co-tenant in the Carson Industrial Center property of
approximately $177,000.
-24-
<PAGE>
COPLEY PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
SCHEDULE III
<TABLE>
<CAPTION>
Buildings and
Description Encumbrances(a) Land Improvements Total
- ------------------------------ -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Investment in Property
Broadway Industrial Center
Industrial - Bulk Distribution
Building
Tempe, Arizona $ 743,600 $ 2,248,016 $ 2,991,616
Kingsview Industrial Center
Industrial - Bulk Distribution
Building
Carson, CA 1,077,000 2,025,712 3,102,712
Los Angeles Corporate Center
Office Building
Monterey Park, California 2,861,000 6,235,120 9,096,120
University Business Center
Research & Developement
Buildings
Santa Barbara, California $19,353,947 3,679,870 17,000,555 20,680,425
Huntwood Associates
Industrial - Bulk Distribution
Buildings
Hayward, California 12,292,993 5,487,508 12,750,719 18,238,227
Wiegman Associates
Industrial - Bulk Distribution
Buildings
Hayward, California 7,686,409 2,535,994 5,244,158 7,780,152
Baygreen Industrial Park
Industrial - Light Industrial
Buildings
Hayward, California 167,223 1,189,212 1,356,435
Sample/I-95 Business Park
Land, Industrial - Light
Industrial Buildings
Pompano Beach, Florida 5,102,986 5,706,697 10,809,683
----------- ----------- ----------- -----------
$39,333,349 $21,655,181 $52,400,189 $74,055,370
----------- ----------- ----------- -----------
<CAPTION>
Date
Accumulated Acquired or Depreciable
Description Depreciation Constructed Life
- ------------------------------ --------------- ----------- -----------
<S> <C> <C> <C>
Investment in Property
Broadway Industrial Center
Industrial - Bulk Distribution
Building
Tempe, Arizona $207,367 1994 5-25 years
Kingsview Industrial Center
Industrial - Bulk Distribution
Building
Carson, CA 37,757 1995 5-25 years
Los Angeles Corporate Center
Office Building
Monterey Park, California 1,261,250 1986 5-25 years
University Business Center
Research & Developement
Buildings
Santa Barbara, California 1,572,880 1987-1988 (b) 5-25 years
Huntwood Associates
Industrial - Bulk Distribution
Buildings
Hayward, California 1,402,309 1987-1988 (b) 5-25 years
Wiegman Associates
Industrial - Bulk Distribution
Buildings
Hayward, California 494,344 1986-1987 (b) 5-25 years
Baygreen Industrial Park
Industrial - Light Industrial
Buildings
Hayward, California 91,943 1993 5-25 years
Sample/I-95 Business Park
Land, Industrial - Light
Industrial Buildings
Pompano Beach, Florida 684,724 1989-1995 (b) 5-25 years
-----------
$ 5,752,574
-----------
</TABLE>
-25-
<PAGE>
COPLEY PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
SCHEDULE III
(Continued)
<TABLE>
<CAPTION>
Buildings and Accumulated
Description Encumbrances (a) Land Improvements Total Depreciation
- ----------------------- ---------------- ----------- -------------- ----------- ------------
Properties owned 100% by Copley subsequent to the February Exchanges.
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Metro Business Park
Industrial- Service Center
Buildings
Phoenix, Arizona 5,217,399 1,982,562 8,998,208 10,980,770 4,784,918
Dominguez Properties
Industrial- Bulk
Distribution Buildings
Los Angeles, California 5,218,332 1,476,232 5,600,737 7,076,969 2,581,997
Columbia Place
Office Building
Columbia, Maryland 10,263,748 2,179,802 6,718,923 8,898,725 94,277
----------- ----------- ----------- ------------ -----------
20,699,479 5,638,596 21,317,868 26,956,464 7,461,192
----------- ----------- ----------- ------------ -----------
</TABLE>
<TABLE>
Properties in which Copley will no longer have an ownership interest after the February Exchanges.
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Central Distribution Center
Industrial- Bulk
Distribution Buildings
Phoenix, Arizona $ 2,340,285 $578,370 $ 2,419,466 $ 2,997,836 $1,132,682
West Side Business Park
Industrial- Bulk
Distribution Buildings
Phoenix, Arizona 936,096 275,310 1,329,393 1,604,703 698,633
Carson Industrial Center
Industrial- Bulk
Distribution Building
Los Angeles, California 2,092,780 547,715 2,099,115 2,646,830 805,420
Dominguez Properties
Industrial- Bulk
Distribution Buildings
Los Angeles, California 1,820,268 933,550 3,617,151 4,550,701 1,662,872
270 Technology Park
Research & Developement
Buildings
Frederick, Maryland 3,713,011 272,507 3,182,660 3,455,167 30,203
----------- ----------- ----------- ------------ -----------
10,902,440 2,607,452 12,647,785 15,255,237 4,329,810
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Total $70,935,268 $29,901,229 $86,365,842 $116,267,071 $17,543,576
=========== =========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Date
Acquired or Depreciable
Description Constructed Life
- -----------------------
Properties owned 100% by Copley subsequent to the February Exchanges.
- ---------------------------------------------------------------------
<S> <C> <C>
Metro Business Park
Industrial- Service Center
Buildings
Phoenix, Arizona 1985 24 years
Dominguez Properties
Industrial- Bulk
Distribution Buildings
Los Angeles, California 1985 22.9 years
Columbia Place
Office Building
Columbia, Maryland 1988 5-50 years
</TABLE>
<TABLE>
Properties in which Copley will no longer have an ownership interest after the February Exchanges.
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Central Distribution Center
Industrial- Bulk
Distribution Buildings
Phoenix, Arizona 1985 24.7 years
West Side Business Park
Industrial- Bulk
Distribution Buildings
Phoenix, Arizona 1985 25 years
Carson Industrial Center
Industrial- Bulk
Distribution Building
Los Angeles, California 1985 27 years
Dominguez Properties
Industrial- Bulk
Distribution Buildings
Los Angeles, California 1985 22.9 years
270 Technology Park
Research & Developement
Buildings
Frederick, Maryland 1985-1986 2-50 years
</TABLE>
<TABLE>
<CAPTION>
1995
Property Cost Accumulated Depreciation
------------- ------------------------
<S> <C> <C> <C>
Balance at beginning of year 135,396,766 Balance at beginning of year 17,449,374
Dispositions (23,531,256) Dispositions (5,145,485)
Additions 4,401,561 Depreciation Expenses 5,239,688
------------- ------------
Balance at Close of Year $116,267,071 Balance at Close of Year $17,543,577
============= ============
1994
Property Cost Accumulated Depreciation
------------- ------------------------
Balance at beginning of year 136,268,468 Balance at beginning of year 15,238,165
Conversions (703,735) Conversions (2,335,423)
Dispositions (4,020,537) Dispositions (2,928,729)
Additions 3,852,570 Depreciation Expenses 7,475,361
-------------- -------------
Balance at Close of Year $135,396,766 Balance at Close of Year $17,449,374
============== =============
1993
Property Cost Accumulated Depreciation
------------- ------------------------
Balance at beginning of year 134,360,214 Balance at beginning of year 20,097,444
Conversions (759,216) Conversions (9,673,801)
Dispositions Dispositions
Additions 2,667,470 Depreciation Expenses 4,814,522
-------------- -------------
Balance at Close of Year $136,268,468 Balance at Close of Year $15,238,165
============== =============
1992
Property Cost Accumulated Depreciation
------------- ------------------------
Balance at beginning of year 156,502,217 Balance at beginning of year 16,919,673
Transfer (10,962,007) Transfer (1,608,049)
Dispositions (11,990,574) Dispositions (1,304,109)
Additions 810,578 Depreciation Expenses 6,089,929
-------------- -------------
Balance at Close of Year $134,360,214 Balance at Close of Year $20,097,444
============== =============
</TABLE>
(a) Represents liabilities to third-party lenders.
(b) These Properties were converted to wholly owned properties
during the fourth quarter of 1993 or the first quarter of
1994. Accumulated depreciation numbers are amounts from the
date of conversion through December 31, 1995.
-26-
<PAGE>
COPLEY PROPERTIES, INC.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
SCHEDULE IV
<TABLE>
<CAPTION>
CARRYING AMOUNT
INTEREST MATURITY PAYMENT TERMS OF MORTGAGES
DESCRIPTION RATE DATE (NOTE A) (NOTE B)
--------------- --------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
MORTGAGE LOANS
- --------------
Carson Industrial Center (1) 10% December 31, 2050 Interest due monthly; $176,889
Industrial - Bulk Distribution principal due in full at
Building maturity
Carson, California
---------------
TOTAL MORTGAGE LOANS $176,889
===============
DEFICIT AND CONTRIBUTION LOANS
- ------------------------------
---------------
TOTAL DEFICIT AND CONTRIBUTION LOANS $0
===============
---------------
Total $176,889
===============
</TABLE>
(a) The carrying amounts of this mortgage for both book and federal income
tax purposes are the same as the amount listed above. The carrying
amount of the mortgages approximates its face amount.
(b) Reconciliation of the carrying value of mortgage loans:
Balance at December 31, 1994 $12,069,687
New loans during 1995 $6,437
Collection of principal ($127,585)
Collected as part of a sale ($7,677,895)
Contributed to Equity ($4,093,755)
-----------------
Balance at December 31, 1995 $176,889
=================
(1) Effective February 2, 1996, the Company exchanged its tenancy-in-common
interest in Carson Industrial Center, including the note due from the co-tenant,
Central Distribution Center, West Side Business Park and the El Presidio
Properties to gain 100% ownership of Metro Business Park and the East Dominguez
Property.
-27-
<PAGE>
COPLEY PROPERTIES INC.
INDEX TO JOINT VENTURE FINANCIAL STATEMENTS
PAGE
Columbia Place (a)............................................................29
-28-
<PAGE>
COLUMBIA PLACE
(A TENANCY-IN-COMMON)
FINANCIAL REPORT
DECEMBER 31, 1995
-29-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
CONTENTS
--------
DECEMBER 31, 1995
-----------------
<TABLE>
<CAPTION>
<S> <C>
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Income 3
Statement of Partners' Equity 4
Statement of Co-Tenants' Equity 4
Statement Cash Flows 5-6
Notes to Financial Statements 7-11
</TABLE>
-30-
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP]
To the Tenants
Columbia Place (A Tenancy-in-Common)
Columbia, Maryland
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
----------------------------------------------------
We have audited the balance sheet of Columbia Place (A Tenancy-in-Common) as of
December 31, 1995, and M.O.R. XXXVI Associates Limited Partnership as of
December 31, 1994, and the related statements of income, co-tenants' equity and
cash flows for each of the 3 years in the period ended December 31, 1995, 1994
and 1993 (see Note 1). These financial statements are the responsibility of the
tenants' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Place (A Tenancy-in-
Common) as of December 31, 1995, and M.O.R. XXXVI Associates Limited Partnership
as of December 31, 1994, and the results of its operations and cash flows for
each of the 3 years in the period ended December 31, 1995, 1994 and 1993 (see
Note 1), in conformity with generally accepted accounting principles.
/s/Wolpoff & Company, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
January 23, 1996
-31-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
------------------------------------
1995 1994*
------------- -------------
<S> <C> <C>
PROPERTY, AT COST - Notes 1 and 2
Building and Improvements $ 6,671,958 $ 7,784,767
Land 2,179,802 2,179,802
Predevelopment Costs 46,965 46,965
Deferred Costs 673,554 730,983
------------- -------------
9,572,279 10,742,517
Less Accumulated Depreciation and Amortization (30 Years) (94,277) (1,057,364)
------------- -------------
PROPERTY, NET 9,478,002 9,685,153
------------- -------------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 -0- 4,228
Cash Held in Escrow - Note 2 15,000 15,000
Deferred Rent Receivable - Note 1 1,080,778 365,574
Sublease Fee Receivable -0- 250,000
Receivable from Tenant 3,541 -0-
------------- -------------
TOTAL OTHER ASSETS 1,099,319 634,802
------------- -------------
$10,577,321 $10,319,955
============= =============
LIABILITIES AND TENANTS' EQUITY
-------------------------------
LIABILITIES
Mortgage Payable - Note 2 $10,263,748 $10,462,658
Mortgage Payable, Undeveloped Land - Note 2 -0- 1,400,000
Accrued Interest Payable 75,909 118,794
Accounts Payable and Accrued Expenses 6,500 244,327
Payable, Affiliates - Note 3 46,277 18,810
------------- -------------
TOTAL LIABILITIES 10,392,434 12,244,589
PARTNERS' CAPITAL (DEFICIT) -0- (1,924,634)
CO-TENANTS' EQUITY - Note 4 184,887 -0-
------------- -------------
$10,577,321 $10,319,955
============= =============
</TABLE>
* See Note 1 regarding presentation.
_________________
The notes to financial statements are an integral part of this statement.
-32-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
STATEMENT OF INCOME
-------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1995* 1994* 1993*
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Rental Income - Notes 1 and 7 $ 1,277,736 $ 1,561,782 $ 1,705,109
Sublease Fee Income - Note 7 560,004 1,051,217 -0-
Interest Income 313 900 1,151
------------- ------------- -------------
TOTAL REVENUE 1,838,053 2,613,899 1,706,260
============= ============= =============
COSTS AND EXPENSES
Management Fee - Note 3 21,600 15,353 19,330
General and Administrative 10,405 11,507 6,753
Real Property Taxes - Note 1 -0- 49,352 3,028
Real Property Taxes, Undeveloped Land - Note 1 -0- 8,778 8,778
Depreciation and Amortization - Note 1 236,518 352,489 246,135
Mortgage Expense - Notes 2 and 4 920,599 1,053,375 1,074,639
Interest Expense, Undeveloped Land - Notes 2 and 4 82,911 105,583 91,000
Loss on Disposal of Tenant Improvements - Note 1 -0- 2,516,787 -0-
------------- ------------- -------------
TOTAL COSTS AND EXPENSES 1,272,033 4,113,224 1,449,663
============= ============= =============
NET INCOME (LOSS) - Note 5 $ 566,020 $ (1,499,325) $ 256,597
============= ============= =============
</TABLE>
* See Note 1 regarding presentation.
________________
The notes to financial statements are an integral part of this statement.
-33-
<PAGE>
M.O.R. XXXVI ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF PARTNERS' EQUITY
-----------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
August 15, December 31, December 31,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS
Prior Years $ 1,226,000 $ 1,226,000 $ 1,226,000
Current Year 1,543,501 -0- -0-
------------- ------------- -------------
2,769,501 1,226,000 1,226,000
------------- ------------- -------------
ACCUMULATED INCOME (LOSS)
Prior Years (373,738) 1,125,587 868,990
Current Period 359,703 (1,499,325) 256,597
------------- ------------- -------------
(14,035) (373,738) 1,125,587
------------- ------------- -------------
DISTRIBUTIONS - Note 4
Prior Years (2,776,896) (2,584,848) (2,186,776)
Current Year -0- (192,048) (398,072)
------------- ------------- -------------
(2,776,896) (2,776,896) (2,584,848)
------------- ------------- -------------
TOTAL PARTNERS' EQUITY
(DEFICIT) ($21,430) ($1,924,634) ($233,261)
============= ============= =============
<CAPTION>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
STATEMENT OF CO-TENANTS' EQUITY
-------------------------------
<S> <C> <C> <C>
BEGINNING EQUITY $ (21,430) --- ---
ADD: NET INCOME FOR PERIOD
8/16/95 - 12/31/95 206,317 --- ---
------------- ------------- -------------
ENDING EQUITY $ 184,887 --- ---
============= ============= =============
</TABLE>
_______________
The notes to financial statements are an integral part of this statement.
-34-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995* 1994* 1993*
------------ ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 566,020 $(1,499,325) $ 256,597
------------ ------------ --------------
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities
Depreciation and Amortization 236,518 352,489 246,135
Loss on Disposal of Tenant Improvements -0- 2,516,787 -0-
Change in Tenant Receivables (3,541) 6,877 7,458
Increase in Deferred Rent (715,204) (365,574) -0-
Increase in Accrued Interest Payable 81,815 28,094 -0-
Change in Accounts Payable and Accrued Expenses (237,827) 239,180 3,734
Change in Sublease Fee Receivable 250,000 (250,000) -0-
------------ ------------ --------------
Total Adjustments (388,239) 2,527,853 257,327
------------ ------------ --------------
Net Cash Provided by Operating Activities 177,781 1,028,528 513,924
------------ ------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Deferred Costs -0- (730,633) -0-
Additions to Building (29,367) -0- -0-
Increase in Cash Held in Escrow -0- (15,000) -0-
------------ ------------ --------------
Net Cash Used by Investing Activities (29,367) (745,633) -0-
------------ ------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage Principal Payments (198,910) (105,429) (96,861)
Distributions -0- (173,238) (456,286)
Capital Contributions 18,801 -0- -0-
Affiliate Loans 27,467 -0- -0-
------------ ------------ --------------
Net Cash Used by Financing Activities (152,642) (278,667) (553,147)
------------ ------------ --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,228) 4,228 (39,223)
CASH AND CASH EQUIVALENTS, BEGINNING 4,228 -0- 39,223
------------ ------------ --------------
CASH AND CASH EQUIVALENTS, ENDING $ -0- $ 4,228 $ -0-
============ ============ ==============
</TABLE>
(Continued)
* See Note 1 regarding presentation.
_______________
The notes to financial statements are an integral part of this statement.
-35-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995* 1994* 1993*
------------- ------------- ------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 920,599 $ 1,130,863 $ 1,165,639
============= ============= ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Mortgage Payable
and Accrued Interest to Capital
Mortgage Payable $ 1,400,000 $ -0- $ -0-
Accrued Interest 124,692 -0- -0-
------------- ------------- ------------
$ 1,524,692 $ -0- $ -0-
============= ============= ============
</TABLE>
* See Note 1 regarding presentation.
_______________
The notes to financial statements are an integral part of this statement.
-36-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
The financial information presented herein represents the accounts of
Columbia Place (the "Property"). On August 16, 1995, the partners of
M.O.R. XXXVI Associates Limited Partnership entered into a tenancy-in-
common agreement which effectively terminated the Partnership.
Simultaneously, Copley Properties, Inc. and Manekin 36 Limited
Partnership (collectively known as the "co-tenants") formed a co-
tenancy and each own an interest in the property known as Columbia
Place. The tenancy-in-common agreement provides for ownership interest
of 78% for Copley Properties, Inc. and 22% for Manekin 36 Limited
Partnership. Prior to August 16, 1995, Copley Properties, Inc. and
Manekin 36 Limited Partnership were each 50% partners in M.O.R. XXXVI
Associates Limited Partnership.
Presentation
------------
The balance sheet as of December 31, 1994, is that of M.O.R. XXXVI
Associates Limited Partnership and is presented for comparative
purposes. Likewise, the operating statements for the limited
partnership for 1994 and 1993 are presented for comparative purposes.
The 1995 operating statements for Columbia Place include the
operations of the limited partnership through August 15, 1995.
Property
--------
The tenants own and operate an office/warehouse building in Columbia,
Maryland containing approximately 115,000 square feet of leasable
area, leased to the BDM Corporation. The building became operational
in April 1988. In September 1994, BDM vacated and subleased the
building to Ceridian Corporation. Ceridian has an option to lease
contiguous property; this expansion parcel can accommodate a building
of 54,000 square feet. See Note 7 for the terms of the sublease with
Ceridian.
Rental Income
-------------
Rental income is being recognized on a straight-line basis over the
term of the lease. Excess of the rental income recognized over the
amount stipulated in the lease is shown as deferred rent receivable.
Expansion Parcel Costs and Related Interest and Taxes
-----------------------------------------------------
Certain preliminary costs incurred pertaining to the expansion parcel
of land described above were capitalized, and the amount is reflected
as predevelopment costs. Interest and real property tax expenses
pertaining to the undeveloped expansion parcel are being expensed as
incurred. See Note 2 for related debt.
Depreciation
------------
Building costs and tenant improvements were depreciated using the
straight-line method over the estimated useful lives of 50 years
through August 15, 1995. Effective August 16, 1995, depreciation is
based on an estimated useful life of 30 years. For the period August
16, 1995, through December 31, 1995, the change in estimated useful
life had an effect of reducing net income for 1995 by approximately
$30,000.
Effective August 16, 1995, M.O.R. XXXVI Associates Limited Partnership
was terminated upon execution of the tenancy-in-common agreement. As a
result of this termination, the building and improvements were
restated on the books to their net book value, and depreciation
commenced as if the restated amount was placed in service on August
16, 1995.
-37-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED
---------------------------------------
DECEMBER 31, 1995
-----------------
Note 1 - Tenant Expenses/Reimbursements
------------------------------
(Cont.) Certain reimbursed expenses such as property taxes, cleaning,
utilities and HVAC are reflected net of tenant reimbursement.
Cash and Cash Equivalents
-------------------------
Columbia Place considers all highly liquid debt instruments purchased
with a maturity of 3 months or less to be cash equivalents.
Amortization
------------
Various deferred costs are being amortized using the straight-line
method as follows:
<TABLE>
<CAPTION>
Amount Amortization Period
-------- -----------------------
<S> <C> <C>
Leading Costs $506,905 12 Years (Lease Term)
Mortgage Costs 166,649 15 Years
--------
$673,554
========
</TABLE>
Income Taxes
------------
Prior to August 16, 1995, the Property was owned by M.O.R. XXXVI
Associates Limited Partnership. Partnerships, as such, are not subject
to income taxes. The individual partners and co-tenants are required
to report their respective shares of income or loss and other tax
items on their income tax returns.
Loss on Disposal of Tenant Improvements
---------------------------------------
Loss on disposal of tenant improvements of $2,516,787 in 1994
represents the estimated net book value of tenant improvements removed
to prepare the space for Ceridian Corporation (see Note 7).
Note 2 - MORTGAGES PAYABLE
American General Investment Corporation
---------------------------------------
The property is encumbered by a nonrecourse mortgage held by American
General Investment Corporation in the amount of $11,000,000. The terms
of the loan were modified by an agreement effective December 1, 1994.
Pertinent terms of the loan are as follows:
<TABLE>
<CAPTION>
<S> <C>
Mortgage Amount $11,000,000
Outstanding Balance, 12/31/95 $10,263,748
Principal Amortization to Date $736,252
Origination Date April 28, 1988
Annual Payment $1,171,500 - Old
$1,119,509 - New
Interest Rate 10.125% - Old
8.875% - New
Maturity Date (20-Year Amortization) December 31, 2009
Balloon Payment Upon Maturity $4,508,804
</TABLE>
-38-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED
---------------------------------------
DECEMBER 31, 1995
-----------------
Note 2 - Under the terms of the loan modification agreement, a deposit of
(Cont.) $15,000 was made into an interest bearing escrow account; additional
deposits are required in an amount equal to all 1995 funds in excess
of normal operating expenses and required principal and interest
payments. This escrow account is to be used for payment of required
principal and interest payments if operating cash flow is
insufficient. Any funds remaining in the escrow account in excess of
$15,000 plus accrued interest at January 1, 1996, will be applied to
the outstanding principal balance.
Principal maturities for the mortgage during the succeeding 5 years
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $217,299
1997 237,388
1998 259,335
1999 283,311
2000 309,903
</TABLE>
Copley Properties, Inc. (CPI)
-----------------------------
The second mortgage previously held by Mercantile-Safe Deposit & Trust
Company in the amount of $1,400,000 was assigned to Copley Properties,
Inc. on October 31, 1986. In conjunction with the tenancy-in-common
agreement dated August 16, 1995, CPI contributed the note and accrued
interest as capital. Interest was payable monthly at the prime rate
plus .5% per annum. The note was secured by a first mortgage lien on
approximately 4.18 acres of land known as the "expansion parcel" which
is adjacent to the office building. Interest incurred during 1995,
1994 and 1993 of $82,911, $105,583 and $91,000, respectively, has been
charged to operations. As of December 31, 1994, accrued interest
payable on the second mortgage amounted to $41,781.
Note 3 - RELATED PARTY TRANSACTIONS
The co-tenants have various arrangements under contract with Manekin
Corporation, an entity affiliated with Manekin 36 Limited Partnership.
Management Fee
--------------
The co-tenants have entered into an agreement with Manekin Corporation
to act as management agent for the property. The management agreement,
which expires on December 31, 1996, provides for a management fee
equal to $1,800 per month.
Payable, Affiliates
-------------------
Columbia Place participates in a central disbursing cash account with
various affiliated entities. As of December 31, 1995, funds used by
the co-tenancy in excess of its cash balance amounted to $27,467.
Also, distributions payable to Manekin 36 Limited Partnership amounted
to $18,810 as of December 31, 1995 and 1994.
Note 4 - TENANTS' EQUITY
Capital Investment
------------------
During 1988, Copley Properties, Inc. provided equity in the amount of
$1,225,000, in exchange for a 50% interest in M.O.R. XXXVI Limited
Partnership. On August 15, 1995, Copley Properties, Inc. contributed
the second mortgage of $1,400,000 plus accrued interest of $124,692.
-39-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 5 - TAX ACCOUNTING
Tax accounting varies from financial accounting. The following is a
reconciliation of financial accounting income to tax basis income:
<TABLE>
<CAPTION>
Current Prior
Year Years Total
--------- ----------- ------------
<S> <C> <C> <C>
Net Income (Loss),
Financial Accounting $ 566,020 $ (373,738) $ 192,282
Additional Depreciation (121,194) (814,831) (936,025)
Amortization of Construction
Period Interest and Taxes -0- (246,797) (246,797)
Transfer and Recording
Taxes and Other Items -0- (42,418) (42,418)
Loss on Disposal of
Tenant Improvements -0- 2,516,787 2,516,787
Deferred Rent (715,204) (365,574) (1,080,778)
--------- ----------- ------------
Taxable Income $(270,378) $ 673,429 $ 403,051
========== =========== ============
</TABLE>
Note 6 - ALLOCATION OF INCOME (LOSS)
The 1995 net income (loss) was allocated between the partnership and
the co-tenancy.
Note 7 - LEASES
The building was 100% leased to BDM Corporation under a 10-year lease
term which commenced in April 1988. On September 1, 1994, BDM amended
its lease and executed a lease/sublease agreement which provided for
the sublease of the building to Ceridian Corporation (Ceridian) for the
remainder of its lease term. Upon expiration of BDM's lease term,
Ceridian will continue to lease the building under the lease/sublease
agreement. The lease/sublease agreement requires BDM to make payments
to the co-tenants as follows:
<TABLE>
<S> <C>
Reimbursement of outlays made
or to be made on behalf of BDM $ 841,777
-----------
Sublease Fee:
Up-front payments 864,549
Monthly payments of $46,667 from 9/1/94 to 3/31/98 2,006,681
-----------
2,871,230
-----------
Total $3,713,007
===========
</TABLE>
The $864,549 payment was recognized as income in 1994 along with the 4
monthly payments for September through December 1994 ($186,668)
totaling $1,051,217. Sublease fee payments made by BDM in 1995 totaled
$560,004.
-40-
<PAGE>
COLUMBIA PLACE (A TENANCY-IN-COMMON)
------------------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED
---------------------------------------
DECEMBER 31, 1995
-----------------
Note 7 - Ceridian's lease term is for a period of 15 years commencing on
(Cont.) September 18, 1994, with free rent through December 31, 1994, and a
cancellation option on December 31, 2006. The average annual rent
(straight-line) for the term of the lease is $1,277,736.
The following is a schedule of future minimum lease payments to be
received from Ceridian under the noncancelable operating
lease/sublease:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 1,056,669
1997 1,152,730
1988 1,371,461
1999 1,444,371
2000 1,444,371
2001-2006 8,666,224
-------------
$ 15,135,826
=============
</TABLE>
-41-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, 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 and Schedules are
filed as a part of this Annual Report.
(2) Financial Statement Schedules - The Financial Statement
Schedules listed on the accompanying Index to Financial Statements and
Schedules are 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 October 6, 1995, the Company filed one
current report on Form 8-K dated September 28, 1995, reporting item
No. 5 "Other Events," in which the Company reported that on September
20, 1995 it had amended the rights agreement between the Company and
State Street Bank & Trust Company.
-42-
<PAGE>
COPLEY PROPERTIES, INC.
-----------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
(Information Required by Item 8 of Form 10-K)
FINANCIAL STATEMENTS
--------------------
The consolidated balance sheets as of December 31, 1995 and 1994, the
related statements of operations and cumulative deficit and statements of
cash flows for the years ended December 31, 1995, 1994, and 1993, together
with the applicable report of independent public accountants, are included
in Item 8.
SCHEDULES
---------
Schedule III - Real Estate and Accumulated Depreciation -- December 31,
1995
Schedule IV - Mortgage Loans on Real Estate -- December 31, 1995
All other schedules have been omitted because they are inapplicable, not
required or the information is included in the financial statements or
notes thereto.
-43-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Page
Number Number
- ------ ------
<S> <C> <C>
2 Agreement and Plan of Merger dated as of *
February 12, 1996 between Copley Properties,
Inc. and EastGroup Properties.
3 (i) Articles of Incorporation. Restated *
Certificate of Incorporation of Copley
Properties, Inc. dated June 24, 1985;
Certificate of Amendment to the Certificate of
Incorporation of Copley Properties, Inc. dated
May 9, 1990; Certificate of Amendment to the
Restated Certificate of Incorporation of
Copley Properties, Inc. dated June 16, 1994.
3 (ii) By-Laws. By-Laws of Copley Properties, Inc. *
as amended to date.
4 Rights Agreement dated as of June 28, 1990 *
between Copley Properties, Inc. and State
Street Bank & Trust Company as amended
September 20, 1995.
23.1 Consent from Independent Accountants 46
23.2 Consent from Independent Accountants 47
</TABLE>
* Previously filed and incorporated herein by reference.
-44-
<PAGE>
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 PROPERTIES, INC.
Date: May 9, 1996 By: /s/ Daniel C. Mackowiak
------------------------
Daniel C. Mackowiak
Vice President and Treasurer and
Principal Financial and Accounting
Officer of the Company
-45-
<PAGE>
Exhibit 23.1
[LETTERHEAD OF WOLPOFF & COMPANY, LLP]
April 26, 1996
Board of Directors
Copley Properties, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Dear Board of Directors:
We have audited the financial statements of Columbia Place (A Tenancy-in-Common)
as of December 31, 1995, and for the year then ended and have issued our report
thereon. We hereby consent to specific reference to our firm as auditors of
Columbia Place (A Tenancy-in-Common) in your report on the financial statements
of Copley Properties, Inc. for the year ended December 31, 1995.
We also confirm that with respect to Columbia Place (A Tenancy-in-Common), we
are independent public accountants under the requirements of the American
Institute of Certified Public Accountants.
Sincerely,
/s/ Wolpoff & Company LLP
WOLPOFF & COMPANY, LLP
-46-
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report to
the Board of Directors of Copley Properties, Inc. dated March 15, 1996, included
in or made a part of Form 10-K/A-1 for Copley Properties, Inc. for the fiscal
year ended December 31, 1995.
/s/ Arthur Andersen LLP
Boston, Massachusetts
May 9, 1996
-47-
