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 September 30, 1995 Commission File Number 0-15430
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2893293
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
399 Boylston Street, 13th Fl.
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
- ----------------------------------------------------------------------------
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 1;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1995
PART I
FINANCIAL INFORMATION
----------------------
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Property, net $ 13,808,924 $ 16,284,661
Joint ventures 9,112,240 9,326,690
--------------- ---------------
22,921,164 25,611,351
Cash and cash equivalents 1,058,627 1,638,294
Short-term investments 1,070,243 299,205
Interest and rent receivable 609,655 721,961
--------------- ---------------
$ 25,659,689 $ 28,270,811
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loan $ 4,269,830 $ 4,363,307
Accounts payable 354,205 274,141
Accrued management fee 51,820 60,456
Unearned rent 149,263 --
--------------- ---------------
Total liabilities 4,825,118 4,697,904
--------------- ---------------
Partners' capital (deficit):
Limited partners ($1,000 per
unit; 100,000 units authorized,
34,581 units issued and
outstanding) 20,932,360 23,643,312
General partners (97,789) (70,405)
--------------- ---------------
Total partners' capital 20,834,571 23,572,907
--------------- ---------------
$ 25,659,689 $ 28,270,811
=============== ===============
<FN>
(See accompanying notes to financial statements)
</TABLE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>INVESTMENT ACTIVITY
INVESTMENT ACTIVITY
Property rentals $ 546,986 $ 1,718,649 $ 635,690 $ 1,903,212
Depreciation and amortization (123,419) (370,258) (123,419) (370,258)
Interest and other expenses (137,352) (355,825) (133,742) (354,455)
--------------- --------------- ---------------- ---------------
286,215 992,566 378,529 1,178,499
Joint venture earnings 128,048 397,767 135,145 395,985
Investment valuation allowance (2,200,000) (2,200,000) -- --
--------------- --------------- ---------------- ---------------
Total real estate activity (1,785,737) (809,667) 513,674 1,574,484
Interest on cash equivalents
and short term investments 29,580 84,780 19,290 49,001
--------------- --------------- ---------------- ---------------
Total investment activity (1,756,157) (724,887) 532,964 1,623,485
--------------- --------------- ---------------- ---------------
Portfolio Expenses
Management fee 51,820 164,096 60,456 181,369
General and administrative 37,712 102,838 46,939 107,659
--------------- --------------- ---------------- ---------------
89,532 266,934 107,395 289,028
--------------- --------------- ---------------- ---------------
Net Income (loss) $ (1,845,689) $ (991,821) $ 425,569 $ 1,334,457
=============== =============== ================ ===============
Net income (loss) per
limited partnership unit $ (52.84) $ (28.39) $ 12.18 $ 38.20
=============== =============== ================ ===============
Cash distributions per
limited partnership unit $ 15.00 $ 50.00 $ 17.50 $ 52.50
=============== =============== ================ ===============
Number of limited partnership
units outstanding during the period 34,581 34,581 34,581 34,581
=============== =============== ================ ===============
<FN>
(See accompanying notes to financial statements)
</TABLE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1995 September 30, 1995 September 30, 1994 September 30, 1994
------------------- ------------------- ------------------- ------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
period $ (74,092) $23,278,307 $ (70,405) $23,643,312 $ (64,403) $24,237,535 $ (61,266) $24,548,070
Cash
distributions (5,240) (518,715) (17,466) (1,729,049) (6,113) (605,167) (18,339) (1,815,501)
Net income (loss) (18,457) (1,827,232) (9,918) (981,903) 4,256 421,313 13,345 1,321,112
--------- ---------- --------- ---------- --------- ---------- ---------- ----------
Balance at
end of period $ (97,789) $20,932,360 $ (97,789) $20,932,360 $ (66,260) $24,053,681 $ (66,260) $24,053,681
========== =========== ========== =========== ========== =========== =========== ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 2,009,814 $ 1,957,382
-------------- --------------
Cash flows from investing activities:
Investment in property -- (10,566)
Repayment of loan by joint venture 14,188 12,716
Increase in short-term
investments, net (763,677) (41,843)
------------ ------------
Net cash used in investing
activities (749,489) (39,693)
------------ ------------
Cash flows from financing activity:
Reduction of mortgage loan (93,477) (83,147)
Distributions to partners (1,746,515) (1,833,840)
------------ ------------
Net cash used in financing
activities (1,839,992) (1,916,987)
------------ -----------
Net increase (decrease) in cash
and cash equivalents (579,667) 702
Cash and cash equivalents:
Beginning of period 1,638,294 1,210,688
------------ ------------
End of period $ 1,058,627 $ 1,211,390
============== ==============
<FN>
(See accompanying notes to financial statements)
</TABLE>
COPLEY REALTY INCOME PARTNERS 1;
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 September 30, 1995 and December 31, 1994 and the
results of its operations, its cash flows and changes in partners' capital
(deficit) for the interim periods ended September 30, 1995 and 1994. These
adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1994 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
Copley Realty Income Partners 1; 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.
It commenced operations in August 1986, and acquired the four real estate
investments it currently owns prior to the end of 1987. It intends to dispose
of its investments within nine years of their acquisition, and then liquidate;
however, the managing general partner could extend the investment period if it
is in the best interest of the limited partners.
NOTE 2 -PROPERTY
- ----------------
The following is a summary of the Partnership's investments in property:
September 30, 1995 December 31, 1994
------------------ -----------------
Land $ 7,973,584 $ 7,973,584
Buildings and improvements 12,085,214 12,085,214
Investment valuation allowance (2,200,000) --
Other net assets 85,773 --
Accumulated depreciation (4,135,647) (3,774,137)
-------------- ----------------
Net carrying value $ 13,808,924 $ 16,284,661
============== ================
The Partnership's net investment in the Zehntel and United Exposition
properties was $9,862,299 and $3,946,625, respectively, at September 30, 1995
and $12,221,487 and $4,063,174, respectively, at December 31, 1994.
The Partnership's Zehntel property, located in Walnut Creek, California,
was listed for sale during August 1995. The indication from the market is that
the Partnership will not recover its net carrying value in this asset.
Accordingly, during the third quarter of 1995, the Partnership recognized an
investment valuation allowance of $2,200,000 through a charge to net income.
NOTE 3 - REAL ESTATE JOINT VENTURES
- -----------------------------------
The following summarized financial information is presented in the
aggregate for the investments in joint ventures:
Assets and Liabilities
----------------------
September 30, 1995 December 31, 1994
------------------ -----------------
Assets
Real property, at cost less
accumulated depreciation
of $3,347,138 and $2,988,063,
respectively $ 11,700,450 $ 11,944,203
Other 404,266 446,568
------------- -------------
12,104,716 12,390,771
Liabilities 326,188 159,604
------------- -------------
Net Assets $ 11,778,528 $ 12,231,167
============ ============
Results of Operations
----------------------
Nine months ended September 30,
--------------------------------
1995 1994
---- ----
Revenue
Rental income $ 1,287,645 $ 1,323,796
Other 4,412 3,967
------------ --------------
1,292,057 1,327,763
------------ -------------
Expenses
Depreciation and amortization 422,569 445,052
Operating expenses 300,182 288,526
------------ -------------
722,751 733,578
------------ -------------
Net income $ 569,306 $ 594,185
============= ==============
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures.
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1995 were made on October 26, 1995 in the aggregate amount of
$523,954 ($15.00 per limited partnership unit).
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership completed its offering of units of limited partnership
interest in April 1987, and a total of 34,581 units were sold. The Partnership
received proceeds of $30,812,718, net of selling commissions and other offering
costs, which have been invested in real estate, used to pay related acquisition
costs or retained as working capital reserves.
At September 30, 1995, the Partnership had $2,128,870 in cash, cash
equivalents, and short-term investments, of which $523,954 was used for cash
distributions to partners on October 26, 1995; the remainder is being retained
for working capital reserves. The source of future liquidity and cash
distributions to partners will be cash generated by the Partnership's real
estate and short-term investments. Distributions of cash from operations
relating to the first three quarters of 1995 were made at the annualized rates
of 7.0%, 6.0% and 6.0%, respectively, on a capital contribution of $1,000 per
unit. The annualized distribution rate for the comparable prior year quarters
was 7.0%. The decrease in the distribution rate during the second quarter was
the result of the restructuring and extension of a lease at the Zehntel
property, as discussed below under "Operating Factors".
The carrying value of real estate investments in the financial statements
is at cost or is reduced to its lower net fair market value if the investment's
carrying value is determined not to be recoverable through expected undiscounted
future cash flows. Carrying value may be greater or less than current appraised
value. At September 30, 1995, the aggregate appraised value of two of the
Partnership's investments exceeded their related carrying value by approximately
$1,700,000. The total appraised value of the remaining two investments at
September 30, 1995 was approximately $300,000 less than their total carrying
value. 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.
Results of Operations
- ---------------------
Form of Real Estate Investments
The United Exposition and Zehntel investments are wholly-owned properties
fully leased by single tenants. The tenants are responsible for substantially
all property operating expenses. The Anaheim Distribution Center investment is
structured as a joint venture with a real estate management/development firm.
The Medlock Oaks investment is structured as a joint venture with an affiliate
of the Partnership and is managed by a third-party property manager.
Operating Factors
The Zehntel investment, which is comprised of two R&D buildings totaling
145,000 square feet, is fully leased to a single tenant through June, 1996.
During the third quarter of 1995, the Partnership signed a lease extension with
the lessee on the 60,000 square foot building through December, 2000. The
extension is retroactive to April 1, 1995, and is at a lower rental rate than
under the previous lease. This same tenant has been subleasing the 85,000
square foot building and, upon expiration of the original lease in June, 1996,
the Partnership will enter into a direct lease with the sublease tenant in this
building. During the third quarter, the Partnership listed this property for
sale. The indication from the market is that the Partnership will not recover
its carrying value in this asset. Accordingly, the Partnership reduced the
carrying value to its net fair market value through a charge to operations of
$2,200,000.
Occupancy at Medlock Oaks remained at 97% during the third quarter of 1995.
(Occupancy was 100% at December 31, 1994 and 99% at September 30, 1994.)
Occupancy at Anaheim Distribution Center has remained at 100% since September
30, 1994.
During the first quarter of 1995, the Partnership initiated discussions
with its joint venture partner in Anaheim Distribution Center to dissolve the
joint venture. These negotiations are complete, and the dissolution is
expected to be effective January 1, 1996.
Investment Results
The investment valuation allowance of $2,200,000 recognized during the
third quarter of 1995 relates to the reduction in the carrying value of the
Zehntel property. Exclusive of the investment valuation allowance, total real
estate activity for the first nine months of 1995 decreased by approximately
$184,000, or 12% as compared to the same period of 1994. This decrease was
primarily due to a reduction in rental revenue from the Zehntel investment as a
result of the aforementioned lease restructure and extension.
Earnings from joint venture investments were $397,767 and $395,985 for the
first nine months of 1995 and 1994, respectively. The slight increase in 1995
is due to an increase in net operating income at Anaheim Distribution Center of
$37,123, due primarily to increased average occupancy during 1995, partially
offset by a decrease in net operating income at Medlock Oaks of $35,341 as a
result of the occupancy decrease.
Interest on cash equivalents and short-term investments increased by
approximately $36,000 between the two nine-month periods due to higher invested
balances, as well as higher short-term yields.
Cash flow provided by operations increased between the two nine-month
periods by approximately $52,000, while investment activity, exclusive of the
investment valuation allowance, declined by approximately $148,000. This
difference is primarily due to rent prepayments at Zehntel of approximately
$149,000. In addition, cash flow during 1995 from Anaheim Distribution Center
and Medlock Oaks increased as compared to 1994, due to the funding of tenant
improvements with property level cash flow early in 1994.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, accounting, printing and servicing agent fees. These expenses for
the first nine months of 1995 decreased by approximately $5,000 as compared to
the same period in 1994 primarily due to a decrease in printing costs, partially
offset by increased professional fees.
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. Management fees decreased between
the two nine-month periods due to the decrease in distributable cash flow.
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1995
PART II
OTHER INFORMATION
-------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No reports on Form 8-K
were filed during the quarter ended September 30,
1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
(Registrant)
November 13, 1995 -----------------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
First Income Corp.
November 13, 1995 -----------------------------------------
Marie A. Welch
Investment Officer and Chief Accounting
Officer of Managing General Partner,
First Income Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1058627
<SECURITIES> 1070243
<RECEIVABLES> 609655
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2738525
<PP&E> 22921164
<DEPRECIATION> 0
<TOTAL-ASSETS> 25659689
<CURRENT-LIABILITIES> 555288
<BONDS> 4269830
<COMMON> 0
0
0
<OTHER-SE> 20834571
<TOTAL-LIABILITY-AND-EQUITY> 25659689
<SALES> 0
<TOTAL-REVENUES> 2201196
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 637192
<LOSS-PROVISION> 2200000
<INTEREST-EXPENSE> 355825
<INCOME-PRETAX> 991821
<INCOME-TAX> 0
<INCOME-CONTINUING> 991821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 991821
<EPS-PRIMARY> 28.39
<EPS-DILUTED> 28.39
</TABLE>
