<PAGE>
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
- --------------------------------------------------------------------------------
For Quarter Ended September 30, 1998 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)
225 Franklin Street, 25th Fl. 02110
Boston, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(617) 261-9000
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
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COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1998
PART I
FINANCIAL INFORMATION
---------------------
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COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 289,188 $5,259,413
Short-term investments - 299,629
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$ 289,188 $5,559,042
========== ==========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 26,654 $ 56,260
Accrued management fee - 9,017
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Total liabilities 26,654 65,277
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Partners' capital (deficit):
Limited partners ($370 per
unit; 100,000 units
authorized, 34,581
units issued and
outstanding) 348,185 5,579,666
General partners (85,651) (85,901)
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Total partners' capital 262,534 5,493,765
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$289,188 $5,559,042
========== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998 September 30, 1997 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ - $ - $ 130,229 $ 395,968
Property operating expenses - - (37,417) (100,791)
Depreciation and amortization - - (29,772) (91,751)
------------------ ------------------ ------------------ ------------------
- - 63,040 203,426
Joint venture earnings - - - 76,597
Gain on sale of property - - - 507,980
Total real estate operations - - 63,040 788,003
Interest on cash equivalents
and short term investments 25,875 174,857 13,627 65,898
------------------ ------------------ ------------------ ------------------
Total investment activity 25,875 174,857 76,667 853,901
------------------ ------------------ ------------------ ------------------
PORTFOLIO EXPENSES
MANAGEMENT FEE - - 9,017 67,366
GENERAL AND ADMINISTRATIVE 16,285 58,608 23,624 75,040
------------------ ------------------ ------------------ ------------------
16,285 58,608 32,641 142,406
------------------ ------------------ ------------------ ------------------
NET INCOME $ 9,590 $ 116,249 $ 44,026 $ 711,495
================== ================== ================== ==================
NET INCOME PER
LIMITED PARTNERSHIP UNIT $ .27 $ 3.33 $ 1.26 $ 20.37
================== ================== ================== ==================
CASH DISTRIBUTIONS PER
LIMITED PARTNERSHIP UNIT $ - $ 2.61 $ 13.52 $ 174.62
================== ================== ================== ==================
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING THE PERIOD 34,581 34,581 34,581 34,581
================== ================== ================== ==================
</TABLE>
(SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS)
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998 September 30, 1997 September 30, 1997
------------------ ------------------ ------------------ ------------------
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 $(85,746) $5,595,002 $(85,901) $5,579,666 $(97,153) $4,465,640 $(100,300) $9,375,845
Cash
distributions - (5,256,312) (912) (5,346,568) (4,723) (467,535) (8,251) (6,038,534)
Net income 95 9,495 1,162 115,087 440 43,586 7,115 704,380
-------- ---------- -------- ---------- -------- ---------- --------- ----------
Balance at
end of period $(85,651) $ 348,185 $(85,651) $ 348,185 $(101,436) $4,041,691 $(101,436) $4,041,691
======== ========== ======== ========== ========= ========== ========= ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
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<S> <C> <C>
Net cash provided by operating
activities $ 85,317 $ 331,607
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Cash flows from investing activities:
Net proceeds from sale of property - 5,086,239
Increase in deferred disposition fees - 160,740
Investment in property - (36,385)
Decrease in short-term
investments, net 291,938 2,653
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Net cash provided by
investing activities 291,938 5,213,247
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Cash flows from financing activity:
Distributions to partners (5,347,480) (6,046,785)
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Net decrease in cash
and cash equivalents (4,970,225) (501,931)
Cash and cash equivalents:
Beginning of period 5,259,413 1,166,590
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End of period $ 289,188 $ 664,659
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</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
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, 1998 and December 31, 1997 and the
results of its operations, its cash flows and partners' capital (deficit) for
the three and nine months ended September 30, 1998 and 1997. These adjustments
are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1997 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
Copley 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.
The Partnership commenced operations in August 1986, and acquired five real
estate investments prior to the end of 1987. The Partnership sold its remaining
investment in October 1997 and therefore intends to liquidate and dissolve in
early 1999.
NOTE 2 -PROPERTY
- ----------------
Effective January 1, 1996, the East Anaheim Distribution Center joint
venture was dissolved and ownership of the venture's net assets was assigned to
the Partnership. Accordingly, as of that date, the investment was accounted for
as a wholly-owned property. The carrying value of the joint venture investment
at conversion ($3,763,820) was allocated to land, building and improvements, and
other net operating assets. The property was sold on October 24, 1997 for gross
consideration of $4,700,000. The Partnership received net proceeds of
$4,677,970, after closing costs, and recognized a gain of $929,847 ($26.89 per
limited partnership unit) on the sale.
NOTE 3 - REAL ESTATE JOINT VENTURES
- -----------------------------------
On May 2, 1997, the Medlock Oaks buildings, which were owned by the
Partnership (57%) and an affiliate (43%), were sold for a total sales price of
$9,402,779. The Partnership received net proceeds of $5,246,979, after closing
costs, and recognized an adjusted gain of $678,548 ($19.43 per limited
partnership unit) at December 31, 1997 on the sale. On May 29, 1997, the
Partnership made a capital distribution of $5,221,731 ($151 per limited
partnership unit) from the proceeds of the sale.
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
The following Results of Operations relate to the Medlock Oaks joint
venture:
<TABLE>
<CAPTION>
Results of Operations
---------------------
Period From
Nine Months Ended January 1, 1997
September 30, 1998 Through May 2, 1997
------------------ -------------------
<S> <C> <C>
Revenue
Rental income $ - $ 400,861
Other - 735
------------------ ------------------
- 401,596
------------------ ------------------
Expenses
Depreciation and amortization - 156,940
Operating expenses - 112,258
------------------ ------------------
- 269,198
------------------ ------------------
Net income $ - $ 132,398
================== ==================
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and its affiliate on behalf of their various financing arrangements
with the joint venture.
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
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. In connection with two sales in
1996, two sales in 1997, and a partial liquidating distribution in the third
quarter of 1998, capital of $21,786,030 ($630 per limited partnership unit) has
been returned to the limited partners, reducing the adjusted capital
contribution to $370 per unit.
At September 30, 1998, the Partnership had $289,188 in cash and cash
equivalents. The Partnership intends to liquidate and dissolve in early 1999.
The source of future liquidity will be cash generated by the Partnership's
invested cash and cash equivalents. Distributions of cash from operations were
made at an annualized rate of 2.0% for the first two quarters of 1997; the first
quarter 1997 distribution was based on the adjusted capital contribution of $673
per unit; the second quarter 1997 distribution was based on the weighted average
adjusted capital contribution of $619.31. Operating cash distributions were
discontinued effective the first quarter of 1998, as a result of the cash flow
decrease resulting from the sale of the Partnership's remaining investment
during the fourth quarter of 1997.
The Year 2000 Issue is a result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business operations.
The Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services which are dependent on the
use of computers. The Partnership has obtained assurances from AEW Capital
Management that:
. AEW Capital Management has developed a Year 2000 Plan (the "Plan")
consisting of five phases: inventory, assessment, testing,
remediation/repair and certification.
. As of September 30, 1998, AEW Capital Management had completed the
inventory and assessment phases of this Plan and had commenced the
testing and remediation/repair of internal systems.
. AEW Capital Management expects to conclude the internal testing,
remediation/repair and certifications of its Plan no later than
December 31, 1998.
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
The Partnership also relies on joint venture partners and/or property
managers to supply financial and other data with respect to its real properties.
The Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements. To date, the
Partnership is not aware of any problems that would materially impact its
results of operations, liquidity or capital resources. However, the Partnership
has not yet obtained written assurances that these providers would be Year 2000
compliant.
The Partnership currently does not have a contingency plan in the event of
a particular provider or system not being Year 2000 compliant. Such a plan will
be developed if it becomes clear that a provider (including AEW Capital
Management) is not going to achieve its scheduled compliance objectives. The
inability of one of these providers to complete its Year 2000 resolution process
could materially impact the Partnership. In addition, the Partnership is also
subject to external forces that might generally affect industry and commerce,
such as utility or transportation company Year 2000 compliance failures and
related service interruptions.
Results of Operations
As discussed above, the Partnership's last real estate investment
(East Anaheim) was sold in October 1997. Therefore, no comparative real estate
investment results for the periods ended September 30, 1997 and 1998 are
presented.
For the three and nine months ended September 30, 1998, interest on
cash equivalents and short-term investments increased by approximately $110,000
and $12,000 between the respective periods due to higher invested balances in
1998 as a result of the retention of East Anaheim sale proceeds, which were
distributed as part of this quarter's capital distribution mentioned above.
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
decreased approximately $7,300 and $16,400 for the three and nine month periods
of 1998 as compared to the same periods of 1997, primarily due to decreases in
accounting fees and printing costs consistent with the impending dissolution of
the Partnership during 1998.
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. No management fees were incurred
during the three and nine month periods of 1998 concurrent with the
discontinuance of operating cash distributions discussed above.
<PAGE>
COPLEY REALTY INCOME PARTNERS 1;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1998
PART II
OTHER INFORMATION
-------------------
Items 1-5 Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: (27) Financial Data Schedule
b. Reports on Form 8-K: No current reports on Form 8-K were
filed during the quarter ended September 30, 1998.
<PAGE>
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, 1998
/s/ J. Christopher Meyer III
-------------------------------
J. Christopher Meyer III
President, Chief Executive Officer and Director
of Managing General Partner,
First Income Corp.
November 13, 1998
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Treasurer and Principal Financial and Accounting
Officer of Managing General Partner, First Income
Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 289,188
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 289,188
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 289,188
<CURRENT-LIABILITIES> 26,654
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 262,534
<TOTAL-LIABILITY-AND-EQUITY> 289,188
<SALES> 0
<TOTAL-REVENUES> 174,857
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 58,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 116,249
<INCOME-TAX> 0
<INCOME-CONTINUING> 116,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,249
<EPS-PRIMARY> 3.33
<EPS-DILUTED> 3.33
</TABLE>
