<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 0-17807
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2988542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Franklin Street, 25th FL.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 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 |__|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
No voting stock is held by nonaffiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1 of ____ pages (including exhibits). Exhibit Index on Page ____.
<PAGE>
Part I
Item 1. Business.
Copley Pension Properties VI; A Real Estate Limited Partnership (the
"Partnership") (formerly New England Pension Properties VI; A Real Estate
Limited Partnership) was organized under the Uniform Limited Partnership Act of
the Commonwealth of Massachusetts on October 16, 1987, to invest primarily in
newly constructed and existing income-producing real properties.
The Partnership was initially capitalized with contributions of $2,000 in
the aggregate from Sixth Copley Corp. (the "Managing General Partner") and GCOP
Associates Limited Partnership (the "Associate General Partner") (collectively,
the "General Partners") and $10,000 from Copley Real Estate Advisors, Inc. (the
"Initial Limited Partner"). The Partnership filed a Registration Statement on
Form S-11 (the "Registration Statement") with the Securities and Exchange
Commission on October 26, 1987, with respect to a public offering of 80,000
units of limited partnership interest at a price of $1,000 per unit (the
"Units") with an option to sell up to an additional 80,000 Units (an aggregate
of $160,000,000). The Registration Statement was declared effective on January
20, 1988.
The first sale of Units occurred on July 28, 1988, at which time the
Initial Limited Partner withdrew its contribution from the Partnership.
Investors were admitted to the Partnership thereafter at monthly closings; the
offering terminated and the last group of subscription agreements was accepted
by the Partnership on December 31, 1988. At the termination of the offering, a
total of 48,788 Units had been sold, a total of 6,396 investors had been
admitted as limited partners (the "Limited Partners") and a total of $48,511,620
net of discounts had been contributed to the capital of the Partnership. The
remaining 111,212 Units were de-registered on February 10, 1989.
As of December 31, 1996 the Partnership is invested in the five real
property investments described below. During 1990, a joint venture, in which the
Partnership was a partner, sold its interest in a sixth real estate investment
located in Chino Hills, California. The Partnership made a distribution to the
Limited Partners in the amount of $48.17 per unit. During 1994, a joint venture,
in which the Partnership was a partner, sold its interest in a seventh
investment located in Phoenix, Arizona. The Partnership made a distribution to
the Limited Partners of $182.85 per unit. The Partnership has no current plans
to renovate, improve or further develop any of its real property. In the opinion
of the Managing General Partner of the Partnership, the properties are
adequately covered by insurance.
The Partnership has no employees. Services are performed for the
Partnership by the Managing General Partner and affiliates of the Managing
General Partner.
A. Industrial Building in Carson, California ("Wilmington Industrial").
On July 18, 1988 the Partnership acquired a 60% interest in a joint venture
with an affiliate of The Hewson Company. On November 15, 1989, the Partnership
agreed to increase its maximum commitment from $6,685,000 to $7,285,000. On
February 1, 1991, the Partnership agreed to increase its maximum commitment to
$8,085,000. The Partnership made capital contributions totaling $7,774,402. As
of December 31, 1991, because of the developer partner's inability to fund its
share of capital contributions, the Partnership assumed 100% ownership of the
joint venture's assets, which consist primarily of approximately 5.77 acres of
land in Carson, California and an approximately 115,732 square foot multi-tenant
industrial building located thereon. As of December 31, 1996, the building was
100% leased.
<PAGE>
B. Industrial Building in Dallas, Texas ("Stemmons Industrial").
On December 7, 1988, the Partnership acquired a 75% interest in a joint
venture with an affiliate of Trammell Crow Company. The Partnership has invested
$5,307,504 in this asset. The joint venture agreement entitled the Partnership
to receive monthly priority return payments at the rate of 10% per annum. Up to
25% of the total priority return for any year was permitted to accrue if
sufficient cash was not available and specified occupancy conditions were met.
The joint venture agreement also entitled the Partnership to receive 75% of the
remaining cash flow and 75% of sale and refinancing proceeds following the
return of the Partnership's equity. Effective July 1, 1994, the joint venture
was dissolved and ownership of the joint venture assets was assigned to the
Partnership.
The Partnership now owns approximately 8.5 acres of land improved with a
168,478 square foot industrial building, which was developed in two phases. In
1988, the joint venture purchased a 123,620 square foot building and then
renovated this property. In 1991, a 44,858 square foot addition to the building
was completed. As of December 31, 1996, the building was vacant.
C. Apartment Complex in Frederick, Maryland ("Waterford Apartments").
On March 20, 1989 the Partnership acquired a 48.75% interest in a joint
venture formed with Copley Pension Properties VII; A Real Estate Limited
Partnership, an affiliate of the Partnership (the "Affiliate") with a 16.25%
interest, and Frederick Bozzuto Limited Partnership. On October 23, 1990 the
Partnership agreed to increase its maximum commitment from $9,000,000 to
$14,100,000 of which $10,575,000 is considered Senior Capital and $3,525,000 is
considered Junior Capital. As of December 31, 1996, the Partnership had
contributed $14,099,978 to the capital of the joint venture. The joint venture
agreement entitles the Partnership and the Affiliate to receive a preferred
return on their respective invested capital at the rate of 10.09%, per annum.
Such preferred return will be payable currently until the Partnership and the
Affiliate have received an aggregate of $687,471; thereafter, the preferred
return on the Senior Capital will be payable currently and the preferred return
on the Junior Capital will accrue and bear interest at the rate of 10.09% per
annum, compounded monthly, if sufficient cash flow is not available therefor. In
the event of a sale or refinancing prior to the tenth anniversary of the joint
venture agreement, the Partnership would be entitled to have 25% of its
contribution repaid without premium and to have the remaining 75% repaid subject
to a premium designed to preserve the stipulated rate of return through the
ninth anniversary of the joint venture agreement. The joint venture agreement
also entitles the Partnership to receive 48.75% of remaining cash flow and
48.75% of sale and refinancing proceeds following the return of the
Partnership's and the Affiliate's equity.
The joint venture owns approximately 16.35 acres of land improved with an
approximately 295,074 square foot, 314-unit apartment complex, which was
developed in two phases between 1989 and 1991. As of December 31, 1996, this
complex was approximately 97% leased.
<PAGE>
D. Industrial Building, Petaluma, California ("White Phonic").
On April 30, 1990, the Partnership acquired a 50% interest in a joint
venture with a partnership whose principals are William White and George Vila.
As of December 31, 1996, the Partnership had contributed $3,294,860 to the
capital of the joint venture. The maximum commitment is $3,450,000. The joint
venture agreement entitles the Partnership to receive monthly preferred return
payments at the rate of 10% per annum, of which a minimum of 9% is payable
currently. If sufficient cash flow is not available therefor, up to 1% per annum
may accrue and bear interest at the rate of 10% per annum for up to ten years.
The joint venture agreement also entitles the Partnership to receive 50% of the
remaining cash flow and 50% of sale and refinancing proceeds following the
return of the Partnership's equity.
The joint venture owns approximately 2.91 acres of land and has completed
construction thereon of a single-story light industrial building containing
approximately 35,100 square feet. As of December 31, 1996, the building was 100%
leased to a single tenant.
E. Industrial Building, Itasca, Illinois ("Prentiss Copystar").
On May 23, 1991, the Partnership acquired a 51.75% interest in a joint
venture formed with Copley Pension Properties VII; A Real Estate Limited
Partnership, an affiliate of the Partnership (the "Affiliate") with a 23.25%
interest, and with an affiliate of Prentiss Properties, Ltd. As of December 31,
1996, the Partnership had contributed $2,296,411 to the capital of the joint
venture, of which $63,563 had been returned to the Partnership. Of the capital
contributed and not returned, $1,542,848 is characterized as Senior Capital and
$690,000 is characterized as Junior Capital. The joint venture agreement
entitles the Partnership to receive a preferred compounded monthly return of 11%
per annum of which the return on Senior Capital will be payable currently and
the return on Junior Capital may accrue and compound monthly if sufficient cash
flow is not available therefor. If the Senior Capital is repaid prior to the
termination of the joint venture, the Partnership will be entitled to receive a
return on the Senior Capital at the lesser of 11% per annum or the treasury rate
for treasury bonds having a maturity date coinciding with the termination of the
joint venture, plus 75 basis points. The joint venture agreement also entitles
the Partnership to receive 51.75% of the net proceeds of sales and financing
after return of its capital and 51.75% of cash flow remaining after payment of
the preferred return.
The joint venture owns approximately 3.75 acres of land in Itasca, Illinois
and during 1991 completed construction thereon of an approximately 70,535 square
foot single-story industrial building. As of December 31, 1996, the building was
100% leased to a single tenant for a term which expires in 1999. The tenant has
an option that commenced in September, 1995 to purchase the facility at fair
market value. As of December 31, 1996, the tenant has not expressed any interest
in exercising the option.
<PAGE>
Item 2. Properties
The following table sets forth the annual realty taxes for the
Partnership's properties and information regarding tenants who occupy 10% or
more of gross leasable area (GLA) in the Partnership's properties:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Number
of
Tenants
Estimated with Annual Line of
1997 10% Square Contract Business
Annual or Feet of Rent of
Realty More Names (s) of Each per Lease Renewal Principal
Property Taxes of GLA Tenant(s) Tenant Sq. Ft. Expiration Options Tenants
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial Building $ 85,000 6 Practical 26,647 $4.20 Jun, 2008 N/A Packaging
in Carson, CA Packaging
Seaway 12,283 $5.16 Apr, 1999 One 3 year Distribution
International
O-Super Express 18,253 $4.80 Jun, 2000 N/A Distribution
Del Monte 26,545 $4.80 Dec, 1999 Two 5 year Fruit and
Fruit
Products
Continental Wire 11,682 $4.44 Dec, 1999 N/A Wire
Fabrication
Haggen Dazs 12,000 $6.24 Dec, 1998 N/A Ice Cream
Industrial Building $105,850 N/A N/A N/A N/A N/A N/A N/A
in Dallas, TX
Apartment Complex in $274,380 N/A N/A N/A N/A N/A N/A N/A
Frederick, MD
Industrial Building, $ 39,600 1 Phonic Ear 35,100 $12.28 May, 2002 Yes Hearing
Petaluma, CA Products
Industrial Building, $ 72,925 1 Mita Copystar of 70,535 $5.00 Sept, 1999 None Photocopier
Itasca, IL America, Inc. Distributor
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following table sets forth for each of the last five years the gross
leasable area, occupancy rates, rental revenue, and net effective rent for the
Partnership's properties:
- --------------------------------------------------------------------------------
Gross Rental Net
Leasable Year-End Revenue Effective
PROPERTY Area Occupancy Recognized Rent ($/sf/yr)*
- --------------------------------------------------------------------------------
Industrial Building in
Carson, CA
1992 115,732 100% $551,679 $ 4.77
1993 115,732 100% $639,297 $ 5.52
1994 115,732 100% $641,008 $ 5.54
1995 115,732 89% $620,300 $ 6.58
1996 115,732 100% $709,199 $ 7.08
Industrial Building in
Dallas, TX
1992 168,478 100% $550,996 $ 3.27
1993 168,478 100% $550,372 $ 3.27
1994 168,478 100% $551,000 $ 3.27
1995 168,478 82% $561,846 $ 3.49
1996 168,478 0% $ 72,074(1) $ 0.00
Apartment Complex in
Frederick, MD
1992 295,074 93% $2,283,698 $ 9.21
1993 295,074 91% $2,487,586 $ 9.16
1994 295,074 96% $2,551,410 $ 9.25
1995 295,074 94% $2,661,022 $ 9.57
1996 295,074 97% $2,726,498 $ 9.70
Industrial Building,
Petaluma, CA
1992 35,100 100% $481,875 $13.73
1993 35,100 100% $416,146 $11.86
1994 35,100 100% $416,146 $11.86
1995 35,100 100% $416,146 $11.86
1996 35,100 100% $416,146 $11.86
Industrial Building,
Itasca, IL
1992 70,535 100% $477,000 $ 6.76
1993 70,535 100% $467,000 $ 6.62
1994 70,535 100% $475,000 $ 6.73
1995 70,535 100% $479,000 $ 6.79
1996 70,535 100% $492,000 $ 6.98
- --------------------------------------------------------------------------------
* Net effective rent calculation is based on average occupancy during the
respective years.
(1) Temporary four month lease
<PAGE>
Following is a schedule of lease expirations for each of the next ten years
for the Partnership's properties based on the annual contract rent in effect at
December 31, 1996:
- --------------------------------------------------------------------------------
TENANT AGING REPORT
Percentage
of
Total Total Gross
# of Lease Square Annual Annual
Property Expirations Feet Rental Rental*
- --------------------------------------------------------------------------------
Industrial Building in
Carson, CA
1997 0 0 $0 0%
1998 3 46,939 $230,579 41%
1999 3 50,540 $242,664 43%
2000 1 18,253 $87,614 16%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
Industrial Building in
Dallas, TX
1997 0 0 $0 0%
1998 0 0 $0 0%
1999 0 0 $0 0%
2000 0 0 $0 0%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
Apartment Complex in
Frederick, MD
1996 N/A N/A N/A N/A
1997 N/A N/A N/A N/A
1998 N/A N/A N/A N/A
1999 N/A N/A N/A N/A
2000 N/A N/A N/A N/A
2001 N/A N/A N/A N/A
2002 N/A N/A N/A N/A
2003 N/A N/A N/A N/A
2004 N/A N/A N/A N/A
2005 N/A N/A N/A N/A
Industrial Building,
Petaluma, CA
1997 0 0 $0 0%
1998 0 0 $0 0%
1999 0 0 $0 0%
2000 0 0 $0 0%
2001 0 0 $0 0%
2002 1 35,100 $431,028 100%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Industrial Building,
Itasca, IL
1997 0 0 $0 0%
1998 0 0 $0 0%
1999 1 70,535 $352,675 100%
2000 0 0 $0 0%
2001 0 0 $0 0%
2002 0 0 $0 0%
2003 0 0 $0 0%
2004 0 0 $0 0%
2005 0 0 $0 0%
2006 0 0 $0 0%
- --------------------------------------------------------------------------------
* Does not include expenses paid by tenants.
<PAGE>
The following table sets forth for each of the Partnership's properties
the: (i) federal tax basis, (ii) rate of depreciation, (iii) method of
depreciation, (iv) life claimed for purposes of depreciation, and (v)
accumulated depreciation.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Rate of Life Accumulated
Entity / Property Tax Basis Depreciation Method in years Depreciation
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Apartment Complex in
Frederick, MD
- ----------------------
Building & Improvements $ 2,666,994 N/A 150% DB 15 $1,278,656
Building & Improvements 10,239,068 3.64% SL 27.5 2,296,416
----------- ----------
Total Depreciable Assets $12,906,062 $3,575,072
Industrial Building in
Petaluma, CA
- ----------------------
Building & Improvements $ 2,141,214 3.18% SL 31.5 $ 376,502
Building Improvements 295,617 6.67% SL 15 108,414
----------- ----------
Total Depreciable Assets $ 2,436,831 $ 484,916
Industrial Building in
Carson, CA
- ----------------------
Building $ 3,727,028 2.50% SL 40 $ 647,415
----------- ----------
Total Depreciable Assets $ 3,727,028 $ 647,415
Industrial Building in
Dallas, TX
- ----------------------
Building $ 4,124,597 2.50% SL 40 $ 734,169
----------- ----------
Total Depreciable Assets $ 4,124,597 $ 734,169
Industrial Building in
Itasca, IL
- ----------------------
Building $ 2,121,478 2.50% SL 40 $ 280,047
----------- ----------
Total Depreciable Assets $ 2,121,478 $ 280,047
Total Depreciable Assets $25,315,996 $5,721,619
=========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
SL = Straight Line
DB = Declining Balance
<PAGE>
Following is information regarding the competitive market conditions for
each of the Partnership's properties. This information has been gathered from
sources deemed reliable. However, the Partnership has not independently verified
the information and, as such, cannot guarantee its accuracy or completeness:
Industrial Building in Carson, California
This property is located within the greater Los Angeles industrial market,
consisting of 957 million square feet. More specifically, the property is
located within the South Bay industrial market, which consists of 194 million
square feet, or 20% of the total Los Angeles industrial market. As of September
30, 1996, the South Bay industrial vacancy rate was approximately 9.3%, slightly
higher than the Los Angeles Industrial market as a whole, which had a vacancy
rate of 8.5%.
Industrial Building in Dallas, Texas
This industrial building is located in the Dallas/Fort Worth industrial market.
As of December 31, 1996, this market had a total inventory of approximately 375
million square feet, which represents an increase of approximately 13.5 million
square feet from year end 1995. Overall vacancy at year end 1996 was 7.4%. It is
estimated that another 12.9 million square feet of industrial space is under
construction. The building is located within the North Stemmons submarket which
totals approximately 27 million square feet or 7% of the total Dallas/Fort Worth
inventory. At year end 1996, vacancy in this sub market was 9.8%.
Industrial Building, Itasca, Illinois.
This industrial building is located in the Metropolitan Chicago industrial
market. As of September 30, 1996, the overall market had a total inventory of
approximately 925 million square feet, approximately 63.7 million square feet,
or 6.9% of which, was vacant. This availability represents an increase of
roughly 8.3 million square feet from the period ending 12 months earlier, which
is due, in part, to new speculative construction delivered to the market with
limited pre-leasing activity. The Northeast Dupage submarket has currently 5.9
million square feet of available space, up 13% from 12 months ago but down 47%
from 1993 levels.
Apartment Complex in Frederick, Maryland.
This apartment complex is located in the southwestern section of the City of
Frederick, Maryland, which is approximately 50 miles from both Washington, D.C.
and Baltimore, Maryland. As of December, 1996, S.C. Back Associates, Inc.
surveyed eight competitive apartment properties within the Frederick market that
compete with the apartment complex. Overall occupancy in the market in December
1996 was 96.3%, which is up slightly from 95% a year earlier. The market is
relatively healthy as 204 new apartment units were absorbed in 1995 with a
relatively small impact on overall occupancy. Average asking rental rates have
also increased slightly.
<PAGE>
Industrial Building, Petaluma, California
This property is located in northern California in the town of Petaluma which is
within the Sonoma County industrial market. As of September 30, 1996, the Sonoma
County industrial market had a total inventory of approximately 17,800,000
square feet and an overall occupancy rate of 92.6%, which is down slightly from
the occupancy level of a year earlier at 93.3%. The Petaluma submarket is the
strongest submarket within Sonoma County with a current vacancy rate of 3% on a
base of approximately 4.1 million square feet; this vacancy level has remained
relatively constant over the last several years.
Item 3. Legal Proceedings.
The Partnership is not a party to, nor are any of its properties subject
to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There is no active market for the Units. Trading in the Units is sporadic
and occurs solely through private transactions.
As of December 31, 1996, there were 6,582 holders of Units.
The Partnership's Amended and Restated Agreement of Limited Partnership
dated July 28, 1988, as amended to date (the "Partnership Agreement"), requires
that any Distributable Cash (as defined therein) be distributed quarterly to the
partners in specified proportions and priorities. There are no restrictions on
the Partnership's present or future ability to make distributions of
Distributable Cash. For the year ended December 31, 1996, cash distributions
paid in 1996 or distributed after year end with respect to 1996 to the Limited
Partners as a group totaled $2,062,756. For the year ended December 31, 1995,
cash distributions paid in 1995 or distributed after year end with respect to
1995 to the Limited Partners as a group totaled $2,439,400.
Cash distributions exceeded net income in 1996 and net loss 1995 and
therefore resulted in a reduction of partners' capital. The Partnership incurred
a net loss in 1995, primarily as a result of a non-cash charge related to the
reduction in the carrying value of an investment. Cash distributions in 1996 and
1995 approximated cash provided by operating activities. Reference is made to
the Partnership's Statement of Changes in Partners' Capital (Deficit) and
Statement of Cash Flows in Item 8 hereof.
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
For Year For Year For Year For Year For Year
Ended or Ended or Ended or Ended or Ended or
as of as of as of as of as of
12/31/96 12/31/95(1) 12/31/94(2) 12/31/93 12/31/92
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,250,424 $ 2,662,452 $ 5,885,003 $ 2,674,282 $ 2,614,340
Net Income (Loss) $ 1,186,133 $ (206,204) $ 4,677,407 $ 1,778,797 $ 1,762,348
Net Income (Loss)
per Limited
Partnership Unit $ 24.07 $ (4.18) $ 94.91 $ 36.10 $ 35.76
Total Assets $29,099,680 $30,094,908 $32,766,653 $39,603,994 $40,482,576
Total Cash
Distributions
per Limited
Partnership
Unit, including
amounts
distributed
after year end
with respect to
the previous year $ 42.28 $ 50.00 $ 237.73 $ 54.74 $ 53.55
</TABLE>
(1) Net loss in 1995 includes a provision of $1,500,000 to recognize the
impairment of a real estate investment.
(2) Revenues and net income in 1994 include a gain of $2,869,376 on the sale of
the Lakewood property.
<PAGE>
Item 7
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 December 1988 and a total of 48,788 units were sold. The Partnership
received proceeds of $43,472,858, net of selling commissions and other offering
costs, which have been used for investment in real estate, for the payment of
related acquisition costs or retained as working capital reserves. The
Partnership currently holds the five investments described in Item 1 hereof. In
addition, one investment was sold in 1990 and another in 1994. As a result of
these sales, capital of $11,271,004 ($231.02 per limited partnership unit) has
been returned to the limited partners.
At December 31, 1996, the Partnership had $5,270,393 in cash, cash
equivalents and short-term investments, of which $520,898 was used for cash
distributions to partners on January 30, 1997; the remainder is being retained
as working capital reserves. The source of future liquidity and cash
distributions to partners will be primarily cash generated by the Partnership's
short-term and real estate investments. Based an adjusted capital contribution
of $768.98 per limited partnership unit, distributions of cash from operations
were made at the annualized rate of 5.5% for each quarter of 1996. Quarterly
distributions of cash from operations for 1995 were made at the annualized rate
of 6.5%. The decrease in the distribution rate is due to the decline in cash
flow from operations as a result of the vacancy at Stemmons Industrial.
The carrying value of real estate investments in the financial statements
at December 31, 1996 is at depreciated cost, or if the investment's carrying
value is determined not to be recoverable through expected undiscounted future
cash flows, the carrying value is reduced to estimated fair market value. The
fair market value of such investments is further reduced by the estimated cost
of sale for properties held for sale. Carrying value may be greater or less than
current appraised value. At December 31, 1996, the carrying value of one
investment exceeded its appraised value by $260,000. The appraised value of each
of the other investments exceeded their related carrying value by an aggregate
of approximately $5,700,000. The current appraised value of real estate
investments has been estimated by the managing general partner and is generally
based on a combination of traditional appraisal approaches performed by the
Partnership's advisor and independent appraisers. Because of the subjectivity
inherent in the valuation process, the estimated current appraised value may
differ significantly from that which could be realized if the real estate were
actually offered for sale in the marketplace.
<PAGE>
Results of Operations
Form of Real Estate Investments
The Wilmington Industrial investment is a wholly-owned property. Effective
July 1, 1994, the Stemmons Industrial joint venture investment was converted to
a wholly-owned property. The Lakewood investment, which was sold in August 1994,
was a joint venture, as are the remaining investments in the portfolio.
Operating Factors
Three of the Partnership's four industrial properties (Prentiss Copystar,
Wilmington and White Phonic) were 100% leased at December 31, 1996. At December
31, 1995, the Prentiss Copystar and White Phonic properties were 100% leased,
and Wilmington was 89% leased.
Upon expiration of its lease on September 30, 1995, the sole tenant at
Stemmons Industrial vacated the property. The Partnership negotiated a
four-month lease for 82% of the space, which commenced on November 1, 1995, with
a corporation that needed temporary warehouse capacity. That lease expired at
the end of February 1996 and the tenant vacated. The Partnership is marketing
this space to potential long-term tenants. There are no firm prospects at this
time.
During the second quarter of 1995, the managing general partner determined
the Partnership would likely not recover the carrying value of its investment in
the Wilmington Industrial property over the projected holding period.
Accordingly, the carrying value was reduced to estimated net fair market value,
with a charge to operations of $1,500,000.
Occupancy at Waterford Apartments, the Partnership's multi-family
residential property, has been in the mid-90% range through 1996, which is
consistent with the two prior years.
Investment Activity
Interest income on cash equivalents and short-term investments decreased
during 1996 due primarily to lower average investment balances and lower average
yields. Interest income on short term investments and cash equivalents increased
between 1995 and 1994, the result of increased balances and higher interest
rates.
The gain recognized by the Partnership in 1994 on the sale of Lakewood was
$2,869,376 ($58.23 per limited partnership unit). An additional $13,194 was
received in 1995 in final settlement of this sale. The limited partners received
a capital distribution of $182.85 per limited partnership in 1994 from the
proceeds of the sale.
<PAGE>
1996 Compared to 1995
Total real estate activity for 1996 was $1,325,302, a decrease from
$1,432,144 for 1995, exclusive of the investment valuation allowance in 1995.
Operating income at Stemmons Industrial decreased $491,000 due to lower rental
revenue and higher expenses as a result of the property being vacant for the
majority of 1996. This decrease was partially offset by an increase in operating
income of $364,000 from Wilmington Industrial due to the increase in occupancy,
combined with lower depreciation and amortization expense since certain assets
have been fully depreciated.
Cash flow from operations decreased by $523,000 from 1995 to 1996. This
decrease is largely consistent with the investment results discussed above,
combined with changes in property working capital.
1995 Compared to 1994
Exclusive of the operating results from Lakewood Apartments in 1994 and the
investment valuation allowance in 1995, real estate operations for 1995 were
$1,418,950, a 14% decrease compared to $1,645,393 in 1994. Operating income from
Waterford Apartments increased approximately $140,000 as a result of improved
occupancy and rental rates. This increase was offset by a $194,000 decrease in
operating income from Wilmington Industrial due to significant lease roll-over
activity which resulted in lower occupancy for most of the year. Operating
income from Stemmons Industrial also decreased by nearly $155,000 due to lease
roll-over at lower rental rates as well as higher operating expenses.
Exclusive of cash flow generated from Lakewood Apartments in 1994,
operating cash flow in 1995 decreased by $152,298 compared to 1994. This change
is relatively consistent with the changes in real estate operating results and
short-term interest income.
Portfolio Expenses
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative expenses
consist primarily of real estate appraisal, printing, legal, accounting and
investor servicing fees.
1996 Compared to 1995
The Partnership management fee decreased due to a decrease in distributable
cash flow. General and administrative expenses did not change significantly
between the two years.
<PAGE>
1995 Compared to 1994
The Partnership management fee decreased as a result of the decrease in
distributable cash flow. General and administrative expenses did not change
significantly between the two years.
Inflation
By their nature, real estate investments tend not to be adversely affected
by inflation. Inflation may result in appreciation in the value of the
Partnership's real estate investments over time if rental rates and replacement
costs increase. Declines in property values during the period of Partnership
operations, due to market and economic conditions, have overshadowed the
positive affect inflation may have on the value of the Partnership's
investments.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
See the Financial Statements of the Partnership included as a part of this
Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Partnership has had no disagreements with its accountants on any
matters of accounting principles or practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) and (b) Identification of Directors and Executive Officers.
The following table sets forth the names of the directors and executive
officers of the Managing General Partner and the age and position held by each
of them as of December 31, 1996, as well as subsequent changes through January
24, 1997.
Name Position(s) with the Managing General Partner Age
- ---- --------------------------------------------- ---
Joseph W. O'Connor President, Chief Executive Officer and Director 50
Daniel J. Coughlin Managing Director and Director 44
Peter P. Twining(1) Managing Director, General Counsel and Director 50
Wesley M. Gardiner, Jr. Vice President 38
Daniel C. Mackowiak Principal Financial and Accounting Officer 45
James J. Finnegan(2) Managing Director, General Counsel and Director 36
(1) Through January 24, 1997 only
(2) As of January 25, 1997
Mr. O'Connor and Mr. Coughlin have served in an executive capacity since
the organization of the Managing General Partner on October 13, 1987. Mr.
Gardiner and Mr. Twining have served in their capacities since June 1994, and
Mr. Mackowiak has served in his capacity since January 1, 1996. All of these
individuals will continue to serve in such capacities until their successors are
elected and qualified.
(c) Identification of Certain Significant Employees.
None.
(d) Family Relationships.
None.
(e) Business Experience.
The Managing General Partner was incorporated in Massachusetts on
October 13, 1987. The background and experience of the executive officers and
directors of the Managing General Partner are as follows:
Joseph W. O'Connor has been President, Chief Executive Officer and a
Director of AEW Real Estate Advisors, Inc. ("AEW"), formerly known as Copley
Real Estate Advisors, Inc. since January,
<PAGE>
1982. He was a Principal of AEW from 1985 to 1987 and has been a Managing
Director of AEW since January 1, 1988. He has been active in real estate for 28
years. From June, 1967, until December, 1981, he was employed by New England
Mutual Life Insurance Company ("The New England"), which has been merged with
and into Metropolitan Life Insurance Company, most recently as a Vice President
in which position he was responsible for The New England's real estate
portfolio. He received a B.A. from Holy Cross College and an M.B.A. from Harvard
Business School.
Daniel J. Coughlin was a Principal of AEW from 1985 to 1987 and has been a
Managing Director of AEW since January 1, 1988 and a Director of AEW since July
1994. Mr. Coughlin has been active in financial management and control for 22
years. From June, 1974 to December, 1981, he was Real Estate Administration
Officer in the Investment Real Estate Department at The New England. Since
January, 1982, he has been in charge of the asset management division of AEW.
Mr. Coughlin is a Certified Property Manager and a licensed real estate broker.
He received a B.A. from Stonehill College and an M.B.A. from Boston University.
Peter P. Twining was a Managing Director and General Counsel of AEW until
January 24, 1997 when he resigned from all offices and directorships. As such,
he was responsible for general legal oversight and policy with respect to AEW
and its investment portfolios. Before being promoted to this position in January
1994, he was a Vice President/Principal and senior lawyer responsible for
assisting in the oversight and management of AEW's legal operations. Before
joining AEW in 1987, he was a senior member of the Law Department at The New
England and was associated with the Boston law firm, Ropes and Gray. Mr. Twining
is a graduate of Harvard College and received his J.D. in 1979 from Northeastern
University.
Wesley M. Gardiner, Jr. joined AEW in 1990 and has been a Vice President at
AEW since January, 1994. From 1982 to 1990, he was employed by Metric Realty, a
nationally-known real estate investment advisor and syndication firm, as a
portfolio manager responsible for several public and private limited
partnerships. His career at AEW has included asset management responsibility for
the company's Georgia and Texas holdings. Presently, as a Vice President and
Team Leader, Mr. Gardiner has overall responsibility for all the partnerships
advised by AEW whose securities are registered under the Securities and Exchange
Act of 1934. He received a B.A. in Economics from the University of California
at San Diego.
Daniel C. Mackowiak has been a Vice President of AEW since January 1989 and
has been a Vice President and the Principal Financial and Accounting Officer of
the Managing General Partner since January 1996. Mr. Mackowiak previously held
the offices of Chief Accounting Officer of AEW from January 1989 through April
1994 and Vice President and Principal Financial and Accounting Officer of the
Managing General Partner between January 1989 and May 1994. From 1975 until
joining AEW, he was employed by the public accounting firm of Price Waterhouse,
most recently as a Senior Audit Manager. He is a certified public accountant and
has been active in the field of accounting his entire business career. He
received a B.S. from Nichols College and an M.B.A. from Cornell University.
James J. Finnegan is the Assistant General Counsel of AEW Capital
Management, L.P. ("AEW Capital Management") and has succeeded Peter Twining
as Managing Director, General Counsel and Director of AEW, a subsidiary of
AEW Capital Management. Mr. Finnegan served as Vice President and Assistant
General counsel of Aldrich, Eastman & Waltch, L.P., a predecessor to AEW
Capital Management. Mr. Finnegan has over ten years of experience in real
estate law, including seven years of experience in private practice with
major New York City and Boston law firms. Mr. Finnegan also serves as the
firm's securities and regulatory compliance officer. Mr. Finnegan is a
graduate of the University of Vermont (BA) and Fordham University School of
law (JD).
<PAGE>
Mr. O'Connor is a director of Evans Withycombe Residential, Inc., a
Maryland corporation organized as a real estate investment trust which is
listed for trading on the New York Stock Exchange. None of the other
directors of the Managing General Partner is a director of a company with a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934. All of the directors and officers of the Managing
General Partner also serve as directors and officers of one or more
corporations which serve as general partners of publicly-traded real estate
limited partnerships which are affiliated with the Managing General Partner.
(f) Involvement in Certain Legal Proceedings.
None.
<PAGE>
Item 11. Executive Compensation.
Under the Partnership Agreement, the General Partners and their affiliates
are entitled to receive various fees, commissions, cash distributions,
allocations of taxable income or loss and expense reimbursements from the
Partnership. See Notes 1, 2 and 6 of Notes to Financial Statements.
The following table sets forth the amounts of the fees and cash
distributions and reimbursements for out-of-pocket expenses which the
Partnership paid to or accrued for the account of the General Partners and their
affiliates for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Amount of
Compensation
and
Receiving Entity Type of Compensation Reimbursement
- ---------------- -------------------- -------------
<S> <C> <C>
General Partners Share of Distributable Cash $ 20,836
AEW Real Estate Advisors, Inc. Management Fees and 227,422
(formerly known as Copley Expense Reimbursements
Real Estate Advisors, Inc)
New England Securities Corporation Servicing Fees and 9,211
Expense Reimbursement
Back Bay Advisors, L.P. Short-term Investment
Advisory Services 6,278
--------
TOTAL: $263,747
========
</TABLE>
For the year ended December 31, 1996, the Partnership allocated $14,414 of
taxable income to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
No person or group is known by the Partnership to be the beneficial owner
of more than 5% of the outstanding Units at December 31, 1996. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited
and, in some circumstances, are subject to the prior receipt of certain opinions
of counsel or judicial decisions.
Except as expressly provided in the Partnership Agreement, the right to
manage the business of the Partnership is vested exclusively in the Managing
General Partner.
(b) Security Ownership of Management.
The General Partners of the Partnership owned no Units at December 31,
1996.
(c) Changes in Control.
There exists no arrangement known to the Partnership the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
The Partnership has no relationships or transactions to report other than
as reported in Item 11, above.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, 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 Schedule, Financial Statements
Index No. 2, and Financial Statements Index No. 3 are filed as part of this
Annual Report.
(2) Financial Statement Schedules--The Financial Statement Schedule
listed on the accompanying Index to Financial Statements and Schedule is 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. During the last quarter of the year ending
December 31, 1996, the Partnership filed no Current Report on Form 8-K.
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
Financial Statements
* * * * * * * * * * * *
December 31, 1996
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
Report of Independent Accountants.............................................
Financial Statements:
Balance Sheet - December 31, 1996 and 1995.............................
Statement of Operations - Years ended December 31, 1996, 1995
and 1994.............................................................
Statement of Changes in Partners' Capital (Deficit) -
Years ended December 31, 1996, 1995 and 1994.........................
Statement of Cash Flows - Years ended December 31, 1996, 1995
and 1994.............................................................
Notes to Financial Statements..........................................
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1996................................................
<PAGE>
Report of Independent Accountants
To the Partners
Copley Pension Properties VI;
A Real Estate Limited Partnership
In our opinion, based upon our audits and the reports of other auditors for the
years ended December 31, 1996, 1995 and 1994, the financial statements listed in
the accompanying index present fairly, in all material respects, the financial
position of Copley Pension Properties VI; A Real Estate Limited Partnership (the
"Partnership") at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Sixth Copley Corp., the Managing
General Partner of the Partnership; our responsibility is to express an opinion
on these financial statements based on our audits. We did not audit the
financial statements of the Partnership's Waterford Apartments and White Phonic
joint venture investees (collectively, the "Ventures") for the years ended
December 31, 1996, 1995 and 1994, which results of operations are recorded using
the equity method of accounting in the Partnership's financial statements.
Equity in joint venture income for the Ventures aggregated $1,002,020,
$1,021,252, and $893,816 for the years ended December 31, 1996, 1995 and 1994,
respectively. We also did not audit the financial statements of the
Partnership's Prentiss/Copley Itasca Associates joint venture investee for the
year ended December 31, 1995, which results of operations are recorded using the
equity method of accounting in the Partnership's financial statements. Equity in
joint venture income for Prentiss/Copley Itasca Associates aggregated $143,434
for the year ended December 31, 1995. We also did not audit the financial
statements of the Partnership's investment in Stemmons Industrial for the year
ended December 31, 1994, which statements reflect operating income of $459,907
which is included in total real estate operations in the Partnership's financial
statements. We also did not audit the financial statements of 21136 Wilmington
Avenue, a wholly-owned property, for the years ended December 31, 1996, 1995 and
1994, which statements reflect total assets of $5,530,482 and $5,519,958 at
December 31, 1996 and 1995, respectively, and total revenues of $746,004,
$625,282, and $839,503 for the years ended December 31, 1996, 1995 and 1994,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for the equity in joint venture income for
the Ventures for the years ended December 31, 1996, 1995 and 1994, for equity in
joint venture income for Prentiss/Copley Itasca Associates for the year ended
December 31, 1995, for the operating income and equity in joint venture income
for Stemmons Industrial for the year ended December 31, 1994 and for the amounts
for 21136 Wilmington Avenue for the years ended December 31, 1996, 1995 and
1994, is based solely on the reports of the other auditors. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by the Managing
General Partner, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors for the years ended
December 31, 1996, 1995 and 1994 provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
------------------------
Boston, Massachusetts
March 13, 1997
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
December 31,
-----------------------------
1996 1995
------------ ------------
Assets
Real estate investments:
Joint ventures $ 15,479,056 $ 16,200,967
Property, net 8,350,231 8,371,374
------------ ------------
23,829,287 24,572,341
Cash and cash equivalents 3,076,103 2,997,934
Short-term investments 2,194,290 2,524,633
------------ ------------
$ 29,099,680 $ 30,094,908
============ ============
Liabilities and Partners' Capital
Accounts payable $ 86,347 $ 79,597
Accrued management fee 51,517 60,924
Deferred disposition fees 582,677 582,677
------------ ------------
Total liabilities 720,541 723,198
------------ ------------
Partners' capital (deficit):
Limited partners ($768.98 per unit;
160,000 units authorized; 48,788
units issued and outstanding) 28,415,303 29,397,948
General partners (36,164) (26,238)
------------ ------------
Total partners' capital 28,379,139 29,371,710
------------ ------------
$ 29,099,680 $ 30,094,908
============ ============
(See accompanying notes to financial statements)
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Investment Activity
Property rentals $ 818,078 $ 1,187,128 $ 1,134,242
Property operating expenses (369,959) (399,757) (305,962)
Depreciation and amortization (286,940) (533,107) (446,056)
----------- ----------- -----------
161,179 254,264 382,224
Joint venture earnings 1,164,123 1,164,686 1,641,328
Investment valuation allowance -- (1,500,000) --
----------- ----------- -----------
Total real estate operations 1,325,302 (81,050) 2,023,552
Gain on sale of property by
joint venture -- 13,194 2,869,376
----------- ----------- -----------
Total real estate activity 1,325,302 (67,856) 4,892,928
Interest on cash equivalents
and short-term investments 268,223 297,444 240,057
----------- ----------- -----------
Total investment activity 1,593,525 229,588 5,132,985
----------- ----------- -----------
Portfolio Expenses
Management fee 206,070 243,696 267,481
General and administrative 201,322 192,096 188,097
----------- ----------- -----------
407,392 435,792 455,578
----------- ----------- -----------
Net Income (Loss) $ 1,186,133 $ (206,204) $ 4,677,407
=========== =========== ===========
Net income (loss) per limited
partnership unit $ 24.07 $ (4.18) $ 94.91
=========== =========== ===========
Cash distributions per limited
partnership unit $ 44.21 $ 50.00 $ 239.51
=========== =========== ===========
Number of limited partnership
units outstanding during the year 48,788 48,788 48,788
=========== =========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- --------------------------- ---------------------------
General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $ (26,238) $ 29,397,948 $ 464 $ 32,041,490 $ (18,390) $ 39,096,068
Cash distributions (21,787) (2,156,917) (24,640) (2,439,400) (27,920) (11,685,211)
Net income (loss) 11,861 1,174,272 (2,062) (204,142) 46,774 4,630,633
------------ ------------ ------------ ------------ ------------ ------------
Balance at end
of year $ (36,164) $ 28,415,303 $ (26,238) $ 29,397,948 $ 464 $ 32,041,490
============ ============ ============ ============ ============ ============
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,186,133 $ (206,204) $ 4,677,407
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 286,940 533,107 446,056
Equity in joint venture income (1,164,123) (1,164,686) (1,641,328)
Cash distributions from joint ventures 1,871,702 1,841,184 2,652,126
Gain on sale of property by joint venture -- (13,194) (2,869,376)
Investment valuation allowance -- 1,500,000 --
Increase in deferred leasing costs and
other assets (34,104) (11,731) (18,192)
(Increase) decrease in investment income
receivable (16,876) 1,244 5,856
(Increase) decrease in property working capital (84,903) 86,916 207,983
Decrease in operating liabilities (2,657) (1,501) (120,294)
------------ ------------ ------------
Net cash provided by operating activities 2,042,112 2,565,135 3,340,238
------------ ------------ ------------
Cash flows from investing activities:
Investment in property (132,458) (12,014) (97,732)
Net proceeds from sale of investment -- 13,194 8,812,530
Deferred disposition fee -- -- 318,677
Return of capital from joint venture -- -- 5,397
Decrease (increase) in short-term
investments, net 347,219 (1,757,244) 240,794
------------ ------------ ------------
Net cash provided by (used in)
investing activities 214,761 (1,756,064) 9,279,666
------------ ------------ ------------
Cash flows from financing activity:
Distributions to partners (2,178,704) (2,464,040) (11,713,131)
------------ ------------ ------------
Net cash used in financing activity (2,178,704) (2,464,040) (11,713,131)
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 78,169 (1,654,969) 906,773
Cash and cash equivalents:
Beginning of year 2,997,934 4,652,903 3,746,130
------------ ------------ ------------
End of year $ 3,076,103 $ 2,997,934 $ 4,652,903
============ ============ ============
</TABLE>
Significant Non-Cash Transaction:
Effective July 1, 1994, the Partnership's joint venture investment in
Stemmons Industrial was restructured to a wholly-owned property The carrying
value of this investment at conversion was $4,531,719.
(See accompanying notes to financial statements)
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and Business
General
Copley Pension Properties VI; A Real Estate Limited Partnership (the
"Partnership") is a Massachusetts limited partnership organized for the purpose
of investing primarily in newly constructed and existing income-producing real
properties. It primarily serves as an investment for qualified pension and
profit sharing plans and other organizations intended to be exempt from federal
income tax. The Partnership commenced operations in July 1988, and acquired the
five real estate investments it currently owns prior to the end of 1991. It
intends to dispose of its investments within eight to twelve years of their
acquisition, and then liquidate.
The managing general partner of the Partnership is Sixth Copley Corp., a
wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"), formerly
known as Copley Real Estate Advisors, Inc. ("Copley"). The associate general
partner is GCOP Associates Limited Partnership, a Massachusetts limited
partnership, the general partners of which are managing directors of AEW and/or
officers of the managing general partner. Subject to the managing general
partner's overall authority, the business of the Partnership is managed by AEW
pursuant to an advisory contract.
On December 10, 1996, Copley's parent, New England Investment Companies,
Limited Partnership ("NEIC") a publicly traded master limited partnership,
acquired certain assets subject to then existing liabilities from Aldrich,
Eastman & Waltch, Inc. and its affiliates and principals (collectively, "the AEW
operations"). Simultaneously, a new entity, AEW Capital Management L.P., was
formed into which NEIC contributed its interest in Copley and its affiliates. As
a result, the AEW operations were combined with Copley to form the business
operations of AEW Capital Management, L.P. This transaction is not expected to
have a material effect on the operations of the Partnership.
Prior to August 30, 1996, New England Mutual Life Insurance Company ("The
New England") was NEIC's principal unit holder and owner of all of the
outstanding stock of NEIC's general partner. On August 30, 1996, The New England
merged with and into Metropolitan Life Insurance Company ("Met Life"). Met Life
is the surviving entity and, therefore, through a wholly owned subsidiary,
became the owner of the units of partnership interest previously owned by The
New England and of the stock of NEIC's general partner. This transaction is not
expected to have a material effect on the operations of the Partnership.
Management
AEW, as advisor, is entitled to receive stipulated fees from the
Partnership in consideration of services performed in connection with the
management of the Partnership and the acquisition and disposition of Partnership
investments in real property. Partnership management fees are 9% of
distributable cash from operations, as defined, before deducting such fees. The
deferred management fees of $112,441 incurred through 1990 were paid to the
<PAGE>
advisor in September 1994 with a portion of the proceeds from the sale of
Lakewood Apartments. AEW is also reimbursed for expenses incurred in connection
with administering the Partnership ($21,352 in 1996, $23,012 in 1995, and
$15,841 in 1994). Acquisition fees were paid in an amount equal to 2% of the
gross proceeds from the offering, at the time commitments were initially funded.
Disposition fees are generally 3% of the selling price of the property, but are
subject to the prior receipt by the limited partners of their capital
contributions plus a stipulated return thereon.
New England Securities Corporation ("NESC"), an indirect subsidiary of Met
Life, is engaged by the Partnership to act as its unitholder servicing agent.
Fees and out-of-pocket expenses for such services totaled $9,211, $8,493 and
$10,024 in 1996, 1995 and 1994, respectively. Fees to Back Bay Advisors, L.P., a
wholly-owned subsidiary of NEIC, for short-term investment advisory services
totaled $6,278, $5,047 and $4,363, for the same annual periods.
Note 2 - Summary of Significant Accounting Policies
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the managing general partner to make
estimates affecting the reported amounts of assets and liabilities, and of
revenues and expenses. In the Partnership's business, certain estimates require
an assessment of factors not within management's control, such as the ability of
tenants to perform under long-term leases and the ability of the properties to
sustain their occupancies in changing markets. Actual results, therefore, could
differ from those estimates.
Real Estate Joint Ventures
Investments in joint ventures, which are in substance real estate
investments, are stated at cost plus (minus) equity in undistributed joint
venture income (losses). Allocations of joint venture income (losses) were made
to the Partnership's venture partners as long as they had substantial economic
equity in the project. Economic equity is measured by the excess of the
appraised value of the property over the Partnership's total cash investment
plus accrued preferential returns thereon. Currently, the Partnership records an
amount equal to 100% of the operating results of each joint venture, after the
elimination of all inter-entity transactions, except for the two ventures which
include an affiliate of the Partnership, which has substantial economic equity
in the respective projects.
Property
Property includes land and buildings, which are stated at cost less
accumulated depreciation, and other operating net assets (liabilities). The
Partnership's initial carrying value of a property previously owned by a joint
venture equals the Partnership's carrying value of the prior investment on the
conversion date.
<PAGE>
Capitalized Costs, Depreciation and Amortization
Maintenance and repair costs are expensed as incurred. Significant
improvements and renewals are capitalized. Depreciation is computed using the
straight-line method based on estimated useful lives of the buildings and
improvements. Leasing costs are also capitalized and amortized over the related
lease term.
Acquisition fees have been capitalized as part of the cost of real estate
investments. Amounts not related to land are being amortized using the
straight-line method over the estimated useful lives of the underlying property.
Certain tenant leases provide for rental increases over the respective
lease terms. Rental revenue is being recognized on a straight-line basis over
the lease terms.
Realizability of Real Estate Investments
The Partnership considers a real estate investment to be impaired when it
determines the carrying value of the investment is not recoverable through
expected undiscounted cash flows generated from the operations and disposition
of the property. The impairment loss is based on the excess of the investment's
carrying value over its estimated fair market value. For investments being held
for sale, the impairment loss also includes estimated costs of sale. Property
held for sale is not depreciated during the holding period. In 1995, the
managing general partner determined that the carrying value of the Wilmington
Industrial property should be reduced to estimated fair market value. (See Note
4.)
Carrying value may be greater or less than current appraised value. At
December 31, 1996, the carrying value of one investment exceed its appraised
value by $260,000. The remaining investments had appraised values which exceeded
the related carrying values by an aggregate of $5,700,000. At December 31, 1995,
the investments had appraised values which exceeded related carrying values by
an aggregate of $4,500,000.
The current appraised value of real estate investments has been estimated
by the managing general partner and is generally based on a combination of
traditional appraisal approaches performed by the Partnership's advisor and
independent appraisers. Because of the subjectivity inherent in the valuation
process, the estimated current appraised value may differ significantly from
that which could be realized if the real estate were actually offered for sale
in the marketplace.
Cash Equivalents and Short-Term Investments
Cash equivalents are stated at cost, plus accrued interest. The Partnership
considers all highly liquid debt instruments purchased with a maturity of ninety
days or less to be cash equivalents; otherwise, they are classified as
short-term investments.
The Partnership has the positive intent and ability to hold all investments
to maturity; therefore, short-term investments are carried at cost, plus accrued
interest which approximates market value. At December 31, 1996 and 1995, all
investments were in commercial paper with less than two and six months,
respectively, remaining to maturity.
<PAGE>
Organization Costs
Costs incurred in connection with organizing the Partnership were
capitalized and have been amortized using the straight-line method over five
years.
Deferred Disposition Fees
Disposition fees due to AEW related to sales of investments are included in
the determination of gains or losses resulting from such transactions. According
to the terms of the advisory contract, payment of such fees has been deferred
until the limited partners first receive their capital contributions, plus
stipulated returns thereon.
Income Taxes
A partnership is not liable for income taxes and, therefore, no provision
for income taxes is made in the financial statements of the Partnership. A
proportionate share of the Partnership's income is reportable on each partner's
tax return.
Per Unit Computations
Per unit computations are based on the number of units of limited
partnership interest outstanding during the year. The actual per unit amount
will vary by partner depending on the date of admission to, or withdrawal from,
the Partnership.
Reclassifications
Certain amounts in prior year financial statements have been reclassified
to conform with the current year presentation.
Note 3 - Real Estate Joint Ventures
The Partnership had invested in seven real estate joint ventures, organized
as general partnerships with a real estate management/development firm and, in
three cases, with an affiliate of the Partnership. One joint venture sold its
property in 1990; another was restructured into a wholly-owned property in 1991.
During 1994, the Lakewood joint venture sold its property and the Stemmons
Industrial investment was converted to a wholly-owned property. The Partnership
has committed to make capital contributions to the ventures, which are generally
subject to preferential cash distributions at a specified rate and to priority
distributions with respect to sale or refinancing proceeds. 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 their ownership
share in the event a venture partner does not contribute proportionately.
The respective real estate management/development firm is responsible for
day-to-day development and operating activities, although overall authority and
responsibility for the business is shared by the venturers. The real estate
management/development firm, or its affiliates, also provides various services
to the respective joint venture for a fee.
<PAGE>
The following is a summary of cash invested in joint ventures, net of
returns of capital and excluding acquisition fees:
Preferential
Investment/ Rate of Ownership December 31,
Location Return Interest 1996 1995
-------- ------ -------- --------- ----------
Waterford Apartments
Frederick, MD 10.09% 48.75% $14,099,978 $14,099,978
White Phonic
Petaluma, CA 10.0 % 50% $ 3,281,963 $ 3,281,963
Prentiss Copystar
Itasca, IL 11.0 % 51.75% $ 2,232,848 $ 2,232,848
Waterford Apartments
On March 20, 1989, the Partnership entered into a joint venture with an
affiliate of Bozzuto and Associates, and with an affiliate of the Partnership,
to develop and operate a garden-style apartment complex. The Partnership and its
affiliate collectively have a 65% ownership interest in the joint venture. The
Partnership committed to contribute up to $14,100,000 to the capital of the
joint venture. The preferential return related to $3,525,000 is payable
currently only to the extent of available cash flow. In the event of a sale or
refinancing prior to the tenth anniversary of the joint venture agreement, 25%
of the Partnership's contribution would first be repaid unconditionally. The
remaining 75% would be repaid subject to a premium designed to preserve the
stipulated rate of return through the ninth anniversary of the joint venture
agreement.
White Phonic
On April 30, 1990, the Partnership entered into a joint venture with an
affiliate of William C. White and George Vila to develop and operate an
office/industrial building. The Partnership committed to make a maximum capital
contribution of $3,450,000. During the first ten years, up to 1% of the
preferential return may be deferred to the extent payments cannot be met from
operating and extraordinary cash flow. Future minimum rents due to the venture
under non-cancelable operating leases are: $431,028 in 1997; $450,333 in 1998;
$468,936 in 1999; $488,241 in 2000; and $207,090 in 2001.
Prentiss Copystar
On May 23, 1991, the Partnership entered into a joint venture with an
affiliate of Prentiss Properties, Ltd., and an affiliate of the Partnership, to
develop and operate an industrial facility. The Partnership and its affiliate
collectively have a 75% interest in the joint venture. The Partnership committed
to make a maximum capital contribution of $2,300,000. The preferential return
related to $690,000 is payable currently only to the extent of available cash
flow. If $1,610,000, or any portion thereof, is returned to the Partnership
between the second and tenth anniversary of the joint venture agreement, the
return will be increased by an amount sufficient
<PAGE>
to preserve the stipulated rate of return through the tenth anniversary. Future
minimum rents due to the venture under a non-cancelable operating lease are:
$355,000 in 1997; $366,000 in 1998; and $281,000 in 1999.
Sale of Lakewood
On August 12, 1988, the Partnership entered into a joint venture with an
affiliate of Evans Withycombe Company, and an affiliate of the Partnership, to
develop and operate an apartment complex. The Partnership and its affiliate
collectively had a 65% interest in the joint venture. The Partnership made
capital contributions totaling $6,731,182.
On August 17, 1994, the joint venture sold its property. After closing
costs, the Partnership received its share of the sale proceeds of $9,131,207 and
recognized a gain of $2,869,376 ($58.23 per limited partnership unit). At that
time, the Partnership also received a preferential return payment of $237,880. A
disposition fee of $318,677 was accrued but not paid to the advisor. On
September 15, 1994, the Partnership made a capital distribution of $8,920,886
($182.85 per limited partnership unit) from the proceeds of this sale. An
additional $13,194 was received in 1995 in final settlement of this sale.
Summarized Financial Information
The following summarized financial information is presented in the
aggregate for the joint ventures:
Assets and Liabilities
December 31,
-----------------------------
1996 1995
----------- -----------
Assets
Real property, at cost less
accumulated depreciation
of $6,158,575 and
$5,295,528, respectively $17,199,404 $18,062,468
Other 739,700 885,699
----------- -----------
17,939,104 18,948,167
Liabilities 235,655 354,196
----------- -----------
Net assets $17,703,449 $18,593,971
=========== ===========
<PAGE>
Results of Operations
Year ended December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
Revenue:
Rental income $3,720,730 $3,622,286 $5,107,676
Interest and other income 7,842 7,098 15,458
---------- ---------- ----------
3,728,572 3,629,384 5,123,134
---------- --------- ---------
Expenses:
Operating expenses 1,367,708 1,217,644 1,857,013
Depreciation and amortization 878,016 907,276 1,154,979
---------- ---------- ----------
2,245,724 2,124,920 3,011,992
---------- ---------- ----------
Net income $1,482,848 $1,504,464 $2,111,142
========== ========== ==========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to three investments) its affiliates on behalf of
their various financing arrangements with the joint ventures.
Note 4 - Property
On July 18, 1988, the Partnership entered into a joint venture with an
affiliate of The Hewson Company to acquire and operate an industrial building
known as Wilmington Industrial in Carson, CA. The Partnership made capital
contributions totaling $7,774,402. During 1991, when the venture partner did not
fund its proportionate share of the cash flow deficit, the Partnership's
ownership interest increased to 100%.
On December 7, 1988, the Partnership entered into a joint venture with an
affiliate of The Trammell Crow Company to acquire, rehabilitate and operate an
industrial building known as Stemmons Industrial in Dallas, TX. The Partnership
made a capital contribution of $5,307,504. Effective July 1, 1994 this joint
venture was dissolved and the venture partner's interest was assigned to the
Partnership. Accordingly, as of this date, the investment has been accounted for
as a wholly-owned property.
<PAGE>
The following is a summary of the Partnership's investment in property at
December 31, 1996 and 1995, respectively:
December 31,
-----------------------------
1996 1995
----------- -----------
Land $ 3,408,203 $ 3,408,203
Buildings, improvements and
other capitalized costs 8,869,433 8,702,871
Investment valuation allowance (1,500,000) (1,500,000)
Accumulated depreciation and
amortization (2,330,843) (2,058,235)
Net operating liabilities (96,562) (181,465)
----------- -----------
$ 8,350,231 $ 8,371,374
=========== ===========
The Wilmington Industrial building is being depreciated over 30 years and
capitalized improvements are being depreciated over seven years. The buildings
and improvements at Stemmons Industrial are being depreciated over 25 years,
beginning July 1, 1994.
During the second quarter of 1995, as a result of a revision to long-term
rental assumptions, the managing general partner determined that the carrying
value of the Wilmington Industrial property would not be recovered through
expected future undiscounted cash flows. Accordingly, the carrying value was
reduced to estimated net fair market value through the recognition of an
investment valuation allowance of $1,500,000.
Tenant leases provide for minimum rents, subject to adjustment as stated in
each lease. Tenants are also obligated to reimburse their pro-rata share of
operating expenses. The Stemmons Industrial building is not leased as of
December 31, 1996. The minimum rents due under non-cancelable operating leases
at Wilmington Industrial are as follows: $580,000 in 1997; $524,000 in 1998;
$302,000 in 1999; $47,000 in 2000.
<PAGE>
Note 5 - Income Taxes
The Partnership's income for federal income tax purposes differs from that
reported in the accompanying statement of operations as follows:
Year ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
Net income (loss) per financial
statements $ 1,186,133 $ (206,204) $ 4,677,407
Timing differences:
Joint venture earnings 288,647 276,972 55,014
Property rentals (15,318) (24,245) 97,528
Depreciation (28,769) 131,752 234,284
Expenses 10,749 14,332 (23,736)
Gain on sale -- -- (213,169)
Valuation allowance -- 1,500,000 --
----------- ----------- -----------
Taxable income $ 1,441,442 $ 1,692,607 $ 4,827,328
=========== =========== ===========
Note 6 - Partners' Capital
Allocation of net income (losses) from operations and distributions of
distributable cash from operations, as defined, are in the ratio of 99% to the
limited partners and 1% to the general partners. Cash distributions are made
quarterly.
Net sale proceeds and financing proceeds are allocated first to limited
partners to the extent of their contributed capital plus a stipulated return
thereon, as defined, second to pay disposition fees, and then 85% to the limited
partners and 15% to the general partners. The adjusted capital contribution per
limited partnership unit was reduced from $1,000 to $951.83 during 1990, and
from $951.83 to $768.98 during 1994 as a result of sale transactions. Income
from a sale is allocated in proportion to the distribution of related proceeds,
provided that the general partners are allocated at least 1%. Losses from a
sale, and income from a sale if there are no residual proceeds after the
repayment of the related debt, will be allocated 99% to the limited partners and
1% to the general partners.
Note 7 - Subsequent Event
Distributions of cash from operations relating to the quarter ended
December 31, 1996 were made on January 30, 1997 in the aggregate amount of
$520,898 ($10.57 per limited partnership unit).
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
Initial Cost to Costs Subsequent
the Partnership to Acquisition
------------------------------------- --------------------------------------
Buildings,
improvements, Change in
and other Other Capitalized Other Valuation
Description Land Capital Costs Net Assets Improvements Net Assets Allowance
- ----------- ---------- ------------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
CARSON, CA. (See Note A)
- - Industrial bldg $ 2,770,056 $ 4,380,463 $ 8,285 $ 513,613 $ (3,256) $(1,500,000)
DALLAS, TX (See Note B) $ 638,147 $ 3,966,791 $ 46,661 $ 8,581 $ (148,263) --
- -Idustrial bldg
----------- ----------- ----------- ----------- ---------- -----------
Total wholly-owned property $ 3,408,203 $ 8,347,254 $ 54,946 $ 522,194 $ (151,519) $(1,500,000)
=========== =========== =========== =========== ========== ===========
ITASCA, IL.
- - 51.75% interest in
Prentiss Copley/Itasca
Assoc. J/V
- - Develop and operate ----------- See Note C ----------- ----------- ---------- -----------
an industrial building
FREDERICK, MD.
- - 48.75% interest in
Frederick Partners
Joint Venture ----------- See Note C ----------- ----------- ---------- -----------
- - Develop and operate
an apartment complex
PETALUMA, CA.
- - 50% interest in White
Phonic Associates Joint
Venture ----------- See Note C ----------- ----------- ---------- -----------
- - Develop and operate
an industrial building
----------- ----------- ----------- ----------- ---------- -----------
Total joint venture
investments:
=========== =========== =========== =========== ========== ===========
<CAPTION>
Gross Amount at which
Carried at Close of Period
--------------------------------------
Buildings,
improvements,
and other Other Accum. Depr. Status of Date Depreciable
Description Land Capital Costs Net Assets Total & Amort. Construction Acquired Life
- ----------- ---------- ------------- ---------- ----------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CARSON, CA. (See Note A)
- - Industrial bldg $ 2,770,056 $ 3,394,076 $ 5,029 $ 6,169,161 $(1,782,688) Completed 7/18/88 30 years
1990
DALLAS, TX (See Note B) $ 638,147 $ 3,975,372 $ (101,602) $ 4,511,917 $ (548,159)
- -Idustrial bldg Completed 12/7/88 40 Years
1989
----------- ----------- ----------- ----------- -----------
Total wholly-owned property $ 3,408,203 $ 7,369,448 $ (96,573) $10,681,078 $(2,330,847)
=========== =========== =========== =========== ===========
ITASCA, IL.
- - 51.75% interest in
Prentiss Copley/Itasca
Assoc. J/V
- - Develop and operate ----------- ----------- ----------- 1,765,281 N/A Completed 5/20/91 35 Years
an industrial building 1991
FREDERICK, MD.
- - 48.75% interest in
Frederick Partners
Joint Venture ----------- ----------- ----------- 10,559,789 N/A Completed 03/20/89 27.5 Years
- - Develop and operate Ph I - 1990
an apartment complex Ph I - 1991
PETALUMA, CA.
- - 50% interest in White
Phonic Associates Joint
Venture ----------- ----------- ----------- 3,153,986 N/A Completed 04/30/90 40 Years
- - Develop and operate 1991
an industrial building
----------- ----------- ----------- -----------
Total joint venture
investments: $15,479,056
=========== =========== =========== ===========
</TABLE>
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
Schedule III Note A
AT DECEMBER 31, 1996
(1) This joint venture investment was restructured to a wholly-owned investment
on April 1, 1991.
(2) Reconciliation of real estate owned: CARSON, CA.
-----------
Balance at beginning of year $ 5,976,189
Increase in valuation allowance $ 0
Increase in deferred leasing costs
and other assets 166,562
Change in Other Net Operating Assets 26,410
-----------
Balance at end of year $ 6,169,161
===========
Accumulated depreciation and amortization
at beginning of year $(1,662,496)
Depreciation and amortization - 1996 (120,192)
-----------
Accumulated depreciation and amortization
at end of year $(1,782,688)
===========
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
Schedule III Note B
AT DECEMBER 31, 1996
(1) This joint venture partnership investment was restructured to a
wholly-owned property investment on July 1, 1994.
Farmers Branch Assoc.
Industrial Bldg.
(2) Reconciliation of Real Estate owned: Dallas, TX
--------------------
Beginning balance - January 1, 1996 $ 4,453,424
Increase in deferred costs and other assets --
Capital improvements 0
Increase (decrease) in working capital 58,493
-----------
Ending Balance, December 31, 1996 $ 4,511,917
===========
Accumulated Depreciation and
Amortization, January 1, 1996 $ (395,743)
Depreciation and Amortization
Expense - 1996 (152,416)
-----------
Accumulated Depreciation and
Amortization, December 31, 1996 $ (548,159)
===========
<PAGE>
COPLEY PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
SCHEDULE III NOTE C
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
BALANCE BALANCE
AS OF EQUITY IN 1996 AMORTIZATION CASH AS OF
PERCENT OF DECEMBER 31, INCOME/ OF DEFERRED DISTRIBUTED DECEMBER 31,
DESCRIPTION OWNERSHIP 1995 (LOSS) ACQUISITION FEES FROM J/V 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prentiss Copystar 51.75% 1,848,791 162,103 -- (245,613) 1,765,281
Waterford Apartments 48.75% 11,105,697 712,467 (10,272) (1,248,103) 10,559,789
White Phonic 50% 3,246,479 289,553 (4,060) (377,986) 3,153,986
-------------------------------------------------------------------------
Investments in Joint
Ventures at December 31, 1996: $16,200,967 $1,164,123 $(14,332) $(1,871,702) $15,479,056
========================================================================
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
Auditor's Report and Financial Statements
of Frederick Partners
(referred to elsewhere as Waterford Apartments)
Page
----
Independent Auditor's Report of Reznick, Fedder & Silverman, P.C............
Balance Sheet - December 31, 1996 and 1995..................................
Statement of Operations - For the Years Ended
December 31, 1996, 1995 and 1994.......................................
Statement of Partners' Equity - For the Years Ended
December 31, 1996, 1995 and 1994.......................................
Statement of Cash Flows - For the Years Ended
December 31, 1996, 1995 and 1994.......................................
Notes to Financial Statements...............................................
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
FREDERICK PARTNERS
DECEMBER 31, 1996 AND 1995
<PAGE>
Frederick Partners
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF PARTNERS' EQUITY 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 8
<PAGE>
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Frederick Partners
We have audited the accompanying balance sheets of Frederick Partners as
of December 31, 1996 and 1995 and the related statements of operations,
partners' equity and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Frederick Partners as of
December 31, 1996 and 1995 and the results of its operations, changes in
partners' equity and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 22, 1997
- 3 -
<PAGE>
Frederick Partners
BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
----------- -----------
ASSETS
INVESTMENT IN REAL ESTATE
Land $ 3,099,120 $ 3,099,120
Building and improvements 12,906,062 12,906,062
Personal property 1,601,830 1,601,830
----------- -----------
17,607,012 17,607,012
Less accumulated depreciation 5,082,280 4,406,902
----------- -----------
12,524,732 13,200,110
Cash 174,893 323,820
Tenant receivables 4,337 6,129
Tenants' security deposits 44,276 63,710
Prepaid expenses 150,451 124,591
----------- -----------
$12,898,689 $13,718,360
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 830 $ 25,954
Deferred rental income 69,380 114,922
Accrued distributions 2,315,804 1,936,222
Accrued guaranteed payments 1,246,972 1,042,581
Tenants' security deposits payable 44,276 59,471
Due to affiliates 14,521 51,255
----------- -----------
3,691,783 3,230,405
PARTNERS' EQUITY 9,206,906 10,487,955
----------- -----------
$12,898,689 $13,718,360
=========== ===========
See notes to financial statements
- 4 -
<PAGE>
Frederick Partners
STATEMENTS OF OPERATIONS
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---------- ---------- ----------
Revenue
Rent $2,629,810 $2,572,890 $2,447,118
Other lease related income 96,688 88,132 104,292
Interest 7,153 6,198 5,375
---------- ---------- ----------
Total revenue 2,733,651 2,667,220 2,556,785
---------- ---------- ----------
Expenses
Operating expenses
Advertising and promotion 63,263 45,491 44,811
Salaries 262,844 256,226 248,307
Administrative 61,019 50,708 63,864
Management fee 95,681 93,354 89,499
Maintenance 270,429 177,913 166,551
Utilities 91,077 86,482 84,341
Real estate taxes 247,279 252,920 286,447
Insurance 27,764 28,057 25,531
Depreciation 675,378 687,307 715,913
Amortization -- -- 32,220
Guaranteed payments 776,988 758,097 737,164
---------- ---------- ----------
Total operating expenses 2,571,722 2,436,555 2,494,648
---------- ---------- ----------
EXCESS OF REVENUE OVER
EXPENSES $ 161,929 $ 230,665 $ 62,137
========== ========== ==========
See notes to financial statements
- 5 -
<PAGE>
Frederick Partners
STATEMENTS OF PARTNERS' EQUITY
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Frederick Frederick Copley
Bozzuto Bozzuto Copley Pension
Limited Two Limited Pension Properties Total
Partnership Partnership Properties VI VII Equity
--------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Partners' equity, (deficit),
December 31, 1993 $(110,796) $(63,178) $ 9,859,541 $ 3,286,501 $ 12,972,068
Distributions -- -- (1,026,765) (342,255) (1,369,020)
Excess of revenue over expenses -- -- 46,603 15,534 62,137
--------- -------- ----------- ----------- ------------
Partners' equity (deficit)
December 31, 1994 (110,796) (63,178) 8,879,379 2,959,780 11,665,185
Distributions -- -- (1,055,921) (351,974) (1,407,895)
Excess of revenue over expenses -- -- 172,999 57,666 230,665
--------- -------- ----------- ----------- ------------
Partners' equity (deficit),
December 31, 1995 (110,796) (63,178) 7,996,457 2,665,472 10,487,955
Distributions -- -- (1,082,233) (360,745) (1,442,978)
Excess of revenue over expenses -- -- 121,447 40,482 161,929
--------- -------- ----------- ----------- ------------
Partners' equity (deficit),
December 31, 1996 $(110,796) $(63,178) $ 7,035,671 $ 2,345,209 $ 9,206,906
========= ======== =========== =========== ============
</TABLE>
See notes to financial statements
- 6-
<PAGE>
Frederick Partners
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Excess of revenue over expenses $ 161,929 $ 230,665 $ 62,137
Adjustments to reconcile excess of revenue over expenses
to net cash provided by operating activities
Depreciation 675,378 687,307 715,913
Amortization -- -- 32,220
Changes in assets and liabilities
(Increase) decrease in tenant receivables 1,792 (4,784) 561
Decrease (increase) in prepaid expenses (25,860) 31,595 (3,968)
(Decrease) increase in deferred rental income (45,542) (53,570) 117,602
Increase (decrease) in accounts payable (25,124) 15,240 (47,888)
Net security deposits (paid) received 4,239 (4,240) 2,485
Increase in accrued guaranteed payments 204,391 174,570 225,723
Increase (decrease) in due to affiliates (36,734) 35,831 (5,117)
----------- ----------- -----------
Net cash provided by operating activities 914,469 1,112,614 1,099,668
----------- ----------- -----------
Cash flows from financing activities
Capital distributions paid (1,063,396) (1,083,694) (949,820)
----------- ----------- -----------
Net cash used in financing activities (1,063,396) (1,083,694) (949,820)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (148,927) 28,920 149,848
Cash, beginning 323,820 294,900 145,052
----------- ----------- -----------
Cash, ending $ 174,893 $ 323,820 $ 294,900
=========== =========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for guaranteed payments $ 572,597 $ 583,527 $ 511,441
=========== =========== ===========
</TABLE>
See notes to financial statements
- 7 -
<PAGE>
Frederick Partners
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership was formed as a general partnership under the laws of the
State of Maryland on March 20, 1989 for the purpose of constructing,
owning and operating a rental housing project. The project consists of 314
units located in Frederick County, Maryland and is operating as Crystal
Park. During 1990, the construction of the first phase (Phase I) was
completed and rental operations commenced. During 1991, construction of a
second phase of the project (Phase II) was completed and rental operations
commenced. All leases between the Partnership and tenants of the property
are operating leases.
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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Investment in Real Estate
Investment in real estate is carried at cost. Depreciation is provided for
in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives using accelerated methods.
Rental Income
Rental income is recognized as rentals become due. Rental payments
received in advance are deferred until earned.
Income Taxes
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and
is reportable by, the partners individually.
- 8 -
<PAGE>
Frederick Partners
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE B - RELATED PARTY TRANSACTIONS
Expenses Incurred and Reimbursed to Affiliates
The Partnership reimburses payroll and other costs incurred by Bozzuto &
Associates, Inc., an affiliate of Frederick Bozzuto Limited Partnership
and Frederick Bozzuto Two Limited Partner ship, general partners, for
various administrative and operating services relating to the project and
performed by their employees. During 1996, 1995 and 1994, $299,261,
$284,283, and $273,838 were incurred, respectively. At December 31, 1996,
$14,521 remains unpaid, while $51,255 was unpaid as of December 31, 1995,
and included in due to affiliates.
Management Fees
The Partnership is required to pay an annual property management fee to
Bozzuto Management Company, an affiliate of Frederick Bozzuto Limited
Partnership and Frederick Bozzuto Two Limited Partnership, general
partners, in an amount equal to 3.5% of gross receipts collected.
Management fees of $95,681, $93,354 and $89,499 were expensed in 1996,
1995 and 1994, respectively. At December 31, 1996, $8,314 remains unpaid,
while $7,719 was unpaid as of December 31, 1995.
NOTE C - PARTNERS' EQUITY
The acquisition and development of Phase I was funded by capital
contributions from Copley Pension Properties VI and VII, (CPP VI and VII),
general partners, in the amounts of $9,000,000 and $3,000,000,
respectively. The Partnership agreement provides for capital contributions
to be characterized as senior and junior capital. CPP VI capital consists
of $6,750,000 of senior capital and $2,250,000 of junior capital. CPP VII
capital consists of $2,250,000 of senior capital and $750,000 of junior
capital. Capital contributed by both CPP VI and CPP VII has been
contributed pro rata, whereby 75% has been characterized as Phase I senior
capital and 25% as Phase I junior capital.
The Partnership agreement provides for both a "Senior and Junior Priority
Return," on a monthly basis, which is calculated at the rate of 10% per
annum on the outstanding capital. The Phase I Priority Returns are payable
monthly from Operating Cash Flow as defined in the Partnership agreement;
however, (a) to the extent Senior Priority Returns are required to be paid
currently, they will be funded, if necessary, out of the proceeds of
Deficit Contributions and Default Capital
- 9 -
<PAGE>
Frederick Partners
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE C - PARTNERS' EQUITY (Continued)
Contributions as defined in the Partnership agreement, and (b) to the
extent the full amount of the Junior Priority Return cannot be made from
such sources on a monthly basis, the amount of the Junior Priority Return
will accrue with interest at the rate of 10.09% per annum compounded
monthly.
At December 31, 1996 and December 31, 1995, the Phase I Junior Priority
Return (including accrued interest of $753,984 and $522,305, respectively)
and Senior Priority Returns (including accrued interest at $5,916 and
$435, respectively) payable totaled $2,509,334 (of which $1,892,117 was
due to CPP VI and $617,217 was due to CPP VII) and $2,190,570, of which
$1,666,838 was due to CPP VI and $523,732 was due to CPP VII,
respectively.
The acquisition and development of Phase II was funded by capital
contributions from CPP VI and CPP VII in the amounts of $5,100,000 and
$1,700,000, respectively. The Partnership agreement provides for capital
contributions to be characterized as senior and junior capital. CPP VI
capital consists of $3,825,000 of senior capital and $1,275,000 of junior
capital. CPP VII capital consists of $1,275,000 of senior capital and
$425,000 of junior capital. Capital contributed by both CPP VI and CPP VII
has been contributed pro rata, whereby 75% has been characterized as Phase
II senior capital and 25% as Phase II junior capital.
The Partnership agreement provides for both a "Senior and Junior Priority
Return," on a monthly basis, which is calculated at the rate of 10% per
annum on their outstanding capital. During the Phase II construction
period, the Senior Priority Return and the Junior Priority Return payable
to CPP VI and CPP VII are payable monthly, regardless of availability of
Operating Cash Flow, from capital contributions (and are to be funded, if
necessary, out of the proceeds of Deficit Contributions and Default
Capital Contributions, as defined in the Partnership agreement).
Thereafter, the Phase II Priority Returns are payable monthly from
Operating Cash Flow as defined in the Partnership agreement, but, (a) to
the extent Senior Priority Returns are required to be paid currently, they
will be funded, if necessary, out of the proceeds of Deficit Contributions
and Default Capital Contributions as defined in the Partnership agreement,
and (b) to the extent the full amount of the Junior Priority Return cannot
be made from such sources on a monthly basis, the amount of the Junior
Priority Return will accrue with interest at the rate of 10.09% per annum
compounded monthly.
- 10 -
<PAGE>
Frederick Partners
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE C - PARTNERS' EQUITY (Continued)
At December 31, 1996 and December 31, 1995, the Phase II Junior Priority
Return (including accrued interest of $253,360 and $165,677 respectively)
and Senior Priority Returns payable totaled $1,053,442 (of which $786,282
was due to CPP VI and $267,160 was due to CPP VII) and $787,549 (of which
$595,327 was due to CPP VI and $192,222 was due to CPP VII), respectively.
NOTE D - RECONCILIATION OF FINANCIAL STATEMENTS TO TAX RETURN
The following is a reconciliation of the excess of revenue over expenses
and partners' equity per the financial statements to the tax basis excess
(deficiency) of revenue over expenses and partners' equity for the years
ended December 31, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Excess of revenue over expenses (financial
statement basis) $ 161,929 $ 230,665 $ 62,137
Deferred rental income (45,542) (53,570) 117,602
Real estate taxes deductible under IRS
Code Section 461 (27,098) 32,738 (2,786)
----------- ------------ ------------
Tax basis $ 89,289 $ 209,833 $ 176,953
=========== ============ ============
Partners' equity (financial statement basis) $ 9,206,906 $ 10,487,955 $ 11,665,185
Deferred rental income 69,380 114,922 168,493
Real estate taxes deductible under IRS
Code Section 461 (137,189) (110,091) (142,830)
----------- ------------ ------------
Tax basis $ 9,139,097 $ 10,492,786 $ 11,690,848
=========== ============ ============
</TABLE>
- 11 -
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 3
Auditor's Report and Financial Statements
of White Phonic Associates
Page
----
Independent Auditor's Report of Pisenti & Brinker, L.L.P.............
Statement of Financial Position - December 31, 1996 and 1995.........
Statement of Operations - For the Years Ended
December 31, 1996, 1995 and 1994................................
Statement of Partners' Equity - For the Years Ended
December 31, 1996, 1995 and 1994................................
Statement of Cash Flows - For the Years Ended
December 31, 1996, 1995 and 1994................................
Notes to Financial Statements
<PAGE>
White Phonic Associates
(A California General Partnership)
Financial Statements
Years Ended December 31, 1996, 1995 and 1994
<PAGE>
================================================================================
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements
Statements of Financial Position 2
Statements of Operations 3
Statements of Partners' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 12
<PAGE>
[Letterhead of Pisenti & Brinker]
================================================================================
Independent Auditors' Report
To the Partners
White Phonic Associates
Petaluma, California
We have audited the accompanying statements of financial position of White
Phonic Associates (A California General Partnership) as of December 31, 1996 and
1995, and the related statements of operations, partners' equity and cash flows
for the years ended December 31, 1996, 1995 and 1994. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We have 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 White Phonic Associates as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years ended December 31, 1996, 1995 and 1994 in conformity with
generally accepted accounting principles.
/s/ Pisenti & Brinker LLP
Petaluma, California
January 27, 1997
1
<PAGE>
White Phonic Associates
(A California General Partnership)
Statements of Financial Position
================================================================================
December 31, 1996 1995
- --------------------------------------------------------------------------------
Assets
Real estate under operating lease
Building $1,609,121 $1,609,121
Tenant improvements 824,549 824,549
- --------------------------------------------------------------------------------
2,433,670 2,433,670
Accumulated depreciation (500,432) (410,733)
- --------------------------------------------------------------------------------
1,933,238 2,022,937
Land 703,147 703,147
- --------------------------------------------------------------------------------
2,636,385 2,726,084
Cash and cash equivalents 28,225 35,809
Accounts receivable 23,859 4,485
Accrued rents receivable 207,651 205,686
Prepaid expenses and deferred charges
Prepaid insurance 411 340
Deferred marketing costs - 1,191
Lease acquisition costs 155,315 155,315
- --------------------------------------------------------------------------------
155,726 156,846
Accumulated amortization (86,718) (72,377)
- --------------------------------------------------------------------------------
69,008 84,469
- --------------------------------------------------------------------------------
$2,965,128 $3,056,533
================================================================================
Liabilities and partners' equity
Accounts payable $ 5,491 $ 4,812
Accrued return to partner 27,457 27,457
Tenant deposits 28,782 28,782
- --------------------------------------------------------------------------------
Total liabilities 61,730 61,051
Partners' equity 2,903,398 2,995,482
- --------------------------------------------------------------------------------
$2,965,128 $3,056,533
================================================================================
See accompanying Notes to Financial Statements
2
<PAGE>
White Phonic Associates
(A California General Partnership)
Statements of Operations
================================================================================
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue
Minimum lease income $416,146 $416,146 $416,146
Common area maintenance charges 21,883 25,640 20,680
Tax and insurance reimbursements 64,613 40,478 40,083
- --------------------------------------------------------------------------------
$502,642 482,264 476,909
Operating expenses
Priority return to partner 329,486 329,486 329,486
Depreciation 89,699 89,700 89,701
Legal and accounting 10,234 11,473 10,135
Repairs and maintenance 15,784 14,960 11,331
Property taxes 62,148 38,755 37,726
Amortization of lease acquisition costs 15,532 15,299 15,532
Management fees 15,079 14,393 14,248
Utilities 3,881 7,990 8,177
Amortization of organization costs - 1,422 3,413
Insurance 2,394 2,094 2,365
Marketing and promotion 247 319 1,152
Miscellaneous 931 509 174
- --------------------------------------------------------------------------------
545,415 526,400 523,440
- --------------------------------------------------------------------------------
Loss from operations (42,773) (44,136) (46,531)
Interest income 689 900 955
- --------------------------------------------------------------------------------
Net loss $(42,084) $(43,236) $(45,576)
================================================================================
See accompanying Notes to Financial Statements
3
<PAGE>
White Phonic Associates
(A California General Partnership)
Statements of Partners' Equity
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Copley
Pension White/Vila
Properties Associates
VI II Total
- --------------------------------------------------------------------------------
Partners' equity (deficit),
December 31, 1993 $3,230,076 $ (64,782) $3,165,294
Net loss for 1994 (22,788) (22,788) (45,576)
Distributions during 1994 (17,000) (17,000) (34,000)
- --------------------------------------------------------------------------------
Partners' equity (deficit),
December 31, 1994 3,190,288 (104,570) 3,085,718
Net loss for 1995 (21,618) (21,618) (43,236)
Distributions during 1995 (23,500) (23,500) (47,000)
- --------------------------------------------------------------------------------
Partners' equity (deficit),
December 31, 1995 3,145,170 (149,688) 2,995,482
Net loss for 1996 (21,042) (21,042) (42,084)
Distributions during 1996 (25,000) (25,000) (50,000)
- --------------------------------------------------------------------------------
Partners' equity (deficit),
December 31, 1996 $3,099,128 $(195,730) $2,903,398
================================================================================
See accompanying Notes to Financial Statements
4
<PAGE>
White Phonic Associates
(A California General Partnership)
Statements of Cash Flows
================================================================================
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
and Cash Equivalents
Cash flows from operating activities
Net loss $(42,084) $(43,236) $(45,576)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 105,231 106,420 109,043
(Increase) decrease in operating assets:
Accounts receivable (19,374) (2,499) (66)
Accrued rents receivable (1,965) (18,814) (33,906)
Prepaid expenses (71) 372 3,928
Increase in operating liabilities:
Accounts payable 679 637 889
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 42,416 42,880 34,312
- --------------------------------------------------------------------------------
Cash flows from financing activities
Distributions to partners (50,000) (47,000) (34,000)
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents (7,584) (4,120) 312
Cash and cash equivalents,
beginning of year 35,809 39,929 39,617
- --------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 28,225 $ 35,809 $ 39,929
================================================================================
See accompanying Notes to Financial Statements
5
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note A. Formation and Operations of the Partnership and Summary
of Significant Accounting Policies
Formation and Operations of the Partnership
White Phonic Associates is a general partnership (the "Partnership")
organized under the laws of the State of California on April 30,
1990, and is engaged in the development and leasing of office and
industrial buildings in the County of Sonoma. The duration of the
Partnership will extend until December 31, 2040, unless sooner
dissolved or terminated under the terms of the Partnership Agreement
(the "Agreement").
The General Partners (the "Partners") are Copley Pension Properties
VI ("CPP VI"), a Massachusetts Real Estate Limited Partnership
consisting of institutional investors, and White/Vila Associates II
("White/Vila"), a California General Partnership consisting of
individuals. As consideration for a 50% interest in the Partnership,
CPP VI contributed $824,406 in cash at inception and has made
additional cash contributions subsequent to inception amounting to
$2,470,454 subject to a maximum of $3,450,000 as provided for in the
Agreement. In exchange for its 50% interest, White/Vila contributed
property in kind consisting of land, development costs, and certain
intangibles. The Partnership also assumed the liabilities of
White/Vila consisting of a mortgage loan on the land and accrued
liabilities related to the development project. The net fair market
value of the assets and liabilities contributed by White/Vila was
determined by agreement of the Partners to be in the amount of $1.00.
The Partnership commenced development for and construction of a
commercial building approximating 35,000 square feet shortly after
inception on the land contributed by White/Vila, which is located in
the Oakmead Industrial Park in the City of Petaluma. The interior
improvements to the building were designed to meet the needs of a
single tenant pursuant to the terms of an operating lease which had
been acquired by White/Vila prior to the Partnership's formation. The
lease became effective on June 1, 1991 following completion of the
building and tenant improvements, has an initial term of ten years,
and encompasses 100% of the building's available space (see Note E).
Summary of Significant Accounting Policies
Real Estate Under Operating Lease
The building and tenant improvements are stated at cost and
include certain indirect costs such as insurance, property taxes,
development fees, and the return to a Partner which have been
allocated and capitalized during the development and construction
periods of the commercial building. Land is stated at its fair
value at the date of contribution by a Partner, and that value
approximated the contributing Partner's original cost of the land.
6
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note A. Formation and Operations of the Partnership and Summary
of Significant Accounting Policies (continued)
Summary of Significant Accounting Policies (continued)
Depreciation
The cost of the commercial building is being depreciated over an
estimated useful life of forty years. The cost of tenant
improvements is being depreciated over an estimated useful life of
ten years and includes a salvage value of 40% for the estimated
utility of certain structural components extending beyond the
overall useful life of the improvements. All depreciation is
computed using the straight-line method. Maintenance and repair
costs are charged to operations as incurred and significant
betterments and renewals are capitalized.
Development Fee
The Partnership paid a development fee to an affiliate of the
developer Partner as compensation for the supervision and
management of development activities. The fee was payable ratably
over the expected development period and was based on a percentage
of land and hard construction costs. The development fee was
capitalized and is included in the cost of the building and tenant
improvements. See Note D concerning related party transactions.
Marketing and Promotional Costs
The Partnership has incurred certain costs for promotional
activities such as ground-breaking ceremonies which are considered
to be fully recoverable from future lease revenues. Such costs
have been capitalized and are being amortized over the ten-year
fixed term of the lease on a straight-line basis. Amortization of
these costs is included in marketing and promotion expense.
Lease Acquisition Costs
Commissions, legal fees, and other direct costs incurred in
connection with the acquisition of the operating lease for the
occupancy of the commercial building have been capitalized. Such
costs are being amortized over the ten-year fixed term of the
lease on a straight-line basis.
7
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note A. Formation and Operations of the Partnership and Summary
of Significant Accounting Policies (continued)
Summary of Significant Accounting Policies (continued)
Recognition of Income From Operating Lease and Accrued Rents
Receivable
Income from the operating lease is recognized ratably over the
fixed, noncancelable term including rent holidays and is based on
total minimum future rentals to be received. The difference
between the amount of earned lease income on a straight-line basis
and the cash received from the tenant is included in accrued rents
receivable. Certain operating and common area maintenance charges
are recognized as they are earned and become determinable.
Income Taxes
The Partnership is not a taxable entity for purposes of federal
and state income taxation. The net income or loss from rental real
estate activities together with other items of income, deduction,
gain and loss which must be separately stated at the partnership
level are passed through to the Partners and included in their own
income tax returns. The partnership returns of income, the
qualification of the Partnership for federal and state income tax
purposes, and the amount of income or loss reported by the
Partnership are subject to examination by the respective taxing
authorities. If such examinations result in a change to the
reported profits or losses, the tax liabilities of the Partners
could be changed accordingly.
Cash Equivalents
The Partnership considers all highly liquid investments with a
maturity of three months or less when acquired to be "cash
equivalents" for purposes of the statements of cash flows.
Organization Costs
Legal, accounting, filing, and similar fees incurred in connection
with the formation and organization of the Partnership have been
deferred and are being amortized over a period of five years on a
straight-line basis.
Use of Estimates
Management uses estimates and assumptions in preparing its
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect the
reported amount of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amount of
revenue and expenses. Actual results could vary from the estimates
that were used.
8
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note B. Priority Return and Amount Due to Partner
The Agreement provides that CPP VI is entitled to receive a
cumulative priority return at the rate of 10% per annum, compounded
monthly, on its outstanding invested capital. The return is payable
on a monthly basis from operating and extraordinary cash flow as
defined in the Agreement. One-tenth (1%) of the return may be allowed
to accrue during the first 120-month period following the date of
inception if and to the extent that the Partnership is unable to pay
the return from operating and extraordinary cash flows. If the
Partnership is further unable to pay the remaining amount (9%)
currently, then such remaining amount is to be funded from the
proceeds of deficit and default capital contributions as defined and
provided for in the Agreement.
During 1996, 1995 and 1994, the Partnership incurred and made
payments of the priority return to CPP VI amounting to $329,486 for
each year. At December 31, 1996, the unpaid priority return due to
CPP VI amounted to $27,457 and the Partnership was not in default
with respect to its obligations to CPP VI.
Note C. Distributions of Operating and Extraordinary Cash Flows
The Agreement provides that non-liquidating distributions of
operating cash flow are to be made first to CPP VI in payment of its
priority return; second, to the Partners in the amounts of their
respective default priority returns, if any; third, to the Partners
in the amounts of their respective deficit preferred returns; and
fourth, to the Partners in accordance with their respective
interests. Extraordinary cash flow is to be distributed first to CPP
VI in payment of its priority return; second, to CPP VI in repayment
of its invested capital; third, to the Partners in the amounts of
their default priority returns; fourth, to the Partners in payment of
their default capital contributions; fifth, to the Partners in the
amounts of their respective deficit preferred returns; sixth, to the
Partners in the amounts of their respective deficit capital
contributions; and seventh, to the Partners in accordance with their
respective interests. The Partnership made total distributions of
operating cash flow to the Partners in the amounts of $50,000,
$47,000 and $34,000 for 1996, 1995 and 1994, respectively, split
equally between the Partners in accordance with their interests in
the Partnership. No distributions of extraordinary cash flow have
been made by the Partnership since its inception.
9
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note D. Related Party Transactions
The Partnership paid a development fee to G & W Management Company,
Inc. (the "Management Company"), an affiliate of White/Vila, equal to
2% of total land and hard construction costs incurred in connection
with the development of the commercial building (see Note A).
Additionally, the Partnership has entered into an agreement with the
Management Company which provides for the management of rental
properties in return for which the Management Company is paid a
management fee in the amount of 3% of the gross rental receipts from
net leases. Furthermore, the Partnership contracted with Vila
Construction Co., Inc., also an affiliate of White/Vila, for the
development and construction of the commercial building in the
capacity of a general contractor.
Payments made to related parties in connection with the transactions
described above for the years ended December 31, 1996, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
Related Entity Transaction 1996 1995 1994
-------------------------- --------------- ------- ------- -------
<S> <C> <C> <C> <C>
G & W Management Co., Inc. Management fees $14,439 $13,758 $13,359
==========================================================================
</TABLE>
The amounts owed to related parties as of December 31, 1996 arising
from the aforementioned transactions and included in accounts
payable, are as follows:
<TABLE>
<S> <C> <C> <C>
G & W Management Co., Inc. $ 5,450 $ 4,812 $ 4,175
==========================================================================
</TABLE>
Note E. Commitments and Concentration of Credit Risk
Lease Agreement With Single Tenant
The Partnership leases its commercial building to a single tenant,
Phonic Ear, Inc. under the terms of an operating lease with an
initial term of ten years which commenced on June 1, 1991. The lease
provides for an option to purchase the underlying property during the
third through sixth lease years for a purchase price which ranges
from a minimum of $4,584,000 to a maximum of $5,277,700 based upon
(1) whether or not rents are adjusted according to the terms of the
lease, (2) the particular year during which the option is exercised,
and (3) whether or not a roadway is constructed adjacent to the
property.
As of December 31, 1996, no action by Phonic Ear, Inc. had been taken
on the option.
10
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note E. Commitments and Concentration of Credit Risk (continued)
Lease Agreement With Single Tenant (continued)
In addition, if the lessee (tenant) elects not to exercise the
purchase option referred to above, the lease provides for an
automatic one-year extension and two consecutive five-year options to
extend the initial ten-year term.
The lease with Phonic Ear, Inc. accounted for all of the
Partnership's revenue for the years ended December 31, 1996, 1995 and
1994, consisting of minimum lease income and contingent rents.
Contingent rental income amounted to $86,496, $66,118 and $60,763,
respectively.
At December 31, the Partnership had outstanding from Phonic Ear, Inc.
accrued rents receivable as follows:
1996 1995 1994
Accrued expense reimbursements
currently due $ 23,859 $ 4,485 $ 1,986
Deferred portion of accrued
minimum rents receivable 207,651 205,686 186,872
---------------------------------------------------------------------
$231,510 $210,171 $188,858
=====================================================================
Minimum future rents to be received over the initial ten-year term of
the lease as of December 31, 1996 for each of the next five years and
in the aggregate are as follows:
Year Ending December 31,
1997 $ 431,028
1998 450,333
1999 468,936
2000 488,241
2001 207,090
---------------------------------------------------------------------
$2,045,628
=====================================================================
11
<PAGE>
White Phonic Associates
(A California General Partnership)
Notes to Financial Statements
================================================================================
Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Note E. Commitments and Concentration of Credit Risk (continued)
Concentration of Credit Risk
A concentration of credit risk exists with respect to the operating
lease with Phonic Ear, Inc. All of the Partnership's revenue is
earned and its assets are employed in the City of Petaluma. The
maximum accounting loss which the Partnership would recognize from
credit risk associated with the operating lease amounted to $271,326,
$265,750 and $259,736 as of December 31, 1996, 1995 and 1994,
respectively.
Obligations Under Special Assessment Bonds
The Partnership is obligated under special assessment bonds issued by
the City of Petaluma, California in connection with infrastructure
improvements made to the industrial park in which the Partnership's
real property is located. The bonds were originally issued in 1987
and assessed against the various parcels comprising the industrial
park. The Partnership acquired title to the property in May 1990
subject to the remaining obligations due on the bonds, the principal
balance of which amounted to approximately $3,991 at December 31,
1996. The bonds provide for serial redemption in graduated
installments over a remaining term of 7 years, maturing in 2002. The
scheduled debt service on the bonds is collected by the county tax
collector and is included as a line item on the semi-annual property
tax statements. Due to the overall insignificance of the bond
liability and the nature of the improvements which gave rise to the
obligation, the Partnership accounts for the bond payments as a
component of property taxes, which were capitalized as an indirect
cost during the development and construction phases of the real
estate project and have been charged to operations since the
commencement of leasing activities.
12
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Exhibit Number
- ------ ------- ------
10A. Lakewood Associates General Partnership *
Agreement dated August, 1988 between EW Lakewood Limited
Partnership, New England Pension properties V; A Real
Estate Limited Partnership and the Registrant.
10B. Hewson Wilmington Associates General *
Partnership Agreement dated July 18, 1988
between Hewson/Wilmington, L.P. and the Registrant.
10C. Farmers Branch Associates General Partnership *
Agreement dated December 7, 1988 between North
Dallas Division #81, Ltd. and the Registrant.
10D. Payne Ranch Centre Associates General *
Partnership Agreement dated January 4, 1989
between Payne Ranch Investors 88 and the
Registrant.
10E. Development Agreement dated December 28, *
1988 by and between Payne Ranch Centre Associates
and Albertson's, Inc.
10F. Contract of Sale dated December 28, 1988 *
by and between Payne Ranch Centre Associates
and Albertson's, Inc.
10G. Frederick Partners General Partnership *
Agreement dated as of March 20, 1989 between Frederick
Bozzuto Limited Partnership, Copley Pension Properties
VII; A Real Estate Limited Partnership and the
Registrant.
10H. First Amendment to Hewson Wilmington Associates *
General Partnership Agreement dated as of
December 31, 1989 by and between Hewson/Wilmington,
L.P., a California limited partnership and the
Registrant.
- ----------
* Previously filed and incorporated herein by reference.
<PAGE>
10I. White Phonic Associates General Partnership *
Agreement dated as of April 30, 1990 between White/Vila
Associates II, a California general partnership and the
Registrant.
10J. Purchase and Sale Agreement and Escrow *
Instructions dated as of June 12, 1990 by
and between Payne Ranch Centre Associates,
a Colorado general partnership and Super
Enterprises, Inc., a California corporation.
10K. Purchase and Sale Agreement and Escrow Instructions *
(Jiffy Lube Parcel) by and between Payne Ranch
Centre Associates and Super Enterprises, Inc. dated
as of July 26, 1990.
10L. Purchase and Sale Agreement and Escrow Instructions *
(Wells Fargo Parcel) by and between Payne Ranch
Associates and Super Enterprises, Inc. dated as of
August 31, 1990.
10M. Second Amendment to Farmers Branch Associates
General Partnership Agreement by and between *
North Dallas Division #81, Ltd. and the
Registrant effective as of October 18, 1989.
10N. General Partnership Agreement of Prentiss/Copley *
Itasca Associates dated as of May 20, 1991 between Prentiss
Properties Itasca, L.P., a Texas limited partnership and
the Registrant.
10O. Agreement of Dissolution of Partnership and *
Cancellation of Farmers Branch Associates General
Partnership Agreement dated July 1, 1994 by and between
North Dallas Division #81, Ltd., a Texas limited partnership,
and Registrant.
10P. Asset Contribution Agreement by and among Evans *
Withycombe Residential, Inc., a Maryland Corporation,
and Evans Withycombe Residential, L.P., a Delaware
limited partnership, as Purchasers and Lakewood
Associates, an Arizona limited Partnership composed
of Registrant, New England Pension Properties V and EW
Lakewood L.P., as Sellers, dated June 9, 1994.
- ----------
* Previously filed and incorporated herein by reference.
<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 PENSION PROPERTIES VI;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 28, 1997 By: /s/ Joseph W. O'Connor
----------------------
Joseph W. O'Connor
President of the
Managing General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Principal
Executive Officer and
Director of the
/s/ Joseph W. O'Connor Managing General Partner March 28, 1997
- ------------------------
Joseph W. O'Connor
Principal Financial and
Accounting Officer of the
/s/ Daniel C. Mackowiak Managing General Partner March 28, 1997
- ------------------------
Daniel C. Mackowiak
Director of the
/s/ Daniel J. Coughlin Managing General Partner March 28, 1997
- ------------------------
Daniel J. Coughlin
Director of the
/s/ James J. Finnegan Managing General Partner March 28, 1997
- ------------------------
James J. Finnegan
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,076,103
<SECURITIES> 2,194,290
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,270,393
<PP&E> 23,829,287
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,099,680
<CURRENT-LIABILITIES> 137,864
<BONDS> 582,677
0
0
<COMMON> 0
<OTHER-SE> 28,379,139
<TOTAL-LIABILITY-AND-EQUITY> 29,099,680
<SALES> 1,982,201
<TOTAL-REVENUES> 2,250,424
<CGS> 369,959
<TOTAL-COSTS> 369,959
<OTHER-EXPENSES> 694,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,186,133
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,186,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,186,133
<EPS-PRIMARY> 24.07
<EPS-DILUTED> 24.07
</TABLE>
