<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------------------
For Quarter Ended March 31, 1996 Commission File Number 0-17809
COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3005973
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
399 Boylston Street, 13th Fl.
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
- - -------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve (12) months (or for such
shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
<PAGE>
COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART I
FINANCIAL INFORMATION
<PAGE>
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
---------------- -----------------
Assets
<S> <C> <C>
Real estate investments:
Joint ventures $ 5,793,627 $ 10,041,168
Property, net 11,941,864 7,910,129
---------- ----------
17,735,491 17,951,297
Cash and cash equivalents 1,628,373 1,695,180
Short-term investments 707,212 604,309
---------- ----------
$ 20,071,076 $ 20,250,786
========== ==========
Liabilities and Partners' Capital
Accounts payable $ 24,494 $ 56,778
Accrued management fee 41,420 41,420
---------- -----------
Total liabilities 65,914 98,198
---------- -----------
Partners' capital (deficit):
Limited partners ($1,000 per unit;
100,000 units authorized, 27,641
units issued and outstanding) 20,047,445 20,193,397
General partners (42,283) (40,809)
----------- ----------
Total partners' capital 20,005,162 20,152,588
----------- ----------
$ 20,071,076 $ 20,250,786
========== ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1996 1995
------ -----
Investment Activity
<S> <C> <C>
Property rentals $ 387,733 $ 248,711
Property operating expenses (70,863) (35,429)
Depreciation and amortization (101,139) (83,155)
------------ ------------
215,731 130,127
Joint venture earnings 97,454 160,588
------------ ------------
Total real estate operations 313,185 290,715
Interest on cash equivalents
and short-term investments 25,578 30,551
------------ ------------
Total investment activity 338,763 321,266
------------ ------------
Portfolio Expenses
Management fee 41,420 34,517
General and administrative 25,966 27,632
------------ ------------
67,386 62,149
------------ ------------
Net Income $ 271,377 $ 259,117
============ ============
Net income per limited partnership
unit $ 9.72 $ 9.28
============ ============
Cash distributions per limited
partnership unit $ 15.00 $ 12.50
============ ============
Number of limited partnership units
outstanding during the period 27,641 27,641
============ ============
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1996 1995
---------------------- ----------------------
General Limited General Limited
Partners Partners Partners Partners
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at
beginning
of period $ (40,809) $20,193,397 $ (35,706) $20,698,581
Cash
distributions (4,188) (414,615) (3,490) (345,512)
Net income 2,714 268,663 2,591 256,526
----------- ---------- -------- ----------
Balance at end
of period $ (42,283) $20,047,445 $ (36,605) $20,609,595
========== =========== =========== ===========
<FN>
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net cash provided by operating
activities $ 447,632 $ 287,156
---------- ----------
Cash flows from investing activity:
Increase in short-term
investments, net (95,636) (528,593)
---------- ----------
Cash flows from financing activity:
Distributions to partners (418,803) (349,002)
---------- ----------
Net decrease in cash and
cash equivalents (66,807) (590,439)
Cash and cash equivalents:
Beginning of period 1,695,180 2,205,034
---------- ----------
End of period $1,628,373 $1,614,595
=========== ===========
<FN>
Non-cash transaction:
Effective January 1, 1996, the Partnership's joint venture investment in
South Bay/CRIP 3 Associates was converted to a wholly-owned property. The
carrying value of this investment at conversion was $4,180,704.
(See accompanying notes to financial statements)
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Partnership's financial position as of March 31, 1996 and December 31,
1995 and the results of its operations, its cash flows and changes in
partners' capital (deficit) for the interim periods ended March 31, 1996
and 1995. These adjustments are of a normal recurring nature.
See notes to financial statements included in the Partnership's 1995
Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.
NOTE 1 - ORGANIZATION AND BUSINESS
Copley Realty Income Partners 3; A Limited Partnership (the
"Partnership") is a Massachusetts limited partnership organized for the
purpose of investing primarily in newly-constructed and existing income-
producing real properties. It commenced operations in October 1988, and
acquired the three real estate investments it currently owns prior to the
end of 1989. It intends to dispose of its investments within nine years
of their acquisition, and then liquidate.
NOTE 2 - PROPERTY
Effective January 1, 1996, the South Bay/CRIP 3 Associates joint
venture was restructured and the venture partner's ownership interest was
assigned 99% to the Partnership, and 1% to an affiliate of the
Partnership. Accordingly, as of this date, the investment is being
accounted for as a wholly-owned property. The carrying value of the joint
venture investment at conversion ($4,180,704) was allocated to land,
building and improvements, and other net operating assets.
The following is a summary of the Partnership's investment in
property:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Land $ 4,691,144 $ 2,991,854
Building and improvements 8,094,427 5,978,755
Accumulated depreciation (1,485,461) (1,402,497)
Deferred costs, net 509,328 402,230
Other net assets (liabilities) 132,426 (60,213)
------------ ------------
Net carrying value $ 11,941,864 $ 7,910,129
============ =============
</TABLE>
The net carrying value at March 31, 1996 was comprised of Brea West
and South Bay at $7,820,116 and $4,121,748, respectively.
<PAGE
NOTE 3 - REAL ESTATE JOINT VENTURES
The following summarized financial information is presented in the
aggregate for the joint ventures:
<TABLE>
<CAPTION>
Assets and Liabilities
-----------------------
March 31, 1996 December 31, 1995
------------- ----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$1,392,625 and $1,829,810 $ 8,315,241 $ 14,326,926
Other 655,831 1,037,209
-------------- --------------
8,971,072 15,364,135
Liabilities 100,077 99,956
-------------- --------------
Net assets $ 8,870,995 $ 15,264,179
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Results of Operations
----------------------
Quarter Ended March 31,
1996 1995
--------- ----------
<S> <C> <C>
Revenue
Rental income $ 323,408 $ 449,926
Other - 310
---------- -----------
323,408 450,236
---------- -----------
Expenses
Operating expenses 39,941 69,305
Depreciation and
amortization 115,012 142,309
---------- -----------
154,953 211,614
---------- -----------
Net income $ 168,455 $ 238,622
========== ===========
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on
behalf of their various financing arrangements with the joint ventures.
Effective January 1, 1996, the South Bay/CRIP 3 joint venture was
restructured, and the property became wholly-owned by the Partnership.
Accordingly, the 1996 amounts relate only to the Shasta Way joint venture.
<PAGE>
NOTE 4 - SUBSEQUENT EVENT
Distributions of cash from operations relating to the quarter ended
March 31, 1996 were made on April 25, 1996 in the amount of $418,803
($15.00 per limited partnership unit).
<PAGE>
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 June 1989 and a total of 27,641 units were sold.
The Partnership received proceeds of $24,458,317, net of selling
commissions and other offering costs, which have been used for investment
in real estate and to pay related acquisition costs, or are being retained
as working capital reserves.
At March 31, 1996, the Partnership had $2,335,585 in cash, cash
equivalents, and short-term investments, of which $418,803 was used for
cash distributions to partners on April 25, 1996; the remainder is being
retained for working capital reserves. The source of future liquidity and
cash distributions to partners will be cash generated by the Partnership's
real estate and short-term investments. Distributions of cash from
operations relating to the first quarter of 1996 were made at the
annualized rate of 6.0% on a capital contribution of $1,000 per unit. The
annualized distribution rate for the comparable prior year quarter was
5.0%. The increase in the distribution rate in the second quarter of 1995
is the result of increased cash flow from the lease-up of the South Bay
property in May 1995.
The carrying value of real estate investments in the financial
statements at March 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 costs of sale for properties held for
sale. Carrying value may be greater or less than current appraised value.
At March 31, 1996, the aggregate appraised value of two of the
Partnership's investments was approximately $400,000 greater than their
aggregate carrying value. The carrying value of the remaining investment
exceeded its related appraised value by approximately $100,000. 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,
Copley Real Estate Advisors, Inc., and independent appraisers. Because of
the subjectivity inherent in the valuation process, the current appraised
value may differ significantly from that which could be realized if the
real estate were actually offered for sale in the marketplace.
<PAGE>
Results of Operations
Form of Real Estate Investments
The Brea West investment is a wholly-owned property. The South Bay
investment was structured as a joint venture with a real estate
management/development firm. Effective January 1, 1996, however, the
venture was restructured and the venture partner's ownership interest was
assigned 99% to the Partnership, and 1% to an affiliate of the
Partnership. Accordingly, as of this date, this investment is being
accounted for as a wholly-owned property. The Shasta Way investment had
been structured as a joint venture with a real estate
management/development firm and an affiliate of the Partnership. As of
January 1, 1996, the Shasta Way joint venture was restructured, and the
management/development firm's interest was assigned to the Partnership and
its affiliate in proportion to their respective ownership interests. The
Partnership's ownership percentage increased to 58%.
Operating Factors
The South Bay property is 100% leased to a single tenant. The lease
term began in May, 1994 for 83% of the building in the first year and 100%
of the building through September, 2001. During 1994, the managing
general partner determined that the Partnership will likely not recover
the carrying value of this investment over the projected holding period.
Accordingly, the carrying value was reduced to estimated net realizable
value, with a charge to operations of $2,400,000.
The Brea West and the Shasta Way properties are also 100% leased to
single tenants under long-term leases.
Investment Results
Interest earned on cash equivalents and short-term investments for
the first quarter of 1996 decreased by approximately $5,000, or 16%, as
compared to the same period in 1995 primarily due to lower short-term
yields, partially offset by higher invested balances.
Total real estate operations increased by $22,470, or 8%, for the
first three months of 1996 as compared to the comparable period of 1995.
The increase is primarily due to the occupancy increase at South Bay in
May 1995, as well as a rental increase at Brea West as of October 1995.
Net income increased by approximately $12,000 between the first three
months of 1995 and 1996, while cash provided by operations increased by
approximately $160,000. This difference is primarily due to the timing
of cash distributions from joint venture investments.
<PAGE>
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, printing, accounting and servicing agent fees. These
expenses decreased approximately $2,000 or 6% between the first three
months of 1996 and 1995, due to decreased professional fees.
The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. Management fees increased
between the two three-month periods due to the increase in distributable
cash flow.
<PAGE>
COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: No Current Reports on Form 8-K
were filed during the quarter ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COPLEY REALTY INCOME PARTNERS 3; A LIMITED
PARTNERSHIP
(Registrant)
May 14, 1996
/s/ Peter P. Twining
-------------------------------
Peter P. Twining
Managing Director and General Counsel
of Managing General Partner,
Third Income Corp.
May 14, 1996
/s/ Daniel C. Mackowiak
--------------------------------
Daniel C. Mackowiak
Principal Financial and Accounting
Officer of Managing General Partner,
Third Income Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,628,373
<SECURITIES> 707,212
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,335,585
<PP&E> 17,735,491
<DEPRECIATION> 1,485,461
<TOTAL-ASSETS> 20,071,076
<CURRENT-LIABILITIES> 65,914
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,005,162
<TOTAL-LIABILITY-AND-EQUITY> 20,071,076
<SALES> 485,187
<TOTAL-REVENUES> 510,765
<CGS> 70,863
<TOTAL-COSTS> 70,863
<OTHER-EXPENSES> 168,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 271,377
<INCOME-TAX> 0
<INCOME-CONTINUING> 271,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,377
<EPS-PRIMARY> 9.72
<EPS-DILUTED> 9.72
</TABLE>
