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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 June 30, 2000 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)
World Trade Center East
Two Seaport Lane, 16th Fl.
Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 261-9000
-------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report:
225 Franklin Street, 25th Fl.
Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2000
PART I
FINANCIAL INFORMATION
2
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
STATEMENTS OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $1,532,563 $1,559,851
---------- ----------
$1,532,563 $1,559,851
========== ==========
Liabilities and net assets in liquidation
Accounts payable $ - $ 48,751
Accrued expenses for liquidation 56,000 64,000
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Total liabilities 56,000 112,751
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Net assets in liquidation:
Limited partners ($242 per
unit; 100,000 units authorized,
27,641 units issued and
outstanding) 1,494,612 1,465,444
General partners (18,049) (18,344)
---------- ----------
Total partners' capital 1,476,563 1,447,100
---------- ----------
$1,532,563 $1,559,851
========== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
3
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
------------------------------------
<S> <C> <C>
Net assets in liquidation at
beginning of period $1,447,100 $1,447,100
------------------ ----------------
Increase (decrease) during period:
Operating activities
Interest income 23,477 46,507
------------------ ----------------
23,477 46,507
Liquidating activities
Change in provision for
liquidation expenses 5,986 (17,044)
------------------ ----------------
5,986 (17,044)
------------------ ----------------
Net change in net assets in liquidation $ 29,463 29,463
------------------ ----------------
Net assets in liquidation at end of period $1,476,563 $1,476,563
================== ================
</TABLE>
(See accompanying notes to unaudited financial statements)
4
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
------------------ ----------------
<S> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 213,792 $ 479,466
Property operating expenses (49,355) (56,390)
Depreciation and amortization (1,634) (80,126)
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162,803 342,950
Joint venture earnings 128,131 225,052
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Total real estate operations 290,934 568,002
Gain on sale of property 1,118,340 1,118,340
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Total real estate activity 1,409,274 1,686,342
Interest on cash equivalents 22,718 44,872
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Total investment activity 1,431,992 1,731,214
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PORTFOLIO EXPENSES
Management fee 27,614 55,227
General and administrative 22,524 41,419
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50,138 96,646
---------- ----------
Net Income $1,381,854 $1,634,568
========== ==========
Net income per
limited partnership unit $ 49.49 $ 58.54
========== ==========
Cash distributions per
limited partnership unit $ 10.00 $ 23.00
========== ==========
Number of limited partnership
units outstanding during the period 27,641 27,641
========== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
5
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
--------------------
<S> <C>
Net cash provided by
operating activities $ 519,190
----------------
Cash flows from investing activity:
Net proceeds from sale of property 8,125,191
Disposition fee accrued for Brea sale 255,900
----------------
Net cash provided by investing activities 8,381,091
----------------
Cash flows from financing activity:
Distributions to partners (642,164)
----------------
Net increase in
Cash and cash equivalents 8,258,117
Cash and cash equivalents:
Beginning of period 2,163,411
----------------
End of period $10,421,528
================
</TABLE>
(See accompanying notes to unaudited financial statements)
6
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the Partnership's financial
position as of June 30, 2000 and December 31, 1999 and the changes of net assets
in liquidation and the results of its operations, for the three and six month
periods ended June 30, 2000 and 1999, respectively, and its cash flows for the
six month periods ended June 30, 1999. These adjustments are of a normal
recurring nature.
Certain reclassifications have been made to conform to the current period
presentation.
See notes to financial statements included in the Partnership's 1999 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.
The Partnership commenced operations in October 1988, and acquired its real
estate investments prior to the end of 1989. The Partnership sold its last
remaining investment in August 1999. On December 31, 1999, the Partnership
adopted a plan of liquidation and intends to dissolve in 2000.
In connection with its adoption of a plan of liquidation on December 31,
1999, the Partnership also adopted the liquidation basis of accounting which,
among other things, requires that assets and liabilities be stated at their
estimated net realizable value and that estimated costs of liquidating the
Partnership be provided to the extent that they are reasonably determinable.
NOTE 2 - PROPERTY
-----------------
On June 25, 1999, the Partnership sold the Brea West building for a gross
sale price of $8,530,000. The Partnership received net proceeds of $8,381,091
after closing costs, and recognized a gain of $1,374,240 ($49.22 per limited
partnership unit) on the sale. On July 29, 1999 the Partnership made a capital
distribution of $8,126,454 ($294 per limited partnership unit) from the proceeds
of the sale. At the time of sale, a disposition fee of $255,900 was accrued but
not paid to AEW Real Estate Advisors, Inc. This fee was subsequently reversed
in conjunction with the sale of the Partnership's last remaining investment (see
Note 3) since the limited partners did not receive a return of their capital
contributions from the sale of the Partnership's investments.
7
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
NOTE 3 - REAL ESTATE JOINT VENTURES
-----------------------------------
On August 27, 1999, the Shasta Way joint venture investment, in which the
Partnership and an affiliate owned a 58% and 42% interest, respectively, sold
its property to an unaffiliated third party for gross proceeds of $13,057,000,
of which the Partnership's 58% share was $7,573,060. The Partnership received
its 58% share of the net proceeds, $7,444,456 after closing costs, and
recognized a gain of $2,702,113 ($96.78 per limited partnership unit) on the
sale. On September 22, 1999 the Partnership made a capital distribution of
$7,297,224 ($264 per limited partnership unit) from the proceeds of the sale.
The following summarized financial information is presented in the
aggregate for the Shasta Way joint venture:
<TABLE>
<CAPTION>
Results of Operations
---------------------
Six Months Ended
June 30, 1999
---------------------
<S> <C>
Revenue
Rental income $722,483
Other income 2,110
--------
724,593
--------
Expenses
Operating expenses 105,318
Depreciation and amortization 230,390
--------
335,708
--------
Net income $388,885
========
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and its affiliate on behalf of their various financing arrangements
with the joint venture.
Note 4 - ACCRUED EXPENSES FOR LIQUIDATION
-----------------------------------------
Accrued expenses for liquidation as of June 30, 2000 include estimates of
costs to be incurred in carrying out the dissolution and liquidation of the
Partnership. These costs include estimates of legal fees, accounting fees, tax
preparation and filing fees and other professional services.
During the six months ended June 30, 2000 the Partnership incurred $25,044 of
such expenses and the General Partner re-evaluated the estimated costs to
dissolve the Partnership. The provision for liquidation expenses was
accordingly increased by an additional $17,044 to reflect the revised estimates.
8
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
The actual costs could vary significantly from the related provisions due to
the uncertainty related to the length of time required to complete the
liquidation and dissolution of the Partnership. The accrued expenses do not
take into consideration possible litigation arising from the customary
representations and warranties made as part of each sale. Such costs are
unknown and are not estimable at this time.
9
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
The Partnership completed its offering of units of limited partnership
interest in 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.
On June 25, 1999, the Partnership sold the Brea West property for a gross sale
price of $8,530,000 and received net proceeds of $8,381,091 after closing costs.
On July 29, 1999, the Partnership made a capital distribution of $8,126,454
($294 per limited partnership unit) from the proceeds of the sale.
On August 27, 1999, the Shasta Way joint venture in which the Partnership and
an affiliate owned a 58% and 42% interest, respectively, sold its property for a
gross sale price of $13,057,000, of which the Partnership's 58% share was
$7,573,060. The Partnership received its 58% share of the net proceeds, after
closing costs, in the amount of $7,444,456. On September 22, 1999, the
Partnership made a capital distribution of $7,297,224 ($264 per limited
partnership unit) from the proceeds of the sale.
In connection with a sale of property in July 1997, and the two sales in
June and August 1999, capital of $20,951,878 ($758 per limited partnership unit)
has been returned to the limited partners, reducing the adjusted capital
contribution to $242 per unit.
At June 30, 2000, the Partnership had $1,532,563 in cash and cash equivalents
which is being retained primarily as a reserve in the event of any claims for
breach of representations or warranties in connection with the sale of Shasta
Way, and as an additional reserve in connection with the liquidation of the
Partnership. The Partnership intends to liquidate in 2000. Distributions of
cash from operations relating to the first two quarters of 1999 were made at the
annualized rate of 5.0% on the adjusted capital contribution of $800 per unit.
There have been no distributions from operations since the distribution related
to the third quarter of 1999 due to the sale of the Partnership's last remaining
investment in August, 1999. When all Partnership expenses have been settled, a
distribution of the remaining cash reserves will be made.
Results of Operations
---------------------
Operating Factors
As discussed above, the Partnership sold the Brea West property on June 25,
1999. The Partnership received net proceeds of $8,381,091, after closing costs
and recognized a gain of $1,374,240 ($49.22 per limited partnership unit). The
property was 100% leased to a single tenant at the time of sale.
10
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
As discussed above, the Shasta Way joint venture, in which the Partnership and
an affiliate owned a 58% and 42% interest, respectively, sold its property on
August 27, 1999. The Partnership received its 58% share of the net proceeds,
after closing costs, in the amount of $7,444,456 and recognized a gain of
$2,702,113 ($96.78 per limited partnership unit). The Shasta Way property was
100% leased at the time of sale.
Investment Results
There are no real estate comparative operating results for the three and six
month periods ended June 30, 2000 and 1999 due to the sales of the Partnership's
last two remaining properties in 1999, as discussed above.
Cash flow from operations through June 30, 2000 decreased by approximately
$546,000 compared with the same period in 1999. The decrease is due to the
sales of the Partnership's last two remaining properties in 1999, as discussed
above.
Interest on cash equivalents remained relatively stable between the comparable
three and six month periods ended June 30, 2000 and 1999, respectively.
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
incurred in 1999 primarily consist of real estate appraisal, printing, legal,
accounting and investor servicing fees. General and administrative expenses for
the three and six months periods ended June 30, 1999 were $22,524 and $41,419,
respectively.
There was no management fee incurred during the first and second quarters
of 2000 due to the discontinuance of operating cash distributions as a result of
the sales of the Partnership's last two remaining properties in 1999, as
discussed above.
Costs to dissolve and liquidate the Partnership include legal fees,
accounting fees, tax preparation fees, filing fees and other professional
services. During the six months ended June 30, 2000, the Partnership incurred
$25,044 of such expenses and the General Partner re-evaluated the estimated
costs to dissolve the Partnership. The provision for liquidation expenses was
accordingly increased by $17,044 to reflect the revised estimates.
11
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COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2000
PART II
OTHER INFORMATION
Items 1-5 Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: (27) Financial Data Schedule
b. Reports on Form 8-K: No current reports on Form 8-K were filed
during the quarter ended June 30, 2000.
12
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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)
August 11, 2000
/s/ Alison L. Husid
-------------------------------
Alison L. Husid
President, Chief Executive Officer and Director
of Managing General Partner,
Third Income Corp.
August 11, 2000
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Treasurer and Principal Financial and Accounting
Officer of Managing General Partner, Third Income
Corp.
13
