<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 June 30, 1997 Commission File Number 0-20126
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3035851
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
- --------------------------------------------------------------------------------
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 PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
PART I
FINANCIAL INFORMATION
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS
<S> <C> <C>
Real estate investments:
Joint ventures $ 12,905,755 $ 13,073,326
Property, net 11,069,877 11,224,191
----------- -----------
23,975,632 24,297,517
Cash and cash equivalents 2,731,464 3,030,587
Short-term investments 1,714,989 1,430,515
----------- -----------
$ 28,422,085 $ 28,758,619
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 78,824 $ 77,888
Accrued management fee 65,027 60,529
Deferred disposition fees 478,108 478,108
----------- -----------
Total liabilities 621,959 616,525
----------- -----------
Partners' capital (deficit):
Limited partners ($884 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 27,836,473 28,175,021
General partners (36,347) (32,927)
----------- -----------
Total partners' capital 27,800,126 28,142,094
----------- -----------
$ 28,422,085 $ 28,758,619
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Six
Quarter Months Quarter Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1997 1996 1996
---------- ----------- ---------- ----------
INVESTMENT ACTIVITY
<S> <C> <C> <C> <C>
Property rentals $ 454,796 $ 916,239 $ 425,534 $ 856,245
Property operating expenses (163,035) (342,270) (167,751) (343,505)
Depreciation and
amortization (87,700) (175,400) (87,743) (175,486)
---------- ----------- ---------- ----------
204,061 398,569 170,040 337,254
Joint venture earnings 317,018 644,938 308,058 601,650
---------- ----------- ---------- ----------
Total real estate activity 521,079 1,043,507 478,098 938,904
Interest on cash equivalents
and short-term investments 58,151 114,409 59,557 118,431
---------- ----------- ---------- ----------
Total investment activity 579,230 1,157,916 537,655 1,057,335
---------- ----------- ---------- ----------
PORTFOLIO EXPENSES
Management fees 65,027 130,054 60,949 121,899
General and administrative 54,646 100,325 44,472 92,967
---------- ----------- ---------- ----------
119,673 230,379 105,421 214,866
---------- ----------- ---------- ----------
Net Income $ 459,557 $ 927,537 $ 432,234 $ 842,469
========== =========== ========== ==========
Net income per limited
partnership unit $ 10.81 $ 21.82 $ 10.17 $ 19.82
========== =========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Cash distributions per
limited
partnership unit $ 15.47 $ 29.87 $ 14.50 $ 28.23
========= ========== ========= ==========
Number of limited
partnership units
outstanding during the
period 42,076 42,076 42,076 42,076
========= ========== ========= ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
Quarter Ended Ended Quarter Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
--------------------- --------------------- --------------------- ---------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning $(34,367) $28,032,427 $(32,927) $28,175,021 $(27,847) $29,014,444 $(26,114) $29,186,014
of period
Cash distributions (6,575) (650,916) (12,695) (1,256,810) (6,163) (610,102) (11,998) (1,187,805)
Net income 4,595 454,962 9,275 918,262 4,322 427,912 8,424 834,045
------- ---------- ------- ---------- ------- ---------- ------- ----------
Balance at end
of period $(36,347) $27,836,473 $(36,347) $27,836,473 $(29,688) $28,832,254 $(29,688) $28,832,254
======= ========== ======= ========== ======= ========== ======= ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 1,257,766 $ 1,143,091
----------- -----------
Cash flows from investing activities:
Investment in property - 32,744
Increase in short-term
investments, net (287,384) (25,429)
----------- -----------
Net cash (used in) provided by
investing activities (287,384) 7,315
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,269,505) (1,199,803)
----------- -----------
Net decrease in cash
and cash equivalents (299,123) (49,397)
Cash and cash equivalents:
Beginning of period 3,030,587 3,194,992
----------- -----------
End of period $ 2,731,464 $ 3,145,595
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<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 June 30, 1997 and December 31, 1996 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 1997 and 1996. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1996 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
Note 1 - Organization and Business
- ----------------------------------
Copley Pension Properties VII; 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 entities intended to be exempt from federal
income tax. The Partnership commenced operations in March 1989. It acquired
four of the five real estate investments it currently owns prior to 1991, and a
fifth property in 1995. The Partnership intends to dispose of its investments
within eight to twelve years of their acquisition, and then liquidate.
Note 2 - Real Estate Joint Ventures
- -----------------------------------
The following summarized financial information is presented in the aggregate for
the Partnership's three joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
--------------- -------------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$7,928,555 and $7,454,395
respectively $ 21,935,459 $ 22,409,515
Other 1,379,535 1,359,304
----------- -----------
23,314,994 23,768,819
Liabilities 166,738 242,965
----------- -----------
Net assets $ 23,148,256 $ 23,525,854
=========== ===========
</TABLE>
<PAGE>
Results of Operations
---------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
------------ -----------
<S> <C> <C>
Revenue
Rental income $ 2,421,659 $ 2,342,968
Other 2,387 2,695
---------- ----------
2,424,046 2,345,663
---------- ----------
Expenses
Operating expenses 782,812 800,817
Depreciation and amortization 486,618 549,459
---------- ----------
1,269,430 1,350,276
---------- ----------
Net income $ 1,154,616 $ 995,387
========== ==========
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to two joint ventures) its affiliates on behalf of
their various financing arrangements with the joint ventures.
Note 3 - Property
- -----------------
The following is a summary of the Partnership's two wholly-owned properties:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- ------------------
<S> <C> <C>
Land $ 2,190,969 $ 2,190,969
Buildings and improvements 9,811,682 9,811,682
Accumulated depreciation (897,846) (727,728)
Other net liabilities (34,928) (50,732)
----------- -----------
$ 11,069,877 $ 11,224,191
=========== ===========
</TABLE>
Note 4 - Subsequent Event
- -------------------------
Distributions of cash from operations relating to the quarter ended June 30,
1997 were made on July 24, 1997 in the aggregate amount of $657,491 ($15.47 per
limited partnership unit).
<PAGE>
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
Liquidity and Capital Resources
The Partnership's offering of units of limited partnership interest was
completed as of September 30, 1990. A total of 42,076 units were sold. The
Partnership received proceeds of $36,522,542, net of selling commissions and
other offering costs, which have been used for investment in real estate and the
payment of related acquisition costs, or retained as working capital reserves.
The Partnership made seven real estate investments, one of which was sold in
1991 and another in 1994. Capital of $4,880,816 ($116 per limited partnership
unit) has been returned to the limited partners as a result of sales and the
reduction of cash reserves.
At June 30, 1997, the Partnership had $4,446,453 in cash, cash equivalents
and short-term investments, of which $657,491 was used for operating cash
distributions to partners on July 24, 1997; the remainder is being retained as
working capital reserves. The source of future liquidity and cash distributions
to partners will primarily be cash flow generated by the Partnership's short-
term and real estate investments and proceeds from the sale of such investments.
The adjusted capital contribution was reduced from $892 to $884 per limited
partnership unit during the fourth quarter of 1996, with a distribution of a
portion of cash reserves. Distributions of cash from operations relating to the
first and second quarters of 1997 were made at an annualized rate of 7% on the
adjusted capital contribution. Distributions of cash from operations relating
to the first and second quarters of 1996 were made at an annualized rate of 6.5%
on the adjusted capital contribution. The increase in the distribution rate
results from the attainment of appropriate cash reserve levels and the
improvement in cash flow from operations.
The carrying value of real estate investments in the financial statements 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 estimated cost of sale for properties held for
sale. Carrying value may be greater or less than current appraised value. At
June 30, 1997, the appraised value of each real estate investment exceeded its
carrying value; the aggregate excess was approximately $5,600,000. The current
appraised value of real estate investments has been estimated by the managing
general partner and is generally based on a correlation 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 Investment
The Drilex and Regency Court investments are wholly-owned properties. The
other three of the investments in the portfolio are structured as joint
ventures.
Operating Factors
The Partnership's two industrial properties, Drilex and Prentiss Copystar,
were 100% leased, each by a single tenant, at June 30, 1997, as they were at
December 31, 1996 and June 30, 1996.
The Partnership's two multi-family residential properties, Waterford
Apartments and Regency Court Apartments, ended the second quarter of 1997 with
occupancy levels of 93% and 95%, respectively. Occupancy at Waterford
Apartments remained in the mid 90% range during the first six months of 1996,
consistent with the prior year. Occupancy at Regency Court increased from 91%
at June 30, 1996.
Occupancy at Parkmoor Plaza was 100% at June 30, 1997 where it has remained
since the second quarter of 1995.
Investment Results
Interest on short-term investments and cash equivalents decreased slightly
between the first six months of 1996 and 1997, due to lower average investment
balances.
Total real estate activity for the first six months of 1997 and 1996 was
$1,043,507 and $938,904, respectively. This increase is primarily due to
improved operating income at Regency Court of approximately $55,000 as a result
of higher occupancy. Operating results at Waterford Apartments increased
approximately $29,000 primarily due to higher rental rates. In addition,
operating results at Prentiss improved approximately $14,000 due to lower
operating expenses for landscaping and common area improvements combined with a
decrease in amortization expense related to leasing commissions that became
fully amortized. Operating results at the two remaining properties were
relatively unchanged.
Cash flow from operations increased by approximately $115,000 between the
respective six month periods. This change was due to the operating results at
Regency Court combined with changes in working capital.
<PAGE>
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
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.
The Partnership management fee increased between the first six months of
1996 and 1997 due to an increase in distributable cash flow. General and
administrative expenses increased between the respective six month periods due
to an increase in professional fees.
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
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 June 30, 1997.
<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 PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 12, 1997
/s/ James J. Finnegan
-------------------------------
James J. Finnegan
Managing Director and General Counsel
of Managing General Partner,
Seventh Copley Corp.
August 12, 1997
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,731,464
<SECURITIES> 1,714,989
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,446,453
<PP&E> 23,975,632
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,422,085
<CURRENT-LIABILITIES> 143,851
<BONDS> 478,108
0
0
<COMMON> 0
<OTHER-SE> 27,800,126
<TOTAL-LIABILITY-AND-EQUITY> 28,422,085
<SALES> 1,561,177
<TOTAL-REVENUES> 1,675,586
<CGS> 342,270
<TOTAL-COSTS> 342,270
<OTHER-EXPENSES> 405,779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 927,537
<INCOME-TAX> 0
<INCOME-CONTINUING> 927,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 927,537
<EPS-PRIMARY> 21.82
<EPS-DILUTED> 21.82
</TABLE>
