<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, 1998 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, 1998
PART I
FINANCIAL INFORMATION
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Joint ventures $ 9,162,563 $12,693,813
Property, net 10,758,427 10,957,147
----------- -----------------
19,920,990 23,650,960
Joint venture held for disposition 3,324,410 -
Cash and cash equivalents 4,571,861 3,154,152
Short-term investments - 1,320,041
----------- -----------------
$27,817,261 $28,125,153
=========== =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 54,442 $ 82,215
Accrued management fee 65,026 65,027
Deferred disposition fees 478,108 478,108
----------- -----------
Total liabilities 597,576 625,350
----------- -----------
Partners' capital (deficit):
Limited partners ($884 per unit;
160,000 units authorized, 42,076
units issued and outstanding) 27,261,836 27,539,153
General partners (42,151) (39,350)
----------- -----------
Total partners' capital 27,219,685 27,499,803
----------- -----------
$27,817,261 $28,125,153
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 487,966 $ 971,151 $ 454,796 $ 916,239
Property operating expenses (204,285) (372,015) (163,035) (342,270)
Depreciation and amortization (88,152) (176,304) (87,700) (175,400)
--------- ---------- --------- ----------
195,529 422,832 204,061 398,569
Joint venture earnings 358,842 715,645 317,018 644,938
--------- ---------- --------- ----------
Total real estate activity 554,371 1,138,477 521,079 1,043,507
Interest on cash equivalents
and short-term investments 58,227 115,705 58,151 114,409
--------- ---------- --------- ----------
Total investment activity 612,598 1,254,182 579,230 1,157,916
--------- ---------- --------- ----------
PORTFOLIO EXPENSES
Management fees 65,026 130,053 65,027 130,054
General and administrative 37,540 89,265 54,646 100,325
--------- ---------- --------- ----------
102,566 219,318 119,673 230,379
--------- ---------- --------- ----------
Net income $ 510,032 $1,034,864 $ 459,557 $ 927,537
========= ========== ========= ==========
Net income per limited partnership
unit $ 12.00 $ 24.35 $ 10.81 $ 21.82
========= ========== ========= ==========
Cash distributions per limited
partnership unit $ 15.47 $ 30.94 $ 15.47 $ 29.87
========= ========== ========= ==========
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>
Quarter Ended Six Months Ended Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
----------------------- --------------------------- ----------------------- -----------------------
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- ----------- ------------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning $(40,677) $27,407,821 $(39,350) $27,539,153 $(34,367) $28,032,427 $(32,927) $28,175,021
of period
Cash distributions (6,575) (650,916) (13,150) (1,301,832) (6,575) (650,916) (12,695) (1,256,810)
Net income 5,101 504,931 10,349 1,024,515 4,595 454,962 9,275 918,262
-------- ----------- ------------- ----------- -------- ----------- -------- -----------
Balance at end
of period $(42,151) $27,261,836 $(42,151) $27,261,836 $(36,347) $27,836,473 $(36,347) $27,836,473
======== =========== ============= =========== ======== =========== ======== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
Net cash provided by operating activities $ 1,429,965 $ 1,257,766
----------- -----------
Cash flows from investing activities:
Increase (decrease) in short-term
investments, net 1,302,726 (287,384)
----------- -----------
Cash flows from financing activity:
Distributions to partners (1,314,982) (1,269,505)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 1,417,709 (299,123)
Cash and cash equivalents:
Beginning of period 3,154,152 3,030,587
----------- -----------
End of period $ 4,571,861 $ 2,731,464
=========== ===========
</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, 1998 and December 31, 1997 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended June 30, 1998 and 1997. These adjustments are of a normal
recurring nature.
See notes to financial statements included in the Partnership's 1997 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.
Note 1 - Organization and Business
- ----------------------------------
Copley 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; however,
the managing general partner could extend the investment period if it is
considered to be in the best interest of the limited partners. The Partnership
has engaged AEW Real Estate Advisors, Inc. (the "Advisor") to provide asset
management services.
Note 2 - Real Estate Joint Ventures
- -----------------------------------
The Waterford Apartments joint venture was sold in August, 1998 (see Note 4).
Therefore, this joint venture has been reclassed as "Joint venture held for
disposition".
<PAGE>
The following summarized financial information is presented in the aggregate for
the Partnership's three joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$2,875,890 and $8,403,624
respectively $ 9,381,113 $21,473,990
Joint venture held for disposition 11,988,949 -
Other 1,053,870 1,615,524
----------- -----------------
22,423,932 23,089,514
Liabilities 135,020 385,634
----------- -----------------
Net assets $22,288,912 $22,703,880
============ =================
</TABLE>
Results of Operations
---------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ -----------
<S> <C> <C>
Revenue
Rental income $2,545,519 $2,421,659
Other 4,873 2,387
---------- ----------
2,550,392 2,424,046
---------- ----------
Expenses
Operating expenses 749,188 782,812
Depreciation and amortization 451,428 486,618
---------- ----------
1,200,616 1,269,430
---------- ----------
Net income $1,349,776 $1,154,616
========== ==========
</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.
<PAGE>
Note 3 - Property
- -----------------
The following is a summary of the Partnership's two wholly-owned properties:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- ------------------
<S> <C> <C>
Land $ 2,190,969 $ 2,190,969
Buildings and improvements 9,865,883 9,865,883
Accumulated depreciation (1,261,339) (1,090,317)
Other net liabilities (37,086) (9,388)
----------- -----------
$10,758,427 $10,957,147
=========== ===========
</TABLE>
Note 4 - Subsequent Events
- -------------------------
Distributions of cash from operations relating to the quarter ended June 30,
1998 were made on July 30, 1998 in the aggregate amount of $657,491 ($15.47 per
limited partnership unit).
On August 7, 1998, Waterford Apartments, located in Frederick, Maryland, was
sold for a gross sale price of $21,800,000. The Partnership received its 25%
share of the proceeds in the amount of approximately $5,417,000.
<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, 1998, the Partnership had $4,571,861 in cash and cash
equivalents, of which $657,491 was used for operating cash distributions to
partners on July 30, 1998; the remainder is being retained as working capital
reserves. The source of future liquidity and cash distributions to partners will
primarily be cash generated by the Partnership's invested cash and cash
equivalents and real estate investments, and proceeds from the sale of such
investments. Distributions of cash from operations relating to the first two
quarters of 1998 and 1997 were made at an annualized rate of 7% on the adjusted
capital contribution of $884.
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, 1998, the appraised value of each real estate investment exceeded its
carrying value; the aggregate excess was approximately $11,592,000. 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 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 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, 1998, as they were at
December 31, 1997 and June 30, 1997.
The Partnership's two multi-family residential properties, Waterford
Apartments and Regency Court Apartments, ended the second quarter of 1998 with
occupancy levels of 96% and 97%, respectively. Occupancy at Waterford Apartments
has consistently been in the mid-90% range. Occupancy at Regency Court has
remained in the high 90% range since September 30, 1996.
Occupancy at Parkmoor Plaza was 100% at June 30, 1998, where it has
remained since the second quarter of 1995.
Investment Results
Interest on short-term investments and cash equivalents was consistent
between the first two quarters of 1997 and 1998.
Total real estate activity for the first six months of 1998 and 1997 was
$1,138,477 and $1,043,507, respectively. The increase of approximately $95,000
is due to improved operating results: 1) at Regency Court of approximately
$25,000 as a result of improved market conditions and lower vacancy and 2) at
Waterford Apartments and Parkmoor Plaza of approximately $44,000 and $30,000,
respectively, as a result of higher rental rates. Operating results from the
remainder of the Partnership's investments were relatively unchanged between the
respective periods.
Cash flow from operations increased by approximately $172,000 between the
respective six month periods. This change was due to the increase in operating
results discussed above, decreases in working capital, and the timing of
distributions from joint ventures.
<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 remained unchanged between the first six
month periods of 1997 and 1998. General and administrative expenses decreased
approximately $11,000 or 11% between the respective six month periods due to
decreases in accounting and appraisal fees.
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1998
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, 1998.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
(Registrant)
August 14, 1998
/s/ Wesley M. Gardiner, Jr.
-------------------------------
Wesley M. Gardiner, Jr.
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
August 14, 1998
/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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,571,861
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,571,861
<PP&E> 23,245,400
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,817,261
<CURRENT-LIABILITIES> 119,468
<BONDS> 478,108
0
0
<COMMON> 0
<OTHER-SE> 27,219,685
<TOTAL-LIABILITY-AND-EQUITY> 27,817,261
<SALES> 1,686,796
<TOTAL-REVENUES> 1,802,501
<CGS> 372,015
<TOTAL-COSTS> 372,015
<OTHER-EXPENSES> 395,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,034,864
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,034,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,034,864
<EPS-PRIMARY> 24.35
<EPS-DILUTED> 24.35
</TABLE>
