<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, 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 MARCH 31, 1998
PART I
FINANCIAL INFORMATION
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Assets
Real estate investments:
Joint ventures $12,584,612 $12,693,813
Property, net 10,815,587 10,957,147
----------- -----------
23,400,199 23,650,960
Cash and cash equivalents 4,565,294 3,154,152
Short-term investments -- 1,320,041
----------- -----------
$27,965,493 $28,125,153
=========== ===========
Liabilities and Partners' Capital
Accounts payable $ 55,214 $ 82,215
Accrued management fee 65,027 65,027
Deferred disposition fees 478,108 478,108
----------- -----------
Total liabilities 598,349 625,350
----------- -----------
Partners' capital (deficit):
Limited partners ($884 per unit;
160,000 units authorized,
42,076 units issued
and outstanding) 27,407,821 27,539,153
General partners (40,677) (39,350)
----------- -----------
Total partners' capital 27,367,144 27,499,803
----------- -----------
$27,965,493 $28,125,153
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
------------------------
1998 1997
------ ------
<S> <C> <C>
INVESTMENT ACTIVITY
PROPERTY RENTALS $ 483,185 $ 461,443
PROPERTY OPERATING EXPENSES (167,730) (179,235)
DEPRECIATION AND AMORTIZATION (88,152) (87,700)
--------- ---------
227,303 194,508
JOINT VENTURE EARNINGS 356,803 327,920
--------- ---------
TOTAL REAL ESTATE ACTIVITY 584,106 522,428
INTEREST ON CASH EQUIVALENTS
AND SHORT-TERM INVESTMENTS 57,478 56,258
--------- ---------
TOTAL INVESTMENT ACTIVITY 641,584 578,686
--------- ---------
PORTFOLIO EXPENSES
MANAGEMENT FEES 65,027 65,027
GENERAL AND ADMINISTRATIVE 51,725 45,679
--------- ---------
116,752 110,706
--------- ---------
NET INCOME $ 524,832 $ 467,980
========= =========
NET INCOME PER LIMITED PARTNERSHIP
UNIT $ 12.35 $ 11.01
========= =========
CASH DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 15.47 $ 14.40
========= =========
NUMBER OF LIMITED PARTNERSHIP UNITS
OUTSTANDING DURING THE PERIOD 42,076 42,076
========= =========
</TABLE>
(SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS)
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended March 31,
--------------------------------------------------
1998 1997
----------------------- -----------------------
<S> <C> <C> <C> <C>
General Limited General Limited
Partners Partners Partners Partners
-------- ----------- -------- -----------
Balance at beginning $(39,350) $27,539,153 $(32,927) $28,175,021
of period
Cash distributions (6,575) (650,916) (6,120) (605,894)
Net income 5,248 519,584 4,680 463,300
-------- ----------- -------- -----------
Balance at end
of period $(40,677) $27,407,821 $(34,367) $28,032,427
======== =========== ======== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended March 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 765,907 $ 647,231
---------- ----------
Cash flows from investing activities:
Decrease in short-term
investments, net 1,302,726 223,886
---------- ----------
Net cash provided by
investing activities 1,302,726 223,886
---------- ----------
Cash flows from financing activity:
Distributions to partners (657,491) (612,014)
---------- ----------
Net increase in cash
and cash equivalents 1,411,142 259,103
Cash and cash equivalents:
Beginning of period 3,154,152 3,030,587
---------- ----------
End of period $4,565,294 $3,289,690
========== ==========
</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 March 31, 1998 and December 31, 1997 and the results of its
operations, its cash flows and partners' capital (deficit) for the interim
periods ended March 31, 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 following summarized financial information is presented in the aggregate for
the Partnership's three joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$8,622,928 and $8,403,624,
respectively $21,254,686 $21,473,990
Other 1,547,962 1,615,524
----------- -----------
22,802,648 23,089,514
Liabilities 262,394 385,634
----------- -----------
Net assets $22,540,254 $22,703,880
============ ===========
</TABLE>
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Quarter ended March 31,
1998 1997
---------- ----------
<S> <C> <C>
Revenue
Rental income $1,260,937 $1,214,229
Other 1,685 806
---------- ----------
1,262,622 1,215,035
---------- ----------
Expenses
Operating expenses 354,693 360,907
Depreciation and amortization 225,714 243,365
---------- ----------
580,407 604,272
---------- ----------
Net income $ 682,215 $ 610,763
========== ==========
</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>
March 31, 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 (1,175,828) (1,090,317)
Other net liabilities (65,437) (9,388)
----------- -----------
$10,815,587 $10,957,147
=========== ===========
</TABLE>
Note 4 - Subsequent Event
Distributions of cash from operations relating to the quarter ended March 31,
1998 were made on April 29, 1998 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 March 31, 1998, the Partnership had $4,565,294 in cash and cash
equivalents, of which $657,491 was used for operating cash distributions to
partners on April 29, 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 real estate investments, and
proceeds from the sale of such investments. Distributions of cash from
operations relating to the first quarters of 1998 and 1997 were made at an
annualized rate of 7% on the adjusted capital contribution.
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
March 31, 1998, the appraised value of each real estate investment exceeded its
carrying value; the aggregate excess was approximately $8,500,000. 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 real estate investments in the portfolio are structured as joint
ventures.
Operating Factors
The Partnership's two industrial properties, Drilex and Prentiss Copystar,
were 100% leased at March 31, 1998, as they were at December 31, 1997 and March
31, 1997.
The Partnership's two multi-family residential properties, Waterford
Apartments and Regency Court Apartments, ended the first quarter of 1998 with an
occupancy level of 95% and 98%, 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 March 31, 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 quarter of 1997 and 1998.
Total real estate activity for the first quarter of 1998 and 1997 was
$584,106 and $522,428, respectively. This increase is primarily due to improved
operating results at Waterford Apartments of approximately $20,000 due to higher
rental rates and lower operating expenses for advertising and salaries. In
addition, operating results at Regency Court increased approximately $35,000
primarily due to increased income from improved market conditions and lower
expenses with regards to apartment maintenance. Operating results from the
remainder of the Partnership's investments were relatively unchanged between the
respective periods.
Cash flow from operations increased by approximately $119,000 between the
respective three month periods. This increase was due to the increased
operating results discussed above as well as increases in cash flow from
Waterford Apartments and Parkmoor Plaza.
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.
<PAGE>
The Partnership management fee remained unchanged between the first quarter
of 1997 and 1998. General and administrative expenses increased approximately
13% due primarily to an increase in professional fees.
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1998
PART II
OTHER INFORMATION
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 March 31, 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)
May 15, 1998 /s/ Wesley M. Gardiner, Jr.
-------------------------------
Wesley M. Gardiner, Jr.
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
May 15, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,565,294
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,565,294
<PP&E> 23,400,199
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,965,493
<CURRENT-LIABILITIES> 120,241
<BONDS> 478,108
0
0
<COMMON> 0
<OTHER-SE> 27,367,144
<TOTAL-LIABILITY-AND-EQUITY> 27,965,493
<SALES> 839,988
<TOTAL-REVENUES> 897,466
<CGS> 167,730
<TOTAL-COSTS> 167,730
<OTHER-EXPENSES> 204,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 524,832
<INCOME-TAX> 0
<INCOME-CONTINUING> 524,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 524,832
<EPS-PRIMARY> 12.35
<EPS-DILUTED> 12.35
</TABLE>
