<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, 2000 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)
World Trade Center East
Two Seaport Lane, 16th Floor
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
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2000
PART I
FINANCIAL INFORMATION
2
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
ASSETS
Real estate investments:
Joint venture $ 842,842 $ 820,724
Property, net 2,382,056 2,065,242
Joint venture held for disposition, net - 8,093,276
------------- -----------------
3,224,898 10,979,242
Cash and cash equivalents 3,776,906 4,169,397
------------- -----------------
$ 7,001,804 $ 15,148,639
============= =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 61,965 $ 82,971
Accrued management fee 23,875 47,793
Deferred disposition fees 1,384,858 1,033,108
------------- -----------------
Total liabilities 1,470,698 1,163,872
------------- -----------------
Partners' capital:
Limited partners ($201.44 and
$454.22 per unit, respectively;
160,000 units authorized, 42,076
units issued and outstanding) 5,502,950 13,978,434
General partners 28,156 6,333
------------- -----------------
Total partners' capital 5,531,106 13,984,767
------------- -----------------
$ 7,001,804 $ 15,148,639
============= =================
</TABLE>
(See accompanying notes to unaudited financial statements)
3
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY
Property rentals $ 31,534 $ 158,858 $ 72,555 $ 560,791
Property operating expenses (7,528) (58,953) (51,844) (241,670)
Depreciation and amortization (35,592) (71,236) (21,505) (43,010)
------------- ------------- ------------- -------------
(11,586) 28,669 (794) 276,111
Joint venture earnings 151,888 385,779 276,491 551,506
------------- ------------- ------------- -------------
Total real estate operations 140,302 414,448 275,697 827,617
Gain on sale of property 2,604,939 2,604,939 - 3,302,085
------------- ------------- ------------- -------------
Total real estate activity 2,745,241 3,019,387 275,697 4,129,702
Interest on cash equivalents 56,372 107,498 95,009 150,503
------------- ------------- ------------- -------------
Total investment activity 2,801,613 3,126,885 370,706 4,280,205
------------- ------------- ------------- -------------
</TABLE>
4
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PORTFOLIO EXPENSES
Management fees 23,875 54,896 30,055 76,838
General and administrative 47,085 92,785 34,602 89,130
------------- ------------- ------------- -------------
70,960 147,681 64,657 165,968
------------- ------------- ------------- -------------
Net Income $ 2,730,653 $ 2,979,204 $ 306,049 $ 4,114,237
============= ============= ============= ==============
Net income per limited partnership
unit $ 64.25 $ 70.10 $ 7.20 $ 96.80
============= ============= ============= ==============
Cash distributions per limited
partnership unit $ 260.16 $ 271.53 $ 297.13 $ 310.19
============= ============= ============= ==============
Number of limited partnership units
outstanding during the period 42,076 42,076 42,076 42,076
============= ============= ============= ==============
</TABLE>
(See accompanying notes to unaudited financial statements)
5
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------------------ ------------------------ ------------------------ -----------------------
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 $ 3,987 $ 13,746,095 $ 6,333 $ 13,978,434 $ 6,862 $ 26,144,438 $(25,669) $ 22,923,845
of period
Cash distributions (3,137) (10,946,492) (7,969) (11,424,896) (4,730) (12,502,042) (10,281) (13,051,555)
Net income 27,306 2,703,347 29,792 2,949,412 3,060 302,989 41,142 4,073,095
-------- ------------ -------- ------------ -------- ------------ -------- ------------
Balance at end
of period $ 28,156 $ 5,502,950 $ 28,156 $ 5,502,950 $ 5,192 $ 13,945,385 $ 5,192 $ 13,945,385
======== ============ ======== ============ ======== ============ ======== ============
</TABLE>
(See accompanying notes to unaudited financial statements)
6
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
---------------------------
2000 1999
------------ ------------
Net cash provided by operating activities $ 190,408 $ 845,485
------------ ------------
Cash flows from investing activities:
Net proceeds from sale of investment 10,649,149 12,109,900
Deferred disposition fees 351,750 391,500
Investment in property (29,426) -
Investment in joint venture (121,507) -
------------ ------------
Net cash provided by investing activities 10,849,966 12,501,400
------------ ------------
Cash flows from financing activity:
Distributions to partners (11,432,865) (13,061,836)
------------ ------------
Net (decrease) increase in cash
and cash equivalents (392,491) 285,049
Cash and cash equivalents:
Beginning of period 4,169,397 3,985,403
------------ ------------
End of period $ 3,776,906 $ 4,270,452
============ ============
(See accompanying notes to unaudited financial statements)
7
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE 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 results of
its operations, and partners' capital for the three and six month periods ended
June 30, 2000 and 1999 and its cash flows for the six month periods ended June
30, 2000 and 1999. These adjustments are of a normal recurring nature.
Certain reclassifications have been made in the footnotes to conform to the
current period presentations.
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 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 the
two real estate investments it currently owns prior to 1991. The Partnership
intends to dispose of its investments within 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 advisory services.
Note 2 - Real Estate Joint Ventures
-----------------------------------
On May 31, 2000, the South Bay/Parkmoor Plaza joint venture in which the
Partnership held a 75% interest, sold its property to an unaffiliated third
party for gross proceeds of $11,725,000. The Partnership received net proceeds
of $11,000,899 after closing costs and recognized a gain of $2,604,939 ($61.29
per limited partnership unit) on the sale. Net proceeds includes a return of
capital and accrued priority return totaling $9,867,883. A disposition fee was
accrued but not paid to the Advisor. On June 28, 2000, the Partnership made a
capital distribution of $10,635,971 ($252.78 per limited partnership unit) from
the proceeds of the sale.
The following summarized financial information is presented in the
aggregate for the Partnership's joint ventures (one at June 30, 2000 and two at
December 31, 1999:
8
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
Assets and Liabilities
----------------------
June 30, 2000 December 31, 1999
------------- -----------------
Assets
Real property, at cost less
accumulated depreciation of
$458,978 and $432,764,
respectively $2,485,996 $2,386,939
Other 61,057 11,877
Joint venture held for disposition, net - 7,574,762
---------- ----------
2,547,053 9,973,578
Liabilities 146,471 110,939
---------- ----------
Net assets $2,400,582 $9,862,639
========== ==========
Results of Operations
---------------------
Six Months Ended June 30,
2000 1999
---------- ----------
Revenue
Rental income $ 718,989 $1,061,482
---------- ----------
718,989 1,061,482
---------- ----------
Expenses
Operating expenses 235,196 230,339
Depreciation and amortization 154,795 180,365
---------- ----------
389,991 410,704
---------- ----------
Net income $ 328,998 $ 650,778
========== ==========
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliates on behalf of
their various financing arrangements with the joint ventures.
9
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
The 2000 Results of Operations (above) include activity from the Parkmoor
Plaza investment through the date of sale, May 31, 2000. The Partnership
recognized net income of $416,230 and $506,817 for the six months ended June 30,
2000 and 1999, respectively.
Note 3 - Property
-----------------
On March 25, 1999, the Partnership sold the Regency Court Apartments to an
unaffiliated third party for a gross sale price of $13,050,000. The Partnership
received net proceeds of $12,486,618 and recognized a gain of $3,287,303 ($77.35
per limited partnership unit). A disposition fee was accrued but not paid to the
Advisor. On April 29, 1999, the Partnership made a capital distribution of
$12,033,736 ($286 per limited partnership unit) from the proceeds of the sale.
The following is a summary of the Partnership's last remaining investment
in property:
June 30, 2000 December 31, 1999
------------- -----------------
Land $ 244,346 $ 244,346
Buildings and improvements 2,406,403 2,376,977
Lease Commissions 220,887 131,838
Accumulated depreciation (534,456) (494,916)
Accumulated Amortization (35,307) (4,981)
Other net assets (liabilities) 80,183 (188,022)
---------- ----------
$2,382,056 $2,065,242
========== ==========
Note 4 - Subsequent Events
--------------------------
Distributions of cash from operations relating to the quarter ended June
30, 2000 were made on July 27, 2000 in the aggregate amount of $241,406 ($5.68
per limited partnership unit).
10
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
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
each of 1991, 1994, 1998, 1999 and 2000. Through June 30, 2000, capital of
$33,600,210 ($798.56 per limited partnership unit) has been returned to the
limited partners: $32,641,719 as a result of sales, $336,608 in 1996 as a result
of a discretionary reduction of cash reserves and $621,883 as a result of a
distribution of original working capital. As a result of these transactions, the
adjusted capital contribution was reduced to $201.44.
On March 25, 1999, the Partnership sold the Regency Court Apartments to an
unaffiliated third party for a gross sale price of $13,050,000. The Partnership
received net proceeds of $12,486,618 and recognized a gain of $3,287,303 ($77.35
per limited partnership unit). A disposition fee was accrued but not paid to the
Advisor. On April 29, 1999, the Partnership made a capital distribution of
$12,033,736 ($286 per limited partnership unit) from the proceeds of the sale.
On May 31, 2000, the South Bay/Parkmoor Plaza joint venture in which the
Partnership held a 75% interest, sold its property to an unaffiliated third
party for gross proceeds of $11,725,000. The Partnership received net proceeds
of $11,000,899 after closing costs and recognized a gain of $2,604,939 ($61.29
per limited partnership unit) on the sale. Net proceeds includes a return of
capital and accrued priority return totaling $9,867,883. A disposition fee was
accrued but not paid to the Advisor. On June 28, 2000, the Partnership made a
capital distribution of $10,635,971 ($252.78 per limited partnership unit) from
the proceeds of the sale.
11
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
At June 30, 2000, the Partnership had $3,776,906 in cash and cash
equivalents, of which $241,406 was used for operating cash distributions to
partners on July 27, 2000; 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
quarter of 2000 were made at an annualized rate of 6.5% on the adjusted capital
contribution of $454.22. Distributions of cash from operations relating to the
second quarter of 2000 were made at an annualized rate of 5% on the adjusted
capital contribution of $454.22. The rate decrease in the second quarter of 2000
is primarily due to a decrease in cash available for distribution due to the
sale of Parkmoor Plaza on May 31, 2000. Distributions of cash from operations
relating to the first quarter of 1999 were made at an annualized rate of 6% on
the adjusted capital contribution of $742.12. Cash distributions relating to
the second quarter of 1999 were made at an annualized rate of 5.25% on the
weighted average adjusted capital contribution of $545.10. The rate decrease
between the first and second quarters of 1999 was due to a decrease in cash
available for distribution as a result of the sale of Regency Court Apartments
on March 25, 1999.
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, 2000, the appraised value of each real estate investment exceeded its
carrying value; the aggregate excess was approximately $440,000. 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.
Results of Operations
Form of Real Estate Investment
The Drilex investment is a wholly-owned property. The remaining real
estate investment, Prentiss Copystar is structured as a joint venture.
Operating Factors
As mentioned above, The Parkmoor Plaza investment was sold on May 31, 2000
and the Partnership recognized a gain of $2,604,939. The property was 100%
leased at the time of sale, as it was on December 31, 1999.
12
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
As mentioned above, the Regency Court Apartments investment was sold on
March 25, 1999. The Partnership recognized a gain of $3,287,303. Regency Court
was 97% leased at the time of sale.
One of the Partnership's two industrial properties, Drilex, was 100% leased
by a single tenant at June 30, 2000 as it was at June 30, 1999. The other
industrial property, Prentiss Copystar, was vacant at June 30, 2000 compared to
100% leased at June 30, 1999. During the first quarter of 2000, the Partnership
executed a long-term lease with a single tenant, which is expected to commence
during August 2000, upon completion of tenant improvements.
Investment Results
For the three and six months ended June 30, 2000, operating results from
real estate operations were $140,302 and $414,448, respectively, compared to
$275,697 and $827,617 for the comparable periods in 1999. The decreases of
$135,395 and $413,169 for the comparative three and six month periods are due to
a decrease in both joint venture earnings as well as property operations. The
decrease in joint venture earnings is a result of the Parkmoor Plaza sale on May
31, 2000 and the vacancy at Prentiss Copystar. The three month decrease in
property operations for the period ended June 30, 2000 is due to a reversal of
reimbursement income recorded in the first quarter of 2000 offset by a reversal
of property taxes also recorded in the first quarter of 2000 at Drilex. The
overall six month decrease in property operations is due to the decrease in
operating results at Drilex, as discussed, as well as the sale of Regency Court
in March 1999.
Interest on cash equivalents for the three and six months ended June 30,
2000, was $56,372 and $107,498, respectively, compared to $95,009 and $150,503
for the same periods in 1999. The decreases of $38,637 and $43,005 for the
comparative three and six month periods are primarily due to lower average
investment balances in 2000, as a result of the decrease in operating activity,
discussed above.
Operating cash flow decreased $655,077 between the six months ended June
30, 1999 and June 30, 2000. The decrease is due to the decrease in distributions
from joint ventures, and a decrease in property working capital as well as the
decrease in operating activity, discussed above.
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.
13
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
For the three and six months ended June 30, 2000, management fees were
$23,875 and $54,896, respectively, compared to $30,055 and $76,838 for the
comparable periods in 1999. The decreases in management fees for the respective
three and six month periods are due to lower operational distributions as a
result of a decrease in distributions from joint ventures due to the vacancy at
Prentiss Copystar and the sales of Regency Court Apartments in 1999 and Parkmoor
Plaza in 2000.
General and administrative expenses for the three and six months ended June
30, 2000 were $47,085 and $92,785, respectively, compared to $34,602 and $89,130
for the same periods in 1999. The increases between the comparative three and
six month periods are primarily due to higher taxes, investor servicing and
printing fees.
14
<PAGE>
COPLEY PENSION PROPERTIES VII;
A REAL ESTATE LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2000
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None.
b. Reports on Form 8-K: During the quarter ended June 30, 2000, one
Current Report on Form 8-K was filed on June 13, 2000 reporting
on Item No. 2 (Acquisition or Disposition of Assets) and Item No.
7 (Financial statements and Exhibits), relating in both cases to
the May 31, 2000 sale of Parkmoor Plaza.
15
<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, 2000
/s/ Alison L. Husid
-------------------------------
Alison L. Husid
President, Chief Executive Officer
And Director of Managing General
Partner, Seventh Copley Corp.
August 14, 2000
/s/ Karin J. Lagerlund
-------------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Seventh Copley Corp.
16
