<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
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For Quarter Ended September 30, 1997 Commission File Number 0-18735
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3058134
(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
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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 REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1997
PART I
FINANCIAL INFORMATION
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Assets
Real estate joint ventures $3,739,326 $6,619,560
Property held for disposition 917,570 -
---------- ----------
4,656,896 6,619,560
Cash and cash equivalents 1,123,833 941,045
Short-term investments 494,421 711,740
---------- ----------
$6,275,150 $8,272,345
========== ==========
Liabilities and Partners' Capital
Accounts payable $ 45,203 $ 52,294
Accrued management fee 14,124 18,653
Deferred disposition fees 89,700 -
---------- ----------
Total liabilities 149,027 70,947
---------- ----------
Partners' capital (deficit):
Limited partners ($729 and $963 per
unit, repectively; 100,000 units
authorized, 11,931 units issued
and outstanding) 6,129,409 8,211,849
General partners (3,286) (10,451)
---------- ----------
Total partners' capital 6,126,123 8,201,398
---------- ----------
$6,275,150 $8,272,345
========== ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Investment Activity
Joint venture earnings $ 88,000 $ 344,764 $145,529 $427,583
Interest on cash equivalents
and short-term investments 21,761 75,558 21,073 61,284
Gain on sale of property - 973,919 - -
-------- ---------- -------- --------
109,761 1,394,241 166,602 488,867
-------- ---------- -------- --------
Portfolio Expenses
General and administrative 25,395 73,770 21,711 64,291
Management fee 14,124 49,774 18,653 55,960
Amortization 1,542 5,051 1,861 5,584
-------- ---------- -------- --------
41,061 128,595 42,225 125,835
-------- ---------- -------- --------
Net Income $ 68,700 $1,265,646 $124,377 $363,032
======== ========== ======== ========
Net income per limited partnership unit $ 5.70 $ 105.02 $ 10.32 $ 30.12
======== ========== ======== ========
Cash distributions per limited
partnership unit $ 14.26 $ 279.56 $ 15.65 $ 44.54
======== ========== ======== ========
Number of limited partnership units
outstanding during the period 11,931 11,931 11,931 11,931
======== ========== ======== ========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997 September 30, 1996 September 30, 1996
---------------------- ----------------------- ---------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General Limited General Limited General Limited General Limited
Partners Partners Partners Partners Partners Partners Partners Partners
-------- ---------- -------- ----------- -------- ---------- ----------- ---------
Balance at beginning
of period $(2,254) $6,231,532 $(10,451) $ 8,211,849 $(8,409) $8,413,930 $(7,314) $8,522,348
Cash distributions (1,719) (170,136) (5,491) (3,335,430) (1,886) (186,720) (5,368) (531,406)
Net income 687 68,013 12,656 1,252,990 1,243 123,134 3,630 359,402
-------- ---------- -------- ----------- -------- ---------- ---------- ----------
Balance at end
of period $(3,286) $6,129,409 $ (3,286) $ 6,129,409 $(9,052) $8,350,344 $(9,052) $8,350,344
======== ========== ======== =========== ======== ========== ========== ==========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Net cash provided by operating activities $ 532,491 $ 575,525
----------- ----------
Cash flows from investing activities:
Net proceeds from sale of property 2,736,433 -
Increase in deferred disposition fees 89,700 -
Investment in joint venture (49,881) -
Decrease in short-term
investments, net 214,966 99,661
----------- ----------
Net cash provided by investing
activities 2,991,218 99,661
----------- ----------
Cash flows from financing activity:
Distributions to partners (3,340,921) (536,774)
----------- ----------
Net increase in cash
and cash equivalents 182,788 138,412
Cash and cash equivalents:
Beginning of period 941,045 1,362,861
----------- ----------
End of period $ 1,123,833 $1,501,273
=========== ==========
</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 September 30, 1997 and December 31, 1996 and the
results of its operations, its cash flows and partners' capital (deficit) for
the interim periods ended September 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 Realty Income Partners 4; 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 September 1989, and acquired the two
real estate investments it currently owns prior to 1992. The Partnership intends
to dispose of its investments within six to nine years of their acquisition, and
then liquidate. 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 1, 1997, the Hohokam property within the Newhew joint venture was
sold for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to the
Advisor. On May 29, 1997, the Partnership made a capital distribution of
$2,791,854 ($234 per limited partnership unit) from the proceeds of the sale.
<PAGE>
The following summarized financial information is presented in the aggregate
for the two joint ventures:
Assets and Liabilities
----------------------
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$2,327,932 and $2,282,330 $9,575,332 $11,648,017
Other 337,268 651,527
---------- -----------
9,912,600 12,299,544
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Liabilities
Note payable (a) 1,070,593 1,084,418
Other 173,827 271,985
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1,244,420 1,356,403
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Net assets $8,668,180 $10,943,141
========== ===========
</TABLE>
(a) Note payable to an insurance company, secured by the remaining
building within the Newhew joint venture, accrues interest at 9.25% per
annum. Principal and interest installments of $9,848 were due monthly
through the sale date of October 24, 1997. (See Note 3).
Results of Operations
---------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
--------------- --------------
<S> <C> <C>
Revenue
Rental income $1,378,618 $1,524,036
Other income 3,970 3,999
---------- ----------
1,382,588 1,528,035
---------- ----------
Expenses
Operating expenses 296,307 329,495
Depreciation and amortization 430,498 456,951
Interest expense 74,810 76,028
---------- ----------
801,615 862,474
---------- ----------
Net income $ 580,973 $ 665,561
========== ==========
</TABLE>
<PAGE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to one joint venture) its affiliate on behalf of
their various financing arrangements with the joint ventures.
NOTE 3 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
September 30, 1997 were made on October 30, 1997 in the aggregate amount of
$142,810 ($11.85 per limited partnership unit).
On October 24, 1997, the Partnership sold the Fairmont property to an
institutional buyer (the "Buyer"), which is unaffiliated with the Partnership.
The selling price was determined by arm's length negotiations between the
Partnership and the Buyer. The Fairmont property was sold for $3,600,000, of
which approximately $1,139,000 was used to discharge the related note payable
(See Note 2). The Partnership received net proceeds of approximately
$2,013,000. Accordingly, the book value associated with the Partnership's share
of the Fairmont property within the Newhew joint venture has been reclassified
on the Balance Sheet as "Property held for disposition." This transaction will
be accounted for in the fourth quarter of 1997.
<PAGE>
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 December 1990 and a total of 11,931 units were sold. The
Partnership received proceeds of $10,097,962, net of selling commissions and
other offering costs, which have been used for investment in real estate and to
pay related acquisition costs, or retained as working capital reserves. In July
1995, the Partnership reduced its working capital reserves by making a capital
distribution of $441,447 ($37 per limited partnership unit). After the
distribution, the Partnership's adjusted capital contribution was $963 per unit.
On May 1, 1997, the Hohokam property within the Newhew joint venture was
sold for $2,990,000. The Partnership received net proceeds of $2,826,133, after
closing costs, and recognized a gain of $973,919 ($80.81 per limited partnership
unit) on the sale. A disposition fee of $89,700 was accrued but not paid to the
Advisor. On May 29, 1997, the Partnership made a capital distribution of
$2,791,854 ($234 per limited partnership unit) from the proceeds of the sale.
The distribution reduced the adjusted capital contribution to $729 per unit.
At September 30, 1997, the Partnership had $1,618,254 in cash, cash
equivalents, and short-term investments, of which $142,810 was used for cash
distributions to the partners on October 30, 1997; the remainder is being
retained for working capital reserves. The source of future liquidity and cash
distributions to partners will be cash generated by the Partnership's real
estate and short-term investments. Distributions of cash from operations
related to each of the first three quarters of 1996 and 1997 were made at the
annualized rate of 6.5% on the adjusted capital contribution; the second quarter
1997 distribution rate was based on a weighted average adjusted capital
contribution; the third quarter 1997 distribution was based on the adjusted
capital contribution of $729 per unit.
The carrying value of real estate investments in the financial statements
at September 30, 1997 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 the estimated cost
of sale for properties held for sale. Carrying value may be greater or less
than current appraised value. At September 30, 1997, the appraised value of the
Shasta Way investment exceeded its carrying value by approximately $800,000.
The current appraised value of real estate investments has been determined by
the managing general partner and is generally based on a combination of
traditional appraisal approaches performed by the Advisor and independent
appraisers. Because of the subjectivity inherent in the valuation process, the
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>
On October 24, 1997, the Partnership sold the Fairmont property to an
institutional buyer (the "Buyer"), which is unaffiliated with the Partnership.
The selling price was determined by arm's length negotiations between the
Partnership and the Buyer. The Fairmont property was sold for $3,600,000, of
which approximately $1,139,000 was used to discharge the related note payable;
the Partnership received net proceeds of approximately $2,013,000. Accordingly,
the book value associated with the Partnership's share of the Fairmont property
within the Newhew joint venture has been reclassified on the Balance Sheet as
"Property held for disposition." This transaction will be accounted for in the
fourth quarter of 1997.
Results of Operations
Form of Real Estate Investments
The Newhew investment is structured as a joint venture with a real estate
management/development firm. The Shasta Way investment had been structured as a
joint venture with a real estate management/development firm and an affiliate of
the Partnership. As of January 1, 1996, the Shasta Way joint venture was
restructured, and the management/development firm's interest was assigned to the
Partnership and its affiliate in proportion to their respective ownership
interests. The Partnership's ownership percentage increased to 42%.
Operating Factors
As discussed above, the Partnership sold the two Newhew Phase I buildings
(Hohokam Corporate Center) on May 1, 1997 and recognized a gain of $973,919.
Occupancy at Hohokam increased from 97% at March 31, 1997 to 100% as of the sale
date. The property was 99% leased at December 31, 1996 and 100% at September
30, 1996.
Fairmont Commerce Center (Newhew's Phase II investment) has been 100%
leased to two tenants since May 1992.
Shasta Way is 100% occupied by a single tenant under a lease which expires
on December 31, 1998.
Investment Results
Interest income on cash equivalents and short-term investments for the
nine months ended September 30, 1997 increased $14,000 or 23% as compared to the
corresponding period of 1996 due to higher invested balances, as well as higher
short-terms yields.
<PAGE>
Exclusive of operating results at Hohokam of $75,475 in 1997 and $157,902
in 1996, joint venture earnings were $269,289 and $269,681 for the nine months
ended September 30, 1997 and 1996, respectively. The 1997 amount is comprised
of operating income of $99,318 at Fairmont and $169,971 at Shasta Way; the 1996
amount was comprised of operating income of $98,428 at Fairmont and $171,253 at
Shasta Way. The slight improvement at Fairmont is primarily due to increased
expense reimbursement income, essentially offset by increased amortization of
tenant improvements. The slight decrease at Shasta Way is due primarily to
lower income as a result of non-recurring prior year expense reimbursement
settlements.
Operating cash flow decreased by approximately $42,000 between the first
nine months of 1996 and 1997 while net income, exclusive of the gain on sale,
decreased by approximately $71,000. The difference is primarily due to the
timing of distributions from both Shasta Way and Newhew.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
increased by $9,000, or 15%, between the first nine months of 1996 and 1997 as
increased accounting fees were partially offset by a decrease in appraisal fees.
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. Management fees decreased between
the two nine-month periods due to the decrease in distributable cash flow.
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1997
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 September 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 REALTY INCOME PARTNERS 4; A LIMITED PARTNERSHIP
(Registrant)
November 12, 1997 /s/ James J. Finnegan
-----------------------------
James J. Finnegan
Vice President
of Managing General Partner,
Fourth Income Corp.
November 12, 1997 /s/ Karin J. Lagerlund
-----------------------------
Karin J. Lagerlund
Principal Financial and Accounting
Officer of Managing General Partner,
Fourth Income Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,123,833
<SECURITIES> 494,421
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,618,254
<PP&E> 4,656,896
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,275,150
<CURRENT-LIABILITIES> 59,327
<BONDS> 89,700
0
0
<COMMON> 0
<OTHER-SE> 6,126,123
<TOTAL-LIABILITY-AND-EQUITY> 6,275,150
<SALES> 344,764
<TOTAL-REVENUES> 1,394,241
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 128,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,265,646
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,265,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,265,646
<EPS-PRIMARY> 105.02
<EPS-DILUTED> 105.02
</TABLE>
