<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 March 31, 1999 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
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COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1999
PART I
FINANCIAL INFORMATION
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
(Unaudited) (Audited)
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<S> <C> <C>
Assets
Real estate joint venture $ 3,527,427 $ 3,478,418
Cash and cash equivalents 1,375,562 1,498,022
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$ 4,902,989 $ 4,976,440
============ ==============
Liabilities and Partners' Capital
Accounts payable $ 27,190 $ 40,674
Accrued management fee 19,202 11,705
Deferred disposition fees 197,700 197,700
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Total liabilities 244,092 250,079
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Partners' capital:
Limited partners ($561 per
unit; 100,000 units
authorized, 11,931 units issued
and outstanding) 4,656,810 4,723,600
General partners 2,087 2,761
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Total partners' capital 4,658,897 4,726,361
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$ 4,902,989 $ 4,976,440
============ ==============
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1999 1998
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<S> <C> <C>
Investment Activity
Joint venture earnings $ 70,157 $ 61,595
Interest on cash equivalents
and short-term investments 16,525 19,804
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86,682 81,399
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Portfolio Expenses
General and administrative 15,415 18,819
Management fee 19,202 11,705
Amortization 1,183 1,183
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35,800 31,707
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Net Income $ 50,882 $ 49,692
========== ==========
Net income per limited partnership unit $ 4.22 $ 4.12
========== ==========
Cash distributions per limited
partnership unit $ 9.82 $ 10.75
========== ==========
Number of limited partnership units
outstanding during the period 11,931 11,931
========== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1999 1998
--------------------- ---------------------
General Limited General Limited
Partners Partners Partners Partners
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Balance at beginning
of period $ 2,761 $4,723,600 $ 5,403 $4,985,173
Cash distributions (1,183) (117,163) (1,296) (128,258)
Net income 509 50,373 497 49,195
-------- ---------- -------- ----------
Balance at end
of period $ 2,087 $4,656,810 $ 4,604 $4,906,110
======== ========== ======== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
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<S> <C> <C>
Net cash provided by operating activities $ (4,114) $ 122,616
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Cash flows from investing activities:
Decrease in short-term
investments, net - 461,103
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Cash flows from financing activity:
Distributions to partners (118,346) (129,554)
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Net increase (decrease) in cash
and cash equivalents (122,460) 454,165
Cash and cash equivalents:
Beginning of period 1,498,022 1,081,267
---------- ----------
End of period $1,375,562 $1,535,432
========== ==========
</TABLE>
(See accompanying notes to unaudited financial statements)
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A 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 March 31, 1999 and December 31, 1998 and the results of its
operations, its cash flows and partners' capital (deficit) for the three months
ended March 31, 1999 and 1998. These adjustments are of a normal recurring
nature.
See notes to financial statements included in the Partnership's 1998 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 its
remaining real estate investment prior to 1991. The Partnership intends to
dispose of this investment within nine years of 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 VENTURE
- ----------------------------------
The following summarized financial information is presented in the aggregate
for the joint venture:
<TABLE>
<CAPTION>
Assets and Liabilities
----------------------
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Assets
Real property, at cost less
accumulated depreciation of
$1,125,823 and $1,084,004 $ 7,104,376 $ 7,146,195
Other 125,502 153,318
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7,229,878 7,299,513
Liabilities 88,813 70,400
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Net assets $ 7,141,065 $ 7,229,113
============== ==============
</TABLE>
<PAGE>
Results of Operations
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<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
-------------- ------------
<S> <C> <C>
Revenue
Rental income $ 341,626 $ 301,755
Other income 978 -
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342,604 301,755
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Expenses
Operating expenses 59,871 39,410
Depreciation and amortization 115,195 115,196
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175,066 154,606
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Net income $ 167,538 $ 147,149
============== ============
</TABLE>
Liabilities and expenses exclude amounts owed and attributable to the
Partnership and 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 March 31,
1999 were made on April 29, 1999 in the aggregate amount of $92,917 ($7.71 per
limited partnership unit). In addition, a special operating distribution was
made on April 29, 1999 funded from reserve operating cash flow totaling $101,232
($8.40 per limited partnership unit).
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
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.
During 1997, capital of $4,796,262 was returned to the limited partners as a
result of the sales of Hohokam and Fairmont. On May 29, 1997, the Partnership
made a capital distribution of $2,791,854 ($234 per limited partnership unit)
from the sale proceeds of Hohokam, which reduced the adjusted capital
contribution to $729 per unit. On November 24, 1997, the Partnership made a
capital distribution of $2,004,408 ($168 per limited partnership unit) from the
sale proceeds of Fairmont, which reduced the adjusted capital contribution to
$561 per unit.
At March 31, 1999, the Partnership had $1,375,562 in cash and cash
equivalents, of which $194,149 was used for cash distributions to the partners
on April 29, 1999; 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 invested cash and cash
equivalents. Distributions of cash from operations related to the first quarter
of 1998 were made at the annualized rate of 7.0%; cash distributions from
operations related to the first quarter of 1999 were made at the annualized rate
of 5.5% on the adjusted capital contribution of $561 per unit. The decrease in
the distribution rate is due to a one-time final operating reserve distribution
from Hohokam in February 1998 relating to the investment's sale in 1997.
The carrying value of the remaining real estate investment in the financial
statements at March 31, 1999 is at depreciated cost. However, it is the
Partnership's policy that 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
an investment 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 March 31, 1999, the appraised value of the Partnership's remaining
real estate investment exceeded its carrying value by approximately $1,850,000.
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
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
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.
Year 2000 Readiness Disclosure
- ------------------------------
The Year 2000 Issue is a result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business operations.
The Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services which are dependent on the
use of computers. The Partnership has obtained assurances from AEW Capital
Management that:
. AEW Capital Management has developed a Year 2000 Plan (the "Plan") consisting
of five phases: inventory, assessment, testing, remediation/repair and
certification.
. As of September 30, 1998, AEW Capital Management had completed the inventory
and assessment phases of this Plan and had commenced the testing and
remediation/repair of internal systems.
. AEW Capital Management expects to conclude the internal testing,
remediation/repair and certifications of its Plan no later than June 30,
1999.
The Partnership also relies on joint venture partners and/or property managers
to supply financial and other data with respect to its real properties. The
Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements. To date, the Partnership
is not aware of any problems that would materially impact its results of
operations, liquidity or capital resources. However, the Partnership has not yet
obtained written assurances that these providers would be Year 2000 compliant.
The Partnership currently does not have a contingency plan in the event of a
particular provider or system not being Year 2000 compliant. Such a plan will be
developed if it becomes clear that a provider (including AEW Capital Management)
is not going to achieve its scheduled compliance objectives by June 30, 1999.
The inability of one of these providers to complete its Year 2000 resolution
process could materially impact the Partnership. In addition, the Partnership is
also subject to external forces that might generally affect industry and
commerce, such as utility or transportation company Year 2000 compliance
failures and related service interruptions. Given the nature of its operations,
the Partnership will not incur any costs associated with Year 2000 compliance.
All such costs are borne by AEW Capital Management and the property managers.
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
Results of Operations
- ---------------------
Operating Factors
Shasta Way is 100% occupied by a single tenant under a lease with an initial
lease term which expired December 31, 1998. In February 1998, the tenant
exercised its renewal option for a 5-year term which commenced on January 1,
1999.
Investment Results
For the three months ended March 31, 1999, real estate operating results were
$50,882 compared to $49,692 for the comparable period in 1998.
Joint venture earnings from Shasta Way were $70,157 for the three month period
ended March 31, 1999 compared to $61,595 for the same period in 1998. The
increase of $8,562 is primarily due to a rental increase which occurred midway
through 1998.
Cash flow from operations decreased by approximately $127,000 between the
first three months of 1998 and 1999. The decrease is primarily due to a lease
commission paid at Shasta Way in January of 1999 as well as a one-time final
distribution from Hohokam in February of 1998 consisting of remaining operating
reserves.
Interest on cash equivalents and short-term investments decreased by
approximately $3,000 between the first three months of 1999 and 1998 as a result
of a decrease in average investment balances.
Portfolio Expenses
General and administrative expenses primarily consist of real estate
appraisal, legal, accounting, printing and servicing agent fees. These expenses
decreased by approximately $3,000 between the respective three month periods of
1999 and 1998, primarily due to decreases in accounting 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 increased between
the comparable three month periods of 1999 and 1998, respectively, due to a
special distribution from reserve operating cash flow in 1999.
<PAGE>
COPLEY REALTY INCOME PARTNERS 4;
A LIMITED PARTNERSHIP
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1999
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 March 31, 1999.
<PAGE>
SIGNATURES
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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)
May 13, 1999
/s/ J. Christopher Meyer, III
-------------------------------
J. Christopher Meyer, III
President, Chief Executive Officer and Director
of Managing General Partner,
Fourth Income Corp.
May 13, 1999
/s/ Karin J. Lagerlund
--------------------------------
Karin J. Lagerlund
Treasurer and Principal Financial and Accounting
Officer of Managing General Partner, Fourth
Income Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,375,562
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,375,562
<PP&E> 3,527,427
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,902,989
<CURRENT-LIABILITIES> 244,092
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,658,897
<TOTAL-LIABILITY-AND-EQUITY> 4,902,989
<SALES> 70,157
<TOTAL-REVENUES> 86,682
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 35,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 50,882
<INCOME-TAX> 0
<INCOME-CONTINUING> 50,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,882
<EPS-PRIMARY> 4.22
<EPS-DILUTED> 4.22
</TABLE>
