10-Q 1 d10q.txt FORM 10-Q DTD 09/30/01 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 September 30, 2001 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 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 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 PART I FINANCIAL INFORMATION 2 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS

(See accompanying notes to unaudited financial statements) 3 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP

4 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP

(See accompanying notes to unaudited financial statements) 5 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (Unaudited)

(See accompanying notes to unaudited financial statements) 6 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited)

(See accompanying notes to unaudited financial statements) 7 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 September 30, 2001 and December 31, 2000 and the results of its operations, and partners' capital for the three and nine month periods ended September 30, 2001 and 2000 and its cash flows for the nine month periods ended September 30, 2001 and 2000. These adjustments are of a normal recurring nature. See notes to financial statements included in the Partnership's 2000 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 and has disposed of all its real estate investments as of September 30, 2001. The Partnership intends to liquidate and dissolve in 2002. Note 2 - Real Estate Joint Ventures On February 26, 2001, the Prentiss Copystar joint venture investment in which the Partnership and an affiliate were entitled to 31% and 69%, respectively, of the operating activity, sold its property to an unaffiliated third party for gross proceeds of $4,575,000, of which the Partnership's share was $1,418,250. The Partnership received its 31% share of the net proceeds, $1,366,126 after closing costs, and had recognized an initial gain on the sale of $330,165. Due to additional costs of sale, offset by a receipt of additional proceeds in the third quarter, the gain was decreased to $329,078 ($7.74 per limited partnership unit). A disposition fee of $42,548 was accrued but not paid to AEW Real Estate Advisors, Inc. (the "Advisor"). In accordance with the Partnership agreement, this fee was reversed during the second quarter of 2001. On March 29, 2001, the Partnership made a capital distribution of $1,178,128 ($28.00 per limited partnership unit) from the proceeds of the sale. 8 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP 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 $11,000,422 and recognized a gain of $2,501,169 ($58.85 per limited partnership unit). A disposition fee of $351,750 was accrued but not paid to the Advisor. In accordance with the Partnership agreement, this fee was reversed during the second quarter of 2001. 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 for the Prentiss Copystar joint venture: Assets and Liabilities ---------------------- September 30, 2001 December 31, 2000 ------------------ ----------------- Assets Real property, at cost less accumulated depreciation of $2,901,209 at December 31, 2000 $ - $ 2,746,869 Other - 73,107 ------------ ----------- - 2,819,976 Liabilities - 106,201 ------------ ----------- Net assets $ - $ 2,713,775 ============ =========== 9 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP The following summarized financial information is presented for the Prentiss Copystar joint venture. With respect to the period ended September 30, 2000, net income includes results of operations from the South Bay/Parkmoor Plaza joint venture through its sale date of May 31, 2000. Results of Operations Nine Months Ended September 30, 2001 2000 ------------ ------------ Revenue Rental income $ 87,305 $ 777,616 ------------ ------------ 87,305 777,616 ------------ ------------ Expenses Operating expenses 51,177 227,499 Depreciation and amortization 12,151 39,321 ------------ ------------ 63,328 266,820 ------------ ------------ Net income $ 23,977 $ 510,796 ============ ============ 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. Note 3 - Property On April 6, 2001, the Partnership sold its Drilex investment to an unaffiliated third party for gross proceeds of $2,500,000. The Partnership received net proceeds of $2,361,968 and recognized a gain of $68,290 ($1.61 per limited partnership unit) on the sale. On April 26, 2001, the Partnership made a capital distribution of $2,272,104 ($54.00 per limited partnership unit) from the proceeds of the sale. 10 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP The following is a summary of the Drilex investment in property: September 30, 2001 December 31, 2000 ------------------ ----------------- Property held for disposition, net $ - $ 2,318,455 ------------ ------------ $ - $ 2,318,455 ============ ============ During the year ended December 31, 2000, the Partnership recognized $132,174 in net income from this investment. 11 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 and two of which were sold in 2001. Through September 30, 2001, capital of $39,677,667 ($943.00 per limited partnership unit) has been returned to the limited partners; $36,091,951 as a result of sales, $336,608 in 1996 as a result of a discretionary reduction of cash reserves and $3,249,108 as a result of distributions of original working capital. As a result of sales and similar transactions, the adjusted capital contribution has been reduced to $57.00 per limited partnership unit. At September 30, 2001, the Partnership had $771,724 in cash and cash equivalents which is being retained as a reserve in connection with the liquidation of the Partnership. A distribution of operational cash previously held in reserves was made on July 26, 2001 in the amount of $12.45 per limited partnership unit. A capital distribution of orginial working capital previously held in reserves was made on April 26, 2001 in the amount of $27.00 per limited partnership unit. 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 distribution rate decrease in the second quarter of 2000 was primarily due to a decrease in cash available for distribution due to the sale of Parkmoor Plaza on May 31, 2000. There have been no distributions of cash from operations effective as of the third quarter of 2000 due to insufficient cash flow resulting from the sale of Parkmoor Plaza, Prentiss Copystar being vacant during the first eight months of 2000 and its sale in February 2001, and Drilex having reduced its cash flow to the Partnership due to payments of capital expenditures and its sale in April 2001. 12 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations --------------------- Form of Real Estate Investment The Drilex investment was a wholly-owned property. Drilex was sold on April 6, 2001. The Prentiss Copystar real estate investment was structured as a joint venture. Prentiss Copystar was sold on February 26, 2001. Operating Factors As mentioned above, Drilex was sold on April 6, 2001 and the Partnership recognized a gain of $68,290. At the time of sale, Drilex was 100% leased, as it was at September 30, 2000. As mentioned above, the Prentiss Copystar joint venture investment in which the Partnership and an affiliate were entitled to 31% and 69% of the operating activity, respectively, sold its property on February 26, 2001. The Partnership recognized its 31% share of the gain of $329,078. At the time of the sale, Prentiss Copystar was 100% leased. As mentioned above, the Parkmoor Plaza investment was sold on May 31, 2000 and the Partnership recognized a gain $2,501,169. The property was 100% leased at the time of sale. Investment Results Interest on cash equivalents for the three and nine months ended September 30, 2001, was $8,155 and $71,880, respectively, compared to $104,354 and $211,852 for the comparable periods in 2000. The decreases of $96,199 and $139,972 for the comparative three and nine month periods are due to lower average investment balances in 2001. For the three and nine months ended September 30, 2001, real estate operating results were ($26) and $82,550, respectively, compared to $192,104 and $606,552 for the comparable periods in 2000. The decreases of $192,130 and $524,002 for the comparative three and nine month periods are due to a decrease in both joint venture earnings as well as property operations as a result of the sale of Parkmoor Plaza in May 2000, the sale of Prentiss Copystar in February 2001 and the sale of Drilex in April 2001. The Partnership recognized $1,427,406 in revenue during the nine months ended September 30, 2001, which was attributable to the reversal of deferred disposition fees, in accordance with the Partnership agreement. 13 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP 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. During the respective three and nine month periods of 2000 and 2001, management fees remained relatively stable. General and administrative expenses for the three and the nine months ended September 30, 2001 were $44,590 and $121,212, respectively, compared to $46,344 and $139,129 for the same periods in 2000. While the comparative three month periods remained relatively stable, the overall nine month decrease is due to a decrease in appraisal fees, investor servicing fees and lower taxes. 14 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 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 September 30, 2001. 15 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) November 9, 2001 /s/ Alison L. Husid ------------------------------- Alison L. Husid President, Chief Executive Officer And Director of Managing General Partner, Seventh Copley Corp. November 9, 2001 /s/ Jonathan Martin ------------------------------- Jonathan Martin Principal Financial and Accounting Officer of Managing General Partner, Seventh Copley Corp. 16

COPLEY PENSION PROPERTIES VII 10-Q