10-Q 1 d10q.txt FORM 10-Q 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, 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 JUNE 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 STATEMENTS OF OPERATIONS (Unaudited)

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 June 30, 2001 and December 31, 2000 and the results of its operations, and partners' capital for the three and six month periods ended June 30, 2001 and 2000 and its cash flows for the six month periods ended June 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 June 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 are 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, $1,253,848 after closing costs, and recognized an initial gain on the sale of $330,165, which, due to additional costs of sale, was decreased to $325,767 ($7.66 per limited partnership unit). A disposition fee of $42,548 was accrued but not paid to AEW Real Estate Advisors, Inc. ( the "Advisors"). 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 ---------------------- June 30, 2001 December 31, 2000 ------------- ----------------- Assets Real property, at cost less accumulated depreciation of $2,901,209 $ - $2,746,869 Other 171,018 73,107 -------- ---------- 171,018 2,819,976 Liabilities - 106,201 -------- ---------- Net assets $171,018 $2,713,775 ======== ========== 9 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations Six Months Ended June 30, 2001 2000 ------- -------- Revenue Rental income $87,305 $718,989 ------- -------- 87,305 718,989 ------- -------- Expenses Operating expenses 51,177 235,196 Depreciation and amortization 12,151 154,795 ------- -------- 63,328 389,991 ------- -------- Net income $23,977 $328,998 ======= ======== 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. The six months ended June 30, 2000 includes net income from the South Bay/Parkmoor Plaza joint ventures through its date of sale. 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 $2,338,547 and a gain of $68,264 ($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: June 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. Note 4 - Subsequent Event On July 26, 2001, a distribution was made from operational cash previously held in reserves in the amount of $529,138 ($12.45 per limited partnership unit). 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 June 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. At June 30, 2001, the Partnership had $1,327,677 in cash and cash equivalents, of which $529,138 was used for a distribution from operational cash previously held in reserves to partners on July 26, 2001. The remainder is being retained as a reserve in connection with the liquidation of the Partnership. There were no distributions of cash from operations for the first quarter of 2001 due to the sale of Prentiss Copystar and insufficient cash flow from Drilex. Distributions of cash from operations for 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 for 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 was primarily due to a decrease in cash available for distribution due to the sale of Parkmoor Plaza on May 31, 2000. 12 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations --------------------- Form of Real Estate Investment The Drilex investment is 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 $68,264. At the time of sale, Drilex was 100% leased, as it was at June 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 $325,767. 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 six months ended June 30, 2001, was $30,901 and $63,725, respectively, compared to $56,372 and $107,498 for the comparable periods in 2000. The decreases of $25,471 and $43,773 for the comparative three and six month periods are due to lower average investment balances in 2001. For the three and six months ended June 30, 2001, real estate operating results were ($24,959) and $82,576, respectively, compared to $140,302 and $414,448 for the comparable periods in 2000. The decreases of $165,261 and $331,872 for the comparative three and six 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. 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. For the three and six months ended June 30, 2001, management fees were $52,332 compared to $23,875 and $54,896 for the comparable periods in 2000. The three month increase in management fees is due to the distribution of operational cash flow previously held in reserves, while the comparative six month management fee remained relatively stable. General and administrative expenses for the three and the six months ended June 30, 2001 were $36,631 and $76,622, respectively, compared to $47,085 and $92,785 for the same periods in 2000. The decreases between the comparative three and six month periods are due to a decrease in legal fees, appraisal fees and lower taxes. 14 COPLEY PENSION PROPERTIES VII; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001 PART II OTHER INFORMATION Item 6. Reports on Form 8-K Reports on Form 8-K: During the quarter ended June 30, 2001, one Current Report on Form 8-K was filed on April 20, 2001 reporting on Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7 (Financial statements and Exhibits), relating in both cases to the April 6, 2001 sale of Drilex. 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) August 14, 2001 /s/ Alison L. Husid ------------------------------- Alison L. Husid President, Chief Executive Officer And Director of Managing General Partner, Seventh Copley Corp. August 14, 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