10-Q 1 d10q.txt FORM 10-Q DATED 03/31/01 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 March 31, 2001 Commission File Number 0-17807 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-2988542 (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 VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED MARCH 31, 2001 PART I FINANCIAL INFORMATION 2 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP BALANCE SHEETS March 31, 2001 December 31, 2000 (Unaudited) (Audited) -------------- ----------------- Assets Real estate investments: Property, net $4,304,381 $4,284,794 ---------- ---------- 4,304,381 4,284,794 Joint Venture held for disposition - 1,864,405 Other assets 90,121 - Cash and cash equivalents 2,313,857 2,053,663 ---------- ---------- $6,708,359 $8,202,862 ========== ========== Liabilities and Partners' Capital Accounts payable $ 93,269 $ 98,555 Deferred disposition fees 1,464,280 1,369,577 ---------- ---------- Total liabilities 1,557,549 1,468,132 ---------- ---------- Partners' capital: Limited partners ($168.49 and $223.49, respectively, per unit; 160,000 units authorized 48,788 units issued and outstanding) 5,126,292 6,721,206 General partners 24,518 13,524 ---------- ---------- Total partners' capital 5,150,810 6,734,730 ---------- ---------- $6,708,359 $8,202,862 ========== ========== (See accompanying notes to unaudited financial statements) 3 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2001 2000 -------- -------- INVESTMENT ACTIVITY Property rentals $ 226,509 $192,500 Property operating expenses (63,045) (48,516) Depreciation and amortization (48,078) (31,594) ---------- -------- 115,386 112,390 Joint venture earnings (loss) 16,673 (41,636) ---------- -------- Total real estate operations 132,059 70,754 Gain on sale of joint venture 972,678 - ---------- -------- Total real estate activity 1,104,737 70,754 Interest on cash equivalents 30,821 32,244 ---------- -------- Total investment activity 1,135,558 102,998 ---------- -------- PORTFOLIO EXPENSES General and administrative 36,138 40,013 ---------- -------- 36,138 40,013 ---------- -------- Net income $1,099,420 $ 62,985 ========== ======== Net income per limited partnership unit $ 22.31 $ 1.28 ========== ======== Cash distributions per limited partnership unit $ 55.00 $ 2.81 ========== ======== Number of limited partnership units outstanding during the period 48,788 48,788 ========== ======== (See accompanying notes to unaudited financial statements) 4 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (Unaudited) Three Months Ended March 31, ----------------------------------------------- 2001 2000 ---------------------- --------------------- General Limited General Limited Partners Partners Partners Partners -------- ---------- -------- ---------- Balance at beginning of period $13,524 $ 6,721,206 $11,211 $6,492,235 Cash distributions - (2,683,340) (1,385) (137,094) Net income 10,994 1,088,426 630 62,355 ------- ----------- ------- ---------- Balance at end of period $24,518 $ 5,126,292 $10,456 $6,417,496 ======= =========== ======= ========== (See accompanying notes to unaudited financial statements) 5 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP SUMMARIZED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2001 2000 -------- -------- Net cash provided by (used in) operating activities $ 85,196 $ (24,567) ---------- ---------- Cash flows from investing activities: Deferred disposition fee 94,703 - Investment in property - (3,636) Investment in joint venture (43,405) - Net proceeds from sale 2,807,040 - ---------- ---------- Net cash provided by (used in) investing activities 2,858,338 (3,636) ---------- ---------- Cash flows from financing activity: Distributions to partners (2,683,340) (138,479) ---------- ---------- Net cash used in financing activities (2,683,340) (138,479) ---------- ---------- Net increase (decrease) in cash and cash equivalents 260,194 (166,682) Cash and cash equivalents: Beginning of period 2,053,663 2,305,383 ---------- ---------- End of period $2,313,857 $2,138,701 ========== ========== (See accompanying notes to unaudited financial statements) 6 COPLEY PENSION PROPERTIES VI; 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 March 31, 2001 and December 31, 2000 and its operations, its cash flows and partners' capital for the three months ended March 31, 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 VI; 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 organizations intended to be exempt from federal income tax. The Partnership commenced operations in July 1988, and acquired the real estate investment it currently owns prior to the end of 1991. It intends to dispose of its investments within eight to 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 - Investment in Joint Venture On February 26, 2001, the Prentiss Copystar joint venture investment in which the Partnership and an affiliate are entitled to 69% and 31%, 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 $3,156,750. The Partnership received its 69% share of the net proceeds, $2,901,743 after closing costs, and recognized a gain of $972,678 ($19.74 per Limited Partnership Unit) on the sale. A disposition fee of $94,703 was accrued but not paid to the Advisor. On March 29, 2001, the Partnership made a capital distribution of $2,683,340 ($55.00 per Limited Partnership Unit) from the proceeds of the sale. Summarized Financial Information The following summarized financial information is presented in the aggregate for the Prentiss Copystar joint venture: 7 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP Assets and Liabilities ---------------------- March 31, 2001 December 31, 2000 -------------- ----------------- Assets Real property, at cost less accumulated depreciation of $496,142 $ - $2,746,869 Other 158,280 73,107 -------- ---------- 158,280 2,819,976 Liabilities - 106,201 -------- ---------- Net assets $158,280 $2,713,775 ======== ========== Results of Operations --------------------- Three Months Ended March 31, ---------------------------- 2001 2000 -------- -------- Revenue: Rental income $87,305 $ - ------- -------- 87,305 - ------- -------- Expenses: Operating expenses 63,140 28,370 Depreciation and amortization 12,151 12,815 ------- -------- 75,291 41,185 ------- -------- Net income (loss) $12,014 $(41,185) ======= ======== Liabilities and expenses exclude amounts owed and attributable to the Partnership and its affiliate on behalf of their various financing arrangements with the joint venture. 8 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP Note 3 - Property The following is a summary of the Partnership's remaining wholly-owned property (Wilmington Industrial): March 31, 2001 December 31, 2000 -------------- ----------------- Land $ 2,770,056 $ 2,770,056 Buildings, improvements and other capitalized costs 5,336,205 5,336,205 Investment valuation allowance (1,500,000) (1,500,000) Accumulated depreciation and amortization (2,398,456) (2,350,377) Net operating assets 96,576 28,910 ----------- ----------- $ 4,304,381 $ 4,284,794 =========== =========== Note 4 - Subsequent Event On April 26, 2001, a capital distribution was made from original working capital reserves in the amount of $1,194,818 ($24.49 per Limited Partnership Unit). 9 COPLEY PENSION PROPERTIES VI; A REAL ESTATE 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 on December 31, 1988. A total of 48,788 units were sold. The Partnership received proceeds of $43,472,858, net of selling commissions and other offering costs, which have been used for investment in real estate and for the payment of related acquisition costs, or retained as working capital reserves. The Partnership made seven real estate investments; one investment was sold in each of 1990, 1994, 1997 and 2001 and two investments were sold in 1998. Through March 31, 2001, capital of $40,567,709 ($831.51 per limited partnership unit) has been returned to the limited partners; $38,877,693 as a result of sales and $1,690,016, as a result of a discretionary reduction of original working capital previously held in reserves. At March 31, 2001, the Partnership had $2,313,857 in cash and cash equivalents, of which $1,194,818 was used for a capital distribution from original working capital reserves to the limited partners on April 26, 2001, 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 its remaining real estate investment, and proceeds from the sale of such investment. There have been no operating cash distributions made since the fourth quarter of 1999 due to Prentiss Copystar's vacancy from September 1999 through August 2000 and it's subsequent sale in February 2001 as well as insufficient cash flow from Wilmington Industrial as a result of property level obligations which reduced its cash flow to the Partnership. 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 the estimated cost of sale for properties held for sale. Carrying value may be greater or less than current appraised value. At March 31, 2001, the appraised value of the Partnership's remaining investment exceeded its carrying value by approximately $2,700,000. The current appraised value of real estate investments has been estimated 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 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. 10 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP Results of Operations --------------------- Form of Real Estate Investments The Wilmington Industrial investment is a wholly-owned property. 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, the Prentiss Copystar joint venture investment in which the Partnership and an affiliate were entitled to 69% and 31% of the operating activity, respectively, sold its property on February 26, 2001. The Partnership recognized its 69% share of the gain of $972,678. At the time of the sale, Prentiss Copystar was 100% leased, while it was vacant at March 31, 2000. The Partnership's remaining property, Wilmington Industrial, was 100% leased at March 31, 2001 compared to 67% leased at March 31, 2000. Investment Results Interest income on cash equivalents remained relatively stable between the first quarters of 2000 and 2001. Real estate operating results were $132,059 for the first three months of 2001, and $70,754 for the comparable period of 2000. The increase of $61,305 is primarily due to an increase in joint venture earnings in 2001 as compared to joint venture loss in 2000 due to Prentiss Copystar's vacancy in the first quarter of 2000. Operating results from Wilmington Industrial have remained relatively stable between the first three months of 2001 and 2000. Rental activity has increased due to the decrease in vacancy, however it is offset by an increase in operating expenses. 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 consist primarily of real estate appraisal, printing, legal, accounting and investor servicing fees. The Partnership did not incur management fees during the three months ended March 31, 2001 and 2000, respectively, due to the suspension of cash distributions since the fourth quarter of 1999. General and administrative expenses remained relatively stable between the first quarters of 2001 and 2000. 11 COPLEY PENSION PROPERTIES VI; A REAL ESTATE LIMITED PARTNERSHIP FORM 10-Q FOR QUARTER ENDED MARCH 31, 2001 PART II OTHER INFORMATION Item 6. Reports on Form 8-K Reports on Form 8-K: During the quarter ended March 31, 2001, one Current Report on Form 8-K was filed on March 12, 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 February 26, 2001 sale of Prentiss Copystar. 12 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 VI; A REAL ESTATE LIMITED PARTNERSHIP (Registrant) May 14, 2001 /s/ Alison L. Husid ------------------------------- Alison L. Husid President, Chief Executive Officer and Director of Managing General Partner, Sixth Copley Corp. May 14, 2000 /s/ Jonathan Martin -------------------------------- Jonathan Martin Principal Financial and Accounting Officer of Managing General Partner, Sixth Copley Corp. 13