-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BUv9kvQInUiggkXkPKEstYdIxVUwKXRuJDzzJN/jrwrc/6B+CmP/uI04oSci/BrO bHcjPcIDrKFoP7DcpIQCfA== 0000950148-96-002640.txt : 19961118 0000950148-96-002640.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950148-96-002640 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE ASSOCIATES LTD VII CENTRAL INDEX KEY: 0000722648 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953290316 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13810 FILM NUMBER: 96662998 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended SEPTEMBER 30, 1996 Commission File Number 2-84816 REAL ESTATE ASSOCIATES LIMITED VII (A California Limited Partnership) I.R.S. Employer Identification No. 95-3290316 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CALIF. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 ----- ------ 2 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . 1 Statements of Operations, Nine and Three Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . 2 Statement of Partners' Deficiency, Nine Months Ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 3 Statements of Cash Flows, Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . 4 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 30, 1996 AND 1995 ASSETS
1996 1995 (Unaudited) (Audited) -------------- -------------- INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 18,018,152 $ 18,600,961 CASH (Note 1) 248,564 352,652 SHORT TERM INVESTMENTS (Note 1) 125,000 125,000 OTHER ASSETS 105,129 105,129 -------------- -------------- TOTAL ASSETS $ 18,496,845 $ 19,183,742 ============== ============== LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: NOTES PAYABLE (Note 3) $ 24,869,501 $ 24,869,501 ACCRUED INTEREST PAYABLE (Note 3) 23,814,770 22,427,527 ACCRUED FEES DUE GENERAL PARTNER (Note 4) 3,027,943 2,630,214 ACCOUNT PAYABLE AND OTHER LIABILITIES 589 13,519 -------------- -------------- 51,712,803 49,940,761 -------------- -------------- PARTNERS' DEFICIENCY: General partners (655,290) (630,701) Limited partners (32,560,668) (30,126,318) -------------- -------------- (33,215,958) (30,757,019) -------------- -------------- TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 18,496,845 $ 19,183,742 ============== ==============
The accompanying notes are an integral part of these financial statements. 1 4 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
Nine months Three months Nine months Three months ended ended ended ended Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995 --------------- --------------- --------------- --------------- INTEREST INCOME $ 13,643 $ 4,330 $ 15,849 $ 4,854 --------------- --------------- --------------- --------------- OPERATING EXPENSES: Interest expense 1,742,569 580,856 1,742,569 580,856 Management fees - general partner 557,730 185,910 557,730 185,910 General and administrative 66,078 21,023 76,914 25,538 Legal and accounting 64,720 1,535 58,213 2,000 --------------- --------------- --------------- --------------- 2,431,097 789,324 2,435,426 794,304 --------------- --------------- --------------- --------------- LOSS FROM OPERATIONS (2,417,454) (784,994) (2,419,577) (789,450) DISTRIBUTIONS RECOGNIZED AS INCOME 57,515 - 23,497 - EQUITY IN LOSS OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS (99,000) (33,000) (675,000) (225,000) --------------- --------------- --------------- --------------- NET LOSS $ (2,458,939) $ (817,994) $ (3,071,080) $ (1,014,450) =============== =============== =============== =============== NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (118) $ (39) $ (148) $ (49) =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 2 5 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENT OF PARTNERS' DEFICIENCY NINE MONTHS ENDED SEPTEMBER 30, 1996 (Unaudited)
General Limited Partners Partners Total ------------- ------------- ------------- PARTNERSHIP INTERESTS September 30, 1996 20,802 ============= PARTNERS' DEFICIENCY at January 1, 1996 $ (630,701) $ (30,126,318) $ (30,757,019) Net loss for the nine months ended September 30, 1996 (24,589) (2,434,350) (2,458,939) ------------- ------------- ------------- PARTNERS' DEFICIENCY, September 30, 1996 $ (655,290) $ (32,560,668) $ (33,215,958) ============= ============= =============
The accompanying notes are an integral part of these financial statements. 3 6 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
1996 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,458,939) $ (3,071,080) Adjustments to reconcile net loss to net cash used in operating activities: Equity in loss of limited partnerships and amortization of additional basis and acquisition costs 99,000 675,000 Increase in other assets - (3,561) Increase in accrued interest payable 1,387,243 1,388,795 Increase in accrued fees and expenses due general partner 397,729 522,730 Decrease in accounts payable and other liabilities (12,930) (5,400) ------------- ------------- Net cash used in operating activities (587,897) (493,516) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Distributions from limited partnerships recognized as a return of capital 483,809 635,201 Advances to limited partnership - (72,000) Net cash provided by investing activities 483,809 563,201 ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (104,088) 69,685 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 352,652 498,954 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 248,564 $ 568,639 ============= =============
The accompanying notes are an integral part of these financial statements. 4 7 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Annual Report for the year ended December 31, 1995 prepared by Real Estate Associates Limited VII (the "Partnership."). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals), necessary to present fairly the financial position of the Partnership at September 30, 1996, and the results of operations for the nine and three months then ended and changes in cash flows for the nine months then ended. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments. National Partnership Investments Corp. (NAPICO) is the corporate general partner of the Partnership. USES OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS The investment in limited partnerships is accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects were capitalized as part of the investment account. NET LOSS PER LIMITED PARTNERSHIP INTEREST Net loss per limited partnership interest was computed by dividing the limited partners' share of net loss by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 20,802 for the periods presented. 5 8 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and bank certificates of deposit. SHORT TERM INVESTMENTS Short term investments consist of bank certificates of deposit with original maturities ranging from more than three months to twelve months. The fair value of these securities, which have been classified as held for sale, approximates their carrying value. INCOME TAXES No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the individual partners. NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS The Partnership holds limited partnership interests in 32 limited partnerships. In addition, the Partnership holds a general partner interest in REA IV, NAPICO is also the general partner in REA IV. REA IV, in turn, holds limited partner interests in 16 additional limited partnerships. In total, therefore, the Partnership holds interests, either directly or indirectly through REA IV, in 48 partnerships all of which own residential rental projects consisting of 4,731 apartment units. The mortgage loans of these projects are insured by various governmental agencies. The Partnership, as a limited partner, is entitled to between 98 percent and 99 percent of the profits and losses in the limited partnerships it has invested in directly. The Partnership is also entitled to 99 percent of the profits and losses of REA IV. REA IV holds a 99 percent interest in each of the limited partnerships in which it has invested. Equity in losses of limited partnerships is recognized in the financial statements until the limited partnership investment account is reduced to a zero balance. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. Distributions from the limited partnerships are accounted for as a return of capital until the investment balance is reduced to zero. Subsequent distributions received are recognized as income. The following is a summary of the investment in limited partnerships as of September 30, 1996: Balance, beginning of period $18,600,961 Cash distributions recognized as a return of capital (483,809) Amortization of acquisition costs (228,000) Equity in income of limited partnerships 129,000 ----------- Balance, end of period $18,018,152 ===========
6 9 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS The following are unaudited combined estimated statements of operations for the limited partnerships in which the Partnership has investments:
Nine months Three months Nine months Three months ended ended ended ended Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995 -------------- -------------- -------------- -------------- Revenues: Rental and other $20,358,000 $6,786,000 $19,881,000 $6,627,000 ----------- ---------- ----------- ---------- Expenses: Depreciation 4,047,000 1,349,000 4,401,000 1,467,000 Interest 3,129,000 1,043,000 2,904,000 968,000 Operating 14,400,000 4,800,000 14,601,000 4,867,000 ----------- ---------- ----------- ---------- 21,575,000 7,192,000 21,906,000 7,302,000 ----------- ---------- ----------- ---------- Net loss $(1,218,000) $ (406,000) $(2,025,000) $ (675,000) ============ =========== =========== ==========
NAPICO, or one of its affiliates, is the general partner and property management agent for certain of the limited partnerships included above. NOTE 3 - NOTES PAYABLE Certain of the Partnership's investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. The Partnership is obligated on non-recourse notes payable of $24,869,501, bearing interest at 9 1/2 percent, to the sellers of the Partnership interests. The notes have principal maturity dates ranging from December 1999 to December 2002 or upon sale or refinancing of the underlying partnership properties. These obligations are collateralized by the Partnership's investments in the investee partnerships and are payable out of cash distributions from the investee partnerships, as defined in the notes. Unpaid interest, was $23,814,770 at September 30, 1996, and is due at maturity of the notes. NOTE 4 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNER Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee equal to .5 percent of the invested assets of the partnerships. Invested assets is defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective partnerships. The fee was $557,730 for the nine months ended September 30, 1996 and 1995. 7 10 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 4 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNER (CONTINUED) The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was approximately $32,600 and $29,900 for the nine months ended September 30, 1996 and 1995, respectively, and is included in administrative expenses. NOTE 5 - CONTINGENCIES The corporate general partner of the Partnership and the Partnership are plaintiffs in various lawsuits and have also been named defendants in other lawsuits arising from transactions in the ordinary course of business. In the opinion of management, and the corporate general partner, the claims will not result in any material liability to the Partnership. NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. The notes payable are collateralized by the Partnership's investments in investee limited partnerships and are payable only out of cash distributions from the investee partnerships. The operations generated by the investee limited partnerships, which account for the Partnership's primary source of revenues, are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest and amounts due general partner. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 8 11 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include interest income earned from investing available cash and distributions from limited partnerships in which the Partnership has invested. It is not expected that any of the local limited partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to limited partners in any material amount. RESULTS OF OPERATIONS Partnership revenues consist primarily of interest income earned on certificates of deposit and other temporary investment of funds not required for investment in local partnerships. Operating expenses consist primarily of recurring general and administrative expenses and professional fees for services rendered to the Partnership. In addition, an annual Partnership management fee in an amount equal to .5 percent of invested assets is payable to the corporate general partner. The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership account is reduced to zero are not recognized. Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Except for certificates of deposit and money market funds, the Partnership's investments are entirely interests in other limited and general partnerships owning government assisted projects. Available cash is invested in money market funds and certificates of deposit which provide interest income as reflected in the statement of operations. These temporary investments can be easily converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner. 9 12 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As of September 30, 1996, the Partnership's Corporate General Partner was a plaintiff or defendant in several suits, including the following related to REAL VII: John Mitchell v. Oakwood Apartments, NAPICO et al., Case No. 94CV112108, Court of Common Pleas, Lorain County, Ohio. On March 31, 1994, the Plaintiff filed a lawsuit alleging that on May 5, 1992, while returning to his apartment (Oakwood Apartments, Lorain, Ohio) he tripped and sustained mental and physical injuries. The Plaintiff voluntarily dismissed his action and a Notice of Voluntary Dismissal without prejudice was filed. The Plaintiff, however, refiled the action which remains pending. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of Item 7 of regulation S-K. 10 13 REAL ESTATE ASSOCIATES LIMITED VII (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 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. REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) By: National Partnership Investments Corp., General Partner Date: ----------------------------------------- By: ----------------------------------------- Bruce Nelson President Date: ----------------------------------------- By: ----------------------------------------- Shawn Horwitz Executive Vice President and Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 248,564 0 0 0 0 366,213 0 0 18,496,845 589 0 0 0 0 (33,215,958) 18,496,845 0 71,158 0 0 787,528 0 1,742,569 2,458,939 0 2,458,939 0 0 0 2,458,939 0 0
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