-----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, SRy2iZVAG2yT3I80sAvPIjE0JDRO1G47P0q2zLNEx/nO1mR7HAM1TukflAb/RdXv awlvBQY3qR6EqaSX3l0R1g== 0000950148-96-000577.txt : 19960410 0000950148-96-000577.hdr.sgml : 19960410 ACCESSION NUMBER: 0000950148-96-000577 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960409 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-13810 FILM NUMBER: 96545520 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-K405 1 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended DECEMBER 31, 1995 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, CALIFORNIA 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Securities Registered Pursuant to Section 12(b) or 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the Commission by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or 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_______________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 2 PART I. ITEM 1. BUSINESS Real Estate Associates Limited VII ("REAL VII" or the "Partnership") is a limited partnership which was formed under the laws of the State of California on May 24, 1983. On February 1, 1984, the Partnership offered 2,600 units consisting of 10,400 limited partnership interests and warrants to purchase a maximum of 5,200 additional limited partnership interests through a public offering managed by Lehman Brothers Inc. The general partners of the Partnership are National Partnership Investments Corp. ("NAPICO"), a California Corporation (the "Corporate General Partner"), and National Partnership Investments Associates II ("NAPIA II"). NAPIA II is a limited partnership formed under the California Limited Partnership Act and consists of Mr. Charles H. Boxenbaum and an unrelated individual as limited partners and NAPICO as general partner. The business of the Partnership is conducted primarily by its general partners as the Partnership has no employees of its own. Casden Investment Corporation ("CIC") owns 100 percent of NAPICO's stock. The current members of NAPICO's Board of Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden, Henry C. Casden and Brian D. Goldberg. The Partnership holds limited partnership interests in thirty-two local limited partnerships as of December 31, 1995. The Partnership also holds a general partner interest in Real Estate Associates IV ("REA IV") which, in turn, holds limited partnership interests in sixteen additional local limited partnerships; therefore, the Partnership holds interests, either directly or indirectly through REA IV, in forty-eight local limited partnerships. The other general partner of REA IV is NAPICO. Each of the local partnerships owns a low income housing project which is subsidized and/or has a mortgage note payable to or is insured by agencies of the federal or local government. In order to stimulate private investment in low income housing, the federal government and certain state and local agencies have provided significant ownership incentives, including among others, interest subsidies, rent supplements, and mortgage insurance, with the intent of reducing certain market risks and providing investors with certain tax benefits, plus limited cash distributions and the possibility of long-term capital gains. There remain, however, significant risks. The long-term nature of investments in government assisted housing limits the ability of the Partnership to vary its portfolio in response to changing economic, financial, and investment conditions. Such investments are also subject to changes in local economic circumstances and housing patterns, as well as rising operating costs, vacancies, rent collection difficulties, energy shortages, and other factors which have an impact on real estate values. These projects also require greater management expertise and may have higher operating expenses than conventional housing projects. The partnerships in which the Partnership has invested are principally existing local limited partnerships. The Partnership became the limited partner in these local limited partnerships pursuant to arm's-length negotiations with the local partnership's general partners who are often the original project developers. In certain other cases, the Partnership invested in newly formed local partnerships which, in turn, acquired the projects. As a limited partner, the Partnership's liability for obligations of the local limited partnership is limited to its investment. The local general partner of the local limited partnership retains the responsibility of maintaining, operating and managing the project. Under certain circumstances, the Partnership has the right to replace the general partner of the local limited partnerships. 3 Although each of the partnerships in which the Partnership has invested will generally own a project which must compete in the market place for tenants, interest subsidies and rent supplements from governmental agencies make it possible to offer these dwelling units to eligible "low income" tenants at a cost significantly below the market rate for comparable conventionally financed dwelling units in the area. During 1995, all of the projects in which the Partnership had invested were substantially rented. The following is a schedule of the status, as of December 31, 1995, of the projects owned by local partnerships in which the Partnership, either directly or indirectly through REA IV, has invested. SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS AN INVESTMENT DECEMBER 31, 1995
Units Authorized For Rental Assistance Under Section 8 or Other Rent No. of Supplement Units Percentage of Name & Location Units Program Occupied Total Units - --------------- ----- ----------------- -------- ------------- Anthracite Apts. 121 121/ 0 121 100% Pittston, PA Aristocrat Manor 113 113/ 0 88 78% Hot Springs, AR Arkansas City Apts. 16 4/ 7 12 75% Arkansas City, AR Arrowsmith Apts. 70 70/ 0 70 100% Corpus Christi, TX Ashland Manor 189 189/ 0 187 99% Toledo, OH Bangor House 121 121/ 0 121 100% Bangor, ME Bellair Manor Apts. 68 7/ 7 68 100% Niles, OH Birch Manor Apts. I 60 12/ 0 57 95% Medina, OH Birch Manor Apts II 60 6/ 0 59 98% Medina, OH Bluewater Apts. 116 None 112 97% Port Huron, MI
4 SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS AN INVESTMENT DECEMBER 31, 1995 (CONTINUED)
Units Authorized For Rental Assistance Under Section 8 or Other Rent No. of Supplement Units Percentage of Name & Location Units Program Occupied Total Units - --------------- ----- ----------------- -------- ------------- Center City 176 175/ 0 176 100% Hazelton, PA Clarkwood Apts. I 72 24/ 0 71 99% Elyria, OH Clarkwood Apts. II 120 39/ 0 117 98% Elyria, OH Cleveland Apts. I 50 50/ 0 49 98% Hayti, MO Cleveland Apts. II 50 50/ 0 50 100% Hayti, MO Cleveland Apts. III 21 21/ 0 21 100% Hayti, MO Danbury Park Manor 151 85/ 0 139 92% Superior Township, MI Desoto Apts. 42 42/ 0 42 100% Desoto, MO Dexter Apts. 50 50/ 0 47 94% Dexter, MO Edgewood Terrace II 258 103/ 0 253 98% Washington, DC Goodlette Arms Apts. 250 None 249 100% Naples, FL Hampshire House 150 150/ 0 149 99% Warren, OH Henrico Arms 232 232/ 0 232 100% Richmond, VA
5 SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS AN INVESTMENT DECEMBER 31, 1995 (CONTINUED)
Units Authorized For Rental Assistance Under Section 8 or Other Rent No. of Supplement Units Percentage of Name & Location Units Program Occupied Total Units - --------------- ----- ----------------- -------- ------------- Ivywood Apts. 124 75/ 0 119 96% Columbus, OH Jasper County Prop. 24 None 24 100% Heidelberg, MS King Towers 68 14/ 0 67 99% Cincinnati, OH Meherrin Landings 42 None 35 83% Emporia, VA Nantucket Apts. 60 59/ 0 59 98% Alliance, OH Newton Apts. 36 None 30 83% Newton, MS Oak Hill Apts. 120 82/ 0 117 98% Franklin, PA Oakview Apts. 32 None 28 88% Monticello, AR Oakwood Park I Apts 50 None 49 98% Lorain, OH Oakwood Park II Apts 78 None 75 96% Lorain, OH Pachuta Apartments 16 None 15 94% Pachuta, MS Parkway Towers Apt 104 103/ 0 104 100% E. Providence, RI Pebbleshire Apts. 120 24/ 0 114 95% Vernon Hills, IL
6 SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS AN INVESTMENT DECEMBER 31, 1995 (CONTINUED)
Units Authorized For Rental Assistance Under Section 8 or Other Rent No. of Supplement Units Percentage of Name & Location Units Program Occupied Total Units - --------------- ----- ----------------- -------- ------------- Pinebrook Apts. 136 109/ 0 128 94% Lansing, MI Rand Grove Village 212 212/ 0 186 88% Palatine, IL Richards Park Apts. 60 24/ 0 60 100% Elyria, OH Ridgewood Towers 140 140/ 0 137 98% Moline, IL Shubuta Properties 16 None 14 88% Shubuta, MS South Glen Apts. 159 27/ 0 158 99% Trenton, MI South Park Apts. 138 138/ 0 130 94% Elyria, OH Sunland Terrace 80 80/ 0 80 100% Phoenix, AZ Tradewinds East 150 None 144 96% Essexville, MI Warren Heights Apts II 88 87/ 0 86 98% Warren, OH White Cliff Apts. 72 72/ 0 70 97% Cincinnati, OH Yorkview Estates 50 50/ 0 48 96% Massillon, OH ----- --------- ----- TOTAL 4,731 2,960/ 14 4,567 97% ===== ========= =====
7 ITEM 2. PROPERTIES Through its participation in local limited and general partnerships, the Partnership holds interests in real estate properties. See Item 1 and Schedule XI for information pertaining to these properties. ITEM 3. LEGAL PROCEEDINGS As of December 31, 1995, the Partnership's Corporate General Partner was a plaintiff or defendant in several lawsuits, In addition, the Partnership is involved in the following lawsuits. In the opinion of management and the Corporate General Partner, the claims will not result in any material liability to the Partnership. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS. The Limited Partnership Interests are not traded on a public exchange but were sold through a public offering managed by Lehman Brothers, Inc. It is not anticipated that any public market will develop for the purchase and sale of any partnership interest. Limited Partnership Interests may be transferred only if certain requirements are satisfied. At December 31, 1995, there were 3,666 registered holders of units in the Partnership. No distributions have been made from the inception of the Partnership to December 31, 1995. The Partnership has invested in certain government assisted projects under programs which in many instances restrict the cash return available to project owners. The Partnership was not designed to provide cash distributions to investors in circumstances other than refinancing or disposition of its investments in limited partnerships. 8 ITEM 6. SELECTED FINANCIAL DATA:
Year Ended December 31, ---------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Loss From Partnership Operations $ (3,234,086) $ (3,225,472) $ (3,245,333) $ (3,244,612) $ (3,136,606) Distributions From Limited Partnerships Recognized as Income 19,632 249,371 190,767 124,966 96,384 Equity in Loss of Limited Partnerships and Amortization of Acquisition Costs (511,033) (1,074,503) (1,325,646) (1,014,151) (949,827) ------------ ------------ ------------ ------------ ------------ Net Loss $ (3,725,487) $ (4,050,604) $ (4,380,212) $ (4,133,797) $ (3,990,049) ============ ============ ============ ============ ============ Net Loss per Limited Partnership Interest $ (179) $ (193) $ (211) $ (197) $ (190) ============ ============ ============ ============ ============ Total assets $ 19,183,742 $ 20,411,116 $ 22,203,347 $ 24,129,351 $ 25,662,180 ============ ============ ============ ============ ============ Investments in Limited Partnerships $ 18,600,961 $ 19,757,594 $ 21,590,427 $ 23,573,755 $ 25,235,991 ============ ============ ============ ============ ============ Notes Payable $ 24,869,501 $ 24,869,501 $ 24,869,501 $ 24,869,501 $ 24,869,501 ============ ============ ============ ============ ============ Fees and Expenses Due to General Partner $ 2,630,214 $ 2,041,574 $ 1,597,934 $ 1,054,294 $ 410,654 ============ ============ ============ ============ ============
9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY The Partnership's primary sources of funds include interest income on money market funds and certificates of deposit and distributions from local partnerships in which the Partnership has invested. It is not expected that any of the local partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership's limited partners in any material amount. CAPITAL RESOURCES The Partnership received $39,000,000 in subscriptions for units of limited partnership interests (at $5,000 per unit) during the period March 7, 1984 to June 11, 1985, pursuant to a registration statement on Form S-11. RESULTS OF OPERATIONS The Partnership was formed to provide various benefits to its partners as discussed in Item 1. It is anticipated that the local partnerships in which the Partnership has invested could produce tax losses for as long as 20 years. The Partnership will seek to defer income taxes from sale by not selling any projects or project interests within 10 years, except to qualified tenant cooperatives, or when proceeds of the sale would supply sufficient cash to enable the Partners to pay applicable taxes. Tax benefits will decline over time as the advantages of accelerated depreciation are greatest in the earlier years, as deductions for interest expense decrease as mortgage principal is amortized, and as the Tax Reform Act of 1986 limits the deductions available. 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 investment 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. A recurring Partnership expense is the management fee. The fee is payable monthly to the corporate general partner of the Partnership and is calculated as a percentage of the Partnership's invested assets. The fee is payable beginning with the month following the Partnership's initial investment in a local partnership. General and administrative expenses of the Partnership consist substantially of professional fees or services rendered to the Partnership. 10 Interest expense did not vary significantly in the years presented. The Partnership, as a limited partner in the local partnerships in which it has invested, is subject to the risks incident to the construction, management and ownership of improved real estate. The Partnership investments are also subject to adverse general economic conditions and, accordingly, the status of the national economy, including substantial unemployment and concurrent inflation, could increase vacancy levels, rental payment defaults and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial Statements and Supplementary Data are listed under Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 11 REAL ESTATE ASSOCIATES LIMITED VII (A California limited partnership) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT DECEMBER 31, 1995 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Real Estate Associates Limited VII (A California limited partnership) We have audited the accompanying balance sheets of Real Estate Associates Limited VII (a California limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' deficiency and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedules listed in the index at item 14. These financial statements and financial statement schedules are the responsibility of the management of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We did not audit the financial statements of certain limited partnerships, the investments in which are reflected in the accompanying financial statements using the equity method of accounting. The investments in these limited partnerships represent 31 percent and 36 percent of total assets as of December 31, 1995 and 1994, respectively, and the equity in loss of these limited partnerships represents 21 percent, 14 percent and 28 percent of the total net loss of the Partnership for the years ended December 31, 1995, 1994 and 1993, respectively, and represent a substantial portion of the investee information in Note 2 and the financial statement schedules. The financial statements of these limited partnerships are audited by other auditors. Their reports have been furnished to us and our opinion, insofar as it relates to the amounts included for these limited partnerships, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Real Estate Associates Limited VII as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, based on our audits and the reports of other auditors, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Los Angeles, California March 29, 1996 1 13 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) BALANCE SHEETS DECEMBER 31, 1995 AND 1994 ASSETS
1995 1994 ------------ ------------ INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 18,600,961 $ 19,757,594 CASH 352,652 498,954 SHORT TERM INVESTMENTS (Note 1) 125,000 125,000 OTHER ASSETS 105,129 29,568 ------------ ------------ TOTAL ASSETS $ 19,183,742 $ 20,411,116 ============ ============ LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: Notes payable (Note 3) $ 24,869,501 $ 24,869,501 Accrued interest payable (Note 3) 22,427,527 20,514,472 Accrued fees and expenses due general partner (Note 4) 2,630,214 2,041,574 Accounts payable and other liabilities 13,519 17,101 ------------ ------------ 49,940,761 47,442,648 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 4 and 5) PARTNERS' (DEFICIENCY): General partners (630,701) (593,446) Limited partners (30,126,318) (26,438,086) ------------ ------------ (30,757,019) (27,031,532) ------------ ------------ TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 19,183,742 $ 20,411,116 ============ ============
The accompanying notes are an integral part of these financial statements. 2 14 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------- ------------ ----------- REVENUE: Interest income $ 20,741 $ 16,409 $ 16,947 ----------- ----------- ----------- OPERATING EXPENSES: Interest (Note 3) 2,323,426 2,326,128 2,344,505 Management fees - general partner (Note 4) 743,640 743,640 743,640 General and administrative (Note 4) 106,227 98,197 98,219 Legal and accounting 81,534 73,916 75,916 ----------- ----------- ----------- 3,254,827 3,241,881 3,262,280 ----------- ----------- ----------- LOSS FROM OPERATIONS (3,234,086) (3,225,472) (3,245,333) DISTRIBUTIONS FROM LIMITED PARTNERSHIP RECOGNIZED AS INCOME (Note 2) 19,632 249,371 190,767 EQUITY IN LOSS OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ADDITIONAL BASIS AND ACQUISITION COSTS (Note 2) (511,033) (1,074,503) (1,325,646) ----------- ----------- ----------- NET LOSS $(3,725,487) $(4,050,604) $(4,380,212) =========== =========== =========== NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (179) $ (193) $ (211) =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 3 15 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) STATEMENTS OF PARTNERS' DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
General Limited Partners Partners Total ---------- ------------ ------------ DEFICIENCY, December 31, 1992 $(509,138) $(18,091,578) $(18,600,716) Net loss for 1993 (43,802) (4,336,410) (4,380,212) --------- ------------ ------------ DEFICIENCY, December 31, 1993 (552,940) (22,427,988) (22,980,928) Net loss, 1994 (40,506) (4,010,098) (4,050,604) --------- ------------ ------------ DEFICIENCY, December 31, 1994 (593,446) (26,438,086) (27,031,532) Net loss, 1995 (37,255) (3,688,232) (3,725,487) --------- ------------ ------------ DEFICIENCY, December 31, 1995 $(630,701) $(30,126,318) $(30,757,019) ========= ============ ============
The accompanying notes are an integral part of these financial statements. 4 16 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,725,487) $(4,050,604) $(4,380,212) 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 511,033 1,074,503 1,325,646 Decrease (increase) in other assets (75,561) (25,911) 249 Increase in accrued interest payable 1,913,055 1,803,220 1,929,282 Increase in accrued fees and expenses due general partner 588,640 443,640 543,640 Increase (decrease) in accounts payable and other liabilities (3,582) 11,513 (18,714) ----------- ----------- ----------- Net cash used in operating activities (791,902) (743,639) (600,109) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Distributions from limited partnerships recognized as a return of capital 649,950 869,113 666,372 Capital contributions to limited partnerships (4,350) (110,783) (8,690) ----------- ----------- ----------- Net cash provided by investing activities 645,600 758,330 657,682 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH (146,302) 14,691 57,573 CASH, beginning of year 498,954 484,263 426,690 ----------- ----------- ----------- CASH, end of year $ 352,652 $ 498,954 $ 484,263 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 410,370 $ 522,908 $ 415,223 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 5 17 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Real Estate Associates Limited VII (the "Partnership") was formed under the California Limited Partnership Act on May 24, 1983. The Partnership was formed to invest primarily in other limited partnerships or joint ventures which own and operate primarily federal, state or local government-assisted housing projects. The general partners are Coast Housing Investments Associates, a limited partnership and National Partnership Investments Corp. (NAPICO), the corporate general partner, and National Partnership Investments Associates II (NAPIA II), a limited partnership. Casden Investment Corporation owns 100 percent of NAPICO's stock. The general partner of NAPIA II is NAPICO. The Partnership issued 5,200 units of limited partnership interests through a public offering. Each unit was comprised of two limited partnership interests and two warrants granting the investor the right to purchase two additional limited partnership interests. An additional 10,400 interests associated with warrants were exercised. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest in proportion to their respective investments. The Partnership shall be dissolved only upon the expiration of 50 complete calendar years (December 31, 2033) from the date of the formation of the Partnership or the occurrence of various other events as specified in the Partnership agreement. Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the general partners will be entitled to a liquidation fee as stipulated in the Partnership agreement. The limited partners will have a priority return equal to their invested capital attributable to the project(s) or project interest(s) sold and shall receive from the sale of the project(s) or project interest(s) an amount sufficient to pay state and federal income taxes, if any, calculated at the maximum rate then in effect. The general partners' fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions. 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. PRINCIPLES OF CONSOLIDATION These financial statements include the accounts of Real Estate Associates Limited VII and Real Estate Associates IV ("REA IV"), a California general partnership in which the Partnership holds a 99 percent general partner interest. Losses in excess of the minority interest is equity that would otherwise be attributed to the minority interest are being allocated to the Partnership. 6 18 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) METHOD OF ACCOUNTING FOR INVESTMENTS IN LIMITED PARTNERSHIPS The investments in limited partnerships are accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects have been capitalized as part of the investment account and are being amortized on a straight line basis over the estimated lives of the underlying assets, which is generally 30 years. 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 all years presented. 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. 2. INVESTMENTS 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 low income rental projects consisting of 4,731 apartment units. The mortgage loans of these projects are payable to or insured by various governmental agencies. The Partnership, as a limited partner, is entitled to between 93 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. The cumulative amount of the unrecognized equity in losses of certain unconsolidated limited partnerships was approximately $6,359,000 and $5,063,000 as of December 31, 1995 and 1994, respectively. 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. 7 19 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 2. INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED) The following is a summary of the investments in limited partnerships and reconciliation to the limited partnership accounts:
1995 1994 ----------- ----------- Investment balance, beginning of year $19,757,594 $21,590,427 Cash distributions recognized as a return of capital (649,950) (869,113) Equity in loss of limited partnerships (309,810) (687,952) Amortization of additional basis and capitalized acquisition costs and fees (201,223) (386,551) Capital contributions to limited partnerships 4,350 110,783 ----------- ----------- Investment balance, end of year $18,600,961 $19,757,594 =========== ===========
The difference between the investment per the accompanying balance sheets at December 31, 1995 and 1994, and the equity per the limited partnerships' combined financial statements is due primarily to cumulative unrecognized equity in losses of certain limited partnerships, additional basis and costs capitalized to the investment account and cumulative distributions recognized as income. Selected financial information from the combined financial statements at December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995, of the limited partnerships in which the Partnership has invested directly or indirectly, is as follows:
Balance Sheets -------------- 1995 1994 -------- -------- (in thousands) Land and buildings, net $ 83,427 $ 89,204 ======== ======== Total assets $ 99,949 $103,240 ======== ======== Mortgages loan payable $ 77,936 $ 79,494 ======== ======== Total liabilities $ 95,863 $ 96,859 ======== ======== Equity of Real Estate Associates Limited VII $ 4,793 $ 7,042 ========= ======== Deficiency of other partners $ (707) $ (661) ========= ========
8 20 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 2. INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED) Statements of Operations
1995 1994 1993 -------- -------- -------- (in thousands) Total revenue $27,145 $26,507 $26,244 ======= ======= ======= Interest expense $ 3,503 $ 3,871 $ 4,298 ======= ======= ======= Depreciation $ 6,596 $ 5,867 $ 5,352 ======= ======= ======= Total expenses $28,768 $29,209 $28,282 ======= ======= ======= Net loss $(1,623) $(2,702) $(2,038) ======= ======= ======= Net loss allocable to the Partnership $(1,606) $(1,835) $(1,593) ======= ======= =======
Land and buildings above have been adjusted for the amount by which the investments in the limited partnerships exceed the Partnership's share of the net book value of the underlying net assets of the investee which are recorded at historical costs. Depreciation on the adjustment is provided for over the estimated remaining useful lives of the properties. An affiliate of NAPICO is the general partner in 26 of the limited partnerships included above, and another affiliate receives property management fees of approximately 5 to 6 percent of the revenue from three of these partnerships. The affiliate received property management fees of $116,175, $107,237 and $107,173 in 1995, 1994 and 1993 respectively. The following sets forth the significant data for these partnerships in which an affiliate of NAPICO was the general partner, reflected in the accompanying financial statements using the equity method of accounting:
1995 1994 1993 -------- -------- -------- (in thousands) Total assets $42,346 $44,526 ======= ======= Total liabilities $50,676 $50,822 ======= ======= Deficiency of Real Estate Associates Limited VII $(8,047) $(6,026) ======= ======= Deficiency of other partners $ (283) $ (270) ======= ======= Total revenue $12,311 $11,934 $10,120 ======= ======= ======= Net loss $(1,262) $(1,934) $(1,664) ======= ======= =======
9 21 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 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 August 1999 to December 2002 or upon sale or refinancing of the underlying partnership properties. These obligations and related interest are collateralized by the Partnership's investments in the investee limited partnerships and are payable only out of cash distributions from the investee partnerships, as defined in the notes. Unpaid interest is due at maturity of the notes. Maturity dates on the notes payable are as follows:
Years Ending December 31, ------------------------- 1996 $ - 1997 - 1998 - 1999 17,809,919 2000 - Thereafter 7,059,582 ----------- $24,869,501 ===========
4. FEES AND EXPENSES DUE 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 original 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 interest in the capital accounts of the respective partnerships. As of December 31, 1995, the fees and expenses due the general partner exceeded the Partnership's cash. The general partners, during the forthcoming year, will not demand payment of amounts due in excess of such cash or such that the Partnership would not have sufficient operating cash. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was $39,900, $38,450 and $39,725 in 1995, 1994 and 1993, respectively, and is included in operating expenses. 10 22 REAL ESTATE ASSOCIATES LIMITED VII (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 5. CONTINGENCIES The corporate general partner of the Partnership and the Partnership are involved in various 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. 6. 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. The major differences in tax and financial reporting result from the use of different bases and depreciation methods for the properties held by the limited partnerships. Differences in tax and financial reporting also arise as losses are not recognized for financial reporting purposes when the investment balance has been reduced to zero. 7. 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. FOURTH-QUARTER ADJUSTMENT The Partnership's policy is to record its equity in the loss of limited partnerships on a quarterly basis, using estimated financial information furnished by the various local operating general partners. The equity in loss of limited partnerships reflected in the accompanying annual financial statements is based primarily upon audited financial statements of the investee limited partnerships. The decrease of approximately $164,000 between the estimated nine-month equity in loss and the actual 1995 year end equity in loss has been recorded in the fourth quarter. 11 23 SCHEDULE REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN LIMITED PARTNERSHIPS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1995 --------------------------------------------------------------------------- Cash Equity Balance Distri- in Balance January Capital butions Income December Limited Partnerships 1, 1995 Contributions Received (Loss) 31, 1995 - -------------------- ------------ ------------- ---------- ------------- ------------ Anthracite Apts. $ 1,037,867 $ $ (25,948) $ 45,114 $ 1,057,033 Aristocrat Manor 660,098 (113,078) 547,020 Arkansas City Apts. Arrowsmith Apts. 469,332 (14,850) (71,663) 382,819 Ashland Manor Bangor House 1,609,060 (101,136) 105,152 1,613,076 Bellair Manor Apts. 305,068 (4,882) (17,714) 282,472 Birch Manor I 581 (581) Birch Manor II 3,244 (3,244) Bluewater Apts. 1,797,663 (27,003) 25,340 1,796,000 Center CIty Apts. 2,033,873 (36,470) 192,689 2,190,092 Clarkwood Apts. I 1,061 (1,061) Clarkwood Apts. II Cleveland I 133,418 (33,240) 7,960 108,138 Cleveland II 166,434 (18,230) (11,946) 136,258 Cleveland III 30,597 (1,734) (3,922) 24,941 Danbury Park Manor Desoto Apts. 178,452 (18,253) (20,011) 140,188 Dexter Apts. 149,359 (5,623) (31,614) 112,122 Edgewood Terrace II 934,508 (30,738) (135,205) 768,565 Goodlette Arms Apts. 2,543,290 (1,485) (21,709) 2,520,096 Hampshire House Apts. Henrico Arms (9,865) 9,865 Ivywood Apts. 411,136 (4,015) (47,488) 359,633 Jasper County King Towers 337,383 (40,680) 296,703 Meherrin Landings Nantucket Apts. 274,141 (18,516) 255,625 Newton Apts. Oak Hill I 241,932 (52,786) 189,146 Oakview Apts. Oakwood Park I 1,640 (1,640) Oakwood Park II 864 (864) Pachuta Apts. Parkway Towers 1,558,737 (15,590) 164,843 1,707,990 Pebbleshire Apts. 9,840 (9,840) Pinebrook Apts. 679,155 49,671 728,826 Rand Grove Village 822,741 (24,284) (279,606) 518,851 Richards Park Apts. 1,022 (1,022) Ridgewood Towers 721,120 (224,604) 120,236 616,752 Shubuta Properties South Glen Apts. 323,984 (15,000) (23,763) (275,916) 9,305 South Park Apts. 1,098 (1,098) Sunland Terrace Tradewinds East Apts. 1,634,847 (24,471) 1,610,376 Warren Heights Apts. II 308,241 (3,915) (20,250) 284,076 White Cliffs Apts. 246,471 (1,031) (35,051) 210,389 Yorkview Estates 148,687 (3,941) (10,277) 134,469 ------------ ------------- ---------- ------------- ------------ $ 19,757,594 $ 4,350 $ (649,950) $ (511,033) $ 18,600,961 ============ ============ ========== ============= ============
24 SCHEDULE (CONTINUED) REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN LIMITED PARTNERSHIPS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1994 ------------------------------------------------------------------------- Cash Equity Balance Distri- in Balance January Capital butions Income December Limited Partnerships 1, 1994 Contributions Received (Loss) 31, 1994 - -------------------- ------- ------------- -------- ------ -------- Anthracite Apts. $ 1,082,364 $ $(25,948) $ (18,549) $ 1,037,867 Aristocrat Manor 711,571 (51,473) 660,098 Arkansas City Apts. Arrowsmith Apts. 499,723 - (30,391) 469,332 Ashland Manor 15,276 (15,276) Bangor House 1,552,706 (33,006) 89,360 1,609,060 Bellair Manor Apts. 335,256 (9,693) (20,495) 305,068 Birch Manor I 10,154 (10,154) Birch Manor II 3,288 (3,288) Bluewater Apts. 1,764,963 (13,502) 46,202 1,797,663 Center City Apts. 1,965,002 (36,470) 105,341 2,033,873 Clarkwood Apts. I 6,543 (6,543) Clarkwood Apts. II 7,613 (7,613) Cleveland I 198,885 (77,743) 12,276 133,418 Cleveland II 188,636 (26,191) 3,989 166,434 Cleveland III 45,999 (8,437) (6,965) 30,597 Danbury Park Manor Desoto Apts. 209,309 (27,077) (3,780) 178,452 Dexter Apts. 212,500 (17,987) (45,154) 149,359 Edgewood Terrace II 1,138,047 (32,298) (171,241) 934,508 Goodlette Arms Apts. 2,603,418 (1,485) (58,643) 2,543,290 Hampshire House Apts. Henrico Arms 214,044 (22,021) (192,023) - Ivywood Apts. 491,855 (17,327) (63,392) 411,136 Jasper County King Towers 409,865 (4,871) (67,611) 337,383
25 SCHEDULE (CONTINUED) REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN LIMITED PARTNERSHIPS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1994 ------------------------------------------------------------------------ Cash Equity Balance Distri- in Balance January Capital butions Income December Limited Partnerships 1, 1994 Contributions Received (Loss) 31, 1994 - -------------------- ------- ------------- -------- ------ -------- Meherrin Landings $ $ $ $ $ Nantucket Apts. 299,135 (10,403) (14,591) 274,141 Newton Apts. Oak Hill I 358,228 (10,426) (105,870) 241,932 Oakview Apts. Oakwood Park I 8,137 (8,137) Oakwood Park II 7,239 (7,239) Pachuta Apts. Parkway Towers 1,523,261 (16,131) 51,607 1,558,737 Pebbleshire Apts. 25,838 (25,838) Pinebrook Apts. 983,052 (303,897) 679,155 Rand Grove Village 955,840 (24,284) (108,815) 822,741 Richards Park Apts. 7,576 (7,576) Ridgewood Towers 880,227 (267,282) 108,175 721,120 Shubuta Properties South Glen Apts. 454,860 (23,763) (107,113) 323,984 South Park Apts. 19,119 (19,119) Sunland Terrace Tradewinds East Apts. 1,681,237 (19,388) (27,002) 1,634,847 Warren Heights Apts. II 350,469 (9,929) (32,299) 308,241 White Cliffs Apts. 298,180 (4,993) (46,716) 246,471 Yorkview Estates 181,795 (17,675) (15,433) 148,687 ----------- --------- ---------- ----------- ----------- $21,590,427 $ 110,783 $ (869,113) $(1,074,503) $19,757,594 =========== ========= ========== =========== ===========
26 SCHEDULE (CONTINUED) REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN LIMITED PARTNERSHIPS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1993 ------------------------------------------------------------------------ Cash Equity Balance Distri- in Balance January Capital butions Income December Limited Partnerships 1, 1993 Contributions Received (Loss) 31, 1993 - -------------------- ------- ------------- -------- ------ -------- Anthracite Apts. $ 1,092,595 $ $(25,948) $ 15,717 $ 1,082,364 Aristocrat Manor 1,363,726 (652,155) 711,571 Arkansas City Apts. Arrowsmith Apts. 590,907 (32,237) (58,947) 499,723 Ashland Manor Bangor House 1,485,216 (55,000) 122,490 1,552,706 Bellair Manor Apts. 356,961 (21,705) 335,256 Birch Manor I 190 (190) Birch Manor II 3,288 (3,288) Bluewater Apts. 1,708,765 (13,502) 69,700 1,764,963 Center City Apts. 1,879,365 (36,470) 122,107 1,965,002 Clarkwood Apts. I 2,622 (2,622) Clarkwood Apts. II Cleveland I 175,936 (23,563) 46,512 198,885 Cleveland II 161,353 (25,461) 52,744 188,636 Cleveland III 61,186 (8,029) (7,158) 45,999 Danbury Park Manor Desoto Apts. 147,741 (30,359) 91,927 209,309 Dexter Apts. 203,745 (17,115) 25,870 212,500 Edgewood Terrace II 1,398,550 (49,249) (211,254) 1,138,047 Goodlette Arms Apts. 2,804,128 (1,485) (199,225) 2,603,418 Hampshire House Apts. Henrico Arms 410,501 (39,200) (157,257) 214,044 Ivywood Apts. 556,425 (7,289) (57,281) 491,855 Jasper County King Towers 455,083 (2,826) (42,392) 409,865
27 SCHEDULE (CONTINUED) REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN LIMITED PARTNERSHIPS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1993 ------------------------------------------------------------------- Cash in Equity Balance Distri- Balance January Capital butions Income December Limited Partnerships 1, 1993 Contributions Received (Loss) 31, 1993 - -------------------- ------- ------------- -------- ------ -------- Meherrin Landings $ $ $ $ $ Nantucket Apts. 336,016 (4,330) (32,551) 299,135 Newton Apts. Oak Hill I 459,303 (13,633) (87,442) 358,228 Oakview Apts. Oakwood Park I 1,068 (1,068) Oakwood Park II 1,522 (1,522) Pachuta Apts. Parkway Towers 1,449,840 (16,109) 89,530 1,523,261 Pebbleshire Apts. Pinebrook Apts. 1,208,077 (225,025) 983,052 Rand Grove Village 1,019,653 (24,284) (39,529) 955,840 Richards Park Apts. Ridgewood Towers 992,318 (170,158) 58,067 880,227 Shubuta Properties South Glen Apts. 560,623 (23,763) (82,000) 454,860 South Park Apts. Sunland Terrace Tradewinds East Apts. 1,724,884 (19,388) (24,259) 1,681,237 Warren Heights Apts. II 432,926 (10,806) (71,651) 350,469 White Cliffs Apts. 340,638 (7,478) (34,980) 298,180 Yorkview Estates 197,294 - (15,499) 181,795 ----------- ------- --------- ----------- ----------- $23,573,755 $ 8,690 $(666,372) $(1,325,646) $21,590,427 =========== ======= ========= =========== ===========
28 SCHEDULE (Continued) REAL ESTATE ASSOCIATES LIMITED VII INVESTMENTS IN, EQUITY IN EARNINGS OF AND DIVIDENDS RECEIVED FROM AFFILIATES AND OTHER PERSONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTES: 1. Equity in income (losses) of the limited partnerships represents the Partnership's allocable share of the net results of operations from the limited partnerships for the year. Equity in losses of the limited partnerships will be recognized until the investment balance is reduced to zero or below zero to an amount equal to future capital contributions to be made by the Partnership. 2. Cash distributions from the limited partnerships will be treated as a return of the investment and will reduce the investment balance until such time as the investment is reduced to an amount equal to additional contributions. Distributions subsequently received will be recognized as income. 29 SCHEDULE III REAL ESTATE ASSOCIATES LIMITED VII REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS INVESTMENTS DECEMBER 31, 1995
Buildings, Furnishings Number Outstanding & Equipment of Mortgage Amount Carried Accumulated Partnership/Location Units Loan Land at close of period Total Depreciation - ---------------------------------------------------------------------------------------------------------------------------- Anthracite Apartments 121 $3,523,673 $120,375 $4,193,703 $4,314,078 $1,501,762 Pittston, PA Aristocrat Manor 113 1,807,809 265,158 3,004,365 3,269,523 1,081,283 Hot Springs, AR Arkansas City Apartments 16 501,255 22,416 504,920 527,336 132,724 Arkansas City, AR Bangor House 121 3,939,302 125,277 6,325,601 6,450,878 2,110,801 Bangor, ME Bluewater Apartments 116 1,828,069 130,163 3,715,886 3,846,049 1,501,785 Port Huron, MI Center City Apartments 176 5,015,387 157,315 6,116,391 6,273,706 2,195,512 Hazelton, PA Cleveland Apartments I 50 832,245 60,000 1,397,376 1,457,376 688,358 Hayti, MO Cleveland Apartments II 50 821,424 50,000 1,427,920 1,477,920 681,039 Hayti, MO Cleveland Apartments III 21 365,044 25,000 604,465 629,465 301,598 Hayti, MO Danbury Park Manor 151 1,996,177 183,752 4,239,666 4,423,418 1,602,120 Superior Township, MI Desoto Apartments 42 689,537 50,000 1,223,646 1,273,646 570,232 Desoto, MO Dexter Apartments 50 830,131 50,000 1,522,911 1,572,911 728,369 Dexter, MO Goodlette Arms Apartments 250 3,181,463 500,000 6,930,905 7,430,905 2,737,335 Naples, FL Henrico Arms 232 3,027,678 206,980 3,752,662 3,959,642 3,341,423 Richmond, VA Jasper County Prop. 24 666,274 33,000 756,218 789,218 622,175 Heidelberg, MS Meherrin Landings 42 1,256,766 105,000 1,281,083 1,386,083 712,852 Emporia, VA Newton Apartments 36 959,959 55,017 1,051,674 1,106,691 891,707 Newton, MS Oakview Apartments 32 1,115,413 75,000 1,153,487 1,228,487 287,691 Monticello, AR Pachuta Apartments 16 446,965 20,680 484,754 505,434 404,743 Pachuta, MS Parkway Towers Apartments 104 1,608,380 271,419 4,077,524 4,348,943 3,015,182 East Providence, RI Rand Grove Village 212 2,919,561 491,000 6,026,792 6,517,792 3,535,987 Palatine, IL Shubuta Properties 16 448,513 23,179 521,086 544,265 411,648 Shubuta, MS South Glen Apartments 159 2,918,396 298,089 4,779,323 5,077,412 3,086,260 Trenton, MI Sunland Terrace 80 2,352,979 55,500 2,980,337 3,035,837 1,400,740 Phoenix, AZ Tradewinds East Apartments 150 2,406,763 117,692 5,056,058 5,173,750 2,013,480 Essexville, MI Arrowsmith Apartments 70 1,307,427 252,480 2,312,151 2,564,631 1,006,076 Corpus Christi, TX Ashland Manor 189 2,370,726 91,530 4,484,942 4,576,472 2,028,597 Toledo, OH Bellair Manor Apartments 68 952,767 152,995 1,597,944 1,750,939 643,997 Niles, OH Birch Manor Apartments I 60 637,785 60,889 1,373,175 1,434,064 557,357 Medina, OH Birch Manor Apartments II 60 799,162 50,284 1,432,405 1,482,689 577,459 Medina, OH
30 REAL ESTATE ASSOCIATES LIMITED VII SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS INVESTMENTS DECEMBER 31, 1995
Buildings, Furnishings Number Outstanding & Equipment of Mortgage Amount Carried Accumulated Partnership/Location Units Loan Land at close of period Total Depreciation - ---------------------------------------------------------------------------------------------------------------------------- Clarkwood Apartments I 72 702,065 68,841 1,592,455 1,661,296 647,644 Elyria, OH Clarkwood Apartments II 120 1,273,595 92,510 2,730,574 2,823,084 1,109,744 Elyria, OH Hampshire House Apartments 150 3,036,226 101,163 4,062,821 4,163,984 1,629,844 Warren, OH Ivywood Apartments 124 1,760,518 200,184 3,020,686 3,220,870 1,215,285 Columbus, OH King Towers 68 807,585 97,919 1,532,422 1,630,341 614,766 Cincinnati, OH Nantucket Apartments 60 677,006 34,676 1,344,874 1,379,550 543,811 Alliance, OH Oak Hill Apartments 120 1,960,346 75,834 3,173,971 3,249,805 1,272,189 Franklin, PA Oakwood Park I Apartments 50 278,893 63,123 889,197 952,320 363,985 Lorain, OH Oakwood Park II Apartments 78 497,934 102,202 1,437,489 1,539,691 587,109 Lorain, OH Richards Park Apartments 60 773,786 52,416 1,448,588 1,501,004 583,039 Elyria, OH South Park Apartments 138 1,119,536 135,579 2,852,592 2,988,171 1,157,314 Elyria, OH Warren Heights Apartments II 88 1,252,484 21,803 2,268,950 2,290,753 910,468 Warren, OH White Cliff Apartments 72 1,189,568 62,911 1,966,523 2,029,434 787,137 Cincinnati, OH Yorkview Estates 50 696,089 22,049 1,240,379 1,262,428 498,604 Massillon, OH Edgewood Terrace II 258 4,107,312 525,000 9,636,726 10,161,726 5,670,749 Washington, DC Pebbleshire Apartments 120 2,008,898 359,943 4,311,798 4,671,741 1,662,391 Vernon Hills, IL Pinebrook Apartments 136 1,594,847 265,172 3,465,357 3,730,529 1,386,834 Lansing, MI Ridgewood Towers 140 2,671,992 88,658 6,358,401 6,447,059 3,573,387 Moline, IL Additional basis of real estate due to capital contribution to investee limited partnership 332,570 8,022,823 8,355,393 4,477,537 ----- ----------- ---------- ------------ ------------ ----------- TOTAL 4,731 $77,935,710 $6,802,743 $145,685,996 $152,488,739 $69,062,129 ===== =========== ========== ============ ============ ===========
31 SCHEDULE III (Continued) REAL ESTATE ASSOCIATES LIMITED VII REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS INVESTMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTES: 1. Each local limited partnership has developed, owns and operates the housing project. Substantially all project costs, including construction period interest expense, were capitalized by the limited partnerships. 2. Depreciation is provided for by various methods over the estimated useful lives of the projects. The estimated composite useful lives of the buildings are from 25 to 40 years. 3. Investments in property and equipment:
Buildings, Furnishings, And Land Equipment Total ---- ---------- ----- Balance, December 31, 1992 $6,735,343 $143,257,008 $149,992,351 Net additions - 1993 - 596,553 596,553 ---------- ------------ ------------ Balance, December 31, 1993 6,735,343 143,853,561 150,588,904 Net additions - 1994 36,000 1,077,123 1,113,123 ---------- ------------ ------------ Balance, December 31, 1994 6,771,343 144,930,684 151,702,027 Net additions - 1995 31,400 755,312 786,712 ---------- ------------ ------------ Balance, December 31, 1995 $6,802,743 $145,685,996 $152,488,739 ========== ============ ============
32 SCHEDULE III (Continued) REAL ESTATE ASSOCIATES LIMITED VII REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL VII HAS INVESTMENTS DECEMBER 31, 1995, 1994 AND 1993
Buildings, Furnishings And Equipment -------------- ACCUMULATED DEPRECIATION: - ------------------------ Balance, January 1, 1993 $51,460,199 Net additions, 1993 5,306,968 ----------- Balance, December 31, 1993 56,767,167 Net additions, 1994 5,731,210 ----------- Balance, December 31, 1994 62,498,377 Net additions, 1995 6,563,752 ------------ Balance, December 31, 1995 $69,062,129 ===========
33 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT REAL ESTATE ASSOCIATES LIMITED VII (the "Partnership") has no directors or executive officers of its own. National Partnership Investment Corp. ("NAPICO" or "the Managing General Partner") is a wholly-owned subsidiary of Casden Investment Company, an affiliate of The Casden Company. The following biographical information is presented for the directors and executive officers of NAPICO with principal responsibility for the Partnership's affairs. CHARLES H. BOXENBAUM, 66, Chairman of the Board of Directors and Chief Executive Officer of NAPICO. Mr. Boxenbaum has been associated with NAPICO since its inception. He has been active in the real estate industry since 1960, and prior to joining NAPICO was a real estate broker with the Beverly Hills firm of Carl Rhodes Company. Mr. Boxenbaum has been a guest lecturer at national and state realty conventions, certified properties exchanger's seminars, Los Angeles Town Hall, National Association of Home Builders, International Council of Shopping Centers, Society of Conventional Appraisers, California Real Estate Association, National Institute of Real Estate Brokers, Appraisal Institute, various mortgage banking seminars, and the North American Property Forum held in London, England. In 1963, he was the winner of the Snyder Award, the highest annual award offered by the National Association of Real Estate Boards for Best Exchange. He is one of the founders and a past director of the First Los Angeles Bank, organized in November 1974. Mr. Boxenbaum was a member of the Board of Directors of the National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree from the University of Chicago. BRUCE E. NELSON, 44, President and a director of NAPICO. Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is responsible for the operations of all NAPICO sponsored limited partnerships. Prior to that he was primarily responsible for the securities aspects of the publicly offered real estate investment programs. Mr. Nelson is also involved in the identification, analysis, and negotiation of real estate investments. From February 1979 to October 1980, Mr. Nelson held the position of Associate General Counsel at Western Consulting Group, Inc., private residential and commercial real estate syndicators. Prior to that time Mr. Nelson was engaged in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor of Arts degree from the University of Wisconsin and is a graduate of the University of Colorado School of Law. He is a member of the State Bar of California and is a licensed real estate broker in California and Texas. ALAN I. CASDEN, 50, Chairman of The Casden Company, an affiliate of Casden Properties (formerly CoastFed Properties), a director and member of the audit committee of NAPICO, and chairman of the Executive Committee of NAPICO. Mr. Casden is Chairman of the Board, Chief Executive Officer and sole shareholder of The Casden Company and Casden Investment Company. Prior to that, he was the president and chairman of Mayer Group, Inc., which he joined in 1975. He is also chairman of Mayer Management, Inc., a real estate management firm. Mr. Casden has been involved in approximately $3 billion of real estate financings and sales and has been responsible for the development and construction of more than 12,000 apartment units and 5,000 single-family homes and condominiums. 34 Mr. Casden is a member of the American Institute of Certified Public Accountants and of the California Society of Certified Public Accountants. Mr. Casden is a member of the advisory board of the National Multi-Family Housing Conference, the Multi-Family Housing Council, and the President's Council of the California Building Industry Association. He also serves on the advisory board to the School of Accounting of the University of Southern California. He holds a Bachelor of Science and a Masters in Business Administration degree from the University of Southern California. HENRY C. CASDEN, 52, President, Chief Operating Officer and Secretary of The Casden Company and a director and secretary of NAPICO. Mr. Casden has been President and Chief Operating Officer of The Casden Company, as well as a director of NAPICO since February 1988. He became secretary of both companies in late 1994. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr. Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional Corporation. Mr. Casden received his Bachelor of Arts degree from the University of California at Los Angeles, and is a graduate of the University of San Diego Law School. Mr. Casden is a member of the State Bar of California and has numerous professional affiliations. BRIAN D. GOLDBERG, 32, Chief Financial Officer of The Casden Company and a director of NAPICO. Mr. Goldberg joined The Casden Company in 1990 as Vice President of Finance and became Chief Financial Officer in March 1991. Prior to joining The Casden Company, Mr. Goldberg was with Arthur Andersen & Co., an international public accounting firm, from August 1985 until July 1990 in their Los Angeles office. He received his bachelor of science degree in Accounting from the University of Denver. Mr. Goldberg is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. SHAWN HORWITZ, 36, Executive Vice President and Chief Financial Officer. Mr. Horwitz joined NAPICO in 1990 and is responsible for the financial affairs of NAPICO and the limited partnerships sponsored by NAPICO. Prior to joining NAPICO, Mr. Horwitz was President of Star Sub Shops, Inc., a corporation engaged in the business of selling fast food franchises, for approximately one year, was an audit manager in the real estate industry group for Altschuler, Melvin & Glasser for six years, and was an auditor with Arthur Young & Co. for 3 years. Mr. Horwitz received his Bachelor of Commerce degree in accounting from Rhodes University in South Africa and is a member of the Illinois Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the South African Institute of Chartered Accountants. BOB SCHAFER, 54, Vice President and Corporate Controller. Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible for the financial reporting function of the Company. Prior to this, he was a Group and Division Controller at Bergen Brunswig for over eight years, Controller at a Flintkote subsidiary for over four years, and Assistant Controller at an electronics subsidiary of General Electric for two years. Mr. Schafer is a member of the California Society of Certified Public Accountants. He holds a Bachelor of Science degree in accounting from Woodbury University, Los Angeles. 35 PATRICIA W. TOY, 66, Senior Vice President - Communications and Assistant Secretary. Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a U.S. Naval Officer in communications and personnel assignments. She holds a Bachelor of Arts Degree from the University of Nebraska. MARK L. WALTHER, 35, Executive Vice President, General Counsel and Assistant Secretary. Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther worked in the San Francisco law firm of Browne and Kahn which specialized in construction litigation. Mr. Walther received his Bachelor of Arts Degree in Political Science from the University of California, Santa Barbara and is a graduate of the University of California, Davis, School of Law. He is a member of the State Bar of Hawaii. 36 ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS Real Estate Associates Limited VII has no officers, directors or employees. However, under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to pay the Corporate General Partner an annual management fee. The annual management fee is approximately equal to .5 percent of the invested assets, including the Partnership's allocable share of the mortgages related to the real estate properties held by local limited partnerships. The fee is earned beginning in the month the Partnership makes its initial contribution to the local partnership. In addition, the Partnership reimburses the Corporate General Partner for certain expenses. An affiliate of the General Partner is responsible for the on-site property management for certain properties owned by the limited partnerships in which the Partnership has invested. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners The General Partners own all of the outstanding general partnership interests of REAL VII; no person is known to own beneficially in excess of 5 percent of the outstanding limited partnership interests. (b) With the exception of the initial limited partner, Bruce Nelson, who is an officer of the Corporate General Partner, none of the officers or directors of the Corporate General Partner own directly or beneficially any limited partnership interests in REAL VII. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Partnership has no officers, directors or employees of its own. All of its affairs are managed by the Corporate General Partner, National Partnership Investments Corp. The transactions with the Corporate General Partner are primarily in the form of fees paid by the Partnership to the general partner for services rendered to the Partnership, as discussed in Item 11 and in the accompanying notes to the financial statements. 37 ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORT ON FORM 8-K FINANCIAL STATEMENTS Report of Independent Public Accountants. Balance Sheets as of December 31, 1995 and 1994. Statements of Operations for the years ended December 31, 1995, 1994 and 1993. Statements of Partners' Deficiency for the years ended December 31, 1995, 1994 and 1993. Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993. Notes to Financial Statements. FINANCIAL STATEMENT SCHEDULES APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED VII, REAL ESTATE ASSOCIATES IV AND THE LIMITED PARTNERSHIPS IN WHICH REAL ESTATE ASSOCIATES LIMITED VII AND REAL ESTATE ASSOCIATES IV HAVE INVESTMENTS. Schedule - Investments in Limited Partnerships, December 31, 1995, 1994 and 1993. Schedule III - Real Estate and Accumulated Depreciation, December 31, 1995. The remaining schedules are omitted because the required information is included in the financial statements and notes thereto or they are not applicable or not required. EXHIBITS (3) Articles of incorporation and bylaws: The registrant is not incorporated. The Partnership Agreement was filed with Form S-11 #2-84816 which is incorporated herein by reference. (10) Material contracts: The registrant is not party to any material contracts, other than the Restated Certificate and Agreement of Limited Partnership dated May 24, 1983 and the forty-eight contracts representing the partnership investment in local limited partnership's as previously filed at the Securities Exchange Commission, File #2-84816 which is hereby incorporated by reference. (13) Annual report to security holders: Pages ____ to ____. REPORTS ON FORM 8-K No reports on Form 8-K were filed during the year ended December 31, 1995. 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 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 352,652 0 0 0 0 477,652 0 0 19,183,742 13,519 0 0 0 0 (30,757,019) 19,183,742 0 40,373 0 0 1,442,434 0 2,323,426 (3,725,487) 0 (3,725,487) 0 0 0 (3,725,487) 0 0
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