0000765506-95-000005.txt : 19950809 0000765506-95-000005.hdr.sgml : 19950809 ACCESSION NUMBER: 0000765506-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950808 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA SEVEN ASSOCIATES LTD PARTNERSHIP CENTRAL INDEX KEY: 0000765506 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 942970056 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14581 FILM NUMBER: 95559579 BUSINESS ADDRESS: STREET 1: 900 COTTAGE GROVE RD STREET 2: SOUTH BLDG CITY: BLOOMFIELD STATE: CT ZIP: 06002 BUSINESS PHONE: 2037266000 MAIL ADDRESS: STREET 1: 900 COTTAGE GROVE RD STREET 2: SOUTH BUILDING CITY: BLOOMFIEELD STATE: CT ZIP: 06002 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14581 California Seven Associates Limited Partnership, a California Limited Partnership (Exact name of registrant as specified in its charter) California 94-2970056 (State of Organization) (I.R.S. Employer Identification No.) 900 Cottage Grove Road, South Building Bloomfield, Connecticut 06002 (Address of principal executive offices) Telephone Number: (203) 726-6000 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 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 Part I - Financial Information
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Balance Sheets June 30, December 31, 1995 1994 Assets (Unaudited) (Audited) Property and improvements, at cost: Land and land improvements $20,563,613 $20,562,073 Buildings 110,079,476 109,890,874 Furniture and fixtures 13,105,205 13,030,382 Machinery and equipment 796,124 765,087 144,544,418 144,248,416 Less accumulated depreciation 50,231,633 48,128,827 Net property and improvements 94,312,785 96,119,589 Cash and cash equivalents 2,813,166 1,191,015 Partial cash settlement - earthquake insurance 9,337,772 -- Accounts receivable 132,189 488,885 Prepaid expenses and other assets 253,661 599,166 Total $106,849,573 $98,398,655 Liabilities and Partners' Deficit Liabilities: Liabilities not subject to compromise: Accounts payable and accrued expenses $372,837 $357,719 Tenant security deposits 480,847 472,898 Unearned income 72,467 79,046 Earthquake insurance - partial settlement unapplied 9,250,000 -- 10,176,151 909,663 Postpetition liabilities subject to compromise: Fees and reimbursements payable to the General Partner and its affiliates 282,920 102,832 Prepetition liabilities subject to compromise: Note and mortgages payable 111,983,903 111,983,903 Accrued interest payable 2,560,559 2,560,559 Accounts payable and accrued expenses 877,395 923,957 Fees and reimbursements payable to the general partner and its affiliates 4,078,563 4,078,563 119,500,420 119,546,982 Total liabilities 129,959,491 120,559,477 Partners' deficit: General Partner (774,337) (764,846) Limited partners (362 Class A Units and 3 Class B Units): (22,335,581) (21,395,976) Total partners' deficit (23,109,918) (22,160,822) Total $106,849,573 $98,398,655 The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 Property operating revenues: Rental income $3,517,251 $3,346,297 $7,114,295 $7,040,376 Other 113,524 121,751 231,120 258,278 3,630,775 3,468,048 7,345,415 7,298,654 Property operating expenses: Maintenance and repairs, furniture rental, insurance, and other property operations 719,147 723,914 1,463,254 1,455,479 Real estate taxes 221,232 343,786 502,747 694,516 Management fees 126,791 138,505 255,593 281,690 Property administrative 642,680 641,351 1,386,078 1,353,228 1,709,850 1,847,556 3,607,672 3,784,913 Net property revenue 1,920,925 1,620,492 3,737,743 3,513,741 Other operating costs and expenses: Depreciation 1,051,290 1,056,298 2,102,806 2,115,518 Management and administrative fees to affiliates 73,736 79,462 148,284 155,096 Partnership administrative 22,964 39,130 42,716 82,573 Net cost (recovery) on business interruption insurance 83,520 (465,469) 125,239 (465,469) 1,231,510 709,421 2,419,045 1,887,718 Net partnership operating income 689,415 911,071 1,318,698 1,626,023 Interest income 11,683 3,376 20,851 8,193 Interest expense (contractual interest of $2,615,450 and $5,230,900 for the three and six months ended June 30, 1995, respectively) (1,407,597) (2,615,450) (2,293,318) (5,230,900) Net loss before reorganization items (706,499) (1,701,003) (953,769) (3,596,684) Reorganization items: Interest income 94,874 -- 101,773 -- United States Trustee fees (5,000) -- (10,000) -- Professional fees (61,322) -- (87,100) -- Net loss $(677,947) $(1,701,003) $(949,096) $(3,596,684) Net loss: General Partner $(6,780) $(17,010) $(9,491) $(35,967) Limited partners (671,167) (1,683,993) (939,605) (3,560,717) $(677,947) $(1,701,003) $(949,096) $(3,596,684) Net loss per Class A Unit: $(1,854) $(4,652) $(2,596) $(9,836) The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Statements of Cash Flows For the Six Months Ended June 30, 1995 and 1994 (Unaudited) 1995 1994 Cash flows from operating activities: Net loss $(949,096) $(3,596,684) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 2,102,806 2,115,518 Accounts receivable 356,696 59,011 Accounts payable and accrued expenses 831 (39,625) Other, net 259,103 953,870 Liabilities subject to compromise 133,526 -- Net cash provided by (used in) operating activities 1,903,866 (507,910) Cash flows from investing activities: Purchase of property and improvements (280,751) (82,028) Cash flows from financing activities: Cash distribution to limited partners (964) (2,343) Net increase (decrease) in cash and cash equivalents 1,622,151 (592,281) Cash and cash equivalents, beginning of year 1,191,015 1,440,476 Cash and cash equivalents, end of period $2,813,166 $848,195 Supplemental disclosure of cash information: Accrued purchase of property and improvements $ 15,251 $ -- Interest paid during period $2,293,318 $4,300,000 Fees paid in connection with reorganization $ 81,636 $ -- The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements (Unaudited) Readers of this quarterly report should refer to the audited financial statements for California Seven Associates Limited Partnership, a California Limited Partnership ("the Partnership"), for the year ended December 31, 1994 which are included in the Partnership's 1994 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. 1. Organization and Basis of Accounting a) Organization: On September 16, 1994, the Partnership filed a voluntary petition for bankruptcy protection under Chapter 11 of Title 11, United States Code. The Partnership's Chapter 11 bankruptcy reorganization case is currently pending in the United States Bankruptcy Court for the Central District of California. The Partnership's goal is to maximize recovery by creditors and partners by preserving the Partnership as a viable entity with a going concern value. The financial statements do not include any adjustments relating to the recoverability of reported asset amounts or the amounts of liabilities that might result from the outcome of this uncertainty. b) Basis of Presentation: The accompanying financial statements were prepared in accordance with generally accepted accounting principles. It is the opinion of management that the financial statements presented reflect all the adjustments necessary for a fair presentation of the financial condition and results of operations. Certain amounts in the 1994 financial statements have been reclassified to conform to the 1995 presentation. c) Cash and Cash Equivalents: Short-term investments with a maturity of three months or less at the time of purchase are reported as cash equivalents. At June 30, 1995 the Partnership had cash and cash equivalents classified as cash collateral used in the operations of the properties and payment to the first mortgage lender totalling $878,269. In addition, at June 30, 1995, cash and cash equivalents include amounts the Partnership is required to maintain in segregated cash collateral accounts for security deposits, taxes and insurance, and the Sherman Oaks deductible. The balances of these accounts at June 30, 1995 were $479,370, $691,517 and $503,492, respectively. The Partnership had unencumbered cash and cash equivalents at June 30, 1995 of $260,518. 2. Petition for Relief Under Chapter 11 On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petitions for relief under the Federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor in Possession. These claims are reflected in the accompanying balance sheets as prepetition liabilities. Additional claims may arise subsequent to the filing date resulting from the rejection of executory contracts and from the determination by the Court of allowed claims for contingencies and other disputed amounts. Claims secured against the Partnership's assets are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured by liens on the Partnership's property and improvements. On September 22, 1994, the Partnership entered into a Letter Agreement with the first mortgage lender which defines and authorizes the use of cash collateral. The Partnership was granted use of collateral pursuant to the Letter Agreement until September 30, 1995. All excess cash flow from property operations after payment of property operating expenses, allowed capital expenditures, and funding of agreed upon segregated cash collateral accounts, is remitted to the first mortgage lender monthly. As part of the Partnership's Motion for Use of Cash Collateral, the Partnership requested all use of property that may be cash collateral in the form of rental revenues and insurance proceeds to repair the Sherman Oaks property. On February 1, 1995, the Court held a hearing on the use of cash collateral to repair Sherman Oaks and denied the Partnership's Motion without prejudice after determining that the issue should be decided in the context of the confirmation of the Partnership's plan of reorganization. On or about December 6, 1994, the first mortgage lender commenced a declaratory action against the Partnership, claiming that the second lien holder is an insider as defined under 11 U.S.C. Sec. 101. The Partnership filed an answer to the Complaint denying that the second lien holder is an insider as that term is defined in the Bankruptcy Code. A status hearing was held on February 21, 1995 which resulted in a discovery deadline and continued status hearing date of May 22, 1995. After arguments by counsel on May 22, the status hearing was continued to September 1995. On or about January 30, 1995, the first mortgage lender filed a Motion for Relief from the Automatic Stay. The Partnership filed an Opposition to the Motion. At the hearing held on February 21, 1995, the court set April 18, 1995 as the final evidentiary hearing. After hearing arguments and representations of counsel, the Court continued the hearing to July 12, 1995 and then to August 9, 1995. On March 17, 1995, the Partnership filed its proposed Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated March 16, 1995, together with a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code. On March 17, 1995, the Court set the hearing on the Partnership's Disclosure Statement for April 18, 1995. On April 17, 1995, the Partnership filed with the Bankruptcy Court certain Non-material Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy Court held a hearing and acted upon the approval of the Partnership's Disclosure Statement together with the Non-material Amendments. After considering the Disclosure Statement and the Non-material Amendments thereto, the Court ruled that certain additional information should be included in the Partnership's Disclosure Statement. The Court required the Partnership to file an Amended Disclosure Statement which the Court approved without further hearing. The Partnership filed its Amended Disclosure Statement and Amended Plan of Reorganization on May 4, 1995. On May 15, 1995, the Partnership mailed all impaired creditors, limited partners, and parties in interest a copy of the Amended Disclosure Statement and Amended Plan of Reorganization, along with a ballot for voting and other notices. All classes of creditors, limited partners and parties in interest impaired under the Amended Plan of Reorganization voted to accept the plan except Class 1, the first mortgage lender, Travelers Insurance Co. Pursuant to the order approving the Amended Disclosure Statement, the Court set July 12, 1995 as the confirmation hearing for the Partnership's Amended Plan of Reorganization. Subsequently, a stipulation was agreed to and approved by the Court to bifurcate the confirmation hearing to allow additional pleadings. Nonfeasibility issues were scheduled to be heard on July 12, 1995 and all feasibility related issues would be heard by the Court on August 9, 1995. 3. Property and Improvements and Note and Mortgages Payable At June 30, 1995, the Partnership owned five operating apartment properties located in California totaling 1,763 units with leases generally for a term of one year or less. The Partnership owns a sixth property with 372 apartment units which was not operating and was unoccupied at June 30, 1995. All properties are pledged as security for the long-term debt. Although the first and second mortgages payable represent secured claims under the bankruptcy proceedings, there is uncertainty as to whether the claims are undersecured or will be impaired under a plan of reorganization. The mortgages payable, therefore, are classified as liabilities subject to compromise in the accompanying balance sheet. Interest expense will be recorded postpetition to the extent paid during the proceeding. The Partnership has entered into a cash collateral agreement with the first mortgage lender which calls for the payment of cash flow from operations, rents less operating expenses and capital, on a monthly basis. The Sherman Oaks property was severely damaged by the January 17, 1994 Southern California earthquake. The property is not operating and is currently unoccupied. The Partnership's properties are covered by insurance, including earthquake and business interruption; although the policy carries a 5% deductible. On April 28, 1994, the Partnership received a $750,000 advance on the business interruption policy for the earthquake damaged property. The Partnership recorded the advance as income, "Net recovery on business interruption insurance", for the year ended December 31, 1994. "Net cost (recovery) on business interruption insurance" represents costs specifically associated with the earthquake. All other income statement lines relating to the Sherman Oaks property include only the activity related to the period from January 1, 1994 to January 16, 1994, or fixed operating expenses unrelated to the earthquake, if applicable. On March 9, 1995, the Partnership submitted a report, prepared as of January 11, 1995, representing the Partnership's business interruption claim. The claim adjuster and the Partnership's representatives have agreed on the components and the amount of the claim, which was submitted to the applicable insurance companies for approval. The income statement does not include any amounts relating to the pending claim with the insurance company. Of February 3, 1995, the insurance company carrying the first $10,000,000 layer of earthquake insurance coverage offered to settle a portion of the loss resulting from the earthquake. The appropriate documents were executed in the second quarter of 1995 and on April 26, 1995, the Partnership received a partial insurance settlement of $9,250,000. The application of the insurance proceeds to the outstanding first mortgage payable or repair of the Sherman Oaks property will be decided by the Court as part of the Plan of Reorganization confirmation process. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements - Continued (Unaudited)
4. Transactions with Affiliates Fees and other expenses incurred by the Partnership related to the General Partner or its affiliates are as follows: Three Months Ended Six Months Ended Unpaid at June 30, June 30, June 30, 1995 1994 1995 1994 1995 Interest on assignment note(a) $ -- $22,000 $ -- $44,000 $502,334 Asset management fee 36,236 41,962 73,284 80,096 2,538,361 Administration and management fee -- -- -- -- 260,050 General partner's salary 37,500 37,500 75,000 75,000 975,000 Real Estate Advisory fee -- -- -- -- 518,750 Reimbursement (at cost) for out of pocket expenses 12,002 9,131 21,340 15,676 58,858 Reorganization item: Professional fees 6,094 -- 10,464 -- 10,464 $91,832 $110,593 $180,088 $214,772 $4,863,817 (a) Postpetition interest is recorded to the extent it is paid. Contractual interest on assignment note was $22,000 and $44,000 for the three and six months ended June 30, 1995, respectively.
5. Litigation [Theodore D. Cohen, et al v. California Seven Associates, et al., No. 657925 (Orange County, CA, May 16, 1991)] Plaintiffs in suit brought against the Partnership and its General Partner are members of the class participating in a federal court action in Chicago [In re VMS Securities Litigation, No. 90 c 2412, N.D. Ill.] which concluded in a settlement. Defendant filed a Motion for Summary Judgment which was granted. Plantiffs have requested additional time for filing an appeal. The likelihood of an unfavorable outcome or the extent of any possible liability cannot be assessed at this time. 6. Going Concern The Partnership plans to pursue confirmation of the Plan of Reorganization, which contemplates repairing the Sherman Oaks property. The outcome of this effort is unknown at this time. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Although every effort is being made to preserve the Partnership as a going concern, the possibility remains that the Partnership will cease its operations causing the complete loss of the ownership interest held by the partners. If the Partnership's effort to reorganize is unsuccessful, the Partnership will likely lose the properties and improvements through foreclosure with no cash available to partners. As a result of a foreclosure, the Partnership would record extraordinary income on relief of indebtedness. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources On September 16, 1994, the Partnership filed a voluntary petition under Chapter 11 of the Federal bankruptcy laws in the United States Bankruptcy Court for the District of California. Pursuant to Section 1108 of the Bankruptcy Code, the Partnership is managing and operating its business as a debtor in possession and will continue to do so pursuant to Sections 1107 and 1108 of the Bankruptcy Code unless otherwise ordered by the Court. On February 3, 1995, the insurance company carrying the first $10,000,000 layer of earthquake insurance coverage, offered to settle a portion of the loss resulting from the earthquake. The appropriate documents were executed in the second quarter of 1995 and on April 26, 1995, the Partnership received a partial insurance settlement of $9,250,000. The application of the insurance proceeds to the outstanding first mortgage payable or repair of the Sherman Oaks property will be decided by the Court as part of the Plan confirmation process. On March 9, 1995, the Partnership submitted a report, prepared as of January 11, 1995, representing the Partnership's business interruption claim. The claim adjuster and the Partnership's representative's have agreed on the components and the amount of the claim, which was submitted to the applicable insurance companies for approval. On or about January 30, 1995, the first mortgage lender filed a Motion for Relief from the Automatic Stay. The Partnership filed an Opposition to the Motion. At the hearing held on February 21, 1995, the court set April 18, 1995 as the final evidentiary hearing. After hearing arguments and representations of counsel, the Court continued the hearing to July 12, 1995 and then to August 9, 1995. On March 17, 1995, the Partnership filed its proposed Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated March 16, 1995, together with a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code. On March 17, 1995, the Court set the hearing on the Partnership's Disclosure Statement for April 18, 1995. On April 17, 1995, the Partnership filed with the Bankruptcy Court certain Non-material Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy Court held a hearing and acted upon the approval of the Partnership's Disclosure Statement together with the Non-material Amendments. After considering the Disclosure Statement and the Non-material Amendments thereto, the Court ruled that certain additional information should be included in the Partnership's Disclosure Statement. The Court required the Partnership to file an Amended Disclosure Statement which the Court approved without further hearing. The Partnership filed its Amended Disclosure Statement and Amended Plan of Reorganization on May 4, 1995. On May 15, 1995, the Partnership mailed all impaired creditors, limited partners, and parties in interest a copy of the Amended Disclosure Statement and Amended Plan of Reorganization, along with a ballot for voting and other notices. All classes of creditors, limited partners and parties in interest impaired under the Amended Plan of Reorganization voted to accept the plan except Class 1, the first mortgage lender, Travelers Insurance Co. Pursuant to the order approving the Amended Disclosure Statement, the Court set July 12, 1995 as the confirmation hearing for the Partnership's Amended Plan of Reorganization. Subsequently, a stipulation was agreed to and approved by the Court to bifurcate the confirmation hearing to allow additional pleadings. Nonfeasibility issues were scheduled to be heard on July 12, 1995 and all feasibility related issues would be heard by the Court on August 9, 1995. The Partnership plans to pursue confirmation of the Plan of Reorganization. The outcome of this effort is unknown at this time. Although every effort is being made to preserve the Partnership as a going concern, the possibility remains that the Partnership will cease its operations causing the complete loss of the ownership interests held by the partners. If the Partnership's effort to reorganize is unsuccessful, the Partnership will likely lose the Project through foreclosure with no cash available to Partners. A foreclosure would result in an income allocation to the Partners; although, if a limited partner's ownership interest in the Partnership is the partner's only passive activity and the limited partner has been suspending passive loss allocations as required by the Tax Reform Act of 1986, the suspended losses available are estimated to be more than the potential foreclosure income allocation, resulting in an available net loss. In a year in which the Project is disposed of and the Partnership dissolved, any cumulative suspended loss will be available for use by a limited partner to offset ordinary income. Results of Operations During 1994, the apartment submarkets in which the Partnership's properties operate remained stable in terms of occupancy percentages and new construction. Absorption of existing units continued and rental rates began to increase slightly. Contributing to the Partnership's improved net property revenue results (property level revenues less property level operating expenses) for 1994, as compared with 1993, was a decrease in OAKWOOD related costs due to the conversion of Mission Bay East from OAKWOOD operations to conventional apartments effective January 1, 1994. When adjusted for Sherman Oaks activity and other incomparable activity, net property revenues for the first quarter of 1995 had decreased approximately 3% as compared with the fourth quarter of 1994. Net property revenues for the three months ended June 30, 1995 increased approximately 2% as compared with the first quarter of 1995. Property revenues remained flat in the second quarter while property level expenses decreased slightly. The Sherman Oaks property was severely damaged by the Southern California earthquake on January 17, 1994. The property was evacuated and city inspectors classified the property as unsafe for use. The property is not operating and is unoccupied. As a result, the property generated no revenue in 1995, and only a nominal amount in 1994, and has incurred only necessary operating expenses and expenses related to the earthquake since. Sherman Oaks' results for the six months ended June 30, 1995, as compared with the same period in 1994, were affected as follows: Rental income decreased approximately $91,000, other income decreased approximately $9,000, property operating expenses decreased approximately $87,000, real estate taxes decreased approximately $125,000, management fees decreased approximately $24,000 and property administrative expenses decreased approximately $62,000. For the three months ended June 30, 1995, Sherman Oaks' results, as compared with the same period in 1994, were affected as follows: Rental income increased approximately $8,000, other income decreased approximately $2,000, property operating expenses decreased approximately $15,000, real estate taxes decreased approximately $88,000, management fees decreased approximately $12,000 and property administrative expenses increased approximately $20,000. The following analytical comments have been limited to the Partnership's five operating properties. Rental income at Mission Bay East increased approximately $124,000 and $118,000 for the three and six months ended June 30, 1995, respectively, as compared with the same periods in 1994. Average occupancy increased approximately 9% and 6% for the three and six months, respectively, as compared with the same periods in 1994. Less corporate business in the first quarter of 1995, however, decreased rental income slightly as corporate rates are higher than conventional rates. Rental income at Arbor Park decreased approximately $39,000 and $56,000 for the three and six months as a slight increase in rates in 1994 partially offset the decrease in average occupancy for 1995. At Amberway, increased average occupancy for the three and six months increased rental income approximately $56,000 and $95,000, respectively. Increased average occupancy in the second quarter of 1995 at West Los Angeles resulted in increased rental income of approximately $45,000 and $37,000 for the three and six months, respectively. A slight decrease in average occupancy at Arbor Park decreased rental income approximately $22,000 and $29,000 for the three and six months ended June 30, 1995, respectively, as compared with the same periods in 1994. Other income decreased for the three and six months ended June 30, 1995, as compared with the same periods in 1994, due primarily to decreased laundry revenue and cleaning fees earned at Arbor Park. Overall, property operating expenses decreased for the three months and increased for the six months ended June 30, 1995, as compared to the same periods of the previous year. Insurance expense increased approximately $83,000 and $166,000 for the three and six months, respectively, for the five properties in total. In the second quarter of 1995, Pacifica Club had increased non-routine maintenance for carpet, vinyl and kitchen counter replacements while Mission Bay East had an increase due to a termite treatment. In the first quarter of 1995, however, Mission Bay East had decreased carpet and vinyl replacements. In addition, Amberway and Arbor Park had increased non-routine maintenance expenses for the first quarter of 1995 for carpet and vinyl replacements. Partially offsetting these increases were decreased furniture rental expense for the three and six months at West Los Angeles. In addition, property operating expenses decreased for the three months ended June 30, 1995 at West Los Angeles because of earthquake related repairs in the second quarter of 1994. Property taxes decreased for the three and six months ended June 30, 1995, as compared with the same periods in 1994, due to decreased assessed values for fiscal year 1995 (July 1, 1994 to June 30, 1995) at all properties. The increase in property administrative expense for the three and six months ended June 30, 1995, as compared with the same periods in 1994, was the result of increased direct and indirect payroll related costs at the five properties. In addition, advertising costs increased for the six months at West Los Angeles, Mission Bay East and Arbor Park, while decreasing at Pacifica Club. The decrease in partnership administrative expense for the three and six months ended June 30, 1995, as compared with the same periods in 1994, was due primarily to a decrease in legal fees incurred. The increase in interest income for the three and six months ended June 30, 1995, as compared with the same periods in 1994, was due to the increase in interest rates. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Occupancy The following is a listing of approximate physical occupancy levels by quarter for the Partnership's investment properties: 1994 1995 At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30 The Anaheim Property 83% 81% 89% 95% 92% 93% The Huntington Beach Property 95% 98% 99% 94% 94% 97% The West Los Angeles Property 87% 92% 87% 83% 91% 97% The San Diego Property 84% 93% 95% 92% 95% 94% The Sherman Oaks Property (a) N/A N/A N/A N/A N/A N/A The Upland Property 91% 90% 91% 95% 85% 87% [FN] (a) The property was severely damaged by the January 17, 1994 Southern California earthquake. The property was evacuated and considered unsafe for use. Therefore, occupancy is not applicable for the periods presented. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Part II - Other Information Item 1. Legal Proceedings The information included in the "Notes to Financial Statements, Note 5. Litigation" on page 8 of the Partnership's June 30, 1995 Financial Statements, is incorporated by reference. The information included in the "Notes to Financial Statements, Note 2. Petition for Relief Under Chapter 11" on page 5 of the Partnership's June 30, 1995 Financial Statements, is incorporated by reference. Item 2. Changes in the Rights of the Partnership Security Holders (b) On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal bankruptcy laws. The voluntary reorganization action may provide for a reorganization of the debt and equity structure of the Partnership business which may change the rights and form of the equity interests of the Partnership. Item 3. Defaults by the Partnership on its Senior Securities On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal bankruptcy laws. On the filing date, the Partnership was in default on its second mortgage loan obligation. Although the second mortgage holder had acknowledged the default, the Partnership did not receive a notice of acceleration. Due to the Chapter 11 proceedings, claims secured against the Partnership assets are stayed. The balance of the second mortgage note at June 30, 1995 was $14,000,000 plus $1,699,892 of accrued and unpaid interest. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 2.3 Third Modification to Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code for California Seven Associates Limited Partnership, Debtor and Debtor in Possession, Proposed by the Debtor, Dated April 25, 1995. 27 Financial Data Schedule (b) No Form 8-Ks were filed during the three months ended June 30, 1995. 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. California Seven Associates Limited Partnership, a California Limited Partnership By: CIGNA Realty Resources, Inc. - Seventh, General Partner Date: August 8, 1995 By: /s/ John D. Carey John D. Carey, President and Controller (Principal Executive Officer) (Principal Accounting Officer) EX-2 2 THIRD MODIFICATION TO AMENDED PLAN OF REORGANIZATION EXHIBIT 2.3 THIRD MODIFICATION TO AMENDED PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE FOR CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP, DEBTOR AND DEBTOR IN POSSESSION, PROPOSED BY THE DEBTOR, DATED APRIL 25, 1995 California Seven Associates Limited Partnership, Debtor and Debtor in Possession (the "Debtor"), hereby files this Third Modification to its Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code for California Seven Associates Limited Partnership, Debtor and Debtor in Possession, Proposed by the Debtor, Dated April 25, 1995 (the "Plan"), pursuant to 11 U.S.C. 1127 as follows: 1. Section 6.01, Class 1 Claims, commencing at page 26, line 13 through line 20, is modified by deleting the existing text and replacing it with the following new text: Amberway Apartments $ 12,900,000 Arbor Park Apartments $ 6,300,000 Mission Bay East Apartments $ 26,600,000 Oakwood Apartments - West Los Angeles $ 18,900,000 Pacifica Club Apartments $ 16,100,000 Sherman Oaks Apartments $ 14,900,000 2. Section 6.01, Class 1 Claims, at page 27, line 1 shall be amended by deleting the text "8.125%" and replacing it with "8.0%". 3. Section 6.01, Class 1 Claims, commencing on page 27, line 7, to page 28, line 4, is modified by deleting the existing text and replacing it with the following new text: Upon Stabilization of Occupancy of Sherman Oaks, the $14,900,000 shall be paid as set forth below. The balance of the Allowed Secured Claim (without Sherman Oaks) in the total approximate amount of $80,161,306 evidenced by the Modified Note secured by the First Deed of Trust on the five Operating Properties shall earn interest for the first 18 months commencing on the first day of the first month after the Effective Date as follows: % OF INTEREST TRANCHE NO. AMOUNT OF DEBT PAID PER ANNUM 1st $56,112,914 8% 2nd 12,024,196 9.5% 3rd 12,024,196 10% The payments of interest only shall be due and payable in arrears by the tenth day of the month for all three tranches. In addition, the second and third tranches shall receive allocated excess property cash flow at the rate of 39% and 60%, respectively. The allocated excess property cash flow for the second and third tranches shall be paid in arrears on a quarterly basis in accordance with the participation percentages. The participation percentages were calculated when combined with interest paid to achieve 18% and 25% rates of return, respectively over the term of the Plan. The Allowed Secured Claim (including Sherman Oaks) in the total approximate amount of $95,061,306 after the first 18 months as evidenced by the Modified Note and secured by the First Deed of Trust on the six (6) Properties shall earn interest and shall be paid as follows: % OF INTEREST TRANCHE NO. AMOUNT OF DEBT PAID PER ANNUM 1st $ 66,542,914 8% 2nd 14,259,196 9.5% 3rd 14,259,196 10% The interest as set forth above for the first tranche shall be based on a 30-year amortization schedule of payment of the principal of the Modified Note due and payable on December 31, 2004. The second and third tranches shall receive allocated excess property cash flow at the rate of 39% and 60%, respectively. The allocated excess property cash flow for the second the third tranches shall be paid in arrears on a quarterly basis in accordance with the participation percentages. The participation percentages were calculated when combined with interest paid to achieve 18% and 25% rates of return, respectively over the term of the Plan. The balance on the Modified Note shall be due and payable in full on December 31, 2004. All payments made to Travelers postpetition have been and/or shall be credited against the principal amount of the Modified Note. 4. In accordance with the agreement between Travelers and the Debtor, Exhibit "D" to the Plan (Third Note Modification Agreement; Third Deed of Trust Modification Agreement; and Second Amendment to Security Agreement) may be modified after confirmation. 5. In all other respects, the terms and conditions of the Plan shall remain if full force and effect. If, however, there are any inconsistencies in any other parts of the Plan and the Modification contained herein, the Modification shall control. DATED this ________ day of August, 1995. CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP, a California Limited Partnership By: J. SCOTT BOVITZ (#93548) Of Counsel DIXON DIXON & JESSUP LTD., L.L.P. AND By: _____________________________ CLIFTON R. JESSUP, JR. BRUCE H. WHITE DIXON DIXON & JESSUP LTD., L.L.P. ITS ATTORNEYS EX-27 3 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q 1995
5 DEC-31-1995 JUN-30-1995 6-MOS 2813166 0 132189 0 0 0 144544418 50231633 106849573 0 111983903 0 0 0 0 106849573 0 7345415 0 3607672 2419045 0 2293318 0 0 (949096) 0 0 0 (949096) 0 0