SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1996Commission file number 0-8915
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(Exact name of registrant as specified in its charter)
Illinois 36-2875192
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
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
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of Operations. . . . . . . . 10
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 13
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 4,356,931 2,826,515
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 4,294,143
Rents and other receivables . . . . . . . . . . . . . . . . . . . . . 301,341 454,591
Restricted construction loan proceeds . . . . . . . . . . . . . . . . -- 2,783,191
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . . 382,169 273,086
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 5,040,441 10,631,526
------------ -----------
Investment property, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,179,147 2,179,147
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . 31,771,137 31,071,865
------------ -----------
33,950,284 33,251,012
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . 18,081,451 17,370,504
------------ -----------
Total investment property, net of accumulated depreciation. . . 15,868,833 15,880,508
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,342,369 1,363,945
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 855,751 810,110
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . . 2,124,087 37,279
------------ -----------
$ 25,231,481 28,723,368
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 1,496,183 1,396,898
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 944,743 1,302,198
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 190,648 198,578
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 2,631,574 2,897,674
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 52,814 61,249
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 23,397,958 24,532,836
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 26,082,346 27,491,759
Venture partner's subordinated equity in venture. . . . . . . . . . . . 105,529 105,529
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (701,321) (723,934)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (676,244) (279,075)
------------ -----------
(1,376,565) (1,002,009)
------------ -----------
Limited partners (18,005 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . 16,269,038 16,269,038
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . 13,642,654 13,099,947
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (29,491,521) (27,240,896)
------------ -----------
420,171 2,128,089
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . . (956,394) 1,126,080
------------ -----------
$ 25,231,481 28,723,368
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 1,992,723 1,937,262 6,232,349 5,500,017
Interest income . . . . . . . . . . . . . . . . 106,006 291,606 365,235 365,004
----------- ---------- ---------- ----------
2,098,729 2,228,868 6,597,584 5,865,021
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 577,321 615,790 1,755,546 1,753,882
Depreciation. . . . . . . . . . . . . . . . . . 242,504 159,225 710,947 477,675
Property operating expenses . . . . . . . . . . 896,668 813,916 2,717,204 2,341,794
Professional services . . . . . . . . . . . . . 8,824 -- 44,562 54,594
Amortization of deferred expenses . . . . . . . 36,738 37,156 121,533 111,470
General and administrative. . . . . . . . . . . 21,654 8,035 69,280 17,279
----------- ---------- ---------- ----------
1,783,709 1,634,122 5,419,072 4,756,694
----------- ---------- ---------- ----------
Operating earnings (losses). . . . . . . . 315,020 594,746 1,178,512 1,108,327
Venture partner's share of
venture's operations. . . . . . . . . . . . . . (156,322) (286,194) (613,192) (569,200)
----------- ---------- ---------- ----------
Net operating earnings (losses)
before extraordinary item. . . . . . . . 158,698 308,552 565,320 539,127
Extraordinary item:
Prepayment penalty and deferred mortgage
expense on refinanced long-term debt,
net of venture partner's share of $391,010. . -- -- -- (391,010)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . . $ 158,698 308,552 565,320 148,117
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . . $ 8.46 16.45 30.14 28.75
Extraordinary item . . . . . . . . . . -- -- -- (21.50)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . $ 8.46 16.45 30.14 7.25
=========== ========== ========== ==========
Cash distributions per limited
partnership interest . . . . . . . . . . $ 125.00 -- 125.00 --
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 565,320 148,117
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710,947 477,675
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 121,533 111,470
Venture partner's share of venture's operations . . . . . . . . . . . . 613,192 569,200
Extraordinary item, net of venture partner's share of $391,010. . . . . -- 391,010
Changes in:
Rents and other receivables . . . . . . . . . . . . . . . . . . . . . . 153,250 131,433
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . . . (109,083) 384,311
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (45,641) 6,766
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (357,455) 574,583
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,930) 92,150
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . -- 135,921
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (8,435) 1,397
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,635,698 3,024,033
------------ -----------
Cash flows from investing activities:
Restricted construction loan proceeds . . . . . . . . . . . . . . . . . . 2,783,191 --
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,294,143 --
Net sales and maturities (purchases) of short-term investments. . . . . . -- 122,949
Additions to investment property. . . . . . . . . . . . . . . . . . . . . (699,272) (3,877,058)
Payments of deferred expenses . . . . . . . . . . . . . . . . . . . . . . (99,957) (358,630)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . 6,278,105 (4,112,739)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (1,035,593) (14,986,003)
Initial proceeds received from refinanced long-term debt. . . . . . . . . -- 19,000,000
Payments received from refinanced long-term debt holdback . . . . . . . . -- 2,989,018
Prepayment penalty on long-term debt. . . . . . . . . . . . . . . . . . . -- (708,234)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (2,700,000) --
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (397,169) --
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (2,250,625) --
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (6,383,387) 6,294,781
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . 1,530,416 5,206,075
Cash and cash equivalents, beginning of year. . . . . . . . . . . 2,826,515 2,047,492
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . $ 4,356,931 7,253,567
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,763,476 1,661,732
============ ===========
Non-cash investing and financing activities:
Non-cash extraordinary item . . . . . . . . . . . . . . . . . . . . . . $ -- 155,826
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1995 which are
included in the Partnership's 1995 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain amounts in the 1995 Financial Statements have been
reclassified in order to conform with the 1996 presentation.
Statement of Financial Accounting Standards No. 121 was adopted by the
Partnership on January 1, 1996.
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of September
30, 1996 and for the nine months ended September 30, 1996 and 1995 are as
follows:
Unpaid at
September 30,
1996 1995 1996
------ ------ -------------
Reimbursement (at cost) for
out-of-pocket expenses. . . $5,755 11,170 846
====== ====== ====
OAKRIDGE VENTURE
During 1996, the venture completed the renovation and remodel of the
mall. As a result, approximately $2,800,000 of excess proceeds from the
refinancing was released from escrow by the lender. Additionally, after
the venture's review of the requirements for operating reserves, repairs
and deferred maintenance projects, the venture concluded that the remaining
loan proceeds of $4,534,872 need no longer be classified as restricted
funds.
The $1,700,000 Macy's remodeling project has been completed.
As a result of the completion of these significant projects, occupancy
at the property increased to 94% during the quarter.
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1996 and for the three and nine months ended September 30, 1996 and 1995.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investments.
During 1996 some of the Limited Partners in the Partnership received
from unaffiliated third parties unsolicited offers to purchase up to 882
Interests in the Partnership for amounts ranging from $335 to $475, per
Interest. The Partnership recommended against acceptance of these offers
on the basis that, among other things, the offer price was inadequate. All
such offers have expired. Approximately 213 Interests were purchased by
such unaffiliated third parties pursuant to such offers. In addition, the
Partnership has, from time to time, received inquiries from other third
parties that may consider making offers for Interests, including requests
for the list of Limited Partners in the Partnership. These inquiries are
generally preliminary in nature. There is no assurance that any third
party will commence an offer for Interests, the terms of any such offer or
whether any such offer, if made, will be consummated, amended or withdrawn.
The board of directors of JMB Realty Corporation ("JMB") the Corporate
General Partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and has retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests.
In July 1996, Oakridge venture distributed $5,400,000 (of which the
Partnership's share was $2,700,000) of previously restricted funds (as
discussed above). Subsequently, in August 1996, the Partnership
distributed $2,250,625 ($125 per Interest) to the Limited Partners and
$397,169 to the General Partners of such refinancing proceeds. The
Oakridge venture had cash and cash equivalents of approximately $2,385,000
at September 30, 1996. In October 1996, Oakridge venture distributed an
additional $1,000,000 (of which the Partnership's share was $500,000). The
remaining cash is expected to be retained by the venture for anticipated
short-term operating reserves at the property. Accordingly, the ultimate
source of future liquidity of the Partnership and distributions to partners
is expected to come from the sale of the remaining investment property.
After reviewing the remaining property and its competitive
marketplace, and considering the mall renovation which was completed in
1996, the General Partners of the Partnership expect to be able to
liquidate the remaining asset as quickly as practicable. The affairs of
the Partnership are expected to be wound up no later than 1999 (sooner if
the property is sold in the nearer term), barring unforeseen economic
developments.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents, the decrease in the
restricted construction loan proceeds (originally intended to be used for
the mall expansion and remodeling project), restricted funds and accounts
payable and the increase in buildings and improvements at September 30,
1996 as compared to December 31, 1996 is primarily due to the completion of
the mall expansion at the Oakridge investment property during 1996. In
addition, venture partner's deficit in venture increased during the period
under comparison primarily as a result of the Oakridge venture distribution
discussed above.
The decrease in rents and other receivables at September 30, 1996 as
compared to December 31, 1995 is primarily due to the timing of receipt of
rent from tenants at the Oakridge investment property.
The increase in rental income for the three and nine months ended
September 30, 1996 as compared to the three and nine months ended September
30, 1995 is primarily due to increased occupancy (permanent and temporary
tenants) and increased sales at the Oakridge investment property. The
increase for the nine months ended September 30, 1996 is also due to a
reversal of an over-accrual of overage rent in 1995.
The decrease in interest income for the three months ended September
30, 1996 as compared to the three months ended September 30, 1995 is
primarily due to a decrease in the amount of cash available for short-term
investments as a result of Oakridge venture distributions made to its
partners in July 1996 and the subsequent distribution by the Partnership of
$2,647,794 to its Partners.
The increase in depreciation expense for the three and nine months
ended September 30, 1996 as compared to the three and nine months ended
September 30, 1995 is primarily due to the capital additions incurred in
1995 and 1996 at the Oakridge Mall investment property.
The increase in property operating expenses for the three and nine
months ended September 30, 1996 as compared to the three and nine months
ended September 30, 1995 is primarily due to increased land rental expense
and increased occupancy at the Oakridge investment property.
The decrease in venture partner's share of venture's operations for
the three months ended September 30, 1996 as compared to the three months
ended September 30, 1995 is primarily due to the decrease in interest
income and increase in depreciation expense discussed above. The increase
in venture partner's share of venture's operations for the nine months
ended September 30, 1996 as compared to the nine months ended September 30,
1995 is primarily due to the increase in rental income which had a greater
impact than the changes in interest income and depreciation expense,
discussed above.
The extraordinary item, net of venture partner's share, is due to the
retirement of indebtedness related to the refinancing of the mortgage debt
at the Oakridge investment property in February, 1995.
The increase in general and administrative expenses for the nine
months ended September 30, 1996, as compared to the nine months ended
September 30, 1995 is attributable primarily to the recognition of costs
for certain outsourcing services and the timing of the recognition of
certain printing costs in 1996.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Partnership's
remaining investment property.
<CAPTION>
1995 1996
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Oakridge Mall
San Jose, California. . . 91% 91% 90% 88% 88% 92% 94%
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A. The Prospectus of the Partnership dated October 17,
1977, as supplemented on December 5, 1977, January 16, 1978 and March 28,
1978, as filed with the Commission pursuant to Rules 424(b) and 424(c), is
hereby incorporated herein by reference to Exhibit 3-A to the Partnership's
Report for December 31, 1993 on Form 10-K of the Securities Exchange Act of
1934 (File No. 0-8915) filed on March 25, 1994.
3-B. Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, and which agreement is hereby
incorporated herein by reference to Exhibit 3-B to the Partnership's Report
for December 31, 1993 on Form 10-K of the Securities Exchange Act of 1934
(File No. 0-8915) filed on March 25, 1994.
10-A. Acquisition documents relating to the purchase by the
Partnership of an interest in Oakridge Mall in San Jose, California, are
hereby incorporated herein by reference to the Partnership's Registration
Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as
amended.
10-B. Closing statement dated February 15, 1995 relating to
the refinancing by Oakridge Associates, Ltd. which owns Oakridge Mall in
San Jose, California is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915)
dated May 11, 1995).
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 8, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,356,931
<SECURITIES> 0
<RECEIVABLES> 683,510
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,040,441
<PP&E> 33,950,284
<DEPRECIATION> 18,081,451
<TOTAL-ASSETS> 25,231,481
<CURRENT-LIABILITIES> 2,631,574
<BONDS> 23,397,958
<COMMON> 0
0
0
<OTHER-SE> (956,394)
<TOTAL-LIABILITY-AND-EQUITY> 25,231,481
<SALES> 6,232,349
<TOTAL-REVENUES> 6,597,584
<CGS> 0
<TOTAL-COSTS> 3,549,684
<OTHER-EXPENSES> 113,842
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,755,546
<INCOME-PRETAX> 1,178,512
<INCOME-TAX> 0
<INCOME-CONTINUING> 565,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 565,320
<EPS-PRIMARY> 30.14
<EPS-DILUTED> 30.14
</TABLE>
