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 June 30, 1996 Commission 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
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 9,460,263 2,826,515
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 4,294,143
Rents and other receivables . . . . . . . . . . . . . . . . . . . . . . 261,056 454,591
Restricted construction loan proceeds . . . . . . . . . . . . . . . . . -- 2,783,191
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . . . 270,188 273,086
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 9,991,507 10,631,526
------------ -----------
Investment property, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,179,147 2,179,147
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . 31,720,995 31,071,865
------------ -----------
33,900,142 33,251,012
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . 17,838,947 17,370,504
------------ -----------
Total investment property, net of accumulated depreciation. . . . 16,061,195 15,880,508
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,348,850 1,363,945
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . 817,833 810,110
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . . . -- 37,279
------------ -----------
$ 28,219,385 28,723,368
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 1,462,328 1,396,898
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,623 1,302,198
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,352 198,578
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 2,330,303 2,897,674
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 46,319 61,249
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 23,784,941 24,532,836
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 26,161,563 27,491,759
Venture partner's subordinated equity in venture. . . . . . . . . . . . . 525,120 105,529
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . . (707,670) (723,934)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (279,075) (279,075)
------------ -----------
(985,745) (1,002,009)
------------ -----------
Limited partners (18,005 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . . 16,269,038 16,269,038
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . . 13,490,305 13,099,947
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (27,240,896) (27,240,896)
------------ -----------
2,518,447 2,128,089
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . . . 1,532,702 1,126,080
------------ -----------
$ 28,219,385 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 SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 2,363,262 1,866,299 4,239,626 3,562,755
Interest income . . . . . . . . . . . . . . . . . 154,153 40,157 259,229 73,398
----------- ---------- ---------- ----------
2,517,415 1,906,456 4,498,855 3,636,153
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 582,643 616,435 1,178,225 1,138,092
Depreciation. . . . . . . . . . . . . . . . . . . 239,056 159,225 468,443 318,450
Property operating expenses . . . . . . . . . . . 956,591 626,381 1,820,536 1,500,116
Professional services . . . . . . . . . . . . . . 12,510 9,788 35,738 57,708
Amortization of deferred expenses . . . . . . . . 40,022 37,157 84,795 74,314
General and administrative. . . . . . . . . . . . 25,643 17,973 47,626 33,892
----------- ---------- ---------- ----------
1,856,465 1,466,959 3,635,363 3,122,572
----------- ---------- ---------- ----------
Operating earnings (losses). . . . . . . . . 660,950 439,497 863,492 513,581
Venture partner's share of
venture's operations. . . . . . . . . . . . . . . (342,895) (214,438) (456,870) (283,006)
----------- ---------- ---------- ----------
Net operating earnings (losses)
before extraordinary item. . . . . . . . . 318,055 225,059 406,622 230,575
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). . . . . . . . . . . . . $ 318,055 225,059 406,622 (160,435)
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . . . $ 16.96 12.00 21.68 12.29
Extraordinary item . . . . . . . . . . . -- -- -- (21.50)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . $ 16.96 12.00 21.68 (9.21)
=========== ========== ========== ==========
Cash distributions per limited
partnership interest . . . . . . . . . . . $ -- -- -- --
=========== ========== ========== ==========
<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
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 406,622 (160,435)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468,443 318,450
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . . . 84,795 74,314
Venture partner's share of venture's operations . . . . . . . . . . . . . . 456,870 283,006
Extraordinary item, net of venture partner's share of $391,010. . . . . . . -- 391,010
Changes in:
Rents and other receivables . . . . . . . . . . . . . . . . . . . . . . . . 193,535 238,016
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . . . . . 2,898 254,454
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . . (7,723) (16,573)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (627,575) 536,298
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,226) 94,617
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . -- 266,508
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . . (14,930) (15,715)
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . . . 957,709 2,263,950
------------ -----------
Cash flows from investing activities:
Restricted construction loan proceeds . . . . . . . . . . . . . . . . . . . . 2,783,191 (6,868,262)
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,294,143 --
Net sales and maturities (purchases) of short-term investments. . . . . . . . -- (1,428,599)
Additions to investment property. . . . . . . . . . . . . . . . . . . . . . . (649,130) (1,672,152)
Payments of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . (69,700) (306,774)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . . . 6,358,504 (10,275,787)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . . . (682,465) (14,663,768)
Initial proceeds received from refinanced long-term debt. . . . . . . . . . . -- 27,000,000
Prepayment penalty on long-term debt. . . . . . . . . . . . . . . . . . . . . -- (708,234)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . . . (682,465) 11,627,998
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . . 6,633,748 3,616,161
Cash and cash equivalents, beginning of year. . . . . . . . . . . . . 2,826,515 2,047,492
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . $ 9,460,263 5,663,653
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . . . $ 1,183,451 1,043,475
============ ===========
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
JUNE 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.
Statement of Financial Accounting Standards No. 121 was adopted by the
Partnership on January 1, 1996.
Certain reclassifications have been made to the 1995 Financial
Statements in order to conform with the 1996 presentation.
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of June 30,
1996 and for the six months ended June 30, 1996 and 1995 are as follows:
Unpaid at
June 30,
1996 1995 1996
------ ------ -------------
Reimbursement (at cost) for
out-of-pocket expenses. . . . $5,503 9,312 846
====== ====== ====
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 92% 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 June 30, 1996
and for the three and six months ended June 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 the second quarter some of the Limited Partners in the
Partnership received from unaffiliated third parties unsolicited offers to
purchase up to 782 Interests in the Partnership at $400 and $335,
respectively, per Interest. The Partnership recommended against acceptance
of these offers on the basis that, among other things, the offer price was
inadequate. In June, one such offer expired. Approximately 128 Interests
were purchased by such unaffiliated third parties pursuant to such offers.
Subsequent to the end of the quarter, an additional unaffiliated third
party commenced an unsolicited tender offer to purchase up to 882 Interests
in the Partnership at $475 per Interest. As of the date of this report,
the Partnership has not issued its recommendation on this new offer and
such offer remains outstanding. In addition, the Partnership has, from
time to time, received inquires 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. Expenses incurred in
connection with the previous tender offers and additional potential tender
offers for Interests are expected to increase Partnership operating
expenses in the third quarter.
Oakridge venture had cash and cash equivalents of approximately
$7,534,000 at June 30, 1996. In July 1996, Oakridge venture distributed
$5,400,000 (of which the Partnership's share was $2,700,000) of such cash.
The remaining cash will be retained by the venture for operating reserves,
repairs and deferred maintenance projects. 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 is primarily due to
the completion of the mall expansion at the Oakridge investment property
during 1996.
The decrease in rents and other receivables at June 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 six months ended June
30, 1996 as compared to the three and six months ended June 30, 1995 is
primarily due to increased occupancy (permanent and temporary tenants) and
increased sales at the Oakridge investment property. The increase is also
due to a reversal of an over accrual of overage rent in 1995.
The increase in interest income for the three and six months ended
June 30, 1996 as compared to the three and six months ended June 30, 1995
and the increase in mortgage and other interest expense for the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995 is
primarily due to refinancing of the mortgage debt and establishment of
required escrow accounts at the Oakridge investment property during 1995.
The increase in depreciation expense for the three and six months
ended June 30, 1996 as compared to the three and six months ended June 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 six
months ended June 30, 1996 as compared to the three and six months ended
June 30, 1995 is primarily due to increased land rental expense and
increased occupancy at the Oakridge investment property.
The increase in venture partner's share of venture's operations for
the three and six months ended June 30, 1996 as compared to the three and
six months ended June 30, 1995 is due to increased operating earnings at
the Oakridge investment property.
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.
<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%
</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 for the quarter 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: August 9, 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: August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,460,263
<SECURITIES> 0
<RECEIVABLES> 531,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,991,507
<PP&E> 33,900,142
<DEPRECIATION> 17,838,947
<TOTAL-ASSETS> 28,219,385
<CURRENT-LIABILITIES> 2,330,303
<BONDS> 23,784,941
<COMMON> 0
0
0
<OTHER-SE> 1,532,702
<TOTAL-LIABILITY-AND-EQUITY> 28,219,385
<SALES> 4,239,626
<TOTAL-REVENUES> 4,498,855
<CGS> 0
<TOTAL-COSTS> 2,373,774
<OTHER-EXPENSES> 83,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,178,225
<INCOME-PRETAX> 863,492
<INCOME-TAX> 0
<INCOME-CONTINUING> 406,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 406,622
<EPS-PRIMARY> 21.68
<EPS-DILUTED> 21.68
</TABLE>
