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, 1997 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
<PAGE>
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. . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 12
<PAGE>
<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, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 3,911,291 3,840,380
Rents and other receivables . . . . . . . . . . . . . . . . . . . . 322,617 141,089
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . 245,647 251,541
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 4,479,555 4,233,010
------------ -----------
Investment property held for sale or disposition. . . . . . . . . . . 16,019,637 15,741,875
------------ -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,210,394 1,247,802
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 1,022,326 891,801
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . 2,126,542 2,767,256
------------ -----------
$ 24,858,454 24,881,744
============ ===========
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1997 1996
------------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 1,602,523 1,530,822
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 892,081 870,137
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 182,153 187,881
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . 2,676,757 2,588,840
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 57,828 50,862
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 22,182,418 23,002,015
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 24,917,003 25,641,717
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). . . . . . . . . . . . . . . . . (669,629) (697,686)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (676,244) (676,244)
------------ -----------
(1,344,873) (1,372,930)
------------ -----------
Limited partners (18,005 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 16,269,038 16,269,038
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . 14,403,278 13,729,911
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (29,491,521) (29,491,521)
------------ -----------
1,180,795 507,428
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . (164,078) (865,502)
------------ -----------
$ 24,858,454 24,881,744
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . $ 2,115,242 2,164,591 4,340,763 4,239,626
Interest income . . . . . . . . . . . . . . . 58,517 154,153 125,157 259,229
----------- ---------- ---------- ----------
2,173,759 2,318,744 4,465,920 4,498,855
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . 549,371 582,643 1,109,865 1,178,225
Depreciation. . . . . . . . . . . . . . . . . -- 239,056 -- 468,443
Property operating expenses . . . . . . . . . 831,718 956,591 1,694,408 1,820,536
Professional services . . . . . . . . . . . . 18,918 12,510 42,977 35,738
Amortization of deferred expenses . . . . . . 59,384 40,022 120,706 84,795
General and administrative. . . . . . . . . . 21,112 25,643 55,826 47,626
----------- ---------- ---------- ----------
1,480,503 1,856,465 3,023,782 3,635,363
----------- ---------- ---------- ----------
Operating earnings (loss). . . . . . . . 693,256 462,279 1,442,138 863,492
Venture partner's share of
venture's operations. . . . . . . . . . . . . (351,575) (243,560) (740,714) (456,870)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . $ 341,681 218,719 701,424 406,622
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest . . . . . . . . . $ 18.22 11.66 37.40 21.68
=========== ========== ========== ==========
Cash distributions per limited
partnership interest . . . . . . . . . $ -- -- -- --
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 701,424 406,622
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 468,443
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 120,706 84,795
Venture partner's share of venture's operations . . . . . . . . . . . . 740,714 456,870
Changes in:
Rents and other receivables . . . . . . . . . . . . . . . . . . . . . . (181,528) 193,535
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . . . 5,894 2,898
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (130,525) (7,723)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,944 (627,575)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,728) (5,226)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 6,966 (14,930)
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,279,867 957,709
------------ -----------
Cash flows from investing activities:
Restricted construction loan proceeds . . . . . . . . . . . . . . . . . . -- 2,783,191
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 4,294,143
Additions to investment property. . . . . . . . . . . . . . . . . . . . . (277,762) (649,130)
Payments of deferred expenses . . . . . . . . . . . . . . . . . . . . . . (83,298) (69,700)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (361,060) 6,358,504
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (747,896) (682,465)
Distribution to venture partner . . . . . . . . . . . . . . . . . . . . . (100,000) --
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (847,896) (682,465)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . 70,911 6,633,748
Cash and cash equivalents, beginning of year. . . . . . . . . . . 3,840,380 2,826,515
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . $ 3,911,291 9,460,263
============ ===========
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996
------------ -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,115,593 1,183,451
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1996 which are
included in the Partnership's 1996 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.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121") as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell such property and active marketing activity has commenced or is
expected to commence in the near term. In accordance with SFAS 121, any
properties identified as "held for sale or disposition" are no longer
depreciated. As of December 31, 1996, the Partnership committed to a plan
to sell the Oakridge Mall investment property. Accordingly, this property
has been classified as held for sale or disposition in the accompanying
consolidated financial statements. The results of operations, net of
venture partner's share, for the property was $740,714 and $456,870,
respectively, for the six months ended June 30, 1997 and 1996.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. As the Partnership's
capital structure only has general and limited partnership interests, the
Partnership does not expect any significant impact on its consolidated
financial statements upon adoption of these standards when required at the
end of 1997.
Certain amounts in the 1996 Financial Statements have been
reclassified in order to conform with the 1997 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,
1997 and for the six months ended June 30, 1997 and 1996 are as follows:
Unpaid at
June 30,
1997 1996 1997
------ ------ -------------
Reimbursement (at cost) for
out-of-pocket expenses. . . $ -- 5,503 --
====== ====== ====
<PAGE>
OAKRIDGE VENTURE
Occupancy at the property is 90% at June 30, 1997. During the
remainder of 1997 and in 1998, expiration of tenant leases will be
approximately 7% and 10%, respectively. There is no assurance that the
expiring tenants can be retained.
The refinanced mortgage loan bears interest at 9.19% per annum and
requires monthly payments of principal and interest of $310,165 until
maturity in February 1998. Upon notification by Oakridge Venture to the
lender, within dates determined by the refinanced mortgage loan documents,
the venture has the option to extend the loan for two 3-year periods. The
interest rate on these extensions would be adjusted at each period based on
the then current three year U.S. Treasury rates and would require similar
payments of principal and interest. As of the date of this report, the
venture is in negotiations with the lender to extend the first loan
extension notification date. Based upon the venture's current intent to
exercise its option to extend the loan at its scheduled maturity in
February 1998, the Partnership has continued to classify the loan as a
long-term liability in the accompanying consolidated financial statements.
Montgomery Ward, a major department store, which owns its own facility
at Oakridge Mall, filed for bankruptcy protection pursuant to Chapter 11 of
the Federal Bankruptcy Code on July 7, 1997. The tenant continues to
operate and fulfill its obligations under its operating agreement.
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, 1997
and for the three and six months ended June 30, 1997 and 1996.
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 Holders of Interests in the Partnership
received from unaffiliated third parties unsolicited tender offers to
purchase up to 4.9% of the Interests in the Partnership at amounts between
$335 and $475 per Interest. The Partnership recommended against acceptance
of these offers on the basis that, among other things, the offer prices
were inadequate. Such offers have expired. The Partnership had also
received requests from other unaffiliated third parties for the list of
Holders of Interests. It is possible that other offers for Interests may
be made by unaffiliated third parties in the future, although there is no
assurance that any other 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.
<PAGE>
The Partnership had been made aware that in June 1997 two other
unaffiliated third parties made unsolicited tender offers to some of the
Holders of Interests. These offers each sought to purchase up to 4.9% of
the Interests in the Partnership at amounts between $350 and $485 per
Interest. These offers will expire in August 1997. The Special Committee
recommended against acceptance of these offers on the basis that, among
other things, the offer prices were inadequate. As of the date of this
report, the Partnership is aware that 3.2% of the outstanding Interests
have been purchased in 1996 and 1997 by such unaffiliated third parties
either pursuant to such tender offers or through negotiated purchases.
At June 30, 1997, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $3,911,000. Such funds will be
utilized for working capital requirements and distributions to partners.
The sources of capital (in addition to the cash and cash equivalents) for
both short-term and long-term future liquidity and distributions are
expected to be through net cash generated by Oakridge and from its sale
and/or refinancing.
After reviewing the remaining property and its competitive
marketplace, and considering the Oakridge 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.
Accordingly, Oakridge Mall, the Partnership's remaining investment
property, has been considered held for sale or disposition as of December
31, 1996. Therefore, the property will no longer be subject to continued
depreciation. The affairs of the Partnership are expected to be wound up
no later than December 31, 1999, perhaps in the 1997-1998 time frame,
barring unforeseen economic developments.
RESULTS OF OPERATIONS
The increase in rents and other receivables at June 30, 1997 as
compared to December 31, 1996 is primarily due to the timing of tenant
rental receipts at the Oakridge investment property.
The decrease in venture partner's deficit in venture at June 30, 1997
as compared to December 31, 1996 as well as the increase in venture
partner's share of venture operations for the three and six months ended
June 30, 1997 as compared to the three and six months ended June 30, 1996
is primarily due to the decreases in depreciation expense and property
operating expenses, as discussed below.
The decrease in interest income for the three and six months ended
June 30, 1997 as compared to the three and six months ended June 30, 1996
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 and the subsequent distribution by the Partnership to its Partners
during 1996.
The decrease in depreciation expense for the three and six months
ended June 30, 1997 as compared to the three and six months ended June 30,
1996 is due to the Oakridge investment property being classified as held
for sale as of December 31, 1996 and therefore is no longer subject to
continued depreciation.
The decrease in property operating expenses for the three and six
months ended June 30, 1997 as compared to the three and six months ended
June 30, 1996 is primarily due to decreases in repairs and maintenance
expenses at the Oakridge investment property mainly as a result of the
completion in 1996 of the mall expansion and remodeling project at the
property.
<PAGE>
<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>
1996 1997
------------------------------------- ------------------------------
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. . . 88% 88% 88% 92% 91% 90%
</TABLE>
<PAGE>
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.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between AGPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is hereby incorporated herein by reference to
Exhibit 3-C to the Partnership's Report for September 30, 1996 on Form 10-Q
(File No. 0-8915) dated November 8, 1996.
4-A. Secured promissory note #1 dated February 15, 1995 in
the amount of $23,900,000 relating to the refinancing of the mortgage note
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.
4-B. Secured promissory note #2 dated February 15, 1995 in
the amount of $3,100,000 relating to the refinancing of the mortgage note
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.
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.
<PAGE>
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 8, 1997
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 8, 1997
<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, 1997 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,911,291
<SECURITIES> 0
<RECEIVABLES> 568,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,479,555
<PP&E> 16,019,637
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,858,454
<CURRENT-LIABILITIES> 2,676,757
<BONDS> 22,182,418
<COMMON> 0
0
0
<OTHER-SE> (164,078)
<TOTAL-LIABILITY-AND-EQUITY>24,858,454
<SALES> 4,340,763
<TOTAL-REVENUES> 4,465,920
<CGS> 0
<TOTAL-COSTS> 1,815,114
<OTHER-EXPENSES> 98,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,109,865
<INCOME-PRETAX> 1,442,138
<INCOME-TAX> 0
<INCOME-CONTINUING> 701,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701,424
<EPS-PRIMARY> 37.40
<EPS-DILUTED> 37.40
</TABLE>
