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 No. 0-9555
JMB INCOME PROPERTIES, LTD. - VII
(Exact name of registrant as specified in its charter)
Illinois 36-2999384
(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. . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - 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 . . . . . . . . . . . . . . . . . . . . . $ 6,205,769 6,182,420
Interest, rents and other receivables . . . . . . . . . . . . . . . 1,181,025 1,240,876
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 5,933 8,541
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,316,775 414,466
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 8,709,502 7,846,303
------------ -----------
Investment properties, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,540 1,394,540
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . 59,330,585 59,219,726
------------ -----------
60,725,125 60,614,266
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 39,318,877 38,155,769
------------ -----------
Total investment properties,
net of accumulated depreciation . . . . . . . . . . . . . 21,406,248 22,458,497
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,105,082 1,126,436
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 1,766,720 1,947,136
Venture partners' deficit in venture. . . . . . . . . . . . . . . . . . 2,463,948 2,469,936
------------ -----------
$ 35,451,500 35,848,308
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 325,866 306,980
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 885,037 946,999
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 279,144 280,863
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 2,711,352 2,214,272
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 4,201,399 3,749,114
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 219,003 222,631
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 32,915,106 33,082,901
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 37,335,508 37,054,646
------------ -----------
Venture partners' subordinated equity in venture. . . . . . . . . . . . 1,449,395 1,631,431
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 1,065,374 1,069,065
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (8,018,599) (7,978,262)
------------ -----------
(6,952,225) (6,908,197)
------------ -----------
Limited partners (60,505 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 54,676,276 54,676,276
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 49,287,873 49,376,449
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (100,345,327) (99,982,297)
------------ -----------
3,618,822 4,070,428
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . (3,333,403) (2,837,769)
------------ -----------
$ 35,451,500 35,848,308
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - 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 . . . . . . . . . . . . . . . . . $ 2,845,385 2,797,635 5,617,910 5,605,719
Interest income . . . . . . . . . . . . . . . . 95,181 83,578 191,020 174,249
----------- ---------- ----------- ----------
2,940,566 2,881,213 5,808,930 5,779,968
----------- ---------- ----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 882,408 941,673 1,767,057 1,884,684
Depreciation. . . . . . . . . . . . . . . . . . 582,016 576,650 1,163,108 1,153,359
Property operating expenses . . . . . . . . . . 1,401,792 1,432,004 2,754,019 2,805,975
Professional services . . . . . . . . . . . . . 21,020 16,135 70,551 56,354
Amortization of deferred expenses . . . . . . . 57,996 58,172 116,060 99,925
General and administrative. . . . . . . . . . . 31,064 26,752 78,337 50,667
----------- ---------- ----------- ----------
2,976,296 3,051,386 5,949,132 6,050,964
----------- ---------- ----------- ----------
Operating earnings (loss) . . . . . . . (35,730) (170,173) (140,202) (270,996)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . 24,918 45,425 47,935 84,146
----------- ---------- ----------- ----------
Net earnings (loss) . . . . . . . . . . $ (10,812) (124,748) (92,267) (186,850)
=========== ========== =========== ==========
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . . . $ (.17) (1.98) (1.46) (2.96)
=========== ========== =========== ==========
Cash distributions per
limited partnership
interest. . . . . . . . . . . . . . . $ 4.00 2.00 6.00 4.00
=========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (92,267) (186,850)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,163,108 1,153,359
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 116,060 99,925
Amortization of discounts on long-term debt . . . . . . . . . . . . . . 112,001 106,507
Venture partners' share of ventures' operations . . . . . . . . . . . . (47,935) (84,146)
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 240,267 6,728
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,608 4,307
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . (902,309) 64,362
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,962) 127,034
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,719) (1,040)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 497,080 38,978
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (3,628) 41,617
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,021,304 1,370,781
------------ -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments. . . . . . -- (947,496)
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (110,859) (30,386)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (94,706) (129,865)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (205,565) (1,107,747)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (260,910) (238,657)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (128,113) (152,075)
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (363,030) (242,020)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (40,337) (26,891)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (792,390) (659,643)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . 23,349 (396,609)
Cash and cash equivalents, beginning of year. . . . . . . . . . . 6,182,420 3,483,861
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . $ 6,205,769 3,087,252
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,656,776 1,779,217
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
GENERAL
Readers of this 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.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Managing General Partner
and its affiliates including the reimbursement for direct expenses relating
to the administration of the Partnership and the operation of the
Partnership's investments. 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. . . $1,343 2,953 --
====== ====== =====
ONE WOODFIELD LAKE
The Schaumburg, Illinois office market in which One Woodfield Lake
office building is located has improved over the last six months of 1996.
This improvement is expected to continue with occupancy levels increasing
along with net effective rent levels. The property is currently 98%
leased. Subsequent to the end of the quarter, the joint venture finalized
an agreement with a major tenant (U.S. Life, approximately 52,000 square
feet) to extend the expiration date of its original lease from 2000 to 2006
and to expand their premises by 5,900 square feet to approximately 58,000
square feet. In return, the joint venture reduced the rental rate
effective immediately, with the new rental rate approximating current
market rental rates.
In addition, the joint venture is currently engaged in lease renewal
discussions with another major tenant (Xerox, approximately 40,000 square
feet or 21% of the buildings leasable square footage) whose lease expires
in 1997. There is no assurance this lease will be renewed and any
resulting vacancy and leasing costs would likely adversely affect operating
property cash flows.
Based upon improving property operating and market conditions, the
joint venture has decided it would most likely commit additional capital
which may be necessary to cover anticipated leasing costs and working
capital requirements at the property. This decision is based on the
expectation of the return of such additional investment, plus a reasonable
profit thereon, from future property operations, sale or refinancing.
The joint venture must escrow with the lender any excess cash flow (as
defined) due to the terms of the current property indebtedness (as modified
and extended in 1995). An amount of $157,321 has been escrowed with the
lender as of the date of this report.
WESTDALE MALL
The mall continues to operate in a very competitive retail
environment. During the first quarter of 1996, occupancy had dropped to
85% but increased to 88% in the second quarter. Currently, as leases
expire, lease renewals and new leases are likely to be at rental rates
equal to or slightly below rates on existing leases. In addition, new
leases will likely require expenditures for lease commission and tenant
improvements prior to tenant occupancy. This anticipated decline in rental
rates, an anticipated increase in re-leasing time and the costs upon
releasing will result in a decrease in cash flow from operations over the
near term. The Partnership is also evaluating the competitive positioning
of this property in its market. The joint venture intends to allocate the
resources necessary for the manager of the mall to continue to attract new
tenants, subject to Venture working capital sources and reserves.
ADJUSTMENTS
In the opinion of the Managing 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 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 an unaffiliated third party an unsolicited tender
offer to purchase up to 2,664 Interests in the Partnership between $70 and
$85 per Interest. The Partnership recommended against acceptance of this
offer on the basis that, among other things, the offer price was
inadequate. In June such offer expired with approximately 922 Interests
being purchased by such unaffiliated third party pursuant to such offer.
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 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 managing 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 offer
and additional potential tender offers for Interests are expected to
increase Partnership operating expenses in the third quarter.
At June 30, 1996, the Partnership and its consolidated ventures had
cash and cash equivalents of approximately $6,205,700. Such funds are
available for distributions to partners and working capital requirements of
which approximately $975,000 is being held at the Westdale Mall for costs
to be incurred including capital additions and tenant improvements.
The General Partners of the Partnership expect to be able to conduct
an orderly liquidation of its remaining investment portfolio as quickly as
practicable. Therefore, the affairs of the Partnership are expected to be
wound up no later than December 31, 1999 (sooner if the properties are sold
in the near term), barring unforeseen economic developments.
RESULTS OF OPERATIONS
The increase in escrow deposits and the related accrued real estate
taxes at June 30, 1996 as compared to December 31, 1995 is primarily due to
the timing of payments of real estate taxes at the Partnership's investment
properties. Also contributing to the increase in escrow deposits is the
escrowing of any excess cash flow (as defined) with the lender due to the
terms of the current property indebtedness (as modified and extended in
1995) at the One Woodfield Lake investment property.
The decrease in mortgage and other interest for the three and six
months ended June 30, 1996 as compared to the same period in 1995 is
primarily due to the 1995 debt extension and modification which reduced the
monthly effective mortgage loan interest cost at the One Woodfield Lake
investment property.
<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
investment properties.
<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. One Woodfield Lake
Schaumburg, Illinois. . 88% 88% 88% 88% 89% 90%
2. Westdale Mall
Cedar Rapids, Iowa. . . 93% 94% 94% 94% 85% 88%
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A. The Prospectus of the Partnership dated January 18,
1980, as supplemented May 23, 1980, 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, 1992 on Form 10-K
(File No. 0-9555) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which is hereby incorporated
herein by reference to Exhibit 3-B to the Partnership's Report for December
31, 1992 on Form 10-K (File No. 0-9555) dated March 19, 1993.
4-A. Mortgage loan agreement relating to the purchase by the
Partnership of an interest in the One Woodfield Lake Office Building in
Schaumburg, Illinois is hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-9555) dated June 17, 1980.
4-B. Mortgage loan agreement relating to the purchase by the
Partnership of an interest in Westdale Mall in Cedar Rapids, Iowa is hereby
incorporated by reference to the Partnership's Report on Form 8-K (File No.
0-9555) dated October 3, 1980.
4-C. Mortgage loan modification and extension agreement
concerning the mortgage loan secured by the One Woodfield Lake Office
Building in Schaumburg, Illinois is hereby incorporated by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-9555)
dated March 25, 1996.
10-A. Acquisition documents including the venture agreement
relating to the purchase by the Partnership of an interest in the One
Woodfield Lake Office Building in Schaumburg, Illinois are hereby
incorporated by reference to the Partnership's Report on Form 8-K (File No.
0-9555) dated June 17, 1980.
10-B. Acquisition documents including the venture agreement
relating to the purchase by the Partnership of an interest in Westdale Mall
in Cedar Rapids, Iowa are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-9555) dated October 3, 1980.
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.
JMB INCOME PROPERTIES, LTD. - VII
BY: JMB Realty Corporation
(Managing 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> 6,205,769
<SECURITIES> 0
<RECEIVABLES> 2,503,733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,709,502
<PP&E> 60,725,125
<DEPRECIATION> 39,318,877
<TOTAL-ASSETS> 35,451,500
<CURRENT-LIABILITIES> 4,201,399
<BONDS> 32,915,106
<COMMON> 0
0
0
<OTHER-SE> (3,333,403)
<TOTAL-LIABILITY-AND-EQUITY> 35,451,500
<SALES> 5,617,910
<TOTAL-REVENUES> 5,808,930
<CGS> 0
<TOTAL-COSTS> 4,033,187
<OTHER-EXPENSES> 148,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,767,057
<INCOME-PRETAX> (140,202)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,267)
<EPS-PRIMARY> (1.46)
<EPS-DILUTED> (1.46)
</TABLE>
