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 March 31, 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. . . . . . . . 9
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 11
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 6,966,034 6,182,420
Interest, rents and other receivables . . . . . . . . . . . . . . . 1,011,692 1,240,876
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 4,483 8,541
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 873,587 414,466
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 8,855,796 7,846,303
------------ -----------
Investment properties, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,540 1,394,540
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . 59,255,431 59,219,726
------------ -----------
60,649,971 60,614,266
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 38,736,861 38,155,769
------------ -----------
Total investment properties,
net of accumulated depreciation . . . . . . . . . . . . . 21,913,110 22,458,497
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,105,704 1,126,436
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 1,894,962 1,947,136
Venture partners' deficit in venture. . . . . . . . . . . . . . . . . . 2,465,079 2,469,936
------------ -----------
$ 36,234,651 35,848,308
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 316,282 306,980
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 1,205,546 946,999
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 280,013 280,863
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 2,769,903 2,214,272
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 4,571,744 3,749,114
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 205,587 222,631
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 33,000,256 33,082,901
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 37,777,587 37,054,646
------------ -----------
Venture partners' subordinated equity in venture. . . . . . . . . . . . 1,510,744 1,631,431
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 1,065,807 1,069,065
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (7,991,708) (7,978,262)
------------ -----------
(6,924,901) (6,908,197)
------------ -----------
Limited partners (60,505 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 54,676,276 54,676,276
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 49,298,252 49,376,449
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (100,103,307) (99,982,297)
------------ -----------
3,871,221 4,070,428
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . (3,053,680) (2,837,769)
------------ -----------
$ 36,234,651 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 MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------- -----------
<S> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,772,525 2,808,084
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,839 90,671
----------- ----------
2,868,364 2,898,755
----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . . . . . . . . . . 884,649 943,011
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581,092 576,709
Property operating expenses . . . . . . . . . . . . . . . . . . . . . 1,352,227 1,373,971
Professional services . . . . . . . . . . . . . . . . . . . . . . . . 49,531 40,219
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . 58,064 41,753
General and administrative. . . . . . . . . . . . . . . . . . . . . . 47,273 23,915
----------- ----------
2,972,836 2,999,578
----------- ----------
Operating earnings (loss) . . . . . . . . . . . . . . . . . . (104,472) (100,823)
Venture partners' share of ventures' operations . . . . . . . . . . . . 23,017 38,721
----------- ----------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . $ (81,455) (62,102)
=========== ==========
Net earnings (loss) per limited partnership interest. . . . . $ (1.29) (.99)
=========== ==========
Cash distributions per limited partnership interest . . . . . $ 2.00 2.00
=========== ==========
<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
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (81,455) (62,102)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581,092 576,709
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 58,064 41,753
Amortization of discounts on long-term debt . . . . . . . . . . . . . . 55,658 52,910
Venture partners' share of ventures' operations . . . . . . . . . . . . (23,017) (38,721)
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 281,358 (29,646)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,058 3,837
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . (459,121) 145,064
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,547 (88,639)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (850) (777)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 555,631 99,474
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (17,044) 17,130
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,212,921 716,992
------------ -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments. . . . . . -- 1,733,649
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (35,705) (3,861)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (37,332) (61,352)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (73,037) 1,668,436
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (129,001) (118,000)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (92,813) (56,475)
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (121,010) (121,010)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (13,446) (13,446)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (356,270) (308,931)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . 783,614 2,076,497
Cash and cash equivalents, beginning of year. . . . . . . . . . . 6,182,420 3,483,861
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . $ 6,966,034 5,560,358
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 829,841 890,878
============ ===========
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
MARCH 31, 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 March 31, 1996 and for the three months ended March 31, 1996 and 1995
are as follows:
Unpaid at
March 31,
1996 1995 1996
------ ------ -------------
Reimbursement (at cost) for
out-of-pocket expenses. . . $1,343 2,524 --
====== ====== =======
ONE WOODFIELD LAKE
One Woodfield Lake office building currently operates in a market
which is characterized by low occupancies and net effective rent levels.
The Partnership must escrow any cash flow due to the terms of the current
property indebtedness (as modified and extended in 1995). An amount of
$42,435 has been escrowed with the lender as of the date of this report.
In 1997, tenant leases representing approximately 26% of the property will
expire. There can be no assurance that the expiring tenant space will be
renewed. Any resulting vacancy and any subsequent releasing costs would
likely adversely affect property cash flows. Should the property not
produce sufficient cash flow to service its indebtedness, the joint venture
may decide not to commit any significant additional amounts of capital to
this property due to the fact that recovery of such amounts may be
unlikely. As a result, the joint venture would no longer have an ownership
interest in the property. In such event, the joint venture would recognize
a gain for financial reporting and Federal income tax reporting purposes
without any net realizable proceeds.
WESTDALE MALL
The mall continues to operate in a very competitive retail
environment. During the first quarter of 1996, occupancy has dropped to
85%. 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 March 31,
1996 and the three months ended March 31, 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.
At March 31, 1996, the Partnership and its consolidated ventures had
cash and cash equivalents of approximately $6,923,000. Such funds are
available for distributions to partners and working capital requirements of
which approximately $1,400,000 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 cash and cash equivalents at March 31, 1996 as
compared to December 31, 1995 is primarily due to cash being held for
capital improvements at the Westdale investment property.
The increase in escrow deposits and the related accrued real estate
taxes at March 31, 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.
The decrease in mortgage and other interest for the three months ended
March 31, 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%
2. Westdale Mall
Cedar Rapids, Iowa. . . 93% 94% 94% 94% 85%
</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: May 10, 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: May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,966,034
<SECURITIES> 0
<RECEIVABLES> 1,889,762
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,855,796
<PP&E> 60,649,971
<DEPRECIATION> 38,736,861
<TOTAL-ASSETS> 36,234,651
<CURRENT-LIABILITIES> 4,571,744
<BONDS> 33,000,256
<COMMON> 0
0
0
<OTHER-SE> (3,053,680)
<TOTAL-LIABILITY-AND-EQUITY> 36,234,651
<SALES> 2,772,525
<TOTAL-REVENUES> 2,868,364
<CGS> 0
<TOTAL-COSTS> 1,991,383
<OTHER-EXPENSES> 96,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 884,649
<INCOME-PRETAX> (104,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (81,455)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,455)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> (1.29)
</TABLE>
