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, 1998 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 [ ]
<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. . . . . . . . . . . . . . . 10
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 13
<PAGE>
<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, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 6,028,593 10,764,988
Interest, rents and other receivables . . . . . . . . . . . . . . . 1,053,598 1,136,079
Escrow deposits and restricted funds. . . . . . . . . . . . . . . . 162,379 139,040
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 7,244,570 12,040,107
------------ -----------
Investment properties held for sale or disposition. . . . . . . . . . . 14,709,918 14,609,918
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 907,653 906,601
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 893,261 962,563
------------ -----------
$ 23,755,402 28,519,189
============ ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1998 1997
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 401,594 389,783
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 885,513 836,648
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 203,175 228,588
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 903,067 1,222,176
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 2,393,349 2,677,195
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 237,364 228,528
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 19,915,942 20,016,456
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 22,546,655 22,922,179
------------ -----------
Venture partners' subordinated equity in venture. . . . . . . . . . . . 1,299,748 1,264,277
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 2,235,857 2,225,424
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (9,214,140) (8,099,086)
------------ -----------
(6,977,283) (5,872,662)
------------ -----------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . 54,676,276 54,676,276
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . 56,850,833 56,600,446
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (104,640,827) (101,071,327)
------------ -----------
6,886,282 10,205,395
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . (91,001) 4,332,733
------------ -----------
$ 23,755,402 28,519,189
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,954,285 2,848,106
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,559 84,486
----------- ----------
2,070,844 2,932,592
----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . . . . . . . . . . . . 590,406 875,268
Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . 942,892 1,622,422
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . 35,700 39,200
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . . 40,092 59,247
General and administrative. . . . . . . . . . . . . . . . . . . . . . . . 59,563 35,684
----------- ----------
1,668,653 2,631,821
----------- ----------
402,191 300,771
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (141,371) (113,979)
----------- ----------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 260,820 186,792
=========== ==========
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.14 2.96
=========== ==========
Cash distributions per
limited partnership
interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59.00 --
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,820 186,792
Items not requiring (providing) cash or cash equivalents:
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 40,092 59,247
Amortization of discounts on long-term debt . . . . . . . . . . . . . . 61,063 58,388
Venture partners' share of ventures' operations . . . . . . . . . . . . 141,371 113,979
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 151,783 (138,556)
Escrow deposits and restricted funds. . . . . . . . . . . . . . . . . . (23,339) (356,796)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,865 (72,766)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,413) (929)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . (319,109) 670,157
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 8,836 21,646
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 344,969 541,162
------------ -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (100,000) --
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (41,144) (20,052)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (141,144) (20,052)
------------ -----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (149,766) (141,034)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (105,900) (70,600)
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (3,569,500) --
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (1,115,054) --
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (4,940,220) (211,634)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . (4,736,395) 309,476
Cash and cash equivalents, beginning of year. . . . . . . . . . . 10,764,988 6,876,686
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . $ 6,028,593 7,186,162
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 554,756 816,881
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
GENERAL
Readers of this report should refer to the Partnership's audited
financial statements for the year ended December 31, 1997 which are
included in the Partnership's 1997 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 March 31, 1998, the Partnership and its consolidated
venture have previously committed to a plan to sell the Westdale Mall
investment property. Accordingly, the consolidated property has been
classified as held for sale or disposition in the accompanying consolidated
financial statements as of the date of such plan's adoption. The results
of operations, for the three months ended March 31, 1998 for Westdale Mall,
net of the venture partner's share, were $259,113. The results of
operations, for the three months ended March 31, 1997 for Westdale Mall and
the One Woodfield Lake investment property, net of the venture partners'
share, were $198,037.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership may be
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of March 31,
1998 and for the three months ended March 31, 1998 and 1997 are as follows:
Unpaid at
March 31,
1998 1997 1998
------ ----- -------------
Reimbursement (at cost) for
out-of-pocket expenses. . . $ -- 3,166 --
====== ===== =====
<PAGE>
WESTDALE MALL
Westdale Mall continues to operate in a very competitive retail
environment, which may adversely affect its operations due to various
circumstances. Montgomery Ward, which owns a store adjacent to Westdale
Mall, filed for bankruptcy in July 1997, and it is unknown at this time
whether its store will continue to operate. Econofoods, which occupies
48,400 square feet of space on the periphery of the site, has announced it
will open a new, larger store in an open air center across the street from
Westdale Mall; therefore, the Partnership believes that the tenant will
likely not renew its lease upon expiration in July 2000. The operator of
the cinema at Westdale Mall has also announced its intention to open a 12-
screen multiplex cinema in a nearby development. Furthermore, it is
expected that Westdale Mall will be subject to greater competition in the
future, particularly from a new shopping center that is scheduled to open
later this year approximately 20 miles from Westdale Mall. During the
first quarter of 1998, occupancy decreased to 88%, and 8% of the property
is leased to tenants on a month-to-month basis. 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 re-leasing will
result in a decrease in cash flow from operations over the near term. The
Partnership is also evaluating certain capital improvement projects and 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 working
capital sources and reserves. The Gap, a retail store located in the mall,
was provided with a tenant allowance of $370,440 in consideration for the
renewal of its lease. The unaffiliated venture partner in the joint
venture elected not to contribute it's share of this tenant allowance. The
Partnership, in order to retain this tenant, funded the tenant allowance
during 1997 and 1998. The tenant allowance contribution of $370,440, plus
15% simple interest per annum, has been added to the Partnership's
preferred position from any future sales proceeds pursuant to the Westdale
venture agreement.
In addition, the Partnership has committed to a plan to sell the
property or its interest in the property, and therefore, has classified the
property as held for sale or disposition as of December 31, 1996. The
property has not been subject to continued depreciation as of such date.
ONE WOODFIELD LAKE
On October 10, 1997, the unaffiliated venture partners caused One
Woodfield Lake to redeem and retire the Partnership's interest. In
connection with the redemption of the Partnership's interest and as is
customary in such transactions, the Partnership agreed to certain
representations and warranties in a maximum amount of $500,000, with a
stipulated survival period that expires June 15, 1998.
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,
1998 and the three months ended March 31, 1998 and 1997.
<PAGE>
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 consolidated
financial statements for additional information concerning the
Partnership's investments.
At March 31, 1998, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $6,029,000. Such funds are
available for distributions to partners (including venture partners),
potential obligations related to representations and warranties given
pursuant to the redemption of the Partnership's interest in One Woodfield
Lake and working capital requirements, of which approximately $1,271,000 is
being held at the Westdale Mall for costs to be incurred including capital
additions and tenant improvements to the extent not funded by the venturers
as described further in the notes to the accompanying financial statements.
During 1997, some of the Limited Partners 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 ranging from $100 to
$129 per Interest. The Partnership recommended against acceptance of these
offers on the basis that, among other things, the offer price was
inadequate. Additionally, in 1998, some of the Limited Partners in the
Partnership received from an unaffiliated third party an unsolicited tender
offer to purchase up to 3.29% of the Interests in the Partnership at an
amount of $200 per Interest. The Partnership remained neutral and
expressed no opinion in regards to acceptance of the offer. As of the date
of this report, all such offers have expired. As of the date of this
report, the Partnership is aware that, in the aggregate, 9.4% of the
outstanding Interests have been purchased by such unaffiliated third
parties either pursuant to such tender offers or through negotiated
purchases. In addition, 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 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.
The General Partners of the Partnership expect to be able to conduct
an orderly liquidation of its remaining investment property as quickly as
practicable. Therefore, the affairs of the Partnership are expected to be
wound up no later than December 31, 1999, barring unforeseen economic
developments.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents at March 31, 1998 as
compared to December 31, 1997 is primarily due to the distribution of sale
proceeds of $3,569,500 to the Limited Partners and $1,115,054 to the
General Partners as a result of the redemption on October 10, 1997 of the
Partnership's interest in the One Woodfield Lake Limited Partnership.
The decrease in accrued real estate taxes at March 31, 1998 as
compared to December 31, 1997 is due to the timing of payments of real
estate taxes at Westdale Mall.
<PAGE>
Significant fluctuations in the accompanying consolidated statements
of operations not otherwise reported herein are primarily due to the
redemption in October 1997 of the Partnership's interest in the One
Woodfield Lake Limited Partnership.
The increase in interest income for the three months ended March 31,
1998 as compared to the three months ended March 31, 1997 is primarily due
to the retention and investment, until late February 1998, of proceeds from
the redemption of One Woodfield Lake.
The increase in general and administrative expenses for the three
months ended March 31, 1998 as compared to the three months ended March 31,
1997 is primarily due to the payment of the Illinois Replacement Tax on the
proceeds received from the redemption of One Woodfield Lake.
<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
investment properties owned during 1998.
<CAPTION>
1997 1998
------------------------------------- ------------------------------
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. Westdale Mall
Cedar Rapids, Iowa. . . . . 91% 87% 90% 94% 88%
</TABLE>
<PAGE>
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.
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 the
Partnership's Report for September 30, 1996 on Form 10-Q, as amended, (File
No. 0-9555) dated November 8, 1996.
4-A. Mortgage loan agreement relating to the purchase by the
Partnership of an interest in Westdale Mall in Cedar Rapids, Iowa is hereby
incorporated herein by reference to the Partnership's Report on Form 8-K
(File No. 0-9555) dated October 3, 1980.
10-A. 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 herein by reference to the
Partnership's Report on Form 8-K (File No. 0-9555) dated October 3, 1980.
10-B. Partnership Interest Redemption Agreement and exhibits
thereto relating to the Partnership's redemption of its interest in the One
Woodfield Lake Limited Partnership are hereby incorporated herein by
reference to the Partnership's Report for October 10, 1997 on Form 8-K
(File No. 0-9555) dated October 27, 1997.
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.
JMB INCOME PROPERTIES, LTD. - VII
BY: JMB Realty Corporation
(Managing General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 13, 1998
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.
By: GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 13, 1998
<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, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,028,593
<SECURITIES> 0
<RECEIVABLES> 1,215,977
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,244,570
<PP&E> 14,709,918
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,755,402
<CURRENT-LIABILITIES> 2,393,349
<BONDS> 19,915,942
<COMMON> 0
0
0
<OTHER-SE> (91,001)
<TOTAL-LIABILITY-AND-EQUITY> 23,755,402
<SALES> 1,954,285
<TOTAL-REVENUES> 2,070,844
<CGS> 0
<TOTAL-COSTS> 982,984
<OTHER-EXPENSES> 95,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 590,406
<INCOME-PRETAX> 402,191
<INCOME-TAX> 0
<INCOME-CONTINUING> 260,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,820
<EPS-PRIMARY> 4.14
<EPS-DILUTED> 4.14
</TABLE>
