SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1997 Commission file number 0-9555
JMB INCOME PROPERTIES, LTD. - VII
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-2999384
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . . 6
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . 7
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . 11
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . . . 14
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures . . . . . . . . . . . . . 37
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 37
Item 11. Executive Compensation. . . . . . . . . . . . . 40
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 41
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 42
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 42
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . 44
i
<PAGE>
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report. Capitalized
terms used herein, but not defined, have the same meanings as used in the
Notes.
The registrant, JMB Income Properties Ltd.-VII, (the "Partnership"),
is a limited partnership formed in late 1978 and currently governed by the
Revised Uniform Limited Partnership Act of the State of Illinois to invest
in improved income-producing commercial and residential real property. The
Partnership sold $60,500,000 in Limited Partnership Interests (the
"Interests") commencing on January 18, 1980 pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933 (Registration No.
2-65390). A total of 60,505 Interests were sold to the public at $1,000
per Interest. The offering closed on May 30, 1980. No Limited Partner has
made any additional capital contribution after such date. The Limited
Partners of the Partnership share in their portion of the benefits of
ownership of the Partnership's real property investments according to the
number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title and/or through joint venture
partnership interests. The Partnership's remaining real estate investment
is located in the state of Iowa. A presentation of information about
industry segments, geographic regions, raw materials, or seasonality is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole. Pursuant to the Partnership
agreement, the Partnership is required to terminate no later than October
31, 2028. The Partnership is self-liquidating in nature. At sale of a
particular property, the net proceeds, if any, are generally distributed or
reinvested in existing properties rather than invested in acquiring
additional properties. As discussed further in Item 7, the Partnership
currently expects to conduct an orderly liquidation of its remaining
investment as quickly as practicable and to wind up its affairs not later
than December 31, 1999, barring any unforeseen economic developments.
The Partnership has made the real property investments set forth in
the following table:
<PAGE>
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1997,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (e) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Two Penn Center Plaza
office building
Philadelphia,
Pennsylvania . . . . . 502,000 sq. ft. 12-1-79 6-25-86 fee ownership of land and
n.r.a. improvements (through
joint venture partnership)
Huron Mall
shopping center
Huron, South Dakota. . 155,000 sq. ft. 5-1-80 1-21-88 fee ownership of improve-
g.l.a. ments and ground lease-
hold interest in land
One Woodfield Lake
office building
Schaumburg, Illinois . 204,000 sq. ft. 6-4-80 10-10-97 fee ownership of land and
n.r.a. improvements (through joint
venture partnership) (c)(g)
Westdale Mall
shopping center
Cedar Rapids, Iowa . . 733,000 sq. ft. 9-19-80 20% fee ownership of improve-
g.l.a. ments and ground lease-
hold interest in land
(through joint venture
partnership) (c)(d)(f)
Clackamas Town Center
shopping center
Clackamas County,
Oregon . . . . . . . . 435,000 sq. ft. 1-20-81 1-30-92 fee ownership of improve-
g.l.a. ments and ground lease-
hold interest in land
(through joint venture
partnership)
Oklahoma Distribution
Center
industrial warehouse
Oklahoma City,
Oklahoma . . . . . . . 465,000 sq. ft. 3-12-81 7-1-92 fee ownership of land and
improvements
<PAGE>
<FN>
- ---------------
(a) The computation of this percentage for the property held at
December 31, 1997 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b) Reference is made to the Notes and to Schedule III filed with
this annual report for the current outstanding principal balances and a
description of the long-term mortgage indebtedness secured by the
Partnership's real property investment.
(c) Reference is made to the Notes for a description of the joint
venture partnership through which the Partnership made this real property
investment.
(d) Reference is made to the Notes for a description of the
leasehold interest, under a ground lease, in the land on which this real
property investment is situated.
(e) Reference is made to Item 8 - Schedule III filed with this
annual report for further information concerning real estate taxes and
depreciation.
(f) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.
(g) The Partnership's interest in the property was redeemed.
Reference is made to the Notes for a further description of such
transaction.
</TABLE>
<PAGE>
The Partnership's remaining real property investment is subject to
competition from similar types of properties (including properties owned by
affiliates of the General Partners or properties owned by certain of the
joint venture partners) in the vicinity in which it is located. Such
competition is generally for the retention of existing tenants.
Additionally, the Partnership is in competition for new tenants. Reference
is made to Item 7 below for a discussion of competitive conditions and
future capital improvement plans of the Partnership and its investment
property. Approximate occupancy levels for properties are set forth in
Item 2 below to which reference is hereby made. The Partnership maintains
the suitability and competitiveness of its remaining property in its market
primarily on the basis of effective rents, tenant allowances and service
provided to tenants. In the opinion of the Managing General Partner of the
Partnership, the investment property held at December 31, 1997 is
adequately insured.
On October 10, 1997, the unaffiliated venture partner in the One
Woodfield Lake office building caused the venture to redeem the
Partnership's interest in the venture. Reference is made to the Notes for
a further description of such transaction.
Reference is made to the Notes for a schedule of minimum lease
payments to be received in each of the next five years, and in the
aggregate thereafter, under leases in effect at the Westdale Mall shopping
center as of December 31, 1997.
The Partnership has no employees.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns or owned through joint venture partnerships the
properties or interests in the properties referred to under Item 1 above to
which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations and
approximate physical occupancy levels by quarter during fiscal years 1997
and 1996 for the Partnership's investment properties owned during 1997:
<PAGE>
<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
Principal At At At At At At At At
Business 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> <C>
1. One Woodfield Lake
Schaumburg, Insurance,
Illinois. . . . . . . . . . Business Machines 89% 90% 98% 98% 100% 100% 100% N/A
2. Westdale Mall
Cedar Rapids, Iowa. . . . . Retail 85% 88% 89% 91% 91% 87% 90% 94%
<FN>
- ----------
Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the Partnership's interest in the property was redeemed and was not owned by the
Partnership at the end of the period.
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1997 and 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 5,237 record holders of the 60,500
Interests outstanding of the Partnership. There is no public market for
Interests and it is not anticipated that a public market for Interests will
develop. Upon request, the Managing General Partner may provide
information relating to a prospective transfer of Interests to an investor
desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspects of the transaction, will
be subject to negotiation by the investor. There are certain conditions
and restrictions on the transfer of Interests, including, among other
things, the requirement that the substitution of a transferee of Interests
as a Limited Partner of the Partnership be subject to the written consent
of the Managing General Partner, which, may be granted or withheld in its
sole and absolute discretion. The rights of a transferee of Interests who
does not become a substituted Limited Partner will be limited to the rights
to receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Managing General Partner
has been received by the Managing General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses from operations of the
Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the holder of
Interests, without regard to the results of Partnership's operations during
particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
holder of the Interests as of the last day of the quarterly period with
respect to which distribution is made.
Reference is made to Item 6 below for a discussion of cash
distributions made to the Limited Partners.
Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1997 1996 1995 1994 1993
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . . $ 11,605,543 11,913,468 12,143,574 11,561,134 11,342,933
============ ========== ========== ========== ==========
Earnings (loss) before
gain on redemption of
Partnership's interest
in investment property . . $ 1,485,589 (452,971) (303,584) (531,183) (607,671)
Gain on redemption of
Partnership's interest
in investment property . . 7,347,738 -- -- -- --
------------ ---------- ---------- ---------- ----------
Net earnings (loss) . . . . $ 8,833,327 (452,971) (303,584) (531,183) (607,671)
============ ========== ========== ========== ==========
Net earnings (loss)
per Limited Partner
Interest (b):
Earnings (loss) before
gain on redemption
of Partnership's
interest in invest-
ment property . . . . . $ 23.57 (7.19) (4.82) (8.43) (9.64)
Gain on redemption
of Partnership's
interest in invest-
ment property. . . . . . 103.02 -- -- -- --
------------ ---------- ---------- ---------- ----------
Net earnings (loss) . . . . $ 126.59 (7.19) (4.82) (8.43) (9.64)
============ ========== ========== ========== ==========
Total assets. . . . . . . . $ 28,519,189 34,058,072 35,848,308 37,210,551 38,663,940
Long-term debt (net
of unamortized
discounts) . . . . . . . . $ 20,016,456 32,736,988 33,082,901 21,059,132 33,666,734
Cash distributions
per Interest (c) . . . . . $ 8.00 10.00 8.00 8.00 38.00
============ ========== ========== ========== ==========
<PAGE>
<FN>
- ---------------
(a) The above selected financial data should be read in
conjunction with the consolidated financial statements and the related
Notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based on the number
of Interests outstanding at the end of each period.
(c) Cash distributions from the Partnership are generally not
equal to Partnership's income (loss) for financial reporting or Federal
income tax purposes. Each Partner's taxable income (or loss) from the
Partnership in each year is equal to his allocable share of the taxable
income (loss) of the Partnership, without regard to the cash generated or
distributed by the Partnership. Accordingly, cash distributions to the
Limited Partners since the inception of the Partnership have not resulted
in taxable income to such Limited Partners and have therefore represented a
return of capital.
</TABLE>
<PAGE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997
<CAPTION>
Property
- --------
Westdale Mall: a) The gross leasable area ("GLA") occupancy rate and average base rent
per square foot as of December 31 for each of
the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1993 90% 7.50
1994 92% 7.72
1995 94% 7.74
1996 91% 7.66
1997 94% 7.21
<FN>
(1) Average gross base rent per square foot is based on GLA occupied
as of December 31 of each year.
(2) Gross base rents do not include tenant allowances or certain
other leasing concessions.
</TABLE>
<TABLE>
<CAPTION>
Scheduled
Lease
Base Rent Expiration Lease
b) Significant Tenants Square Feet Per Annum Date Renewal Option(s)
------------------- ----------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
J.C. Penney 147,439 $ 501,404 10/2009 3-5 Year Terms
(Department Store)
Younker Brothers
(Department Store) 100,000 219,000 2/2010 3-10 Year Terms
Peterson/Von Maur 100,000 515,775 9/2010 3-5 Year Terms
(Department Store)
EconoFoods 48,394 200,000 6/2000 2-5 Year Terms
(Grocery Store)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
c) The following table sets forth certain
information with respect to the expiration
of leases for the next ten years at the
Westdale Mall:
Annualized Percent of
Number of Approx. Total Base Rent Total 1997
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 8 11,824 271,454 5%
1999 16 67,899 696,655 14%
2000 14 78,809 785,951 16%
2001 6 25,921 316,964 6%
2002 12 31,436 480,012 10%
2003 7 20,637 348,333 7%
2004 5 14,805 263,494 5%
2005 8 46,353 555,030 11%
2006 5 6,908 208,083 4%
2007 2 3,027 63,016 1%
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item
1, the Partnership had approximately $54,700,000 (after deducting selling
expenses and other offering costs) with which to make investments in
income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments and for working capital reserves. A portion of such proceeds
was utilized to acquire the properties described in Item 1 above.
During 1996, 1997 and 1998, 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 $70 to $200 per Interest. The Partnership recommended
against acceptance of these offers on the basis that, among other things,
the offer price was inadequate. Such offers have expired with the
exception of one which is currently scheduled to expire in April 1998. As
of the date of this report, the Partnership is aware that, in the
aggregate, 9.16% 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.
At December 31, 1997, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $10,765,000. Of this amount,
$3,569,500 and $1,115,054 was distributed to the limited and general
Partners, respectively, in February 1998 as proceeds on the redemption in
October 1997 of the Partnership's interest in the One Woodfield Lake
limited partnership. Such remaining funds are available for distributions
to partners and for working capital requirements including costs expected
to be incurred for capital additions and tenant improvements at Westdale
Mall. The Partnership and its consolidated venture has currently budgeted
in 1998 approximately $600,000 for tenant improvements and other capital
expenditures at Westdale Mall, as discussed below. The Partnership's share
of such items in 1998 is currently budgeted to be approximately $400,000.
Actual amounts expended may vary depending on a number of factors including
actual leasing activity, results of property operations, the extent of
unaffiliated venture partner compliance with its obligation to share in the
funding of such requirements as discussed below, liquidity considerations
and other market conditions over the course of the year. The sources of
capital (in addition to the cash and cash equivalents noted above) for such
items and for both short-term and long-term future liquidity and distribu-
tions are expected to be through net cash generated by the Partnership's
remaining investment property and through the sale of such investment.
Reference is made to the Partnership's property specific discussions below.
The Partnership and its venture's mortgage obligations are all non-
recourse.
<PAGE>
ONE WOODFIELD LAKE
The Partnership had committed to a plan to sell its interest in the
property, and therefore, had classified the property as held for sale or
disposition as of December 31, 1996. On October 10, 1997, the Partnership
sold its interest to its unaffiliated venture partner. Reference is made
to the Notes for a further description of such transaction.
WESTDALE MALL
The mall continues to operate in a very competitive retail
environment. During 1997, occupancy increased to 94%, 14% of which 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. 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.
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 its share of this tenant allowance. The Partnership, in order
to retain this tenant, funded $277,830 of the $370,440 tenant allowance as
of December 31, 1997 and the remaining $92,610 in early 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.
GENERAL
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic, business interests or goals that
are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. In an effort to reduce Partnership operating expenses, the
Partnership elected to make semi-annual rather than quarterly distributions
of operating cash flow commencing with the 1996 distributions. The
Partnership has also sought loan modifications where appropriate. By
conserving working capital, the Partnership will be in a better position to
meet the future needs of its remaining property since the availability of
satisfactory outside sources of capital may be limited given the
portfolio's current debt levels. Due to these factors, the Partnership has
<PAGE>
held its remaining investment property longer than originally anticipated
in an effort to maximize the return to the Limited Partners. However,
after reviewing the remaining property and the marketplace in which it
operates, the General Partners of the Partnership expect to be able to
conduct an orderly liquidation of this remaining investment 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
Significant fluctuations in the accompanying consolidated financial
statements not otherwise reported are primarily due to the redemption on
October 10, 1997 of the Partnership's interest in the One Woodfield Lake
Limited Partnership.
The increase in cash and cash equivalents at December 31, 1997 as
compared to December 31, 1996 was primarily due to the retention and
investment of proceeds from the October redemption of One Woodfield Lake,
as discussed above.
The increase in interest, rents and other receivables at December 31,
1997 as compared to December 31, 1996 is primarily due to the timing of
rental collections at the Westdale Mall.
The increase in venture partners' subordinated equity in venture at
December 31, 1997 as compared to December 31, 1996 is primarily due to no
additional depreciation expense being incurred on the Westdale Mall
investment property as a result of the property being classified as "held
for sale or disposition" in accordance with SFAS 121 on December 31, 1996,
and therefore, is not subject to continued depreciation as of that date.
In addition to Westdale Mall, One Woodfield Lake investment property was
also classified as "held for sale or disposition" on December 31, 1996.
Accordingly, the decreases in depreciation expense and venture partners'
share of venture's operations for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is primarily due to no further
depreciation expense being incurred on these properties.
The decrease in rental income and the related increase in venture
partner's share of ventures' loss for 1996 as compared to 1995 is primarily
due to the write off in 1996 of previously accrued rents receivable due to
the 1996 extension and modification of a major tenant lease at the One
Woodfield Lake investment property.
The increase in interest income for the year ended December 31, 1996
as compared to the year ended December 31, 1995 is primarily due to an
increase in the Partnership's average investment balance in U.S. Government
obligations and other investments in 1996 and to the higher yields received
in 1996 related to these investments held by the Partnership.
The increase in professional services for the year ended December 31,
1996 as compared to the year ended December 31, 1995 is primarily due to
expenses incurred in connection with tender offer matters, as discussed
above.
The gain on redemption of Partnership's interest in investment
property for the year ended December 31, 1997 is due to the sale of the
Partnership's interest in the One Woodfield Lake office building on
October 10, 1997.
<PAGE>
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's remaining property have escalation clauses covering increases
in the cost of operating and maintaining the property as well as real
estate taxes. Therefore, there should be little effect on operating
earnings if the property remains substantially occupied. In addition,
substantially all of the leases at the Partnership's remaining property
contain provisions which entitle the Partnership to participate in gross
receipts of tenants above fixed minimum amounts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations, years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Schedule
--------
Consolidated Real Estate and Accumulated Depreciation III
Schedules not filed:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB INCOME PROPERTIES, LTD. - VII:
We have audited the consolidated financial statements of JMB Income
Properties, Ltd. - VII (a limited partnership) and consolidated ventures as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB Income Properties, Ltd. - VII and consolidated ventures at December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 10,764,988 6,876,686
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 1,136,079 976,723
Escrow deposits and restricted funds. . . . . . . . . . . . . . . . . . 139,040 731,964
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 12,040,107 8,585,373
------------ -----------
Properties held for sale or disposition . . . . . . . . . . . . . . . . . 14,609,918 20,460,067
------------ -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 906,601 1,228,677
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . 962,563 1,226,540
Venture partners' deficit in venture. . . . . . . . . . . . . . . . . . . -- 2,557,415
------------ -----------
$ 28,519,189 34,058,072
============ ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 389,783 345,913
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 836,648 1,136,735
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,588 277,345
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 1,222,176 2,219,287
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 2,677,195 3,979,280
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 228,528 184,601
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 20,016,456 32,736,988
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 22,922,179 36,900,869
------------ -----------
Venture partners' subordinated equity in venture. . . . . . . . . . . . . 1,264,277 1,120,019
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . . 2,225,424 1,050,946
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (8,099,086) (8,045,308)
------------ -----------
(5,872,662) (6,993,362)
------------ -----------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . . . 54,676,276 54,676,276
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . . 56,600,446 48,941,597
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (101,071,327) (100,587,327)
------------ -----------
10,205,395 3,030,546
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . 4,332,733 (3,962,816)
------------ -----------
$ 28,519,189 34,058,072
============ ===========
<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
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $ 11,218,737 11,519,926 11,836,675
Interest income . . . . . . . . . . . . . . . . . . 386,806 393,542 306,899
------------ ------------ ------------
11,605,543 11,913,468 12,143,574
------------ ------------ ------------
Expenses:
Mortgage and other interest . . . . . . . . . . . . 3,242,853 3,524,875 3,710,008
Depreciation. . . . . . . . . . . . . . . . . . . . -- 2,343,167 2,320,865
Property operating expenses . . . . . . . . . . . . 5,699,169 6,173,609 6,135,852
Professional services . . . . . . . . . . . . . . . 125,818 136,115 97,224
Amortization of deferred expenses . . . . . . . . . 259,899 235,779 210,956
General and administrative. . . . . . . . . . . . . 144,555 141,272 71,819
------------ ------------ ------------
9,472,294 12,554,817 12,546,724
------------ ------------ ------------
2,133,249 (641,349) (403,150)
Venture partners' share of
venture's operations. . . . . . . . . . . . . . . . (647,660) 188,378 99,566
------------ ------------ ------------
Net earnings (loss) before gain on
redemption of Partnership's interest
in investment property . . . . . . . . . . . 1,485,589 (452,971) (303,584)
Gain on redemption of Partnership's
interest in investment property . . . . . . . . . . 7,347,738 -- --
------------ ------------ ------------
Net earnings (loss). . . . . . . . . . . . . . $ 8,833,327 (452,971) (303,584)
============ ============ ============
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1997 1996 1995
------------ ------------ ------------
Net earnings (loss) per
limited partnership interest:
Net earnings (loss) before gain on
redemption of Partnership's interest
in investment property. . . . . . . . . . $ 23.57 (7.19) (4.82)
Gain on redemption of Partnership's
interest in investment property . . . . . 103.02 -- --
------------ ------------ ------------
$ 126.59 (7.19) (4.82)
============ ============ ============
<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 PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit) at
December 31,
1994 . . . . . $1,000 1,081,208 (7,924,480) (6,842,272) 54,676,276 49,667,890 (99,498,257) 4,845,909
Cash distri-
butions
($8.00
per limited
partnership
interest). . . -- -- (53,782) (53,782) -- -- (484,040) (484,040)
Net earnings
(loss) . . . . -- (12,143) -- (12,143) -- (291,441) -- (291,441)
------- ---------- ------------ ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1995 . . . . . 1,000 1,069,065 (7,978,262) (6,908,197) 54,676,276 49,376,449 (99,982,297) 4,070,428
Cash distri-
butions
($10.00)
per limited
partnership
interest). . . -- -- (67,046) (67,046) -- -- (605,030) (605,030)
Net earnings
(loss) . . . . -- (18,119) -- (18,119) -- (434,852) -- (434,852)
------- ---------- ------------ ---------- ---------- ---------- ----------- ----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
Balance
(deficit) at
December 31,
1996 . . . . . 1,000 1,050,946 (8,045,308) (6,993,362) 54,676,276 48,941,597 (100,587,327) 3,030,546
Cash distri-
butions
($8.00
per limited
partnership
interest). . . -- -- (53,778) (53,778) -- -- (484,000) (484,000)
Net earnings
(loss) . . . . -- 1,174,478 -- 1,174,478 -- 7,658,849 -- 7,658,849
------- ---------- ------------ ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1997 . . . . . $ 1,000 2,225,424 (8,099,086) (5,872,662) 54,676,276 56,600,446 (101,071,327) 10,205,395
======= ========== ============ ========== ========== ========== =========== ==========
<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
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . $ 8,833,327 (452,971) (303,584)
Items not requiring (providing) cash
or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . -- 2,343,167 2,320,865
Amortization of deferred expenses . . . . . . . . . 259,899 235,779 210,956
Amortization of discounts on
long-term debt. . . . . . . . . . . . . . . . . . 237,587 226,736 215,762
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . . 647,660 (188,378) (99,566)
Gain on redemption of Partnership's
interest in investment property . . . . . . . . . (7,347,738)
Changes in:
Interest, rents and other receivables . . . . . . . (129,785) 993,290 (110,319)
Escrow deposits and restricted funds. . . . . . . . 592,924 (317,498) 383,648
Accounts payable. . . . . . . . . . . . . . . . . . (300,087) 189,736 (84,082)
Accrued interest. . . . . . . . . . . . . . . . . . (48,757) (3,518) (3,217)
Accrued real estate taxes . . . . . . . . . . . . . (997,111) 5,015 38,400
Tenant security deposits. . . . . . . . . . . . . . 43,927 (38,030) 130,202
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . 1,791,846 2,993,328 2,699,065
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities of
short-term investments. . . . . . . . . . . . . . . -- -- 1,956,495
Additions to investment properties
(net of related payables) . . . . . . . . . . . . . (635,583) (344,737) (118,281)
Payment of deferred expenses. . . . . . . . . . . . . (440,169) (338,020) (331,734)
Cash proceeds from redemption of
Partnership's interest in investment
property, net of expenses . . . . . . . . . . . . 4,681,786 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . . 3,606,034 (682,757) 1,506,480
----------- ----------- -----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . (583,500) (533,716) (488,192)
Distributions to venture partners . . . . . . . . . . (388,300) (410,513) (480,972)
Distributions to limited partners . . . . . . . . . . (484,000) (605,030) (484,040)
Distributions to general partners . . . . . . . . . . (53,778) (67,046) (53,782)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . . (1,509,578) (1,616,305) (1,506,986)
----------- ----------- -----------
Net increase in cash
and cash equivalents. . . . . . . . . . . . 3,888,302 694,266 2,698,559
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . 6,876,686 6,182,420 3,483,861
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . . $10,764,988 6,876,686 6,182,420
=========== =========== ===========
Supplemental disclosure of
cash flow information:
Cash paid for mortgage and
other interest. . . . . . . . . . . . . . . . . . . $ 3,054,023 3,301,657 3,497,463
=========== =========== ===========
Non-cash investing and financing activities:
Redemption of Partnership's interest in
investment property:
Gain on redemption of Partnership's
interest in investment property . . . . . . . . $ 7,347,738 -- --
Basis in investment property. . . . . . . . . . . (2,665,952) -- --
----------- ----------- -----------
Cash proceeds from redemption of
Partnership's interest in
property, net of expenses . . . . . . . . . $ 4,681,786 -- --
=========== =========== ===========
Net assets and venture partner's capital in
venture written off upon redemption of
interest in investment property . . . . . . . . . . $ 3,915,817 -- --
=========== =========== ===========
<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
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (through a joint venture) one real estate
investment. Business activities consist of rentals to a variety of retail
companies as well as the ultimate sale or disposition of such real estate.
The Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio and wind up its affairs not later than
December 31, 1999.
The accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned ventures, One Woodfield
Lake ("Woodfield") (prior to the redemption of the Partnership's interest
in October 1997) and Westdale Associates ("Westdale"). The effect of all
transactions between the Partnership and the consolidated ventures has been
eliminated.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to reflect the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1997 and 1996 is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . . $ 28,519,189 15,247,086 34,058,072 705,034
Partners' capital accounts
(deficits):
General partners. . . . . . . . . . (5,872,662) (2,500,185) (6,993,362) (3,755,544)
Limited partners. . . . . . . . . . 10,205,395 12,207,089 3,030,546 4,412,427
Net earnings (loss):
General partners. . . . . . . . . . 1,174,478 1,309,137 (18,119) 13,251
Limited partners. . . . . . . . . . 7,658,849 8,278,662 (434,852) 318,036
Net earnings (loss)
per limited partner-
ship interest. . . . . . . . . . . . 126.59 136.84 (7.19) 5.26
=========== ========== ========== ==========
</TABLE>
<PAGE>
The net earnings (loss) per limited partnership interest is based upon
the limited partnership interests outstanding at the end of each period.
Deficit capital accounts will result, through the duration of the
Partnership, in net gain for financial reporting and Federal income tax
reporting purposes.
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. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. The
Partnership records amounts held in U.S. Government obligations at cost,
which approximates market. For the purposes of these statements, the
Partnership's policy is to consider all such amounts held with original
maturities of three months or less ($9,318,431 and $5,279,536 at December
31, 1997 and 1996, respectively) as cash equivalents, which includes
investments in an institutional mutual fund which holds U.S. Government
obligations, with any remaining amounts (generally with original maturities
of one year or less) reflected as short-term investments being held to
maturity.
Discounts provided on long-term mortgage notes are amortized over the
terms of the related notes using the interest method.
Deferred expenses consist primarily of loan fees and lease commissions
which are amortized over the terms stipulated in the related agreements or
over the terms of the related leases using the straight-line method.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrues
rental income for the full period of occupancy on a straight-line basis.
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 has been
required under applicable law to remit directly to the tax authorities
amounts representing other taxes or withholding from distributions paid to
partners.
The Partnership has acquired, either directly or through joint
ventures, two office buildings, three shopping centers and an industrial
warehouse as investments. Five properties have been sold by the
Partnership. The remaining property owned at December 31, 1997 was
operating. The cost of the investment property represents the total cost
to the Partnership and its ventures, plus miscellaneous acquisition costs.
Depreciation on the properties has been provided over the estimated
useful lives of the various components as follows:
YEARS
-----
Improvements (new)--straight-line or
150% declining balance. . . . . . . . . . . . . 5-35
Personal property (used)--straight-line or
150% declining balance. . . . . . . . . . . . . 5-10
Personal property (new)--straight-line or
200% declining balance. . . . . . . . . . . . . 5-10
====
<PAGE>
The investment property is pledged as security for the long-term debt,
for which there is no recourse to the Partnership.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
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. SFAS 121 requires that the Partnership record an
impairment loss on its properties to be held for investment whenever their
carrying value cannot be fully recovered through estimated undiscounted
future cash flows from their operations and sale. The amount of the
impairment loss to be recognized would be the difference between the
property's carrying value and the property's estimated fair value. 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.
Adjustments for impairment loss for such properties (subsequent to the date
of adoption of SFAS 121) are made in each period as necessary to report
these properties at the lower of carrying value or fair value less costs to
sell. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.
As of December 31, 1996, the Partnership committed to a plan to sell
the Westdale Mall and One Woodfield Lake investment properties.
Accordingly, these properties were classified at December 31, 1996 as held
for sale or disposition in the accompanying consolidated financial
statements. During 1997, the partnership's interest in the One Woodfield
Lake investment property was redeemed by the unaffiliated venture partner.
As of December 31, 1997, the Westdale Mall investment property remains
classified as held for sale or disposition in the accompanying consolidated
financial statements. The results of operations, net of venture partners'
share, for such properties were $1,436,514, ($563,217) and ($357,656),
respectively, for the years ended December 31, 1997, 1996 and 1995.
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. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only has general and limited partnership
interests, the Partnership will not experience any significant impact on
its consolidated financial statements.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1997 is a party to one operating joint
venture agreement. Pursuant to such agreement, the Partnership made
initial capital contributions of $9,850,000 (before legal and other
acquisition costs and its share of operating deficits as discussed below).
In general, the joint venture partners, who are either the sellers (or
their affiliates) of the property investments acquired, or parties that
have contributed an interest in the property developed, or were
subsequently admitted to the ventures, make no cash contributions to the
ventures, but their retention of an interest in the property, through the
joint venture, is taken into account in determining the purchase price of
the Partnership's interest, which is determined by arm's-length
negotiations. Under certain circumstances, either pursuant to the venture
agreements or due to the Partnership's obligations as a general partner,
the Partnership may be required to make additional cash contributions to
the ventures.
<PAGE>
The Partnership acquired, through the above venture, one regional
shopping mall. The joint venture partner (who was primarily responsible
for constructing the property) contributed any excess of cost over the
aggregate amount available from Partnership contributions and financing to
the extent such funds exceeded the aggregate costs, and was to retain such
excesses. The venture property is being financed under a long-term debt
arrangement as described below.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
INVESTMENT PROPERTIES
ONE WOODFIELD LAKE
The Partnership owned an 80% general partnership interest in an
existing joint venture whose sole investment was an office building in
Schaumburg, Illinois. The venture agreement, as amended, provided that the
Partnership had a cumulative annual preference in the distribution of net
cash receipts (as defined) of $546,000. The next $136,500 of annual net
cash receipts was to be distributed to the venture partners; any remaining
net cash receipts were to be distributed 80% to the Partnership and 20% to
the venture partners.
Operating deficits were to be funded 80% by the Partnership and 20% by
the joint venture partner. The Partnership and the joint venture partner
had executed an amendment to the venture agreement that specified that each
partner make contributions to the venture in their respective partnership
interests to fund the venture's operating deficits and provided for the
repayment of such contributions (as defined) prior to the distributions of
the cumulative annual preferences of net cash receipts. Operating profits
and losses were allocated 80% to the Partnership and 20% to the joint
venture partner.
An affiliate of the developer managed the property pursuant to a long-
term agreement which provided for a management fee of approximately $64,000
and $68,300 for 1997 and 1996, respectively, subject to annual increases
based upon a formula relating to the Consumer Price Index.
The long-term mortgage note secured by the One Woodfield Lake office
building matured on September 1, 1995. The joint venture signed an
extension of the maturity date of the mortgage loan until September 1, 1998
and a reduction in the interest rate. Though the monthly mortgage loan
payments declined as a result of this agreement, any excess cash flow, as
defined, was escrowed with the lender.
The Partnership approached the unaffiliated venture partners in One
Woodfield Lake with the intent to market and sell the property. Per the
One Woodfield Lake venture agreement, the unaffiliated venture partners in
One Woodfield Lake held a right of first opportunity to purchase the
Partnership's interest in the property. This resulted in negotiations with
the venture partners concerning the purchase of such interest.
Accordingly, on October 10, 1997, the unaffiliated venture partners caused
One Woodfield Lake to redeem and retire the Partnership's interest for a
redemption price of $4,730,744. The redemption price was based upon a
deemed sale price of the property of $17,500,000, which approximated the
price at which the Partnership intended to market the property to
unaffiliated third parties, less approximately $12,331,000 of existing debt
(from which the Partnership was released of all liability by the lender at
closing) and closing costs. The redemption of the Partnership's interest
resulted in a gain of $7,347,738 and $9,438,217 to the Partnership for
financial reporting purposes and Federal income tax reporting purposes,
respectively, in 1997. In addition, in connection with the redemption of
<PAGE>
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.
WESTDALE MALL
The Partnership owns, through a joint venture partnership with the
seller, an interest in Westdale Mall shopping center. The venture
agreement provides that the first $1,267,500 of net cash receipts shall be
distributed 64.7% to the Partnership and 35.3% to the venture partner; all
remaining annual net cash receipts are to be distributed 45.5% to the
Partnership, 24.8% to the venture partner and 29.7% to the ground lessor as
additional rent. The Partnership has a preferred position (related to the
Partnership's cash investment in the venture) with respect to distributions
of sale or refinancing proceeds from the venture, after payment to the
ground lessor of the amounts described below. As required by the venture
agreement, any deficit from operations is to be funded 45.5% by the
Partnership and 54.5% by the venture partner.
Venture operating profits and losses are allocated 64.7% to the
Partnership and 35.3% to the venture partner.
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 its share of this tenant allowance. The Partnership, in order
to retain this tenant, funded $277,830 of the $370,440 tenant allowance as
of December 31, 1997 and the remaining $92,610 in early 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.
Effective August 1, 1994, the venture partner transferred its interest
in Westdale Mall to another company affiliated with the venture partner's
parent company. The property is managed by the new venture partner
pursuant to an assignment of the previous agreement which provides for a
management fee equal to a portion of the tenants' contributions toward
operating costs plus the lesser of $120,000 per year or 3% of the minimum
rent received from tenants.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and
1996:
1997 1996
----------- -----------
8.25% (9.875% prior to September 1,
1995) mortgage note, secured
by an office building in Schaumburg,
Illinois; balance payable in monthly
installments (interest only) of
$84,774 from September 1, 1995
through scheduled maturity on
September 1, 1998 (refinanced by
the unaffiliated venture partner
upon redemption of the Partnership's
interest in the property in 1997) . . $ -- 12,330,749
<PAGE>
1997 1996
----------- -----------
8-3/4% - 10-3/8% mortgage notes,
due at various dates from
March 1, 2010 to July 1, 2015;
secured by a leasehold and
shopping center in Cedar Rapids,
Iowa; payable in monthly
installments aggregating
$234,841 (including interest).
Balances are net of $4,159,246
in 1997 and $4,396,833 in 1996
of unamortized discounts based
on imputed interest rates of 12% . . . 20,406,239 20,752,152
----------- ----------
Total debt . . . . . . . . . . . . 20,406,239 33,082,901
Less current portion
of long-term debt . . . . . . . . 389,783 345,913
----------- ----------
Total long-term debt . . . . . . . $20,016,456 32,736,988
=========== ==========
Five-year maturities of long-term debt (net of unamortized discounts)
are summarized as follows:
1998. . . . . . . . . . . $ 389,783
1999. . . . . . . . . . . 439,217
2000. . . . . . . . . . . 494,921
2001. . . . . . . . . . . 557,690
2002. . . . . . . . . . . 628,419
===========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties are to be allocated to the General
Partners to the greater of 1% of such profits or the amount of cash
distributable to the General Partners from any such sale or refinancing (as
described below). Losses from the sale or refinancing of investment
properties are to be allocated 1% to the General Partners. The remaining
sale or refinancing profits and losses will be allocated to the Limited
Partners.
An amendment to the Partnership Agreement, effective January 1, 1991,
generally provides that notwithstanding any allocation contained in the
Agreement, if at any time profits are realized by the Partnership, any
current or anticipated event that would cause the deficit balance in
absolute amount in the Capital Account of the General Partners to be
greater than their share of the Partnership's indebtedness (as defined)
after such event, then the allocation of Profits to the General Partners
shall be increased to the extent necessary to cause the deficit balance in
the Capital Account of the General Partners to be no less than their
respective shares of the Partnership's indebtedness after such event. In
general, the effect of this amendment is to allow the deferral of the
recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu-
tions except under certain limited circumstances upon termination of the
Partnership. Distributions of "cash flow" of the Partnership are allocated
90% to the Limited Partners and 10% to the General Partners. However,
portions of such distributions to the General Partners are subordinated to
the Limited Partners' receipt of a stipulated return on capital.
<PAGE>
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership an amount equal to 3% of the selling price, and that the
remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, the Limited Partners shall receive 100% of such net sale proceeds
until the Limited Partners (i) have received cash distributions of sale or
refinancing proceeds in an amount equal to the Limited Partners' aggregate
initial capital investment in the Partnership and (ii) have received
cumulative cash distributions from the Partnership's operations which, when
combined with sale or refinancing proceeds previously distributed, equal a
6% annual return on the Limited Partners' average capital investment for
each year (their initial capital investment as reduced by sale or
refinancing proceeds previously distributed) commencing with the fourth
fiscal quarter of 1980. Two-thirds of the 3% General Partner distribution
discussed above is further subordinated to the Limited Partners receiving
out of sales proceeds an amount equal to 110% of their initial capital
investment in the Partnership. The Limited Partners have received cash
distributions that satisfied the requirements in (i) and (ii) above. Also,
the Limited Partners have received an amount equal to 110% of their initial
capital investment with the August 1993 cash distribution. Therefore,
pursuant to the distribution levels described above, the General Partners
received $1,115,054 in early 1998 as a distribution from the redemption of
the Partnership's interest in the One Woodfield Lake limited partnership.
Including this distribution, a total of approximately $5,600,000 of sale
proceeds have been distributed to the General Partners.
LEASES - AS PROPERTY LESSOR
At December 31, 1997, the Partnership's and its consolidated ventures'
principal asset consisted of one shopping center. The Partnership has
determined that all leases relating to this property are properly
classified as operating leases; therefore rental income is reported when
earned and the cost of the property, excluding the cost of the land, was
depreciated over its estimated useful life until the property was
classified as held for sale or disposition as discussed above. Leases with
tenants range in term from one to twenty-seven years and provide for fixed
minimum rent and partial reimbursement of operating costs. In addition,
leases with shopping center tenants provide for additional rent based upon
percentages of tenants' sales volume. A substantial portion of the ability
of retail tenants to honor their leases is dependent upon the retail
economic sector.
Cost and accumulated depreciation of the leased asset is summarized as
follows at December 31, 1997:
Shopping Center:
Cost . . . . . . . . . . . . . . $42,339,927
Accumulated depreciation . . . . 27,730,009
-----------
$14,609,918
===========
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1998. . . . . . . . . . . . . . . . $ 4,919,266
1999. . . . . . . . . . . . . . . . 4,456,136
2000. . . . . . . . . . . . . . . . 3,524,083
2001. . . . . . . . . . . . . . . . 3,153,653
2002. . . . . . . . . . . . . . . . 2,756,765
Thereafter. . . . . . . . . . . . . 10,281,752
-----------
Total. . . . . . . . . . . . $29,091,655
===========
<PAGE>
Contingent rent (based on sales by property tenants) included in con-
solidated rental income was as follows for the years ended December 31,
1997, 1996 and 1995:
1995. . . . . . . . . . . . . . . . $656,128
1996. . . . . . . . . . . . . . . . 793,567
1997. . . . . . . . . . . . . . . . 948,163
========
LEASES - PROPERTY LESSEE
The following lease agreement has been determined to be an operating
lease.
The Westdale venture leases the land underlying the Cedar Rapids, Iowa
shopping center from the Partnership's venture partner. The lease has a
remaining term of approximately 37 years with options to extend the lease
for two additional ten-year periods. The lease requires the venture to pay
all costs and expenses of the property, including maintenance, insurance
and real estate taxes. The lease provides for annual base rent of $848,900
plus additional rent based upon gross income from certain tenants and
annual cash flow in excess of specified levels as described in the Notes.
The lease further provides that upon sale of the Westdale Mall shopping
center the Westdale venture may require the lessor to convey a portion of
the leased land to the purchaser as part of the sale. As consideration for
such conveyance, the lessor is entitled to receive the first $5,872,000 of
net sales proceeds plus 29.7% of any net sales proceeds in excess of
$19,784,000.
Total rental expense for the years ended December 31, 1997, 1996 and
1995 under the above operating leases was $1,117,898, $1,080,250 and
$1,071,906, respectively, and consisted substantially of minimum rent.
Future minimum rental commitments under the above operating lease are
as follows:
1998. . . . . . . . . . . . . . . . $ 848,900
1999. . . . . . . . . . . . . . . . 848,900
2000. . . . . . . . . . . . . . . . 848,900
2001. . . . . . . . . . . . . . . . 848,900
2002. . . . . . . . . . . . . . . . 848,900
Thereafter. . . . . . . . . . . . . 27,436,887
-----------
Total. . . . . . . . . . . . . $31,681,387
===========
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 December 31, 1997, 1996 and 1995 are as follows:
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
------ ------ ------ ------------
Reimbursement (at cost) for
other out-of-pocket expenses. . $1,508 3,992 10,481 --
------ ------ ------ ------
$1,508 3,992 10,481 --
====== ====== ====== ======
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
------------------------- -------------- ------------------------------------
LAND AND BUILDINGS BUILDINGS BUILDINGS
LEASEHOLD AND AND AND
ENCUMBRANCE INTEREST IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL (D)
----------- ----------- ------------ --------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Cedar Rapids,
Iowa (C) . . $20,406,239 -- 35,020,531 7,319,396 -- (F) 42,339,927 42,339,927
=========== ========= ========== ========== ========= ========== ==========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Cedar Rapids,
Iowa (C) . . . . . . . . . . . . . . $27,730,009 1980 09/19/80 5-35 years 1,130,430
=========== =========
<FN>
- ------------------
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the
property, including amounts incurred subsequent to acquisition which were contemplated at the
time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1997 for Federal income tax
purposes was $37,946,167.
(C) The property is owned and operated by a joint venture.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(D) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . $ 60,959,003 60,614,266 60,495,985
Additions during period . . . . . . . . 635,583 344,737 118,281
Reduction during period . . . . . . . . (19,254,659) -- --
------------ ------------ ------------
Balance at end of period. . . . . . . . $ 42,339,927 60,959,003 60,614,266
============ ============ ============
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . $ 40,498,936 38,155,769 35,834,904
Depreciation expense. . . . . . . . . . -- 2,343,167 2,320,865
Reduction in accumulated depreciation . (12,768,927) -- --
------------ ------------ ------------
Balance at end of period. . . . . . . . $ 27,730,009 40,498,936 38,155,769
============ ============ ============
<FN>
(F) Property operated under ground lease.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during
fiscal years 1997 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which is owned directly or indirectly, by certain of
its officers, directors, members of their families and affiliates. JMB has
responsibility for all aspects of the Partnership's operations, subject to
the requirement that sales of real property must be approved by the
Associate General Partner of the Partnership, AGPP Associates, L.P., an
Illinois limited partnership with JMB as the sole general partner. The
limited partners of the Associate General Partner are generally officers,
directors and affiliates of JMB or its affiliates. The Partnership is
subject to certain conflicts of interest arising out of its relationships
with the General Partners and their affiliates as well as the fact that the
General Partners and their affiliates are engaged in a range of real estate
activities. Certain services have been and may in the future be provided
to the Partnership or its investment properties by affiliates of the
General Partners, including property management services and insurance
brokerage services. In general, such services are to be provided on terms
no less favorable to the Partnership than could be obtained from
independent third parties and are otherwise subject to conditions and
restrictions contained in the Partnership Agreement. The Partnership
Agreement permits the General Partners and their affiliates to provide
services to, and otherwise deal and do business with, persons who may be
engaged in transactions with the Partnership, and permits the Partnership
to borrow from, purchase goods and services from, and otherwise to do
business with, persons doing business with the General Partners or their
affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants and/or for the sale of property.
Because the timing and amount of cash distributions and profits and losses
of the Partnership may be affected by various determinations by the General
Partners under the Partnership Agreement, including whether and when to
sell a property, the establishment and maintenance of reasonable reserves,
the timing of expenditures and the allocation of certain tax items under
the Partnership Agreement, the General Partners may have a conflict of
interest with respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Managing
General Partner are as follows:
<PAGE>
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President and 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Managing General Partner to be held on
June 3, 1998. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Managing General Partner to be held on June 3,
1998. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-XI
("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII
("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-
- -XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle
Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate
Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and
Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing
general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB
Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-X
("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB
Income Properties, Ltd.-XII ("JMB Income-XII"), and JMB Income Properties
Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing directors and officers are also officers and/or directors of
various affiliated companies of JMB, including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")), and Income
Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced
Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are
also partners, directly or indirectly, of certain partnerships which are
associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-VII, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage
Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income
Plus-II and IDS/BIG.
<PAGE>
The business experience during the past five years of each such
director and officer of the Managing General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 60) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October 1969. Mr. Malkin is also a director of Urban Shopping Centers,
Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment
trust in the business of owning, managing and developing shopping centers.
He is a Certified Public Accountant.
Neil G. Bluhm (age 60) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August 1970. Mr. Bluhm is also a principal of Walton Street Real Estate
Fund I, L.P. and a director of USC, Inc. He is a member of the Bar of the
State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 59) has been associated with JMB since June 1971
and served as an Executive Vice President of JMB until December of 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 56) has been associated with JMB since July
1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 64) has been associated with JMB since December
1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 51) has been associated with JMB since December
1970 and served as an Executive Vice President of JMB until December 1990.
Mr. Schreiber is President of Schreiber Investments, Inc., a company which
is engaged in the real estate investing business. He is also a senior
advisor and partner of Blackstone Real Estate Advisors L.P., an affiliate
of the Blackstone Group, L.P. Mr. Schreiber is also a director of USC,
Inc., a trustee of Amli Residential Property Trust and a director of a
number of investment companies advised or managed by T. Rowe Price
Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 48) has been associated with JMB since March
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 50) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 45) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 49) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 62) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of
the Partnership are entitled to receive a share of cash distributions, when
and as cash distributions are made to the Limited Partners, and a share of
profits or losses. Reference is also made to the Notes for a description
of such transactions, distributions and allocations. In 1997, 1996 and
1995 cash distributions of $53,778, $67,046 and $53,782 were paid,
respectively, to the General Partners. In addition, in February 1998, the
General Partners were paid $1,115,054 as a distribution from the redemption
of the Partnership's interest in the One Woodfield Lake limited
partnership.
The General Partners of the Partnership may be reimbursed for their
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's real property investments. In 1997, the
Managing General Partner was due reimbursement for such out-of-pocket
expenses in the amount of $1,508, all of which was paid as of December 31,
1997.
The Partnership is permitted to engage in various transactions
involving affiliates of the Managing General Partner of the Partnership and
its affiliates. The relationship of the Managing General Partner (and its
directors and officers) to its affiliates is set forth in Item 10 above and
Exhibit 21 hereto.
<PAGE>
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Managing General Partner, its officers and directors and the Associate General Partner own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 99 Interests Less than 1%
directly
Limited Partnership
Interests Managing General Partner, 99 Interests Less than 1%
its officers and directly
directors and the Associate
General Partner as a group
<FN>
No officer or director of the Managing General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning the ownership of the Managing General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Managing General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this report).
(2) 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.
3-B.* Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, which is hereby
incorporated herein by reference.
3-C. Acknowledgement of rights and duties of the
General Partners of the Partnership between ABPP Associates, L.P. (a
successor Associate General Partner of the Partnership) and JMB Realty
Corporation as of December 31, 1995 is 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 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 dated May 1, 1995 is incorporated
herein 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.
<PAGE>
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.
10-C. 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.
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule
----------------
* Previously filed as Exhibits 3-A and 3-B to the
Partnership's Report for December 31, 1992 on Form 10-K (File No. 0-9555)
and hereby incorporated herein by reference.
(b) The following report on Form 8-K was filed since the
beginning of the last quarter of the period covered by this report.
The Partnership's Report on Form 8-K (File No. 0-9555) for
October 10, 1997 (describing the redemption of its interest in the One
Woodfield Lake Limited Partnership) was filed. This Report was dated
October 27, 1997 and includes a discussion of the redemption (Item 2) and
narrative pro forma financial information with respect to the redemption
(Item 7).
No annual report for the fiscal year 1997 or proxy material has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership 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
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Managing General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1998
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1998
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1998
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1998
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1998
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1998
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1998
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----
3-A. The Prospectus of the Partnership
dated January 18, 1980 Yes
3-B. Amended and Restated Agreement
of Limited Partnership Yes
3-C. Acknowledgement of rights and
duties of the General Partners
of the Partnership Yes
4-A. Mortgage loan agreement
relating to One Woodfield Lake
Office Building Yes
4-B. Mortgage loan agreement
relating to Westdale Mall Yes
4-C. Mortgage loan modification
and no extension agreement
relating to the One Woodfield
Lake Office Building Yes
10-A. Acquisition documents
related to One Woodfield
Lake Office Building Yes
10-B. Acquisition documents
related to the Westdale Mall Yes
10-C. Redemption documents related
to the One Woodfield Lake
office building Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a general partner in Westdale Associates, an
Illinois general partnership which holds title to the Westdale Mall
Shopping Center. Reference is made to the Notes to Consolidated Financial
Statements filed with this annual report for a summary description of the
terms of certain of such partnership agreements. The Partnership's
interest in the foregoing joint venture partnerships, and the results of
their operations are included in the consolidated financial statements of
the Partnership filed with this annual report.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - VII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1997, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - VII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1997, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,764,988
<SECURITIES> 0
<RECEIVABLES> 1,275,119
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,040,107
<PP&E> 14,609,918
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,519,189
<CURRENT-LIABILITIES> 2,677,195
<BONDS> 20,016,456
<COMMON> 0
0
0
<OTHER-SE> 4,332,733
<TOTAL-LIABILITY-AND-EQUITY>28,519,189
<SALES> 11,218,737
<TOTAL-REVENUES> 11,605,543
<CGS> 0
<TOTAL-COSTS> 5,959,068
<OTHER-EXPENSES> 270,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,242,853
<INCOME-PRETAX> 2,133,249
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,485,589
<DISCONTINUED> 7,347,738
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,833,327
<EPS-PRIMARY> 126.59
<EPS-DILUTED> 126.59
</TABLE>
