SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
June 30, 2000 Commission File No. 0-9555
JMB INCOME PROPERTIES, LTD. - VII
(Exact name of registrant as specified in its charter)
Illinois 36-2999384
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
------
JUNE 30, DECEMBER 31,
2000 1999
------------ -----------
Current assets:
Cash and cash equivalents. . . . . . $ 5,844,862 6,815,891
Interest, rents and
other receivables. . . . . . . . . 402,775 859,993
Escrow deposits and restricted
funds. . . . . . . . . . . . . . . 426,925 399,978
------------ -----------
Total current assets . . . . 6,674,562 8,075,862
------------ -----------
Investment properties, at cost:
Buildings and improvements . . . . . -- 42,587,581
------------ -----------
Less accumulated depreciation. . . . -- 33,245,964
------------ -----------
Total investment proper-
ties, net of accumulated
depreciation . . . . . . . -- 9,341,617
Investment property held for
sale or disposition. . . . . . . . . 8,837,819 --
Deferred expenses . . . . . . . . . . 767,631 808,567
Accrued rents receivable . . . . . . . 855,569 888,233
Venture partner's deficit in venture . 683,741 404,271
------------ -----------
$ 17,819,322 19,518,550
============ ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
2000 1999
------------ -----------
Current liabilities:
Current portion of long-term debt. . $ 525,369 494,921
Accounts payable . . . . . . . . . . 533,784 1,607,586
Accrued interest . . . . . . . . . . 5,583 1,434
Accrued real estate taxes. . . . . . 1,479,845 1,418,382
------------ -----------
Total current liabilities. . 2,544,581 3,522,323
Tenant security deposits . . . . . . . 26,351 56,397
Long-term debt, less current portion . 18,780,376 19,077,717
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . 21,351,308 22,656,437
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . 1,000 1,000
Cumulative net earnings (loss) . . 2,151,994 2,157,003
Cumulative cash distributions. . . (9,348,583) (9,321,696)
------------ -----------
(7,195,589) (7,163,693)
------------ -----------
Limited partners:
Capital contributions,
net of offering costs. . . . . . 54,676,276 54,676,276
Cumulative net earnings (loss) . . 54,838,134 54,958,357
Cumulative cash distributions. . . (105,850,807) (105,608,827)
------------ -----------
3,663,603 4,025,806
------------ -----------
Total partners' capital
accounts (deficits). . . . (3,531,986) (3,137,887)
------------ -----------
$ 17,819,322 19,518,550
============ ===========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . $ 1,558,417 2,257,838 3,596,405 4,321,183
Interest income. . . . . . . . . . . . . . . . . 93,987 63,459 180,569 118,542
----------- ----------- ---------- ----------
1,652,404 2,321,297 3,776,974 4,439,725
----------- ----------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . 581,802 577,622 1,146,300 1,105,656
Depreciation . . . . . . . . . . . . . . . . . . -- -- 461,188 --
Property operating expenses. . . . . . . . . . . 1,109,862 1,358,162 2,198,454 2,431,732
Professional services. . . . . . . . . . . . . . 22,610 14,707 43,810 78,329
Amortization of deferred expenses. . . . . . . . 36,705 37,357 73,089 74,715
General and administrative . . . . . . . . . . . 32,191 64,197 65,621 113,086
----------- ---------- ---------- ----------
1,783,170 2,052,045 3,988,462 3,803,518
----------- ---------- ---------- ----------
(130,766) 269,252 (211,488) 636,207
Venture partners' share of
ventures' operations . . . . . . . . . . . . . . 53,182 (104,517) 86,256 (255,370)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . $ (77,584) 164,735 (125,232) 380,837
=========== ========== ========== ==========
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . . . $ (1.23) 2.61 (1.99) 6.04
=========== ========== ========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . . . . . $ 4.00 4.00 4.00 4.00
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- -----------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . $ (125,232) 380,837
Items not requiring (providing) cash
or cash equivalents:
Depreciation . . . . . . . . . . . . . 461,188 --
Amortization of deferred expenses. . . 73,089 74,715
Amortization of discounts on
long-term debt . . . . . . . . . . . 132,712 127,906
Venture partners' share of ventures'
operations . . . . . . . . . . . . . (86,256) 255,370
Changes in:
Interest, rents and other
receivables. . . . . . . . . . . . . 489,882 332,826
Escrow deposits and restricted
funds. . . . . . . . . . . . . . . . (26,947) (36,319)
Accounts payable . . . . . . . . . . . (1,025,802) 138,204
Accrued interest . . . . . . . . . . . 4,149 (57,995)
Accrued real estate taxes. . . . . . . 61,463 95,355
Tenant security deposits . . . . . . . (30,046) --
---------- -----------
Net cash provided by (used in)
operating activities . . . . . (71,800) 1,310,899
---------- -----------
Cash flows from investing activities:
Additions to investment properties . . . (5,390) (118,061)
Payment of deferred expenses . . . . . . (32,153) (2,986)
---------- -----------
Net cash provided by (used in)
investing activities . . . . . (37,543) (121,047)
---------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . (399,605) (373,298)
Distributions to venture partners. . . . (193,214) (10,343)
Distributions to limited partners. . . . (241,980) (242,000)
Distributions to general partners. . . . (26,887) (26,889)
---------- -----------
Net cash provided by (used in)
financing activities . . . . . (861,686) (652,530)
---------- -----------
Net increase (decrease) in
cash and cash equivalents. . . (971,029) 537,322
Cash and cash equivalents,
beginning of year. . . . . . . 6,815,891 5,611,560
---------- -----------
Cash and cash equivalents,
end of period. . . . . . . . . $5,844,862 6,148,882
========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and
other interest . . . . . . . . . . . . $1,032,363 1,065,834
========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
JMB INCOME PROPERTIES, LTD. - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
GENERAL
Readers of this report should refer to the Partnership's audited
financial statements for the year ended December 31, 1999 which are
included in the Partnership's 1999 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121") as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell such property and active marketing activity has commenced or is
expected to commence in the near term. In accordance with SFAS 121, any
properties identified as "held for sale or disposition" are no longer
depreciated. As of December 31, 1996, the Partnership committed to a plan
to sell the Westdale Mall investment property or its interest in the
property. On June 30, 1999, the Partnership's plan for sale or disposal
had not resulted in a sale or disposition. As a result, the Partnership
made an adjustment to record the depreciation expense as of June 30, 1999
that would have been recognized had the Westdale Mall investment property
not been considered to be "held for sale or disposition". Further, the
Partnership began recording depreciation expense for the Westdale Mall
investment property commencing July 1, 1999. However, as discussed below,
in the second quarter of 2000, the Partnership began negotiations to sell
its interest in the Westdale Mall to its venture partner. Therefore, the
Partnership has reclassified the Westdale Mall as held for sale as of
April 1, 2000 and has stopped recording depreciation as of that date. The
results of operations, net of the venture partner's share for the Westdale
Mall for the six months ended June 30, 2000 and 1999 were ($158,094) and
$468,058, respectively.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership may be
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of June 30,
2000 and for the six months ended June 30, 2000 and 1999 are as follows:
<PAGE>
Unpaid at
June 30,
2000 1999 2000
------ ------ ----------
Insurance commissions. . . . . . . . . $ 647 553 --
Reimbursement (at cost) for
out-of-pocket expenses . . . . . . . 2,779 -- --
------ ----- -----
$3,426 553 --
====== ===== =====
WESTDALE MALL
Westdale Mall continues to operate in a very competitive retail
environment, which may adversely affect its operations due to various
circumstances. Econofoods, which occupied 48,400 square feet of space
(approximately 7% of the total leaseable area) on the periphery of the
site, started construction of a new, larger store across the street from
Westdale Mall, and moved out upon expiration of its lease on July 21, 2000.
The operator of the cinema at Westdale Mall opened a 12-screen multiplex
cinema in a nearby development. Furthermore, Westdale Mall is subject to
greater competition, particularly from a shopping center that opened
approximately 20 miles from Westdale Mall. During the second quarter of
2000, occupancy increased to 94%, and 1% of the property is leased to
tenants on a month-to-month basis. As leases expire, lease renewals and
new leases are likely to be at rental rates equal to or slightly below
rates on existing leases. In addition, new leases will likely require
expenditures for lease commissions 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 began negotiations with its venture partner to sell
its interest in the venture in the second quarter of 2000. On July 31,
2000, the Partnership sold its interest in the Westdale Mall to the venture
partner for $2,000,000 in cash, subject to closing costs, broker
commissions and prorations. This amount approximates the sales proceeds
the Partnership would have received if the property had been sold for a
price of approximately $30,700,000 and the existing debt of approximately
$22,800,000 and a ground lease obligation of approximately $5,900,000 had
been paid. Though nominally a 64.7% partner in Westdale Associates,
preference levels under the partnership agreement provide that 100% of the
net proceeds would have been distributed to the Partnership at a deemed
selling price of $30,700,000. The Partnership received cash proceeds from
this sale of approximately $1,612,000 (after closing costs and broker
commissions, but before prorations of approximately $240,000). The
Partnership has no liability for any representations, warranties or
covenants in connection with the sale of its interest in Westdale
Associates. The property was classified as held for sale as of April 1,
2000, and therefore, has not been subject to continued depreciation as of
that date for financial reporting purposes. The Partnership expects to
recognize a gain on sale of approximately $10,100,000 and $8,500,000 for
financial reporting and Federal income tax purposes, respectively, in 2000.
ADJUSTMENTS
In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 2000
and the three and six months ended June 30, 2000 and 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying consolidated
financial statements for additional information concerning the
Partnership's investments.
At June 30, 2000, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $5,845,000. Such funds are
available for distributions to partners (including venture partners), and
working capital requirements. The Partnership and its consolidated venture
had currently budgeted in 2000 approximately $500,000 for tenant
improvements and other capital expenditures at Westdale Mall of which
approximately $171,000 was incurred prior to the July 31, 2000 sale. 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 distributions were expected to be through net cash generated
by the Partnership's remaining investment property through its sale date
and through the sale of such investment. The Partnership's venture's
mortgage obligations were all non-recourse.
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.
In April 1999, some of the Limited Partners received from an
unaffiliated third party an unsolicited tender offer to purchase up to 4.9%
of the Interests in the Partnership at $100 per interest. The Special
Committee advised the Limited Partners to accept this offer. Additionally,
in June 2000 and June 1999, some of the Limited Partners in the Partnership
received from an unaffiliated third party unsolicited tender offers to
purchase up to 2.0% and 4.78%, respectively, of the Interests in the
Partnership at an amount of $50 per Interest. The Special Committee
recommended against acceptance of these offers on the basis that, among
other things, the offer price was inadequate. All such offers have
expired. As of the date of this report, the Partnership is aware that, in
the aggregate, 12.20% 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.
As discussed in the Notes, the Partnership sold its interest in the
Westdale Mall on July 31, 2000. The Partnership received cash proceeds
from this sale of approximately $1,612,000 (after closing costs and broker
commissions).
The Partnership Agreement provides that the General Partners, subject
to certain limitations, 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
<PAGE>
as reduced by sale or refinancing proceeds previously distributed)
commencing with the fourth fiscal quarter of 1980. Two-thirds of the 3%
distribution to the General Partners 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 which was satisfied by the August 1993 cash distribution.
Therefore, the proceeds from the sale of the Partnership's interest in the
Property will be distributed first to the General Partners in an amount
equal to 3% (approximately $920,000) of the deemed selling price of
$30,700,000, and then the remaining proceeds (net after expenses and
retained working capital) will be distributed 85% to the Limited Partners
and 15% to the General Partners.
Due to the sale of the Partnership's interest in its last remaining
investment property, the affairs of the Partnership are expected to be
wound up as soon as practicable, which is currently expected to be no later
than December 31, 2000, barring unforseen developments. However, there can
be no assurance that this will occur.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents and the corresponding
decrease in accounts payable is primarily due to the timing of the payments
for certain operating expenses at the Westdale Mall.
The decrease in interest, rents and other receivables at June 30, 2000
as compared to December 31, 1999 is primarily due to a refund and
adjustment relating to the over-billing of real estate tax recoveries to a
major tenant.
The decrease in rental income for the three and six months ended
June 30, 2000 as compared to the three and six months ended June 30, 1999
is primarily due to a refund and adjustment relating to the over-billing of
real estate tax recoveries to a major tenant. Additionally, the decrease
is also due to a decrease in recoverable common area expenses due to such
factors as an unusually mild winter in 2000 and higher janitorial costs in
1999 due to start-up contract costs in the second quarter of 1999.
The increase in interest income for the three and six months ended
June 30, 2000 as compared to the three and six months ended June 30, 1999
is primarily due to the timing of the receipt of certain receivables in
1999 and the timing of the payment of certain payables in 2000 resulting in
a higher average cash balance during the first six months of 2000 as
compared to the first six months of 1999 at Westdale Mall.
The increase in depreciation for the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999 is due to the commencement
of continued depreciation at the Westdale Mall beginning July 1, 1999 as a
result of the Partnership no longer classifying this property as held for
sale or disposition until April 1, 2000.
The decrease in property operating expenses for the three and six
months ended June 30, 2000 as compared to the three and six months ended
June 30, 1999 is primarily due to a decrease in common area expenses due to
such factors as an unusually mild winter in 2000 and higher janitorial
costs in 1999 due to start-up contract costs in the second quarter of 1999.
The decrease in professional services for the six months ended
June 30, 2000 as compared to the six months ended June 30, 1999 is
primarily due to consulting fees and legal fees incurred in 1999 related to
marketing costs for the potential sale of the Westdale Mall.
The decrease in general and administrative expense for the three and
six months ended June 30, 2000 as compared to the three and six months
ended June 30, 1999 is primarily due to marketing expenses in 1999 for the
potential sale of the Westdale Mall.
<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Partnership's
investment property owned during 2000.
<CAPTION>
1999 2000
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Westdale Mall
Cedar Rapids, Iowa (a) . . . 89% 91% 91% 94% 93% 94%
<FN>
(a) The percentage represents physical occupancy which includes temporary tenants.
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A. The Prospectus of the Partnership dated January 18,
1980, as supplemented May 23, 1980, as filed with the Commission pursuant
to Rules 424(b) and 424(c), is hereby incorporated herein by reference to
Exhibit 3-A to the Partnership's Report for December 31, 1992 on Form 10-K
(File No. 0-9555) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which is hereby incorporated
herein by reference to Exhibit 3-B to the Partnership's Report for December
31, 1992 on Form 10-K (File No. 0-9555) dated March 19, 1993.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between AGPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1996 on Form 10-Q, as amended, (File
No. 0-9555) dated November 8, 1996.
4-A. Mortgage loan agreement relating to the purchase by the
Partnership of an interest in Westdale Mall in Cedar Rapids, Iowa is hereby
incorporated herein by reference to the Partnership's Report on Form 8-K
(File No. 0-9555) dated October 3, 1980.
27. Financial Data Schedule
--------------------
(b) No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - VII
BY: JMB Realty Corporation
(Managing General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
By: GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: August 14, 2000
