United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 0-11779
S/M REAL ESTATE FUND VII, LTD.
Exact Name of Registrant as Specified in its Charter
Texas 75-1845682
State or Other Jurisdiction I.R.S. Employer
of Incorporation or Organization Identification No.
5520 LBJ Freeway, Suite 500, Dallas, Texas 75240
Address of Principal Executive Offices Zip Code
(214) 404-7100
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets
At March 31, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 962,216 $ 962,216
Building and improvements 7,641,408 7,650,943
8,603,624 8,613,159
Less accumulated depreciation (4,547,985) (4,464,838)
4,055,639 4,148,321
Cash and cash equivalents 900,427 935,994
Cash held in escrow 153,360 105,901
Accounts receivable 407 801
Other assets 34,540 22,160
Total Assets $ 5,144,373 $ 5,213,177
Liabilities and Partners' Deficit
Liabilities:
Note payable $ 6,380,912 $ 6,380,912
Accounts payable:
Trade 3,916 25,139
Affiliates 40,664 40,664
Accrued interest payable 636,180 663,178
Accrued expenses and other liabilities 96,768 59,261
Total Liabilities 7,158,440 7,169,154
Partners' Deficit:
General Partners (106,753) (106,172)
Limited Partners (11,080 units outstanding) (1,907,314) (1,849,805)
Total Partners' Deficit (2,014,067) (1,955,977)
Total Liabilities and Partners' Deficit $ 5,144,373 $ 5,213,177
Statement of Partners' Deficit
For the three months ended March 31, 1996
General Limited
Partners Partners Total
Balance at December 31, 1995 $ (106,172) $ (1,849,805) $ (1,955,977)
Net loss (581) (57,509) (58,090)
Balance at March 31, 1996 $ (106,753) $ (1,907,314) $ (2,014,067)
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Rental $ 319,757 $ 319,720
Interest 11,723 13,306
Total income 331,480 333,026
Expenses
Property operating 165,078 165,822
Interest 120,574 121,550
Depreciation 92,682 92,980
General and administrative 11,236 12,340
Total expenses 389,570 392,692
Net Loss $ (58,090) $ (59,666)
Net Loss Allocated:
To the General Partners $ (581) $ (597)
To the Limited Partners (57,509) (59,069)
$ (58,090) $ (59,666)
Per limited partnership unit
(11,080 outstanding) $(5.19) $(5.33)
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net loss $ (58,090) $(59,666)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 92,682 92,980
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Cash held in escrow (47,459) (24,535)
Accounts receivable 394 (2,144)
Other assets (12,380) 8,813
Accounts payable (21,223) 10,919
Accrued interest payable (26,998) (22,997)
Accrued expenses and other liabilities 37,507 1,266
Net cash provided by (used for) operating activities (35,567) 4,636
Cash Flows From Investing Activities
Additions to investment property --- (47,897)
Net cash used for investing activities --- (47,897)
Net decrease in cash and cash equivalents (35,567) (43,261)
Cash and cash equivalents, beginning of period 935,994 933,424
Cash and cash equivalents, end of period $ 900,427 $ 890,163
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 147,572 $ 144,547
Supplemental Disclosure of Non-Cash Investing Activities
Write-off of fully depreciated building improvements $ 9,535 $ ---
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
partner's deficit for the three months ended March 31, 1996. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
The following significant events have occurred subsequent to fiscal year 1995,
or the following material contingencies exist and require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Mortgage Note Payable
The General Partners had commenced discussions in 1995 with the lender of the
mortgage secured by the Partnership's remaining property, Fifth Avenue
Apartments ("Fifth Avenue") as a result of the scheduled debt maturity on
December 31, 1995. Such discussions continued past the December 31, 1995
maturity date, with the lender agreeing to forbear from foreclosing on the
property while such discussions continued. As a result of the General
Partners' efforts, the Partnership entered into an agreement to extend the
maturity date of the loan to April 1, 1996. Simultaneously, the Partnership
entered into a tentative agreement with the lender to restructure and further
extend the mortgage which was scheduled to close on or before April 1, 1996.
However, the terms of the agreement could not be finalized by such date and
the mortgage, as extended, matured on April 1, 1996. The General Partners
were given formal notice that the lender intended to foreclose its lien
against the property at a foreclosure sale scheduled for May 7, 1996.
However, through continued discussions, the General Partners again reached an
agreement with the lender to postpone the scheduled foreclosure sale and
continue discussions through May 31, 1996. If an agreement to restructure
the mortgage on terms and conditions acceptable to the Partnership cannot be
reached on or before such date, the General Partners anticipate that the
lender will cause the property to be scheduled for foreclosure at a sale to
be held on June 4, 1996. As of March 31, 1996, the outstanding balance of
the mortgage secured by Fifth Avenue, including principal and accrued
interest, totalled $7,017,092. Commencing April 1, 1996, the Partnership
suspended monthly debt service payments as a result of ongoing negotiations
with the lender in an attempt to restructure and extend the mortgage. In
connection with the agreement to postpone the foreclosure sale, the
Partnership made debt service payments to the lender for the months of March
and April 1996.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
For the three months ended March 31, 1996, the Partnership had sufficient cash
to meet both operating expenses and minimum required debt service pursuant to
the Partnership's Modified Plan of Reorganization. The General Partners had
commenced discussions in 1995 with the lender of the mortgage secured by Fifth
Avenue as a result of the scheduled debt maturity on December 31, 1995. Such
discussions continued past the December 31, 1995 maturity date, with the lender
agreeing to forbear from foreclosing on the property while such discussions
continued. As a result of the General Partners' efforts, the Partnership
entered into an agreement to extend the maturity date of the loan to April 1,
1996. Simultaneously, the Partnership entered into a tentative agreement with
the lender to restructure and further extend the mortgage which was scheduled
to close on or before April 1, 1996. However, the terms of the agreement could
not be finalized by such date and the mortgage, as extended, matured on April
1, 1996. The General Partners were given formal notice that the lender
intended to foreclose its lien against the property at a foreclosure sale
scheduled for May 7, 1996. However, through continued discussions, the General
Partners again reached an agreement with the lender to postpone the scheduled
foreclosure sale and continue discussions through May 31, 1996. If an
agreement to restructure the mortgage on terms and conditions acceptable to the
Partnership cannot be reached on or before such date, the General Partners
anticipate that the lender will cause the property to be scheduled for
foreclosure at a sale to be held on June 4, 1996. As of March 31, 1996, the
outstanding balance of the mortgage secured by Fifth Avenue, including
principal and accrued interest, totalled $7,017,092. Commencing April 1, 1996,
the Partnership suspended monthly debt service payments as a result of ongoing
negotiations with the lender in an attempt to restructure and extend the
mortgage. In connection with the agreement to postpone the foreclosure sale,
the Partnership made debt service payments to the lender for the months of
March and April 1996.
Cash and cash equivalents totalled $900,427 at March 31, 1996, compared to
$935,994 at December 31, 1995. The $35,567 decrease is primarily attributable
to cash used for operating activities.
Cash held in escrow increased from $105,901 at December 31, 1995 to $153,360 at
March 31, 1996. The $47,459 increase is primarily attributable to escrow
contributions for insurance and real estate taxes.
Other assets increased from $22,160 at December 31, 1995 to $34,540 at March
31, 1996. The increase is due to legal fees and other costs incurred by the
Partnership associated with the remodification negotiations with the lender as
discussed above.
Accounts payable totalled $44,580 at March 31, 1996, compared to $65,803 at
December 31, 1995. The decrease is primarily attributable to the payment of
previously outstanding repair and maintenance costs and general and
administrative expenses.
Accrued interest payable totalled $636,180 at March 31, 1996, compared to
$663,178 at December 31, 1995. The decrease is a result of interest payments
made on the Partnership's mortgage obligation during the first three months of
1996.
Accrued expenses and other liabilities totalled $96,768 at March 31, 1996,
compared to $59,261 at December 31, 1995. The increase is primarily
attributable to an accrual for real estate taxes during the first quarter of
1996.
Results of Operations
For the three months ended March 31, 1996, Partnership operations resulted in a
net loss of $58,090, largely unchanged from a net loss of $59,666 for the
corresponding period in 1995.
Rental income at Fifth Avenue totalled $319,757 for the three months ended
March 31, 1996, largely unchanged from $319,720 for the corresponding period in
1995. Occupancy at Fifth Avenue averaged approximately 93% for the three
months ended March 31, 1996, compared to approximately 94% for the
corresponding period in 1995. The average rental income per occupied square
foot at the property was $8.16 for the three months ended March 31, 1996,
compared to $8.07 for the corresponding period in 1995.
Total expenses for the three months ended March 31, 1996 were $389,570, largely
unchanged from $392,692 for the corresponding period in 1995.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
S/M REAL ESTATE FUND VII, LTD.
BY: SM7 APARTMENT INVESTORS INC.
General Partner
Date: May 13, 1996 BY: /s/ Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: May 13, 1996 BY: /s/ Daniel M. Palmier
Name: Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
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<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1996
<CASH> 1,053,787
<SECURITIES> 000
<RECEIVABLES> 407
<ALLOWANCES> 000
<INVENTORY> 000
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<PP&E> 8,603,624
<DEPRECIATION> 4,547,985
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000
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<OTHER-SE> (2,014,067)
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<SALES> 319,757
<TOTAL-REVENUES> 331,480
<CGS> 000
<TOTAL-COSTS> 165,078
<OTHER-EXPENSES> 103,918
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 120,574
<INCOME-PRETAX> (58,090)
<INCOME-TAX> 000
<INCOME-CONTINUING> (58,090)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (58,090)
<EPS-PRIMARY> (5.19)
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