FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-14369
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0784852
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) 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>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash:
Unrestricted $ 451,627
Restricted--tenant security deposits 94,167
Investments 250,624
Accounts receivable 4,231
Escrow for taxes 116,644
Restricted escrows 165,769
Other assets 246,668
Investment properties:
Land $ 1,774,028
Buildings and related personal property 18,117,422
19,891,450
Less accumulated depreciation (8,190,792) 11,700,658
---------- ----------
$13,030,388
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 46,053
Tenant security deposits 93,756
Accrued taxes 135,461
Other liabilities 103,226
Mortgage notes payable 11,473,623
Partners' Capital (Deficit)
General partners $ (136,654)
Limited partners (17,343 units
issued and outstanding) 1,314,923 1,178,269
---------- ----------
$13,030,388
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
1
<PAGE>
b) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- -------- ------ ------
<S> <C> <C> <C> <C>
Revenues:
Rental income $847,169 $821,538 $2,453,724 $2,373,304
Other income 35,418 40,285 114,350 90,052
------- ------- --------- ---------
Total revenues 882,587 861,823 2,568,074 2,463,356
------- ------- --------- ---------
Expenses:
Operating 211,049 187,666 624,913 549,377
General and administrative 28,907 25,233 87,579 82,298
Property management fees 44,035 41,456 126,928 121,584
Maintenance 151,226 181,728 385,596 363,105
Depreciation 180,207 164,622 531,042 473,142
Interest 231,872 233,826 697,714 725,740
Property taxes 45,158 46,986 138,492 139,831
------- ------- --------- ---------
Total expenses 892,454 881,517 2,592,264 2,455,077
------- ------- --------- ---------
Loss on disposal of property -- (38,549) -- (38,549)
------- ------- --------- ---------
Net loss $ (9,867) $(58,243) $ (24,190) $ (30,270)
======= ======= ========= =========
Net loss allocated
to general partners (1%) $ (99) $ (582) $ (242) $ (303)
Net loss allocated
to limited partners (99%) (9,768) (57,661) (23,948) (29,967)
------- ------- --------- ---------
$ (9,867) $(58,243) $ (24,190) $ (30,270)
======= ======= ========= =========
Net loss per limited
partnership unit $ (.56) $ (3.32) $ (1.38) $ (1.73)
======= ======= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
c) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 17,343 $ 2,000 $17,343,000 $17,345,000
====== ======== ========== ==========
Partners' capital (deficit) at
December 31, 1994 17,343 $(136,412) $ 1,338,871 $ 1,202,459
Net loss for the nine months
ended September 30, 1995 -- (242) (23,948) (24,190)
------ -------- ---------- ----------
Partners' capital (deficit) at
September 30, 1995 17,343 $(136,654) $ 1,314,923 $ 1,178,269
====== ======== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
d) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (24,190) $ (30,270)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 531,042 473,142
Amortization of discounts and loan costs 32,141 28,816
Loss on disposal of property -- 38,549
Change in accounts:
Restricted cash (19,321) (2,100)
Accounts receivable (1,608) (6,816)
Escrows for taxes 32,745 50,784
Other assets 15,289 8,848
Accounts payable (36,679) (7,855)
Tenant security deposit liabilities 20,906 2,100
Accrued taxes (33,522) (33,076)
Other liabilities (3,537) 2,574
-------- ----------
Net cash provided by
operating activities 513,266 524,696
-------- ----------
Cash flows from investing activities:
Property improvements and replacements (504,204) (278,786)
Cash invested in short-term investments (350,624) --
Cash received from matured investments 100,000 --
Deposits to restricted escrows (7,026) (5,094)
Receipts from restricted escrows 12,428 33,081
Insurance proceeds from property damage 31,366 --
-------- ----------
Net cash used in investing
activities (718,060) (250,799)
-------- ----------
Cash flows from financing activities:
Payments on mortgage notes payable (114,992) (90,482)
Repayment of mortgage note payable -- (6,909,833)
Refinancing proceeds -- 6,910,000
Loan costs -- (61,714)
-------- ----------
Net cash used in financing
activities (114,992) (152,029)
-------- ----------
Net (decrease) increase in cash (319,786) 121,868
Cash at beginning of period 771,413 687,936
-------- ----------
Cash at end of period $ 451,627 $ 809,804
======== ==========
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 665,573 $ 696,924
======== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
e) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Corporate General Partner, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1995, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1995. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the year ended
December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
NOTE B - RECONCILIATION OF CASH FLOWS
The following is a reconciliation of the subtotal on the accompanying
statements of cash flows captioned "net cash provided by operating activities"
to "net cash used in operations", as defined in the partnership agreement.
However, "net cash used in operations" should not be considered an alternative
to net income as an indicator of the Partnership's operating performance or to
cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Net cash provided by operating activities $ 513,266 $ 524,696
Payments on mortgage notes payable (114,992) (90,482)
Property improvements and replacements (504,204) (278,786)
Changes in reserves for net operating
liabilities 25,727 (14,459)
Change in restricted escrows, net 5,402 27,987
Additional reserves -- (175,000)
-------- --------
Net cash used in operations $ (74,801) $ (6,044)
======== ========
</TABLE>
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve an additional $175,000 in 1994 to fund major capital
improvements.
5
<PAGE>
d) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - continued
(unaudited)
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following transactions with
Insignia Financial Group, Inc. and affiliates were charged to expense in 1995
and 1994:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Property management fees $126,928 $121,584
Data processing services 11,581 11,563
Marketing services 5,696 3,766
Reimbursement for services of affiliates 33,907 26,951
</TABLE>
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the Corporate General Partner. An affiliate
of the Corporate General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the Corporate General
Partner, who receives payments on these obligations from the agent. The amount
of the partnership's insurance premiums accruing to the benefit of the affiliate
of the Corporate General Partner by virtue of the agent's obligations is not
significant.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment
complexes. The following table sets forth the average occupancy of the
properties for the nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Average
Occupancy
Property 1995 1994
- -------- ---- ----
<C> <C> <C>
Hickory Ridge Apartments
Memphis, Tennessee 97% 97%
Governor's Park
Fort Collins, Colorado 89% 96%
</TABLE>
The Corporate General Partner attributes the decrease in occupancy at
Governor's Park to the completion of several new apartment complexes in the
area.
The Partnership's net loss for the nine months ended September 30, 1995, was
$24,190 with the third quarter having a loss of $9,867. The Partnership had net
losses of $30,270 and $58,243 for the corresponding periods of 1994. The
decrease in net loss is primarily attributable to the loss on disposal of
property in 1994 when fourteen roofs were replaced at Hickory Ridge. Also
contributing to this decrease was increased other income due to additional
tenant charges arising primarily from lease cancellation fees at both Governor's
Park and Hickory Ridge and increased interest income due to higher interest
rates in 1995. Offsetting these changes was an increase in operating expense due
to increased advertising and concessions at Governor's Park to combat the
competition from new apartment complexes in the area. Also contributing to the
increase in operating expenses was the hiring of a leasing agent at Governor's
Park and the hiring of a groundskeeper at Hickory Ridge to handle increasing
demands. In addition, depreciation expense increased due to the large amount of
additions at Governor's Park in 1994.
As part of the ongoing business plan of the Partnership, the Corporate
General Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Corporate General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Corporate General Partner will be able to sustain such a
plan.
At September 30, 1995, the Partnership reported unrestricted cash of
$451,627 versus $809,804 for the same period of 1994. Net cash provided by
operating activities decreased primarily due to the payment of fire damage
expenses accrued at December 31, 1994. In addition, restricted cash increased
due to a new policy at Governor's Park in 1995 requiring tenants to pay a $500
pet security deposit. This increase was offset by the related increase in
security deposit liabilities. Net cash used in investing activities increased
primarily due to increased
7
<PAGE>
property improvements in the first nine months of 1995 over the same period of
1994. These property improvements are mainly attributable to the vinyl siding
project at Hickory Ridge. In addition, the Partnership placed available cash
into short-term investments in 1995. Net cash invested in short-term investments
of approximately $250,000 also contributed to this change. In addition,
Governor's Park received insurance proceeds of approximately $31,000 in 1995
related to fire damage. Net cash used in financing activities decreased
primarily due to the loan costs incurred in the first quarter of 1994 related to
the refinancing of Hickory Ridge.
The Corporate General Partner budgeted $450,000 for vinyl siding and other
exterior renovations on approximately half of the buildings at Hickory Ridge
Apartments, which will be funded from property operations and Partnership
reserves. As of September 30, 1995, approximately $380,000 had been spent. In
addition, the second phase of the exterior renovation project, which includes
the remaining buildings at Hickory Ridge, is scheduled to begin in late 1995 or
early 1996, provided the Partnership maintains adequate cash reserves.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $11,473,623, net of discount, is amortized over varying periods
with required balloon payments ranging from March 1, 2001, to October 15, 2003,
at which time the properties will either be refinanced or sold. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales, and the availability of cash reserves. No cash distributions
were recorded in 1994 or during the first nine months of 1995. At this time, the
Corporate General Partner does not anticipate making a cash distribution during
1995.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Exhibit 27, Financial Data Schedule, is filed
as an exhibit to this report.
b) Reports on Form 8-K: None filed during the quarter ended
September 30, 1995.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
By: Shelter Realty VII Corporation
Corporate General Partner
By:/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By:/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: November 9, 1995
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 451,627
<SECURITIES> 250,624
<RECEIVABLES> 4,231
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 19,891,450
<DEPRECIATION> 8,190,792
<TOTAL-ASSETS> 13,030,388
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 11,473,623
<COMMON> 0
0
0
<OTHER-SE> 1,178,269
<TOTAL-LIABILITY-AND-EQUITY> 13,030,388
<SALES> 0
<TOTAL-REVENUES> 2,568,074
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,592,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 697,714
<INCOME-PRETAX> (24,190)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,190)
<EPS-PRIMARY> (1.38)
<EPS-DILUTED> 0
<FN>
<F1>
The Registrant has an unclassified balance sheet.
</FN>
<PAGE>
</TABLE>
