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 June 30, 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 0-14369
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 (864) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 871,958
Restricted--tenant security deposits 88,832
Accounts receivable 1,871
Escrow for taxes 80,207
Restricted escrows 81,419
Other assets 227,023
Investment properties:
Land $ 1,774,028
Buildings and related personal property 18,534,164
20,308,192
Less accumulated depreciation (8,746,182) 11,562,010
$12,913,320
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 72,172
Tenant security deposits 89,175
Accrued taxes 90,384
Other liabilities 100,462
Mortgage notes payable 11,357,826
Partners' Capital (Deficit)
General partners $ (136,404)
Limited partners (17,343 units
issued and outstanding) 1,339,705 1,203,301
$12,913,320
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 878,757 $ 809,894 $1,729,406 $1,606,555
Other income 33,926 44,875 71,617 78,932
Total revenues 912,683 854,769 1,801,023 1,685,487
Expenses:
Operating 241,548 280,288 483,373 496,757
General and administrative 30,471 30,513 68,193 58,672
Maintenance 171,020 153,271 252,900 234,370
Depreciation 187,844 179,303 370,182 350,835
Interest 229,675 232,575 460,096 465,842
Property taxes 42,852 45,149 87,359 93,334
Total expenses 903,410 921,099 1,722,103 1,699,810
Net income (loss) $ 9,273 $ (66,330) $ 78,920 $ (14,323)
Net income (loss) allocated
to general partners (1%) $ 93 $ (663) $ 789 $ (143)
Net income (loss) allocated
to limited partners (99%) 9,180 (65,667) 78,131 (14,180)
$ 9,273 $ (66,330) $ 78,920 $ (14,323)
Net income (loss) per limited
partnership unit $ .52 $ (3.79) $ 4.50 $ (.82)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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, 1995 17,343 $(137,193) $ 1,261,574 $ 1,124,381
Net income for the six
months ended June 30, 1996 -- 789 78,131 78,920
Partners' capital (deficit)
at June 30, 1996 17,343 $(136,404) $ 1,339,705 $ 1,203,301
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 78,920 $ (14,323)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 370,182 350,835
Amortization of discounts and loan costs 21,635 21,399
Change in accounts:
Restricted cash 1,930 (11,121)
Accounts receivable 2,328 (1,779)
Escrows for taxes 80,519 76,890
Other assets 10,428 8,974
Accounts payable 36,622 62,582
Tenant security deposit liabilities (1,930) 14,284
Accrued taxes (84,800) (78,680)
Other liabilities 3,764 10,551
Net cash provided by operating activities 519,598 439,612
Cash flows from investing activities:
Property improvements and replacements (267,498) (379,927)
Deposits to restricted escrows (2,197) (4,806)
Receipts from restricted escrows 24,295 4,428
Insurance proceeds from property damage -- 31,366
Net cash used in investing activities (245,400) (348,939)
Cash flows from financing activities:
Payments on mortgage notes payable (81,916) (75,932)
Net cash used in financing activities (81,916) (75,932)
Net increase in cash 192,282 14,741
Cash and cash equivalents at beginning of period 679,676 771,413
Cash and cash equivalents at end of period $ 871,958 $ 786,154
Supplemental disclosure of cash flow information:
Cash paid for interest $ 438,461 $ 443,443
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED 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 Article 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 six month periods ended June
30, 1996, are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1996. 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, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks and
Certificates of Deposit with original maturities less than 90 days. At certain
times, the amount of cash deposited at a bank may exceed the limit on insured
deposits.
Restricted cash - tenant security deposits - The Partnership requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged the unit and is current on rental payments.
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.
Note B - Reconciliation of Cash Flows - continued
Six Months Ended
June 30,
1996 1995
Net cash provided by operating activities $ 519,598 $ 439,612
Payments on mortgage notes payable (81,916) (75,932)
Property improvements and replacements (267,498) (379,927)
Change in restricted escrows, net 22,098 (378)
Changes in reserves for net operating
liabilities (48,861) (81,701)
Additional reserves (150,000) --
Net cash used in operations $ (6,579) $ (98,326)
The Corporate General Partner believes it to be in the best interest of the
Partnership to reserve an additional $150,000 to fund maintenance items and
capital improvements including the second phase of the vinyl siding project and
possible roof repairs at Hickory Ridge.
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. Balances and other transactions with
Insignia Financial Group, Inc. and affiliates in 1996 and 1995 are as follows:
Six Months Ended
June 30,
1996 1995
Property management fees $ 89,064 $ 82,893
Reimbursement for services of affiliates 50,781 36,307
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.
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 six
months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Hickory Ridge Apartments
Memphis, Tennessee 97% 97%
Governor's Park Apartments
Ft. Collins, Colorado 93% 87%
The Corporate General Partner attributes the increase in occupancy at Governor's
Park to increased performance by the leasing staff, a tighter housing market,
and a decrease in tenant turnover.
The Partnership reported net income for the six months ended June 30, 1996, of
$78,920, with the second quarter having net income of $9,273. The Partnership
reported net losses of $14,323 and $66,330 for the corresponding periods in
1995. The increase in net income is primarily attributable to an increase in
rental income. Rental income increased as a result of increased occupancy at
Governor's Park and rental rate increases. Operating expense also decreased due
to a reduction in concessions offered at Governor's Park as occupancy increased.
Offsetting the increase in net income was a decrease in other income and an
increase in general and administrative expense and maintenance expense. Other
income decreased during the three months ended June 30, 1996, due to a decrease
in lease cancellation fees at Governor's Park. The decrease in lease
cancellation fees is due to the increase in occupancy and decrease in tenant
turnover. General and administrative expense increased due to increased
reimbursements to the General Partner and increased insurance expense due to
additional coverage. Maintenance expense increased due to exterior painting at
Governor's Park.
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 June 30, 1996, the Partnership had unrestricted cash of $871,958 compared to
$786,154 for the same period in 1995. Net cash provided by operating activities
increased as a result of the increase in net income as previously discussed.
Net cash used in investing activities decreased primarily due to a decrease in
property improvements and replacements in 1996 as compared to 1995. This
decrease is mainly attributable to vinyl siding and other exterior renovations
on the majority of buildings at Hickory Ridge being completed in 1995. Proceeds
from insurance providers also decreased as the Partnership's investment
properties have not incurred any casualties in 1996 or 1995. Governor's Park
received insurance proceeds of approximately $31,000 in 1995 related to fire
damage incurred in 1994. Net cash used in financing activities increased
primarily due to the increase in principal payments in 1996 as a result of the
normal amortization of mortgage indebtedness.
The Corporate General Partner budgeted $217,000 for vinyl siding and other
exterior renovations on the remaining buildings at Hickory Ridge Apartments,
which will be funded from property operations and Partnership reserves. The
Partnership may have to fund significant roof repairs at Hickory Ridge in 1996
due to their age and condition.
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 $11,357,826, 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 1995 or the six months ended June 30, 1996.
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 June 30, 1996.
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: August 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VII Ltd. Partnership's 1996 Second Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000758009
<NAME> SHELTER PROPERTIES VII LTD PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 871,958
<SECURITIES> 0
<RECEIVABLES> 1,871
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 20,308,192
<DEPRECIATION> 8,746,182
<TOTAL-ASSETS> 12,913,320
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,357,826
0
0
<COMMON> 0
<OTHER-SE> 1,203,301
<TOTAL-LIABILITY-AND-EQUITY> 12,913,320
<SALES> 0
<TOTAL-REVENUES> 1,801,023
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,722,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460,096
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,920
<EPS-PRIMARY> 4.50
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
