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 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 0-14369
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)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 881,529
Restricted--tenant security deposits 91,382
Accounts receivable 2,587
Escrow for taxes 66,293
Restricted escrows 97,578
Other assets 241,064
Investment properties:
Land $ 1,774,028
Buildings and related personal property 18,300,296
20,074,324
Less accumulated depreciation (8,558,337) 11,515,987
$12,896,420
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 27,228
Tenant security deposits 91,725
Accrued taxes 79,311
Other liabilities 106,961
Mortgage notes payable 11,397,167
Partners' Capital (Deficit)
General partners $ (136,497)
Limited partners (17,343 units
issued and outstanding) 1,330,525 1,194,028
$12,896,420
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 850,649 $ 796,661
Other income 37,691 34,057
Total revenues 888,340 830,718
Expenses:
Operating 197,630 174,968
General and administrative 37,722 28,159
Property management fees 44,195 41,501
Maintenance 81,880 81,099
Depreciation 182,338 171,532
Interest 230,421 233,267
Property taxes 44,507 48,185
Total expenses 818,693 778,711
Net income $ 69,647 $ 52,007
Net income allocated to general partners (1%) $ 696 $ 520
Net income allocated to limited partners (99%) 68,951 51,487
$ 69,647 $ 52,007
Net income per limited partnership unit $ 3.98 $ 2.97
See Accompanying Notes to Consolidated Financial Statements
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 three
months ended March 31, 1996 -- 696 68,951 69,647
Partners' capital (deficit)
at March 31, 1996 17,343 $(136,497) $ 1,330,525 $ 1,194,028
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 69,647 $ 52,007
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 182,338 171,532
Amortization of discounts and loan costs 10,802 10,686
Change in accounts:
Restricted cash (620) 2,458
Accounts receivable 1,612 (2,340)
Escrows for taxes 94,433 90,745
Other assets 5,214 4,424
Accounts payable (8,322) (44,843)
Tenant security deposit liabilities 620 941
Accrued taxes (95,873) (92,123)
Other liabilities 10,262 13,924
Net cash provided by operating activities 270,113 207,411
Cash flows from investing activities:
Property improvements and replacements (33,630) (127,190)
Deposits to restricted escrows (1,523) (2,651)
Receipts from restricted escrows 7,463 4,428
Insurance proceeds from property damage -- 14,124
Net cash used in investing activities (27,690) (111,289)
Cash flows from financing activities:
Payments on mortgage notes payable (40,570) (37,607)
Net cash used in financing activities (40,570) (37,607)
Net increase in cash 201,853 58,515
Cash and cash equivalents at beginning of period 679,676 771,413
Cash and cash equivalents at end of period $ 881,529 $ 829,928
Supplemental disclosure of cash flow information:
Cash paid for interest $ 219,619 $ 222,581
<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 month
period ended March 31, 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 its space and is current on its 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.
Three Months Ended
March 31,
1996 1995
Net cash provided by operating activities $ 270,114 $ 207,411
Payments on mortgage notes payable (40,570) (37,607)
Property improvements and replacements (33,630) (127,190)
Change in restricted escrows, net 5,940 1,777
Changes in reserves for net operating
liabilities (7,327) 26,814
Additional reserves (200,000) (355,000)
Net cash used in operations $ (5,473) $(283,795)
The Corporate General Partner believes it to be in the best interest of the
Partnership to reserve an additional $200,000 to fund maintenance items and
capital improvements including the second phase of the vinyl siding project and
possible roof repairs at Hickory Ridge. The Corporate General Partner reserved
$355,000 in 1995 to fund maintenance items and capital improvements including
the initial phase of the vinyl siding project 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:
Three Months Ended
March 31,
1996 1995
Property management fees $ 44,195 $ 41,501
Reimbursement for services of affiliates 25,594 21,088
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 consists of two apartment
complexes. The following table sets forth the average occupancy of the
properties for the three months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Hickory Ridge Apartments
Memphis, Tennessee 97% 98%
Governor's Park Apartments
Ft. Collins, Colorado 92% 89%
The Corporate General Partner attributes the increase in occupancy at
Governor's Park to increased performance of the leasing staff, a tighter housing
market, and less tenant turnover.
The Partnership reported net income for the three months ended March 31,
1996, of $69,647 versus $52,077 for the corresponding period of 1995. The
increase in net income is primarily attributable to an increase in other income
and rental income. Lease cancellation fees and deposit forfeitures from
increased turnover increased other income at Hickory Ridge during the first
quarter of 1996. Also, other income increased due to an increase in interest
income due to increased cash balances and interest rates. Rental income
increased due to increased occupancy at Governor's Park as discussed above.
Offsetting these increases was an increase in operating expense and general
and administrative expense. Operating expense increased due to concessions
offered at Governor's Park to increase occupancy and the hiring of a
groundskeeper at Hickory Ridge during the third quarter of 1995 to handle
increasing demands. General and administrative expense increased due to
increased reimbursements to the Corporate General Partner and its affiliates and
increased insurance expense due to additional coverage.
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 March 31, 1996, the Partnership had unrestricted cash of $881,529,
compared to $829,928, 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. Cash used for accounts payable also decreased due to the
timing of payments to vendors. Net cash used in investing activities decreased
primarily due to decreased property improvements in 1996 compared to 1995.
These property improvements were mainly attributable to the vinyl siding project
at Hickory Ridge. Net cash used in financing activities increased due to the
increase in principal payments in 1996.
The Corporate General Partner budgeted $217,000, for vinyl siding and other
exterior renovations on the remaining portion of the buildings at Hickory Ridge
Apartments, which will be funded from property operations and Partnership
reserves. The Partnership may also have to fund significant roof repairs at
Hickory Ridge in 1996.
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 $11,397,167, 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 first quarter ended March 31, 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as part of this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 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: May 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VII Ltd. 1996 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 881,529
<SECURITIES> 0
<RECEIVABLES> 2,587
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 20,074,324
<DEPRECIATION> 8,558,337
<TOTAL-ASSETS> 12,896,420
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,397,167
0
0
<COMMON> 0
<OTHER-SE> 1,194,028
<TOTAL-LIABILITY-AND-EQUITY> 12,896,420
<SALES> 0
<TOTAL-REVENUES> 888,340
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 818,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230,421
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,647
<EPS-PRIMARY> 3.98
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
