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, 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)
<TABLE>
<CAPTION>
September 30, 1996
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 915,635
Restricted--tenant security deposits 85,122
Accounts receivable 3,376
Escrow for taxes 124,362
Restricted escrows 82,592
Other assets 211,713
Investment properties:
Land $ 1,774,028
Buildings and related personal property 18,661,101
20,435,129
Less accumulated depreciation (8,938,196) 11,496,933
$12,919,733
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 25,256
Tenant security deposits 85,465
Accrued taxes 130,818
Other liabilities 100,757
Mortgage notes payable 11,317,725
Partners' Capital (Deficit)
General partners $ (135,840)
Limited partners (17,343 units
issued and outstanding) 1,395,552 1,259,712
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 885,758 $ 847,169 $2,615,164 $2,453,724
Other income 42,210 35,418 113,827 114,350
Total revenues 927,968 882,587 2,728,991 2,568,074
Expenses:
Operating 250,779 255,084 734,152 751,841
General and administrative 29,112 28,907 97,305 87,579
Maintenance 130,245 151,226 383,145 385,596
Depreciation 192,014 180,207 562,196 531,042
Interest 228,914 231,872 689,010 697,714
Property taxes 40,493 45,158 127,852 138,492
Total expenses 871,557 892,454 2,593,660 2,592,264
Net income (loss) $ 56,411 $ (9,867) $ 135,331 $ (24,190)
Net income (loss) allocated
to general partners (1%) $ 564 $ (99) $ 1,353 $ (242)
Net income (loss) allocated
to limited partners (99%) 55,847 ( 9,768) 133,978 (23,948)
$ 56,411 $ ( 9,867) $ 135,331 $ (24,190)
Net income (loss) per limited
partnership unit $ 3.22 $ (.56) $ 7.73 $ (1.38)
<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 nine months
ended September 30, 1996 1,353 133,978 135,331
Partners' capital (deficit)
at September 30, 1996 17,343 $(135,840) $ 1,395,552 $ 1,259,712
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) SHELTER PROPERTIES VII LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 135,331 $ (24,190)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 562,196 531,042
Amortization of discounts and loan costs 32,498 32,141
Change in accounts:
Restricted cash 5,640 (19,321)
Accounts receivable 823 (1,608)
Escrows for taxes 36,364 32,745
Other assets 16,911 15,289
Accounts payable (10,294) (36,679)
Tenant security deposit liabilities (5,640) 20,906
Accrued taxes (44,366) (33,522)
Other liabilities 4,058 (3,537)
Net cash provided by operating activities 733,521 513,266
Cash flows from investing activities:
Property improvements and replacements (394,435) (504,204)
Deposits to restricted escrows (3,369) (7,026)
Receipts from restricted escrows 24,295 12,428
Insurance proceeds from property damage -- 31,366
Net cash used in investing activities (373,509) (467,436)
Cash flows from financing activities:
Payments on mortgage notes payable (124,053) (114,992)
Net cash used in financing activities (124,053) (114,992)
Net increase (decrease) in cash 235,959 (69,162)
Cash and cash equivalents at beginning of period 679,676 771,413
Cash and cash equivalents at end of period $ 915,635 $ 702,251
Supplemental disclosure of cash flow information:
Cash paid for interest $ 656,511 $ 665,573
<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 Shelter Realty VII Corporation (the "Corporate General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine month period ended September 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.
Nine Months Ended
September 30,
1996 1995
Net cash provided by operating activities $ 733,521 $ 513,266
Payments on mortgage notes payable (124,053) (114,992)
Property improvements and replacements (394,435) (504,204)
Change in restricted escrows, net 20,926 5,402
Changes in reserves for net operating
liabilities (3,496) 25,727
Additional reserves (235,000) --
Net cash used in operations $ (2,537) $ (74,801)
The Corporate General Partner believes it to be in the best interest of the
Partnership to reserve an additional $235,000 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. Property management fees paid to
affiliates of Insignia Financial Group, Inc. during the nine months ended
September 30, 1996 and 1995, are included in operating expenses on the
consolidated statement of operations and are reflected in the following table.
The Corporate General Partner and its affiliates received reimbursements and
fees as reflected in the following table:
Nine Months Ended
September 30,
1996 1995
Property management fees $ 134,959 $ 126,928
Reimbursement for services of affiliates 72,226 51,184
Included in "reimbursements for services of affiliates" for 1996 is $13,093 in
reimbursements for construction oversight costs.
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 nine
months ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Hickory Ridge Apartments
Memphis, Tennessee 97% 97%
Governor's Park Apartments
Ft. Collins, Colorado 94% 89%
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 nine months ended September 30,
1996, of $135,331, with the third quarter having net income of $56,411. The
Partnership reported net losses of $24,190 and $9,867 for the corresponding
periods in 1995. The increase in net income is primarily attributable to an
increase in rental income due to increased occupancy at Governor's Park and
rental rate increases at both properties. Other income increased for the three
months ended September 30, 1996, due to higher interest rates and increased cash
balances being held in interest bearing accounts. Also contributing to the
increase in net income was the decrease in maintenance expense for the three
months ended September 30, 1996, at Hickory Ridge. Hickory Ridge completed some
major repair projects in 1995 such as exterior painting, gutter repairs, and
landscaping.
Offsetting the increase in net income was an increase in general and
administrative expense. General and administrative expense increased due to
increased reimbursements to the General Partner 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 September 30, 1996, the Partnership had unrestricted cash of $915,635
compared to $702,251 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. Insurance proceeds from property damage decreased as the Partnership's
investment properties have not incurred any material 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 due to the increase in principal payments in 1996 as a result of the
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 $11,317,725, 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 nine months ended September 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 September 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: October 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VII Limited Partnership 1996 Third Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000758009
<NAME> SHELTER PROPERTIES VII LIMITED PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 915,635
<SECURITIES> 0
<RECEIVABLES> 3,376
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 20,435,129
<DEPRECIATION> 8,938,196
<TOTAL-ASSETS> 12,919,733
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,317,725
0
0
<COMMON> 0
<OTHER-SE> 1,259,712
<TOTAL-LIABILITY-AND-EQUITY> 12,919,733
<SALES> 0
<TOTAL-REVENUES> 2,728,991
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,593,660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 689,010
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,331
<EPS-PRIMARY> 7.73
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
