UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 0-14581
California Seven Associates Limited Partnership,
a California Limited Partnership
(Exact name of registrant as specified in its charter)
California 94-2970056
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (203) 726-6000
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
<PAGE>
Part I - Financial Information
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Balance Sheets
September 30 December 31
1994 1993
Assets (Unaudited) (Audited)
Property and improvements, at cost:
Land and land improvements $ 20,562,073 $ 20,562,073
Buildings 109,734,471 109,659,882
Furniture and fixtures 12,998,478 12,925,199
Machinery and equipment 725,947 681,295
144,020,969 143,828,449
Less accumulated depreciation 47,084,313 43,907,921
Net property and improvements 96,936,656 99,920,528
Cash and cash equivalents 719,736 1,440,476
Accounts receivable 364,509 388,172
Prepaid expenses and other assets 21,900 19,832
Total $ 98,042,801 $101,769,008
Liabilities and Partners' Deficit
Liabilities:
Liabilities not subject to compromise:
Accounts payable and accrued expenses $ 172,313 $ 480,275
Tenant security deposits 463,411 472,865
Unearned income 32,331 303,995
668,055 1,257,135
Prepetition liabilities subject to compromise:
Note and mortgages payable 111,983,903 111,983,903
Accrued interest payable 2,560,559 1,600,118
Accounts payable and accrued expenses 1,238,893 --
Deferred management fees 2,000,000 2,000,000
Fees and reimbursements payable to the
general partner and its affiliates 4,087,661 3,848,505
121,871,016 119,432,526
Total liabilities 122,539,071 120,689,661
Partners' deficit:
General Partner (788,210) (732,454)
Limited partners (362 Class A Units
and 3 Class B Units): (23,708,060) (18,188,199)
Total partners' deficit (24,496,270) (18,920,653)
Total $ 98,042,801 $101,769,008
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Property operating revenues:
Rental income $3,435,469 $4,401,878 $10,432,112 $12,829,424
Other 137,481 108,234 400,448 526,976
3,572,950 4,510,112 10,832,560 13,356,400
Operating expenses:
Maintenance and repairs, furniture
rental, insurance, and
other property operations 657,286 845,213 2,073,721 2,513,185
Real estate taxes 304,901 305,137 999,417 1,043,555
Management fees 128,676 140,047 410,366 413,816
Property administrative 688,427 873,124 2,041,655 2,749,872
1,779,290 2,163,521 5,525,159 6,720,428
Net property revenue 1,793,660 2,346,591 5,307,401 6,635,972
Other operating costs and (income) expenses:
Depreciation and
amortization 1,060,874 1,120,767 3,176,392 3,351,774
Management and administrative
fees to affiliates 65,635 82,338 220,731 246,710
Partnership administrative 27,808 28,083 110,381 84,715
Net recovery on business
interruption resulting from
California earthquake 88,877 -- (376,592) --
1,243,194 1,231,188 3,130,912 3,683,199
Net partnership operating
income 550,466 1,115,403 2,176,489 2,952,773
Interest income 5,340 11,641 13,533 37,797
Interest expense (Contractual interest
of $2,615,450 and $7,846,350 for the
three and nine months ended
September 30, 1994,
respectively) (2,179,542)(2,615,450) (7,410,442) (7,846,350)
Net loss before
reorganization items (1,623,736)(1,488,406) (5,220,420) (4,855,780)
Reorganization items:
United States Trustee fees (800) -- (800) --
Professional fees (354,397) -- (354,397) --
Net loss $ 1,978,933 $(1,488,406)$(5,575,617)$(4,855,780)
Net loss:
General Partner $(19,789) $(14,884) $(55,756) $ (48,558)
Limited partners (1,959,144) (1,473,522) (5,519,861) (4,807,222)
$ (1,978,933)$(1,488,406)$(5,575,617)$(4,855,780)
Net loss per Class A Unit $ (5,412) $ (4,071) $ (15,248) $ (13,280)
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Statements of Cash Flows
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Cash flows from operating activities:
Net loss $(5,575,617) $(4,855,780)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,176,392 3,351,774
Accounts receivable 23,663 4,320
Accrued interest payable 960,441 782,667
Accounts payable and accrued expenses 933,274 216,424
Fees and reimbursements payable to the
General Partner and its affiliates 239,156 268,593
Other, net (283,186) 325,977
Net cash provided by (used in)
operating activities (525,877) 93,975
Cash flows from investing activities:
Purchase of property and improvements (192,520) (382,205)
Cash flows from financing activities:
Cash distribution to limited partners (2,343) (6,322)
Net decrease in cash and cash equivalents (720,740) (294,552)
Cash and cash equivalents, beginning of year 1,440,476 2,268,544
Cash and cash equivalents, end of period $ 719,736 $ 1,973,992
Supplemental disclosure of cash information:
Interest paid during period $6,450,001 $ 7,063,683
Fees paid in connection with
reorganization $ 355,197 $ --
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Notes to Financial Statements
(Unaudited)
Readers of this quarterly report should refer to the audited financial
statements for California Seven Associates Limited Partnership, a
California Limited Partnership ("the Partnership"), for the year ended
December 31, 1993 which are included in the Partnership's 1993 Annual
Report, as certain footnote disclosures which would substantially duplicate
those contained in such audited financial statements have been omitted from
this report.
1. Organization and Basis of Accounting
a) Organization: On September 16, 1994, the Partnership filed a
voluntary petition for bankruptcy protection under Chapter 11 of Title
11, United States Code. The Partnership's Chapter 11 bankruptcy
reorganization case is currently pending in the United States
Bankruptcy Court for the Central District of California. The
Partnership's goal is to maximize recovery by creditors and partners
by preserving the Partnership as a viable entity with a going concern
value. The financial statements do not include any adjustments
relating to the recoverability of reported asset amounts or the
amounts of liabilities that might result from the outcome of this
uncertainty.
b) Basis of Presentation: The accompanying financial statements were
prepared in accordance with generally accepted accounting principles.
It is the opinion of management that the financial statements
presented reflect all the adjustments necessary for a fair
presentation of the financial condition and results of operations.
Certain amounts in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.
c) Cash and Cash Equivalents: Short-term investments with a maturity of
three months or less at the time of purchase are reported as cash
equivalents.
2. Property and Improvements and Note and Mortgages Payable
At September 30, 1994, the Partnership owned five operating apartment
properties located in California totaling 1,763 units with leases generally
for a term of one year or less. The Partnership owns a sixth non-operating
property with 372 apartment units. All properties are pledged as security
for the long-term debt. Although the first and second mortgages payable
represent secured claims under the bankruptcy proceedings, there is
uncertainty as to whether the claims are undersecured or will be impaired
under a plan of reorganization. The mortgages payable, therefore, are
classified as liabilities subject to compromise in the accompanying balance
sheet. Interest expense will be recorded postpetition to the extent paid
during the proceeding. The Partnership has entered into a cash collateral
agreement with the first mortgage lender which calls for the payment of
cash flow from operations, rents less operating expenses and capital, on a
monthly basis.
The Sherman Oaks property sustained extensive damage from the January
17, 1994 Southern California earthquake. The property was "red-tagged" by
city inspectors which means that the property is unsafe for use. It is
currently unoccupied. The Partnership's properties are covered by
insurance, including earthquake and business interruption; although the
policy carries a 5% deductible. Prior to the bankruptcy, the first
mortgage lender, Travelers Insurance Co., had discretion as to the decision
to rebuild or apply the net insurance proceeds to reduce the outstanding
debt obligation. The final decision to repair/rebuild Sherman Oaks or
collect net insurance proceeds will be decided by the Bankruptcy Court in
February 1995. The carrying value of the Sherman Oaks property at
September 30, 1994 was $17,312,627. The financial statements do not
include any adjustments for possible losses resulting from the earthquake.
On April 24, 1994, the Partnership received a $750,000 advance on the
business interruption policy for the earthquake damaged property. During
July 1994, a claim for $1,215,000, representing the first six months of
1994 business interruption, was submitted to the insurance company.
Included in the income statement as "Net recovery on business interruption
resulting from California earthquake" for the three and nine months ended
September 30, 1994 is the insurance advance less costs specifically
associated with the earthquake. All other income statement lines for 1994
as they relate to the Sherman Oaks property, only include activity related
to the period from January 1, 1994 to January 16, 1994, or fixed operating
expenses unrelated to the earthquake, if applicable. The income statement
does not include any other amounts relating to the pending claim with the
insurance company for 1994 operations.
3. Transactions with Affiliates
Fees and other expenses required to be paid by the Partnership to the
General Partner or its affiliates are as follows:
Three Months Ended Nine Months Ended Unpaid at
September 30, September 30, September 30,
1994 1993 1994 1993 1994
Interest on assignment
note(a) $18,333 $ 22,000 $ 62,333 $ 66,000 $ 502,334
Asset management fee 28,135 44,838 108,231 134,210 2,427,276
Administration and
management fee -- -- -- -- 260,050
General partner's
salary 37,500 37,500 112,500 112,500 862,500
Real Estate
Advisory fee -- -- -- -- 518,750
Reimbursement (at cost)
for out of
pocket expenses 6,767 7,886 22,443 25,036 19,085
$90,735 $112,224 $305,507 $337,746 $4,589,995
(a) Postpetition interest is recorded to the extent it is paid.
Contractual interest on assignment note was $22,000 and $66,000 for
the three and nine months ended September 30, 1994, respectively.
4. Litigation
In California Seven Associates Limited Partnership, et al v. SBD Group,
Inc. et al [Case no. 716034 (Superior Court of the State of California,
Orange County)] The Partnership won a judgement against the Defendants in
the amount of $152,308.84, plus interest. Defendants filed a Motion for
Reconsideration, asking the Court to review its prior ruling, which
resulted in a reversal of this judgement. Further discovery has produced
documents corroborating Plaintiffs' position, and the parties are
negotiating a settlement. The lawsuit was commenced as a result of
Defendants refusal to forward rent payments which accrued while the
Partnership owned the property (Torrance Oakwood 20900 Anza, City of
Torrance).
[Theodore D. Cohen, et al v. California Seven Associates, et al., No.
657925 (Orange County, CA, May 16, 1991)] Plaintiffs in suit brought
against the Partnership and its General Partner are members of the class
participating in a federal court action in Chicago [In re VMS Securities
Litigation, No. 90 c 2412, N.D. Ill.] which has concluded in a settlement,
of which plaintiffs have been notified. Defendant has filed a Motion for
Summary Judgment. The likelihood of an unfavorable outcome or the extent
of any possible liability cannot be assessed at this time.
5. Petition for Relief Under Chapter 11
On September 16, 1994, the Partnership filed a petition for relief under
Chapter 11 of the Federal bankruptcy laws in the United States Bankruptcy
Court for the Central District of California. Under Chapter 11, certain
claims against the Debtor in existence prior to the filing of the petitions
for relief under the Federal bankruptcy laws are stayed while the Debtor
continues business operations as Debtor-in-possession. These claims are
reflected in the accompanying balance sheets as "prepetition liabilities
subject to compromise".
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Notes to Financial Statements - Continued
(Unaudited)
Additional claims may arise subsequent to the filing date resulting from
the rejection of executory contracts and from the determination by the
Court of allowed claims for contingencies and other disputed amounts.
Claims secured against the Partnership's assets are stayed, although the
holders of such claims have the right to move the court for relief from the
stay. Secured claims are secured by liens on the Partnership's property
and improvements.
On September 22, 1994, the Partnership entered into a Letter Agreement
with Travelers which defines and authorizes the use of cash collateral. On
September 26, 1994, an interim hearing was held on the use of revenues that
may be classified as cash collateral pending a final hearing. The
Partnership was granted use of cash collateral pursuant to the Letter
Agreement with Travelers pending a final hearing.
On October 17, 1994, the Court held a status hearing in connection with
the Partnership's request to use cash collateral in the form of rental
revenues and insurance proceeds to repair the Sherman Oaks property. The
court set a trial date of February 1, 1995.
The Partnership plans to solidify its position on the Sherman Oaks issue
as well as continue the process for formulating a plan of reorganization.
The outcome of these efforts is unknown at this time. Although every
effort is being made to preserve the Partnership as a going concern, the
possibility remains that the Partnership will cease its operations causing
the complete loss of the equity interests held by the partners.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor In Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On September 16, 1994, the Partnership filed a voluntary petition for
reorganization under Chapter 11 of the Federal bankruptcy laws in the
United States Bankruptcy Court for the District of California. Pursuant to
Section 1108 of the Bankruptcy Code, the Partnership is managing and
operating its business as a debtor in possession and will continue to do so
pursuant to Sections 1107 and 1108 of the Bankruptcy Code unless otherwise
ordered by the Court.
One of the Partnership's six properties, Sherman Oaks, sustained
extensive damage from the Southern California earthquake on January 17,
1994. The property was evacuated and city inspectors classified the
property as unsafe for use. The Partnership has insurance for the damage
and for business interruption, subject to a 5% deductible. Due to the
extent of the loss under the mortgage documents, the first mortgage lender,
Travelers Insurance Co., has control over property and casualty insurance
proceeds. As a result, Travelers has discretion as to the decision to
repair rebuild or apply net proceeds to the outstanding mortgage
obligation.
For a period prior to and especially in the months following the
earthquake the Partnership's cash reserves were reduced to very low levels.
In November 1993, the Partnership ceased payment on the second mortgage.
During 1994, the Partnership was forced to limit capital expenditures to
those needed for safety and structural integrity. On April 29, 1994, the
Partnership received a $750,000 cash advance on the business interruption
policy. The funds were used for property operations and debt service.
During July, a claim for $1,215,000, representing the first six months
of 1994 business interruption, was submitted to the insurance company. A
short time after submitting the claim, Travelers asserted that it has
control over the business interruption insurance proceeds as well as the
property damage proceeds. As a result, the Partnership has not received
further proceeds from the business interruption policy.
Based on the information received by the Partnership, it is in the
opinion of management that it is in the best interest of creditors and
partners to repair/rebuild Sherman Oaks. Travelers contends that applying
net insurance and residual sales proceeds to outstanding first mortgage
debt appears to be the appropriate action. The filing of the voluntary
petition under Chapter 11 is the Partnership's opportunity to use the
protection of the courts to reach an appropriate repair/rebuild decision
for the Sherman Oaks property. Maximizing recovery on the Sherman Oaks
property follows the Partnership's goal in the Chapter 11 proceeding to
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
maximize recovery by creditors and partners by preserving the Partnership
as a viable entity with a going concern value.
On September 22, 1994, the Partnership entered into a Letter Agreement
with Travelers which defines and authorizes the use of cash collateral. On
September 26, 1994, on interim hearing was held on the use of revenues that
may be classified as cash collateral pending a final hearing. The
Partnership was granted use of cash collateral pursuant to the Letter
Agreement with Travelers pending a final hearing.
On October 17, 1994, the Court held a status hearing in connection with
the Partnership's request to use cash collateral in the form of rental
revenues and insurance proceeds to repair the Sherman Oaks property. The
court set a trial for February 1, 1995.
The Partnership plans to solidify its position on the Sherman Oaks issue
as well as continue the process for formulating a plan of reorganization.
The outcome of these efforts is unknown at this time. Although every
effort is being made to preserve the Partnership as a going concern, the
possibility remains that the Partnership will cease its operations causing
the complete loss of the equity interests held by the partners.
Results of Operations
The Sherman Oaks property sustained extensive damage from the Southern
California earthquake on January 17, 1994, following which the property was
evacuated and city inspectors classified the property as unsafe for use.
As a result, the property had generated little revenue for the first
quarter and has had a substantial decrease in operating expenses. Sherman
Oaks' results for the nine months ended September 30, 1994, as compared
with the same period in 1993, were effected as follows: Rental income
decreased approximately $2,488,000, other income decreased approximately,
$82,000, property operating expenses decreased approximately $485,000 and
property administrative expenses decreased approximately $509,000. The
results for the three months ended September 30, 1994, as compared with the
same period of 1993, were effected as follows: Rental income decreased
approximately $881,000, other income decreased approximately $37,000,
property operating expenses decreased approximately $207,000 and property
administrative expenses decreased approximately $167,000. The following
analytical comments have been limited to the Partnership's five other
properties.
The weakness in the Southern California economy and increased
competition, both of which have had an adverse impact on occupancy and,
subsequently, rental rates, have combined to support the Partnership's
decision to convert a number of the properties to conventional apartments,
unfurnish more units at the remaining OAKWOOD properties, and to switch to
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
an effective rent strategy to maintain occupancy and market share. The
strategies appeared to have worked in 1993; occupancy percentages were
restored and stabilized and rental rates began to pick back up slightly.
Results improved considerably for the first quarter of 1994. Exclusive of
the Sherman Oaks property, net property revenues (property level revenues
less property level operating expenses) increased to $2,097,000, a 15%
increase from 1993's first quarter result of $1,821,000 and a 22% increase
from 1993's fourth quarter result of $1,720,000. Net property revenues for
the second quarter 1994 were down from the first quarter of 1994 and the
comparable quarter of 1993. Typically, the second quarter results have
lagged behind strong first quarter earnings. During the second quarter of
1993, the Partnership collected redecorating fees from new laundry
contracts at Pacifica Club and Arbor Park aggregating to $70,000.
Excluding the one-time fees and exclusive of Sherman Oaks, net property
revenues for the second quarter 1994 totalled $1,762,000 compared with the
$1,709,000 for the same period of 1993. For the three months ended
September 30, 1994, results are up to $1,903,000 from $1,834,000 compared
with the same period of 1993.
Effective January 1, 1994, Mission Bay East converted from OAKWOOD
operations to conventional apartment operations. As part of the
conversion, the property is transitioning to a large majority of
unfurnished units. During the second quarter, the property continued
unfurnishing as the post-conversion target for furnished units is 80. At
June 30, 1994, the furnished units stood at 180. Although the property
ended the first quarter with a drop in occupancy percentage, average
occupancy for the first quarter included some leftover corporate rentals
which, combined with expense savings from the conversion, helped
boost net property revenue for the first quarter 1994 by 12% compared
to the first quarter of 1993 and 16% compared to the fourth quarter of
1993. Net property revenue for the second quarter 1994 was down from
the first quarter but up 8% from the second quarter of 1993. During the
third quarter of 1993, the property received approximately $50,000 in tax
refunds. Exclusive of the refunds, net property revenue in the third
quarter of 1994 was down slightly from 1993, approximately 1%. Additional
repairs and maintenance was incurred in the third quarter for carpet
replacements. The property had average occupancy for the quarter of 95%
and ended the quarter at 95%.
At the Partnership's other conventionally run apartment properties,
Arbor Park, Amberway and Pacifica Club, operations for the three and nine
months ended September 30, 1994, as compared to the same periods of 1993
have posted mixed results. Net property revenues for 1993 include one-time
laundry contract fee income of $30,000, $38,000, and $40,000 for Arbor
Park, Amberway, and Pacifica Club, respectively. Excluding the laundry
contract fee, Arbor Park's results for the three and nine months compared
with the previous year were up 31% and down 1%, respectively. The decrease
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
for the nine months is attributable to a steady experience of maintenance
and repair expenses incurred in the first half of 1994 compared to very
little in the first half of 1993. Arbor Park had proportionately higher
level of maintenance expenses in the latter half of 1993 contributing to
the positive results for the third quarter. Amberway's net revenue,
exclusive of 1993 laundry contract revenue and an adjustment to accounts
receivable, dropped 18% and 11% for the three and nine months,
respectively, compared to the previous year. The drop is directly related
to weak occupancies. Physical occupancy was negatively impacted by
relocations, job loss and home purchases. Offsetting a portion of the six
month drop in revenue was a large drop in maintenance and repairs expenses.
Pacifica Club's net property revenue increased, exclusive of laundry
contract revenue, by 58% and 25% for the three and nine months ended
September 30, 1994, respectively, compared with the same periods of the
previous year. The increases are attributable to strong occupancies, lower
taxes, and savings in payroll expenses in third quarter.
The Partnership currently has one remaining property operating as an
OAKWOOD. During the first quarter of 1994, the West Los Angeles OAKWOOD
posted a 42% increase in net property revenue compared to the first quarter
of 1993 and a 17% increase compared to the fourth quarter of 1993. For the
second quarter 1994, net property revenues are down from the first quarter
but are up 6% compared with the second quarter of 1993 and 23% for the six
month period ended June 30, 1994 compared with the first six months of
1993. Increases in the first two quarters are attributable to increased
average occupancy percentages, less discounting on corporate rental rates
and lower expenses, including a drop in repairs and maintenance and worker
compensation insurance. For the third quarter, net revenues continued to
drop due to weak occupancies, the quarter averaged 84% and ended at 87%.
Net property revenues are down 20% for the third quarter of 1994 compared
with the same period of 1993 but are still up 5% year over year.
A slight rate increase and less corporate rate discounting increased
rental income approximately $18,000 for the nine month period at West Los
Angeles. For the three months ended September 30, 1994, as compared to the
same period of 1993, rental income at West Los Angeles decreased $69,000
due to a drop in occupancy. At Mission Bay East, leftover corporate
business from the first quarter partially offset the decrease in rental
income for the second and third quarters at the property. Mission Bay East
posted a $46,000 and $41,000 decrease for the three and nine month periods
as conventional rates are lower than corporate rates. Rental income at
Pacifica Club increased approximately $203,000 for the nine months and
$87,000 for the three months as the result of higher average occupancy. At
Arbor Park, a slight increase in rates led to a $11,000 and $33,000
increase in the three and nine month periods, respectively. These
increases were offset by $68,000 and $124,000 decreases for the three and
nine month periods, respectively, at Amberway because of weak occupancy.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Other income decreased for the three and nine months ended September 30,
1994, as compared with the same period in 1993, due to one-time
redecorating fees received from a new laundry contract in 1993 of $38,000,
$40,000, and $30,000 at Amberway, Pacifica Club, and Arbor Park,
respectively. The fee for Amberway was received and recorded in the first
quarter of 1993 and the fees for Pacifica Club and Arbor Park were received
and recorded in the second quarter of 1993. Other income increased $66,000
for the three months ended September 30, 1994, as compared with the same
period of 1993, due to an adjustment in 1993 for accounts receivable at
Amberway. Due to a management company change, certain accounts receivable
were recorded as revenue when collected. The adjustment recorded negates
the revenue effect.
Overall, property operating expenses increased for the three and nine
months ended September 30, 1994, as compared to the same periods of the
previous year. Amberway and West Los Angeles posted declines in
maintenance and repair expenses due to costs in the first quarter of 1993
resulting from damages caused by heavy rains. Offsetting the decreases was
an increase in utilities at Mission Bay East as a result of lower
reimbursements for various utilities from corporate tenants. As the
property converts to conventional operations from OAKWOOD, utilities will
increase as the Partnership will not charge back certain utilities to its
non-corporate tenants. Additionally, Mission Bay East and Arbor Park had
increased non-routine maintenance for carpet replacements, faucets, and
vinyl.
The decrease in property administrative expense for the three and nine
months ended September 30, 1994, as compared with the same periods in 1993,
was the result of a reduction of OAKWOOD related costs at Mission Bay East
as the result of the conversion from OAKWOOD operations to conventional
operations. The property saved $33,000 and $116,000 for the three and nine
month periods, respectively, in payroll related direct and indirect costs.
Although conventional type advertising increased with the conversion,
OAKWOOD related advertising dropped for the three and nine month periods,
for a net decrease of $41,000 and $9,000, respectively. The significant
savings in payroll related costs experienced at West Los Angeles for the
first two quarters of 1994 were offset by a third quarter increase of
$31,000. West Los Angeles saved approximately $4,000 and $11,000 for the
three and nine months, respectively, on data processing costs.
The decrease in interest income for the three and nine months ended
September 30, 1994, as compared with the same periods in 1993, was due to
the decrease in the average cash balance invested as a result of cash flow
deficits.
Amortization decreased for the three and nine months ended September 30,
1994, as compared with 1993, due to deferred loan costs becoming fully
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
amortized during 1993. Offsetting the decrease partially was an increase
in depreciation from major additions in 1992 and 1993.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Occupancy
The following is a listing of approximate occupancy levels by quarter
for the Partnership's investment properties during 1994 and 1993:
1993 1994
At 3/31 At 6/30At 9/30At 12/31At 3/31 At 6/30 At 9/30
The Anaheim Property 91% 96% 94% 91% 83% 81% 89%
The Huntington Beach
Property 91% 86% 94% 96% 95% 98% 99%
The West Los Angeles
Property 85% 93% 92% 83% 87% 92% 87%
The San Diego
Property 86% 92% 86% 97% 84% 93% 95%
The Sherman Oaks
Property (a) 87% 88% 88% 84% N/A N/A N/A
The Upland Property 92% 90% 91% 91% 91% 90% 91%
(a) The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property was evacuated and considered
unsafe for use. Therefore, occupancy is not applicable for 1994.
Part II - Other Information
Item 1. Legal Proceedings
The information included in the "Notes to Financial Statements, Note 4.
Litigation" on page 6 of the Partnership's September 30, 1994 Financial
Statements, is incorporated by reference.
The information included in the "Notes to Financial Statements, Note 5.
Petition for Relief Under Chapter 11" on page 7 of the Partnership's
September 30, 1994 Financial Statements, is incorporated by reference.
Item 2. Changes in the Rights of the Partnership Security Holders
(b) On September 16, 1994, the Partnership filed a petition for relief
under Chapter 11 of the Federal bankruptcy laws. The voluntary
reorganization action may provide for a reorganization of the debt and
equity structure of the Partnership business which may change the rights
and form of the equity interests of the Partnership.
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California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor In Possession)
Item 3. Defaults by the Partnership on its Senior Securities
On September 16, 1994, the Partnership filed a petition for relief under
Chapter 11 of the Federal bankruptcy laws. On the filing date, the
Partnership was in default on its second mortgage loan obligation.
Although the second mortgage holder had acknowledged the default, the
Partnership did not receive a notice of acceleration. Due to the Chapter
11 proceedings, claims secured against the Partnership assets are stayed.
The balance of the second mortgage note at September 30, 1994 was
$14,000,000 plus $1,699,892 of accrued and unpaid interest.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8K:
The Partnership filed a report on Form 8-K dated September 30, 1994,
reporting the Partnership's September 16, 1994 voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code.
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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.
California Seven Associates Limited Partnership,
a California Limited Partnership
By: CIGNA Realty Resources, Inc. - Seventh,
General Partner
Date: November 14 , 1994 By: /s/ John D. Carey
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)
