UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
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)
Registrant's telephone number, including area code:(203) 726-6000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. Not applicable.
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 36
PART III
Item 10. Directors and Executive Officers of the
Registrant 36
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners
and Management 38
Item 13. Certain Relationships and Related Transactions 39
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 41
SIGNATURES
<PAGE>
Item 1. Business
The registrant, California Seven Associates Limited Partnership, a
California limited partnership (the "Partnership"), was formed on January
30, 1985 under the laws of the State of California to acquire and operate
seven apartment complexes located in California. Pursuant to a private
offering, in February 1985, the Partnership sold Class B Limited
Partnership Interests for an aggregate purchase price of $500,000.
Commencing in March 1985, the Partnership sold Class A Limited Partnership
Interests (the "Units") at a price of $150,000 each (362 Units in total),
for an aggregate purchase price of $54,300,000. The selling period closed
on December 15, 1985 with $54,800,000 having been raised from a total of
526 Class A and B investors. On April 30, 1986, the Partnership filed a
General Form for Registration of Securities on Form 10 pursuant to the
Securities Act of 1934 (Registration No. 0-14581), which was amended by
Form 8 dated July 25, 1986.
The General Partner of the Partnership is CIGNA Realty Resources,
Inc.-Seventh (the "General Partner"), a Delaware corporation qualified to
do business in the States of California and Connecticut and a wholly owned
subsidiary of CIGNA Financial Partners, Inc. ("CFP"), which is in turn, a
wholly owned subsidiary of Connecticut General Corporation ("CGC"), which
is in turn, a wholly owned subsidiary of CIGNA Holdings, Inc., which is a
wholly owned subsidiary of CIGNA Corporation ("CIGNA"), a publicly held
corporation whose stock is traded on the New York Stock Exchange.
The Partnership is engaged solely in the business of real estate
investment. A presentation of information about industry segments is not
applicable.
On January 31, 1985, the Partnership acquired from IFD Properties,
Inc.-First, ("IFD-First"), an affiliate of the General Partner, fee title,
subject to a first mortgage note and seven deeds of trust, to seven
apartment complexes (the "Investment") and related site improvements in the
State of California for the aggregate purchase price, excluding acquisition
fees and expenses, of $146,000,000.
During 1990, one of the seven apartment complexes was sold. Of the
remaining six apartment complexes (the "Project"), three were operated as
conventional apartment complexes and three were operated under the R & B
OAKWOOD marketing concept ("OAKWOOD") during 1993. During 1994, one of the
three OAKWOOD properties will be converting to conventional operation. See
Items 2 and 7 for a definition and discussion of the OAKWOOD concept.
On January 17, 1994, the Sherman Oaks OAKWOOD property sustained
extensive damage during the Southern California earthquake. The property
was "red-tagged" by city officials, a designation issued to buildings
considered totally unsafe for use. The extent of the damage is currently
being reviewed and the ultimate effect on the Partnership's operations and
value of the Project is unknown. The Partnership's Project is insured for
earthquakes (5% deductible) and business interruption.
The Project, in aggregate, is currently subject to a modified first
mortgage and a related party second mortgage. See Item 7 and the Notes to
Financial Statements for a description of encumbrances.
<PAGE>
Although the cost to the Partnership for the Investment was an aggregate
purchase price, the General Partner allocated cost, including the
assignment fee and certain capitalized fees and expenses, to each of the
properties based on their appraised values at the time of purchase. The
allocated cost is set forth in the table below:
<TABLE>
<CAPTION>
Purchase Price,
Assignment Fees
and Certain
Name of Property Capitalized Fees No. of Year
and Location (a) and Expenses (b) Units Completed
<S> <C> <C> <C>
1. Amberway Apartments
Anaheim, California $15,691,572 272 1983
2. Pacifica Club
Huntington Beach,
California 17,619,662 304 1971
3. Oakwood Apartments
Los Angeles, California 22,968,097 363 1966
4. Mission Bay East
San Diego, California 42,077,743 564 1970
5. Oakwood Apartments
Sherman Oaks,
California(c) 22,442,254 372 1969
6. The Torrance Property
Torrance, California(d) 14,901,734 248 1965
7. Arbor Park Apartments
Upland, California 11,745,533 260 1971
<FN>
(a) Reference is made to Item 7 and the Notes to Financial Statements
for a description of the original and current long-term
indebtedness secured by the Project in aggregate and to Schedule XI
for additional information.
(b) The Partnership's total investment in the Investment was
$147,446,595, representing the purchase price of $146,000,000 and
assignment fees and certain capitalized fees and expenses of
$l,446,595.
(c) The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property was evacuated and is currently
unoccupied.
(d) This property was sold October 25, 1990. Reference is made to Item
7 and the Notes to Financial Statements for a description of the
sale.
</TABLE>
The Partnership's real property investments were described in Form 8
dated July 25, 1986, under Item 3 thereof, which descriptions are hereby
incorporated by reference.
<PAGE>
During 1993, the United States economy showed signs of improvement as it
moved from a generally jobless recovery to a sustained expansion with good
and consistent job creation in all parts of the country except California.
Generally apartment markets were challenged by increased levels of home
ownership which left occupancies and rents relatively unchanged from a year
ago. In 1993, apartment markets stabilized with minimal construction
activity, occupancies in the low 90% range, and rental growth approximating
inflation. The short-term outlook is for more of the same. The current
wave of new household formations and mobility associated with increased
confidence and economic growth is causing a strong push to higher levels of
home ownership and also creating apartment demand. The biggest risk to
apartment markets is a long-term shift to greater home ownership driven by
aging demographics combined with low interest rates and renewed economic
vitality. The somewhat lower risk to Southern California's apartment
market is due to high housing prices and overall weak economy. Multifamily
housing starts in 1993 were the lowest on record. Southern California
followed the Northeast in the largest declines in multifamily housing
starts for 1993.
Although according to recent employment figures, California's economy
has still not reached its bottom, a weak job recovery is expected to begin
generally in California during the second half of 1994. Southern
California will remain the weakest region of the State. This expected job
growth for 1994 ranks California as one of the three weakest states in
terms of job growth.
California is estimated to have lost another 170,000 jobs during 1993,
bringing total jobs lost since 1990 to 526,000. Most of these job losses
have occurred in manufacturing (half of which can be attributed to the
defense and aerospace industries), wholesale and retail trade, and
construction. Service related jobs have actually grown by 3% since 1990,
and coupled with construction, will be the main drivers behind an overall
job increase in 1994.
The impact of the January 17, 1994 Los Angeles earthquake on both the
national and California economies, and on California's real estate markets
is currently unknown. On an overall perspective, the damage from the
earthquake has been estimated at $15 billion, approximately one-half the
amount of the damage associated with Hurricane Andrew. As the earthquake
damage is either replaced or repaired, a short-term increase in spending
and construction is expected, providing a temporary boost to the Southern
California economy. The rebuilding is expected to be completed by mid-
1995, contributing to an overall economic slowdown projected for 1995.
At the end of January 1994, statistical data was compiled from the
inspection reports prepared by the Los Angeles Department of Building and
Safety. Due to the frequent occurrence and magnitude of after shocks,
numerous reinspections have occurred that are not reflected in this data.
By the end of January 1994, approximately 35,000 buildings had been
inspected. The information available included a building status code:
Green "Inspected" tags are issued to each structure which has been
inspected and determined to be safe for regular use. Yellow tags marked
"Limited Entry" are issued to each structure which has been determined to
be partially useable, but in which some areas of the structure are still
not safe for use. Red "Unsafe" tags are issued for structures which are
determined to be totally unsafe for use. Absent a change in their status
due to reinspection, such "red tagged" buildings will likely require
significant rehabilitation or demolition. The damage to housing was a city
wide problem with significant damage concentrated in the Northridge, Studio
City, Canoga Park, Winnetka, Sylmur, Crenshaw, and Los Feliz areas. In
multifamily housing structures, over 1,300 buildings with over 33,000 units
and an estimated population over 92,000 persons are either partially or
fully vacated. Approximately 11,000 multifamily buildings were estimated
to have some damage. Of the 11,000, over 700 buildings with estimated
damage of $500 million were reported as "red tagged". Updated reports are
likely to show large increases to all categories of the initial report. A
major objective of the city and property owners is to restore market
stability. Many hurdles will be encountered including market value
declines, complexity of reinvestment decisions, limitations on capital
resources, and complexity of debt holders positions. The Sherman Oaks
property, located in Los Angeles, was extensively damaged by the Los
Angeles earthquake. The property was "red-tagged" by city inspectors and
significant portions of the property are likely to require extensive repair
or complete rebuilding. The effects of the earthquake on the housing markets
of the damaged areas is unknown but generally believed to be negative in
the short-term.
<PAGE>
As can be seen from the preliminary numbers, the competition for
residential multifamily once the area is rebuilt will be extraordinarily
intense. As a result of the extensive repair or complete rebuilding, the
newness factor will push the market toward homogeneity. Each owner will
have to compete for an entirely new tenant base. In addition, the pool of
available residents will most likely be much less than available capacity
as attracting prospective tenants to the area is perceived as difficult in
the short-term. The competitive submarket for the Sherman Oaks property is
defined as the area bordered by Burbank Boulevard to the north, Cold Water
Canyon Avenue to the east, Ventura Boulevard to the south, and Victory
Boulevard to the west. The primary market in which the property is located
contains very little commercial activity. The market is mature and
affluent, growing at a much slower pace than Los Angeles as a whole. Very
little vacant land is available for construction of new apartments except
what has become available through the demolition of single family homes and
small duplex and fourplex buildings. In their place are constructed much
higher density buildings. The primary market suffered very extensive
damage as a result of the earthquake. If repaired, the Sherman Oaks
property will face strong competition, all of which will be attempting to
lease newly refurbished or rebuilt buildings. Inversely, many smaller
multifamily buildings may be unable to repair or replace which could
actually improve the competitive position and increase rates. Most of
these buildings will have lost their previous tenant base and will be faced
with a negative market psychology resulting from the earthquake.
Regardless of the earthquake, Los Angeles has been experiencing a
significant downturn in its economy since 1990. With a population of over
nine million, Los Angeles is the largest metropolitan area in the country.
Los Angeles accounts for approximately 30% of California's total non-farm
employment base. The economic structure is diverse with high-tech defense-
oriented manufacturing, apparel and textile manufacturing, entertainment
and service industries, and international trade. Los Angeles has
benefitted from defense contracts and the earlier surging housing and
commercial construction markets, but these successes, in turn, have made
the area particularly vulnerable to the protracted economic downturn. Los
Angeles' economy is expected to continue to contract through most of 1994
before posting any type of modest increases in 1995. Improving prospects
for the trade, business, service, and entertainment industries will be
overwhelmed by the steady job declines in manufacturing. Los Angeles will
rank as one of the weakest large metro economies over the next year.
The West Los Angeles property's primary market is defined as Olympic
Boulevard to the north, Overland Avenue to the east, Culver Boulevard to
the south, and Centinela Boulevard to the west. Population growth in the
immediate vicinity is forecast to grow very slowly due to a slight decrease
in the total number of households. The West Los Angeles property is
showing a strong shift in demographics as its economic base changes and
average income levels have fallen. Like Sherman Oak's primary market, the
West Los Angeles market is mature and has seen a significant amount of
residential properties replaced with buildings able to occupy a greater
number of tenants. Unlike Sherman Oaks, however, the West Los Angeles
market has significantly more hotel and corporate-type competition. The
property is 70% furnished, which caters to a more short-term renter.
Competition from hotels remains fierce and soft real estate markets and
increasing vacancies within the conventional market has led many
conventional operators to enter the corporate market. As a result of the
increased competition, the West Los Angeles property has reduced its price
8% on studios, 17% on one bedroom units, and 10% on two bedroom units
since 1991. The West Los Angeles property's age and quality falls below
average levels compared to its immediate market. The soft market
conditions have also led to reduced rates, increased concessions, and more
flexibility in credit policies for conventional apartment units.
The San Diego property is located in the Mission Bay area of San Diego.
San Diego ranks as the sixth largest city in the United States. The city's
climate and location provide for a diverse economic base including tourism,
international trade (increasing rapidly, especially with Mexico),
agriculture, military and government, manufacturing and services. Although
the area still has a large military presence, its economic base has
diversified substantially over the past two decades. Aerospace, electronic
components, instruments, wholesale trade and business services are the key
components to the economic base. San Diego is also the center for a
growing cluster of biotechnology industries. As with California in
general, San Diego's economy remains weak. Employment has continued to
decline, led by weakness in the construction, manufacturing, and trade
industries. Large aerospace firms continue to aggressively reduce work
forces. Construction and trade, already greatly reduced from the collapsed
commercial real
<PAGE>
estate market and tepid consumer spending, fell 7% and
2.5%, respectively, during 1993. One positive sign for San Diego that is
negative for multifamily housing has been the increase of home sales and
residential construction activity. The economy for San Diego is expected
to remain weak throughout 1994, with some strengthening possibly occurring
in 1995. By 1995, cuts in commercial construction, defense, and financial
services should be ending and San Diego will be poised to take advantage of
expanding tourist industries, residential construction, and NAFTA. The
promise of additional trade should boost the demand for transportation,
business, and financial services. The submarket in which the Mission Bay
property operates has reported a 3% vacancy factor while San Diego County
reported a 5.5% vacancy. The Mission Bay submarket has increased occupancy
while other less affluent areas have experienced drops. Rents have
generally been lowered to regain lost occupancies and the use of rent
concessions has been widespread. The property's attractive beach area
location, combined with the renovation program and competitive rates, has
allowed Mission Bay to effectively compete for market share. The Mission
Bay property has moved more towards unfurnished apartments and the
conventional apartment business. During 1994, the property will completely
convert to conventional apartment units from OAKWOOD. The property's
rental rates are generally priced $50 to $100 below newer, higher graded
competitors, although a lack of supply of two bedroom units has allowed the
Mission Bay property to set these prices very close to the upscale
competition. As the market strengthens, the competition is expected to
raise rates allowing the Mission Bay property another opportunity to
attract price sensitive tenants.
The Anaheim property is located in Orange County's largest city. Orange
County is the third largest metropolitan area in California and the
fifteenth in the country. Anaheim's population has increased by 28% since
1980 and it is ranked as one of the wealthiest regions in the nation.
Anaheim is a major center for finance, business, accounting, and legal
services. Manufacturing comprises 20% of the employment base with
concentrations in high-tech industries. Anaheim also receives a
disproportionate share of prime defense contract awards. The city's
favorable long-term outlook led to an overbuilt rental market which, when
combined with weakened economic conditions, led to an extremely competitive
environment. During 1992, economic conditions weakened in Orange County as
approximately 90,000 jobs were lost, including more than a third of the
defense-related base. Because the defense industry generates so many other
jobs in the area, such as construction and retail trade, the overall impact
on the economy has been substantial. Anaheim's recession-plagued economy
appears to have stabilized somewhat from the significant declines
experienced in 1992. Although weakness in manufacturing has accounted for
the overall downward trend in the region's economy, gains in the service
sector have worked to offset the overall drop. The Anaheim property has
not been directly impacted by the defense industry layoffs and downsizing
due to the property's relatively far commuting distance to the large
defense contracting companies. The property's resident profile is more
focused on the service industry. Although the property has exposure to
out-migration trends which have continued throughout California, movement
to home ownership should not negatively impact occupancy levels as home
prices remain high, despite a 7% deflation in median home prices to
$217,000. A new 285 unit property was added to the competitive market in
1992 and initial leaseup was completed in 1993. There are currently no new
plans or permits for multifamily construction outstanding in the area.
Overall, occupancy in the Anaheim market remained fairly stable over the
year and is not expected to increase substantially due to weak population
gains forecast for the short-term. The Anaheim property has comparable
monthly rates to its local competition and slightly higher per square foot
rates due to the slightly smaller floor plans.
Huntington Beach is located in the northwest quadrant of Orange County
and is considered a "beach-side" community. The area continues to be zoned
as primarily residential with several pockets of commercial use,
specifically retail and office space. During 1993, soft economic
conditions and high unemployment resulted in out- migration from Orange
County leading to depressed occupancy levels and pressure to lower rental
rates. The property's submarket consists of eight properties within a
three mile radius which are generally conventional buildings with a
corporate base of less than 10%. The Huntington Beach property converted
to conventional apartments in 1992 from OAKWOOD, with corporate units
comprising 5% of the property at year end. Local competition vacancies are
averaging 3% to 10% and are anticipated to remain in that range based on
the population base and the lack of new construction. The Huntington Beach
property is estimated to have a 9% vacancy rate for 1994. Several
competitors are very similar in age, averaging eighteen years old, and are
all adjacent properties. Price differentials in the submarket have been
attributed to age, location, and the extent of the rehabilitation of the
<PAGE>
units. During 1993, the Huntington Beach property adopted an effective
rent strategy while the competition still offers free rent up front. At
the Huntington Beach property, the monthly rents were lowered, effectively
spreading the up front concession over the term of the lease. This
strategy has positioned the property at the lowest advertised monthly rent
in the area, stabilized occupancy, and increased its market share. No new
construction activity is in progress or currently planned for the near
future.
The Upland property is located in the southwest corner of San Bernardino
County in a region known as the Inland Empire. Classified as a bedroom
community, this region's past growth has been in response to the high cost
of housing in the Los Angeles and Orange counties. Economic weakness in
the Los Angeles and Orange counties has reduced their relative cost of both
single family and multifamily housing, thereby increasing competition for
the Inland Empire. The Upland property, along with the local competition,
has slowly lost residents as a result of military base closures and
relocations. Defense cutbacks have necessitated corporate downsizing which
has also led to relocations and out-migration trends. Overall, the area's
short-term prospects remain weak given the continuing recession in the Los
Angeles region. Lower housing costs compared to Los Angeles and Anaheim
will allow the Inland Empire region opportunities for migration and
population growth as the neighboring communities recover in the next two to
five years. Vacancy rates at the property are consistent with these trends
as well as the market's overall inability to increase rates. The
property's overall rental rates remain competitive for both one and two
bedroom floor plans.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2 on the following page.
The Partnership itself has no employees; however, the unaffiliated
property managers engaged by the Partnership maintains on-site staff. For
a description of property management services provided by CIGNA
Investments, Inc. ("CII", formerly CIGNA Capital Advisors, Inc.), and the
terms of transactions between the Partnership and affiliates of the General
Partner, see Item 13 and the Notes to Financial Statements.
The following list details operating revenues for each of the
Partnership's investment properties as a percentage of the Partnership's
operating and interest revenues during 1991, 1992 and 1993:
<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
The Anaheim Property 11% 11% 11%
The Huntington Beach Property 14% 13% 14%
The West Los Angeles Property 19% 21% 20%
The San Diego Property 25% 25% 26%
The Sherman Oaks Property(a) 19% 20% 20%
The Upland Property 9% 10% 9%
<FN>
(a) The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property was evacuated and is currently
unoccupied.
</TABLE>
In 1991, interest from investments in short-term interest bearing
instruments and interest earned on investor notes accounted for the balance
of Partnership operating and interest revenue. In 1992 and 1993, interest
income accounted for less than 1% of Partnership revenue.
Losses from "passive activities" (which include any rental activity) may
only offset income from "passive activities". The Partnership is engaged
in passive activities and therefore investors are subject to these rules.
Passive losses in excess of passive income are suspended and are carried
over to future years when they may be deducted against passive income
generated by the Partnership in such year (including gain recognized on the
sale of the
<PAGE>
Partnership's assets) or against passive income derived by
investors from other sources. Any suspended losses remaining subsequent to
Partnership dissolution may be used by investors to offset ordinary income.
Item 2. Properties
The Partnership owns directly (subject to first and second mortgage
loans) the properties described in Item 1 hereof. See Notes to Financial
Statements for a description of unaffiliated management agreements. The
Partnership has engaged one of the two management companies to manage three
of the remaining six properties pursuant to the "OAKWOOD" marketing concept
(see Item 7 below). During 1994, one of the three remaining OAKWOODS will
convert to conventional operations. One of the four components of the
OAKWOOD concept provides that apartments will be leased in accordance with
month-to-month, six-month, or one-year rental agreements with a minimum
30-day stay. Though a portion of the apartments are operated under the
OAKWOOD concept, the Partnership has reserved a number of furnished and
unfurnished units for longer-term leases to meet total market needs.
Leases are generally for a term of one year or less. In the opinion of the
General Partner, the Partnership's properties continue to be adequately
insured.
<PAGE>
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties during 1989, 1990,
1991, 1992 and 1993 (a):
<TABLE>
<CAPTION>
The Anaheim The Huntington The West The San The Sherman The Upland
Property Beach Property Los Angles Diego Oaks Property
Property Property Property
<S> <C> <C> <C> <C> <C> <C>
1989
At 3/31 89% 76% 87% 77% 84% 83%
At 6/30 99% 99% 96% 93% 94% 93%
At 9/30 94% 98% 97% 81% 90% 87%
At 12/31 86% 95% 85% 73% 90% 93%
1990
At 3/31 92% 98% 90% 73% 94% 91%
At 6/30 94% 97% 94% 71% 90% 94%
At 9/30 89% 92% 88% 85% 92% 94%
At 12/31 89% 86% 77% 78% 89% 88%
1991
At 3/31 85% 93% 87% 84% 90% 88%
At 6/30 96% 96% 95% 97% 94% 92%
At 9/30 81% 85% 84% 83% 84% 94%
At 12/31 72% 72% 74% 78% 84% 94%
1992
At 3/31 84% 83% 89% 86% 85% 91%
At 6/30 75% 89% 94% 93% 90% 94%
At 9/30 85% 89% 87% 87% 90% 87%
At 12/31 90% 85% 83% 72% 93% 92%
1993
At 3/31 91% 91% 85% 86% 87% 92%
At 6/30 96% 86% 93% 92% 88% 90%
At 9/30 94% 94% 92% 86% 88% 91%
At 12/31 91% 96% 83% 97% 84% 91%
<FN>
(a) The Torrance Property was sold on October 25, 1990; therefore the
Torrance occupancy statistics have not been included in this
presentation.
(b) The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property was evacuated and is currently
unoccupied.
</TABLE>
<PAGE>
Item 3. Legal Proceedings
The information disclosed in Notes to Financial Statements-Litigation,
included herein, is incorporated by reference.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related Security
Holder Matters
As of December 31, 1993, there were approximately 536 record holders of
Units, including the Initial Limited Partner, the Class A Limited Partners,
and the seven Class B Limited Partners.
The Revenue Act of 1987 adopted provisions which have an adverse impact
on investors in a "publicly traded partnership" ("PTP"). A PTP is a
partnership whose interests are traded on an established securities market
or readily tradable on a secondary market (or the substantial equivalent
thereof). Units of Registrant are not listed or quoted for trading on an
established securities exchange. However, CFP will, upon request, provide
a Limited Partner desiring to sell or transfer Units with a list of
secondary market firms which may provide a means for matching potential
sellers with potential buyers of Units, if any. Frequent sales of Units
utilizing these services could cause the Registrant to be deemed a PTP. If
Registrant were classified as a PTP, (i) Registrant may be taxed as a
corporation, or (ii) income derived from an investment in Registrant would
be treated as non-passive income. In June 1988, the IRS issued Notice
88-75 in which it established alternative safe harbors that allow interests
in a partnership to be transferred or redeemed in certain circumstances
without causing the partnership to be characterized as a PTP. One such
safe harbor, applicable to a partnership in which all interests were issued
in a private offering, exempts a partnership from PTP characterization
(regardless of how many Units in such partnership are traded) if either (A)
the partnership does not have more than 500 partners, or (B) the initial
offering price of each unit of partnership interest is at least $20,000 and
the partnership agreement provides that no unit of partnership interest may
be subdivided for resale into units smaller than a unit the initial
offering price of which would have been at least $20,000. Registrant has
more than 500 partners, and although the initial offering price of the
Units was at least $20,000, the partnership agreement does not contain a
provision prohibiting the subdivision of Units for resale into Units with a
price of less than $20,000. Thus, Registrant cannot avail itself of this
exception to potential classification as a PTP. Consequently, the
Registrant has adopted a policy prohibiting transfers of Units in secondary
market transactions unless, notwithstanding such transfers, Registrant will
satisfy at least one of the alternative safe harbors contained in the IRS
Notice. Such a restriction could impair the ability of an investor to
liquidate his investment.
It is unlikely that any funds will be available for distribution,
including proceeds from the sale of any remaining Partnership property.
Proceeds from the sale of the Torrance property in 1990 were used to reduce
mortgage principal and accrued interest, thus reducing the ongoing debt
service requirements of the Partnership (see the Notes to Financial
Statements). Any cash flow that is available for distribution with respect
to any year or portion thereof will be distributed 99% to the Limited
Partners and 1% to the General Partner. Reference is made to Notes to
Financial Statements for a description of payments to the State of
Connecticut on behalf of limited partners and charged to limited partner
capital accounts.
<PAGE>
Item 6. Selected Financial Data (a)
<TABLE>
California Seven Associates Limited Partnership,
a California limited partnership
December 31, 1993, 1992, 1991, 1990 and 1989
(In thousands except per Unit and footnoted information)
(not covered by Report of Independent Accountants)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Total income $ 17,979 $ 18,156 $ 19,514 $ 23,573 $ 24,497
Net income (loss) (b) (6,554) (6,386) (5,432) 6,544 (12,578)
Net income (loss) per unit (b)
Class A (17,924) (17,465) (14,856) 14,566 (34,399)
Class B -- -- -- 263,570 --
Total assets 101,769 106,512 113,058 117,478 136,071
Long-term obligations 111,984 111,984 111,984 118,544 151,024
<FN>
(a) The above selected financial data should be read in conjunction with
the financial statements and the related notes herein. Reference is
made to Notes to Financial Statements for a description of payments to
the State of Connecticut on behalf of limited partners. These
payments are charged to limited partner capital accounts and have not
been included as part of the above presentation.
(b) Included in 1990 is $7,330,011 gain on sale of property ($6,050,815 or
$16,715 per Unit for Class A and $790,711 or $263,570 per Unit for
Class B) and $6,110,706 gain on debt refinancing ($16,711 per Class A
Unit).
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership was formed on January 30, 1985 in the State of
California for the purpose of acquiring from IFD Properties, Inc.-First (an
affiliate of the General Partner) and operating seven apartment complexes
located in such state. CFP had entered into a purchase and sale agreement,
dated as of January 15, 1985, with IFD Properties, Inc.-First to acquire
the fee estate in the Investment. On January 30, 1985, CFP assigned all
its rights under the agreement to the Partnership. Pursuant to the
agreement, the Partnership acquired the Investment on January 31, 1985 for
the aggregate purchase price of $146,000,000.
The Partnership accepted title to the Investment subject to the existing
first mortgage note and the seven deeds of trust, held by The Travelers
Insurance Company and in February 1985 obtained from Brookside Savings &
Loan Association, Los Angeles, California, a nine-year second mortgage loan
in the principal amount of $20,000,000. The Partnership is currently
operating under the second modification of the first mortgage. The second
mortgage was refinanced by a combination of debt forgiveness by Brookside
Savings and Loan Association, Partnership reserves, and a $14,000,000
related party mortgage note in 1990. Reference is made to the Notes to
Financial Statements for a description of the mortgage debt, modifications
and refinance thereto. In conjunction with the first mortgage's initial
modification, the Partnership established a $1 million escrow account in
the name of the lender which had earned approximately $206,000 in interest
as of the date of the second modification. As a requirement of the second
modification, $706,000 was applied toward deferred interest.
In October 1990, concurrent with the first mortgage's second
modification and second mortgage refinance, the Partnership sold the
Torrance property for a gross sales price of $20,750,000. After closing
costs, the Partnership netted approximately $19,787,000. Of that amount,
$19,000,000 was required to be paid to the first mortgage lender;
$14,000,000 was applied to principal, and $5,000,000 was applied to
deferred interest. Of the remaining amount, $730,000 was retained by the
first mortgage lender and added to the existing escrow account for funding
operating deficits and capital expenditures. Closing costs for the
Torrance sale include a real estate advisory fee of $518,750 earned by an
affiliate of the General Partner. The affiliate has deferred payment of
this fee in order that the Partnership may utilize the funds for
operations. This fee remained unpaid at December 31, 1993.
In April 1986, pursuant to a loan agreement, the Partnership obtained
from ContiTrade Services Corporation an 8% working capital loan in the
principal amount of $36,649,813 (of which the Partnership received loan
proceeds of $35,200,000 after deducting a $1,449,813 discount). A portion
of the loan, approximately $32,900,000, was used to repay interim
indebtedness secured in conjunction with the acquisition of the Project and
the remainder was added to Partnership cash reserves. The loan served as a
vehicle to help fund Partnership cash needs as limited partners made staged
payments on capital contributions. In 1991, virtually all the limited
partners made their last payment and, subsequently, the Partnership paid
the final payment on the working capital loan. The difference between the
limited partner note payments received and the final working capital loan
payment made of approximately $500,000 was added to reserves to be used for
the operational needs of the Partnership. Reference is made to the Notes
to Financial Statements for a description of limited partner capital
contributions.
The mortgage escrow account, established with the first mortgage lender
in conjunction with the debt modifications, was closed in 1992. The
Partnership withdrew $523,000 on April 13, 1992 for renovation projects at
the West Los Angeles and Sherman Oak properties. On October 23, 1992, the
remaining balance, $870,000, was withdrawn for renovation projects at the
San Diego, Sherman Oaks, and West Los Angeles properties, and for 1992
operating deficits.
On January 17, 1994, the Sherman Oaks property sustained extensive
damage during the Southern California earthquake. Its net book value was
$17,677,130 at December 31, 1993. The property was "red-tagged" by city
officials; a designation issued to buildings considered totally unsafe for
use. The extent of the damages is currently being reviewed and the
ultimate effect on the Partnership's operations and equity value of the
Project is unknown.
<PAGE>
The Partnership's Project is insured for earthquakes
and business interruption. The insurance policy carries a 5% deductible.
The Partnership's cash reserves would not be adequate to fund the
deductible should the insurance proceeds be used to rebuild the property.
In the case of a total loss, the first mortgage lender has discretion as to
the decision to rebuild or apply the proceeds to reduce the outstanding
debt obligation. Due to the Partnership's lack of capital, the Partnership
would be limited to applying any insurance proceeds to the outstanding
first mortgage balance, attempting to finance the deductible with one of
the existing lenders, or financing the deductible with a new lender
(possibly requiring a priority position). Due to the preliminary stage of
the survey and analysis, the outcome cannot yet be reasonably concluded.
At December 31, 1993 the Partnership had $1,440,476 in cash and cash
equivalents which will be used for payment of working capital and accrued
liabilities. The Partnership's accrued liabilities at December 31, 1993
include the January 4, 1994 first mortgage debt service payment of $716,667
and tenant security deposits of $473,000. Remaining reserves are to be
used for working capital.
The cash flow deficit from property operations, inclusive of debt service,
was $1,224,000 for 1993 compared with $1,600,000 for 1992. The lower
deficit was a result of withholding $443,450 in debt service payments due
the second mortgage lender. Property operations for 1994 have been
estimated to be sufficient to cover first mortgage debt service and
necessary capital expenditures exclusive of the Sherman Oaks normal
property operations but inclusive of collections representing reimbursement
for loss of operations (net operating income) from the business
interruption insurance.
The rehabilitation projects at West Los Angeles, Sherman Oaks and
Mission Bay East were almost complete at the end of 1993. West Los Angeles
had budgeted for 86 units but only completed 34. The property has budgeted
another 29 units at a cost of $19,200 for 1994. Mission Bay has
approximately 60 units left to rehabilitate which have been deferred to
1995 with minimal impact expected on earnings. Capital expenditures for
the Project, exclusive of Sherman Oaks, are planned at approximately
$289,000 for items needed for safety and structural integrity, as well as
items needed for leasing, such as appliance replacement. Expenditures will
be limited to those which can be funded from property operations after
first mortgage debt service.
Results for 1993 continued to draw on Partnership reserves after debt
service and capital expenditures. Due to depressed property operations and
lack of equity beyond the mortgage holders, the Partnership withheld its
November 1, 1993 and subsequent second mortgage debt service payments.
Although the second mortgage lender has acknowledged the default, the
Partnership has not yet received notice of acceleration. The Partnership
is currently discussing a remedy to the default which could include cash
flow debt service payments. The Partnership also continues to hold open
discussions with the first mortgage lender for possible further note
modification prior to the debt maturity in May 1995. If the Partnership is
unable to modify the first mortgage note prior to debt maturity or a debt
modification allows no potential benefit to the Partners, the Project may
be subject to foreclosure.
If the second mortgage remains in default, the Partnership could lose
the properties through foreclosure with no cash available to investors. A
foreclosure would result in an income allocation to the Partners; although,
if limited partners had been suspending passive loss allocations as
required by the Tax Reform Act of 1986, the suspended losses available are
estimated to be more than the potential foreclosure income allocation,
resulting in an available net loss. In a year in which the Partnership
disposes of the Project and the Partnership is subsequently dissolved,
suspended losses will be available for use by investors to offset ordinary
income.
For a discussion of the markets effecting each of the properties'
operations, reference is made to Item 1. Business.
During 1992, the Partnership enacted strategies to improve 1993's net
cash flow from operations over 1992 results. Amberway and Pacifica Club
converted from OAKWOOD to conventional operations. Remaining OAKWOODS
unfurnished a number of units and reduced administrative costs. The
changes were an attempt to stabilize occupancy and reduce expenses. Arbor
Park was converted to conventional operations during 1991.
<PAGE>
Although rental rates on conventional units are lower than OAKWOOD units, a more
stabilized occupancy and administrative cost savings were expected to more than
offset the rate reduction for the year.
During the second quarter, two of the conventionally run properties,
Pacifica Club and Arbor Park, had problems with maintaining or increasing
occupancy coupled with delinquent rents. Due to market pressures,
virtually all of the competition has been offering up front rental
concessions, such as the free rent for the first month. During May and
June, up front concessions offered throughout the first two quarters at
Pacifica Club and Arbor Park were dropped and the properties switched to an
effective rent strategy. Monthly rents were lowered, effectively spreading
the up front concession over the term of the lease. The market in which
Pacifica Club operates remains very competitive. For the third quarter,
over 80% of the property's vacancy was made up of one bedroom units as
renters double up and seek two bedroom units to save expenses. During the
fourth quarter, discounts were offered at Pacifica Club's one bedroom
units, which further stabilized occupancy. The effective rent strategy has
begun to work at Pacifica Club as evidenced by the property's occupancy
percentage growth by the end of the year. Although down approximately 3%
for the year, Pacifica Club's rental income increased approximately 11%
over the prior quarter and the same quarter of the prior year. The
effective rent strategy has also assisted in the leasing efforts at Arbor
Park. Occupancy has been maintained with a 5% increase in rental income
from last quarter. Revenues are down approximately 5% year-to-date
compared to last year. The Partnership's other conventional property,
Amberway, has reported very strong occupancy and increased levels of rental
income. Average occupancy at Amberway for 1993 was 93% compared with the
average for 1992 of 84%. In late May, the property began a program to
increase rental rates which improved rental income for the year. Overall,
expenses at the three properties were down due to the conversion, but
Amberway's repair and maintenance expenses were up because of a painting
project which was required to enhance curb appeal. As expected, the newly
painted property has attracted a greater number of tenants at higher rates.
Net operating income at Pacifica Club, Arbor Park, and Amberway for this
year versus last year was up $27,000 or 2%, down $141,000 or 15%, and up
$170,000 or 19%, respectively.
For 1994, the Partnership plans estimate an overall increase in net
operating income at the conventional properties as a result of the painting
expenses incurred in 1993 at both Amberway and Arbor Park. Rental income
is estimated to remain relatively flat due to continued weaknesses in the
California markets.
At the OAKWOODS, the strategy of unfurnishing was expected to create
more lease base and, therefore, greater stability and reduced turnover. At
Sherman Oaks, the implementation of the strategy has been limited as
corporate demand was strong throughout the year. The conventional business
was slow, but the corporate business allowed Sherman Oaks to report
revenues within 3% of the prior year. Rental rates have decreased
significantly at West Los Angeles as the result of severe competition and
the depressed economy. Rental income is down $139,000 or 4% from the prior
year. Increasing the conventional lease base to 26% in 1993 helped
increase rental income by $100,000 for the second half of the year. The
unfurnishing appears to stabilize occupancy and will be increased to 30% in
1994. The San Diego market has been firming slightly, but rates still have
not improved. Rental income is up 1% from the previous year due to a very
strong fourth quarter. OAKWOOD administrative costs have been reduced at
Sherman Oaks, West Los Angeles, and Mission Bay East, but have been offset
by increases in furniture rental, repairs and maintenance, and utilities.
In December, a recommendation to convert the Mission Bay property to
conventional operations was approved. The property is the lowest quality
OAKWOOD in the San Diego market and has found it difficult to compete
within this market niche. In addition, a majority of the Mission Bay
property's OAKWOOD has been naval industry related. This business is
expected to decline through 1994, shrinking the property's primary source
of OAKWOOD business. It is anticipated that the conversion from OAKWOOD to
conventional operations will save approximately $205,000 in expenses while
maintaining revenues at 1993 levels.
Overall, occupancy has been increasing, the properties are realizing
administrative cost savings, and rental rates are beginning to stabilize
and increase. However, heavy rains in the first quarter, the decrease in
Southern California tourism, and the weak economy all contributed to
sustained depressed results. Overall, net operating income for the 1993
was within 1% of 1992.
<PAGE>
Results of Operations
The Investment was acquired and R & B Apartment Management Company
engaged for the purpose of managing the Investment pursuant to the OAKWOOD
marketing concept which R & B originated. Three of the remaining six
properties are operated under this concept with one scheduled for
conversion to conventional operations in 1994. The OAKWOOD concept has
four components:
(1) studio, one bedroom, and two bedroom furnished apartments;
(2) month to month, six month and one year rental agreements with
a minimum 30-day stay;
(3) optional houseware package with maid service;
(4) middle-to-upper income level tenants who are in need of
temporary housing.
The concept has proven popular with corporate clients for temporary
housing, relocation, and new employees.
R & B has also found Southern California to be well suited to the OAKWOOD
concept as it has a sizable affluent population which frequently leases on
a short-term basis. The soft market conditions in Southern California
during the past three years have led to increased competition for corporate
tenants and also reduced popularity of this concept as corporations have
trimmed expenditures and the region has lost jobs. Consequently, the
Partnership converted three properties to conventional apartments in 1991
and 1992 and began unfurnishing more units at the remaining OAKWOODS to
stabilize occupancy. In 1994, one of the remaining OAKWOODS will also
convert to conventional operations.
Results - 1993 compared with 1992
Total 1993 rental income was $17,266,927 compared to $17,476,053 in
1992. The 1993 rental income decline of $209,126 or 1.2% was primarily the
result of continued weakness in the Southern California economy and
increased competition, both of which have had an adverse impact on
occupancy and, subsequently, rental rates. These factors have combined to
support the Partnership's decision to convert a number of the properties to
conventional apartments and unfurnish more units at the remaining OAKWOOD
properties to maintain occupancy and market share.
The West Los Angeles and Sherman Oaks properties have traditionally had
the highest percentage of corporate rental activity and, therefore, were
the hardest hit by the slowdown in corporate rentals in the prior year.
The decision to discount rates and unfurnish some of the units has helped
to stabilize occupancy.
Throughout the first three quarters of the year, Sherman Oaks was able
to maintain approximately the same rental income level, down only $42,000
through September; however, decreased demand in the fourth quarter resulted
in a decrease to rental income of $111,000 for the year. The West Los
Angeles property showed some improvement for the current year fourth
quarter versus the 1992 fourth quarter, but revenues were still down
$139,000 compared to the prior year due to the depressed economy. Higher
fourth quarter occupancy at Mission Bay East, due to strong corporate
demand, resulted in a $50,000 increase in rental income over the twelve
month period.
At the conventional properties, rental income decreased at Pacifica Club
and Arbor Park and increased at Amberway for the year ended December 31,
1993, as compared to 1992. Rental income at Pacifica Club has dropped
$62,000 for the year and Arbor Park's revenue fell $82,000, both the result
of lower rates. These decreases were offset by a $134,000 increase at
Amberway due to increased rates and higher average occupancy. Occupancy
has been stabilizing and has improved from the prior year at both Pacifica
Club and Amberway.
<PAGE>
Other income increased for the year ended December 31, 1993, as compared
with 1992, due mainly to $49,000, $52,000 and $35,000 of redecorating fees
resulting from new laundry contracts received at Amberway, Pacifica Club and
Arbor Park, respectively.
The increase in property operating expenses for the year ended December
31, 1993, as compared with 1992, was partially due to increased furniture
rental expense at West Los Angeles and Sherman Oaks resulting from the
decision to rent rather than purchase replacement furniture as part of the
rehabilitation projects. Repairs and maintenance expenses increased in the
first quarter at West Los Angeles, Sherman Oaks, and Amberway as a result
of damage incurred from the heavy rains in Southern California in early
1993. Painting projects were completed at Amberway and Arbor Park to
enhance curb appeal. In addition, repairs and maintenance increased at
Sherman Oaks due to pipe damage. Utilities increased at each of the
properties except Amberway due to increases in utility rates and the
conversion to more conventional apartments.
Property taxes are down for the year ended December 31, 1993, as
compared with 1992, due to a $49,604 property tax refund received for
Mission Bay East for fiscal year 1993 (July 1, 1992 to June 30, 1993), as
well as decreased assessments at Mission Bay East and Pacifica Club.
Base management fees were generally lower due to overall decreases in
revenue. However, the decrease was offset by an incentive management fee
of approximately $46,000 earned for Mission Bay East in 1993 compared to an
incentive fee of $36,000 earned in 1992 for Sherman Oaks.
The decrease in property administrative expense for the year ended
December 31, 1993, as compared with 1992, was the result of reduced
corporate administrative expenses at the three remaining OAKWOOD properties
and also at the converted properties. Cost cutting efforts at each of the
Partnership's properties also contributed to lower administrative expenses.
These decreases were partially offset by an increase in bad debts at
Amberway and increased payroll related expenses at Arbor Park.
The decrease in interest income in 1993 as compared with 1992 was due to
the decrease in the average cash balance invested as a result of cash flow
deficits. In addition, during 1992 the cumulative balance in the mortgage
escrow account was withdrawn to fund capital improvement projects.
Depreciation increased for the year ended December 31, 1993, as compared
with 1992, due to the additions associated with the rehabilitation projects
at the three OAKWOOD properties. Amortization decreased for the year ended
December 31, 1993, as compared with 1992 due to deferred loan costs
becoming fully amortized during 1993.
Results - 1992 compared with 1991
Rental income decreased in 1992, as compared with 1991, due to a weak
economy and intensified competition in Southern California resulting in
lower occupancy, reduced corporate demand, and downward pressure on rental
rates. The Partnership reduced rental rates to maintain occupancy and
market share, converted some OAKWOODS to conventional apartments and
unfurnished a portion of the remaining OAKWOODS to create more stability.
The West Los Angeles and Sherman Oaks properties have traditionally had
the highest percentage of corporate rental activity and, therefore, were
initially the hardest hit by the slowdown in corporate rentals. These
properties accounted for the majority of the 1991 decreases and did not
begin to rebound until the second half of 1992. Rental income at these
properties decreased approximately $28,000 in 1992, despite an increase of
approximately $128,000 for the fourth quarter resulting from the
rehabilitation project and a weak prior year fourth quarter.
Rental rates were discounted at Amberway and Pacifica during the first
quarter of 1992 to help increase falling occupancy. The rates were further
reduced when the properties were converted to conventional apartments. The
rate reductions have resulted in a stabilization of occupancy. Rental
income for Amberway decreased $173,000 for the year despite a $44,000
increase for the fourth quarter. Occupancy and rental rates have not
stabilized sufficiently to
<PAGE>
allow Pacifica Club to reverse the falling revenue trend. Rental income for the
property decreased $342,000 for the year and $73,000 for the fourth quarter.
Rental rate discounts and free rent concessions were implemented in 1992
in an effort to maintain occupancy levels at Arbor Park. Increasing
vacancy in Los Angeles and Orange counties has put downward pressure on
rates. For 1992, as compared with 1991, rental income decreased
approximately $102,000.
Rental rate decreases were also used to boost falling occupancy levels
at Mission Bay East during the past three quarters of 1992. The resulting
decline in rental income has more than offset gains made in the first
quarter relating to leftover rentals from the America's Cup Challenger
eliminations. Rental income decreased at this property by approximately
$270,000 for 1992.
The decrease in other income for 1992, as compared with 1991, was mainly
the result of an overall decrease in occupancy. This decrease was
partially offset by slight increases in facility rentals at several
properties and a slight increase in furniture rental income at Amberway.
The increase in property operating expense for the year ended December
31, 1992, as compared with 1991, was mainly due to increased furniture
rental expense at Sherman Oaks and West Los Angeles. A decision was made
to rent rather than purchase replacement furniture as part of the
rehabilitation projects. Additional increases were the result of increased
repairs and maintenance expense of approximately $100,000 at Amberway and
Pacifica Club. This increase was partially offset by savings in repairs
and maintenance expense of approximately $59,000 at West L.A. as a result
of the rehabilitation project. The remaining increase was the result of
relatively minor increases in insurance expense and utilities at the
Partnership's properties.
The decrease in management fee expense for the year ended December 31,
1992, as compared with 1991, was the result of significantly lower rental
income in 1992 as mentioned above. Included in management fees for 1992
was an incentive management fee of approximately $36,000 relative to
Sherman Oaks.
The decrease in property administrative expense for the year ended
December 31, 1992, as compared with 1991, was mainly the result of reduced
corporate chargebacks from the management company and strong cost cutting
efforts. Significant areas of savings included payroll, fringe,
advertising and promotion. Corporate chargebacks related to the OAKWOOD
concept were eliminated at Amberway and Pacifica Club when they were
converted to conventional apartments, resulting in decreased administrative
costs of approximately $247,000. Through negotiations with the management
company, corporate chargebacks were also eliminated at Sherman Oaks and
reduced at West L.A., resulting in reduced administrative costs of
approximately $160,000. Most of the remaining decreases were the result of
savings of approximately $32,000 at Mission Bay East from a 10% staff
reduction and strong cost cutting efforts at Arbor Park coupled with
continued savings from the conversion to conventional apartments, resulting
in savings of approximately $127,000.
Depreciation and amortization expense decreased for the year ended
December 31, 1992, as compared with 1991, despite the capital additions
over the prior two years. The decrease was the result of the expiration of
the useful lives of certain components of the Partnership's investment
properties and a 1991 adjustment of approximately $210,000 to amortize the
remaining balance of the deferred costs associated with the Brookside debt
retired in 1990.
Interest income and expense decreased for the year ended December 31,
1992, as compared with 1991, due to the receipt of the final investor note
payment along with the repayment of the working capital loan in 1991.
Interest income was also affected by reduced cash balances, as the result
of operating deficits, and reduced interest rates in the current year.
The decrease in management and administrative fees to affiliates for the
year ended December 31, 1992, as compared with 1991, was mainly due to the
expiration of the partnership administrative and management fee effective
January 1, 1992.
<PAGE>
The decrease in general and administrative expense for the year ended
December 31, 1992, as compared with 1991, was the result of higher
professional fees in the prior year associated with the allocation of 1990
sales proceeds for tax purposes.
Inflation
Since inflation has been at a low rate during 1993, 1992 and 1991, the
effect inflation and changing prices have had on current revenue and income
from operations has been minimal.
Inflation in future periods may increase rental rates (from leases to
new tenants or renewals of leases to existing tenants) assuming no major
changes in normal market conditions. At the same time, it is anticipated
that property operating expenses will be similarly affected. Assuming no
major changes in occupancy levels, increases in rental income are expected
to cover inflation driven increases in the cost of operating the Project
and property taxes. Inflation may also result in capital appreciation of
the Project over a period of time as rental rates and development costs
increase.
<PAGE>
Item 8. Financial Statements and Supplementary Data
California Seven Associates Limited Partnership,
a California limited partnership
Index
Page
Report of Independent Accountants 21
Financial Statements:
Balance Sheets, December 31, 1993 and 1992 22
Statements of Operations, For the Years Ended
December 31, 1993, 1992 and 1991 23
Statements of Partners' Deficit, For the Years Ended
December 31, 1993, 1992 and 1991 24
Statements of Cash Flows, For the Years Ended December 31, 1993, 1992
and 1991 25
Notes to Financial Statements 26
Schedules:
X - Supplementary Statements of Operations Information,
For the Years Ended December 31, 1993, 1992 and 1991 34
XI - Real Estate and Accumulated Depreciation, December 31, 1993 35
Schedules not filed:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or the information is presented
in the financial statements or related notes.
<PAGE>
Report of Independent Accountants
To the Partners of
California Seven Associates
Limited Partnership
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of California
Seven Associates Limited Partnership at December 31, 1993 and 1992, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 11 to the
financial statements, the Partnership has sustained negative cash flows and is
in default on its second mortgage loan obligation. These conditions raise
substantial doubt about the Partnership's ability to continue as a going
concern. The Partnership's plans in regard to these matters are described in
Note 5 and 11. The financial statements do not include any adjustments that
might result from the outcome of these uncertainities.
As discussed in Note 10, on January 17, 1994, the Sherman Oaks property
sustained extensive damage from an earthquake. The property is considered
unsafe for use and is currently not occupied. The extent of the damage is
currently being reviewed and the ultimate effect on the Partnership's operations
is unknown at this time.
(Price Waterhouse)
Hartford, Connecticut
February 16, 1994
<PAGE>
<TABLE>
California Seven Associates Limited Partnership,
a California limited partnership
Balance Sheets
December 31, 1993 and 1992
<CAPTION>
Assets 1993 1992
<S> <C> <C>
Property and improvements, at cost:
Land and land improvements $ 20,562,073 $ 20,562,073
Buildings 109,659,882 109,348,616
Furniture and fixtures 12,925,199 12,583,562
Machinery and equipment 681,295 638,158
143,828,449 143,132,409
Less accumulated depreciation 43,907,921 39,695,623
Net property and improvements 99,920,528 103,436,786
Cash and cash equivalents 1,440,476 2,268,544
Accounts receivable 388,172 391,981
Prepaid expenses 792 196,886
Other assets 19,040 18,257
Deferred charges -- 199,046
Total $101,769,008 $106,511,500
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Partners' Deficit
<S> <C> <C>
Liabilities:
Notes and mortgages payable $111,983,903 $111,983,903
Accounts payable and accrued expenses 446,318 417,986
Accrued interest payable 1,600,118 352,001
Tenant security deposits 472,865 399,124
Unearned income 303,995 161,257
Deferred management fees 2,000,000 2,000,000
Fees and reimbursements payable to the General
Partner and its affiliates 3,848,505 3,519,603
Other liabilities 33,957 48,734
Total liabilities 120,689,661 118,882,608
Partners' deficit:
General Partner (732,454) (666,914)
Limited partners(362 Class A and
3 Class B Units) (18,188,199) (11,704,194)
Total partners' deficit (18,920,653) (12,371,108)
Total $101,769,008 $106,511,500
<FN>
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
California Seven Associates Limited Partnership,
a California limited partnership
<CAPTION>
Statements of Operations
For the Years Ended December 31, 1993, 1992 and 1991
1993 1992 1991
<S> <C> <C> <C>
Property operating revenues:
Rental income $ 17,266,927 $ 17,476,053 $ 18,391,301
Other 659,373 538,404 591,079
17,926,300 18,014,457 18,982,380
Property operating expenses:
Maintenance and repairs, furniture rental,
insurance, and other property
operations 3,484,288 3,061,562 2,559,973
Real estate taxes 1,401,422 1,462,483 1,409,033
Management fees 595,936 593,330 601,222
Property administrative 3,739,022 4,126,168 4,725,736
9,220,668 9,243,543 9,295,964
Net property revenue 8,705,632 8,770,914 9,686,416
Other operating costs and expenses:
Depreciation and amortization 4,411,344 4,390,850 4,411,912
Management and administrative
fees to affiliates 329,118 330,964 414,674
Partnership administrative 109,978 115,422 124,074
4,850,440 4,837,236 4,950,660
Net partnership operating income 3,855,192 3,933,678 4,735,756
Interest income 52,585 141,897 532,049
Interest expense (10,461,800) (10,461,800) (10,699,836)
Net loss $ (6,554,023) $ (6,386,225) $ (5,432,031)
Net loss:
General Partner $ (65,540) $ (63,862) $ (54,320)
Limited partners (6,488,483) (6,322,363) (5,377,711)
$ (6,554,023) $ (6,386,225) $ (5,432,031)
Net loss per Class A Unit: $ (17,924) $ (17,465) $ (14,856)
<FN>
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
California Seven Associates Limited Partnership,
a California limited partnership
Statements of Partners' Deficit
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
General Limited Partners
Partner Class A Class B Original Total
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 $ (548,732) $ (6,799,292) $ -- $ (4,623) $ (7,352,647)
Contributions -
note payments -- 6,814,018 -- -- 6,814,018
Net loss (54,320) (5,377,711) -- -- (5,432,031)
Balance,
December 31, 1991 (603,052) (5,362,985) -- (4,623) (5,970,660)
Cash distributions -- (14,223) -- -- (14,223)
Net loss (63,862) (6,322,363) -- -- (6,386,225)
Balance,
December 31, 1992 (666,914) (11,699,571) -- (4,623) (12,371,108)
Cash distributions -- (2,343) -- -- (2,343)
Contribution -
note payment -- 6,821 -- -- 6,821
Net loss (65,540) (6,488,483) -- -- (6,554,023)
Balance,
December 31, 1993 $ (732,454) $(18,183,576) $ -- $ (4,623) $(18,920,653)
<FN>
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
California Seven Associates Limited Partnership,
a California limited partnership
Statements of Cash Flows
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,554,023) $ (6,386,225) $ (5,432,031)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 4,411,344 4,390,850 4,411,912
Amortization of debt discount -- -- 59,197
Accounts receivable 3,809 395,768 (402,207)
Fees and reimbursements payable to the
General Partner and its
affiliates 328,902 330,881 415,049
Accounts payable 32,311 107,313 16,001
Accrued interest payable 1,248,117 (628,667) 448,005
Other, net 397,013 (8,165) 428,951
Net cash used in
operating activities (132,527) (1,798,245) (55,123)
Cash flows from investing activities:
Purchase of property and improvements (696,040) (653,346) (833,439)
Receipts from mortgage escrow account -- 1,392,647 --
Net cash provided by (used in)
investing activities (696,040) 739,301 (833,439)
Cash flows from financing activities:
Cash distributions to limited
partners (6,322) (7,901) --
Proceeds from partners' capital
contributions 6,821 -- 6,814,018
Repayments of notes and
mortgage loans -- -- (6,619,475)
Net cash provided by (used in)
financing activities 499 (7,901) 194,543
Net decrease in cash and cash
equivalents (828,068) (1,066,845) (694,019)
Cash and cash equivalents,
beginning of year 2,268,544 3,335,389 4,029,408
Cash and cash equivalents,
end of year $ 1,440,476 $ 2,268,544 $ 3,335,389
Supplemental disclosure of cash information:
Interest paid during year $ 9,213,683 $ 11,090,467 $ 10,192,634
<FN>
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements
1.Organization and Basis of Accounting
California Seven Associates Limited Partnership, a California limited
partnership, (the "Partnership") was formed to acquire and operate
apartment complexes located in California.
The General Partner of the Partnership is CIGNA Realty Resources, Inc. -
Seventh (the "General Partner"), a Delaware corporation qualified to do
business in the States of California and Connecticut and an indirect wholly
owned subsidiary of CIGNA Corporation.
The Partnership is currently in default on its second mortgage loan
obligation and could lose its investment in property and improvements
through foreclosure.
The Partnership's records are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles for
financial reporting purposes and are adjusted for federal income tax
reporting. The net effect of the adjustments as of December 31, 1993, 1992
and 1991, principally relating to differences in depreciation methods and
accounting for capital transactions and limited partner capital
contribution notes receivable, are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
Financial Tax Financial Tax
Reporting Reporting Reporting Reporting
<S> <C> <C> <C> <C>
Total assets $101,769,008 $73,208,025 $106,511,500 $79,679,623
Partners' deficit:
General Partner (732,454) (20,703,414) (666,914) (18,450,516)
Limited partners:
Class A (18,183,576) (25,234,133) (11,699,571) (19,277,177)
Class B -- (1,227,911) -- (1,227,911)
Original (4,623) (9,842) (4,623) (9,842)
Net loss:
General Partner (65,540) (2,252,898) (63,862) (3,658,495)
Limited partners:
Class A (6,488,483) (5,956,956) (6,322,363) (4,472,686)
Class B -- -- -- --
Net loss
per Class A Unit: (17,924) (16,456) (17,465) (12,356)
</TABLE>
<TABLE>
<CAPTION>
1991
Financial Tax
Reporting Reporting
<S> <C> <C>
Total assets $113,058,490 $88,085,002
Partners' deficit:
General Partner (603,052) (14,792,021)
Limited partners:
Class A (5,362,985) (14,790,268)
Class B -- (1,227,911)
Original (4,623) (9,842)
Net loss:
General Partner (54,320) (1,604,186)
Limited partners:
Class A (5,377,711) (5,626,739)
Class B -- --
Net loss
per Class A Unit: (14,856) (15,544)
</TABLE>
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
2.Summary of Significant Accounting Policies
a)Property and Improvements: Property and improvements are carried at cost
less accumulated depreciation. The cost represents the initial purchase
price and subsequent capitalized costs, including certain acquisition
expenses. Depreciation on property and improvements is calculated on the
straight-line method based on the estimated useful lives of the various
components (5 to 30 years). Repair and
maintenance expenses are charged to operations as incurred.
As a result of inherent changes in market values of real estate property
and improvements, the Partnership reviews potential impairment annually.
The undiscounted future cash flows for each property, as estimated by the
Partnership, is compared to the carrying value. If the carrying value is
greater than the sum of the estimated future undiscounted cash flows, and deemed
permanent, an impairment loss is recognized currently.
b)Cash and Cash Equivalents: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
c)Mortgage Escrow Account: Mortgage escrow account consisted of funds escrowed
as required by the first mortgage lender to be used for capital
improvements and operating deficits at the Partnership's properties.
During 1992, the cumulative balance was withdrawn and the account was
closed. The funds were used for 1991 and 1992 capital improvement projects
and operating deficits.
d)Deferred Charges: Deferred charges consisted of costs incurred in the
organization of the Partnership, which were amortized using the
straight-line method over sixty months, and costs of obtaining financing
and surety for the working capital loan which were amortized over the life
of the loan. The balance at December 31, 1992 consisted of costs incurred
obtaining mortgage financing, which were fully amortized by December 31,
1993.
e)Mortgage Notes: Discounts on long-term mortgage notes were amortized as
interest expense over the term of the related note using the interest
method.
f)Partners' Deficit: Offering costs comprised of sales commissions and other
issuance expenses have been charged to the partners' capital accounts as
incurred.
g)Income Taxes: No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
h)Basis of Presentation: Certain amounts in the 1992 financial statements have
been reclassified to conform with 1993 presentation.
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
3. Property and Improvements
At December 31, 1993 the Partnership owned six properties located in
California totaling 2,135 units with leases generally for a term of one
year or less. All properties are pledged as security for the long-term
debt.
The Partnership is currently in default on its second mortgage loan
obligation and could lose its investment in property and improvements
through foreclosure.
The Sherman Oaks property sustained extensive damage from the January
17, 1994 Southern California earthquake. Preliminary indications are that
structural damage is considerable and the property may not be salvageable.
The Partnership's properties are covered by insurance, including earthquake
(5% deductible) and business interruption. The Partnership's insurance
company has been notified and engineers are surveying the property. Damage
estimates are expected to be completed in April 1994. In the case of a
total loss, the first mortgage lender has discretion as to the decision to
rebuild or apply the proceeds to reduce the outstanding debt obligation.
The financial statements do not include any adjustments for possible losses
resulting from the earthquake.
4. Deferred Charges
Deferred charges at December 31, 1993 and 1992 consist of the following:
1993 1992
Costs of obtaining financing $ 1,740,994 $ 1,740,994
Accumulated amortization (1,740,994) (1,541,948)
$ -- $ 199,046
5. Notes, Mortgages and Loan Modifications
The following table summarizes outstanding debt as of December 31, 1993
and 1992:
1993 1992
First mortgage loan (including cumulative
deferred interest of $11,433,903 at
December 31, 1993 and 1992). $ 97,433,903 $ 97,433,903
Second mortgage loan with affiliate of
General Partner. The Partnership is currently
in default on this mortgage note. 14,000,000 14,000,000
Assignment note, which bears interest at 16%
per annum, payable to an affiliate of the
General Partner. As of December 31, 1993,
the balance remained deferred and unpaid. 550,000 550,000
Total notes and mortgages payable $ 111,983,903 $ 111,983,903
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
One of the six properties securing the Partnership's mortgage notes was
extensively damaged in the January 17, 1994 Southern california earthquake.
The effect on the Partnership's debt obligations is currently unknown.
Partnership property is held subject to a first mortgage loan with an
original principal balance of $100,000,000. Interest thereon initially
accrued and compounded at 12.75% per annum. Pursuant to an eighteen month
payment modification agreement negotiated during 1987, interest only
payments calculated at 10% were due monthly through January 1, 1989. The
difference between the pay rate and the coupon rate accumulated as deferred
interest. Interest was charged on accumulated deferred interest at 12.75%
per annum. In conjunction with the modification, a $1 million escrow
account was established in the name of the lender, to provide the lender
additional collateral to secure the Partnership's obligations under the
loan.
Effective with the August 1, 1989 payment, a temporary arrangement
reduced monthly payments to interest only at 10.5% and then to 10%
effective with the May 1, 1990 payment. The differences between the
negotiated rates and the coupon rate of 12.75% continued to accrue.
In October 1990, simultaneously with the sale of the Torrance property,
the Partnership completed a permanent modification of the first mortgage
loan. Terms included a reduced interest rate from the coupon of 12.75% to
10%, an extension of the due date from December 1993 to May 1995 and a
fixing of deferred interest at $17,140,361 as of May 1, 1990 with no
additional interest accruals on deferred interest. As an additional
requirement of the modification, $14,000,000 of the sales proceeds from the
Torrance property was used to reduce the principal and $5,000,000 was used
to reduce the deferred interest balance. No gain or loss was recorded on
the first mortgage modification. In addition, $706,458 of the escrow
account, including accumulated interest of $206,458, was applied against
the deferred interest balance. Also, as part of the Torrance property
sale, $730,000 of the sales proceeds was required to be deposited in the
escrow account to be used for operating deficits and capital expenditures.
The Partnership property was also held subject to a $20,000,000 variable
rate second mortgage loan scheduled to mature on December 31, 1993. The
interest rate was adjusted monthly to 2% above the Five Year Treasury
Constant Matrix Index as published by the Federal Reserve Board (the
"current accrual rate"). Pursuant to debt modification agreements signed
in 1987 and 1989, interest only payments, calculated at 8.64%, were due
monthly from August 1, 1987 until January 1, 1990. Beginning February 1,
1990, interest only payments calculated at 9% were due monthly until
maturity. The difference between interest accruing on the note and
interest paid during this period was deferred. During the term of the
mortgage, the interest rate could not exceed 17.5% per annum.
On October 26, 1990, the Partnership refinanced its $20,000,000 second
mortgage loan. At the time of the refinance, the Partnership owed
Brookside Savings $20,310,706 of principal, including deferred interest,
and $419,328 of unpaid current interest payable. The Partnership
maintained a $200,000 debt escrow account for the benefit of Brookside
Savings, established as a result of the 1987 debt modification agreement.
The Partnership negotiated a discounted payoff with Brookside Savings for
$14,419,328 plus forfeiture of the debt escrow account of $200,000. The
Partnership utilized the proceeds from a new second mortgage of
$14,000,000, obtained from an affiliate of the General Partner, plus
$419,328 of Partnership reserves to pay off the Brookside Savings mortgage.
The difference between the payoff amount, including the escrow account, and
the total amounts outstanding netted a $6,110,706 extraordinary gain from
debt forgiveness in the 1990 Statement of Operations. The term of the
replacement second mortgage require monthly interest only payments at
12.67% with a maturity date concurrent with the first mortgage, as
modified.
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
Effective November 1, 1993, the Partnership began withholding the
interest payment on its second mortgage note. Although the second mortgage
holder has acknowledged the default, the Partnership has not received
notice of acceleration. If the Partnership remains in default, the
properties could be lost through foreclosure. The Partnership is
discussing a possible remedy to the default, which could include cash flow
debt service payments.
6. Limited Partner Capital
The initial Limited Partner contributed $100 to the capital of the
Partnership. Pursuant to a private offering, the Partnership sold Limited
Partnership Interests to seven Class B Limited Partners for an aggregate
purchase price of $500,000. The Partnership also sold 362 Class A
partnership Units at a Unit price of $150,000 each ($54,300,000 in total).
Of these Units, 1.5 Units were purchased for cash, 14.4 Units were
purchased pursuant to a three-year note option and 346.1 Units were
purchased pursuant to a seven-year note option. The three and seven-year
note options provided for the sale of Units upon receipt at subscription of
$45,000 and $18,343 per Unit, respectively, with the balance due of
$105,000 and $131,657 per Unit, respectively, being evidenced by a secured
recourse promissory note bearing interest at the rate of 12% per annum.
Interest payments were due in semi-annual installments on each March 1 and
December 1, beginning on December 1, 1985. In the fourth quarter of 1993,
the investor note receivable balance of $6,821 on .333 unit was collected.
During 1991, the State of Connecticut enacted new income tax
legislation, a part of which effects partnerships. The portfolio income
allocations made by the Partnership to the limited partners are considered
Connecticut based income and subject to Connecticut tax. On July 14, 1993,
the Partnership filed its 1992 Form CT-1065 Partnership tax return with the
State of Connecticut. The Partnership has elected to pay the tax due on
the limited partners' share of portfolio income and, therefore, paid tax
due of $6,322 directly to the State of Connecticut. The Partnership also
accrued the 1993 estimated payment of $2,343 as of December 31, 1993.
These amounts were treated as reductions of partners' capital and reported
as distributions in the accompanying financial statements.
7. Transactions with Affiliates
Fees and other expenses incurred by the Partnership to the General
Partner or its affiliates during the years ended December 31, 1993, 1992
and 1991 are as follows:
1993 1992 1991
Interest on assignment note $ 88,000 $ 88,000 $ 88,000
Asset management fee 179,118 180,964 190,524
Administration and management fee -- -- 74,150
General partner salary 150,000 150,000 150,000
Reimbursement (at cost) for
out-of-pocket expenses 30,508 34,906 35,231
Payment of all fees and expenses, other than reimbursement for out-of-
pocket expenses, has been deferred by the General Partner and its
affiliates.
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
8. Management Agreements
On January 31, 1985, the Partnership entered into a Management Agreement
with R & B Apartment Management Company ("R & B"). The term of the
agreement was approximately ten years with provisions to extend the term as
defined in the Management Agreement.
Generally, the management fee was equal to 5.0% of the gross rental
receipts collected. A portion of the Annual Management Fee was subject to
deferral based on certain operating results, but not to exceed, in total,
$2,000,000 or exceed, in any one year, one-half of the Annual Management
Fee otherwise payable in such year. As of December 31, 1989, the maximum
was reached. Upon termination of the Management Agreement or upon sale,
any deferral of the Annual Management Fee will be recoverable, without
interest, provided investors have received their investment plus an 8%
return.
R & B is entitled to an additional fee equal to 10% of the amount by
which net sales, as defined, exceeds the deferred R & B management fee.
In 1991, the management agreement was renegotiated for the five
remaining OAKWOOD format properties and the one conventional format
property. For the OAKWOOD properties, a base amount was set using 1991 as
a base year. For 1991, the actual net operating income was compared to the
base. For 1992 to 1995, the fee was to be 5% provided R&B achieved a 5%
annual growth in net operating income from the 1991 base. If the annual
growth target wasn't met, R&B would only receive a 3% fee. In 1991, the
base net operating income was not reached and R & B's fee was reduced by
40% to 3% of gross rental receipts. For the conventional property, Arbor
Park, the fee was set at 4% of gross revenues.
On May 1, 1992, the Huntington Beach and Anaheim properties were
converted from the OAKWOOD concept to conventional apartment operations.
In conjunction with Anaheim's conversion, R&B was replaced as the property
management company by Prometheus. The property management fee for these
properties has been changed to 3% of gross receipts plus an additional 1%
incentive fee based on certain revenue and expense goals. The Partnership
also renegotiated the management fee on the remaining OAKWOOD properties,
West Los Angeles, Sherman Oaks and Mission Bay East, to an incentive base
fee of 3% with the potential for an additional 1% if net operating income
objectives are met. R&B has also agreed to absorb all corporate allocation
costs relating to the OAKWOOD program for Sherman Oaks and to a reduction
in the corporate allocation percentage at West Los Angeles.
9. Partnership Agreement
Generally, distribution of operating cash flow, allocations of net
income or losses from operations, and loss on dispositions, as reported on
the Partnership's Federal income tax returns, will be allocated 99% to the
Limited Partners and 1% to the General Partner.
All allocations among the Limited Partners of net income or loss will be
made in the proportion that the capital contribution made or required to be
made by each Limited Partner bears to the total capital contributions made
or required to be made by all Limited Partners except as noted in the
Partnership Agreement Section 6 (e) and 6(f).
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
In general, gains from dispositions shall be allocated first to the
Class B Limited Partners in proportion to their respective negative capital
accounts and then to the other Partners in proportion to their respective
negative capital accounts. Thereafter, gains from dispositions shall be
allocated in accordance with Partnership Agreement Section 6(g)(i) through
(iv).
Proceeds from capital transactions will be distributed generally to each
Limited Partner equivalent to aggregate capital contributions; then, to
each Limited Partner, equal to 8% per annum of his aggregate capital
contribution; then, to the General Partner equivalent to its aggregate
capital contribution; then, of the balance, 75% to the Limited Partners and
25% to the General Partner.
Paragraph 6(u) of the Partnership Agreement limits the allocation of
losses recognized for Federal income tax purposes to partners where such
allocation would cause their negative capital account to be in excess of
their share of minimum gain as defined in such paragraph. Those losses not
allocated to the Limited Partners are allocated to the General Partner.
Paragraph 6(v) contains minimum gain chargeback and qualified income
offset provisions in accordance with Treasury Regulation
1.704-1T(b)(4)(iv)(e), - 1T(b)(4)(iv)(h)(4), and - 1(b)(2)(ii)(d).
10. Contingency
On January 17, 1994, The Sherman Oaks property sustained extensive
damage during the Southern California earthquake. The property was "red-
tagged" by city officials; a designation issued to buildings considered
totally unsafe for use. The extent of the damages is currently being
reviewed and the ultimate effect on the Partnership's operations is unknown.
The carrying value of the Sherman Oaks property amounted to approximately
$17,700,000 at December 31, 1993. The Partnership's Project is insured for
earthquakes (5% deductible) and business interruption. The Partnership's
cash reserves would not be adequate to fund the deductible should the
insurance proceeds be used to rebuild the property. In the case of a total
loss, the first mortgage lender has discretion as to the decision to
rebuild or apply the proceeds to reduce the outstanding debt obligation.
Due to the Partnership's lack of capital, the Partnership would be limited
to applying any insurance proceeds to the outstanding first mortgage
balance, attempting to finance the deductible with one of the existing
lenders, or financing the deductible with a new lender (possibly requiring
a priority position). Due to the preliminary stage of the survey and
analysis, the outcome cannot yet be reasonably concluded. The financial
statements do not include any adjustments for possible losses resulting
from the earthquake.
11. Liquidity
The Partnership's cash flow from operations after debt service and
capital improvements has been in a continual deficit position. As a result
of cash flow deficits and the lack of investor equity, the Partnership
began withholding payment of debt service on its second mortgage and
remains in default at December 31, 1993. Future capital expenditures will
be limited to those needed for safety and structural integrity. Additional
expenditures will be limited to those which can be funded from property
operations after first mortgage debt service. The General Partner has
estimated 1994 operations to be sufficient to cover first mortgage debt
service and necessary capital expenditures, exclusive of Sherman Oaks
normal property operations, but inclusive of collections representing
reimbursement for loss of operations (net operating income) from business
interruption insurance. Dependant on the timing of the
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
Notes to Financial Statements - Continued
insurance reimbursement, the General Partner may have to take further steps
to preserve the Partnership's cash such as aging payables past 30 days,
partial remittances on the first mortgage debt or arranging unsecured
short-term borrowings.
12. 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)] Plaintiff continues to seek payment of
$154,194.58 plus interest and fees from Defendant. The lawsuit stems from
Defendants refusal to forward rental payments which accrued while Plaintiff
owned the property (Torrance Oakwood 20900 Anza, City of Torrance). A
Mandatory Settlement Conference, followed by a jury trial has been set for
July. Plaintiff intends to file a motion for Summary Judgement prior to
the trial date.
Plaintiffs in a suit brought against the Partnership and its General
Partner [Theodore D. Cohen, et al v. California Seven Associates, et al.,
No. 657925 (Orange County, CA, May 16, 1991)]. The Partnership, its
General Partner, and other defendants have denied liability in the Cohen
case and will, if necessary, continue to defend this suit. Given the
numerous issues that remain to be resolved during the motion, discovery and
trial phases of this action, the likelihood of an unfavorable outcome or
the extent of any possible liability cannot be assessed at this time.
Settlement has been reached in principle in Alan P. Johnson v.
California Seven Associates, et al., [No. 654593 (Superior Court, San
Diego, CA, January 15, 1993)]. It is anticipated that the settlement will
be documented in March 1994. The settlement will not involve any funds
from the Partnership or General Partner.
<PAGE>
<TABLE>
SCHEDULE X
California Seven Associates Limited Partnership,
a California limited partnership
<CAPTION>
Supplementary Statements of Operations Information
For the Years Ended December 31, 1993, 1992 and 1991
Charged to Expenses
1993 1992 1991
<S> <C> <C> <C>
Repairs and maintenance $ 2,214,644 $ 2,146,871 $2,200,821
Real estate taxes 1,401,422 1,462,483 1,409,033
Advertising 393,639 499,097 685,479
Amortization of:
Deferred financing costs 199,046 265,078 377,158
Deferred surety fee -- -- 12,822
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XI
California Seven Associates Limited Partnership
(a California limited partnership)
<CAPTION>
Real Estate and Accumulated Depreciation
December 31, 1993
Costs
Capitalized
Initial Cost to Partnership (B) Subsequent to
Acquisition
Land, Building
Description of Land and Improvements
Apartment Complexes Land Furniture and and Furniture
by Property Location Encumbrances(B) Improvements Buildings Fixtures & Fixtures
<S> <C> <C> <C> <C> <C>
Anaheim, CA $ 2,858,000 $11,327,356 $1,506,216 $ 536,906
Huntington Beach, CA 2,663,000 13,705,763 1,250,899 1,565,141
West Los Angeles, CA 4,000,000 17,818,823 1,149,274 2,332,704
San Diego, CA 5,939,000 34,160,345 1,978,398 3,253,199
Sherman Oaks, CA 3,908,000 17,411,273 1,122,981 2,278,778
Upland, CA 1,140,000 9,724,577 880,956 1,316,860
Total $111,983,903 $20,508,000 $104,148,137 $7,888,724 $11,283,588
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at Close of Period (C) (D)
Description of
Apartment Complexes Land and Land Building and Furniture and Machinery and
Property Location Improvements Improvements Fixtures Equipment Total
<S> <C> <C> <C> <C> <C>
Anaheim, CA $2,865,938 $11,396,131 $1,938,160 $ 28,249 $16,228,478
Huntington Beach, CA 2,680,932 14,506,307 1,892,636 104,928 19,184,803
West Los Angeles, CA 4,000,000 18,993,661 2,149,018 158,122 25,300,801
San Diego, CA 5,945,739 35,551,719 3,614,057 219,427 45,330,942
Sherman Oaks, CA 3,924,740 18,740,934 1,953,936 101,422 24,721,032
Upland, CA 1,144,724 10,471,130 1,377,392 69,147 13,062,393
Total $20,562,073 $109,659,882 $12,925,199 $681,295 $143,828,449
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Depreciation in
Description of Latest Statement
Apartment Complexes Accumulated Date of Date of Operation is
by Property Location Depreciation(E) Construction Acquired Computed
<S> <C> <C> <C> <C>
Anaheim, CA $5,282,602 1983 1-31-85 5-30 years
Huntington Beach, CA 6,156,614 1971 1-31-85 5-30 years
West Los Angeles, CA 7,431,065 1966 1-31-85 5-30 years
San Diego, CA 13,602,060 1970 1-31-85 5-30 years
Sherman Oaks, CA 7,043,902 1969 1-31-85 5-30 years
Upland, CA 4,391,678 1971 1-31-85 5-30 years
Total $43,907,921
<FN>
(A) Reference is made to the Notes to Financial Statements.
(B) The cost to the Partnership represents the initial purchase price of properties including
the assignment fee and certain capitalized fees and expenses.
(C) The aggregate cost of real estate owned at December 31, 1993 for federal income tax
purposes is $143,839,540.
</TABLE>
<TABLE>
<CAPTION>
(D) Reconciliation of real estate owned:
Description 1993 1992 1991
<S> <C> <C> <C>
Balance at begining of period $143,132,409 $142,479,063 $141,645,624
Additions during period 696,040 653,346 833,439
Balance at end of period $143,828,449 $143,132,409 $142,479,063
</TABLE>
<TABLE>
<CAPTION>
(E) Reconciliation of accumulated depreciation:
Description 1993 1992 1991
<S> <C> <C> <C>
Balance at begining of period $39,695,623 $35,569,851 $31,547,919
Additions during period 4,212,298 4,125,772 4,021,932
Balance at end of period $43,907,921 $39,695,623 $35,569,851
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership, CIGNA Realty Resources,
Inc.-Seventh, a Delaware corporation, is an indirectly, wholly owned
subsidiary of CIGNA Corporation, a publicly held corporation whose stock is
traded on the New York Stock Exchange. The General Partner has
responsibility for and control over the affairs of the Partnership.
The directors and executive officers of the General Partner as of
February 28, 1994 are as follows:
Name Office Served Since
R. Bruce Albro Director May 2, 1988
Philip J. Ward Director May 2, 1988
John Wilkinson Director September 7, 1993
John D. Carey President, Controller September 7, 1993,
September 4, 1990
Verne E. Blodgett Vice President, Counsel April 2, 1990
Joseph W. Springman Vice President,
Assistant Secretary September 7, 1993
David C. Kopp Secretary September 29, 1989
Gail B. Marcus Treasurer August 25, 1992
There is no family relationship among any of the foregoing directors or
officers. There are no arrangements or understandings between or among
said officers or directors and any other person pursuant to which any
officer or director was selected as such.
The foregoing directors and officers are also officers and/or directors
of various affiliated companies of CIGNA Realty Resources, Inc. - Seventh,
including CIGNA Financial Partners, Inc. (the parent of CIGNA Realty
Resources, Inc. - Seventh), CIGNA Investments, Inc., CIGNA Corporation (the
parent of CIGNA Investments, Inc.), and Connecticut General Corporation
(the parent of CIGNA Financial Partners, Inc.).
<PAGE>
The business experience of each of the directors and executive officers
of the General Partner of the Partnership is as follows:
R. BRUCE ALBRO - DIRECTOR
Mr. Albro, age 51, a Senior Managing Director of CII, joined Connecticut
General's Investment Operations in 1971 as a Securities Analyst in Paper,
Forest Products, Building and Machinery. Subsequently, he served as a
Research Department Unit Head, as an Assistant Portfolio Manager, then as
Director of Equity Research and a member of the senior staff of CIGNA
Investment Management Company, and as a Portfolio Manager in the Fixed
Income area. He then headed the Marketing and Merchant Banking area for
CII. Prior to his current assignment of Division Head, Portfolio
Management Division, he was an insurance portfolio manager, and prior to
that, he was responsible for Individual Investment Product Marketing. In
addition, Mr. Albro currently serves as President of the CIGNA Funds Group
and other CIGNA affiliated mutual funds. Mr. Albro received a Master of
Arts degree in Economics from the University of California at Berkeley and
a Bachelor of Arts degree in Economics from the University of Massachusetts
at Amherst.
PHILIP J. WARD - DIRECTOR
Mr. Ward, age 45, is Senior Managing Director and Division Head of CIGNA
Investment Management (CIM), in charge of the Real Estate Investment
Division of CIM. He was appointed to that position in December 1985. Mr.
Ward joined Connecticut General's Mortgage and Real Estate Department in
1971 and became an officer in 1976. Since joining the company he has held
real estate investment assignments in Mortgage and Real Estate Production
and in Portfolio Management. Prior to his current position, Mr. Ward held
assignments in CII, responsible for the Real Estate Production area, CIGNA
Realty Advisors, Inc. and Congen Realty Advisory Company, all wholly-owned
subsidiaries of CIGNA Corporation and/or Connecticut General. Mr. Ward has
held various positions with the General Partner. His experience includes
all forms of real estate investments, with recent emphasis on acquisitions
and joint ventures. Mr. Ward is a 1970 graduate of Amherst College with a
Bachelor of Arts degree in Economics. He is a member of the Society of
Industrial and Office Realtors, the National Association of Industrial and
Office Parks, the Urban Land Institute, and a Trustee of the International
Council of Shopping Centers.
JOHN WILKINSON - DIRECTOR
Mr. Wilkinson, age 50, Senior Vice President and Chief Financial Officer
of the CIGNA Individual Insurance Division. He was appointed to that
position in January 1992. Mr. Wilkinson joined the company in 1970, and
became an officer in 1978. In 1981, he joined CIGNA Individual Financial
Services Division (now CIGNA Individual Insurance) and was appointed Vice
President in 1988 in that Division. Mr. Wilkinson continued to work in the
Insurance Marketing area, as Vice President until he was appointed to his
current position. Mr. Wilkinson is a 1965 graduate of the U.S. Naval
Academy. He is a Registered Principal of CIGNA Financial Advisors, Inc., a
Fellow of the Society of Actuaries, a member of the American Academy of
Actuaries, a Chartered Life Underwriter, and Chartered Financial Planner.
JOHN D. CAREY, PRESIDENT, CONTROLLER
Mr. Carey, age 30, joined CIGNA in 1990. Prior to joining CIGNA, he held
the position of manager at KPMG Peat Marwick in the audit department and
was a member of the Real Estate Focus Group. His experience includes
accounting and financial reporting for public and private real estate
limited partnership syndications. Mr. Carey is a graduate of Central
Connecticut State University with a Bachelor of Science Degree and is a
Certified Public Accountant.
<PAGE>
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 56, is an Assistant General Counsel of CIGNA
Corporation. He joined Connecticut General Life Insurance Company in 1975
as an investment attorney and has held various positions in the Legal
Division of Connecticut General Life Insurance Company prior to his
appointment as Assistant General Counsel in 1981. Mr. Blodgett received a
Bachelor of Arts degree from Yale University and graduated with honors from
the University of Connecticut School of Law. He is a member of the
Connecticut Bar and the American Bar Association.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Joseph W. Springman, age 52, Managing Director and Department Head
responsible for asset management. He joined CIGNA's Real Estate operations
in 1970. He has held positions as an officer or director of several real
estate affiliates of CIGNA. His past real estate assignments have included
Development and Engineering, Property Management, Director, Real Estate
Operations, Portfolio Management and Vice President, Real Estate
Production. Prior to assuming his asset management post, Mr. Springman was
responsible for production of real estate and mortgage investments. He
received a Bachelor of Science degree from the U.S. Naval Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 48, is Secretary of CII, Corporate Secretary of Connecticut
General Life Insurance Company, and Assistant Corporate Secretary and
Assistant General Counsel, Insurance and Investment Law of CIGNA
Corporation. He also serves as an officer of various other CIGNA
Companies. He joined Connecticut General Life Insurance Company in 1974 as
a commercial real estate attorney and held various positions in the Legal
Department of Connecticut General Life Insurance Company prior to his
appointment as Corporate Secretary in 1977. Mr. Kopp is an honors graduate
of Northern Illinois University and served on the law review at the
University of Illinois College of Law. He is a member of the Connecticut
Bar Association and is Past President of the Hartford Chapter, American
Society of Corporate Secretaries.
GAIL B. MARCUS - TREASURER
Ms. Marcus, age 37, is Treasurer of CII and Assistant Vice President of
Treasury Operations and Services. She also serves as Treasurer of
Connecticut General Life Insurance Company and various CIGNA subsidiaries.
She joined Connecticut General Life Insurance Company in 1980 and held a
number of positions in systems and Corporate Staff before joining the Group
Pension Division in 1986 as Assistant Vice President, Customer Service.
Ms. Marcus assumed her current responsibilities in Treasury in 1990. She
is an honors graduate of Wesleyan University and holds an MBA from the
Wharton School at the University of Pennsylvania.
Item 11. Executive Compensation
Officers and directors of the General Partner receive no current or
proposed direct compensation from the Partnership in such capacities.
However, certain officers and directors of the General Partner received
compensation from the General Partner and/or its affiliates (but not from
the Partnership) for services performed for various affiliated entities,
which may include services performed for the Partnership, but such
compensation was not material in the aggregate.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of interest of the Partnership.
<PAGE>
There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the
Partnership.
As of February 28, 1994, the individual directors and the directors and
officers, as a group, of the General Partner beneficially owned Partnership
Units and shares of the common stock of CIGNA, parent of the General
Partner, as set forth in the following table:
<TABLE>
<CAPTION>
Units Shares
Beneficially Beneficially Percent of
Name Owned(a) Owned(b) Class
<S> <C> <C> <C>
R. Bruce Albro (c) 0 2,560 *
Philip J. Ward (d) 0 12,651 *
John Wilkinson (e) 0 5,036 *
All directors and officers
as a group (8 persons) (f) 0 25,435 *
<FN>
* Less than 1% of class
(a) No officer or director of the General Partner possesses a right to
acquire beneficial ownership of additional Units of interest of the
Partnership.
(b) The directors and officers have sole voting and investment power over
all the shares of CIGNA common stock they own beneficially.
(c) Shares beneficially owned includes options to acquire 1,445 shares and
1,115 shares which are restricted as to disposition.
(d) Shares beneficially owned includes options to acquire 6,505 shares and
4,330 shares which are restricted as to disposition.
(e) Shares beneficially owned includes options to acquire 3,071 shares and
1,490 shares which are restricted as to disposition.
(f) Shares beneficially owned by directors and officers include 12,706
shares of CIGNA common stock which may be acquired upon exercise of
stock options and 9,725 shares which are restricted as to disposition.
</TABLE>
Item 13. Certain Relationships and Related Transactions
In consideration for the assignment to the Partnership of the right to
acquire the Project pursuant to the agreement of sale, the Partnership paid
CFP the sum of $l,400,000, $300,000 of which was paid to CFP during 1985 in
cash from the first available cash of the Partnership, which was the
Partners' Capital Contributions, and $l,100,000 of which was paid by
executing and delivering to CFP an assignment note. The assignment note
bears interest at 16.0% per annum. Interest earned during 1993 totaled
$88,000. Interest earned since 1989 of $440,000 remained unpaid at
December 31, 1993. The principal balance of $550,000 has been deferred by
CFP and remains unpaid and is included in the notes and mortgages payable
of the accompanying financial statements.
The Partnership and CFP have entered into an agreement (the "Partnership
Administration and Management Service Agreement") pursuant to which CFP
performs administrative and management services for the Partnership for an
aggregate fee (the "Partnership Administration and Management Fee") of
$543,000, representing one percent (l.0%) of the equity raised from the
Class A Limited Partners. This fee was to be paid over the course of the
seven-year investor note option which concluded in 1991. The Partnership
Administration and Management Fee was for monitoring the payments of the
Limited Partners on the Limited Partners' notes. The amounts due for 1990
and 1991 of $260,050 remained unpaid at December 31, 1993.
<PAGE>
In addition, pursuant to the Partnership Administration and Management
Services Agreement, the Partnership paid a salary to the General Partner of
$200,000 in 1985 and $150,000 annually thereafter for managing the
day-to-day operations of the Partnership and for performing administrative
services for the Partnership, including, without limitation, mailing tax
information to the Limited Partners, and soliciting their consents when
required under the Limited Partnership Agreement and other investor
communications, managing the Partnership's banking arrangements, balancing
the Partners' capital accounts, filing the Partnership's tax returns, and
exposing its assets to creditors as a general partner. In 1993, the
General Partner earned a salary of $150,000. The amounts due for 1989
through 1993 of $750,000 remained unpaid at December 31, 1993.
The Partnership has entered into an agreement with CFP (the "Partnership
Incentive Management Agreement") pursuant to which CFP will attempt to
maximize cash flow to the Limited Partners by increasing revenues and
minimizing expenses. Pursuant to the Partnership Incentive Management
Agreement, commencing in 1991, CFP will be paid an annual fee (the
"Incentive Management Fee") of nine percent (9.0%) of the cash flow, but
only to the extent that actual cash flow exceeds projected cash flow. It
is not expected that any such fee will be paid.
Pursuant to an agreement between the Partnership and CII (the "Real
Estate Advisory Services Agreement"), on the sale of the Project, CII will
receive a real estate advisory fee equal to 3.5% of the gross sales price
of the property, from which amount third party brokerage commissions to the
extent of one percent (l.0%) may be paid. In 1990, CII earned a 2.5% real
estate advisory fee on the gross sales price of the Torrance Property. The
amount of the fee was $518,750 (which remained unpaid at December 31,
1993).
The Partnership has entered into an asset management agreement (the
"Asset Management Agreement") with CII pursuant to which CII performs
certain functions relating to the supervision of the management of the
assets of the Partnership and supervision of unaffiliated property
management companies. For these services, CII will receive a fee (the
"Asset Management Fee") equal to two percent (2.0%) per annum of gross
revenue for the years 1985-1990 (inclusive) and one percent (l.0%) per
annum of gross revenues thereafter. CII earned $179,118 for its services
in 1993. At December 31, 1993 the Partnership owed CII $2,319,045 for the
1987 through 1993 fees.
The General Partner and its affiliates may be reimbursed for their
direct expenses incurred in the offering, organization and administration
of the Partnership. In 1993, the General Partner and its affiliates were
due reimbursement for such out of pocket administrative expenses in the
amount of $30,508 of which $659 was unpaid as of December 31, 1993.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements. See Index to Financial Statements in
Item 8.
2. Financial Statement Schedules
(a) Supplementary Statements of Operations Information. See
Index to Financial Statements in Item 8.
(b) Real Estate and Accumulated Depreciation. See Index to
Financial Statements in Item 8.
3. Exhibits
3.1 Form 8, Amendment No. 1 to Form 10 Registration Statement
dated July 25, 1986.
3.2 Certificate of Limited Partnership of California Seven
Associates Limited Partnership, dated January 30, 1985,
incorporated by reference to Exhibit 3.1 to Form 10
Registration Statement under the Securities Act of 1934,
File No. 0-13458.
3.3 Second Amended and Restated Limited Partnership Agreement of
California Seven Associates Limited Partnership, dated as of
February 14, 1985, incorporated by reference to Exhibit 3.2
to Form 10 Registration Statement under the Securities Act
of 1934, File No. 0-13458.
4.1 Form of Seven-Year Negotiable Promissory Note of the Class A
Limited Partner, incorporated by reference to Exhibit 4.2 to
Form 10 Registration Statement under the Securities Act of
1934, File No. 0-13458.
4.2 Second Amended and Restated Limited Partnership Agreement
defining the rights of the Limited Partners, dated as of
February 14, 1985 (See pp. 3-18 - 3-26 of Exhibit 3.2),
incorporated by reference to Exhibit 4.6 to Form 10
Registration Statement under the Securities Act of 1934,
File No. 0-13458.
10.1 Mortgage Note from IFD Properties, Inc.-First to The
Travelers Insurance Company, as Mortgagee, dated as of
December 20, 1984, incorporated by reference to Exhibit 10.1
to Form 10 Registration Statement under the Securities Act
of 1934, File No. 0-13458.
10.2 Deed of Trust from IFD Properties, Inc.-First to The
Travelers Insurance Company, dated as of December 20, 1984,
relating to the Los Angeles Property, incorporated by
reference to Exhibit 10.2 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.3 Security Agreement between IFD Properties, Inc.-First and The
Travelers Insurance Company, dated as of December 20, 1984,
incorporated by reference to Exhibit 10.3 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
10.4 Purchase and Sale Agreement between IFD Properties, Inc.-First
and CIGNA Financial Partners, Inc., dated as of January 15, 1985,
incorporated by reference to Exhibit 10.4 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
10.5 Assignment and Assumption Agreement between CIGNA Financial
Partners, Inc. and the Registrant, dated January 30, 1985,
incorporated by reference to Exhibit 10.5 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
<PAGE>
10.6 Transfer and Assignment Agreement between CIGNA Financial
Partners, Inc. and the Registrant, dated January 30, 1985,
incorporated by reference to Exhibit 10.6 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
10.7 Mortgage Note from the Registrant to Brookside Savings & Loan
Association, as Mortgagee, dated February 15, 1985, incorporated
by reference to Exhibit 10.7 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.8 Deed of Trust and Assignment of Rents from the Registrant to
Brookside Savings & Loan Association, dated February 15, 1985,
incorporated by reference to Exhibit 10.8 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
10.9 Real Estate Advisory Services Agreement between the Registrant
and CIGNA Capital Advisers, Inc., dated as of February 1, 1985,
incorporated by reference to Exhibit 10.9 to Form 10 Registration
Statement under the Securities Act of 1934, File No. 0-13458.
10.10 Promissory Note from the Registrant to CIGNA Financial Partners,
Inc., dated as of January 30, 1985, incorporated by reference to
Exhibit 10.10 to Form 10 Registration Statement under the
Securities Act of 1934, File No. 0-13458.
10.11 Partnership Administration and Management Services Fee Agreement
between the Registrant and CIGNA Financial Partners, Inc., dated
as of March 1, 1985, incorporated by reference to Exhibit 10.13
to Form 10 Registration Statement under the Securities Act of
1934, File No. 0-13458.
10.12 Agreement between the Registrant and CIGNA Financial Partners,
Inc., dated as of December 1, 1985, incorporated by reference to
Exhibit 10.14 to Form 10 Registration Statement under the
Securities Act of 1934, File No. 0-13458.
10.13 Incentive Management Agreement between the Registrant and CIGNA
Financial Partners, Inc., dated as of March 1, 1985, incorporated
by reference to Exhibit 10.15 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.14 Asset Management Agreement between the Registrant and CIGNA
Capital Advisers, Inc., dated as of March 1, 1985, incorporated
by reference to Exhibit 10.16 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.15 Organization Agreement between the Registrant and CIGNA Financial
Partners, Inc., dated as of March 1, 1985, incorporated by
reference to Exhibit 10.17 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.16 Working Capital Loan Arrangement Agreement between the Registrant
and CIGNA Financial Partners, Inc., dated as of March 1, 1985,
incorporated by reference to Exhibit 10.18 to Form 10
Registration Statement under the Securities Act of 1934, File No.
0-13458.
10.17 Management Agreement between IFD Properties, Inc.-First and R&B
Enterprises, dated as of January 30, 1985, incorporated by
reference to Exhibit 10.19 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.18 Assignment and Assumption of Management Agreement between IFD
Properties, Inc.-First and the Registrant, dated January 31,
1985, incorporated by reference to Exhibit 10.20 to Form 10
Registration Statement under the Securities Act of 1934, File No.
0-13458.
<PAGE>
10.19 Inducement Agreement between Industrial Indemnity Company and the
Registrant, incorporated by reference to Exhibit 10.21 to Form 10
Registration Statement under the Securities Act of 1934, File No.
0-13458.
10.20 Surety Bonds of Industrial Indemnity Company, incorporated by
reference to Exhibit 10.22 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.21 Indemnification Agreement between the Registrant, CIGNA Realty
Resources, Inc.,-Seventh and Industrial Indemnity Company, dated
March 21, 1986, incorporated by reference to Exhibit 10.23 to
Form 10 Registration Statement under the Securities Act of 1934,
File No. 0-13458.
10.22 Loan Agreement between the Registrant and ContiTrade Services
Corporation, dated as of April 10, 1986, incorporated by
reference to Exhibit 10.24 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.23 Promissory Note from the Registrant to ContiTrade Services
Corporation, dated as of April 10, 1986, incorporated by
reference to Exhibit 10.25 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.24 Pledge and Assignment Agreement between the Registrant and
ContiTrade Services Corporation, dated as of April 10, 1986,
incorporated by reference to Exhibit 10.26 to Form 10
Registration Statement under the Securities Act of 1934, File No.
0-13458.
10.25 Letter Agreement between the Registrant and ContiTrade Services
Corporation, dated as of April 10, 1986, incorporated by
reference to Exhibit 10.27 to Form 10 Registration Statement
under the Securities Act of 1934, File No. 0-13458.
10.26 Modification Agreement between the Registrant, IFD Properties,
Inc.-First and The Travelers Insurance Company, dated as of
August 1, 1987, incorporated by reference to Exhibit 10.26 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.
10.27 Security Agreement between the Registrant and The Travelers
Insurance Company, effective as of August 1, 1987, incorporated
by reference to Exhibit 10.27 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987.
10.28 Agreement for purchase and sale dated October 26, 1990 between
the Registrant and SBD Group Inc. for the sale of the
Registrant's Torrance Property, incorporated by reference to
Exhibit 10.28 to Registrants Annual Report on Form 10Q for the
quarterly period ended September 30, 1990.
10.29 Second Note Modification Agreement between IFD Properties, Inc.,
-First, the Registrant and the Travelers Insurance Company, dated
May 1, 1990.
10.30 Promissory Note between the Registrant and Congen Properties,
Inc. as Mortgagee, dated October 26, 1990.
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 30, 1994 By: /s/ John D. Carey
John D. Carey, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and
on the date indicated.
/s/ Philip J. Ward Date: March 30, 1994
Philip J. Ward, Director
/s/ R. Bruce Albro Date: March 30, 1994
R. Bruce Albro, Director
/s/ John Wilkinson Date: March 30, 1994
John Wilkinson, Director
/s/ John D. Carey Date: March 30, 1994
John D. Carey, President, Controller
(Principal Executive Officer)
(Principal Accounting Officer)
/s/ Gail B. Marcus Date: March 30, 1994
Gail B. Marcus, Treasurer
(Principal Financial Officer)
