UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14581
California Seven Associates Limited Partnership,
a California Limited Partnership
(Exact name of registrant as specified in its charter)
California 94-2970056
(State of Organization) (I.R.S. Employer Identification
No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (203) 726-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days
Yes X No
<PAGE>
Part I - Financial Information
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California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Balance Sheets
<S> <C> <C>
June 30, December 31,
1995 1994
Assets (Unaudited) (Audited)
Property and improvements, at cost:
Land and land improvements $20,563,613 $20,562,073
Buildings 110,079,476 109,890,874
Furniture and fixtures 13,105,205 13,030,382
Machinery and equipment 796,124 765,087
144,544,418 144,248,416
Less accumulated depreciation 50,231,633 48,128,827
Net property and improvements 94,312,785 96,119,589
Cash and cash equivalents 2,813,166 1,191,015
Partial cash settlement - earthquake insurance 9,337,772 --
Accounts receivable 132,189 488,885
Prepaid expenses and other assets 253,661 599,166
Total $106,849,573 $98,398,655
Liabilities and Partners' Deficit
Liabilities:
Liabilities not subject to compromise:
Accounts payable and accrued expenses $372,837 $357,719
Tenant security deposits 480,847 472,898
Unearned income 72,467 79,046
Earthquake insurance - partial
settlement unapplied 9,250,000 --
10,176,151 909,663
Postpetition liabilities subject to compromise:
Fees and reimbursements payable to the General
Partner and its affiliates 282,920 102,832
Prepetition liabilities subject to compromise:
Note and mortgages payable 111,983,903 111,983,903
Accrued interest payable 2,560,559 2,560,559
Accounts payable and accrued expenses 877,395 923,957
Fees and reimbursements payable to the
general partner and its affiliates 4,078,563 4,078,563
119,500,420 119,546,982
Total liabilities 129,959,491 120,559,477
Partners' deficit:
General Partner (774,337) (764,846)
Limited partners (362 Class A Units
and 3 Class B Units): (22,335,581) (21,395,976)
Total partners' deficit (23,109,918) (22,160,822)
Total $106,849,573 $98,398,655
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
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<CAPTION>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Statements of Operations
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Property operating revenues:
Rental income $3,517,251 $3,346,297 $7,114,295 $7,040,376
Other 113,524 121,751 231,120 258,278
3,630,775 3,468,048 7,345,415 7,298,654
Property operating expenses:
Maintenance and repairs,
furniture rental, insurance,
and other property operations 719,147 723,914 1,463,254 1,455,479
Real estate taxes 221,232 343,786 502,747 694,516
Management fees 126,791 138,505 255,593 281,690
Property administrative 642,680 641,351 1,386,078 1,353,228
1,709,850 1,847,556 3,607,672 3,784,913
Net property revenue 1,920,925 1,620,492 3,737,743 3,513,741
Other operating costs and expenses:
Depreciation 1,051,290 1,056,298 2,102,806 2,115,518
Management and administrative
fees to affiliates 73,736 79,462 148,284 155,096
Partnership administrative 22,964 39,130 42,716 82,573
Net cost (recovery) on business
interruption insurance 83,520 (465,469) 125,239 (465,469)
1,231,510 709,421 2,419,045 1,887,718
Net partnership operating
income 689,415 911,071 1,318,698 1,626,023
Interest income 11,683 3,376 20,851 8,193
Interest expense (contractual interest
of $2,615,450 and $5,230,900 for the
three and six months ended June 30,
1995, respectively) (1,407,597) (2,615,450) (2,293,318) (5,230,900)
Net loss before
reorganization items (706,499) (1,701,003) (953,769) (3,596,684)
Reorganization items:
Interest income 94,874 -- 101,773 --
United States Trustee fees (5,000) -- (10,000) --
Professional fees (61,322) -- (87,100) --
Net loss $(677,947) $(1,701,003) $(949,096) $(3,596,684)
Net loss:
General Partner $(6,780) $(17,010) $(9,491) $(35,967)
Limited partners (671,167) (1,683,993) (939,605) (3,560,717)
$(677,947) $(1,701,003) $(949,096) $(3,596,684)
Net loss per Class A Unit: $(1,854) $(4,652) $(2,596) $(9,836)
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<S> <C> <C>
1995 1994
Cash flows from operating activities:
Net loss $(949,096) $(3,596,684)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation 2,102,806 2,115,518
Accounts receivable 356,696 59,011
Accounts payable and accrued expenses 831 (39,625)
Other, net 259,103 953,870
Liabilities subject to compromise 133,526 --
Net cash provided by (used in)
operating activities 1,903,866 (507,910)
Cash flows from investing activities:
Purchase of property and improvements (280,751) (82,028)
Cash flows from financing activities:
Cash distribution to limited partners (964) (2,343)
Net increase (decrease) in cash and
cash equivalents 1,622,151 (592,281)
Cash and cash equivalents, beginning of year 1,191,015 1,440,476
Cash and cash equivalents, end of period $2,813,166 $848,195
Supplemental disclosure of cash information:
Accrued purchase of property and
improvements $ 15,251 $ --
Interest paid during period $2,293,318 $4,300,000
Fees paid in connection with
reorganization $ 81,636 $ --
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Notes to Financial Statements
(Unaudited)
Readers of this quarterly report should refer to the audited
financial statements for California Seven Associates Limited Partnership, a
California Limited Partnership ("the Partnership"), for the year ended
December 31, 1994 which are included in the Partnership's 1994 Annual
Report, as certain footnote disclosures which would substantially duplicate
those contained in such audited financial statements have been omitted from
this report.
1. Organization and Basis of Accounting
a) Organization: On September 16, 1994, the Partnership filed a
voluntary petition for bankruptcy protection under Chapter 11 of
Title 11, United States Code. The Partnership's Chapter 11
bankruptcy reorganization case is currently pending in the United
States Bankruptcy Court for the Central District of California.
The Partnership's goal is to maximize recovery by creditors and
partners by preserving the Partnership as a viable entity with a
going concern value. The financial statements do not include any
adjustments relating to the recoverability of reported asset
amounts or the amounts of liabilities that might result from the
outcome of this uncertainty.
b) Basis of Presentation: The accompanying financial statements were
prepared in accordance with generally accepted accounting
principles. It is the opinion of management that the financial
statements presented reflect all the adjustments necessary for a
fair presentation of the financial condition and results of
operations. Certain amounts in the 1994 financial statements have
been reclassified to conform to the 1995 presentation.
c) Cash and Cash Equivalents: Short-term investments with a maturity
of three months or less at the time of purchase are reported as
cash equivalents. At June 30, 1995 the Partnership had cash and
cash equivalents classified as cash collateral used in the
operations of the properties and payment to the first mortgage
lender totalling $878,269. In addition, at June 30, 1995, cash and
cash equivalents include amounts the Partnership is required to
maintain in segregated cash collateral accounts for security
deposits, taxes and insurance, and the Sherman Oaks deductible.
The balances of these accounts at June 30, 1995 were $479,370,
$691,517 and $503,492, respectively. The Partnership had
unencumbered cash and cash equivalents at June 30, 1995 of
$260,518.
2. Petition for Relief Under Chapter 11
On September 16, 1994, the Partnership filed a petition for relief
under Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Central District of California. Under Chapter 11,
certain claims against the Debtor in existence prior to the filing of the
petitions for relief under the Federal bankruptcy laws are stayed while the
Debtor continues business operations as Debtor in Possession. These claims
are reflected in the accompanying balance sheets as prepetition
liabilities.
Additional claims may arise subsequent to the filing date resulting
from the rejection of executory contracts and from the determination by the
Court of allowed claims for contingencies and other disputed amounts.
Claims secured against the Partnership's assets are stayed, although the
holders of such claims have the right to move the court for relief from the
stay. Secured claims are secured by liens on the Partnership's property
and improvements.
On September 22, 1994, the Partnership entered into a Letter
Agreement with the first mortgage lender which defines and authorizes the
use of cash collateral. The Partnership was granted use of collateral
pursuant to the Letter Agreement until September 30, 1995. All excess cash
flow from property operations after payment of property operating expenses,
allowed capital expenditures, and funding of agreed upon segregated cash
collateral accounts, is remitted to the first mortgage lender monthly.
As part of the Partnership's Motion for Use of Cash Collateral, the
Partnership requested all use of property that may be cash collateral in
the form of rental revenues and insurance proceeds to repair the Sherman
Oaks property. On February 1, 1995, the Court held a hearing on the use of
cash collateral to repair Sherman Oaks and denied the Partnership's Motion
without prejudice after determining that the issue should be decided in the
context of the confirmation of the Partnership's plan of reorganization.
On or about December 6, 1994, the first mortgage lender commenced a
declaratory action against the Partnership, claiming that the second lien
holder is an insider as defined under 11 U.S.C. Sec. 101. The Partnership
filed an answer to the Complaint denying that the second lien holder is an
insider as that term is defined in the Bankruptcy Code. A status hearing
was held on February 21, 1995 which resulted in a discovery deadline and
continued status hearing date of May 22, 1995. After arguments by counsel
on May 22, the status hearing was continued to September 1995.
On or about January 30, 1995, the first mortgage lender filed a
Motion for Relief from the Automatic Stay. The Partnership filed an
Opposition to the Motion. At the hearing held on February 21, 1995, the
court set April 18, 1995 as the final evidentiary hearing. After hearing
arguments and representations of counsel, the Court continued the hearing
to July 12, 1995 and then to August 9, 1995.
On March 17, 1995, the Partnership filed its proposed Plan of
Reorganization under Chapter 11 of the Bankruptcy Code dated March 16,
1995, together with a Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code. On March 17, 1995, the Court set the hearing on the
Partnership's Disclosure Statement for April 18, 1995. On April 17, 1995,
the Partnership filed with the Bankruptcy Court certain Non-material
Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy
Court held a hearing and acted upon the approval of the Partnership's
Disclosure Statement together with the Non-material Amendments. After
considering the Disclosure Statement and the Non-material Amendments
thereto, the Court ruled that certain additional information should be
included in the Partnership's Disclosure Statement. The Court required the
Partnership to file an Amended Disclosure Statement which the Court
approved without further hearing.
The Partnership filed its Amended Disclosure Statement and Amended
Plan of Reorganization on May 4, 1995. On May 15, 1995, the Partnership
mailed all impaired creditors, limited partners, and parties in interest a
copy of the Amended Disclosure Statement and Amended Plan of
Reorganization, along with a ballot for voting and other notices. All
classes of creditors, limited partners and parties in interest impaired
under the Amended Plan of Reorganization voted to accept the plan except
Class 1, the first mortgage lender, Travelers Insurance Co.
Pursuant to the order approving the Amended Disclosure Statement,
the Court set July 12, 1995 as the confirmation hearing for the
Partnership's Amended Plan of Reorganization. Subsequently, a stipulation
was agreed to and approved by the Court to bifurcate the confirmation
hearing to allow additional pleadings. Nonfeasibility issues were
scheduled to be heard on July 12, 1995 and all feasibility related issues
would be heard by the Court on August 9, 1995.
3. Property and Improvements and Note and Mortgages Payable
At June 30, 1995, the Partnership owned five operating apartment
properties located in California totaling 1,763 units with leases generally
for a term of one year or less. The Partnership owns a sixth property with
372 apartment units which was not operating and was unoccupied at June 30,
1995. All properties are pledged as security for the long-term debt.
Although the first and second mortgages payable represent secured
claims under the bankruptcy proceedings, there is uncertainty as to whether
the claims are undersecured or will be impaired under a plan of
reorganization. The mortgages payable, therefore, are classified as
liabilities subject to compromise in the accompanying balance sheet.
Interest expense will be recorded postpetition to the extent paid during
the proceeding. The Partnership has entered into a cash collateral
agreement with the first mortgage lender which calls for the payment of
cash flow from operations, rents less operating expenses and capital, on a
monthly basis.
The Sherman Oaks property was severely damaged by the January 17,
1994 Southern California earthquake. The property is not operating and is
currently unoccupied. The Partnership's properties are covered by
insurance, including earthquake and business interruption; although the
policy carries a 5% deductible.
On April 28, 1994, the Partnership received a $750,000 advance on
the business interruption policy for the earthquake damaged property. The
Partnership recorded the advance as income, "Net recovery on business
interruption insurance", for the year ended December 31, 1994. "Net cost
(recovery) on business interruption insurance" represents costs
specifically associated with the earthquake. All other income statement
lines relating to the Sherman Oaks property include only the activity
related to the period from January 1, 1994 to January 16, 1994, or fixed
operating expenses unrelated to the earthquake, if applicable.
On March 9, 1995, the Partnership submitted a report, prepared as
of January 11, 1995, representing the Partnership's business interruption
claim. The claim adjuster and the Partnership's representatives have
agreed on the components and the amount of the claim, which was submitted
to the applicable insurance companies for approval. The income statement
does not include any amounts relating to the pending claim with the
insurance company.
Of February 3, 1995, the insurance company carrying the first
$10,000,000 layer of earthquake insurance coverage offered to settle a
portion of the loss resulting from the earthquake. The appropriate
documents were executed in the second quarter of 1995 and on April 26,
1995, the Partnership received a partial insurance settlement of
$9,250,000. The application of the insurance proceeds to the outstanding
first mortgage payable or repair of the Sherman Oaks property will be
decided by the Court as part of the Plan of Reorganization confirmation
process.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Notes to Financial Statements - Continued
(Unaudited)
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<CAPTION>
4. Transactions with Affiliates
Fees and other expenses incurred by the Partnership related to the
General Partner or its affiliates are as follows:
<S> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended Unpaid at
June 30, June 30, June 30,
1995 1994 1995 1994 1995
Interest on assignment note(a) $ -- $22,000 $ -- $44,000 $502,334
Asset management fee 36,236 41,962 73,284 80,096 2,538,361
Administration and management fee -- -- -- -- 260,050
General partner's salary 37,500 37,500 75,000 75,000 975,000
Real Estate Advisory fee -- -- -- -- 518,750
Reimbursement (at cost) for
out of pocket expenses 12,002 9,131 21,340 15,676 58,858
Reorganization item:
Professional fees 6,094 -- 10,464 -- 10,464
$91,832 $110,593 $180,088 $214,772 $4,863,817
(a) Postpetition interest is recorded to the extent it is paid.
Contractual interest on assignment note was $22,000 and
$44,000 for the three and six months ended June 30, 1995,
respectively.
</TABLE>
5. Litigation
[Theodore D. Cohen, et al v. California Seven Associates, et al.,
No. 657925 (Orange County, CA, May 16, 1991)] Plaintiffs in suit brought
against the Partnership and its General Partner are members of the class
participating in a federal court action in Chicago [In re VMS Securities
Litigation, No. 90 c 2412, N.D. Ill.] which concluded in a settlement.
Defendant filed a Motion for Summary Judgment which was granted. Plantiffs
have requested additional time for filing an appeal. The likelihood of an
unfavorable outcome or the extent of any possible liability cannot be
assessed at this time.
6. Going Concern
The Partnership plans to pursue confirmation of the Plan of
Reorganization, which contemplates repairing the Sherman Oaks property.
The outcome of this effort is unknown at this time. The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties. Although every effort is being made to
preserve the Partnership as a going concern, the possibility remains that
the Partnership will cease its operations causing the complete loss of the
ownership interest held by the partners.
If the Partnership's effort to reorganize is unsuccessful, the
Partnership will likely lose the properties and improvements through
foreclosure with no cash available to partners. As a result of a
foreclosure, the Partnership would record extraordinary income on relief of
indebtedness.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On September 16, 1994, the Partnership filed a voluntary petition
under Chapter 11 of the Federal bankruptcy laws in the United States
Bankruptcy Court for the District of California. Pursuant to Section 1108
of the Bankruptcy Code, the Partnership is managing and operating its
business as a debtor in possession and will continue to do so pursuant to
Sections 1107 and 1108 of the Bankruptcy Code unless otherwise ordered by
the Court.
On February 3, 1995, the insurance company carrying the first
$10,000,000 layer of earthquake insurance coverage, offered to settle a portion
of the loss resulting from the earthquake. The appropriate documents were
executed in the second quarter of 1995 and on April 26, 1995, the
Partnership received a partial insurance settlement of $9,250,000. The
application of the insurance proceeds to the outstanding first mortgage
payable or repair of the Sherman Oaks property will be decided by the Court
as part of the Plan confirmation process.
On March 9, 1995, the Partnership submitted a report, prepared as
of January 11, 1995, representing the Partnership's business interruption
claim. The claim adjuster and the Partnership's representative's have
agreed on the components and the amount of the claim, which was submitted
to the applicable insurance companies for approval.
On or about January 30, 1995, the first mortgage lender filed a
Motion for Relief from the Automatic Stay. The Partnership filed an
Opposition to the Motion. At the hearing held on February 21, 1995, the
court set April 18, 1995 as the final evidentiary hearing. After hearing
arguments and representations of counsel, the Court continued the hearing
to July 12, 1995 and then to August 9, 1995.
On March 17, 1995, the Partnership filed its proposed Plan of
Reorganization under Chapter 11 of the Bankruptcy Code dated March 16,
1995, together with a Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code. On March 17, 1995, the Court set the hearing on the
Partnership's Disclosure Statement for April 18, 1995. On April 17, 1995,
the Partnership filed with the Bankruptcy Court certain Non-material
Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy
Court held a hearing and acted upon the approval of the Partnership's
Disclosure Statement together with the Non-material Amendments. After
considering the Disclosure Statement and the Non-material Amendments
thereto, the Court ruled that certain additional information should be
included in the Partnership's Disclosure Statement. The Court required the
Partnership to file an Amended Disclosure Statement which the Court
approved without further hearing.
The Partnership filed its Amended Disclosure Statement and Amended
Plan of Reorganization on May 4, 1995. On May 15, 1995, the Partnership
mailed all impaired creditors, limited partners, and parties in interest a
copy of the Amended Disclosure Statement and Amended Plan of
Reorganization, along with a ballot for voting and other notices. All
classes of creditors, limited partners and parties in interest impaired
under the Amended Plan of Reorganization voted to accept the plan except
Class 1, the first mortgage lender, Travelers Insurance Co.
Pursuant to the order approving the Amended Disclosure Statement,
the Court set July 12, 1995 as the confirmation hearing for the
Partnership's Amended Plan of Reorganization. Subsequently, a stipulation
was agreed to and approved by the Court to bifurcate the confirmation
hearing to allow additional pleadings. Nonfeasibility issues were
scheduled to be heard on July 12, 1995 and all feasibility related issues
would be heard by the Court on August 9, 1995.
The Partnership plans to pursue confirmation of the Plan of
Reorganization. The outcome of this effort is unknown at this time.
Although every effort is being made to preserve the Partnership as a going
concern, the possibility remains that the Partnership will cease its
operations causing the complete loss of the ownership interests held by the
partners.
If the Partnership's effort to reorganize is unsuccessful, the
Partnership will likely lose the Project through foreclosure with no cash
available to Partners. A foreclosure would result in an income allocation
to the Partners; although, if a limited partner's ownership interest in the
Partnership is the partner's only passive activity and the limited partner
has 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 Project is disposed of and the Partnership
dissolved, any cumulative suspended loss will be available for use by a
limited partner to offset ordinary income.
Results of Operations
During 1994, the apartment submarkets in which the Partnership's
properties operate remained stable in terms of occupancy percentages and
new construction. Absorption of existing units continued and rental rates
began to increase slightly. Contributing to the Partnership's improved net
property revenue results (property level revenues less property level
operating expenses) for 1994, as compared with 1993, was a decrease in
OAKWOOD related costs due to the conversion of Mission Bay East from
OAKWOOD operations to conventional apartments effective January 1, 1994.
When adjusted for Sherman Oaks activity and other incomparable activity,
net property revenues for the first quarter of 1995 had decreased
approximately 3% as compared with the fourth quarter of 1994. Net
property revenues for the three months ended June 30, 1995 increased
approximately 2% as compared with the first quarter of 1995. Property
revenues remained flat in the second quarter while property level expenses
decreased slightly.
The Sherman Oaks property was severely damaged by the Southern
California earthquake on January 17, 1994. The property was evacuated and
city inspectors classified the property as unsafe for use. The property is
not operating and is unoccupied. As a result, the property generated no
revenue in 1995, and only a nominal amount in 1994, and has incurred only
necessary operating expenses and expenses related to the earthquake since.
Sherman Oaks' results for the six months ended June 30, 1995, as compared
with the same period in 1994, were affected as follows: Rental income
decreased approximately $91,000, other income decreased approximately
$9,000, property operating expenses decreased approximately $87,000, real
estate taxes decreased approximately $125,000, management fees decreased
approximately $24,000 and property administrative expenses decreased
approximately $62,000. For the three months ended June 30, 1995, Sherman
Oaks' results, as compared with the same period in 1994, were affected as
follows: Rental income increased approximately $8,000, other income
decreased approximately $2,000, property operating expenses decreased
approximately $15,000, real estate taxes decreased approximately $88,000,
management fees decreased approximately $12,000 and property administrative
expenses increased approximately $20,000. The following analytical
comments have been limited to the Partnership's five operating properties.
Rental income at Mission Bay East increased approximately $124,000
and $118,000 for the three and six months ended June 30, 1995,
respectively, as compared with the same periods in 1994. Average occupancy
increased approximately 9% and 6% for the three and six months,
respectively, as compared with the same periods in 1994. Less corporate
business in the first quarter of 1995, however, decreased rental income
slightly as corporate rates are higher than conventional rates. Rental
income at Arbor Park decreased approximately $39,000 and $56,000 for the
three and six months as a slight increase in rates in 1994 partially offset
the decrease in average occupancy for 1995. At Amberway, increased average
occupancy for the three and six months increased rental income
approximately $56,000 and $95,000, respectively. Increased average
occupancy in the second quarter of 1995 at West Los Angeles resulted in
increased rental income of approximately $45,000 and $37,000 for the three
and six months, respectively. A slight decrease in average occupancy at
Arbor Park decreased rental income approximately $22,000 and $29,000 for
the three and six months ended June 30, 1995, respectively, as compared
with the same periods in 1994.
Other income decreased for the three and six months ended June 30,
1995, as compared with the same periods in 1994, due primarily to decreased
laundry revenue and cleaning fees earned at Arbor Park.
Overall, property operating expenses decreased for the three months
and increased for the six months ended June 30, 1995, as compared to the
same periods of the previous year. Insurance expense increased
approximately $83,000 and $166,000 for the three and six months,
respectively, for the five properties in total. In the second quarter of
1995, Pacifica Club had increased non-routine maintenance for carpet, vinyl
and kitchen counter replacements while Mission Bay East had an increase due
to a termite treatment. In the first quarter of 1995, however, Mission Bay
East had decreased carpet and vinyl replacements. In addition, Amberway
and Arbor Park had increased non-routine maintenance expenses for the
first quarter of 1995 for carpet and vinyl replacements. Partially
offsetting these increases were decreased furniture rental expense for the
three and six months at West Los Angeles. In addition, property operating
expenses decreased for the three months ended June 30, 1995 at West Los
Angeles because of earthquake related repairs in the second quarter of
1994.
Property taxes decreased for the three and six months ended June
30, 1995, as compared with the same periods in 1994, due to decreased
assessed values for fiscal year 1995 (July 1, 1994 to June 30, 1995) at all
properties.
The increase in property administrative expense for the three and
six months ended June 30, 1995, as compared with the same periods in 1994,
was the result of increased direct and indirect payroll related costs at
the five properties. In addition, advertising costs increased for the six
months at West Los Angeles, Mission Bay East and Arbor Park, while
decreasing at Pacifica Club.
The decrease in partnership administrative expense for the three
and six months ended June 30, 1995, as compared with the same periods in
1994, was due primarily to a decrease in legal fees incurred.
The increase in interest income for the three and six months ended
June 30, 1995, as compared with the same periods in 1994, was due to the
increase in interest rates.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Occupancy
The following is a listing of approximate physical occupancy levels
by quarter for the Partnership's investment properties:
1994 1995
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30
The Anaheim Property 83% 81% 89% 95% 92% 93%
The Huntington Beach Property 95% 98% 99% 94% 94% 97%
The West Los Angeles Property 87% 92% 87% 83% 91% 97%
The San Diego Property 84% 93% 95% 92% 95% 94%
The Sherman Oaks Property (a) N/A N/A N/A N/A N/A N/A
The Upland Property 91% 90% 91% 95% 85% 87%
[FN]
(a) The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property was evacuated and considered
unsafe for use. Therefore, occupancy is not applicable for the
periods presented.
<PAGE>
California Seven Associates Limited Partnership,
a California Limited Partnership
(Debtor in Possession)
Part II - Other Information
Item 1. Legal Proceedings
The information included in the "Notes to Financial Statements,
Note 5. Litigation" on page 8 of the Partnership's June 30, 1995 Financial
Statements, is incorporated by reference.
The information included in the "Notes to Financial Statements,
Note 2. Petition for Relief Under Chapter 11" on page 5 of the
Partnership's June 30, 1995 Financial Statements, is incorporated by
reference.
Item 2. Changes in the Rights of the Partnership Security Holders
(b) On September 16, 1994, the Partnership filed a petition for
relief under Chapter 11 of the Federal bankruptcy laws. The voluntary
reorganization action may provide for a reorganization of the debt and
equity structure of the Partnership business which may change the rights
and form of the equity interests of the Partnership.
Item 3. Defaults by the Partnership on its Senior Securities
On September 16, 1994, the Partnership filed a petition for relief
under Chapter 11 of the Federal bankruptcy laws. On the filing date, the
Partnership was in default on its second mortgage loan obligation.
Although the second mortgage holder had acknowledged the default, the
Partnership did not receive a notice of acceleration. Due to the Chapter
11 proceedings, claims secured against the Partnership assets are stayed.
The balance of the second mortgage note at June 30, 1995 was $14,000,000
plus $1,699,892 of accrued and unpaid interest.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.3 Third Modification to Amended Plan of Reorganization under
Chapter 11 of the Bankruptcy Code for California Seven Associates
Limited Partnership, Debtor and Debtor in Possession, Proposed by
the Debtor, Dated April 25, 1995.
27 Financial Data Schedule
(b) No Form 8-Ks were filed during the three months ended June 30,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
California Seven Associates Limited
Partnership,
a California Limited Partnership
By: CIGNA Realty Resources, Inc. - Seventh,
General Partner
Date: August 8, 1995 By: /s/ John D. Carey
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)
<PAGE>
EXHIBIT 2.3
THIRD MODIFICATION TO AMENDED PLAN OF REORGANIZATION UNDER CHAPTER 11 OF
THE BANKRUPTCY CODE FOR CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP,
DEBTOR AND DEBTOR IN POSSESSION, PROPOSED BY THE DEBTOR, DATED APRIL 25,
1995
California Seven Associates Limited Partnership, Debtor and
Debtor in Possession (the "Debtor"), hereby files this Third Modification
to its Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code for California Seven Associates Limited Partnership, Debtor and Debtor
in Possession, Proposed by the Debtor, Dated April 25, 1995 (the "Plan"),
pursuant to 11 U.S.C. 1127 as follows:
1. Section 6.01, Class 1 Claims, commencing at page 26, line 13
through line 20, is modified by deleting the existing text and replacing it
with the following new text:
Amberway Apartments $ 12,900,000
Arbor Park Apartments $ 6,300,000
Mission Bay East Apartments $ 26,600,000
Oakwood Apartments - West Los Angeles $ 18,900,000
Pacifica Club Apartments $ 16,100,000
Sherman Oaks Apartments $ 14,900,000
2. Section 6.01, Class 1 Claims, at page 27, line 1 shall be
amended by deleting the text "8.125%" and replacing it with "8.0%".
3. Section 6.01, Class 1 Claims, commencing on page 27, line 7,
to page 28, line 4, is modified by deleting the existing text and replacing
it with the following new text:
Upon Stabilization of Occupancy of Sherman Oaks, the
$14,900,000 shall be paid as set forth below.
The balance of the Allowed Secured Claim (without Sherman
Oaks) in the total approximate amount of $80,161,306 evidenced by
the Modified Note secured by the First Deed of Trust on the five
Operating Properties shall earn interest for the first 18 months
commencing on the first day of the first month after the
Effective Date as follows:
% OF INTEREST
TRANCHE NO. AMOUNT OF DEBT PAID PER ANNUM
1st $56,112,914 8%
2nd 12,024,196 9.5%
3rd 12,024,196 10%
The payments of interest only shall be due and payable in
arrears by the tenth day of the month for all three tranches. In
addition, the second and third tranches shall receive allocated
excess property cash flow at the rate of 39% and 60%,
respectively. The allocated excess property cash flow for the
second and third tranches shall be paid in arrears on a quarterly
basis in accordance with the participation percentages. The<PAGE>
participation percentages were calculated when combined with
interest paid to achieve 18% and 25% rates of return,
respectively over the term of the Plan.
The Allowed Secured Claim (including Sherman Oaks) in the
total approximate amount of $95,061,306 after the first 18 months
as evidenced by the Modified Note and secured by the First Deed
of Trust on the six (6) Properties shall earn interest and shall
be paid as follows:
% OF INTEREST
TRANCHE NO. AMOUNT OF DEBT PAID PER ANNUM
1st $ 66,542,914 8%
2nd 14,259,196 9.5%
3rd 14,259,196 10%
The interest as set forth above for the first tranche shall be
based on a 30-year amortization schedule of payment of the
principal of the Modified Note due and payable on December 31,
2004. The second and third tranches shall receive allocated
excess property cash flow at the rate of 39% and 60%,
respectively. The allocated excess property cash flow for the
second the third tranches shall be paid in arrears on a quarterly
basis in accordance with the participation percentages. The
participation percentages were calculated when combined with
interest paid to achieve 18% and 25% rates of return,
respectively over the term of the Plan. The balance on the
Modified Note shall be due and payable in full on December 31,
2004. All payments made to Travelers postpetition have been
and/or shall be credited against the principal amount of the
Modified Note.
4. In accordance with the agreement between Travelers and the
Debtor, Exhibit "D" to the Plan (Third Note Modification Agreement; Third
Deed of Trust Modification Agreement; and Second Amendment to Security
Agreement) may be modified after confirmation.
5. In all other respects, the terms and conditions of the Plan
shall remain if full force and effect. If, however, there are any
inconsistencies in any other parts of the Plan and the Modification
contained herein, the Modification shall control.
DATED this ________ day of August, 1995.
CALIFORNIA SEVEN ASSOCIATES
LIMITED PARTNERSHIP, a California
Limited Partnership
By: J. SCOTT BOVITZ (#93548)
Of Counsel
DIXON DIXON & JESSUP LTD.,
L.L.P.
AND
By: _____________________________
CLIFTON R. JESSUP, JR.
BRUCE H. WHITE
DIXON DIXON & JESSUP LTD.,
L.L.P.
ITS ATTORNEYS
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