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, 1994
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 8
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of
Financial Condition and
Results of Operations 12
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and
Financial Disclosure 35
PART III
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 37
Item 12. Security Ownership of Certain Beneficial Owners
and Management 37
Item 13. Certain Relationships and Related Transactions 38
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 40
SIGNATURES 43
<PAGE>
PART I
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. Reference is made to Item 7 for a
description of the sale.
The Partnership is in the business of owning and operating six
apartment complexes (the "Project") and related site improvements all
located in Central and Southern California. One of the six properties, the
Sherman Oaks property, was severely damaged in the January 1994 Northridge
earthquake. The Sherman Oaks property is presently not operating and is
unoccupied. The Partnership's Project is insured, inclusive of earthquake
coverage and business interruption, subject to a 5% deductible. Reference
is made to Item 7 for a description of the status of the Sherman Oaks
property and the insurance claim.
The Partnership is currently operating five properties. Of the
five properties operating, one is operated under the R&B OAKWOOD marketing
concept ("OAKWOOD") and four are operated as conventional apartment
complexes. Although one of the four conventional properties converted from
OAKWOOD during 1994, the property continues to generate revenues and
benefit from utilizing the OAKWOOD system. The OAKWOOD concept has four
components: studio, one bedroom, and two bedroom furnished apartments;
month to month, six month and one year rental agreements with a minimum
30-day stay; optional housewares package with maid service; and
middle-to-upper income level tenants who are in need of temporary housing.
The concept is established and works well with corporate clients
seeking temporary housing, relocation, and housing for new employees.
Southern California is well suited to the OAKWOOD concept as Southern
California has a sizable affluent population which frequently leases on a
short-term basis. The weakness in the Southern California economy in 1991
and 1992 had an adverse impact on occupancy and, subsequently, rental
rates, which supported the Partnership's decision to convert a portion of
the Project's operations to conventional operations.
<PAGE>
On September 16, 1994, the Partnership filed a voluntary petition
for reorganization under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Central 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. Reference is made to Item 7 for a
description of the events prior to and subsequent to the bankruptcy filing.
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:
Purchase Price, Assignment
Name of Property Fees and Certain Capitalized No. of Year
and Location (a) Fees and Expenses (b) Units Completed
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
(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.
(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.
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 1994, the United States economy flourished with the recovery
which began in 1993 by adding an additional three and one half million
private sector jobs. All regions of the country realized job expansion,
although California and much of the Northeast continued to show sub-par
growth. Overall, apartment markets benefitted from the recovery with
stable performance and occupancies in the low 90s range. Rental income
rose on average 2-4% across the country during the year, with the exception
of southern California, which was flat. The short-term outlook predicts
that increased consumer confidence and economic growth will translate into
both higher levels of home ownership and stronger apartment demand. The
biggest risk to apartment markets is a long-term shift to greater home
ownership driven by an aging population combined with lower levels of
renter household formations. In general, markets with low home prices
would realize the greatest negative impact on apartment occupancies as both
property types compete for the same tenants. However, California, and in
particular the southern part of the state, is less vulnerable to the risk
of home ownership due to high housing prices and the overall weak economy.
While the median price of a home in California had dropped in recent years
in response to the recession, it is still well out of a typical renter's
economic range.
California's economy grew modestly in 1994 and is forecasted to
continue to grow in 1995 and beyond. In fact, the state's economy is seen
as having reached its bottom during mid-1994 as evidenced by the slow job
growth currently underway. Total employment in California posted modest
growth in 1994. According to the U.S. Department of Labor Bureau of Labor
Statistics (February 1995), California employment totalled 12,069,000 for
December 1994 compared with 12,052,200 for December 1993. The Los Angeles-
Long Beach area and the San Diego area both showed a slight contraction
with total employment of 3,708,900 for December 1994 versus December 1993
of 3,737,000, and 937,800 for December 1994 compared with 942,700 for
December 1993, respectively. Both Orange County and Riverside-San
Bernardino grew relatively strongly, reporting 1,130,700 in December 1994
versus 1,122,800 in December 1993 and 758,000 for December 1994 compared
with 744,000 for December 1993. While contractions within the defense and
aerospace industries will continue, growing activity in trade, tourism and
technology-based industries have filtered and will continue to filter
through the economy. In 1995, each of these areas will see job growth in
excess of 1% a year. Growth in personal and per capita income will also
continue, albeit at a slower pace than the rest of the country.
During 1994, apartment markets remained stable with minimal new
construction. While national multifamily starts in 1994 rebounded from an
eight year decline to post a 6.9% increase, this level is still 40% below
levels reached during the late 1980s. Starts in Los Angeles, at 1600, were
the lowest on record. Absorption of the existing supply continued.
Los Angeles experienced a protracted downturn in its economy from
1990 through mid-1994. Only recently have the signs of recovery been
evident in job growth. With a population of over nine million, Los Angeles
is the largest metropolitan area in the country. Los Angeles accounts for
approximately 30% of the state's total non-farm employment base. Since
1990, Los Angeles lost over 483,000 jobs or 11.6% of its total non-farm
employment base. This accounted for nearly two-thirds of the state's job
loss, underscoring the degree of economic devastation. During 1994, all
industries lost jobs with the exception of construction and services which
posted increases. The January 17, 1994 earthquake in Los Angeles spurred
job growth of 2.9% in the construction industry, creating an additional
15,000 jobs. While job loss was experienced in all other sectors, the
degree of that loss has slowed considerably. Predictions for 1995 and
beyond show growth in all sectors, particularly in services, trade,
construction and transportation. Additionally, the negative impact from
the earthquake on the entertainment and tourism industries appears to be
less than originally anticipated, as hotels, in particular, have maintained
occupancies at near pre-earthquake levels. Rebuilding from the Northridge
earthquake will continue to give the Los Angeles economy a modest boost
over the remainder of the year. Damage was estimated at 15 billion dollars
and approximately 50,000 multifamily units are still considered limited
entry or unsafe. Without the stimulus created by new building on the
construction and retail trade, the region's economy would remain flat.
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. This is a mature and affluent market which, prior to the
earthquake, was growing at a slower pace than Los
<PAGE>
Angeles as a whole. The
employment base for this area is heavily vested in the services (34%) and
trade (21%) industries. Multifamily vacancies in the market are close to
10% and those complexes which have rebuilt compete for an entirely new
tenant base. Very little vacant land is available for construction of new
apartments except what has become available through the demolition of
buildings damaged during the earthquake. Competition for newly refurbished
apartment units is expected to be intense as many smaller complexes will
not be able to rebuild their structures or restore their competitive
positions within the market. Sherman Oaks, if rebuilt, should be able to
command rates comparable to the market. The eight complexes which compete
with Sherman Oaks had occupancies ranging from of 90% to 98% in 1994.
Although unemployment is high in Los Angeles, the outlook for the immediate
area surrounding Sherman Oaks is one of healthy growth as rebuilding moves
forward. If rebuilt, the property would be ideally positioned to compete
effectively in this market.
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. There are
approximately 40,000 apartment units competing in this submarket. This
area has experienced out migration trends in recent years in response to
the heavy job loss in California. An estimated 140,000 residents left the
Los Angeles area in 1994. With significant losses in the defense and
manufacturing industries, West Los Angeles has seen a dramatic shift in job
markets and a continuing decrease in average income levels. The commercial
and office sectors now make up 70% of the employment base. Vacancies in
the market averaged 11% in 1994. At the West Los Angeles property, the
average monthly rent is $942, down from $1,013 in 1992. The property was
88% occupied during the year. The soft market conditions have also led to
reduced rates, increased concessions, and more flexibility in credit
policies for conventional apartment units. However, experts predict that the
Los Angeles economy "bottomed out" in 1994 and the makings of a slow recovery
are underway.
The San Diego property is located in the Mission Bay area of San
Diego, the sixth largest city in the United States. This area has a
diverse employment base including defense, agriculture, aerospace and bio-
medical industries. The tourism industry also contributes to the local
economy as do the thirty-eight colleges and universities, including the
University of California at San Diego and San Diego State. The military
presence, which currently accounts for 82,000 jobs, is expected to remain
stable although these numbers are significantly lower than prior years,
reflecting downsizing in the defense industry. While economically diverse,
San Diego, like all of California, has suffered from the recession in terms
of job loss. Some submarkets are showing improvement, however, including
the San Diego property's which averaged a 4.7% vacancy rate in 1994, below
San Diego County's average of 5.9%. Rents averaged $661 per month, a level
which has essentially remained flat for the past three years. The property
has remained fairly competitive despite its age due to its desirable
location near Pacific Beach, as well as its pricing strategy of offering
rates approximately $50 lower than the newer competition. It also offers a
wide range of amenities and has undergone extensive renovations to update
its look and increase appeal. Concessions are basically the norm in the
market and the property offers a variety of lease incentives to attract and
retain tenants including $100-$300 rebates off the first month's rent for
long term leases, zero security deposits for qualified residents, and
limited rent increase programs, all geared to encourage lease signing and
renewals.
The Anaheim property is located in Anaheim, Orange County's largest
city. Throughout 1993 and the first half of 1994, jobs in the aviation,
aerospace, semi-conductor and defense industries suffered heavy losses but
a recent upsurge in new orders for airplanes show that the economy is once
again entering a period of growth. Since January 1994, approximately
17,000 new jobs entered the market with corporate profits and sales up.
Unemployment in Anaheim dropped from 8% to 6.6% during the year. Walt
Disney is the city's largest employer with 10,000 on its payroll. This is
followed by the city itself employing 3,500 workers. The property is
located approximately 2 miles from downtown Anaheim in a clean, well-
established neighborhood close to major highway arteries. This market
contains eight apartment complexes totalling 1,646 units. The property's
main competition comes in the form of two class "A" complexes, the most
recent built in 1992. While the newer complexes offer greater amenities,
the property's good quality and lower rates offer an affordable
alternative. The property's average rental rate was $688 per month.
Concessions are a given in the market with most offering money off the
first month's rent as opposed to a reduced monthly rent for the term of the
lease. The Anaheim property typically offers $350 to $550 off the first
month. Since 1992, no new multifamily units have come into the market and
none are planned for 1995.
<PAGE>
Additionally, there is no competition from single family home sales. While
the median price of a home dropped to $214,000, this is still well out of a
typical renter's range. Occupancy at the property for 1994 averaged 88%. This is
expected to improve to 92%-95% during 1995 with rents increased 2% on new
leases when possible. Concessions are expected to remain part of the
market throughout the year.
The Huntington Beach property is located in the northwest quadrant
of Orange County, two miles from the ocean in an area defined as a beach
community. Centrally located between Los Angeles and San Diego, the area
has benefitted recently from the Metro Link rail system which expanded its
service in Orange County to and from Los Angeles. The major industry
remains aerospace with major corporations such as McDonnell Douglas,
Rockwell International and Hughes Aircraft. This industry was hard hit by
the recession and has experienced continual layoffs. McDonnell Douglas
laid off 2,000 workers in 1994 alone. During 1994, however, signs of
stability were evident as job loss was down, occupancy levels stabilized,
and concessions in the market decreased. Some upward movement, however
slight, was seen in rental rates. The overall northwest market contains
approximately 136,000 units with the Huntington Beach property's submarket
containing eight complexes with 2,050 units located within a three mile
radius. The majority of these units are conventional apartments with
corporate clientele making up less than 2%. During 1992 the property
converted from OAKWOOD to conventional apartment units. During 1994 the
number of corporate units in the property was reduced from fifteen units to
eight, or less than 3% of the property's total. Pricing at the property is
in-line with the market for one bedroom units ($675 per month) and slightly
below market for two bedroom units ($817 per month versus $865 for the
competition). Concessions remain a staple of the market with most
complexes offering move-in specials of free rent up front. The property
had operated with an effective rent strategy in 1993 as opposed to free
rent upfront, however, during 1994 initiated a program offering $400 off
the first month's rent on twelve month leases. The effective rent program,
which spreads the discount over the term of the lease and thereby offering
lower monthly payments, is still in effect to those residents who prefer it
over the upfront discount. Competitive rates combined with concessions
enabled the property to have a 96% occupancy average during 1994. The
market averages 97%-99%. The ultimate effect of the orange county bankruptcy
case on taxes and services for property owners in the County are uncertain.
The Upland property is located in the southwest corner of San
Bernardino County in a rural, residential area known as the Inland Empire.
Located outside the major metropolitan areas, this region experienced a
surge of growth in the late 1980s and early 1990s in response to the high
cost of housing in Los Angeles and Orange counties. Many residents
commuted to work in Los Angeles and surrounding communities. This area is
one of the hardest hit by the recession in California and falling housing
costs in Los Angeles and Orange County spurred competition for the Inland
Empire. The closures of Norton and George Air Force bases cost the region
thousands of military and civilian jobs since 1990. An additional 3,000
jobs will be lost due to the closure of March Air Force Base in Riverside
in 1995. A Defense Finance and Accounting Service Center, however, is
expected to open soon in San Bernardino and the expansion of commercial
flights at the new San Bernardino Airport will bring new jobs into the
area. The area has been successful at replacing lost jobs posting one of
the best job growth rates in California for 1994. During 1994 the property
was 92% occupied. Average rental rates were $622 per month with
concessions a given in the market. This is situation is not expected to
improve substantially during 1995.
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 contracted and supervised by CIGNA Investments, Inc.
("CII", formerly CIGNA Capital Advisors, Inc.) on behalf of the Partnership
maintain on-site staff. For a description of property management services
provided by CII, and the terms of transactions between the Partnership and
affiliates of the General Partner, see Item 13 and the Notes to Financial
Statements.
<PAGE>
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 1992, 1993 and 1994:
1992 1993 1994
The Anaheim Property 11% 11% 14%
The Huntington Beach Property 13% 14% 18%
The West Los Angeles Property 21% 20% 25%
The San Diego Property 25% 26% 31%
The Sherman Oaks Property(a) 20% 20% 1%
The Upland Property 10% 9% 11%
(a)The property was severely damaged by the January 17, 1994
Southern California earthquake. The property was evacuated and is
currently unoccupied.
In all years, 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 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 two
of the remaining six properties pursuant to the "OAKWOOD" marketing concept
(see Item 1). 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.
Although a portion of the Project is or was operated under the OAKWOOD
concept, all of the properties have and will continue to offer furnished
and unfurnished units for conventional longer-term leases to meet total
market needs. Conventional leases are generally for a term of one year or
less.
Reference is made to Item 7 for a description of the status of the
Sherman Oaks property which was severely damaged in the Northridge
earthquake.
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 1990, 1991,
1992, 1993 and 1994 (a):
<TABLE>
<CAPTION>
The The The West Los The San The Sherman The Upland
Anaheim Huntington Angeles Diego Oaks Property
Property Beach Property Property Property (b)
Property
<S> <C> <C> <C> <C> <C> <C>
1990
At 92% 98% 90% 73% 94% 91%
03/31
At 94% 97% 94% 71% 90% 94%
06/30
At 89% 92% 88% 85% 92% 94%
09/30
At 89% 86% 77% 78% 89% 88%
12/31
1991
At 85% 93% 87% 84% 90% 88%
03/31
At 96% 96% 95% 97% 94% 92%
06/30
At 81% 85% 84% 83% 84% 94%
09/30
At 72% 72% 74% 78% 84% 94%
12/31
1992
At 84% 83% 89% 86% 85% 91%
03/31
At 75% 89% 94% 93% 90% 94%
06/30
At 85% 89% 87% 87% 90% 87%
09/30
At 90% 85% 83% 72% 93% 92%
12/31
1993
At 91% 91% 85% 86% 87% 92%
03/31
At 96% 86% 93% 92% 88% 90%
06/30
At 94% 94% 92% 86% 88% 91%
09/30
At 91% 96% 83% 97% 84% 91%
12/31
1994
At 83% 95% 87% 84% N/A 91%
03/31
At 81% 98% 92% 93% N/A 90%
06/30
At 89% 99% 87% 95% N/A 91%
09/30
At 95% 94% 83% 92% N/A 95%
12/31
<FN>
(a)The Torrance Property was sold on October 25, 1990; therefore the
Torrance occupancy statistics have not been included in this presentation.
<FN>
(b)The property was severely damaged by the January 17, 1994 Southern
California earthquake. The property is currently not operating and is
unoccupied.
</TABLE>
<PAGE>
Item 3. Legal Proceedings
On September 16, 1994, the Partnership filed a voluntary petition
for reorganization under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Central 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. Reference is made to Item 7 for a
description of the events prior to and subsequent to the bankruptcy filing.
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, 1994, 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.
The Partnership is currently operating as a going concern under
Chapter 11 of the Bankruptcy Code. It is uncertain as to the likelihood of
availability of funds for distribution. It is unlikely that the
Partnership's operations will generate any funds which would be available
for distribution in the short-term. 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
(Debtor in Possession)
December 31, 1994, 1993, 1992, 1991 and 1990
(In thousands except per Unit and footnoted information)
(not covered by Report of Independent Accountants)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Total operating income $14,625 $17,926 $18,014 $18,982 $22,007
Net income (loss) (b) (3,239) (6,554) (6,386) (5,432) 6,544
Net income (loss) per unit (b)
Class A (8,859) (17,924) (17,465) (14,856) 14,566
Class B -- -- -- -- 263,570
Total assets 98,399 101,769 106,512 113,058 117,478
Long-term obligations(c) 111,984 111,984 111,984 111,984 118,544
<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.
<FN>
(b) Included in 1994 is $2,000,000 extraordinary gain ($5,470 per
Class A Unit). 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).
<FN>
(c) Effective with the November 1, 1993 payment, the Partnership
began withholding interest payments on the second mortgage
loan obligation. Amounts shown don't include accrued and
unpaid interest on the second mortgage loan. 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, claims relating to the long-term obligations
against the Partnership have been stayed while the Partnership
operates as Debtor in Possession.
</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 the 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 interest 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 ("Travelers") 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
first mortgage note was modified in 1987 and again in 1990. In 1990, the
second mortgage was refinanced by a combination of debt forgiveness by
Brookside Savings and Loan Association, Partnership cash reserves, and a
new $14,000,000 second mortgage note. Reference is made to the Notes to
Financial Statements for a description of the mortgage debt, modifications
and refinance thereto. In conjunction with the initial modification of the
first mortgage, 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 to deferred interest.
In October 1990, concurrent with the second modification of the
first mortgage 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 included a real estate advisory fee of $518,750 earned by
CII, an affiliate of the General Partner. CII deferred payment of this fee
to permit the Partnership to utilize the funds for operations. The fee
remained unpaid at December 31, 1994.
At the time of the sale of the Torrance property, the Partnership
was owed some receivables from rents. The purchaser of the property
collected the rents receivable after the sale date, but refused to remit
the collection proceeds to the Partnership. The Partnership filed a
lawsuit to recover the rent payments and during 1994, reached a settlement
with SBD Group, Inc., the purchaser, for $184,257, including interest and
fees. The Partnership expects to receive the settlement proceeds in early
1995.
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 installment payment on the capital contribution
notes 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,
approximately $500,000, was added to reserves and 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
<PAGE>
withdrawn for renovation projects at the
San Diego, Sherman Oaks, and West Los Angeles properties, and for 1992
operating deficits.
During 1992 and 1993, the Partnership committed a portion of
Partnership cash reserves for renovation projects at the West Los Angeles,
Sherman Oaks, and Mission Bay properties. In addition, as a result of
shortfalls from operations, the Partnership was utilizing cash reserves to
supplement debt service payments on the second mortgage. During 1993, the
Partnership's cash reserves were reduced to very low levels, and in
November 1993, the Partnership ceased payment on the second mortgage.
One of the Partnership's six properties, Sherman Oaks, sustained
extensive damage from the Southern California earthquake on January 17,
1994. The property was evacuated and city inspectors classified the
property as unsafe for use. The Partnership has insurance for the damage
as well as for business interruption, subject to a 5% deductible (the
"Policies").
On April 28, 1994, the Partnership received a $750,000 cash advance
on the business interruption portion of the Policies. The funds were
utilized for working capital needed for the ordinary and necessary
operations of the Project and ultimately, to fund the first mortgage debt
service.
During July 1994, a claim for $1,215,000, representing the first
six months of 1994 business interruption, was sent to the insurance company
carrying the first layer of insurance under the Policies. A short time
after the claim was sent, Travelers asserted that it has control over the
business interruption insurance proceeds as well as the property damage
proceeds. As a result, the Partnership has been delayed in receiving any
further proceeds under the Policies, including proceeds offered as
"undisputed" by the insurance company carrying the first $10,000,000 layer
of insurance. The insurance company has required Travelers' consent prior
to the payment of any insurance proceeds.
In order to determine the full extent of the business interruption
claim, the Partnership hired an accounting firm, Dempsey, Myers & Company
("Dempsey"), specializing in the analysis and preparation of business
interruption, property and fidelity claims on behalf of corporate policy
holders. On March 9, 1995, the Partnership submitted a report prepared as
of January 11, 1995 by Dempsey, representing the Partnership's business
interruption claim, to the adjuster for the insurance companies. Based on
the Dempsey report, the Partnership believes it has a justifiable business
interruption claim in the amount of $4,913,748 (prior to netting out the
$750,000 advance the Partnership has already received for business
interruption). Dempsey has estimated that after the audit of the claim by
the adjuster for the insurance companies and negotiations, the full amount
of the claim is attainable, but at a minimum $3,500,000 will be received
from the business interruption claim. Prior to and after submitting the
claim to the adjuster, the Partnership and the adjuster requested
Travelers' authorization for the adjuster to begin a review of the claim.
On March 22, 1995, Travelers consented to the adjuster reviewing the
business interruption claim.
On February 3, 1995, the insurance company carrying the first
$10,000,000 layer of coverage, offered to settle a portion of the loss
resulting from the earthquake. The insurance company requested that the
Partnership and Travelers jointly submit a "Proof of Loss" and the
insurance company would settle its portion of the loss based on the
conclusion that the magnitude of the loss will require the insurance
company to pay the full amount of its coverage. The Partnership expects
that the appropriate documents will be executed in the very near term and
the Partnership will receive an additional $9,250,000 advance which will be
invested in short term low risk investments.
Based on analysis performed by the General Partner of the research
and data prepared by various experts hired by the General Partner and the
Partnership, the General Partner concluded that it is in the best interest
of the Partnership's creditors and partners to repair/rebuild Sherman Oaks.
Travelers contends that applying net insurance and residual sales proceeds
to outstanding first mortgage debt appears to be the appropriate action.
The Partnership has been working with the City of Los Angeles
Housing Department in obtaining assistance in repairing the Sherman Oaks
property. As of March 16, 1995, the City has represented that it is
prepared to provide at least $300,000 in direct construction financing to
cover a portion of the insurance deductible. In addition, the
<PAGE>
City, in conjunction with a guarantee which has been tentatively agreed
to between the City and
Federal National Mortgage Association, is prepared to issue tax-exempt
bonds in an amount equivalent to satisfy the deductible and the portion of
the Travelers' mortgage attributable to the Sherman Oaks property.
As a result of the low level of Partnership cash reserves, the
additional strain from the loss of one of the Partnership's larger income
producing properties, and the Partnership's inability to collect business
interruption proceeds, the Partnership experienced cash flow difficulties.
On September 16, 1994, the Partnership filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Central 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.
The filing of the voluntary petition under Chapter 11 was the
Partnership's only available alternative while allowing the Partnership the
time and resources to repair Sherman Oaks. The Partnership's goal in the
Chapter 11 proceeding is to maximize recovery by creditors and partners by
preserving the Partnership as a viable entity with a going concern value.
During the two year period prior to the petition filing, the
Partnership made three formal attempts (including one subsequent to the
earthquake) and participated in numerous informal discussions on debt
modifications with Travelers; however, no agreement was reached despite
these efforts. Additionally, in the year prior to the petition, the
Partnership pursued non-traditional opportunities to refinance the
Partnership's debt, which generally were not considered feasible due to
loan to value constraints, questions relating to debt coverage ratios or
lack of benefit to the partners.
On September 22, 1994, the Partnership entered into a Letter
Agreement with Travelers which defines and authorizes the use of cash
collateral. The Partnership was granted use of cash collateral pursuant to
the Letter Agreement with Travelers until June 30, 1995. In addition to
using revenues generated by the Project to pay ordinary and necessary
operating expenses of the Project, the Partnership and Travelers agreed
that the Partnership would establish certain segregated cash collateral
accounts; a tenant security deposit account (equivalent to the tenant
security deposit liability), a tax and insurance account, and a Sherman
Oaks deductible account (initial deposit plus additional deposits over a
period of time not to exceed $500,000). 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 Travelers 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. Travelers objected to the use of cash collateral for the
repair of Sherman Oaks, asserting that its interest in Sherman Oaks would
not be adequately protected. On October 17, 1994, the Court held a status
hearing in connection with the use of cash collateral to repair Sherman
Oaks and the Court set a trial for February 1 and 2, 1995. 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, Travelers commenced a declaratory
action against the Partnership, claiming that the second lien holder,
Congen Properties, Inc., is an insider as defined under 11 U.S.C. Sec. 101.
The Partnership filed an answer to the Complaint denying that Congen
Properties, Inc. is an insider as that term is defined in the Bankruptcy
Code. Congen Properties Inc., also filed an answer denying that it is an
insider as defined in the Code. A status hearing was held on February 21,
1995, and after arguments by counsel, the Court set the discovery deadline
and scheduled the continued status conference both for May 22, 1995.
<PAGE>
On or about January 30, 1995, Travelers filed a Motion for Relief
from the Automatic Stay. The Partnership filed an Opposition to the
Motion. A hearing was held on February 21, 1995. After hearing arguments
by counsel, the court set a date for a final evidentiary hearing on
Travelers' Motion for Relief from Stay for April 18, 1995.
The settlement between the Partnership and SBD Group, Inc.,
regarding collection of rents recorded as accounts receivable when the
Partnership sold from the Torrance property, has been approved by the
Court. The Partnership is in the process of collecting the settlement.
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. The Partnership's
period for soliciting acceptances to the plan expires on June 7, 1995,
unless otherwise extended by the Court. Reference is made to Part IV, Item
14, Exhibits, for a complete copy of the Partnership's Proposed Plan of
Reorganization dated March 16, 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
and 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.
At December 31, 1994, the Partnership had cash and cash equivalents
classified as cash collateral used for the operations of the Project
totalling $(149,946) (including outstanding checks). In addition, cash and
cash equivalents as of December 31, 1994 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
balance of theses accounts at December 31, 1994 were $467,777, $374,095,
and $351,931, respectively. The Partnership had unencumbered cash and cash
equivalents at December 31, 1994 of $147,158.
On March 1, 1995, at 3:40 a.m., there was a fire at the West Los
Angeles property. The Los Angeles Fire Department investigator determined
probable cause as electrical, which began in a wall or ceiling. The fire
was contained to the sauna, men's dressing room, and the apartment located
directly above the sauna. There were no injuries or causalities as a
result of the fire. Repairs were estimated at approximately $100,000 and
repairs were underway within a few days. The Partnership's insurance
covers fire damage subject to a $5,000 deductible.
Results of Operations
Results, exclusive of the Sherman Oaks property, improved in 1994.
The Partnership's net property revenue, exclusive of the Sherman Oaks,
increased 8% in 1994 to approximately $7,821,000 over approximately
$7,254,000 in 1993.
The West Los Angeles OAKWOOD posted an approximately $126,000, or
8%, increase in net property revenue in 1994. The property collected
$38,058 and $85,341 of tax refunds relating to the 1992-1993 and 1993-1994
fiscal tax years, respectively. The assessed value has been decreased
approximately 28% for the 1994-1995 fiscal year. A rate increase and less
corporate rate discounting resulted in an approximate $5,000 increase to
rental revenue.
<PAGE>
Property operating expenses decreased as a result of a
reduced level of necessary repairs and maintenance and a significant drop
in utilities. Partially offsetting the decrease was a higher insurance
premium and increased furniture rental.
At Arbor Park, net property revenue increased approximately
$85,000, or 11%, in 1994. The increase was the result of lower property
taxes from a 25% reduction in the 1994-1995 assessed property value. In
addition, the property received $31,203 and $34,907 of tax refunds for the
1992-1993 and 1993-1994 fiscal tax years, respectively. Property operating
expenses decreased, as 1993 included a painting project. The expense
savings were partially offset by higher insurance expense and an increase
in carpet and vinyl replacements.
An increase in rental income at Pacifica Club, as a result of
higher average occupancy in 1994, coupled with a decrease in expenses, led
to an increase in net property revenue of approximately $251,000 or 18%.
Repairs and maintenance, payroll costs, advertising and real estate tax
expenses all posted decreases and insurance expense increased.
The partial conversion from OAKWOOD operations to conventional
operations decreased expenses at Mission Bay East, resulting in increased
net property revenue of approximately $119,000, or 5%, in 1994. Increases
in insurance expense, utilities and repairs and maintenance expenses were
more than offset by decreased administrative expenses. Although average
occupancy was higher, rental income decreased slightly, as conventional
rates are usually set below corporate rates.
At Amberway, rental income decreased in 1994, partially offset by
expense savings. Property operating expenses decreased, as 1993 included a
painting project and repairs for damage caused by heavy rains. The expense
savings were partially offset by higher insurance premiums. Overall, net
property revenue dropped by $14,000, or 1%.
Results - 1994 Compared with 1993
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
virtually no revenue and has incurred only necessary operating expenses and
expenses directly related to the earthquake. Sherman Oaks' results for the
year ended December 31, 1994, as compared with 1993, were affected as
follows: Rental income decreased approximately $3,295,000, other income
decreased approximately, $110,000, property operating expenses decreased
approximately $581,000, real estate taxes decreased approximately $157,000
and property administrative expenses decreased approximately $704,000. The
following discussion has been limited to the Partnership's five remaining
operating properties.
Total 1994 rental income, exclusive of Sherman Oaks, was
$13,972,863 compared with $13,880,354 for 1993. Increased rental income at
West Los Angeles was attributable to increased average occupancy and less
corporate rate discounting. Mission Bay East posted a decrease of
approximately $13,000, as conventional rates are lower than corporate
rates. Rental income at Pacifica Club increased approximately $196,000 as
the result of higher average occupancy. At Arbor Park, increases in rates
and average occupancy led to an approximate $24,000 increase. Lower
average occupancy at Amberway resulted in an approximate $119,000 decrease.
Other income decreased in total for the year ended December 31,
1994, as compared with 1993, due to one-time redecorating fees received
from a new laundry contract in 1993 of $38,000, $40,000, and $30,000 at
Amberway, Pacifica Club, and Arbor Park, respectively. In addition, 1993
included an offsetting $66,000 adjustment for accounts receivable at
Amberway as a result of a management company change (certain accounts
receivable were recorded as revenue when collected and the adjustment
recorded negated the revenue effect).
<PAGE>
Overall, property operating expenses decreased for the year ended
December 31, 1994, as compared to 1993. Amberway and West Los Angeles
posted lower maintenance and repair expenses due, in part, to costs in the
first quarter of 1993 from damages caused by heavy rains. Routine
maintenance and repair expenses decreased at both West Los Angeles and
Pacifica Club, in part, due to a rehab performed in past years. In 1993
nonrecurring painting projects were completed at Amberway and Arbor Park at
a cost of approximately $69,000 and $71,000, respectively. West Los Angeles
posted a $43,000 savings in utilities. Offsetting the decreases was an
increase in utilities at Mission Bay East, as a result of lower
reimbursements for various utilities from corporate tenants. As the
property converts to conventional operations from OAKWOOD, utilities will
increase as the Partnership will not charge back certain utilities to its
non-corporate tenants. Additionally, Mission Bay East and Arbor Park had
increased non-routine maintenance for carpet replacements, faucets, and
vinyl. At Amberway, non-routine maintenance expenses increased for pool
repairs, draperies and linoleum replacement. At West Los Angeles,
furniture rental expense increased. Insurance expense increased
approximately $95,000 for the five properties in total.
Property taxes decreased for the year ended December 31, 1994, as
compared to 1993, due to successful property tax appeals. Assessed values
decreased for fiscal year 1995 (July 1, 1994 to June 30, 1995) at all the
properties. Property tax refunds were received at West Los Angeles,
Pacifica Club and Arbor Park for fiscal year 1993 (July 1, 1992 to June 30,
1993). Property tax refunds were also received at West Los Angeles and
Arbor Park for fiscal year 1994 (July 1, 1993 to June 30, 1994). The
decreases were partially offset by consulting fees paid for the tax appeals
and a tax refund received at Mission Bay East in 1993.
The increase in management fees for the year ended December 31,
1994, as compared to 1993, was due to incentive management fees earned at
Mission Bay East, West Los Angeles and Pacifica Club in 1994. In 1993,
Mission Bay East earned an incentive management fee.
The decrease in property administrative expense for the year ended
December 31, 1994, as compared with 1993, was the result of a reduction of
OAKWOOD related costs at Mission Bay East. The property had savings
primarily in payroll and advertising costs. Although conventional type
advertising increased with the conversion, OAKWOOD related advertising
dropped for the year. Property administrative expenses decreased at
Pacifica Club due to savings in payroll related costs and advertising.
The decrease in interest income for the year ended December 31,
1994, as compared with 1993, was due to the decrease in the average cash
balance invested.
Amortization decreased for the year ended December 31, 1994, as
compared with 1993, due to deferred loan costs becoming fully amortized
during 1993. Partially offsetting the decrease was an increase in
depreciation from major additions in 1992 and 1993.
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
<PAGE>
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.
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 received resulting from new laundry contracts 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.
Inflation
Since inflation has been at a low rate during 1994, 1993 and 1992,
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
(Debtor in Possession)
Index
Page
Report of Independent Accountants 22
Financial Statements:
Balance Sheets, December 31, 1994 and 1993 23
Statements of Operations, For the Years Ended December 31, 1994,
1993 and 1992 24
Statements of Partners' Deficit, For the Years Ended December 31,
1994, 1993 and 1992 25
Statements of Cash Flows, For the Years Ended December 31, 1994,
1993 and 1992 26
Notes to Financial Statements 27
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>
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, 1994 and
1993, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, 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 3 to
the financial statements, on September 16, 1994 the Partnership filed a
petition for relief under Chapter 11 of the federal bankruptcy laws. As
discussed in Note 4, the Sherman Oaks property was severely damaged
by an earthquake. The property is not operating and is
currently unoccupied. 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 Notes 3, 4 and 11.
The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
PRICE WATERHOUSE LLP
Hartford, Connecticut
March 30, 1995
<PAGE>
California Seven Associates Limited Partnership,
a California limited partnership
(Debtor in Possession)
Balance Sheets
December 31, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
<S> <C> <C>
Property and improvements, at cost:
Land and land improvements $20,562,073 $20,562,073
Buildings 109,890,874 109,659,882
Furniture and fixtures 13,030,382 12,925,199
Machinery and equipment 765,087 681,295
144,248,416 143,828,449
Less accumulated depreciation 48,128,827 43,907,921
Net property and improvements 96,119,589 99,920,528
Cash and cash equivalents 1,191,015 1,440,476
Accounts receivable 488,885 388,172
Prepaid expenses and other assets 599,166 19,832
Total $98,398,655 $101,769,008
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Partners' Deficit
<S> <C> <C>
Liabilities:
Liabilities not subject to compromise:
Accounts payable and accrued expenses $357,719 $480,275
Tenant security deposits 472,898 472,865
Unearned income 79,046 303,995
909,663 1,257,135
Postpetition liabilities subject to compromise:
Fees and reimbursement payable to the General
Partner and its affiliates 102,832 --
Prepetition liabilities subject to compromise:
Note and mortgages payable 111,983,903 111,983,903
Accrued interest payable 2,560,559 1,600,118
Accounts payable and accrued expenses 923,957 --
Deferred management fees -- 2,000,000
Fees and reimbursement payable to the
General Partner and its affiliates 4,078,563 3,848,505
119,546,982 119,432,526
Total liabilities 120,559,477 120,689,661
Partners' deficit:
General Partner (764,846) (732,454)
Limited partners (362 Class A
Units and 3 Class B Units) (21,395,976) (18,188,199)
Total partners' deficit (22,160,822) (18,920,653)
Total $98,398,655 $101,769,008
<FN>
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)
<TABLE>
Statements of Operations
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Property operating revenues:
Rental income $14,063,949 $17,266,927 $17,476,053
Other 561,014 659,373 538,404
14,624,963 17,926,300 18,014,457
Property operating expenses:
Maintenance and repairs, furniture rental,
insurance, and other property operations 2,854,709 3,484,288 3,061,562
Real estate taxes 1,025,137 1,401,422 1,462,483
Management fees 672,578 595,936 593,330
Property administrative 2,723,703 3,739,022 4,126,168
7,276,127 9,220,668 9,243,543
Net property revenue 7,348,836 8,705,632 8,770,914
Other operating costs and (income) expenses:
Depreciation and amortization 4,220,906 4,411,344 4,390,850
Management and administrative fees to affiliates 296,032 329,118 330,964
Partnership administrative 124,672 109,978 115,422
Net recovery on business interruption insurance(299,540) -- --
4,342,070 4,850,440 4,837,236
Net partnership operating income 3,006,766 3,855,192 3,933,678
Interest income 19,875 52,585 141,897
Interest expense (contractual interest of $10,461,800
in 1994) (7,908,417) (10,461,800) (10,461,800)
Net loss before extraordinary gain
and reorganization items (4,881,776) (6,554,023) (6,386,225)
Reorganization items:
Interest income 1,768 -- --
United States Trustee fees (4,800) -- --
Professional fees (354,397) -- --
Net loss before extraordinary gain (5,239,205) (6,554,023) (6,386,225)
Extraordinary gain-deferred management fees 2,000,000 -- --
Net loss $(3,239,205) $(6,554,023) $(6,386,225)
Loss before extraordinary gain:
General Partner $(52,392) $(65,540) $(63,862)
Limited partners (5,186,813) (6,488,483) (6,322,363)
$(5,239,205) $(6,554,023) $(6,386,225)
Net loss:
General Partner $(32,392) $(65,540) $(63,862)
Limited partners (3,206,813) (6,488,483) (6,322,363)
$(3,239,205) $(6,554,023) $(6,386,225)
Loss before extraordinary gain per Class A Unit $(14,328) $(17,924) $(17,465)
Net loss per Class A Unit: $(8,859) $(17,924) $(17,465)
<FN>
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)
Statements of Partners' Deficit
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
General Limited Partners
Partner Class A Class B Original Total
<S> <C> <C> <C> <C> <C>
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)
Cash distributions -- (964) -- -- (964)
Net loss (32,392) (3,206,813) -- -- (3,239,205)
Balance, December 31, 1994 $(764,846) $(21,391,353) $-- $(4,623) $(22,160,822)
<FN>
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)
<TABLE>
Statements of Cash Flows
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,239,205) $(6,554,023) $(6,386,225)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary gain - deferred management fees (2,000,000) -- --
Depreciation and amortization 4,220,906 4,411,344 4,390,850
Accounts receivable (100,713) 3,809 395,768
Accounts payable and accrued expenses (121,177) 32,311 107,313
Other, net (804,250) 1,974,032 (305,951)
Liabilities subject to compromise 2,217,288 -- --
Net cash provided by (used in)
operating activities 172,849 (132,527) (1,798,245)
Cash flows from investing activities:
Purchase of property and improvements (419,967) (696,040) (653,346)
Receipts from mortgage escrow account -- -- 1,392,647
Net cash provided by (used in)
investing activities (419,967) (696,040) 739,301
Cash flows from financing activities:
Cash distribution to limited partners (2,343) (6,322) (7,901)
Proceeds from partners' capital contributions -- 6,821 --
Net cash provided by (used in)
financing activities (2,343) 499 (7,901)
Net decrease in cash and cash equivalents (249,461) (828,068) (1,066,845)
Cash and cash equivalents, beginning of year 1,440,476 2,268,544 3,335,389
Cash and cash equivalents, end of year $1,191,015 $1,440,476 $2,268,544
Supplemental disclosure of cash information:
Interest paid during year $6,947,976 $9,213,683 $11,090,467
Fees paid in connection with reorganization $355,447 $-- $--
<FN>
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
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.
On September 16, 1994, the Partnership filed a voluntary petition
for reorganization under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Central 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.
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, 1994, 1993
and 1992, 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>
1994 1993 1992
Financial Tax Financial Tax Financial Tax
Reporting Reporting Reporting Reporting Reporting Reporting
<S> <C> <C> <C> <C> <C> <C>
Total assets $98,398,655 $68,092,407 $101,769,008 $73,208,025 $106,511,500 $79,679,623
Partners' deficit:
General Partner (764,846) (20,779,181) (732,454) (20,703,414) (666,914) (18,450,516)
Limited partners:
Class A (21,391,353)(30,371,092) (18,183,576) (25,236,476) (11,699,571)(19,277,177)
Class B -- (1,227,911) -- (1,227,911) -- (1,227,911)
Original (4,623) (9,842) (4,623) (9,842) (4,623) (9,842)
Net loss: (a)
General Partner (32,392) (75,767) (65,540) (2,252,898) (63,862) (3,658,495)
Limited partners:
Class A (3,206,813) (5,133,652) (6,488,483) (5,956,956) (6,322,363) (4,472,686)
Net loss
per Class A Unit: (a) (8,859) (14,182) (17,924) (16,456) (17,465) (12,356)
<FN>
(a) Included in 1994 is $2,000,000 extraordinary gain ($5,470 per Class A Unit)
for financial reporting and tax reporting.
</TABLE>
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
<PAGE>
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 recorded.
In November 1993, the Financial Accounting Standards Board issued a
Proposed Statement of Financial Accounting Standards, "Accounting for the
Impairment of Long-Lived Assets". Under the Proposed Statement, entities
should continue to compare the sum of the expected undiscounted future net
cash flows to the carrying amount of the asset. If an impairment exists,
the loss shall be measured as the amount by which the carrying value of the
asset exceeds the fair value of the asset. Fair value of the asset shall
be measured by its market value if an active market for that asset exists.
If no market price is available, a forecast of expected discounted future
net cash flows should be used. The discount rate applied should be
commensurate with the risk involved. The effective date of a final
statement is fiscal years beginning after June 15, 1995. The effect of the
Proposed Statement on the financial position and results of operations of
the Partnership in the year of adoption can not be reasonably estimated.
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. At December 31, 1994 the Partnership had cash and cash
equivalents classified as cash collateral used for operations of the
properties totalling $(149,946) (including outstanding checks). In
addition, at December 31, 1994, 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 December 31, 1994 were
$467,777, $374,095 and $351,931, respectively. The Partnership had
unencumbered cash and cash equivalents at December 31, 1994 of $147,158.
c) Prepaid Expenses and Other Assets: Prepaid expenses at December
31, 1994, consist of prepaid insurance at each property. Other assets at
December 31, 1994 and 1993 consist of utility deposits at various
properties.
d) Partners' Deficit: Offering costs comprised of sales commissions
and other issuance expenses have been charged to the partners' capital
accounts as incurred.
e) 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.
f) Basis of Presentation: Certain amounts in the 1993 and 1992
financial statements have been reclassified to conform with 1994
presentation.
3. 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 subject to compromise."
<PAGE>
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 authorized the
use of cash collateral. The Partnership was granted use of collateral
pursuant to the Letter Agreement until June 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, and after arguments by counsel, the Court
set the discovery deadline and scheduled the continued status conference
both for May 22, 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. A hearing was held on February 21, 1995. After
hearing arguments by counsel, the court set a date for a final evidentiary
hearing on the Motion for Relief from Stay for April 18, 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. The Partnership's
period for soliciting acceptances to the plan expires on June 7, 1995,
unless otherwise extended by the Court.
4. Property and Improvements
At December 31, 1994, the Partnership owned five operating
apartment properties located in California totalling 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 December 31, 1994. All properties are pledged as security
for the mortgages payable.
The Sherman Oaks 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.
<PAGE>
On April 28, 1994, the Partnership received a $750,000 advance on
the business interruption policy for the earthquake damaged property.
Included in the income statement as "Net recovery on business interruption"
for the year ended December 31, 1994 is the insurance advance less costs
specifically associated with the earthquake. All other income statement
lines for 1994 as they relate to the Sherman Oaks property, only include
activity related to the period from January 1, 1994 to January 16, 1994, or
fixed operating expenses unrelated to the earthquake, if applicable. The
income statement does not include any other amounts relating to the pending
claim with the insurance company for 1994 operations.
On March 9, 1995, the Partnership submitted a report, prepared as
of January 11, 1995, representing the Partnership's business interruption
claim, in the amount of $4,913,748 (prior to netting out the $750,000
advance the Partnership has already received for business interruption).
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 insurance company
requested that the Partnership and the first mortgage lender (as a named
additional insured) jointly submit a "Proof of Loss" and the insurance
company would settle its portion of the loss based on the conclusion that
the magnitude of the loss will require the insurance company to pay the
full amount of its coverage. The Partnership expects that the appropriate
documents will be executed in the second quarter of 1995 and the
Partnership will receive an additional $9,250,000 advance.
5. Notes, Mortgages and Loan Modifications
The following table summarizes outstanding debt as of December 31,
1994 and 1993:
1994 1993
First mortgage loan (including cumulative
deferred interest of $11,433,903 at
December 31, 1994 and 1993). $97,433,903 $97,433,903
Second mortgage loan 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, 1994,
the balance remained deferred and unpaid. 550,000 550,000
Total notes and mortgages payable $111,983,903 $111,983,903
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.
<PAGE>
Partnership property is held subject to a first mortgage loan from
the Travelers Insurance Company, 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
plus $419,328 of Partnership cash reserves to pay off the Brookside Savings
mortgage. The second mortgage lender is Congen Properties, Inc., an
indirectly owned subsidiary of CIGNA Corporation. 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.
Effective November 1, 1993, the Partnership began withholding the
interest payment on the second mortgage note.
<PAGE>
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, 1994,
the Partnership paid the tax due on its 1993 Form CT-G State of Connecticut
Group Income Tax Return. The Partnership has elected to pay the tax due on
the limited partners' share of portfolio income and, therefore, paid tax
due of $2,343 directly to the State of Connecticut. The Partnership also
accrued the 1994 estimated payment of $964 as of December 31, 1994. 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, 1994, 1993
and 1992 are as follows:
1994 1993 1992
Interest on assignment note $62,333 $88,000 $88,000
Asset management fee 146,032 179,118 180,964
General partner salary 150,000 150,000 150,000
Reimbursement (at cost) for
out-of-pocket expenses 40,417 30,508 34,906
Payment of all fees and expenses, other than reimbursement for
out-of-pocket expenses, has been deferred by the General Partner and its
affiliates.
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.
In 1991, the Management Agreement was renegotiated for the five
remaining OAKWOOD format properties and one conventional property. For the
OAKWOOD properties, a base amount was set up using 1991 as a base year.
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 was not met, R&B would only receive a 3% fee. In 1991, the base net
<PAGE>
operating income was not reached and R&B's fee was reduced by 40% to 3% of
the gross rental receipts. For the conventional property, the Upland
property, 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.
The Property management fee for the Huntington Beach property had 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 San Diego, to an incentive base fee of 3% of gross
receipts with the potential for an additional 1% if net operating income
objectives are met.
On May 1, 1992, in conjunction with the Anaheim property's
conversion, R&B was replaced as the property manager by Maxim Management
Group, formerly known as Prometheus Management Group. The management fee
is 3% of gross receipts plus an additional 1% incentive based on certain
revenue and expense goals.
For the period between 1985 and 1989, a portion of the annual
management fee earned by R&B was subject to deferral based on certain
operating results. The deferral maximum of $2,000,000 was reached in 1989.
During 1994, R&B released the Partnership from the deferred management fee
obligation.
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).
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 charge back 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).
<PAGE>
10. Litigation
In California Seven Associates Limited Partnership, et al v. SBD
Group, Inc. et al [Case no. 716034 (Superior Court of the State of
California, Orange County)] The Partnership won a judgement against the
Defendants in the amount of $152,309, plus interest. Defendants filed a
Motion for Reconsideration, asking the Court to review its prior ruling,
which resulted in a reversal of this judgement. The parties have reached a
settlement which provides payment of $118,352 to the Partnership plus
interest of $41,016 and fees of $24,889. The lawsuit was commenced as a
result of Defendants refusal to forward rent payments which accrued while
the Partnership owned the property (Torrance Oakwood 20900 Anza, City of
Torrance).
[Theodore D. Cohen, et al v. California Seven Associates, et al.,
No. 657925 (Orange County, CA, May 16, 1991)] Plaintiffs in suit brought
against the Partnership and its General Partner are members of the class
participating in a federal court action in Chicago [In re VMS Securities
Litigation, No. 90 c 2412, N.D. Ill.] which has concluded in a settlement,
of which plaintiffs have been notified. Defendant has filed a Motion for
Summary Judgment. The likelihood of an unfavorable outcome or the extent
of any possible liability cannot be assessed at this time.
11. 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>
<TABLE>
California Seven Associates Limited Partnership SCHEDULE III
(a California limited partnership)
(Debtor in Possession)
Real Estate and Accumulated Depreciation
December 31, 1994
Costs
Initial Cost to Partnership (B) Capitalized
<CAPTION> Subsequent to
Description of Acquisition
Apartment Land, Building
Complexes by Improvements
Property Land and Land Furniture and and Furniture Accumulated
Location Encumbrances(A) Improvements Buildings Fixtures & Fixtures Depreciation (E)
<S> <C> <C> <C> <C> <C> <C>
Anaheim, CA $2,858,000 $11,327,356 $1,506,216 $536,906 $5,685,249
Huntington
Beach, CA 2,663,000 13,705,763 1,250,899 1,644,254 6,683,868
West Los
Angeles, CA 4,000,000 17,818,823 1,149,274 2,424,935 8,220,336
San Diego, CA 5,939,000 34,160,345 1,978,398 3,361,419 14,987,439
Sherman
Oaks, CA 3,908,000 17,411,273 1,122,981 2,283,441 7,772,613
Upland, CA 1,140,000 9,724,577 880,956 1,452,600 4,779,322
Total $111,983,903 $20,508,000 $104,148,137 $7,888,724 $11,703,555 $ $48,128,827
</TABLE>
<TABLE>
Gross Amount at Which Carried at Close of Period (C)(D)
Life on Which
<CAPTION> Depreciation
in Latest
Statement of
Land and Land Building and Furniture and Machinery and Date of Date Operations is
Description Improvements Improvements Fixtures Equipment Total Construction Acquired Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anaheim, CA $2,865,938 $11,396,131 $1,938,160 $28,249 $16,228,478 1983 01/31/85 5-30 years
Huntington
Beach, CA 2,680,932 14,573,787 1,894,359 114,838 19,263,916 1971 01/31/85 5-30 years
West Los
Angeles, CA 4,000,000 19,040,047 2,174,792 178,193 25,393,032 1966 01/31/85 5-30 years
San Diego, CA 5,945,739 35,553,353 3,674,786 265,284 45,439,162 1970 01/31/85 5-30 years
Sherman
Oaks, CA 3,924,740 18,740,934 1,958,599 101,422 24,725,695 1969 01/31/85 5-30 years
Upland, CA 1,144,724 10,586,622 1,389,686 77,101 13,198,133 1971 01/31/85 5-30 years
Total 20,562,073 $109,890,874 $13,030,382 $765,087 $144,248,416
<FN>
(A) Reference is made to the Notes to Financial Statements.
<FN>
(B) The cost to the Partnership represents the initial purchase price of properties including the assignment fee and certain
capitalized fees and expenses.
<FN>
(C) The aggregate cost of real estate owned at December 31, 1994 for federal income tax purposes is $144,253,112
<FN>
(D) Reconciliation of real estate owned:
Description 1994 1993 1992
Balance at beginning of period $143,828,449 $143,132,409 $142,479,063
Additions during period 419,967 696,040 653,346<PAGE>
Balance at end of period $144,248,416 $143,828,449 $143,132,409
<FN>
(E) Reconciliation of accumulated depreciation:
Description 1994 1993 1992
Balance at beginning of period $43,907,921 $39,695,623 $35,569,851
Additions during period 4,220,906 4,212,298 4,125,772
Balance at end of period $48,128,827 $43,907,921 $39,695,623
</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 SecretarySeptember 7,
1993
David C. Kopp Secretary September 29, 1989
Michael M. Sinisgalli Treasurer August 1, 1994
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 52, a Senior Managing Director of CIM, 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 46, 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 CIGNA Investments Inc., 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 the International Council of Shopping Centers. He
is a member of the Board of Directors of DeBartolo Realty Corporation and
Cadillac Fairview, Inc.
JOHN WILKINSON - DIRECTOR
Mr. Wilkinson, age 51, is 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 Counsellor.
JOHN D. CAREY - PRESIDENT, CONTROLLER
Mr. Carey, age 31, 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 57, 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
and the American Bar Associations.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Mr. Springman, age 53, is 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 49, 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.
MICHAEL M. SINISGALLI - TREASURER
Michael M. Sinisgalli, age 36, is Assistant Director, Treasury
Process Management of CIGNA Corporation. In this capacity his
responsibilities include the analysis, design and management of treasury
processes supporting insurance divisions. Michael joined CIGNA in 1991
after having been with Bank of New England since 1983. He served in a
variety of Cash Management positions, being appointed in 1990 as Assistant
Vice President, Cash Management Sales/Marketing. A graduate of Central
Connecticut State University (B.S., Business Administration, 1981), Mr.
Sinisgalli is a Certified Cash Manager and a member of Connecticut Cash
Manager Association.
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.
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.
<PAGE>
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, the indirect
parent of the General Partner, as set forth in the following table:
Units Shares
Beneficially Beneficially Percent
Name Owned(a) Owned(b) of Class
R. Bruce Albro (c) 0 6,076 *
Philip J. Ward (d) 0 17,680 *
John Wilkinson (e) 0 13,753 *
All directors and officers
Group (8) (f) 0 43,984 *
* Less than 1% of class
[FN]
(a) No officer or director of the General Partner possesses a right to
acquire beneficial ownership of additional Units of interest of the
Partnership.
[FN]
(b) The directors and officers have sole voting and investment power
over all the shares of CIGNA common stock they own beneficially.
[FN]
(c) Shares beneficially owned includes options to acquire 3,920 shares
and 2,156 shares which are restricted as to disposition.
[FN]
(d) Shares beneficially owned includes options to acquire 10,985 shares
and 2,274 shares which are restricted as to disposition.
[FN]
(e) Shares beneficially owned includes options to acquire 11,251 shares
and 2,027 shares which are restricted as to disposition.
[FN]
(f) Shares beneficially owned by directors and officers include 28,511
shares of CIGNA common stock which may be acquired upon exercise of
stock options and 10,026 shares which are restricted as to
disposition.
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 1994 totaled
$62,333. Interest earned since 1989 of $502,333 remained unpaid at
December 31, 1994. 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,
1994.
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
1994, the General Partner earned a salary of $150,000. The amounts due for
1989 through 1994 of $900,000 remained unpaid at December 31, 1994.
<PAGE>
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,
1994).
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 $146,032 for its services
in 1994. At December 31, 1994 the Partnership owed CII $2,465,077 for the
1987 through 1994 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 1994, the General Partner and its affiliates were due
reimbursement for such out of pocket administrative expenses in the
amount of $40,417 of which $2,030 was unpaid as of December 31, 1994.
<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) Real Estate and Accumulated Depreciation. See Index to
Financial Statements in Item 8.
3. Exhibits
2.1 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 March 16, 1994.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
27 Financial Data Schedules
(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 31, 1995 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 31, 1994
Philip J. Ward, Director
/s/ R. Bruce Albro Date: March 31, 1994
R. Bruce Albro, Director
/s/ John Wilkinson Date: March 31, 1994
John Wilkinson, Director
/s/ John D. Carey Date: March 31, 1994
John D. Carey, President, Controller
(Principal Executive Officer)
(Principal Accounting Officer)
/s/ Michael M. Sinisgalli Date: March 31, 1994
Michael M. Sinisgalli, Treasurer
(Principal Financial Officer)
<PAGE>
EXHIBIT 2.1
Clifton R. Jessup, Jr.
Bruce H. White
DIXON & DIXON LTD., L.L.P.
2500 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
Telephone: (214) 754-0155
FAX: (214) 754-0704
And
J. Scott Bovitz (#93548)
Of Counsel
DIXON & DIXON LTD., L.L.P.
333 S. Grand Avenue, Suite 2000
Los Angeles, California 90071-1524
Telephone: (213) 346-8310
FAX: (213) 620-1811
Attorneys for Debtor
and Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SANTA ANA DIVISION
In re ) Case No. SA 94-19491-JR
)
CALIFORNIA SEVEN ASSOCIATES ) Chapter 11
LIMITED PARTNERSHIP, a )
California Limited Partnership, ) PLAN OF REORGANIZATION
) UNDER CHAPTER 11 OF THE
Debtor. ) BANKRUPTCY CODE PROPOSED
) BY THE DEBTOR DATED
Employer Tax I.D. #94-2970056 ) MARCH 16, 1995
)
) Date: [TO BE SET]
) Time: [TO BE SET]
) Place: Courtroom 606
) 34 Civic Center Plaza
) Santa Ana, CA 92701
)
<PAGE>
PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE PROPOSED BY THE
DEBTOR DATED MARCH 16, 1995
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS AND INTERPRETATION. . . . . . . . 1
A. Terms Defined in this Plan. . . . . . . . . . . . . . 1
1.01 Acceptance . . . . . . . . . . . . . . . . . . 1
1.02 Administrative Claim . . . . . . . . . . . . . 2
1.03 Administrative Convenience Claim . . . . . . . 2
1.04 Administrative Convenience Class . . . . . . . 2
1.05 Affiliate. . . . . . . . . . . . . . . . . . . 2
1.06 Allowed Administrative Claim . . . . . . . . . 3
1.07 Allowed Amount . . . . . . . . . . . . . . . . 3
1.08 Allowed Claim. . . . . . . . . . . . . . . . . 3
1.09 Allowed Interest . . . . . . . . . . . . . . . 4
1.10 Bankruptcy Code or Code. . . . . . . . . . . . 4
1.11 Bankruptcy Court or Court. . . . . . . . . . . 4
1.12 Bankruptcy Rules . . . . . . . . . . . . . . . 4
1.13 Bar Date . . . . . . . . . . . . . . . . . . . 5
1.14 Business Day . . . . . . . . . . . . . . . . . 5
1.15 CAL 7. . . . . . . . . . . . . . . . . . . . . 5
1.16 Case . . . . . . . . . . . . . . . . . . . . . 5
1.17 Cash . . . . . . . . . . . . . . . . . . . . . 5
1.18 Chapter 5 Causes of Action . . . . . . . . . . 5
1.19 Chapter 5 Recoveries . . . . . . . . . . . . . 6
1.20 Chapter 11 . . . . . . . . . . . . . . . . . . 6
1.21 Claim. . . . . . . . . . . . . . . . . . . . . 6
1.22 Claimant . . . . . . . . . . . . . . . . . . . 6
1.23 Class. . . . . . . . . . . . . . . . . . . . . 6
1.24 Collateral . . . . . . . . . . . . . . . . . . 7
1.25 Confirmation . . . . . . . . . . . . . . . . . 7
1.26 Confirmation Date. . . . . . . . . . . . . . . 7
1.27 Confirmation Order . . . . . . . . . . . . . . 7
1.28 Congen . . . . . . . . . . . . . . . . . . . . 7
1.29 Congen Claim . . . . . . . . . . . . . . . . . 7
1.30 Creditor . . . . . . . . . . . . . . . . . . . 7
1.31 Creditors' Committee . . . . . . . . . . . . . 7
1.32 Debtor . . . . . . . . . . . . . . . . . . . . 7
1.33 Debtor's Financial Projections . . . . . . . . 8
1.34 Designee . . . . . . . . . . . . . . . . . . . 8
1.35 Disallowed Claim . . . . . . . . . . . . . . . 8
1.36 Disclosure Statement . . . . . . . . . . . . . 8
(i)
PAGE
1.37 Disputed Claim . . . . . . . . . . . . . . . . 8
1.38 Disputed Interest. . . . . . . . . . . . . . . 9
1.39 District Court . . . . . . . . . . . . . . . . 10
1.40 Effective Date . . . . . . . . . . . . . . . . 10
1.41 Entity . . . . . . . . . . . . . . . . . . . . 10
1.42 Estate . . . . . . . . . . . . . . . . . . . . 10
1.43 Executory Contracts. . . . . . . . . . . . . . 10
1.44 Face Amount. . . . . . . . . . . . . . . . . . 11
1.45 Fee Application. . . . . . . . . . . . . . . . 11
1.46 File or Filed. . . . . . . . . . . . . . . . . 11
1.47 Filing Date. . . . . . . . . . . . . . . . . . 11
1.48 Final Order. . . . . . . . . . . . . . . . . . 11
1.49 Fiscal Year. . . . . . . . . . . . . . . . . . 11
1.50 General Partner. . . . . . . . . . . . . . . . 11
1.51 Insurance Policy . . . . . . . . . . . . . . . 12
1.52 Insured Claim. . . . . . . . . . . . . . . . . 12
1.53 Insurers . . . . . . . . . . . . . . . . . . . 12
1.54 Interest . . . . . . . . . . . . . . . . . . . 12
1.55 LIBOR. . . . . . . . . . . . . . . . . . . . . 12
1.56 Maxim. . . . . . . . . . . . . . . . . . . . . 13
1.57 Maxim Management Agreement . . . . . . . . . . 13
1.58 Objection Deadline . . . . . . . . . . . . . . 13
1.59 Operating Properties . . . . . . . . . . . . . 13
1.60 Other Priority Claims. . . . . . . . . . . . . 14
1.61 Partnership Units. . . . . . . . . . . . . . . 14
1.62 Plan . . . . . . . . . . . . . . . . . . . . . 14
1.63 Plan Proponent . . . . . . . . . . . . . . . . 14
1.64 Professional Persons . . . . . . . . . . . . . 14
1.65 Properties . . . . . . . . . . . . . . . . . . 14
1.66 Pro Rata . . . . . . . . . . . . . . . . . . . 14
1.67 R&B. . . . . . . . . . . . . . . . . . . . . . 15
1.68 R&B Management Agreements. . . . . . . . . . . 15
1.69 Reorganized Debtor . . . . . . . . . . . . . . 15
1.70 Schedules. . . . . . . . . . . . . . . . . . . 16
1.71 Secured Claim. . . . . . . . . . . . . . . . . 16
1.72 Sherman Oaks . . . . . . . . . . . . . . . . . 16
1.73 Tax Claim. . . . . . . . . . . . . . . . . . . 16
1.74 Term of the Plan . . . . . . . . . . . . . . . 16
1.75 Trade Claimants. . . . . . . . . . . . . . . . 16
1.76 Travelers. . . . . . . . . . . . . . . . . . . 17
1.77 Travelers Secured Claim. . . . . . . . . . . . 17
1.78 Unclaimed Property . . . . . . . . . . . . . . 17
1.79 Unsecured Claim. . . . . . . . . . . . . . . . 18
B. Interpretation, Rules of Construction and Other Terms 18
ARTICLE II - CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 19
2.01 Division of Claims . . . . . . . . . . . . . . 19
2.02 Administrative Claims and Priority Tax Claims. 19
2.03 Allowed Claims and Interests . . . . . . . . . 20
(ii)
PAGE
2.04 Classification of Claims and Interests . . . . 20
(a) Class 1. . . . . . . . . . . . . . . . . . 20
(b) Class 2. . . . . . . . . . . . . . . . . . 20
(c) Class 3. . . . . . . . . . . . . . . . . . 20
(d) Class 4. . . . . . . . . . . . . . . . . . 20
(e) Class 5. . . . . . . . . . . . . . . . . . 20
(f) Class 6. . . . . . . . . . . . . . . . . . 20
(g) Class 7. . . . . . . . . . . . . . . . . . 21
(h) Class 8. . . . . . . . . . . . . . . . . . 21
(i) Class 9. . . . . . . . . . . . . . . . . . 21
ARTICLE III - IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS
AND EQUITY INTERESTS . . . . . . . . . . . 21
3.01 Unimpaired Classes of Claims and Interests . . 21
3.02 Impaired Classes of Claims and Equity
Interests. . . . . . . . . . . . . . . . . 21
ARTICLE IV - TREATMENT OF CERTAIN UNCLASSIFIED ADMINISTRATIVE,
STATUTORY FEES AND TAX CLAIMS. . . . . . . 22
4.01 Administrative Claims. . . . . . . . . . . . . 22
(a) Allowed Administrative Claims Against
the Debtor . . . . . . . . . . . . . . 22
(b) Bar Date for Filing Applications for
Allowance and Payment of Administrative
Expense Claims . . . . . . . . . . . . 22
4.02 Payment of Statutory Fees. . . . . . . . . . . 23
4.03 Tax Claims . . . . . . . . . . . . . . . . . . 23
4.04 Disallowance of Certain Interest and Penalties
on Tax Claims. . . . . . . . . . . . . . . 24
4.05 Disallowance of Special Taxes. . . . . . . . . 24
ARTICLE V - TREATMENT OF UNIMPAIRED CLASSES . . . . . . . 25
5.01 Class 4 Claims . . . . . . . . . . . . . . . . 25
5.02 Class 7 Claims . . . . . . . . . . . . . . . . 25
ARTICLE VI - TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN 25
6.01 Class 1 Claims . . . . . . . . . . . . . . . . 25
6.02 Class 2 Claims . . . . . . . . . . . . . . . . 28
6.03 Class 3 Claims . . . . . . . . . . . . . . . . 28
6.04 Class 5 Claims . . . . . . . . . . . . . . . . 29
6.05 Class 6 Claims . . . . . . . . . . . . . . . . 29
6.06 Class 8 Claims . . . . . . . . . . . . . . . . 29
6.07 Class 9 Interests. . . . . . . . . . . . . . . 29
ARTICLE VII - MEANS FOR EXECUTION OF PLAN AND CONDITIONS
TO PLAN BECOMING EFFECTIVE . . . . . . . . 30
7.01 Partnership Structure. . . . . . . . . . . . . 30
(iii)
PAGE
7.02 Conditions to Plan Becoming Effective and
Events to Occur on the Effective Date . . 30
7.03 Repair of Sherman Oaks . . . . . . . . . . . . 30
7.04 Vesting of Assets in Reorganized Debtor. . . . 31
7.05 The Reorganized Debtor's Obligations Under
the Plan . . . . . . . . . . . . . . . . . 32
7.06 Unclaimed Property . . . . . . . . . . . . . . 32
7.07 Implementation of Plan Under State Partnership
Law. . . . . . . . . . . . . . . . . . . . 33
ARTICLE VIII - PROVISIONS GOVERNING DISTRIBUTIONS . . . . 34
8.01 Distributions by Reorganized Debtor. . . . . . 34
8.02 Date of Distributions for Claims Allowed as of
the Effective Date . . . . . . . . . . . . 34
8.03 Delivery of Distributions. . . . . . . . . . . 35
(a) General. . . . . . . . . . . . . . . . . . 35
(b) Means of Cash Payments. . . . . . . . . . 36
(c) De Minimis Cash Distributions. . . . . . . 36
8.04 Setoff . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX - EXECUTORY CONTRACTS. . . . . . . . . . . . . 37
9.01 Assumption, Rejection and Assignment of
Executory Contracts. . . . . . . . . . . . 37
(a) Executory Contracts. . . . . . . . . . . . 37
(b) Assumption of Residential Tenant Real
Estate Leases. . . . . . . . . . . . . 37
(c) Management Agreements. . . . . . . . . . . 37
(d) Payment of Cure Amounts. . . . . . . . . . 38
(e) Remaining Executory Contracts and Leases . 38
(f) Rejected Executory Contracts and
Proofs of Claim. . . . . . . . . . . . 39
ARTICLE X - COMPOSITION OF GENERAL PARTNER AND
POSTCONFIRMATION MANAGEMENT. . . . . . . . 40
10.01 General Partner. . . . . . . . . . . . . . . . 40
10.02 Management . . . . . . . . . . . . . . . . . . 41
(a) Maxim Management Agreement . . . . . . . . 41
(b) R&B Management Agreement . . . . . . . . . 41
ARTICLE XI - PROVISIONS FOR THE RETENTION, ENFORCEMENT,
SETTLEMENT OR ADJUSTMENT OF CLAIMS
BELONGING TO THE DEBTOR OR TO THE ESTATE . 42
11.01 Preservation and Handling of Claims. . . . . . 42
11.02 Prosecution of Objections to Claims. . . . . . 42
11.03 Authority to Prosecute Objections. . . . . . . 43
(iv)
PAGE
11.04 Treatment of Disputed Claims . . . . . . . . . 43
(a) Payments on Account of Disputed Claims . . 43
(b) Disputed Claims Reserves Distributions on
Account of Disputed Claims, Once Allowed . 43
ARTICLE XII - MISCELLANEOUS . . . . . . . . . . . . . . . 44
12.01 Discharge. . . . . . . . . . . . . . . . . . . 44
12.02 Revesting. . . . . . . . . . . . . . . . . . . 45
12.03 Termination. . . . . . . . . . . . . . . . . . 46
12.04 Injunction . . . . . . . . . . . . . . . . . . 46
12.05 Term of Injunctions or Stays . . . . . . . . . 47
12.06 Jurisdiction Retained. . . . . . . . . . . . . 48
12.07 Exculpation. . . . . . . . . . . . . . . . . . 50
12.08 Nonwaiver. . . . . . . . . . . . . . . . . . . 50
12.09 Successors and Assigns . . . . . . . . . . . . 51
12.10 Modification of the Plan . . . . . . . . . . . 51
12.11 Payment Dates. . . . . . . . . . . . . . . . . 52
12.12 Notices. . . . . . . . . . . . . . . . . . . . 52
12.13 Governing Law. . . . . . . . . . . . . . . . . 52
12.14 Severability . . . . . . . . . . . . . . . . . 53
ARTICLE XIII - CONFIRMABILITY OF THE PLAN AND CRAMDOWN. . 53
13.01 Cramdown . . . . . . . . . . . . . . . . . . . 53
EXHIBITS
EXHIBIT "A" - Debtor's Financial Projections
EXHIBIT "B" - Rejected Executory Contracts
EXHIBIT "C" - Limited Partnership Agreement
(v)
6233C/10566.9
California Seven Associates Limited Partnership, a
California Limited Partnership, the Debtor and Debtor in
Possession in the above-captioned Chapter\11 case, proposes the
following Plan of Reorganization (the "Plan") pursuant to
11\U.S.C. \1121(a).
Reference is made to the Disclosure Statement filed by
the Proponent on or about March 17, 1995, which discusses
CAL\7, and its history, business, management, Properties,
financial information and results of operations. The
Disclosure Statement also contains a summary and analysis of
this Plan. Creditors are urged to consult the Disclosure
Statement before voting to accept or reject this Plan.
NO SOLICITATION MATERIALS OTHER THAN THE DISCLOSURE
STATEMENT AND RELATED MATERIALS TRANSMITTED HEREWITH AND
APPROVED BY THE BANKRUPTCY COURT HAVE BEEN AUTHORIZED BY THE
BANKRUPTCY COURT FOR USE IN SOLICITING ACCEPTANCES OR
REJECTIONS OF THIS PLAN.
ARTICLE I
DEFINITIONS AND INTERPRETATION
A. TERMS DEFINED IN THIS PLAN
In addition to such other terms as are defined in other
sections of the Plan, the following capitalized terms shall
have the following meanings:
1.01. "Acceptance" shall have the same meaning
contained in Section 1126 of the Bankruptcy Code (11 U.S.C.
\1126) and requires that holders of a Class of Claims against
1
6159C/10566.9
the Debtor accept this Plan by at least two thirds in dollar
amount and more than one half in number of such Class of Claims.
1.02. "Administrative Claim" shall mean a Claim for
any cost or expense of administration in connection with this
Case of a kind specified in Section 364(c)(1) of the Bankruptcy
Code (11 U.S.C. \364(c)(1)) or in Section 503(b) of the
Bankruptcy Code (11 U.S.C. \503(b)) and referred to in Section
507(a)(1) of the Bankruptcy Code (11 U.S.C. \507(a)(1)),
including without limitation, the actual, necessary costs and
expenses of preserving the Estate and of operating the business
of the Debtor, including wages, salaries, commissions or any
other compensation for services rendered after the commencement
of the bankruptcy Case, compensation for legal or other
services and reimbursement of costs and expenses under Sections
330(a) or 331 of the Bankruptcy Code (11 U.S.C. \330(a) or
331) or otherwise allowed by the Court, and all fees and
charges assessed against the Estate under Chapter 123,
Title\28, United States Code (28 U.S.C. \1911 et seq.).
1.03. "Administrative Convenience Claim" shall mean
the Unsecured Claim in the amount of $1000 or less, or an
Unsecured Claim voluntarily reduced to $1000 by the election of
the holder of the Unsecured Claim.
1.04. "Administrative Convenience Class" shall mean
all Unsecured Creditors of the Debtor with Claims of $1000 or
less or Claims voluntarily reduced to $1000.
1.05. "Affiliate" shall have the same meaning as
2
6159C/10566.9
such term is defined in Section 101(2) of the Bankruptcy Code
(11 U.S.C. \101(2)).
1.06. "Allowed Administrative Claim" shall mean all
or that portion of any Administrative Claim which has been
allowed by a Final Order of the Bankruptcy Court or is
otherwise allowed under relevant provisions of the Bankruptcy
Code or is expressly designated an Allowed Administrative
Expense Claim under this Plan.
1.07. "Allowed Amount" shall mean the dollar amount
of an Allowed Claim or Allowed Interest.
1.08. "Allowed Claim" shall mean a Claim, whether or
not complete evidence of such Claim is set forth in an
applicable Proof of Claim or in this Plan, other than an
Administrative Claim, that:
(a) either
(1) is scheduled by the Debtor pursuant to the
Bankruptcy Code, other than a Claim scheduled as
disputed, contingent or unliquidated, or
(2) proof of which has been timely filed with
the Court pursuant to the Bankruptcy Code or any
order of the Court, or later filed with leave of
the Court after notice and a hearing; and
(b) either
(1) no objection to the allowance of which or
a motion to expunge has been interposed before any
3
6159C/10566.9
final date for the filing of such objections or
motions set forth in the Confirmation Order, or
(2) any objection to the allowance of which or
a motion to expunge has been overruled by a Final
Order, or
(3) which has otherwise been allowed by a
Final Order or designated as an Allowed Claim
under this Plan.
1.09. "Allowed Interest" shall mean an Interest in
the partnership of the Debtor, held either by the General
Partner or by Limited Partners, and either that is not a
Disputed Interest or that has been allowed by a Final Order.
1.10. "Bankruptcy Code" or "Code" shall mean the
Bankruptcy Reform Act of 1978, as subsequently amended,
principally codified at 11 U.S.C. \101, et seq.
1.11. "Bankruptcy Court" or "Court" shall mean the
United States Bankruptcy Court for the Central District of
California (Santa Ana Division), or, if such court ceases to
have jurisdiction over the Case, such court or adjunct thereof
that exercises jurisdiction over the Case in lieu of the
Bankruptcy Court for the Central District of California, having
jurisdiction over the Case.
1.12. "Bankruptcy Rules" shall mean the Federal Rules
of Bankruptcy Procedure promulgated by the United States
Supreme Court pursuant to Section 2075 of Title 28, United
States Code, and, where appropriate, the Local Bankruptcy Rules
4
6159C/10566.9
for the United States Bankruptcy Court for the Central District
of California to the extent applicable in this Case.
1.13. "Bar Date" shall mean January 30, 1995, the
date set by the Court for filing a proof of Claim or Interest
in this Case.
1.14. "Business Day" shall mean any day except
Saturday, Sunday or any other day on which the law authorizes
commercial banks in the City of Santa Ana, California, to be
closed.
1.15. "CAL 7" shall mean California Seven Associates
Limited Partnership, a California Limited Partnership, the
Debtor and Debtor in possession in the above-captioned case.
1.16. "Case" shall mean the Chapter 11 case commenced
in the Court by the Debtor on the Petition Date.
1.17. "Cash" shall mean cash and cash equivalents
which evidence immediately available funds.
1.18. "Chapter 5 Causes of Action" shall mean all
claims of the Debtor and Reorganized Debtor against any and all
third parties, including without limitation, claims for the
recovery of (a)\transfers of cash, offsets, debt forgiveness
and other types or kinds of property, or the value thereof,
recoverable exclusively pursuant to Sections 544, 545, 547,
548, 549, 550 and 553 of the Code; (b)\damages, general or
exemplary or both relating to or based upon (1)\fraud,
negligence, gross negligence, willful misconduct, or any tort
5
6159C/10566.9
actions, (2)\violations of Federal or State securities laws,
(3)\violations of applicable corporate laws, (4)\breaches of
fiduciary or agency duties, (5)\breaches of causes of action
based upon alter ego or other liability theories; (c)\damages
based upon any other claim of the Debtor, to the extent not
specifically compromised or released pursuant to the Plan or an
agreement referred to, or incorporated into, the Plan or Final
Order entered after notice and opportunity for hearing; (d)\any
claims of the Debtor for equitable subordination under Section
510(c) of the Code or under other applicable laws; and (e)\all
unresolved objections to any Disputed Claims.
1.19. "Chapter 5 Recoveries" shall mean the rights of
the Debtor or any assignee to any proceeds from (a)\any award,
judgment or other determination rendered or made in favor of
the Debtor or assignee as to any Chapter 5 Cause of Action or
(b)\any compromise or settlement entered into by or on behalf
of the Debtor or on behalf of the Estate.
1.20. "Chapter 11" shall mean Chapter 11 of the
Bankruptcy Code.
1.21. "Claim" shall mean a claim against the Debtor,
whether or not asserted, as defined in Section 101(5) of the
Bankruptcy Code (11 U.S.C. \101(5)) by whatever right the
Claimant may have against the Debtor.
1.22. "Claimant" shall mean the holder of a Claim.
1.23. "Class" shall mean a category of holders of
Claims or Interests as provided in Article II of this Plan.
6
6159C/10566.9
1.24. "Collateral" shall mean any property of the
Debtor subject to a valid and enforceable lien to secure the
payment of a Claim.
1.25. "Confirmation" shall mean the entry of an order
by the Court confirming this Plan.
1.26. "Confirmation Date" shall mean the date of the
entry of the Confirmation Order by the Bankruptcy Court Clerk's
Office.
1.27. "Confirmation Order" shall mean the order
signed by the Court confirming this Plan.
1.28. "Congen" shall mean Congen Properties, Inc., a
Delaware corporation, a creditor holding the second lien on the
Properties.
1.29. "Congen Claim" shall mean the Claim held by
Congen evidenced by that certain promissory note dated October
25, 1990 in the original principal amount of $14,000,000 with
related deeds of trust and other security documents executed by
CAL 7 and delivered to Congen, as supplemented and amended and
all related documents which shall be treated as an Allowed
Claim as to principal and accrued interest.
1.30. "Creditor" shall mean the holder of an Allowed
Claim against the Debtor.
1.31. "Creditors' Committee" shall mean the Official
Committee of Unsecured Creditors appointed in this Case
pursuant to Section 1102 of the Code.
1.32. "Debtor" shall mean CAL 7, Debtor and Debtor
7
6159C/10566.9
in Possession in the above-captioned Case.
1.33. "Debtor's Financial Projections" shall mean the
financial projections attached to this Plan as Exhibit "A".
1.34. "Designee" of any person shall mean any Entity<PAGE>
appointed in any writing executed and delivered by such person
for the purpose or purposes specified in such writing. Such
person shall be permitted to appoint different Designees for
different purposes.
1.35. "Disallowed Claim" shall mean any Claim or
portion thereof which has been disallowed by a Final Order.
1.36. "Disclosure Statement" shall mean the
Disclosure Statement pursuant to Section 1125 of the Bankruptcy
Code with respect to the Plan of Reorganization Under Chapter
11 of the Bankruptcy Code Proposed by the Debtor Dated March
17, 1995, together with any amendments or modifications thereto.
1.37. "Disputed Claim" shall mean: (a)\a Claim as to
which, if no proof of Claim has been Filed by the Claims Bar
Date or has otherwise been deemed timely Filed under applicable
law and such Claim has been scheduled by the Debtor in its
Schedule of Liabilities as other than disputed, contingent or
unliquidated: (1)\the Debtor has objected to the Claim and
(2)\(I) any agreement to settle the dispute has not been
executed or (II)\if such agreement was executed prior to the
Confirmation Date, such agreement has not been approved by the
Court; or (b)\a Claim as to which, if a proof of Claim has been
Filed by the Claims Bar Date or has otherwise been deemed
8
6159C/10566.9
<PAGE>
timely Filed under applicable law, an objection has been Filed
by the Debtor or any other party in interest and which
objection, if timely Filed, has not been withdrawn on or before
any date fixed by the Plan or order of the Court for Filing
such objections and such objection has not been denied by a
Final Order. Prior to the time that an objection has been or
may be timely Filed, for the purpose of the Plan, a Claim
asserted in a proof of Claim shall be considered a Disputed
Claim if: (a)\the amount of the Claim specified in the proof
of Claim exceeds the amount of any corresponding Claim
scheduled by the Debtor in its Schedule of Liabilities; (b)\any
corresponding Claim in the Debtor's Schedule of Liabilities has
been scheduled as disputed, contingent or unliquidated,
irrespective of the amount scheduled; or (c)\no corresponding
Claim has been scheduled by the Debtor in its Schedule of
Liabilities. As to any Disputed Claim, only the portion
thereof which either (a) exceeds the amount of any
corresponding Claim scheduled by the Debtor in its Schedule of
Liabilities or (b) is asserted by Debtor in objections filed in
connection therewith as disputed, contingent or unliquidated
shall be deemed the "disputed portion" of such Disputed Claims.
1.38. "Disputed Interest" shall mean any Interest in
the Debtor and as to which an objection has been Filed by the
Debtor or any other party in interest and which objection, if
timely Filed, has not been withdrawn on or before any date<PAGE>
fixed by the Plan or by order of the Court for Filing such
9
6159C/10566.9
objections and such objection has not been denied by a Final
Order.
1.39. "District Court" shall mean the United States
District Court for the Central District of California.
1.40. "Effective Date" shall mean, and shall occur on
the later of (a) the 11th day after the entry of the
Confirmation Order; (b) July 1, 1995; or (c) such later date as
may be mutually agreed by the Debtor and the Creditors'
Committee, with notice and an opportunity to object, to all
parties requesting special notice, unless the effectiveness of
the Confirmation Order has been stayed or vacated, in which
case the Effective Date shall be the later of the 11th day
after the entry of the Confirmation Order or such date
thereafter when any stay of the effectiveness of the
Confirmation Order has expired or otherwise terminated.
1.41. "Entity" shall mean any individual,
corporation, partnership, joint venture, association, joint
stock company, unincorporated organization, estate, trust,
governmental unit or other entity including the Debtor and the<PAGE>
U.S. Trustee, whether singular or plural, but does not include
the Federal Deposit Insurance Corporation and/or the Resolution
Trust Corporation, their successors or assigns.
1.42. "Estate" shall mean the estate created in this
Bankruptcy Case pursuant to Section 541 of the Bankruptcy Code
(11 U.S.C. \541).
1.43. "Executory Contracts" shall mean all leases
10
6159C/10566.9
and executory contracts within the meaning of Section 365 of
the Bankruptcy Code (11 U.S.C. \365) including but not limited
to and all leases or executory contracts that are modified by
this Plan.
1.44. "Face Amount" shall mean with respect to any
Claim the full stated liquidated amount claimed by the holder
of such Claim in any proof of Claim timely filed by such holder
plus the amount determined by (i) agreement of such holder and
Reorganized Debtor, or (ii) by the Court as to the unliquidated
portion, if any, of such Claim.
1.45. "Fee Application" shall mean the application of
a professional person under Sections 330 or 503 of the
Bankruptcy Code (11 U.S.C. \330 or 503) for allowance of<PAGE>
compensation and reimbursement of expenses in the Chapter 11
Case.
1.46. "File" or "Filed" shall mean file or filed with
the Court in this Case.
1.47. "Filing Date" shall mean September 16, 1994,
the day this Case was filed with the Court.
1.48. "Final Order" shall mean an order as to which
any appeal that has been or may be taken has been resolved or
as to which the time for appeal has expired.
1.49. "Fiscal Year" shall mean the annual accounting
period used by the Debtor which is a calendar year.
1.50. "General Partner" shall mean CIGNA Realty
11
6159C/10566.9
Resources, Inc. - Seventh, the sole General Partner of the
Debtor.
1.51. "Insurance Policy" shall mean the collective
insurance policies that provided coverage to the Debtor's
Properties by the Insurers pursuant to the insurance contracts
identified as follows:
(1) Aetna Policy No. 007-MO-15631-SCA (the "Aetna<PAGE>
Policy");
(2) Home Policy No. MLP 9109969 (the "Home Policy");
(3) Phoenix Policy No. E-CIP-P22456 (the "Phoenix
Policy"); and
(4) Lexington Policy No. 8690158 (the "Lexington
Policy").
1.52. "Insured Claim" shall mean the Claim arising
from the damage to Sherman Oaks from the Northridge earthquake
and any other claims covered by the Debtor's Insurance Policy.
1.53. "Insurers" shall collectively mean the Aetna
Life Insurance Company ("Aetna"), Home Insurance Company
("Home"), Phoenix Assurance Company of New York ("Phoenix") and
Lexington Insurance Company ("Lexington").
1.54. "Interest" shall mean the rights of a partner
(general or limited) arising from his, her or its status as an
Equity Interest holder.
1.55. "LIBOR" shall mean the London Inter-Bank
Offering Rate which is published daily in the Wall Street
Journal.
12
6159C/10566.9
1.56. "Maxim" shall mean Maxim Property Management,<PAGE>
formerly known as Prometheus Management Group, an independent
contractor managing the Amberway Apartments for CAL 7 pursuant
to the Maxim Management Agreement.
1.57. "Maxim Management Agreement" shall mean the
Management Agreement dated May 1, 1992, by and between
California Seven Associates Limited Partnership ("Owner"), and
Promethius Management Group, as supplemented and amended from
time to time.
1.58. "Objection Deadline" shall mean the date by
which Objections to Claims shall be filed with the Bankruptcy
Court and served upon the respective holders of each of the
Claims as provided in Section 11.01 of the Plan.
1.59. "Operating Properties" shall mean the following
five (5) apartment complexes and related site improvements
owned and operated by CAL 7 that are currently leased and have
tenants as of the Confirmation Date:
(1) Amberway Apartments
489 S. Chatham Circle
Anaheim, California
(2) Pacifica Club
6700 Warner Avenue
Huntington Beach, California
(3) Oakwood Apartments (West Los Angeles)
3636 Sepulveda Blvd.
Los Angeles, California
(4) Mission Bay East
3883 Ingraham Street
San Diego, California
13<PAGE>
6159C/10566.9
(5) Arbor Park Apartments
859 N. Mountain Avenue
Upland, California
1.60. "Other Priority Claims" shall mean a Claim
which is entitled to priority under Section 507 of the
Bankruptcy Code (11 U.S.C. \507) other than a Claim entitled
to priority under Sections 507(a)(1), 364(c)(1) or 507(a)(7) of
the Bankruptcy Code (11 U.S.C. \507(a)(1) or 507(a)(7)).
1.61. "Partnership Units" shall mean the limited
partnership voting securities issued by CAL 7 and currently
held by the limited partners and by the General Partner.
1.62. "Plan" shall mean this Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code Proposed by the Debtor
Dated March 17, 1995, including any amendment or modification
thereto, which Plan shall also constitute a Plan of
Reorganization within the meaning of Section 368(a)(1) of the
Internal Revenue Code (26 U.S.C. \368(a)(1)).
1.63. "Plan Proponent" shall mean the Debtor and such
other entities which, by appropriate pleadings filed in the
Case prior to the Confirmation Date, join as Plan Proponents.
1.64. "Professional Persons" shall mean an Entity
retained or to be compensated pursuant to Sections 327, 328,
330, 503(b) or 1103 of the Bankruptcy Code.<PAGE>
1.65. "Properties" shall mean the Operating
Properties plus Sherman Oaks property.
1.66. "Pro Rata" shall mean, proportionately, based
14
6159C/10566.9
on the percentage amount of the distribution made on account of
a particular Allowed Claim or Allowed Interest and the
distributions made on account of all Allowed Claims or Allowed
Interests of the Class in which the particular Allowed Claim or
Allowed Interest is included.
1.67. "R&B" shall mean R&B Apartment Management
Company, Inc., an independent contractor managing the Arbor
Park Apartments, Pacifica Club Apartments and Oakwood
Management Company, a division of R&B Realty Group, independent
contractor managing Oakwood Apartments (West Los Angeles),
Sherman Oaks Apartments, and Mission Bay East Apartments
pursuant to the R&B Management Agreements.
1.68. "R&B Management Agreements" shall mean the
following Management Agreements which have been supplemented or
amended from time to time:
1. Management Agreement, Arbor Park Apartments,<PAGE>
Upland, California, dated May 1, 1991;
2. Management Agreement, Pacifica Club Apartments,
dated May 1, 1992;
3. Second Amendment to Management and Leasing
Agreement dated August 1992;
4. First Amendment to Management and Leasing
Agreement dated January 1, 1991; and
5. Management and Leasing Agreement dated January
30, 1985.
1.69. "Reorganized Debtor" shall mean the Debtor's
15
6159C/10566.9
partnership entity resulting from the Plan on and after the
Effective Date.
1.70. "Schedules" shall mean the Schedules of Assets
and Liabilities and the Statement of Financial Affairs filed by
the Debtor in this Case, together with any amendments thereto.
1.71. "Secured Claim" shall mean a Claim secured by a
lien on property of the Debtor, which lien is valid, perfected
and enforceable under applicable law and which is not subject
to avoidance under the Bankruptcy Code or other applicable
non-bankruptcy law and which is duly established in the Case,<PAGE>
but only to the extent of the value of the Collateral that
secures payment of the Claim.
1.72. "Sherman Oaks" shall mean the Oakwood Apartment
complex located at 4500 Woodman Avenue, Sherman Oaks,
California, that was damaged in the Northridge earthquake on
January 17, 1994.
1.73. "Tax Claim" shall mean Claims of the kind
specified in Section 507(a)(7) of the Bankruptcy Code
(11\U.S.C. \507(a)(7)).
1.74. "Term of the Plan" shall mean the period of
time commencing on the Effective Date and ending on the date of
the final payment due under the plan.
1.75. "Trade Claimants" shall mean the holders of
Claims for goods and services rendered to or for any of the
Properties, including but not limited to the Claims of all
16
6159C/10566.9
vendors, suppliers, contractors, R&B and Maxim.
1.76. "Travelers" shall mean The Travelers Life
Insurance Company, a secured Creditor of the Debtor.
1.77. "Travelers Secured Claim" shall mean the<PAGE>
Secured Claim held by Travelers evidenced by the original note
secured by deeds of trust dated December 20, 1984 in the
principal amount of $100,000,000, which debt was originally
incurred on or about December 20, 1984 and was assumed by the
Debtor on or about January 31, 1985 with related security
documents, as supplemented and amended, together with all
related documents which are referenced in the Proof of Claim
filed by Travelers on or about January 23, 1995.
1.78. "Unclaimed Property" shall mean any Cash or
Reorganization Securities which are unclaimed one year
following the Effective Date. Unclaimed Property shall include:
(a) checks (and the funds represented thereby),
which have been returned as undeliverable after having
been properly posted to the forwarding address most
recently provided to the Debtor or Reorganized Debtor;
(b) funds for checks which have not been paid;
(c) checks (and the funds represented thereby),
which are not mailed or delivered because of the
absence of a proper address in which to mail or deliver
such property; and
(d) interest on Cash constituting Unclaimed
Property.
17
6159C/10566.9
<PAGE>
1.79. "Unsecured Claim" shall mean any Claim that is
not an Administrative Claim, an Administrative Convenience
Claim, an Other Priority Claim, a Tax Claim or a Secured Claim.
B. INTERPRETATION, RULES OF CONSTRUCTION AND OTHER TERMS.
Any term used in this Plan that is not defined herein,
whether in this Article I or elsewhere, but that is used in the
Code or the Bankruptcy Rules has the meaning assigned to that
term in the Code or the Bankruptcy Rules and shall be construed
in accordance with the Rules of Construction thereunder.
Any capitalized term used in this Plan that is not
defined herein, but that is defined and used in the Disclosure
Statement has the meaning ascribed to that term in the
Disclosure Statement.
The words "herein," "hereof," "hereto," "hereunder" and
others of similar importance refer to the Plan as a whole and
not to any particular section, subsection or clause contained
in the Plan.
Unless specified otherwise in a particular reference, a
reference in this Plan to an article or a section is a
reference to that article or section of this Plan.
Any reference in this Plan to a document or instrument
being in a particular form means that the document or
instrument shall be in substantially such form.
Any reference in this Plan to an existing document or
instrument means such document or instrument as it may have<PAGE>
been amended, modified or supplemented from time to time.
18
6159C/10566.9
As contextually appropriate, each term stated in either
the singular or plural shall include both the singular and the
plural.
In addition to the foregoing, the rules of construction
set forth in Section 102 of the Code (11 U.S.C. \102) shall
apply to this Plan.
In computing any period of time prescribed or allowed by
this Plan, the provisions of Bankruptcy Rule 9006(a) shall
apply.
All exhibits to this Plan are incorporated into this
Plan, and shall be deemed to be included in this Plan,
regardless of when filed with the Court.
ARTICLE II
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
2.01. Division of Claims. For purposes of
organization, voting and all confirmation matters, except as
otherwise provided herein, all Claims (except for
Administrative Claims and priority Tax Claims) and all Equity
Interests shall be classified as set forth in this Article II<PAGE>
of the Plan.
2.02. Administrative Claims and Priority Tax Claims.
As provided in Section 1123(a)(1) of the Bankruptcy Code (11
U.S.C. \1123(a)(1)), Administrative Claims and priority Tax
Claims against the Debtor shall not be classified for purposes
of voting or receiving distributions under the Plan. Rather,
all such Claims shall be treated separately as
19
6159C/10566.9
unclassified Claims pursuant to the terms set forth in Article
IV of the Plan.
2.03. Allowed Claims and Interests. A Claim or
Interest is in a particular Class only to the extent the Claim
or Interest is an Allowed Claim or Allowed Interest as defined
herein.
2.04. Classification of Claims and Interests. Claims
against the Estate and Interests in the Debtor are classified
as follows:
(a) Class 1 - Class 1 consists of the Travelers
Secured Claim;
(b) Class 2 - Class 2 consists of the Congen Claim;
(c) Class 3 - Class 3 consists of the claims of any<PAGE>
other secured or undersecured claimants;
(d) Class 4 - Class 4 consists of the Other
Priority Claims;
(e) Class 5 - Class 5 consists of Administrative
Convenience Claims against the Debtor;
(f) Class 6 - Class 6 consists of all Unsecured
Claims of Trade Claimants (except Administrative
Convenience Claims in Class 5, undersecured or Secured
Claimants in Class 3, Tenants' Claims in Class 7 and
claims of the General Partner and other claimants in
Class 8);
20
6159C/10566.9
(g) Class 7 - Class 7 consists of the Allowed
Unsecured Claims of the tenants of the Debtor residing
in the Operating Properties;
(h) Class 8 - Class 8 consists of the Allowed
Unsecured Claims of the General Partner and of CIGNA
Financial Partners, Inc. and CIGNA Investments, Inc.;
and<PAGE>
(i) Class 9 - Class 9 consists of the Allowed
Interests of the General Partner and the limited
partners of the Debtor.
ARTICLE III
IDENTIFICATION OF
IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS
3.01. Unimpaired Classes of Claims and Interests.
The class consisting of Other Priority Claims (Class 4) is not
impaired under the Plan. This class is deemed to have accepted
the Plan under the provisions of Section 1126(f) of the
Bankruptcy Code (11 U.S.C. \1126(f)). The Class consisting of
the Allowed Unsecured Claims of the tenants of the Debtor
(Class 7) is not impaired because their leases will be assumed
and their security deposits paid according to the terms of
their leases. This Class is deemed to have accepted the Plan
under the provisions of Section 1126(f) of the Bankruptcy Code
(11\U.S.C. \1126(f)). The Plan Proponent shall not solicit
acceptances of the Plan from Classes 4 and 7.
3.02. Impaired Classes of Claims and Equity
Interests. Classes 1, 2, 3, 5, 6, 8 and 9 are impaired under
21
6159C/10566.9
the Plan. The Plan Proponent shall seek acceptances of the<PAGE>
Plan from these Classes.
ARTICLE IV
TREATMENT OF CERTAIN UNCLASSIFIED
ADMINISTRATIVE, STATUTORY FEES AND TAX CLAIMS
4.01. Administrative Claims.
(a) Allowed Administrative Claims Against the Debtor.
Subject to the Bar Date provisions of Paragraph (b) of
this Article IV, the holders of Allowed Administrative
Claims against the Debtor, unless otherwise agreed,
are entitled to priority under Section 507(a)(1) of
the Bankruptcy Code. An Entity entitled to payment
pursuant to Sections 546(c) or 553 of the Bankruptcy
Code, and an Entity entitled to payment of
administrative expenses pursuant to Sections 503 and
507(a) of the Bankruptcy Code, shall receive on
account of such Allowed Administrative Claims or
administrative expenses unless otherwise agreed, Cash
in the amount of such Allowed Administrative Claims or
administrative expenses on the Effective Date.
Notwithstanding the foregoing, outstanding operating
payables incurred in the ordinary course of business
of the Debtor shall be paid according to their terms.
Professional fee expenses for services rendered after
the Effective Date shall be paid by Reorganized Debtor
in the ordinary course of business.
(b) Bar Date for Filing Applications for Allowance
and Payment of Administrative Expense Claims.
22<PAGE>
6159C/10566.9
Applications for allowance and payment of Administrative
Claims must be filed on or within 90 days after the
Effective Date. The Court shall not consider any
applications for allowance of Administrative Claims
filed after such date. Reorganized Debtor and all other
interested parties shall have until 30 days after the
filing of such Administrative Claims to object to such
Administrative Claims. All Administrative Claims that
become Allowed Administrative Claims after the
Confirmation Date will be treated like other Allowed
Administrative Claims and will be paid on the later of
the Effective Date or within 30 days after becoming an
Allowed Administrative Claim unless otherwise ordered by
the Court. Any of such Claims which are Allowed but
which are not determined to be Administrative Claims
will be treated as Class 6 Claims.
4.02. Payment of Statutory Fees. On or before the
Effective Date, all fees payable pursuant to Section 1930 of
Title 28, United States Code, 28 U.S.C. \1930, as determined
by the Court at the Confirmation Hearing, shall be paid in Cash
equal to the amount of such Administrative Claim.
4.03. Tax Claims. All Tax Claims shall be paid by the<PAGE>
Debtor in full, in Cash, on the Effective Date or pursuant to
their terms; provided, however, that Reorganized Debtor may
elect to pay a Tax Claim in deferred Cash payments of a value
as of the Effective Date equal to the Allowed Amount of such
23
6159C/10566.9
Tax Claim payable over a period (a) not exceeding six years
from the date of assessment if an assessment has been made
prior to the Effective Date, and (b) not exceeding six (6)
years from the Effective Date if no assessment has been made
prior to such date (with interest at the rate of 5.25% from the
Effective Date of the Plan) or as the holder of such Tax Claim
and Reorganized Debtor may otherwise agree.
4.04. Disallowance of Certain Interest and Penalties on
Tax Claims. Holders of Tax Claims shall not receive any
payment on account of postpetition interest on, or penalties
with respect to, or arising in connection with, such Tax
Claims, except as allowed by a Final Order. The Plan, the
Confirmation Order and Section 1141(d) of the Bankruptcy Code
provide for the discharge of any such Claims for postpetition
interest or penalties. Holders of Tax Claims shall not assess
or attempt to collect such interest or penalties from the<PAGE>
Debtor, the Estate, Reorganized Debtor or from any of its
respective properties.
4.05. Disallowance of Special Taxes. The issuance,
transfer, or exchange of a security as defined under the
Bankruptcy Code or applicable law, or the making or delivery of
any instrument of transfer under this Plan, shall not be taxed
under any state or local law imposing a stamp tax or similar
tax as provided in Bankruptcy Code Section 1146.
24
6159C/10566.9
ARTICLE V
TREATMENT OF UNIMPAIRED CLASSES
5.01. Class 4 Claims. Class 4 Claims (the Other
Priority Claims) if any, shall be paid in Cash in full on the
Effective Date or as otherwise agreed between the Debtor and
such claimant.
5.02. Class 7 Claims. Class 7 Claims, all Unsecured
Claims of the Tenants of the Operating Properties, shall have
their leases assumed on the Effective Date and shall be
entitled to receive their security deposits pursuant to the<PAGE>
terms of their leases.
ARTICLE VI
TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN
6.01. Class 1 Claims. The holder of the Class 1 Claim
(the Travelers Secured Claim in the approximate amount of
$97,880,497.00) shall receive in full and complete satisfaction
of its Allowed Secured Claim, six modified Notes (the
"Travelers Modified Notes"). The Travelers Modified Notes
shall contain the same terms as the original Travelers' Note
except as modified by the terms of this Plan. Any accrued and
unpaid postpetition interest shall be added to the principal
amounts of the Travelers Modified Notes. The addition of
accrued interest to principal shall not include default
interest, late charges or attorneys' fees.
The Reorganized Debtor shall execute and deliver to
Travelers the Travelers Modified Notes. The Travelers Modified
25
6159C/10566.9
Notes shall each be secured by a corresponding first lien
evidenced by six corresponding separate first deeds of trust on
the Properties. The amount of the Allowed Secured Claim of
Travelers shall be allocated between the Travelers Modified<PAGE>
Notes and the Properties as follows (subject to adjustments for
payments made):
Note #1 Amberway Apartments $12,550,000
Note #2 Arbor Park Apartments $8,410,000
Note #3 Mission Bay East Apartments $25,500,000
Note #4 Oakwood Apartments - West
Los Angeles $18,600,000
Note #5 Pacifica Club Apartments $16,000,000
Note #6 Sherman Oaks Apartments $16,820,497
The six notes and deeds of trust shall not be cross-defaulted
and cross-collateralized.
The Sherman Oaks note shall be executed and delivered to
Travelers only upon completion of the repair and stabilization
of occupancy of Sherman Oaks. From the Effective Date until
the completion of the repairs and stabilization of occupancy of
Sherman Oaks (approximately 18 months from the Effective Date)
the debt attributable to Sherman Oaks shall be secured by the
Sherman Oaks Apartments with a value of $14,900,000 and by the
cash balance maintained in the Reorganized Debtor's bank
account. For the 18 month period, monthly payments in arrears
of interest only at the rate of 8.125% on the principal amount
of $14,900,000 shall be paid commencing on the tenth day of the
26
6159C/10566.9
<PAGE>
second month after the Effective Date. Upon the execution and
delivery of the Sherman Oaks note, principal plus interest at
the rate of 10.3% per annum based on a 30-year amortization
shall be paid in monthly payments. The rate of interest shall
be adjusted annually on the anniversary of the Effective Date
based upon LIBOR.
The balance of the Allowed Secured Claim in the total
amount of $82,980,497.00 evidenced by the notes secured by
first deeds of trust on the Operating Properties shall earn
interest at the rate of 10.3% per annum for the first 18 months
commencing on the first day of the first month after the
Effective Date. The payments of interest only shall be due and
payable monthly in arrears by the tenth day of the month.
Thereafter, interest at the rate of 10.3% per annum based on a
30-year amortization on the principal balance of all six notes
shall be paid until December 31, 2004, when the total
outstanding balance of each of the six Travelers Modified Notes
shall be due and payable in full. The interest rate shall be
adjusted annually on the anniversary of the Effective Date
based upon LIBOR. All payments made to Travelers postpetition
shall be credited against the amounts of the six notes pro rata.
The Debtor shall maintain the Properties in good and
tenantable condition using funds for capital expenditures with
regard to the five Operating Properties and after stabilization
of occupancy, Sherman Oaks, as estimated in the Debtor's<PAGE>
Projections attached to this Plan. These amounts shall be
27
6159C/10566.9
expended in the ordinary course of business to maintain the
five Operating Properties and Sherman Oaks in a good and
tenantable condition. The Reorganized Debtor may prepay the
loans to Travelers at any time without penalty through sale of
one or more of the Properties or through refinancing of one or
more of the Properties.
The holder of the Allowed Class 1 Claim shall retain its
liens on the Properties to secure the Travelers Modified Notes
on the same terms and conditions as set forth in the original
Travelers security documents except as modified in this Plan.
6.02. Class 2 Claims. The holder of Class 2 Claim
(the Congen Claim in the approximate amount of $15,600,000)
shall receive in full and complete satisfaction of its claim
cash paid on the Effective Date in the amount of $50,000.00 and
shall receive sixty-six and two-thirds (66-2/3) Partnership
Units.
6.03. Class 3 Claims. The holder(s) of the Class 3
Claims (all other secured claimants and undersecured claimants)
shall receive in full and complete satisfaction of their<PAGE>
claims, modified notes in the Allowed Amounts of their claims.
The modified notes shall provide for interest at the rate of
10.3% per annum based on a 30-year amortization of the
principal balance of the modified notes until December 31,
2004, when the total outstanding balance of the modified notes
shall be due and payable in full. The interest rate shall be
adjusted annually on each anniversary of the Effective Date
28
6159C/10566.9
based upon LIBOR. The Claimants in Class\3 claims shall retain
their liens, if any, in accordance with their priority.
6.04. Class 5 Claims. Class 5, all Unsecured Allowed
Claims of the Debtor of $1000 or less or such Claims that are
voluntarily reduced to $1000 (the Administrative Convenience
Class in the approximate amount of $41,000.00), shall receive
Cash for their Allowed Claims equal to the amount of such Claim
not to exceed $1000 as follows: Fifty percent (50%) of such
claim shall be paid on the Effective Date and Fifty percent
(50%) shall be paid seven months after the Effective Date.
6.05. Class 6 Claims. The holders of Class 6 Claims
(the Unsecured Creditors of the Debtor with Allowed Claims in
the approximate aggregate amount of $460,500.00) shall receive<PAGE>
payment in full for their Allowed Claims in Cash to be paid in
annual payments over of term of three (3) years plus interest
at the rate of 5.25% per annum. The first payment shall be
made on the Effective Date.
6.06. Class 8 Claims. The holders of Class 8 Claims
(the Allowed Claims of the affiliates of the General Partner)
shall have their prepetition Unsecured Claims discharged on the
Effective Date.
6.07. Class 9 Interests. The holders of Allowed
Class 9 Interests shall retain their partnership interests in
the Debtor, subject to the treatment of Class 2 as hereinbefore
described.
29
6159C/10566.9
ARTICLE VII
MEANS FOR EXECUTION OF PLAN AND CONDITIONS
TO PLAN BECOMING EFFECTIVE
7.01. Partnership Structure. The Debtor, upon the
Effective Date, shall become the Reorganized Debtor, and shall
take all appropriate actions set forth in the Plan. On and
after the Effective Date, the control of the Reorganized Debtor
shall be determined according to the Limited Partnership<PAGE>
Agreement which is attached hereto as Exhibit "C" and
applicable non-bankruptcy law as modified by this Plan.
7.02. Conditions to Plan Becoming Effective and
Events to Occur on the Effective Date. The Plan shall not be
consummated and the Effective Date shall not occur until each
of the following conditions have been satisfied or such
conditions occur on the Effective Date:
(a) The Confirmation Order shall have been entered
by the Bankruptcy Court in a form satisfactory to the
Debtor;
(b) The Allowed Priority Claims (Class 4) shall
receive payment in full; and
(c) All Administrative Convenience Claims (Class
5) and Allowed Unsecured Claims in Class 6 shall
receive their first pro rata payment.
7.03. Repair of Sherman Oaks. The Reorganized
Debtor, in its sole discretion, shall rebuild, repair and/or
reconstruct (hereinafter collectively referred to as "Repair")
Sherman Oaks. The Reorganized Debtor, in its sole discretion,
30
6159C/10566.9
may enter into contracts, including but not limited to
construction contracts, for the Repair of Sherman Oaks. The<PAGE>
Insurers are directed to immediately pay any and all insurance
proceeds from the Insurance Policy directly to the Debtor as
sole payee. The Reorganized Debtor shall have the right, in
its sole discretion, to use the proceeds from the Insurance
Policy, including but not limited to the business
interruption/rent loss proceeds, to Repair Sherman Oaks. The
Debtor shall further have the right to use any and all
insurance proceeds from the Insurance Policy to pay, including,
but not limited to the deductible required under the Insurance
Policy, and any and all upgrades of the Sherman Oaks property
not otherwise covered by the Insurance Policy. Travelers shall
not interfere in any way with the Repair of Sherman Oaks.
7.04. Vesting of Assets in Reorganized Debtor.
During the period following the entry of the Confirmation
Order, the Debtor shall continue as Debtor in Possession, until
the Effective Date and then shall operate and conduct its
business as the Reorganized Debtor. Except as otherwise
provided in the Plan, on the Effective Date, all property of
the Estate, and any property acquired by the Debtor or any
property treated under any provision of the Plan, shall vest in
Reorganized Debtor, free and clear of all Claims, liens,
charges, other encumbrances and Interests except for the
Claims, liens and security interests specifically retained in
the Plan. Reorganized Debtor may operate its business and may
31
6159C/10566.9
<PAGE>
use, acquire and dispose of cash and property and compromise or
settle any Claims or Interest without supervision or approval
by the Court and free of any restrictions of the Code or
Bankruptcy Rules, other than those restrictions expressly
imposed by the Plan and the Confirmation Order. Without
limiting the foregoing, Reorganized Debtor may pay after the
Effective Date the charges that the Debtor incurs after the
Confirmation Date for Professionals' fees, disbursements,
expenses or related support services without application to the
Court.
7.05. The Reorganized Debtor's Obligations Under the
Plan. Reorganized Debtor shall perform all of the duties and
obligations under the Plan, including obligations to pay or
otherwise satisfy the Allowed Claims. All Cash necessary for
Reorganized Debtor to make payments pursuant to the Plan shall
be obtained from the Debtor's existing Cash balances, cash in
accounts, payments from the Insurers, interest accrued or to
accrue, funds to be received or from the operations of the
Debtor or Reorganized Debtor and any funds received from or
through the City of Los Angeles. Reorganized Debtor may enter
into leases of the Property and may seek to refinance any
individual Property as it deems necessary or appropriate.
7.06. Unclaimed Property. Unclaimed Property shall
be held and maintained by Reorganized Debtor or its Agent, if<PAGE>
any. If the Entity entitled to any such Cash or Non-Cash
Unclaimed Property is located within one (1) year
32
6159C/10566.9
after the Effective Date, such Unclaimed Property, together
with any Cash or non-Cash dividends excluding interest earned
thereon, shall be paid and distributed to such Entity. If,
however, such Entity cannot be located within one (1) year
following the Effective Date, any such Cash Unclaimed Property
and Unclaimed Property and related interest thereon, shall
become the property of Reorganized Debtor.
7.07. Implementation of Plan Under State Partnership
Law. The General Partner of the Debtor is authorized and
directed to take all necessary or appropriate action under
state partnership statutes applicable to the Debtor to
implement the Plan, including amending the limited partnership
agreement of the Debtor which, upon the Effective Date, is
necessary to implement the plan. The General Partner of the
Debtor shall take all such actions without meetings or other
action by the limited partners of the Debtor. The General
Partner of the Debtor and/or the Reorganized Debtor, may
designate one or more officers of the General Partner to<PAGE>
execute documents and certificates and to take all other
actions authorized pursuant to this Plan. Without limiting the
generality of the foregoing, the actions authorized under this
Section of the Plan may include: (a) amending the partnership
agreement of the Debtor, which, upon the Effective Date, shall
become the Reorganized Debtor; and (b) filing documents and
certificates and taking other actions with respect to the
Secretary of State or other appropriate officials of each
33
6159C/10566.9
applicable state. From and after the Effective Date, the
actions of the General Partner of the Reorganized Debtor
(except actions ratifying any of the actions specified above in
this Section 7.07 to authorize and implement the express
provisions of this Plan) shall be subject to all applicable
state partnership laws.
ARTICLE VIII
PROVISIONS GOVERNING DISTRIBUTIONS
8.01. Distributions by Reorganized Debtor. All
distributions to be made under the Plan shall be made by
Reorganized Debtor. Reorganized Debtor may employ or contract
with other Entities to assist in or make the distributions<PAGE>
required by the Plan. Reorganized Debtor shall serve without
bond.
8.02. Date of Distributions for Claims Allowed as of
the Effective Date. Except as otherwise provided in this Plan,
or as may be ordered by the Court, distributions of Cash to
Claims Allowed as of the Effective Date and the nondisputed
amount of Disputed Claims and Disputed Interests shall be made
no later than ten (10) days following the Effective Date.
Authorized distributions to Classes 4, 5 and 6 shall be divided
pro rata among the claimants in such Classes and shall be
deemed made as of the Effective Date if made on the Effective
Date or as promptly thereafter as practicable, but in any event
no later than ten (10) days after the Effective Date.
Distributions on account of the disputed portion of Disputed
34
6159C/10566.9
Claims and Disputed Interests allowed after the Effective Date
shall be made pursuant to Article\XI. The Reorganized Debtor
shall establish a disputed claims reserve for the disputed
claims of Classes 4, 5 and 6 as set forth in Article XI of the
Plan.
8.03. Delivery of Distributions.<PAGE>
(a) General. Subject to Bankruptcy Rule 9010,
distributions and deliveries to each holder of an
Allowed Claim shall be made at the address of such
holder as set forth on the proof of Claim filed by such
holder (or at the last known address of such holder if
no proof of Claim is Filed or if the Debtor has been
notified of a change of address), as of the last
business day prior to the Effective Date. If any
holder's distribution is returned as undeliverable, no
further distribution to such holder shall be made
unless and until Reorganized Debtor is notified of such
holder's then current address, at which time all missed
distributions shall be made to such holder without
interest. Reorganized Debtor shall be under no
obligation to attempt to locate the holder of any
Allowed Claim or to recognize any purported transfer or
encumbrance on the rights of holders of Allowed Claims
after the Confirmation Date. Amounts of undeliverable
distributions attempted by Reorganized Debtor shall be
retained by Reorganized Debtor until such distributions
are claimed or until such distributions become
Unclaimed
35
6159C/10566.9
<PAGE>
Property. All Claims for undeliverable distributions
shall be made on or before the second anniversary of the
Effective Date. After such date, all Unclaimed Property
shall be treated as specified in Section 7.05 of this
Plan and the Claim of any holder with respect to such
property shall be discharged and forever barred.
(b) Means of Cash Payments. Cash payments made
pursuant to the Plan shall be in United States dollars
by checks drawn on the domestic bank selected by the
Debtor or Reorganized Debtor, or by wire transfer from
a domestic bank, at the option of either Debtor or
Reorganized Debtor; provided, however, that cash
payments made to foreign trade creditors holding
Allowed Claims may be paid, at the option of the Debtor
or Reorganized Debtor, in such funds and by such means
as are necessary or customary in a particular foreign
jurisdiction.
(c) De Minimis Cash Distributions. No cash
payment of less than five dollars ($5.00) shall be made
to any holder of a Claim unless a request therefor is
made in writing to Reorganized Debtor.
8.04. Setoff. Reorganized Debtor shall, pursuant to
Section 558 of the Code, or common law rights of setoff and/or
recoupment, in the ordinary course of business, setoff or
assert recoupment against any Allowed Claim, and the
distributions to be made pursuant to the Plan on account of
such Claim, the claims, rights and causes of action of any <PAGE>
36
6159C/10566.9
nature that the Debtor or Reorganized Debtor may hold against
the holder of such Claim; provided, however, that, unless
otherwise provided herein, neither the failure to effect such a
setoff nor the allowance of any Claim hereunder shall
constitute a waiver or release by the Debtor or Reorganized
Debtor of any such claims, rights and causes of action that the
Debtor or Reorganized Debtor may possess against such holder.
ARTICLE IX
EXECUTORY CONTRACTS
9.01. Assumption, Rejection and Assignment of
Executory Contracts.
(a) Executory Contracts. All Executory Contracts
to which the Debtor is a party on the Confirmation Date
shall be assumed on the Effective Date and assigned to
Reorganized Debtor except the executory contracts
listed in Exhibit "B".
(b) Assumption of Residential Tenant Real Estate
Leases. All residential tenant leases in which the
Debtor is lessor shall be assumed on the Effective Date
and assigned to Reorganized Debtor.
(c) Management Agreements. Notwithstanding
anything else in this Plan, the Debtor shall reject the<PAGE>
R&B Management Agreement and the Maxim Management
Agreement effective as of the Effective Date. The
Reorganized Debtor shall enter into new management
37
6159C/10566.9
agreements with R&B and Maxim on or after the Effective
Date with terms consistent with this Plan.
(d) Payment of Cure Amounts. Any monetary amounts
by which each Executory Contract, the unexpired leases
or unexpired lease, as modified, to be assumed under
Sections 9.01(a) and (b) of the Plan is in default
shall be satisfied, pursuant to Section 365(b)(1) of
the Code, at Reorganized Debtor's option or the
assignee of the Debtor: (1)\by payment of the default
amount in Cash on the Effective Date, (2)\by payment of
the default amount in quarterly Cash installments
commencing on the Effective Date and continuing for one
(1) year or (3)\on such other terms as are agreed to by
the parties to such Executory Contract or unexpired
lease. In the event of a dispute regarding the amount
of any cure payments, the ability of Reorganized Debtor<PAGE>
or any assignee to provide "adequate assurance of
future performance" (within the meaning of Section 365
of the Code) under the contract or lease to be assumed,
or any other matter pertaining to assumption, the cure
payments required by Section 365(b)(1) of the Code
shall be made following the entry of a Final Order
resolving the dispute and approving the assumption.
(e) Remaining Executory Contracts and Leases. All
the Executory Contracts that are in effect on the
Confirmation Date, not identified in Sections 9.01(a),
38
6159C/10566.9
(b) and (c) above and which have not been previously
rejected, or for which there is not pending a motion to
reject, on or prior to the Confirmation Date, shall be
deemed rejected by the entry of the Confirmation Order.
(f) Rejected Executory Contracts and Proofs of
Claim. The Court shall determine the dollar amount, if
any, of the Claim of any Entity claiming damages by the
rejection of such Executory Contracts under Section
9.01(c) of this Article IX, provided such Entity files
a proof of Claim in the Bankruptcy Court on or before<PAGE>
the Effective Date. Objections to any such proof of
Claim shall be filed by Reorganized Debtor not later
than thirty (30) days after the Effective Date, and the
Court shall determine any such objection. To the
extent such damages are determined by a Final Order of
the Court, such Entity shall become a Class 6 Claimant
for such amount except as allowed by Final Order as an
Allowed Administrative Claim. Any Entity who has a
Claim for rejection of an Executory Contract or Lease
who does not file a proof of Claim therefor on or
before the Effective Date shall not receive any
distribution under this Plan and shall forever be
barred from asserting any Claims against the Debtor,
Reorganized Debtor, any successor to the Debtor or any
property of the Estate.
39
6159C/10566.9
ARTICLE X
COMPOSITION OF GENERAL PARTNER
AND POSTCONFIRMATION MANAGEMENT
10.01. General Partner. The General Partner of the
Debtor shall continue to be CIGNA Realty Resources, Inc. -<PAGE>
Seventh. The General Partner was incorporated in Delaware and
is qualified to do business in the States of California and
Connecticut. The General Partner's office is located at 900
Cottage Grove Road, South Building, Bloomfield, Connecticut
06002. The officers and directors of the General Partner are
as follows:
NAMES OF OFFICERS POSITION WITH THE
AND DIRECTORS OF THE GENERAL PARTNER
GENERAL PARTNER
R. Bruce Albro Director
Philip J. Ward Director
John Wilkinson Director
John D. Carey President, Controller
Verne E. Blodgett Vice President, Counsel
Joseph W. Springman Vice President and
Assistant Secretary
David C. Kopp Secretary
Michael N. Sinisgalli Treasurer
The officers and directors of the General Partner receive
no current or proposed direct compensation from the Debtor or
Reorganized Debtor in such capacities. However, certain
officers and directors of the General Partner receive
compensation from the General Partner and, or its Affiliates
(but not from the Debtor or Reorganized Debtor) for services
performed to the Debtor or Reorganized Debtor. The General
Partner will however receive compensation from the Reorganized
Debtor pursuant to the terms and conditions set forth in the
40
6159C/10566.9
<PAGE>
Limited Partnership Agreement attached hereto as Exhibit "C".
10.02. Management. The management of the Property
operations of the Reorganized Debtor shall be performed by
Maxim and R&B as follows:
(a) Maxim Management Agreement. Maxim shall
continue to manage the Amberway Apartments for the
Debtor and, then, the Reorganized Debtor. The
Reorganized Debtor shall enter into a new management
agreement with Maxim. The new management agreement
shall provide for a management fee to Maxim in the
amount of 3% of gross receipts plus the opportunity for
an additional 1.5% incentive fee based upon certain
revenues and expense goals.
(b) R&B Management Agreement. R&B shall continue
to manage the Mission Bay East, Arbor Park, West Los
Angeles, Sherman Oaks and Pacifica Club properties.
The Reorganized Debtor shall enter into a new
management agreement with R&B. The new management
agreement shall provide for a management fee to R&B for
all five properties in the amount of 3% of gross
receipts plus an opportunity for an additional 1.5% of
incentive fee based upon certain revenue and expense
goals.
The New Maxim Management Agreement and the New R&B Management
Agreements as set forth in detail the terms and conditions of
the operational management of the Properties, including but not<PAGE>
limited to the payment of management fees.
41
6159C/10566.9
ARTICLE XI
PROVISIONS FOR THE RETENTION, ENFORCEMENT,
SETTLEMENT OR ADJUSTMENT OF CLAIMS
BELONGING TO THE DEBTOR OR TO THE ESTATE
11.01. Preservation and Handling of Claims. Unless
otherwise provided herein, Reorganized Debtor shall retain and
may enforce all Chapter 5 Causes of Action including but not
limited to all rights pursuant to Sections 502, 510, 544, 545
and 546 of the Bankruptcy Code, all preference claims pursuant
to Section 547 of the Bankruptcy Code not settled prior to or
as a part of this Plan, all fraudulent transfer claims pursuant
to Section 548 of the Bankruptcy Code or state law, all claims
relating to postpetition transactions under Section 549 of the
Bankruptcy Code, all claims recoverable under Section 550 of
the Bankruptcy Code, and all claims against any third party on
account of an indebtedness or any other claim owed to or in
favor of the Debtor. Unless otherwise provided herein, such
claims of the Debtor against third parties may be used by
Reorganized Debtor, at its option, to offset any payment due to
such Entity under this Plan.
11.02. Prosecution of Objections to Claims. Unless<PAGE>
another date is established by the Court or this Plan, all
objections to Claims except for all those Claims otherwise
Allowed in the Plan shall be Filed and served on the holders of
such Claims within thirty (30) days after the Effective Date.
If an objection has not been Filed to the proof of Claim or a
scheduled Claim that relates to a Disputed Claim by the
42
6159C/10566.9
objection bar dates established herein, the Claim to which the
proof of Claim or scheduled Claim relates shall be treated as
an Allowed Claim if such Claim has not been allowed earlier or
Allowed by the Plan. For cause shown, the deadline to File
objections to Claims may be extended by the Court after notice
and opportunity to object has been given to all parties
requesting requesting special notice.
11.03. Authority to Prosecute Objections. Except as
otherwise set forth in the Plan, Reorganized Debtor shall have
the authority to File objections, settle, compromise, withdraw
or litigate to judgment objections to Disputed Claims. Except
as otherwise set forth under the Plan, objections to Claims
pending prior to the Confirmation Date may be prosecuted by the
party which Filed same, if authorized to do so under applicable<PAGE>
law.
11.04. Treatment of Disputed Claims.
(a) Payments on Account of Disputed Claims.
Notwithstanding any other provisions of the Plan, no
payments or distributions shall be made on account of
the disputed portion of any Disputed Claim or Interest
until such disputed portion of the Disputed Claim or
Disputed Interest becomes an Allowed Claim or an
Allowed Interest, respectively, unless otherwise
ordered by the Court. (b)
Disputed Claims Reserves Distributions on Account of
Disputed Claims, Once Allowed. A Disputed Claims
Reserves shall be established for Classes 4 and 5
43
6159C/10566.9
Claims. Cash held in the Disputed Claims Reserves shall
be deposited in a segregated bank account in the name of
Reorganized Debtor, for the benefit of potential
claimants of such funds, and shall be accounted for
separately by class. Reorganized Debtor may invest the
cash held in any reserve in investment vehicles and
accounts permitted under the Plan as selected in
Reorganized Debtor's sole discretion regardless of<PAGE>
approval or disapproval by beneficiaries of the Disputed
Claims Reserve. Reorganized Debtor shall also place in
the Disputed Claims Reserve any net return yielded from
the investments held in such reserve pending
distribution. Within thirty (30) days after the end of
each quarter of a Fiscal Year following the Effective
Date, Reorganized Debtor shall make all distributions on
account of the disputed portion of any Disputed Claim
that has become an Allowed Claim during the preceding
quarter of a Fiscal Year in accordance with the
treatment provided for in the Plan for that respective
Claimant. Such distributions shall be made pursuant to
the provisions of the Plan governing the applicable
Class of Claims.
ARTICLE XII
MISCELLANEOUS
12.01. Discharge. Except as otherwise expressly
provided in this Plan or the Confirmation Order, Confirmation
44
6159C/10566.9
of this Plan constitutes a discharge of the Debtor effective as
of the Effective Date of any Claim and any "debt" (as that term<PAGE>
is defined in Section 101(12) of the Bankruptcy Code), and the
Debtor's liability in respect thereof is extinguished
completely. Except as otherwise expressly provided in the
Plan, all Claims and debts of the Debtor (whether reduced to
judgment or not, liquidated or unliquidated, contingent or
noncontingent, asserted or unasserted, fixed or not, matured or
unmatured, disputed or undisputed, legal or equitable, known or
unknown) that arose from any agreement of the Debtor entered
into, or obligation of the Debtor incurred, before the
Confirmation Date, or from any conduct of the Debtor prior to
the Confirmation Date, or that otherwise arose before the
Confirmation Date, including, without limitation, all interest,
if any, on any such debts, whether such interest accrued before
or after the Filing Date (including, without limitation, any
liability of a kind specified in Sections 502(g), 502(h) and
502(i) of the Bankruptcy Code, whether or not a proof of Claim
is filed or deemed filed under Section 501 of the Bankruptcy
Code, such Claim is allowed under Section 502 of the Bankruptcy
Code, or the holder of such Claim has accepted this Plan) are
released and discharged as of the Effective Date of this Plan.
12.02. Revesting. Except as otherwise expressly
provided in this Plan or the Confirmation Order, on the
Effective Date, Reorganized Debtor shall be vested with all of
the property of the Estate free and clear of all Claims, liens,
45
6159C/10566.9
<PAGE>
encumbrances, charges and other interests of Creditors and
equity security holders, and may operate its properties free of
any restrictions imposed by the Bankruptcy Code or by the
Court; provided, however, that Reorganized Debtor shall
continue as a debtor in possession under the Bankruptcy Code
until the Effective Date, and, thereafter, Reorganized Debtor
may operate its business free of any restrictions imposed by
the Bankruptcy Code or the Court.
12.03. Termination. As of the Effective Date, except
as provided in this Plan or the Confirmation Order, all
entities shall be precluded from asserting against Reorganized
Debtor, its respective successors or its respective property,
any other or further Claims, debts, rights, causes of action,
liabilities or equity interests based upon any act or omission,
transaction or other activity of any kind or nature that
occurred prior to the Effective Date. In accordance with the
foregoing, except as provided in this Plan or the Confirmation
Order, as of the Effective Date, the Confirmation Order shall
be a judicial determination of discharge of all such Claims and
other debts and liabilities against the Debtor and termination
of all such Interests and other rights of equity security
holders in the Debtor, pursuant to Sections 524 and 1141 of the
Code, and such discharge shall void any judgment obtained
against the Debtor at any time, to the extent that such<PAGE>
judgment relates to a Claim discharged.
12.04. Injunction. Except as otherwise expressly
46
6159C/10566.9
provided in this Plan, the Confirmation Order shall provide,
among other things, that all Entities who have held, hold or
may hold Claims and all Entities who have held, hold or may
hold Interests against Reorganized Debtor and any of its
Affiliates, are permanently enjoined on and after the Effective
Date from: (a) commencing or continuing in any manner any
action or other proceeding of any kind with respect to any such
Claim against the Debtor, Reorganized Debtor or any of its
Affiliates; (b) the enforcement, attachment, collection or
recovery by any manner or means of any judgment, award, decree
or order against the Debtor, Reorganized Debtor or any of their
respective Affiliates, or the property of the Debtor,
Reorganized Debtor or any of their Affiliates thereof, with
respect to any such Claim; (c) creating, perfecting or
enforcing any encumbrance of any kind against the Debtor,
Reorganized Debtor or any of their respective Affiliates, or
against the property of the Debtor, Reorganized Debtor or any
of their respective Affiliates, with respect to any such Claim;<PAGE>
and (d) from asserting any setoff, right of subrogation or
recoupment of any kind against any obligation due the Debtor,
Reorganized Debtor or any of its Affiliates, or against the
property of the Debtor, Reorganized Debtor or any of its
Affiliates, with respect to any such Claim.
12.05. Term of Injunctions or Stays. Unless otherwise
provided, all injunctions or stays provided for in the case
pursuant to Sections 105 or 362 of the Bankruptcy Code
47
6159C/10566.9
or otherwise shall remain in full force and effect until the
Effective Date rather than the Confirmation Date.
12.06. Jurisdiction Retained. Until the end of the
Term of the Plan, the Court shall have jurisdiction of all
matters arising under, arising out of or relating to this case
including, but not limited to, the following:
(a) To insure that the purpose and intent of this
Plan are carried out;
(b) To consider any modification of this Plan under
Section 1127 of the Bankruptcy Code;
(c) To hear and determine all Claims,
controversies, default suits and disputes against the<PAGE>
Debtor;
(d) To hear, determine and enforce all Claims and
causes of action which may exist on behalf of the
Debtor or the Estate, including, but not limited to,
any right of the Debtor or the Estate to recover such
claims, causes or rights as enumerated in Article XI
above;
(e) To hear and determine all controversies, suits,
defaults and disputes that may arise in connection with
the interpretation, execution or enforcement of this
Plan;
(f) To hear and determine all requests for
compensation and/or reimbursement of expenses for
services rendered or expenses incurred prior to the
Effective Date which may be made after the Effective
Date of the Plan;
48
6159C/10566.9
(g) To hear and determine all objections to Claims,
controversies, suits and disputes that may be pending
at or initiated after the Effective Date, except as
provided in the Confirmation Order;
(h) To consider and act on the compromise and
settlement of any Claim against or cause of action on<PAGE>
behalf of the Debtor or the Estate;
(i) To enforce and interpret by injunction or
otherwise the terms and conditions of the Plan;
(j) To enter an order concluding and terminating
this case;
(k) To correct any defect, cure any omission or
reconcile any inconsistency in the Plan or Confirmation
Order which may be necessary or helpful to carry out
the purposes and intent of the Plan;
(l) To determine all questions and disputes
regarding titles to the assets of the Debtor or the
Estate;
(m) To classify the Claims of any creditor and to
re-examine Claims which have been allowed for purposes
of voting, and to determine objections which may be
filed to creditors' Claims (the failure by the Debtor
to object to, or examine any Claim for the purposes of
voting shall not be deemed a waiver of the Debtor's
right to object to, or re-examine the Claim in whole or
part);
49
6159C/10566.9
<PAGE>
(n) To consider and act on such other matters
consistent with this Plan as may be provided in the
Confirmation Order; and
(o) To consider the rejection of Executory
Contracts that are not discovered prior to Confirmation
and allow Claims for damages with respect to the
rejection of any such Executory Contracts within such
future time as the Court may direct.
12.07. Exculpation. The Debtor, Reorganized Debtor,
the Creditors' Committee, and their respective directors,
shareholders, agents, officers, employees, representatives and
attorneys, including Professionals, (acting in such capacity)
shall neither have nor incur liability to any Entity for any
action taken or omitted to be taken in connection with or
related to the formulation, preparation, dissemination,
implementation, Confirmation or consummation of the Plan, the
Disclosure Statement, earlier versions of same or any contract,
instrument, release or other agreement or document created or
entered into, or any other action taken or omitted to be taken
in connection with the Plan or the Case; provided, however,
that the foregoing provisions of this section shall have no
effect on the liability of any Entity that would otherwise
result from any such action or omission to the extent that such
action or omission is determined in a Final Order to have
constituted gross negligence or willful misconduct.
12.08. Nonwaiver. Neither the filing of this Plan <PAGE>
50
6159C/10566.9
and the accompanying Disclosure Statement, nor any statement or
provision contained herein, nor the taking by the Debtor or a
party in interest of any action with respect to this Plan
shall: (a) be or be deemed to be an admission against interest
and (b) until the Distribution Date, be or be deemed to be a
waiver of any rights of any creditor or party in interest of
Debtor, and until the Distribution Date all such rights are
specifically reserved. In the event that the Effective Date
does not occur, neither this Plan nor any statement contained
herein, may be used or relied upon in any manner in any suit,
action, proceeding or controversy within or outside of the
bankruptcy case involving the Debtor. The Debtor may withdraw
this Plan at any time prior to Confirmation.
12.09. Successors and Assigns. The rights, benefits
and obligations of any Entity named or referred to in the Plan
shall be binding on, and shall inure to the benefit of, any
heir, executor, administrator, successor or assign of such
Entity.
12.10. Modification of the Plan. The Debtor reserves
the right, in accordance with the Bankruptcy Code, to amend or
modify this Plan prior to the Confirmation Date. After the
Confirmation Date, the Debtor may, upon order of the Court,<PAGE>
amend or modify this Plan in accordance with Section 1127(b) of
the Bankruptcy Code, or remedy any defect or omission or
reconcile any inconsistency in this Plan in such
51
6159C/10566.9
manner as may be necessary to carry out the purposes and intent
of this Plan.
12.11. Payment Dates. Whenever any payment or
distribution to be made under the Plan shall be due on a day
other than a Business Day, such payment or distribution shall
instead be made, without interest, on the next Business Day,
except as may be provided in negotiable instruments requiring
such payments.
12.12. Notices. All notices, requests, elections or
demands in connection with the Plan shall be in writing and
shall be deemed to have been given when received or, if mailed,
five (5) days after the date of mailing provided such writing
shall have been sent by registered or certified mail, postage
prepaid, return receipt requested, and sent to the following:
Clifton R. Jessup, Jr.
DIXON & DIXON LTD., L.L.P.
2500 Fountain Place
1445 Ross Avenue<PAGE>
Dallas, Texas 75202
All notices and requests to Claimants and holders of Interests
shall be sent to them at their last known addresses. The
Debtor, and any Claimant or holder of Interests of any Class,
may designate in writing any other address for purposes of this
Section 12.12, which designation shall be effective upon
receipt.
12.13. Governing Law. EXCEPT TO THE EXTENT THAT THE
BANKRUPTCY CODE IS APPLICABLE, THE RIGHTS AND OBLIGATIONS
ARISING UNDER THIS PLAN SHALL BE GOVERNED BY, AND CONSTRUED AND
52
6159C/10566.9
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.
12.14. Severability. Should any provision in this
Plan be determined to be unenforceable, such determination
shall in no way limit or affect the enforceability and
operative effect of any and all other provisions of this Plan.
ARTICLE XIII
CONFIRMABILITY OF THE PLAN AND CRAMDOWN
13.01. Cramdown. The Debtor hereby requests
Confirmation under Section 1129(b) of the Bankruptcy Code of<PAGE>
any impaired Class that does not accept the Plan pursuant to
Section 1126 of the Bankruptcy Code.
///
///
///
///
///
///
///
///
///
///
///
///
///
///
<PAGE>
<TABLE>
CAL-7 PROJECTED CASH FLOW
CONSOLIDATED SOURCES AND USES
<CAPTION>
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Total Sources 10,828,091 8,819,467 11,330,730 11,536,425 12,101,086
Total Uses (5,093,957) (12,855,054) (11,975,365) (11,777,005) (11,821,934)
Net Cash Flow 5,734,135 (4,035,587) (644,635) (240,580) 279,153
Cash Balance 5,734,135 1,698,548 1,053,913 813,333 1,092,486
</TABLE>
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Total Sources 12,661,164 13,265,997 13,967,701 14,716,622 166,191,005
Total Uses (11,809,002) (11,848,333) (11,889,232) (11,931,548) (174,416,860)
Net Cash Flow 852,162 1,417,664 2,078,469 2,785,074 (8,225,855)
Cash Balance 1,944,647 3,362,312 5,440,781 8,225,855 0
</TABLE>
<PAGE>
<TABLE>
CAL - 7 PROJECTED CASH FLOW
SOURCES DETAIL
<CAPTION>
1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
P r o p e r t y
Operations (1):
Amberway 659,019 1,366,079 1,390,231 1,419,861 1,464,268 1,489,221
Arbor Park 421,019 946,444 970,259 994,545 1,019,304 1,044,536
Mission Bay East 1,413,831 2,800,316 2,979,491 3,071,566 3,266,269 3,426,316
Pacifica Club 796,169 1,729,153 1,777,343 1,826,750 1,877,399 1,929,312
West LA 909,607 1,929,743 2,046,215 2,169,309 2,299,369 2,442,054
Sherman Oaks (2) (284,010) (240,656) 2,070,470 1,980,736 2,099,814 2,225,587
Net Cash Flow 3,915,635 8,531,079 11,234,009 11,462,767 12,026,423 12,557,026
from Oper.
Interest Income:
Security
Deposits (3) 12,840 25,680 25,680 25,680 25,680 25,680
Cash Balance (4) 152,396 191,110 71,041 47,978 48,983 78,458
Insurance 327,308 71,599
Proceeds (5)
Rent Loss Insurance 4,164,000
Available Cash
on Hand (7) 1,020,157
Sherman Oaks 504,000
Cash Collateral
Account
T a x e s & 731,756
Insurance Cash
Collateral Account
Total Sources 10,828,091 8,819,467 11,330,730 11,536,425 12,101,086 12,661,164
</TABLE>
<TABLE>
<CAPTION>
2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C>
P r o p e r t y
Operations (1):
Amberway 1,524,736 1,560,789 1,597,362 1,634,439 1,671,999
Arbor Park 1,070,244 1,096,428 1,123,086 1,150,218 1,177,823
Mission Bay East 3,594,206 3,770,322 3,955,068 4,148,866 4,352,160
Pacifica Club 1,962,517 2,037,037 2,092,897 2,150,122 2,209,250
West LA 2,592,603 2,752,077 2,920,336 3,096,069 3,281,833
Sherman Oaks (2) 2,358,418 2,496,690 2,646,805 2,803,187 2,968,575
Net Cash Flow 13,102,724 13,713,343 14,335,554 14,982,901 15,661,640
from Oper.
Interest Income:
Security
Deposits (3) 25,680 25,680 25,680 25,680
Cash Balance (4) 137,594 228,679 355,389 523,208
Insurance
Proceeds (5)
Sales Proceeds(6)
150,659,216
Rent Loss Insurance
Available Cash
on Hand (7)
Sherman Oaks
Cash Collateral
Account
T a x e s &
Insurance Cash
Collateral Account
Total Sources 13,265,997 13,967,701 14,716,622 166,191,005
<FN>
(1) Assumes July 1 to December 31 cash flows from operations (includes full year of insurance expenses to be paid in December).
The individual property cash flows were estimated by R&B and Maxim based on 1994 actual results and conservative growth
projections. Assumes post confirmation commencement of operations on July 1, 1995.
<FN>
(2) Sherman Oaks cash flow assumes lease-up begins during 1996.
<FN>
(3) Assumes interest earned of 5.35% (our current short-term investment rate) on an average security deposit of $480,000.
<FN>
(4) Represents 5.35% interest earned on the average cash balance. Calculation assumes all sources and uses are spread equally
over the period (i.e. divide total activity by 2).
<FN>
(5) Represents the interest earned on the $9,250,000 insurance proceeds received from Aetna in March 1995. Calculation
assumes 5.75% interest on the total amount ($9,250,000) from April 1 until June 30 and then equal draws against the balance
over the 12 months of drawings, permits and construction for Sherman Oaks.
<FN>
(6) Calculated using MT's assumptions (most pessimistic) of a weighted terminal capitalization rate of 10.1875% applied to the
2005 cash flow and a 2% deduction for sales costs.
<FN>
(7) Does not include $300,000 commitment form the City of Los Angeles Housing Department.
</TABLE>
<PAGE>
<TABLE>
CAL - 7 PROJECTED CASH FLOW
USES DETAIL
<CAPTION>
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Additional Costs 1,728,000
for Sherman Oaks(1)
Debt Service to
Travelers (2):
Sherman Oaks Loan 504,427 1,210,625
Balance of Loan 3,561,246 8,546,991
Total Loan 10,568,984 10,568,984 10,568,984
Principal
Balance
Payment to Congen 50,000
Unsecured Non-Insider
Trade Creditors:
Contracts 115,251
Assumed (3)
Administrative
Conv. Claims (4) 20,407 20,406
Property Tax 48,353 58,701 56,114 53,527 50,940
Claims (5)
O t h e r 153,490 169,913 161,702
Claims(5)
C a p i t a l
Expenditures:
Amberway 25,600 97,100 111,000 105,000 109,200
Arbor Park 61,900 225,533 234,554 243,936 253,694
Mission Bay East 108,180 287,600 293,352 299,219 305,203
Pacifica Club 85,914 206,796 215,068 223,671 232,617
West LA 144,455 130,056 135,258 140,669 146,295
Sherman Oaks 0 0 26,000 42,000 55,000
Admin. Claims 200,983 73,333 73,333
(prof. fees)
Statutory Fees 3,750
CII Management
Fees (6)
G e n e r a l
Partner's Salary(6)
Partnership Expenses 10,000 100,000 100,000 100,000 100,000
Distribution to
Equity Holders
Total Uses 5,093,957 12,855,054 11,975,365 11,777,005 11,821,934
</TABLE>
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Additional Costs
for Sherman Oaks(1)
Debt Service to
Travelers (2):
Sherman Oaks Loan
Balance of Loan
Total Loan 10,568,984 10,568,984 10,568,984 10,568,984 10,568,984
Principal 91,864,569
Balance
Payment to Congen
Unsecured Non-Insider
Trade Creditors:
Contracts
Assumed (3)
Administrative
Conv. Claims (4)
Property Tax
Claims (5)
O t h e r
Claims(5)
C a p i t a l
Expenditures:
Amberway 113,600 118,100 122,900 127,800 132,900
Arbor Park 263,842 274,395 285,371 296,786 308,657
Mission Bay East 311,307 317,534 323,884 330,362 336,969
Pacifica Club 241,922 251,599 261,663 272,129 283,015
West LA 152,147 158,233 164,562 171,145 177,991
Sherman Oaks 57,200 59,488 61,868 64,342 66,916
Admin. Claims
(prof. fees)
Statutory Fees
CII Management 2,081,491
Fees (6)
G e n e r a l 1,425,000
Partner's Salary(6)
Partnership Expenses 100,000 100,000 100,000 100,000 100,000
Distribution to 67,070,368
Equity Holders
Total Uses 11,809,002 11,848,333 11,889,232 11,931,548 174,416,860
<FN>
(1) Represents the $1,000,000 insurance deductible and $728,000 cost ot upgrade the units based on Paul Foster's report.
<FN>
(2) Debt service to Travelers assume 10.3% on $82,980,497 and 8.125% on $14,900,000 interest only for the first year
and a half (Sherman Oaks construction and lease-up period), then 10.3% interest with 30 year amortization on
$97,880,497 over the remainder of the loan.
<FN>
(3) Represents the total ($115,251.39) amount of default for the Executory Contracts that the Reorganized Debtor assumes.
Assumes payment in full on the Effective Date.
<FN>
(4) Represents the total ($40,812.99) unsecured allowed claims of $1,000 or less. Assumes payment of 50% on the
Effective Date and 50% seven months after the Effective Date.
<FN>
(5) Assumes property tax claims of $241,765.58 is paid over a five year period and the other non-insider trade creditors
claims (greater than $1,000) of $460,470.61 is paid over a three year period. Both claims assume annual payments on
July 1 and each payment includes 5.35% interest on the outstanding balance.
<FN>
(6) CIGNA Investments, Inc. (CII) management fees represent 1% of total property revenues. General Partner's salary is
a flat $150,000 per year. Both amounts are deferred without interest until disposition.
</TABLE>
<PAGE>
EXHIBIT "B"
REJECTED EXECUTORY CONTRACTS
1. R&B Management Agreements
a. Management Agreement, Arbor Park Apartments, Upland,
California, dated May 1, 1991;
b. Management Agreement, Pacifica Club Apartments,
dated May 1, 1992;
c. Second Amendment to Management and Leasing Agreement
dated August 1992;
d. First Amendment to Management and Leasing Agreement
dated January 1, 1991; and
e. Management and Leasing Agreement dated January 30,
1985.
2. Maxim Management Agreement
Management Agreement dated May 1, 1992, by and between
California Seven Associates Limited Partnership and
Promethius Management Group, as supplemented and amended
from time to time.
EXHIBIT "C"
Reference is made to Registrant Exhibit 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> year
<CASH> 1191015
<SECURITIES> 0
<RECEIVABLES> 488885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 599166
<PP&E> 144248416
<DEPRECIATION> 48128827
<TOTAL-ASSETS> 98398655
<CURRENT-LIABILITIES> 909663
<BONDS> 111983903
<COMMON> 0
0
0
<OTHER-SE> 22160822
<TOTAL-LIABILITY-AND-EQUITY> 98398655
<SALES> 0
<TOTAL-REVENUES> 14624963
<CGS> 0
<TOTAL-COSTS> 7276127
<OTHER-EXPENSES> 4322195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7908417
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (5239205)
<DISCONTINUED> 0
<EXTRAORDINARY> 2000000
<CHANGES> 0
<NET-INCOME> (3239205)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
