<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (Fee Required) For the fiscal year ended
December 31, 1996
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange act of 1934 (No Fee Required). For the transition from
_________to____________
__________________
COMMISSION FILE NO. 0-20120
TMP INLAND EMPIRE VII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 33-0416043
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 N. PARKCENTER DRIVE, SUITE 235 92705
SANTA ANA, CALIFORNIA (Zip Code)
(Address of principal executive office)
</TABLE>
(714) 836-5503
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ------------------- ------------------------------
N/A N/A
</TABLE>
Securities to be 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
--- ---
<PAGE> 2
PART I
ITEM 1(A). BUSINESS
INTRODUCTION
TMP INLAND EMPIRE VII, LTD., a California Limited Partnership (the
"Partnership"), is a California limited partnership formed in July 1990, of
which TMP Investments, Inc., a California corporation, and TMP Properties, a
California general partnership, are the General Partners (the "General
Partners"). The Partnership was formed to acquire, from nonaffiliated person,
parcels of unimproved real property (the "Properties") located primarily in
Riverside and San Bernardino Counties, California. Some of the Properties are
or will be planned, zoned and mapped for single family residential purposes,
while others are or will be planned, zoned and mapped for commercial or
industrial uses. Actions by the Partnership to obtain the desired
general/specific plan, zoning and parcel/tract map changes by or approvals of
governmental entities, and to subdivide and site plan, are commonly referred to
as "pre-development."
The Properties will be held for investment, appreciation, and ultimate
sale and/or improvement of all or a portion thereof either alone or in
conjunction with a joint venture partner. If the Properties or portions
thereof are developed, the Partnership intends to hold and manage the same for
the production of income until such time that they determine a sale would be in
the best interest of he Partnership and its limited partners (the "Limited
Partners"). Upon the sale of the last Property, the payment of all debts and
the distribution of any remaining proceeds, less necessary reserves, to those
persons entitled thereto pursuant to the Partnership's Agreement of Limited
Partnership (the "Partnership Agreement"), the Partnership will be dissolved.
TMP Inland Empire VII. Ltd., a California Limited Partnership, has
been formed under the Revised Limited Partnership Act of the State of
California. The rights and obligations of the Partners in the Partnership are
governed by the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement"). The following statements concerning the Partnership
Agreement are qualified in their entirety by reference to the Partnership
Agreement.
DESCRIPTION OF LIMITED PARTNERSHIP UNITS. The Partnership Agreement
authorizes the issuance and sale of Limited Partnership Units for all cash in
multiples of $1,000 per Unit. Between July 20, 1990 and December 31, 1992, the
Partnership sold a total of 8,700 Limited Partnerships Units. As of December
31, 1996, all Units are outstanding and it is not anticipated that any
additional Limited Partnership Units will be issued in the future. Outstanding
Units are fully paid and nonassessable.
<PAGE> 3
THE RESPONSIBILITIES OF THE GENERAL PARTNERS. The General Partners
have the exclusive management and control of all aspects of the business of the
Partnership. In the course of their management, the General Partners may, in
their absolute discretion, acquire, mortgage, encumber, hold title to, pledge,
sell, release, or otherwise dispose of real property and interests therein when
and upon such terms as they determine to be in the best interest of the
Partnership and employ such persons, including, under certain circumstances,
Affiliates of the General Partners, as they deem necessary for the efficient
operation of the Partnership. It is provided, however, that the Limited
Partners holding, in aggregate, more than 50% of the then outstanding Units
must consent to the sale of substantially all of the assets of the Partnership
other than a sale occurring in the ordinary course of the Partnership's
business. The General Partners shall receive only such compensation as is
provided in the Partnership Agreement.
LIABILITIES OF LIMITED PARTNERS/NONASSESSABILITY OF INTERESTS. A
Limited Partner's capital contributed to the Partnership is subject to the
risks of the Partnership's business. Except as specifically provided in the
Partnership Agreement, he is not permitted to take any part in the management
or control of the business and he may not be assessed for additional capital
contributions. Assuming that the Partnership is operated in accordance with
the terms of the Partnership Agreement, a Limited Partner is not be liable for
the liabilities of the Partnership in excess of his capital contribution and
share of his undistributed profits. Notwithstanding the foregoing, a Limited
Partner is liable for any Distributions made to him if, after such
Distributions, the remaining assets of the Partnership are not sufficient to
pay its then outstanding liabilities, exclusive of liabilities of Limited
Partners on account of their contributions, and liabilities for which recourse
is limited to specific Partnership assets.
The Partnership Agreement provides that the Limited Partners shall not
be bound by, or be personally liable for, the expenses, liabilities, or
obligations of the Partnership.
TERM AND DISSOLUTION. The Partnership will continue for a maximum
period ending December 31, 2021, but may be dissolved at an earlier date, if
certain contingencies occur. Prior to dissolution, Limited Partners may not
withdraw from the Partnership but may, under certain circumstances, assign
their Units to others. (See "Transferability of Units," below.) The
contingencies whereby the Partnership may be dissolved are as follows:
1. The withdrawal, adjudication of bankruptcy,
dissolution, or death of a General Partner, unless
the remaining General Partner agrees to continue the
business of the Partnership, or if there is no
remaining General Partner, all the Limited
artners agree to continue the business of the
Partnership and elect, by unanimous consent, one or
more new General Partners to continue the
Partnership's business;
2. A Majority Vote of the total outstanding Units in
favor of dissolution and termination of the
Partnership; or
<PAGE> 4
3. The removal of a General Partner, unless the
remaining General Partner agrees to continue the
business of the Partnership, or if there is no
remaining General Partner, a majority of the Limited
Partners agree to continue the business of the
Partnership and elect, by a Majority Vote of the
total outstanding Units, one or more new General
Partners to continue the Partnership business.
VOTING RIGHTS OF LIMITED PARTNERS. The voting rights of the Limited
Partners are set forth in Section 6 of the Partnership Agreement. The Limited
Partners have the right to vote upon the following matters affecting the basic
structure of the Partnership:
1. Amendment of the Partnership Agreement (except for
amendments which do not affect the rights of the
Limited Partners);
2 Removal of a General Partner;
3. Admission of a General Partner;
4. The sale of all, or a substantial part, of the assets
of the Partnership other than in the ordinary course
of business;
5. The election to continue the business of the
Partnership and the appointment of a successor
General Partner after the withdrawal, adjudication of
bankruptcy, death, or dissolution of the sole
remaining General Partner;
6. The election to continue the business of the
Partnership and appointment of a successor General
Partner after the removal of the sole remaining
General Partner; or
7. Termination and dissolution of the Partnership, other
than after sale of all of the Properties and receipt
of all amounts due on any seller carryback financing.
A majority Vote of the Limited Partnership shall be required for the
matters set forth above to pass and become effective, except for the matters
specified in Item 5, which shall require the unanimous consent of the Limited
Partners.
The General Partners may at any time call a meeting of the Limited
Partners or for a vote, without a meeting, of the Limited Partners on matters
on which they are entitled to vote, and shall call for such meeting or vote
following receipt of written request therefor of Limited Partners holding 10%
or more of the total outstanding Units.
Each Limited Partnership Unit shall have equal voting rights.
TRANSFERABILITY OF UNITS. Holders of Units shall have the right to
assign one or more whole Units by written instrument the terms of which are not
in contravention of any of the provisions of the Partnership Agreement.
<PAGE> 5
An assignee of record shall be entitled to receive Distributions from
the Partnership attributable to the Units acquired by reason of such assignment
from and after the effective date of the assignment of such Units to him;
however, the Partnership and the General Partners shall be entitled to treat
the assignor of such Units as the absolute owner thereof in all respects, and
shall incur no liability for allocations of Net Income, Net Loss, or
Distributions, or transmittal of reports and notices required to be given to
Limited Partners which made in good faith to such assignor until such time as
written instrument of assignment has been received by the Partnership and
recorded on its books. The effective date of an assignment of Units (of which
assignment the Partnership has actual notice) on which the Assignee shall be
deemed an Assignee of record shall not be later than the first day of the
fiscal quarter following the date set forth on the written instrument of
assignment.
Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of the Partnership Agreement shall be void and
ineffectual, and shall not bind or be recognized by the Partnership.
An Assignee may only be substituted as a Limited Partner in the place
of the assignor Limited Partner with the prior consent of the General Partners.
Any substituted Limited Partner must agree to be bound by the provisions of the
Partnership Agreement.
BOOKS AND RECORDS. At all times during the term of the Partnership,
the General Partners will keep true and accurate books of account of all the
financial activities of the Partnership. These books of account are kept open
for inspection by the Limited Partners or their representatives at any
reasonable time. The General Partners may make such elections for federal and
state income tax purposes as they deem appropriate and the fiscal year of the
Partnership is the calendar year unless changed by the General Partners with
the consent of the Commissioner of Internal Revenue.
DISTRIBUTIONS, NET INCOME AND NET LOSS
ALLOCATION OF NET INCOME AND NET LOSS FROM OPERATIONS. Until such
time that all Limited Partners have received allocations of Net income from the
Partnership equal to a 6% cumulative, but not compounded, preferred return on
adjusted Capital Contributions (the "Preferred Return"), Net Income shall be
allocated 99% to all Limited Partnership Units, which will be further allocated
among such Units on a pro rata basis, and 1% to the General Partners. Until
such time that all Limited Partners have received Distributions equal to their
Capital Contributions plus their Preferred Return, Net Losses shall be
allocated 99% to all Limited Partnership Units, allocated among them on a pro
rata basis, and 1% to the General Partners. Thereafter, Partnership Net
Income, Net Loss, and all items of Partnership deduction and credit shall be
allocated 16.5% to the General Partners and 83.5% to all Limited Partners, pro
rata, according to the number of Units owned. The foregoing allocations are
subject to certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), as set forth in Section 4.5 of the Partnership Agreement.
<PAGE> 6
ALLOCATION OF PROFITS AND LOSSES ON SALES OF PROPERTY. Profits and
Losses on Sales of Property are allocated as set forth in Section 4.5(f) and
4.5(g), respectively, of the Partnership Agreement.
DISTRIBUTIONS. Distributions of Distributable Cash from Operations,
if any, will be made annually within 90 days after the end of the Partnership's
fiscal year and shall be allocated 99% to the Limited Partners and 1% to the
General Partners until the Limited Partners have received cumulative
Distributions in an amount equal to their Capital Contributions plus their
unpaid Preferred Return, after which time Distributions of Distributable Cash
from Operations shall be allocated 83.5% to the Limited Partners and 16.5% to
the General Partners. Except for Distributions on Dissolution described in
Section 8.2 of the Partnership Agreement, Distributions of Cash from Sale or
Refinancing of Partnership Properties shall be distributed to the Partners at
such times as the General Partners shall determine in the same manner as
Distributions of Distributable Cash from Operations. The General Partners have
the right to reuse Cash from the Sale of Refinancing of Partnership Properties
to pay seller financed debt without making a Distribution to Partners;
provided, however, that sufficient funds, if available, shall be distributed to
the Limited Partners to pay any resulting state or federal income tax, assuming
that all such Limited Partners are in a 28% tax bracket.
INVESTMENT OBJECTIVES; RISKS
In general, the investment objectives of the Partnership may be
summarized as follows:
(a) Preservation and return of the Partners' capital.
(b) Capital appreciation.
(c) Added value through pre-development activity (zoning,
subdivision, site planning, engineering).
(d) Cash flow after return of capital.
(e) Minimization of risk by maintaining minimum
partnership debt.
The General Partners are, at all times, guided by a policy of
realizing profit intended to result in gain for the Limited Partners upon
ultimate disposition of the Properties. There can, however, be no assurance or
guarantee that the decisions made by the General Partners will result in the
realization of any profit.
The Partnership is subject to the risks generally incident to the
ownership of real estate, including the uncertainty of cash flow to meet fixed
or variable obligations; adverse changes in national economic conditions;
changes in the investment climate for real estate investment; lack of
geographic diversification; adverse changes in local market conditions, such as
changes in the supply of, or demand for competing properties in an area;
changes in interest rates and the availability of permanent mortgage funds,
which may render the sale or refinancing of a property difficult or
unattractive; changes in real estate tax rate and
<PAGE> 7
other operating expenses, governmental rules (including, without limitations,
zoning laws and fiscal policies); known and unknown environmental conditions on
the property and acts of God that may result in uninsured losses (including,
without limitation, earthquakes and floods).
The purchase of property to be developed or constructed is subject to
more risks than is involved in the purchase of property with an operating
history. In the event the General Partners decide to develop the Properties,
the Partnership will be subject to the risk that there may be unanticipated
delays in, or increases in costs of, development and construction as a result
of factors beyond the control of the General Partners. These factors may
include, among others, strikes, adverse weather, material shortages, and
increases in the cost of labor and materials. Such factors can result in
increased cost of a project and corresponding depletion of the Partnership's
working capital and reserves, or loss of the Partnership's investment as a
result of foreclosure by a construction or other lender. Additional risks may
be incurred where the Partnership makes periodic progress payments or other
advances to the builders prior to completion of the construction. It should
also be noted that the development of unimproved real property is a
time-consuming process which often involves governmental approval of site and
development plans, environmental studies and reports, traffic studies, and
similar items.
The Partnership may enter into joint ventures in order to accomplish
the development of the Properties. Such transactions may create risks not
otherwise present, such as the joint venturer's investment objectives may be
inconsistent with the investment objectives of the partnership.
If the Partnership develops the Properties, either alone or in
conjunction with joint venture partners, construction arrangements will be made
at that time. As of the date of this Form 10K, no arrangements have been
entered into or negotiated with any person for the development of any of the
Properties.
If the Partnership requires a loan to finance pre-development or
development activities, or to pay off or refinance an existing loan on a given
property, the availability and cost of such a loan is uncertain due to money
market fluctuations. The General Partners are unable to predict the effects of
such fluctuations on the Partnership. Money market conditions which may exist
if and when the Partnership seeks to obtain any financing with respect to the
Partnership for development or other purposes may make such financing
difficult or costly to obtain and may have an adverse effect on the
Partnership's ability to develop the Properties. Additionally, such conditions
may also adversely affect the ability of the Partnership to sell the Properties
when a sale is determined to be in the best interests of the Partnership, and
may affect the terms of any such sale.
The Partnership's investment objectives must be considered speculative
and there is no assurance that the Partnership will fulfill them.
<PAGE> 8
SELLING POLICY
The Partnership seeks to sell all Properties for all cash. However,
if the General Partners deem it to be in the best interests of the Partnership
and its Limited Partners, the Partnership will sell one or more of the
Properties in exchange for receiving part of the purchase price in cash at the
time of sale and receiving the balance of the purchase price on a deferred
basis. The deferred amount will be evidenced by an interest-bearing promissory
note secured by a deed of trust on the Property sold. However, the Partnership
does not intend to carry back any promissory notes unless it obtains a first
priority lien against the Property sold.
COMPETITION
It is anticipated that the Partnership will encounter considerable
competition in the pre-development, development, operation, and eventual sale
appreciation, improvement and ultimate sale during a three to five year holding
period. Even under the most favorable marketing conditions there is no
guarantee that the Properties can be pre-developed, developed, operated, or
sold, and if sold, that such sale will be made upon terms favorable to the
Partnership. Similarly, there is no guarantee that the Partnership will be
able to conduct profitable operations on the Properties, if and when they are
developed.
GOVERNMENTAL POLICIES
The Partnership's pre-development and development plans for the
Properties, as well as the value of the Properties, are dependent in large part
on governmental action. The following is a partial list of some, but not all,
of the potential problems which could arise due to governmental action or
inaction.
ZONING/PLANS/MAPS/PERMITS. Certain of the parcels are not zoned for
the uses anticipated by the Partnership. Applications have been or will be
made to change the zoning for certain of those parcels. As described under
Item 2."Properties," some Properties have already been rezoned, but no
assurances can be given that all such rezoning changes will be approved.
Zoning changes are dependent on, among other things, whether or not such change
would be consistent with the General and Specific Plan for a given area.
Further, final parcel/tract maps have not been approved for all Properties, nor
have any grading or building permits been obtained. In the event that such
Properties do not receive the zoning desired by the General Partners, or if
final maps are not approved or permits not obtained, the value of those parcels
to the Partnership and to others may be reduced and the investment results of
the Partnership may be materially adversely affected.
GROWTH INITIATIVES. Many counties and cities in California have been
subject to so called "slow growth" initiatives which could seriously affect the
ability to timely develop properties located within a county or city passing
such an initiative. Although no such initiatives are currently pending, such
an initiative could adversely affect the use or value of those of the
Properties located within such county or city.
<PAGE> 9
PROPERTY TAX REFORM AND RENT CONTROL. Statewide property tax reform
has reduced real property taxes in California. However, subsequently enacted
statewide implementing legislation may cause real property taxes in California
to increase at a more rapid rate than previously experienced and legislation
enacted in certain municipalities in response to the statewide reform requires
owners of real property to pass through property tax saving to residential and
certain commercial tenants by various means, including rent reduction. It is
also possible that legislation at the state or local level may be enacted in
California which include some form of rent control applicable to the
Partnership. In addition, certain fees and charges associated with the
acquisition and ownership of real property in California have been increased to
offset decreases in local revenue resulting from the property tax reduction.
OTHER GOVERNMENTAL INTERVENTION. There can be no assurance that there
will be no governmental intervention with respect to the Properties that would
adversely affect the use or value of the Properties. For example, building
moratoriums, changes in general or specific plans, down-zoning of the
Properties or unanticipated environmental regulation or similar considerations
could impair the value of the Properties, either to the partnership or to
others.
ENVIRONMENTAL
The Partnership may be required in certain instances to obtain
environmental impact, biological impact or other similar reports prior to
development of the Properties. Such reports may indicate conditions which make
it more expensive (or in rare cases, impossible) to develop a Property in a
manner anticipated by the Partnership, or may cause delays in the development
of a Property. If a Property is contaminated by hazardous materials, the
Partnership could incur substantial clean up costs under federal, state and
local laws which could adversely affect the investment results of the
Partnership.
To date, no environmental studies have been done on the Property. The
General Partners know of no environmental conditions on the Properties that
would adversely affect the investment results of the Properties.
EMPLOYEES
The Partnership has no employees. Management of the Partnership is
provided by the General Partners. See Item 10 "Directors and Executive
Officers" for information about the General Partners.
ITEM 1(D). FOREIGN OPERATIONS
The Partnership has no foreign operations in foreign countries:
<PAGE> 10
ITEM 2. PROPERTIES
The Partnership acquired a total of five properties. All of the
Properties are in the area of Southern California known as the "Inland Empire."
While no fixed geographical boundary identifies the Inland Empire, the General
Partners consider the Inland Empire to include most of the western portion of
Riverside and San Bernardino counties and to be roughly bounded by the cities
of Corona on the west, the Coachella Valley (Palm Springs area) on the east,
the City of Victorville on the north and Murietta (formerly Rancho California)
on the south.
Included in this area are the communities of Perris, Sun City, Moreno
Valley, Riverside, Beaumont, San Jacinto, Palm Desert, Murietta (formerly
Rancho California) and Elsinore in Riverside County, and Fontana, Rialto,
Rancho Cucamonga, Ontario, San Bernardino Highlands and Chino in San Bernardino
County.
The Properties are unimproved and do not produce any operating income
or cash flow. It is possible that future economic conditions, governmental
actions or other factors may deter or prevent the Partnership from
pre-developing or developing the Properties, or any of them. In such even, the
potential profitability, if any, with respect to the Properties would be
dependant upon appreciation of the Properties and the Partnership's ability to
refinance and sell the same. There can be no assurance that the Properties,
even if developed by the Partnership, can be operated or ultimately sold for
profit.
The Partnership owns the following properties:
<TABLE>
<CAPTION>
Date Purchase Date Sales
Property Purchased Price Sold Price
-------- --------- ---------- ------ -----
<S> <C> <C> <C> <C>
Perris 9.6 02-21-91 $1,659,000 * *
Victorville 19.55 11-13-90 $1,750,000 * *
Adelanto 18.3 12-03-90 $ 380,000 * *
Victorville 70.35 07-02-91 $1,752,500 * *
Riverside 18.54 08-02-92 $ 673,000 * *
- ----------------------------
</TABLE>
* All of the Properties were still owned by the Partnership as of
December 31, 1996.
PERRIS 9.6. This Property, consisting of approximately 9.6 net acres,
is located at the southwest corner of the intersection of Nuevo Road and Evans
in the City of Perris, and is currently zoned C-2 (general commercial). The
Property is adjacent to the Park West Specific Plan, which contemplates 2,203
residential dwelling units over 520 acres. Construction of the new town center
is underway on Nuevo and the 215 freeway which is 1 -1/2 miles from the
Property.
<PAGE> 11
VICTORVILLE 19.55. This Property, consisting of approximately 19.55
acres, is located at the southeast corner of Holly and Highway 395 in the City
of Victorville. Since contracting to buy the Property, the General Partners
have successfully achieved a rezoning from M-I-T (light manufacturing) to C-2-T
(commercial). The intersection at which the Property is located is schedule to
become one of the major intersections in the Victor Valley. Cal Trans has
informally adopted a redesign plan for Highway 395 which will widen it to six
lanes and create traffic signal controlled intersections at Holly and five
other cross streets in the Cities of Victorville and Adelanto. Holly is
scheduled to become a 100 foot wide surface connector.
ADELANTO 18.3. This property, consisting of approximately 18.3 acres,
is located in the City of Adelanto and is currently zoned R-1 (residential).
Since its acquisition, the General Partners have secured approval of a
tentative tract map creating 73 single-family residential lots. The
engineering and additional work necessary to make the map recordable is
currently underway, and the Property is being held for resale. Located at the
Northeast corner of Cactus and Raccoon in the City of Adelanto, the property is
part of the area to be included within the Second Assessment District to bring
sewer, water and paved streets to the Property.
VICTORVILLE 70.35. This Property, consisting of approximately 70.35
acres, is located within the city limits of Victorville, approximately -1/2
mile east of Highway 395 with Palmdale Drive to the north, and Luna Road to the
south. When the Property was acquired, it was zoned for three residential
units per acre. However, the general plan calls for five units per acre, and
the General Partners have initiated a plan for the Property calling for partial
PUD (Planned Unit Development) zoning and Tentative Tract Maps, which, when
taken together, will create 346 single-family home lots. The Partnership
contracted with Ludwig Engineering to do the final engineering on a deferred
payment basis on these tracts. The final engineering costs are due on sale of
Property or three years, whichever occurs first. The General Partners
personally guaranteed the Partnership's unsecured Note to Ludwig Engineering
for this work. Infrastructure is being brought to the property by a
combination of improvements funded by the City in an Assessment District, and
neighboring developers. The General Partner's business plan is to have the
final map ready to record, making the project much more attractive to a
builder.
RIVERSIDE 18.54. This Property, consisting of approximately 18.54
acres, is located southeast of and adjacent to the intersection of Oleander
Avenue and Decker Road in the Perris Area of Riverside County, California. The
Property is zoned Industrial. Construction of the freeway off-ramp is complete
which greatly enhances the visibility of the Property.
ITEM 3. LEGAL PROCEEDINGS
There are no matters requiring disclosure under Item 3:
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters we submitted to a vote of Registrants security holders
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1996, there were approximately 968 record holders of
Units of Limited Partnership Interest. There is no other class of security
outstanding or authorized. To the General Partners knowledge, there has not
been, and currently there does not exist, any publicly established trading
market for the Units. Accordingly, there was no trading activity during the
fiscal year ended December 31, 1995 or 1994. In 1996, 17 Units traded on the
secondary market at approximately $260 a Unit.
CASH DISTRIBUTIONS
There were no cash distributions to the Partners during the fiscal
years ended December 31, 1996 1995, 1994, 1993, or 1992. A summary of the
provisions of the Partnership Agreement regarding distributions of cash and
allocations of net income and losses is set forth below in Item 1, "Business"
under the subcaption "Distributions, Net Income and Net Loss."
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data of the
Partnership for the years ended December 31, 1996 1995, 1994, 1993, and 1992,
and should be read in conjunction with the more detailed financial statements
contained in Item 8 below.
<PAGE> 13
(UNAUDITED)
YEAR ENDED DECEMBER 31
(NOT COVERED BY AUDITOR'S REPORT)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income $ 1,182 $ 1,668 $ 6,113 $ 8,393 $ 26,744
Other income - - - - -
----------- ----------- ----------- ---------- ----------
Total income $ 1,182 $ 1,668 $ 6,113 $ 8,393 $ 26,744
----------- ----------- ---------- ---------- ----------
Net income (loss) $(3,547,464) $(2,118,961) $ 3,257 $ 5,537 $ 23,888
----------- ----------- ---------- ---------- ----------
Net income (loss) per $ (403.68) $ (241.00) $ .37 $ .63 $ 2.72
----------- ----------- ---------- ---------- ----------
Cash distribution per Unit* $ - $ - $ - $ - $ -
----------- ----------- ---------- ---------- ----------
Total assets $ 2,307,755 $ 5,758,528 $7,572,605 $7,568,733 $7,563,447
=========== =========== ========== ========== ==========
</TABLE>
*(Based on 8,700 Units Outstanding at December 31, 1992, 1993, 1994 1995 and
1996.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the period from inception (July 20, 1990) through December 31,
1991, the Partnership was engaged primarily in the sale of Units of Limited
Partnership Interest and the investment of the subscription proceeds to
purchase parcels of unimproved real property. The only revenues received
during, 1992, 1993, 1994, 1995, and 1996 were from the interest income earned
on funds held pending their investment to acquire the Properties and income
from the forfeiture by potential buyer(s) of non-refundable escrow deposit(s).
The Partnership losses in 1995 and 1996 were due to write-downs in value of the
Partnership land due to a decline in market value of the land.
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The partnership raised a total of $7,722,751, net of syndication
costs, from the sale of Limited Partnership Units. During the Period from
inception through December 31, 1995, the Partnership acquired a total of five
Properties for all cash at a total expenditure of $7,457,705, including
carrying costs (such as interest expense and property taxes). All costs
associated with the acquisition of the Properties, as well as carrying costs
and administrative expenses, are capitalized (i.e., added to the cost of the
Properties) and are deducted from the sales prices to determine gains (or
losses) when the Properties are sold.
The Partnership does not intend to acquire any additional Properties.
The five Properties are being held for resale. Upon sale, the Partnership
intends to distribute the sales proceeds, less any reserves needed for
operations, to the Partners.
The Partnership owns land in the Riverside and San Bernardino counties.
This region of Southern California experienced a significant economic recession
that has substantially eroded the value of all real estate in the area.
Lower home and commercial property prices has driven down the value of
vacant land, and in many instances has made new development financially
unfeasible. This has made it difficult to sell the Partnership land at
anything but liquidation prices. The general partners expect the economic
recovery in this region to be slow. Accordingly, the General Partners intend
to meet currently anticipated cash requirements for at least the next twelve
months by first using cash on hand; second, funds from interest income; third,
the sale of properties; and fourth, from a loan secured by the property.
The General Partners believe there are insufficient funds available to
meet anticipated cash requirements for the next 12 months. In March 1997, the
General Partners procured a $125,000 loan to provide cash for Partnership
operations. The loan is secured by Partnership land. Management is also
attempting to sell one or more of the remaining parcels of land to meet
anticipated cash requirements. There can be no assurance that management will
be successful in selling one or more of the remaining parcels of land.
The Partnership has contracted with Ludwig Engineering to do the final
engineering on the Victorville 70 acre parcel. The Partnership has a note
payable to Ludwig for the work performed. The note matured March 1, 1996. The
General partners are negotiating for an extension of the note. There is no
assurance that management will be successful in obtaining an extension.
There are not current plans to further develop any of the parcels, and it is
expected that no such plans would be undertaken unless adequate funding could
be obtained, either from the sale or refinancing of parcels or from a joint
venture partner.
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Form 10K:
For the fiscal years ended December 31, 1996, 1995, 1994, and 1993:
Page No.
<TABLE>
<S> <C>
Independent Auditor's Report FS-1
Balance Sheets as of December 31, 1996, and 1995 FS-2
Statements of Income for the years ended December 31, 1996, 1995, and 1994
FS-3
Statements of Partners Capital for the years ended
December 31, 1996, 1995, 1994, and 1993 FS-4
Statements of Cash Flow for the years ended December 31,
1996, 1995, and 1994 FS-5
Notes to Financial Statements FS-6
Financial Statement Schedules FS-10
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in
the Financial Statements and Notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The accounting firm of Balser, Horowitz, Frank & Wakeling ("BHF&W),
whose report is included elsewhere herein with respect to the Partnership's
financial statements for the fiscal years ended December 31, 1996 and 1995, has
provided accounting services to this Partnership and to other limited
partnerships of which the General Partners are the general partners, for many
years.
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no employees and no directors or executives
officers. Management of the Partnership is provided by the General Partners.
TMP Properties, a California general partnership, and TMP Investments,
Inc., a California corporation, are the General Partners of the Partnership.
TMP Properties was formed on July 14, 1978. TMP Properties' principal business
has been the acquisition of undeveloped land and the coordination of activities
necessary to add value to such land, primarily through the predevelopment
process. It has syndicated numerous private real estate limited partnerships,
and eleven public real estate limited partnerships. All of the properties
purchased by such partnerships were located in the State of California except
for one (an office building) which was located in Oklahoma City, Oklahoma.
Each of such limited partnerships involved a specified real property program in
which TMP Properties was the general partner. The general partners of TMP
Properties are William O. Paso, Anthony W. Thompson and Scott E. McDaniel.
The individual partners of TMP Properties are listed below, together
with information regarding their employment experience and background.
TMP Investment Inc., a California corporation, was formed on December
12, 1984. TMP Investments Inc. has served in the capacity of a co-general
partner in all of the TMP sponsored programs since December 1984. In 1993, TMP
Investments Inc. began serving as sole general partner in all TMP sponsored
partnerships. TMP Investments Inc. has been and will continue to be engaged in
asset management, real estate accounting, budgetary services, and partnership
management on behalf of existing limited partnerships and limited partnerships
which it sponsors in the future. The shareholders of TMP Investments, Inc.
were William O. Passo, Anthony W. Thompson, and Scott E. McDaniel until
September 1993, when Mr. McDaniel sold his share of TMP Investments Inc. to Mr.
Passo and Mr. Thompson.
WILLIAM O. PASSO, 55, is a Director and the President of TMP
Investments Inc. He practiced law for 18 years, has been a licensed real estate
broker since 1974 and holds registered representative and general principals
securities licenses through the National Association of Securities Dealers, Inc.
Mr. Passo received his Juris Doctorate Degree from UCLA School of Law in 1967.
He has been a senior partner first of Passo, Yates, and Nissen until 1975, then
of Passo & Davis until March 1983 when he resigned from the partnership to take
a leading role in the management of the affairs of TMP Properties. Mr. Passo
has been involved in public and private real estate syndication since 1970, and
has acted as principal, investor, general partner, and counsel in real estate
transactions involving apartments, office buildings, and unimproved land. Mr.
Passo is a director and officer of William O. Passo, Inc., an officer of TMP
Capital Corp., an NASD registered broker-dealer, and an officer of TMP Realty, a
registered real estate broker.
<PAGE> 17
SCOTT E. MCDANIEL, 50, is a Director and Vice President of TMP
Investments Inc. He is a graduate of the U.S. Naval Academy at Annapolis,
majoring in engineering. Mr. McDaniel is a California licensed general
contractor and has been a licensed California real estate broker since 1976.
He was the founder and President of Scott E. McDaniel, Inc. (dba Regal Realty).
Mr. McDaniel has developed office complexes and industrial space in Southern
California and has personally brokered over $125 million of real estate since
1982. Through an affiliated company, DeVille Construction Co. Inc., Mr.
McDaniel has directed general contracting operations in Southern California
since 1982.
ANTHONY W. "TONY" THOMPSON, 50, is Director and Vice-President of TMP
Investments Inc. A graduate of Sterling College in 1969, with a Bachelors
Degree in Science and Economics, Mr. Thompson holds the professional
designations of Charter Life Underwriter and chartered Financial Consultant
form the American College. Mr. Thompson is a registered principal with the
NASD and is a principal in TMP Capital Corp., a NASD registered Broker Dealer.
Mr. Thompson has been involved in the securities and the real estate investment
fields since 1970, and a General Partner of TMP since its formation in 1978.
Mr. Thompson's primary responsibility is marketing TMP offerings through the
broker dealer community.
The General Partners have raised over $100,000,000 since 1978 for
properties which they, or partnerships with which they are affiliated, have
purchased.
ITEM 11. EXECUTIVE COMPENSATION
During the period since the formation of the Partnership (March 20,
1990) through the fiscal year ended December 31, 1996, the Partnership paid
fees to the General Partners for various services in the amount of $87,126 of
which $15,419 was paid in the year ended December 31, 1996, 1995, and 1994.
The General Partners did not receive any Partnership distribution during that
period. (See Item 13. "Certain Relationships and Related Transactions".) The
Partnership has no officers or employees and, therefore, paid no other
compensation other than that paid to the General Partners as indicated above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1996, the Partnership had 8,700 units of Limited
Partnership interest (the "Units") issued and outstanding. To the knowledge of
the General Partners, no person beneficially owns more the 5% of the Units.
The following table set forth the number of Units beneficially owned as of
December 31, 1996 by each officer, director and general partner of the General
Partners and by all such persons as a group.
<PAGE> 18
<TABLE>
<CAPTION>
Number of Percent of
Name of Beneficial Owner Units Class
- ------------------------ --------- ----------
<S> <C> <C>
William O. Passo 21 0.272%
Anthony W. Thompson 48 0.621%
All officers, directors and 69 0.893%
general partners as a group
(2 persons, including the above)
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
The following information summarizes the forms and amounts of
compensation (some of which involve cost reimbursements) paid either by the
Partnership, or others, to the General Partners and their affiliates since the
formation of the Partnership (July 20, 1990) through the fiscal year ended
December 31, 1996. The information under "Operating and Liquidation Stage" and
"Summary of Compensation" below also describes the amounts of compensation to
be paid to the General Partners and their affiliates in the future. None of
these amounts were determined by arm's-length negotiations. Reference is also
made to the Notes to the Financial Statements included elsewhere in this Form
10K for additional information regarding transactions with affiliates.
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
<TABLE>
<CAPTION>
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1996
-------------------------- ----------------------------------------- -----------------
<S> <C> <C>
Selling Commission and Due Up to a maximum of 10% of gross proceeds, a $780,008
Diligence Reimbursement (TMP minimum of which was reallocated to
Capital Corp.) participating Soliciting Dealers (which
included TMP Capital Corp.) from Units sold by
them. Up to an additional 0.5% paid to
Soliciting Dealers (which included TMP Capital
Corp.) for due diligence activities.
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C>
Reimbursement for Organizational Expenses paid to the General $13,426
Organizational Expenses Partners to reimburse them (without markup or
(General Partners) profit) for organizational costs actually
incurred such as advertising, mailing,
printing costs, clerical expenses, legal and
accounting fees.
Reimbursement for Property The General Partners were reimbursed (without $351,234
Expenses (General Partners) markup or profit) for all out of pocket
expenses directly related to the Properties,
including the purchase price of Properties
acquired prior to Partnership formation, out
of pocket carrying costs of such Properties
(such as interest and property taxes)
including actual interest incurred on all
funds advanced for the benefit of the
Partnership, deposits, escrow extension
payments, appraisal fees, expenses of
feasibility and other studies performed by
third parties unaffiliated with the General
Partners and similar expenses, but not
including the General Partners' overhead,
salaries, travel or like expenses.
Property Acquisition Fees For services rendered in connection with the
(General Partners or an acquisition of the Properties acquired by the
affiliate) Partnership, the General Partners, or an
affiliate, received acquisition compensation
(either denominated as such, or as a real
estate brokerage commission, or otherwise) in
the following amounts:
(I) Acquisition fees: $500,000
(II) Real estate brokerage commissions $158,900
</TABLE>
<PAGE> 20
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
<TABLE>
<CAPTION>
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1996
-------------------------- ----------------------------------------- -----------------
<S> <C> <C>
Partnership Management Fee A Partnership Management Fee with respect to $87,126
(General Partners) each Property until a Property is sold or
improvement of the Property commences in an
annual amount of 1/4 of 1% (.225%) of the cost
of the property, but not to exceed 2% of such
cost in the aggregate.
Leasing and Property For leasing an improved Property, or a portion $-0-
Management Fees (General thereof, a commission equal to 7% for the
Partners or an affiliate) first year's rent (net lease) or 6% of the
first year's rent (gross lease) decreasing to
2.5% (net lease) or 2% (gross lease) of the
rent for years eleven through thirty. Upon
development of the Properties, or any of them,
an amount up to 5% of the gross revenues of
the Properties for supervision for the
operation and maintenance of the Properties.
Such leasing and property management fees
shall not exceed the competitive rates that
would be charged by unaffiliated persons.
Interest in Partnership 1% interest in all Partnership allocations of $-0-
Allocation of Each Material Net Income, Net Loss and Distributions of
Item (General Partners) Distributable Cash from Operations and of Cash
from Sale or refinancing of the Properties.
Subordinated Participation A 16.5% interest in all Partnership $-0-
(General Partners) allocations of Net Income and Distributions of
Distributable Cash from Operations and of Cash
from the Sale or Refinancing of the Properties
subordinated to a return of all Limited
Partners' Capital Contributions plus a
cumulative, non-compounded return of 6% per
annum on their Adjusted Capital Contributions.
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
Subordinated Real Estate Real estate commissions with respect to the $-0-
Commission (General Partners sale of Properties which are equal to the
or an Affiliate) lesser of: (I) 3% of the gross sales price of
a Property; equal to one-half the normal and
competitive rate charged by unaffiliated
parties, but payment shall be subordinated to
a return of all Limited Partners' Capital
contributions, plus a cumulative,
noncompounded return of 6% per annum on their
Adjusted Capital Contributions.
</TABLE>
SUMMARY OF COMPENSATION. In summary, the Partnership paid securities
brokerage commissions for services performed by TMP Capital Corp. in the sale
of the Units in the amount of $780,008 (including due diligence fees) and
reimbursed the General Partners for expenses incurred in organizing the
Partnership and documenting the offering in the amount of $13,426. The General
Partners also received Property Acquisition Fees and real estate brokerage
commissions in the amounts set forth above, and were reimbursed for out of
pocket expenditures made in connection with the acquisition and carrying costs
for the Properties or studies related thereto. During the operating stage, the
partnership will pay the General Partners an annual Partnership Management Fee
for managing the Partnership equal to 1/4 of 1% of the cost of the Properties,
payable annually in advance with respect to each Property until such time as
the Properties are sold or improvement of the land commences; provided such
fee, in the aggregate, shall not exceed 2% of the cost of the Properties. At
such time, if at all, that the Properties, or any of them, are developed, the
General Partners will receive leasing commissions as described above, and a
property management fee in an amount up to 5% of the gross property revenues,
but not to exceed the competitive rate charged by nonaffiliated persons
providing similar services. The General Partners have a 1% interest in all
allocations of Partnership Net Income until the limited Partners have received
allocations of Net Income equal to a cumulative, noncompounded return of 6% on
their Adjusted Capital Contributions (the "Preferred Return"); and thereafter,
the General Partners will have a 16.5% interest in all Partnership allocations
of Net Income, Distributions of Distributable Cash from Operations, and Cash
from Sale or Refinancing of Partnership Property and the Limited partners will
have an 83.5% interest therein. Net Losses will be allocated to the Partners
with positive Capital Accounts, in accordance with the ratio of their positive
Capital Account balances until no Partner has a positive Capital Account; and
thereafter, Net Losses will be allocated 100% to the General Partners. If the
General Partners or an Affiliate provide a substantial amount of services with
respect to the sale of a Partnership Property, the General Partners or an
Affiliate may receive a real estate commission in an amount up to one-half of
the amount of competitive real estate commissions, not to exceed 3% of the
sales price of such Property. Both the 16.5% General Partners' participation
and the Partners' real estate commission are subordinated to a return of all
Limited Partners' Capital Contribution plus a cumulative, non-compounded return
of 6% per annum on their Adjusted Capital contributions.
<PAGE> 22
Thus, only after the Limited Partners have recovered their Capital
Contributions plus the cumulative 6% return discussed above, will the General
Partners' allocation of Distributions of Distributable Cash from Operations and
Cash from Sale or Refinancing of Partnership Property exceed a nominal 1%
ownership interest therein. Such allocation provides built-in incentive for
the General Partners to seek the optimum performance from the Partnership's
Properties.
CONFLICTS OF INTEREST
The Partnership is subject to various conflicts of interest from its
relationship with the General Partners. These conflicts include, but are not
limited to:
CONFLICTS IN GENERAL. The interests for the Limited Partners may be
inconsistent with those of the General Partners or their Affiliates when the
General Partners must make policy decisions on behalf of the Partnership. The
General Partners, for instance, might not desire to sell a Property when a sale
would be advantageous to the Limited Partners because of the General Partner's
interest in Distributions of Distributable Cash from Operations and Net
Proceeds from the Sale or Refinancing of the Property. Subject in certain
circumstances to the approval of the holders of a majority or other specified
voting percentage of the Units, the General Partners will have the discretion
as to when to sell a Property or portion thereof. The timing of the sale of a
Property or any portion thereof and the terms on which such sale will be made
may result in a conflict of interest. Furthermore, the sale of a Property may
result in the recognition of substantial taxable gain to the General or Limited
Partners in different ratios depending upon three timing of such sale.
Accordingly, the decisions as to when to sell a Property may be advantageous to
the General Partners and disadvantageous to the Limited Partners, or vice
versa. The General Partners in any event will be compelled to make any
decisions with respect to the sale or retention of a Property based upon the
best interests of the a Partnership and its Limited Partners because of the
fiduciary duty which they owe to the Limited Partners.
AVAILABILITY OF MANAGEMENT SERVICE. The Partnership will not have
independent management, as it will rely on the General Partners and affiliates
for all its management decisions. Other investment projects in which the
General Partners and affiliates participate, either individually or as a
general partner, real estate broker, or investment adviser, may compete with
the Partnership for the time and resources of the General Partners and their
affiliates. The General Partners will, therefore, have conflicts of interest
in allocating management time, services, and functions among the Partnership
and other existing partnerships and businesses, s well as any partnerships or
business entitles which may be organized in the future. Under the Partnership
Agreement, the General Partners are obligated to devote as much time as they,
in their sole discretion, deem to be reasonably required for the proper
management of the Partnership and its assets. The General Partners believe
that they have the capacity to discharge their responsibilities to the
Partnership notwithstanding participation in other investment programs and
projects.
INTERESTS IN OTHER ACTIVITIES. The General Partners, or any of their
affiliates, may engage for their own account, or for the account of others, in
other business ventures, whether real estate or otherwise, and neither the
Partnership nor any Limited Partner shall be entitled to any interest therein
solely by reason of any relationship with or to each other arising from the
Partnership.
<PAGE> 23
RECEIPT OF COMPENSATION BY THE GENERAL PARTNERS. The payments to the
General Partners set forth above have not been determined by arm's-length
negotiations.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8K
(a) For a listing of financial statements, reference is made to Item 8
included in this Form 10K
(b) The Registrant filed no reports on Form 8K during the fourth quarter
of the fiscal year ended December 31, 1996.
(c) Exhibits - Those Exhibits required by Item 601 of Regulation S-K which
are applicable to the Registrant are as follows:
(3), (4) and (10.1) Agreement of Limited Partnership and other
material agreements are incorporated by
reference to Exhibits (3), (4) and (10.1) to
the Form 10 Registration Statement, SEC File
No. 0-20120 filed on April 24, 1992.
<PAGE> 24
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.
Dated: March 14, 1997
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
By: TMP INVESTMENTS INC.,
A California corporation as co-General
Partner
By: __________________________________
William O. Passo, President
By:
___________________________________
Anthony W. Thompson, Executive Vice
President
By:
____________________________________
Michael C. Sun, Chief Financial Officer
and by TMP Properties, a California
General Partnership,
as co-General Partner
By:
_____________________________________
William O. Passo, General Partner
By:
_____________________________________
Scott E. McDaniel, General Partner
By:__________________________________
Anthony W. Thompson, General Partner
<PAGE> 25
TMP INLAND EMPIRE VII, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE> 26
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Financial Statements
December 31, 1996 and 1995
Table of Contents
Independent Auditor's Report............................................ 1
Balance Sheets.......................................................... 2
Statements of Income.................................................... 3
Statements of Partners' Capital......................................... 4
Statements of Cash Flows................................................ 5
Notes to Financial Statements........................................... 6-9
Supplementary Information............................................... 10-12
<PAGE> 27
[BALSER, HOROWITZ, FRANK & WAKELING LETTERHEAD]
Independent Auditor's Report
To the Partners
TMP Inland Empire VII, Ltd.
(A California Limited Partnership)
We have audited the accompanying balance sheets of TMP Inland Empire VII, Ltd.
(A California Limited Partnership) as of December 31, 1996 and 1995, and the
related statements of income, partners' capital, and cash flows for the years
ended December 31, 1996, 1995 and 1994. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TMP Inland Empire VII, Ltd. (A
California Limited Partnership) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years ended December 31,
1996, 1995 and 1994, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information contained
in Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is stated fairly in all material
respects in relation to the basic financial statements taken as a whole.
Balser, Horowitz, Frank and Wakeling
BALSER, HOROWITZ, FRANK & WAKELING
An Accountancy Corporation
Santa Ana, California
January 23, 1997
<PAGE> 28
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assets
Cash $ 7,755 $ 8,660
Investment in unimproved land, at lower of cost
or fair value 2,300,000 5,748,071
Organization costs (net of accumulated
amortization of $10,274 in 1996 and
$8,477 in 1995) 0 1,797
----------- -----------
Total assets $ 2,307,755 $ 5,758,528
=========== ===========
Liabilities and Partners' Capital
Due to affiliates $ 703 $ 0
Accrued interest payable 84,365 61,339
Franchise tax payable 800 800
Property tax payable 87,494 14,532
Notes payable 229,628 229,628
----------- -----------
Total liabilities 402,990 306,299
----------- -----------
Partners' capital (deficit)
General partners $ (57,880) $ (22,405)
Limited partners; 8,700 equity units
authorized and outstanding 1,962,645 5,474,634
----------- -----------
Total partners' capital 1,904,765 5,452,229
----------- -----------
Total liabilities and partners' capital $ 2,307,755 $ 5,758,528
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-2-
<PAGE> 29
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income
- ------
Interest income $ 1,182 $ 1,668 $6,113
----------- ----------- ------
Total income 1,182 1,668 6,113
----------- ----------- ------
Expenses
- --------
Decline in fair value of
unimproved land 3,546,049 2,117,773 0
Amortization 1,797 2,056 2,056
----------- ----------- ------
Total expenses 3,547,846 2,119,829 2,056
----------- ----------- ------
Income or (loss) before income taxes (3,546,664) (2,118,161) 4,057
State franchise tax 800 800 800
----------- ----------- ------
Net income or (loss) $(3,547,464) $(2,118,961) $3,257
=========== =========== ======
Allocation of net income or (loss)
General partners, in the aggregate $ (35,475) $ (21,190) $ 33
=========== =========== ======
Limited partners, in the aggregate $(3,511,989) $(2,097,771) $3,224
Limited partners, per equity unit $ (403.68) $ (241) $ .37
=========== =========== ======
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-3-
<PAGE> 30
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Statements of Partners' Capital
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Partners' capital (deficit),
December 31, 1993 $ (1,248) $ 7,569,181 $ 7,567,933
Net income for 1994 33 3,224 3,257
-------- ----------- -----------
Partners' capital (deficit),
December 31, 1994 (1,215) 7,572,405 7,571,190
Net (loss) for 1995 (21,190) (2,097,771) (2,118,961)
-------- ----------- -----------
Partners' capital (deficit)
December 31, 1995 (22,405) 5,474,634 5,452,229
Net (loss) for 1996 (35,475) (3,511,989) (3,547,464)
-------- ----------- -----------
Partners' capital (deficit)
December 31, 1996 $(57,880) $ 1,962,645 $ 1,904,765
======== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-4-
<PAGE> 31
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flow from operating activities
Net income or (loss) $(3,547,464) $(2,118,961) $ 3,257
Adjustments to reconcile net income or (loss)
to net cash (used in) operating activities:
Amortization 1,797 2,056 2,056
Increase in accrued interest payable 23,026 61,339 0
Increase or (decrease) in due to affiliates 703 (615) 615
Increase in property tax payable 72,962 14,532 0
Increase in carrying costs (97,978) (178,511) (106,080)
Increase in development costs 0 (229,628) (6,488)
Decline in fair value of unimproved land 3,546,049 2,117,773 0
----------- ----------- ---------
Net cash (used in) operating activities (905) (332,015) (106,640)
----------- ----------- ---------
Cash flow from financing activities
Issuance of notes payable 0 229,628 0
----------- ----------- ---------
Net cash provided by financing activities 0 229,628 0
----------- ----------- ---------
Net (decrease) in cash (905) (102,387) (106,640)
Cash, beginning of year 8,660 111,047 217,687
----------- ----------- ---------
Cash, end of year $ 7,755 $ 8,660 $ 111,047
=========== =========== =========
Supplemental disclosures of cash flow information
Income taxes paid $ 800 $ 800 $ 800
Interest paid 0 0 0
</TABLE>
Other disclosures
The Partnership did not enter into any non-cash investing activities, but had
non-cash financing activities (see Note 6). It did not have any short-term
highly liquid investments during the years ended December 31, 1996, 1995 or
1994.
See Accompanying Notes and Independent Auditor's Report
-5-
<PAGE> 32
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1 - Summary of significant accounting policies
Accounting Method - The Partnership's policy is to prepare its financial
statements on the accrual basis of accounting.
Cash and Cash Equivalents - For purposes of the statements of cash flows,
the Partnership considers all cash in banks and all highly liquid
investments with a maturity of three months or less to be cash
equivalents. During the normal course of its business, the Partnership
accumulates cash and maintains deposits at various banks.
Organization Costs - Organization costs include expenses incurred in the
formation of the Partnership that have been capitalized and that are being
amortized over a period of 40 years prior to 1992 and 5 years beginning in
1992.
Investment in Unimproved Land - Investment in unimproved land is stated at
the lower of cost or fair value (see Note 7). All costs associated with
the acquisition of a property are capitalized. Additionally, the
Partnership capitalizes all carrying costs (such as interest expense and
property taxes). These costs are added to the cost of the properties and
are deducted from the sales prices to determine gains when properties are
sold.
Syndication Costs - Syndication costs (such as commissions, printing, and
legal fees) totaling $1,007,223 represent costs incurred to raise capital
and, accordingly, are recorded as a reduction in partners' capital (see
Note 3).
Estimates - In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Concentration - All unimproved land parcels held for investment are
located in the Inland Empire area of Southern California. The eventual
sales price of all parcels is highly dependent on the real estate market
condition. The Partnership attempts to mitigate any potential risk by
monitoring the market condition and holding the land parcels until the
real estate market recovers.
Income Taxes - The entity is treated as a partnership for income tax
purposes and any income or loss is passed through and taxable to the
individual partners. Accordingly, there is no provision for federal income
taxes in the accompanying financial statements. However, the minimum
California Franchise tax due by the Partnership at December 31, 1996 and
1995 is $800.
See Independent Auditor's Report
-6-
<PAGE> 33
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 2 - Organization of the Partnership
On July 20, 1990, the Partnership was formed with TMP Properties (A
California General Partnership) and TMP Investments, Inc. (A California
Corporation) as the general partners. The partners of TMP Properties are
William O. Passo, Anthony W. Thompson and Scott E. McDaniel. William O.
Passo and Anthony W. Thompson were the shareholders of TMP Investments,
Inc. until October 1, 1995, when they sold their shares to TMP Group,
Inc., and then became the shareholders of TMP Group, Inc.
The Partnership originally acquired four separate parcels of unimproved
real property in Riverside and San Bernardino Counties, California. During
1992, one additional parcel in Riverside County was purchased by the
partnership. The properties were to be held for investment, appreciation,
and ultimate sale and/or improvement of all or a portion thereof, either
alone or in conjunction with a joint venture partner.
The partnership agreement provides for two types of investments:
Individual Retirement Accounts (IRA) and others. The IRA minimum purchase
requirement was $2,000 and all others were a minimum purchase requirement
of $5,000. The maximum liability of the limited partners is the amount of
their capital contribution.
Note 3 -Partners' contributions
The Partnership offered for sale 8,700 units at $1,000 each to qualified
investors. As of December 31, 1992, all 8,700 units had been sold for
total limited partner contributions of $8,700,000. There have been no
contributions made by the general partners. As described in Note 1,
syndication costs have been recorded as a reduction in partners' capital.
Note 4 - Allocation of profits, losses and cash distributions
Profits, losses and cash distributions are allocated 99% to the limited
partners and 1% to the general partners until the limited partners have
received an amount equal to their capital contributions plus a cumulative,
non-compounded return of 6% per annum on their adjusted capital
contributions. At that point, the limited partners are allocated 83.5% and
the general partners 16.5% of profits, losses and cash distributions.
There were no distributions in 1996, 1995 or 1994.
See Independent Auditor's Report
-7-
<PAGE> 34
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 5 - Related party transactions
Syndication costs (see Note 1) include $870,000 in selling commissions
paid in prior years to TMP Capital Corp. for the sale of partnership units
of which a portion was then paid to unrelated registered representatives.
William O. Passo and Anthony W. Thompson were the shareholders of TMP
Corp. until October 1, 1995, when they sold their shares to TMP Group,
Inc.
Investment in unimproved land includes acquisition fees of $500,000 paid
in prior years to TMP Properties and TMP Investments, Inc., the general
partners, for services rendered in connection with the acquisition of the
properties.
The Partnership paid $15,419 in partnership management fees to the general
partners for each of the years ended December 31, 1996, 1995 and 1994,
respectively. The Partnership was also charged $9,943, $9,042 and $8,163
during the years ended December 31, 1996, 1995 and 1994, respectively, by
the general partner and an affiliated company of the general partner for
office, secretarial and advertising expenses. At December 31, 1996 the
Partnership had a payable of $703, to the general partner and the
affiliated company.
Note 6 - Notes payable
The Partnership entered into loan agreements with an outside party who
provided engineering service for various land parcels. The total loan
amount of $229,628 accrues interest at 10% per annum, and the interest is
payable on or before March 1, 1997. The principal amount is payable in
full upon sale of the land parcels or upon recordation of the final tract
maps for the same parcels and is secured by those parcels. The loans are
guaranteed by the three general partners of TMP Properties and by TMP
Properties.
Note 7 - Decline in the fair value of investment in unimproved land
As of December 31, 1996 and 1995, the total carrying amount of the
investment in unimproved land was reduced by $3,546,049 and $2,117,773,
respectively. This reduction represents the decline in fair values, as
determined by the general partners, and is due mainly to the downturn in
Southern California's real estate market and slow recovery.
See Independent Auditor's Report
-8-
<PAGE> 35
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 8 - Property taxes payable
Property taxes payable at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 20,043
1996 67,451
--------
$ 87,494
</TABLE>
If the property taxes remain delinquent for five years, then the County
can foreclose on the property. Management plans to take necessary actions
to prevent foreclosures.
See Independent Auditor's Report
-9-
<PAGE> 36
Supplementary Information
<PAGE> 37
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Schedule I - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, For SEC Reporting Purposes)
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
COSTS CAPITALIZED
SUBSEQUENT GROSS
TO ACQUISITION AMOUNT
----------------- AT WHICH
INITIAL CARRYING CARRIED AT ACCUMULATED DATE OF
DESCRIPTION OF ASSETS ENCUMBRANCES COSTS IMPROVEMENTS COSTS YEAR-END DEPRECIATION CONSTRUCTION
--------------------- ------------ ------- ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unimproved land - Perris, CA -0- $ 1,859,244 -0- $167,452 $2,026,696 -0- n/a
Unimproved land - Victorville, CA -0- 1,937,240 -0- 165,235 2,102,475 -0- n/a
Unimproved land - Adelanto, CA -0- 451,137 -0- 41,361 492,498 -0- n/a
Unimproved land - Victorville, CA -0- 2,003,109 $236,116 278,908 2,518,133 -0- n/a
Unimproved land - Riverside, CA -0- 672,441 -0- 151,579 824,020 -0- n/a
--- ----------- -------- -------- ---------- ---
-0- $ 6,923,171 $236,116 $804,535 $7,963,822 -0-
=== =========== ======== ======== ========== ===
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN H COLUMN I
ESTIMATED
DATE DEPRECIABLE
DESCRIPTION OF ASSETS ACQUIRED LIFE
--------------------- -------- -----------
<S> <C> <C>
Unimproved land - Perris, CA 2/21/91 n/a
Unimproved land - Victorville, CA 11/13/90 n/a
Unimproved land - Adelanto, CA 12/3/90 n/a
Unimproved land - Victorville, CA 7/2/91 n/a
Unimproved land - Riverside, CA 8/25/92 n/a
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF CARRYING AMOUNT
- ---------------------------------
<S> <C> <C>
Beginning balance $ 7,865,844
Additions
Improvements $ -0-
Carrying costs 97,978
--------
Total additions 97,978
-----------
Ending balance 7,963,822
Less allowance for decline in the
fair value of unimproved land 5,663,822
-----------
$ 2,300,000
===========
</TABLE>
-10-
<PAGE> 38
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Schedule I - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, For SEC Reporting Purposes)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
COSTS CAPITALIZED
SUBSEQUENT GROSS
TO ACQUISITION AMOUNT
----------------- AT WHICH
INITIAL CARRYING CARRIED AT ACCUMULATED DATE OF
DESCRIPTION OF ASSETS ENCUMBRANCES COSTS IMPROVEMENTS COSTS YEAR-END DEPRECIATION CONSTRUCTION
--------------------- ------------ ------- ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unimproved land - Perris, CA -0- $1,859,244 -0- $152,916 $2,012,160 -0- n/a
Unimproved land - Victorville, CA -0- 1,937,240 -0- 170,178 2,107,418 -0- n/a
Unimproved land - Adelanto, CA -0- 451,137 -0- 35,501 486,638 -0- n/a
Unimproved land - Victorville, CA -0- 2,003,109 236,116 237,802 2,477,027 -0- n/a
Unimproved land - Riverside, CA -0- 672,441 -0- 110,160 782,601 -0- n/a
--- ---------- -------- -------- ---------- ---
-0- $6,923,171 $236,116 $706,557 $7,865,844 -0-
=== ========== ======== ======== ========== ===
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN H COLUMN I
ESTIMATED
DATE DEPRECIABLE
DESCRIPTION OF ASSETS ACQUIRED LIFE
--------------------- -------- -----------
<S> <C> <C>
Unimproved land - Perris, CA 2/21/91 n/a
Unimproved land - Victorville, CA 11/13/90 n/a
Unimproved land - Adelanto, CA 12/3/90 n/a
Unimproved land - Victorville, CA 7/2/91 n/a
Unimproved land - Riverside, CA 8/25/92 n/a
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF CARRYING AMOUNT
- ---------------------------------
<S> <C> <C>
Beginning balance $7,457,705
Additions
Improvements $ 229,628
Carrying costs 178,511
----------
Total additions 408,139
----------
7,865,844
Less allowance for decline in the
fair value of unimproved land (2,117,773)
----------
Ending balance $5,748,071
==========
</TABLE>
-11-
<PAGE> 39
TMP INLAND EMPIRE VII, LTD.
(A California Limited Partnership)
Schedule I - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, For SEC Reporting Purposes)
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
COSTS CAPITALIZED
SUBSEQUENT GROSS
TO ACQUISITION AMOUNT
----------------- AT WHICH
INITIAL CARRYING CARRIED AT ACCUMULATED DATE OF
DESCRIPTION OF ASSETS ENCUMBRANCES COSTS IMPROVEMENTS COSTS YEAR-END DEPRECIATION CONSTRUCTION
--------------------- ------------ ------- ------------ ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unimproved land - Perris, CA -0- $ 1,859,244 -0- $124,180 $1,983,424 -0- n/a
Unimproved land - Victorville, CA -0- 1,937,240 -0- 148,340 2,085,580 -0- n/a
Unimproved land - Adelanto, CA -0- 451,137 -0- 31,454 482,591 -0- n/a
Unimproved land - Victorville, CA -0- 2,003,109 6,488 154,979 2,164,576 -0- n/a
Unimproved land - Riverside, CA -0- 672,441 -0- 69,093 741,534 -0- n/a
--- ----------- ------ -------- ------- ---
-0- $ 6,923,171 $6,488 $528,046 $7,457,705 -0-
=== =========== ====== ======== ========== ===
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN H COLUMN I
ESTIMATED
DATE DEPRECIABLE
DESCRIPTION OF ASSETS ACQUIRED LIFE
--------------------- -------- -----------
<S> <C> <C>
Unimproved land - Perris, CA 2/21/91 n/a
Unimproved land - Victorville, CA 11/13/90 n/a
Unimproved land - Adelanto, CA 12/3/90 n/a
Unimproved land - Victorville, CA 7/2/91 n/a
Unimproved land - Riverside, CA 8/25/91 n/a
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF CARRYING AMOUNT
- ---------------------------------
<S> <C> <C>
Beginning balance $7,345,137
Additions
Improvements $ 6,488
Carrying costs 106,080
----------
Total additions 112,568
----------
Ending balance $7,457,705
==========
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000887025
<NAME> TMP INLAND EMPIRE VII, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 7,755
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,300,000
<CURRENT-ASSETS> 2,307,755
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,307,755
<CURRENT-LIABILITIES> 402,990
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,904,765
<TOTAL-LIABILITY-AND-EQUITY> 2,307,755
<SALES> 55
<TOTAL-REVENUES> 55
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 3,546,049
<CHANGES> 0
<NET-INCOME> (3,547,049)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
