<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 K-SB
[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, 1999
[ ] 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)
CALIFORNIA 33-0416043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 N. PARKCENTER DRIVE, SUITE 235 92705
SANTA ANA, CALIFORNIA (Zip Code)
(Address of principal executive office)
(714) 836-5503
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- ------------------------------
N/A N/A
Securities registered under Section 12 (g) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- ------------------------------
Units of Limited Partnership Interest N/A
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. Yes [] No [X ]
<PAGE>
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 persons,
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 interests 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.
The 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 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 ("Unit(s)") 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 Units. As of December 31, 1999, all Units are
outstanding and it is not anticipated that any additional Units will be issued
in the future. Outstanding Units are fully paid and nonassessable.
THE RESPONSIBILITIES OF THE GENERAL PARTNERS. The General Partners have the
exclusive management and control of all aspects of the business of the
Partnership. On April 1, 1998, PacWest Inland Empire, LLC. ("PacWest"), a
Delaware Limited Liability Company entered into a management, administrative and
consulting agreement (the Management Agreement) with the General Partners to
provide the Partnership with overall management, administrative and consulting
services. PacWest currently contracts with third party service providers to
perform certain of the financial, accounting, and investor relations' services
for the Partnership. 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
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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 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 Partners agree to
continue the business of the Partnership and elect, by unanimous
consent, one or more new General Partners to continue
Partnership's business;
2. A Majority Vote of the total outstanding Units in favor of
dissolution and termination of the Partnership; or
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 out-
standing Units, one or more new General Partners to continue
Pthe 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:
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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
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
carry-back financing.
A majority Vote of the Limited Partners 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 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.
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.
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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 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 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.
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 use
cash from the sale or refinancing of the 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.
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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,
etc.)
(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 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 the 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.
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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 10-KSB, 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.
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 of the
Properties. 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
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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.
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, downzoning of the Properties or
unanticipated environmental regulation and special assessment district
development fees could impair the value of the Properties owned by the
Partnership.
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
hazardous materials contaminate a property, 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 Properties. 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.
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ITEM 1(D). FOREIGN OPERATIONS
The Partnership has no foreign operations in foreign countries:
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 Temecula/Murrieta (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, Temecula/ Murrieta (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 event, the potential
profitability, if any, with respect to the Properties would be dependent 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.
<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 * *
Perris 18.54 08-25-92 $ 673,000 * *
</TABLE>
[FN]
* The Partnership owns the following properties as of December 31, 1999:
</FN>
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 town center is completed on
Nuevo and the 215 freeway, which is 1 1/2 miles from the Property. The property
is expected to be listed for sale in 2000.
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VICTORVILLE 19.55. This property, consisting of approximately 19.55 acres, is
located at the southeast corner of Hopland 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). This property is expected to be listed for sale in 2000.
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). The 73 lot
Tentative Map was approved in 1999 by the City of Adelanto. The property is
located at the Northeast corner of Cactus and Raccoon in the City of Adelanto
and is part of the area to be included within the Second Assessment District to
bring sewer, water and paved streets to the property. This property will be
listed for sale in 2000.
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. The
property has approved tentative tract maps with a total of 341 lots. The
Partnership contracted with Ludwig Engineering to do the final engineering on a
deferred payment basis on these tracts. The Partnership had a note with Ludwig
Engineering for the engineering on the Victorville 70-acre parcel. The note
matured March 1, 1998 but was paid off in January 1999. Infrastructure is being
brought to the property by a combination of improvements funded by the City in
an Assessment District, and neighboring developers. A new high school has
recently been completed within a half mile of the property. This property is
currently listed for sale for $1,900,000.
Perris 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:
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 1999.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1999 there were approximately 854 record holders of Units.
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
trading market for the Units. Accordingly, there was no trading activity during
the fiscal years ended December 31, 1995 - 1999.
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CASH DISTRIBUTIONS
There were no cash distributions to the Partners during the fiscal years ended
December 31, 1995 - 1999. A summary of the provisions of the Partnership
Agreement regarding distributions of cash and allocations of net income and
losses is set forth 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, 1995 - 1999 , and should be read in conjunction
with the more detailed financial statements contained in Item 8 below.
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED DECEMBER 31
(Not Covered by Independent Auditor's Report)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income $ 5 $ 1,067 $ 1,139 $ 1,182 $ 1,668
---------- ---------- ---------- ---------- ---------
Total Income $ 5 $ 1,067 $ 1,139 $ 1,182 $ 1,668
========== ========== ========== =========== =========
Net Loss $ (142,022) $ (106,607) $ (40,493) $(3,547,464) $(2,118,961)
========== ========== ========== =========== ==========
Net Loss per Unit $ (16.16) $ (12.13) $ (4.61) $ (403.68) $ (241)
========== ========== ========== ========== =========
Cash distribution
per Unit* $ - $ - $ - $ - $ -
========== ========== ========== ========== ==========
Total assets $2,787,634 $2,596,295 $2,543,483 $2,307,755 $5,758,528
========== ========== ========== ========== ==========
</TABLE>
[FN]
* (Based on 8,700 Units Outstanding at December 31, 1995 - 1999.)
</FN>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information that the
Partnership's management believes is relevant to an assessment and understanding
of the Partnership's results of operations and financial condition. This
discussion should be read in conjunction with the financial statements and
footnotes, which appear elsewhere in this report.
This Annual Report on Form 10-KSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are subject to the "safe harbor" created
by that section. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
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words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this report.
Additionally, statements concerning future matters such as the features,
benefits and advantages of the Partnership's property regarding matters that are
not historical are forward-looking statements. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
"Risk Factors" sections of this report. The Partnership's actual future results
could differ materially from those projected in the forward-looking statements.
The Partnership assumes no obligation to update the forward-looking statements.
Readers are urged to review and consider carefully the various disclosures made
by the Partnership in this report, which attempts to advise interested parties
of the risks and factors that may affect the Partnership's business, financial
condition and results of operations.
Results of Operations
- ---------------------
The following discussion should be read in conjunction with the attached
financial statements and notes thereto and with the Partnership's audited
financial statements and notes thereto for the fiscal year ended December 31,
1999.
During the period from inception (July 20, 1990) through December 31, 1991, the
Partnership was engaged primarily in the sale of Units and the investment of the
subscription proceeds to purchase parcels of unimproved real property. The only
cash revenues received during 1995-1999 was from the interest income earned on
funds held.
The Partnership recognized losses in 1995 and 1996 due to the write-down in
value of the Partnership land. The decline in land value was due mainly to the
downturn in Southern California's real estate market.
The Partnership's management believes that inflation has not had a material
effect on the Partnership's results of operations or financial condition.
Years Ended December 31, 1999 and 1998
- --------------------------------------
Partnership revenues during the year ended December 31, 1999 and 1998 consisted
of interest income. No properties were sold during the periods presented.
Investing activities for the year ended December 31, 1999 and 1998 used
approximately $194,000 and $176,000 of cash, respectively; mainly to pay for
development and carrying costs of the land held for investment. Financing
activities for the year ended December 31, 1999 used approximately $542,000 to
payoff two notes payable, and borrowed approximately $244,000 in November when
they entered into a new note. Financing activities for the year ended December
31, 1998 provided approximately $63,000 from the proceeds from certain notes
payable and used $10,000 to pay-down certain other notes.
Total expenses for the year ended December 31, 1999 compared with the year ended
December 31, 1998, increased by approximately $34,000. This increase is due
solely to an increase in interest expense of approximately $67,000 or 97%
pursuant to the Financing Agreement with PacWest entered into April 1, 1998 and
therefore only nine months of interest expense was incurred during the year
ended December 31, 1998. The overall increase was partially offset by the
decrease in Accounting and Financial Reporting, Outside Professional Services
12
<PAGE>
and General & Administrative Expenses. Continuity and experience with the
internal accounting staff and external accountant reviews is the explanation for
the decrease in Accounting and Financial Reporting of approximately $8,000.
Outside Professional Services decrease is primarily related to a reduction in
certain insurance expenses from a new insurance carrier. General and
Administrative expenses decrease during the period by $5,231 due to certain
services provided during the year ended December 31, 1998 by PacWest pursuant to
the Management Agreement that were not necessary during the same period in 1999.
Due to Affiliates increases as the Partnership pays its' operating costs. As
discussed above, and pursuant to the Financing Agreement, all funds required to
pay for operating costs are received from PacWest. During the year ended
December 31, 1999, the Partnership paid off one of its' notes payable which
required approximately $365,000 of funds (principal and interest) from PacWest.
The Partnership had five properties as of December 31, 1999 that are being held
for appreciation and resale. Upon the sale of each property, the Partnership
intends to distribute the sales proceeds, less any reserves needed for
operations, to the partners.
Liquidity and Capital Resources
- -------------------------------
The Partnership has 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. The Partnership capitalized the
acquisition costs of the property and direct carrying costs, such as interest
and property taxes. The Partnership does not intend to acquire any additional
properties. The remaining five properties are being held for resale. Upon sale,
if any, 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. That
region of Southern California experienced a significant economic recession that
has substantially eroded the value of real estate in that area. The region is
beginning to show some signs of recovery; however, the recovery has been very
slow.
In March and November 1997, the General Partners procured loans of $125,000 and
$233,825, respectively to provide cash for partnership operations. The loans are
secured by the Properties. Both these loans were either paid off or renegotiated
during the year ended December 31, 1999 (See Note 7 of the accompanying
financial statements).
The Partnership had a note with Ludwig Engineering for the engineering on the
Victorville 70-acre parcel. This note was paid off in February 1999. (See Note 7
in the accompanying financial statements).
There are no 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.
In March 1998, the General Partners entered into an agreement (the Financing
Agreement) with PacWest, whereby PacWest paid a total of $300,000 to the General
13
<PAGE>
Partners and ten other related partnerships (the TMP Land Partnerships). PacWest
agreed to pay up to an additional $300,000 for any deficit capital accounts for
these 11 partnerships in exchange for the rights to distributions from the
general partners; referred to as a "distribution fee" as defined by the
Financing Agreement.
In addition, PacWest has agreed to loan and/or secure a loan for the TMP Land
Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among
the TMP Land Partnerships, based on partnership needs, from recommendations made
by PacWest, and under the approval and/or direction of the general partners. A
portion of these funds will be loaned to the Partnership at 12% simple interest
beginning April 1, 1998. The borrowings are secured by the Partnership's
properties, and the funds will be loaned, as needed, in the opinion of the
general partners. These funds are not to exceed 50% of the 1997 appraised value
of the properties, and will primarily be used to pay for on-going property
maintenance, reduction of existing debt, property taxes in arrears, appropriate
entitlement costs and partnership operations.
As of December 31, 1999 the TMP Land Partnerships have been funded approximately
$2,600,000 by PacWest. An addendum to the Financing Agreement which states
PacWest shall be entitled to increase the aggregate amount of the loan by
written agreement is currently being approved by both the General Partners and
PacWest. Upon signing of this addendum, PacWest, can, at their option and with
the written agreement of the General Partners, make additional advances and the
aggregate amount of cash loaned to the TMP Land Partnerships will not be limited
to a maximum of $2,500,000.
Pursuant to the Financing Agreement, PacWest has acquired the General Partners'
unsubordinated 1% interest in the Partnership and assumed responsibility for all
partnership administration while not replacing any of the General Partners.
The Partnership is currently soliciting third party financing for a total of
$750,000, securing the loans with certain Partnership properties.
In April 1998, PacWest entered into the Management Agreement with the General
Partners to provide the Partnership with overall management, administrative and
consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations' services for the Partnership. PacWest is paid an annual fee of
$15,998 for its administrative services.
14
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Form 10-KSB:
For the fiscal years ended December 31, 1999 and 1998
Page No.
Report of Independent Auditors 16
Balance Sheets as of December 31, 1999 and 1998 17
Statements of Operations for the years ended December
31, 1999 and 1998 18
Statements of Partners Capital for the years ended
December 31, 1999 and 1998 19
Statements of Cash Flows for the years ended
December 31,1999 and 1998 20
Notes to Financial Statements 21 - 25
Financial Statement Schedules 26, 27
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.
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
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.
as of December 31, 1999 and 1998, and the related statements of operations,
partners' capital, and cash flows for the years then ended. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. 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. as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
SWENSON ADVISORS, LLP
An Accountancy Firm
/S/ SWENSON ADVISORS LLP
Temecula, California
March 17, 2000
16
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Balance Sheets
December 31, 1999 and 1998
1999 1998
---- ----
Assets
<S> <C> <C>
Cash $ 3,138 $ 547
Prepaid Expenses 0 5,039
Investment in Unimproved Land, net (Note 1) 2,784,496 2,590,709
------------ -------------
Total Assets $ 2,787,634 $ 2,596,295
============ =============
Liabilities and Partners' Capital
Due to Affiliates (Notes 5 and 6) $ 802,191 $ 114,280
Franchise Tax Payable 800 800
Accrued Interest Payable (Note 7) 0 57,021
Notes Payable (Note 7) 369,000 666,529
------------ ------------
Total Liabilities 1,171,991 838,630
------------ ------------
General Partners (60,771) (59,351)
Limited Partners: 8,700 Equity Units
Authorized and Outstanding 1,676,414 1,817,016
------------ ------------
Total Partners Capital 1,615,643 1,757,665
------------ ------------
Total Liabilities and Partners Capital $ 2,787,634 $ 2,596,295
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
17
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Statements of Operations
For the years ended December 31, 1999 and 1998
1999 1998
-------- --------
<S> <C> <C>
Interest Income $ 5 $ 1,067
------------ -----------
Expenses
Accounting & Financial Reporting 30,731 38,604
Outside Professional Services 30,249 49,548
General & Administrative 11,696 16,927
Interest 68,551 1,795
------------ -----------
Total Expenses 141,227 106,874
------------ -----------
Loss Before Income Taxes (141,222) (105,807)
State Franchise Tax 800 800
------------ -----------
Net Loss $ (142,022) $ (106,607)
============ ===========
Allocation of Net Loss (Note 4):
General Partners, in the Aggregate: $ (1,420) $ (1,066)
============ ===========
Limited Partners, in the Aggregate: $ (140,602) $ (105,541)
============ ===========
Limited Partners, per Equity Unit: $ (16.16) $ (12.13)
============ ===========
</TABLE>
See Accompanying Notes to Financial Statements
18
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Statements of Partners' Capital
For the Years Ended December 31, 1999 and 1998
General Limited
Partners Partners Total
<S> <C> <C> <C>
Partners' Capital (Deficit),
January 1, 1998 $ (58,285) $ 1,922,557 $ 1,864,272
Net Loss for 1998 (1,066) (105,541) (106,607)
------- --------- ---------
Partners' Capital (Deficit),
December 31, 1998 (59,351) 1,817,016 1,757,665
Net Loss for 1999 (1,420) (140,602) (142,022)
------ --------- ---------
Partners' Capital (Deficit),
December 31, 1999 $(60,771) $ 1,676,414 $ 1,615,643
======= ========= ===========
</TABLE>
See Accompanying Notes to Financial Statements
19
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD
A California Limited Partnership
Statements of Cash Flows
For the years ended December 31, 1999 and 1998
1999 1998
--------- ----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Loss $(142,022) $(106,607)
Adjustments to Reconcile Net Loss to Net Cash
Provided By Operating Activities:
Increase in Due to Affiliates 687,911 102,689
Decrease in Prepaid Expenses 5,039 27,181
(Decrease) Increase in Interest & Accounts Payable (57,021) 29,869
(Decrease) in Property Taxes Payable 0 (26,214)
---------- ---------
Net Cash Provided By Operating Activities 493,907 26,918
Cash Flows from Investing Activities:
Increase in Investment in Unimproved Land (193,787) (176,308)
---------- ---------
Net Cash Used In Investing Activities (193,787) (176,308)
Cash Flows from Financing Activities:
Payments Made on Notes Payable (541,529) (10,000)
Borrowings on Notes Payable 244,000 63,075
---------- ---------
Net Cash Provided By (Used In)
Financing Activities (297,529) 53,075
---------- ---------
Net Increase (Decrease) in Cash 2,591 (96,315)
Cash, Beginning of Period 547 96,862
---------- ---------
Cash, End of Period $ 3,138 $ 547
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Taxes $ 800 $ 800
========== ==========
Cash Paid for Interest $ 109,159 $ 50,099
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
20
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
December 31, 1999 and 1998
Note 1 - General and Summary of Significant Accounting Policies
General - TMP Inland Empire VII, Ltd. (the Partnership) was organized in 1990 in
- -------
accordance with the provisions of the California Uniform Limited Partnership Act
for the purpose of acquiring, developing and operating real property in the
Inland Empire area of Southern California.
Accounting Method - The Partnership's policy is to prepare its financial
- ------------------
statements on the accrual basis of accounting.
Investment in Unimproved Land - Investment in unimproved land is stated at the
- ------------------------------
lower of cost or fair value. All costs associated with the acquisition of a
property are capitalized. Additionally, the Partnership capitalizes all direct
carrying costs (such as interest 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).
Use of Estimates - The preparation of financial statements in conformity with
- ----------------
generally accepted accounting principles requires management 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 the reported amounts of 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 in that
geographical area. The Partnership attempts to mitigate any potential risk by
continually monitoring the market conditions and holding the land parcels
through any periods of declining market conditions.
Income Taxes - The entity is treated as a partnership for income tax purposes
- -------------
and accordingly 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 payable annually by the Partnership is $800.
21
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
December 31, 1999 and 1998
Note 2 - Organization of the Partnership
The Partnership was originally formed on July 20, 1990 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 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 since its formation. 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 percent to the limited
partners and one percent to the General Partners until the limited partners have
received an amount equal to their capital contributions plus a cumulative,
non-compounded return of six percent per annum based on their adjusted capital
account balances. At that point, remaining profits, losses and cash
distributions are allocated 83.5 percent to the limited partners and 16.5
percent to the General Partners. There were no distributions in 1999 or 1998.
22
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
December 31, 1999 and 1998
Note 5 - Agreements with PacWest Inland Empire, LLC
In March 1998, the General Partners entered into an agreement (the Financing
Agreement) with PacWest Inland Empire, LLC (PacWest), a Delaware Limited
Liability Company, whereby PacWest paid a total of $300,000 to the General
Partners of the Partnership and ten other related partnerships (the TMP Land
Partnerships). In addition, PacWest agreed to pay up to an additional $300,000
for any deficit capital accounts for these 11 partnerships in exchange for the
rights to the General Partners' distributions; referred to as a "distribution
fee" as defined by the Financing Agreement.
Pursuant to a management, administrative, and consulting agreement (the
Management Agreement), PacWest has acquired the General Partners' unsubordinated
1-% interest in the Partnership and assumed responsibility for all partnership
administration while not replacing any of the General Partners.
In addition, PacWest has agreed to loan and/or secure a loan for the TMP Land
Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among
the TMP Land Partnerships, based on partnership needs, from recommendations made
by PacWest, and under the approval and/or direction of the General Partners. A
portion of these funds will be loaned to the Partnership at 12% simple interest
beginning April 1, 1998. The borrowings are secured by the Partnership's
properties, and funds will be loaned, as needed, in the opinion of the General
Partners. These funds are not to exceed 50% of the 1997 appraised value of the
properties, and will primarily be used to pay for on-going property maintenance,
reduction of existing debt, property taxes in arrears, appropriate entitlement
costs and partnership operations.
As of December 31, 1999 the TMP Land Partnerships have been funded approximately
$2,600,000 by PacWest. An addendum to the Financing Agreement which states
PacWest shall be entitled to increase the aggregate amount of the loan by
written agreement is currently being approved by both the General Partners and
PacWest. Upon signing of this addendum, PacWest, can, at their option and with
the written agreement of the General Partners, make additional advances and the
aggregate amount of cash loaned to the TMP Land Partnerships will not be limited
to a maximum of $2,500,000.
Pursuant to the Financing Agreement, PacWest has acquired the General Partners'
unsubordinated 1% interest in the Partnership and assumed responsibility for all
partnership administration while not replacing any of the General Partners.
23
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
December 31, 1999 and 1998
Note 5 - Agreements with PacWest Inland Empire, LLC (con't)
The Partnership is currently soliciting third party financing for a total of
$750,000, securing the loans with certain Partnership properties.
In April 1998, PacWest entered into the Management Agreement with the General
Partners to provide the Partnership with overall management, administrative and
consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations' services for the Partnership. PacWest will charge a fee for its
administrative services equal to an amount not to exceed the average
reimbursements to the General Partners for such services over the past five
years. As of December 31, 1999 and 1998, the Partnership has an amount due of
approximately $802,000 and $114,000, respectively, including interest, to
PacWest related to the aforementioned agreements.
Note 6 - Related Party Transactions
Syndication costs (see Notes 1 and 3) netted against partners' capital
contributions include $870,000 of 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 Capital 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, TMP Investments, Inc., and the General Partners,
for services rendered in connection with the acquisition of the properties.
See Note 5 regarding information on management of the Partnership during 1999.
Note 7 - Notes Payable
In 1997, the Partnership entered into an amended loan agreement with an outside
party who provided engineering services for various land parcels. The loan
amount of $317,704 accrued interest at 10% per annum, and was originally payable
on or before February 28, 1998. The loan was guaranteed by the three General
Partners of TMP Properties and by TMP Properties. The note was repaid in full in
January 1999.
24
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
December 31, 1999 and 1998
Note 7 - Notes Payable (con't)
In February 1997, the Partnership entered into a loan agreement with an outside
party by offering parcels owned by the Partnership as collateral. The total loan
amount of $125,000 accrued interest at 14% per annum, with the interest payable
monthly beginning April 1, 1997. The principal was originally due in February
1999. In February 1999, the note payable was amended to extend the due date to
February 2001, to decrease the interest rate to 12.25% and reduce the monthly
interest payment to $1,276 beginning on March 1, 1999. For the year ended
December 31, 1999, $15,495 of the interest relating to this note payable has
been paid and capitalized to investment in unimproved land.
In 1997, the Partnership entered into a loan agreement with an outside party by
offering parcels owned by the Partnership as collateral. The total loan amount
of $233,825 accrued interest at 13.5% per annum, and the interest was payable
monthly. This note was refinanced in November 1999. The original lender was paid
off and the Partnership entered into a new loan agreement. The new loan amount
of $244,000 accrues interest at 12% per annum. The interest payment of $2,440 is
due monthly with the initial interest payment due December 1, 1999. The due date
of the loan is November 2001. For the year ended December 31, 1999, $31,185 of
interest relating to these two loans has been paid and capitalized to investment
in unimproved land.
25
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD
(A California Limited Partnership)
Schedule II - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, for SEC Reporting Purposes
For the Year Ended December 31, 1999
COLUMN A B C D E F G H I
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount at Estimated
--------------
Initial Carrying which Carried Accumulated Date of Date Depreciable
Description of Assets Encumbrances Cost Improvement Cost at Year-End Depreciation Construction Acquired Life
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unimproved land -
Perris, CA $ -0- $ 1,859,244 $ 0 $ 277,324 $ 2,136,568 -0- N/A 2/21/91 N/A
Unimproved land -
Victorville, CA -0- $ 1,937,240 $ 0 $ 262,595 $ 2,199,835 -0- N/A 11/13/90 N/A
Unimproved land -
Adelanto, CA -0- $ 451,137 $ 0 $ 70,388 $ 521,525 -0- N/A 12/3/90 N/A
Unimproved land -
Victorville, CA -0- $ 2,003,109 $236,116 $ 422,370 $ 2,661,595 -0- N/A 7/2/91 N/A
Unimproved land -
Perris, CA -0- $ 672,441 $ 0 $ 256,354 $ 928,795 -0- N/A 8/25/92 N/A
$ -0- $ 6,923,171 $236,116 $ 1,289,031 $ 8,448,318 -0-
==== ========= ======= ========== ========= ===
Less valuation allowance: $ 5,663,822
---------
Net carrying value $ 2,784,496
=========
Reconciliation of carrying amount
Beginning balance $ 2,590,709
Additions: Carrying Costs 193,787
-----------
Ending balance $ 2,784,496
===========
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD
(A California Limited Partnership)
Schedule II - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, for SEC Reporting Purposes
For the Year Ended December 31, 1998
COLUMN A B C D E F G H I
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount at Estimated
--------------
Initial Carrying which Carried Accumulated Date of Date Depreciable
Description of Assets Encumbrances Cost Improvement Cost at Year-End Depreciation Construction Acquired Life
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unimproved land -
Perris, CA $ -0- $1,859,244 $ 0 $ 211,084 $ 2,070,328 -0- N/A 2/21/91 N/A
Unimproved land -
Victorville, CA -0- $1,937,240 $ 0 $ 243,040 $ 2,180,280 -0- N/A 11/13/90 N/A
Unimproved land -
Adelanto, CA -0- $ 451,137 $ 0 $ 58,159 $ 509,296 -0- N/A 12/3/90 N/A
Unimproved land -
Victorville, CA -0- $2,003,109 $236,116 $ 368,991 $ 2,608,216 -0- N/A 7/2/91 N/A
Unimproved land -
Perris, CA -0- $ 672,441 $ 0 $ 213,970 $ 886,411 -0- N/A 8/25/92 N/A
$ -0- $6,923,171 $236,116 $ 1,095,244 $ 8,254,531 -0-
==== ========= ======= ========== ========= ===
Less valuation allowance: $ 5,663,822
-----------
Net carrying value $ 2,590,709
=========
Reconciliation of carrying amount
Beginning balance $2,414,401
Additions: Carrying Costs 176,308
---------
Ending balance $2,590,709
=========
</TABLE>
27
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the Independent Accounting Firm. On March 29,
1999 the registrant filed a Form 8-K in which it terminated the accounting firm
of Balser, Horowitz, Frank & Wakeling and appointed the independent accounting
firm of Swenson Advisors, LLP.
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. However, on
April 1, 1998, PacWest entered into the Management Agreement with the General
Partners to provide the Partnership with overall management, administrative and
consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations' services for the Partnership. TMP Properties, a California general
partnership, and TMP Investments, Inc., a California Corporation, are the
General Partners. 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, 58, 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
28
<PAGE>
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, agricultural groves, and unimproved
land. Mr. Passo is a director and officer of William O. Passo, Inc. (dba TMP
Management), a property management company, an officer of TMP Capital Corp., an
NASD registered broker-dealer, and an officer of TMP Realty, a registered real
estate broker.
SCOTT E. MCDANIEL, 53, is a General Partner of TMP Properties. 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, 53, 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, 1999, the Partnership paid fees to
the General Partners for various services in the amount of $102,545 of which
none was paid in the year ended December 31, 1999. The General Partners did not
receive any 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.
29
<PAGE>
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1999, the Partnership had 8,700 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, 1999 by each officer, director and general partner of
the General Partners and by all such persons as a group.
<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, 1999. The
information under "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 10-KSB for additional information regarding transactions
with affiliates.
<TABLE>
<CAPTION>
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1999
- ------------- ---------------------- -----------------
<S> <C> <C>
Selling Commission and Up to a maximum of 10% of gross $780,008
Due Diligence proceeds, a minimum of which was
Reimbursement reallocated to participating Soliciting
(TMP Capital Corp.) 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>
30
<PAGE>
<TABLE>
<CAPTION>
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1999
- ------------- ---------------------- -----------------
<S> <C> <C>
Reimbursement for Organizational Expenses paid to the $13,426
Organizational Expenses General Partners to reimburse them
(General Partners) (without markup or profit) for
organizational costs actually incurred such
as advertising, mailing, printing costs,
clerical expenses, legal and accounting
fees.
Reimbursement for The General Partners were reimbursed $351,234
Property Expenses (without markup or profit) for all out
(General Partners) 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 For services rendered in connection
Fees with the acquisition of the Properties
(General Partners acquired by the Partnership, the
or an affiliate) 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 $158,900
commissions
Partnership Management A Partnership Management Fee with $102,545
Fee (General Partners) respect to 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.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1999
- ------------- ---------------------- -----------------
<S> <C> <C>
Leasing and Property For leasing an improved Property, or a $-0-
Management Fees portion thereof, a commission equal to
(General Partners 7% for the first year's rent (net
or an affiliate) 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 $-0-
Allocation of Each allocations of Net Income, Net Loss and
Material Item Distributions of Distributable Cash from
(General Partners) 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.
Subordinated Real Estate Real estate commissions with respect to $-0-
Commission (General the sale of Properties which are equal
Partners or an Affiliate) to the 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>
32
<PAGE>
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, non-compounded 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.
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 the Properties exceed a nominal 1% ownership interest
therein. Such allocation provides built-in incentive for the General Partners to
seek the optimum performance from the 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,
3
<PAGE>
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 the 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. 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. In April 1998, PacWest
Inland Empire, LLC (PacWest)entered into a management, administrative and
consulting agreement with the general partners of the Partnership to provide the
Partnership with overall management, administrative and consulting services.
PacWest currently contracts with third party service providers to perform
certain of the financial, accounting, and investor relations services for the
Partnership.
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.
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 8-K
(a) For a listing of financial statements, reference is made to
Item 8 included in this Form 10-KSB
(b) The Registrant filed no reports on Form 8-K during the
fourth quarter of the fiscal year ended December 31, 1999
However, a Form 8-K was filed on March 29, 1999
(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
34
<PAGE>
Exhibits (3), (4) and (10.1) to the Form 10 Registration
Statement, SEC File No. 0-20120 filed on April 24, 1992.
27 Financial Data Schedule
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 17, 2000
TMP Inland Empire VII, Ltd.
A California Limited Partnership
By: TMP Investments, Inc., a California Corporation as
Co-General Partner
By: /S/ WILLIAM O PASSO
-------------------------------------
William O. Passo, President
By: /S/ ANTHONY W THOMPSON
-------------------------------------
Anthony W. Thompson, Exec. VP
By: TMP Properties, a California General
Partnership as Co-General Partner
By: /S/ WILLIAM O PASSO
-------------------------------------
William O. Passo, General Partner
By: /S/ ANTHONY W THOMPSON
-------------------------------------
Anthony W. Thompson, General Partner
By: /S/ SCOTT E MCDANIEL
-------------------------------------
Scott E. McDaniel, General Partner
By: JAFCO, Inc., a California Corporation as
Chief Accounting Officer
By: /S/ JOHN A FONSECA
-------------------------------------
John A. Fonseca, President
36
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000887025
<NAME> TMP Inland Empire VII
<MULTIPLIER> 1,000
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.0
<CASH> 3,138
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,138
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,787,634
<CURRENT-LIABILITIES> 802,991
<BONDS> 369,000
0
0
<COMMON> 0
<OTHER-SE> 1,615,643
<TOTAL-LIABILITY-AND-EQUITY> 2,787,634
<SALES> 0
<TOTAL-REVENUES> 5
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 141,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,022)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
