ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes.
The registrant, Carlyle Real Estate Limited Partnership-VII (the "Partnership"), is a limited partnership formed in 1976 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $18,000,000 in Limited Partnership Interests (the "Interests") to the public commencing on October 17, 1977 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-59231). A total of 18,000 Interests were sold to the public at $1,000 per Interest. The offering closed March 31, 1978. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments have been held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's remaining real estate investment is located in the State of California and it has no real estate investments located outside of the United States or in any other country. A presentation of information about industry segments, geographic regions, raw materials, or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate no later than December 31, 2027. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment property as quickly as practicable and to wind up its affairs not later than December 31, 1999, perhaps in 1998, barring any unforeseen economic developments.
The Partnership has made the real property investments set forth in the following table:
The Partnership's remaining real property investment is subject to competition from similar types of properties (including properties owned by affiliates of the General Partners) in the vicinity in which it is located.
Such competition is generally for the retention of existing tenants. Reference is made to Item 7 below for a discussion of competitive conditions and future capital improvement plans of the Partnership and its remaining investment property. Approximate occupancy levels for the property are set forth in the table in Item 2
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations carried on in and approximate physical occupancy levels by quarter during fiscal years 1997 and 1996 for the Partnership's remaining investment property:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not presently subject to any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during fiscal years 1996 and 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 1,641 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Corporate General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Corporate General Partner, which may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Corporate General Partner has been received by the Corporate General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of Interests, without regard to the results of Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which distribution is made.
Reference is made to Item 6
Item 6. The Partnership's and its venture's mortgage obligation secured by the Oakridge investment property is non-recourse and is secured solely by the investment property. The Partnership and its venture are not personally liable for the payment of the mortgage indebtedness.
There are certain risks associated with the Partnership's investment made through a joint venture including the possibility that the Partnership's joint venture partner in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partner may have economic or business interests or goals that are inconsistent with those of the Partnership.
OAKRIDGE MALL
The Partnership has been in discussions with potential buyers for the Oakridge Shopping Mall (on behalf of the venture) or the Partnership's interest in the property. In March 1998, an agreement in principle was reached to sell the Partnership's interest in the property to the venture partner. If the sale is consummated on the proposed terms, the Partnership would recognize a gain for financial reporting and Federal income tax purposes. There can be no assurances that the sale will be consummated under the terms of the agreement or under any other terms. However, upon the ultimate sale of the property or the Partnership's interest in the property, the Partnership would then proceed to terminate its affairs.
The mortgage loan was scheduled to mature in February 1998, however, the venture exercised its option to extend the loan for six months to August 1998. Accordingly, the mortgage loan has been classified as current in the accompanying consolidated financial statements at December 31, 1997.
Such short-term extension is currently considered adequate given the venture's current property sale plans. However, if the venture is unsuccessful in selling the property before the current loan maturity date, the venture would seek an additional loan extension from the current lender or would seek to refinance the mortgage loan.
Montgomery Ward, an anchor department store, which owns its own facility at Oakridge Mall, filed for bankruptcy protection pursuant to Chapter 11 of the Federal Bankruptcy Code on July 7, 1997. The anchor store continues to operate and fulfill its obligations under its operating agreement.
The property underwent a major remodeling and expansion which was completed in 1996. Capital expenditures related to the expansion and remodeling and tenant improvement and other leasing costs associated with the mall expansion were funded by a separate $8,000,000 construction holdback from the February 1995 refinancing. Pursuant to the Oakridge venture agreement, 50% of any partner funding obligations for items such as capital costs were required to be funded by each venture partner. However, additional partner fundings related to the expansion and remodeling were not required.
In July 1996, Oakridge venture distributed $5,400,000 (of which the Partnership's share was $2,700,000) of previously restricted refinancing proceeds. Subsequently, in August 1996, the Partnership distributed $2,250,625 ($125 per Interest) of such refinancing proceeds to the Limited Partners and $397,169 to the General Partners. During the fourth quarter of 1996, Oakridge venture distributed an additional $1,500,000 to its partners (of which the Partnership's share was $750,000).
The property has been considered held for sale or disposition as of December 31, 1996. Therefore, the property is no longer subject to continued depreciation.
GENERAL
The Partnership continues to conserve its working capital. All expenditures are carefully analyzed and certain capital projects are deferred when appropriate. By conserving working capital, the Partnership will be in a better position to meet its future needs since the availability of satisfactory outside sources of capital may be limited given the portfolio's current debt levels. The Partnership has held its remaining investment property longer than originally anticipated in an effort to maximize the return to the Limited Partners. After reviewing the
sole remaining property, Oakridge Mall, and its competitive marketplace, and considering the renovation that was completed in 1996, the General Partners of the Partnership expect to be able to liquidate the remaining asset as quickly as practicable. The affairs of the Partnership are expected to be wound up no later than December 31, 1999, perhaps in 1998, barring unforeseen economic developments.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents at December 31, 1997 as compared to December 31, 1996 is primarily due to the temporary investment of cash generated from operations at the Oakridge investment property.
The increase in rents and other receivables at December 31, 1997 as compared to December 31, 1996 is primarily due to the timing of and increase in lump sum recoveries due from tenants at the Oakridge investment property.
The increase in escrow deposits and other assets at December 31, 1997 as compared to December 31, 1996 is primarily due to the prepayment of commissions for certain tenant leases which are considered prepaid expenses as the leases do not commence until 1998 at the Oakridge investment property.
The increase in accrued rents receivable at December 31, 1997 as compared to December 31, 1996 is due to new tenant leases and lease renewals at the Oakridge investment property which provide for increases in minimum lease payments over the terms of the leases. The Partnership accrues rental income related to these leases for the full period of occupancy on a straight-line basis.
The decrease in venture partner's deficit in venture at December 31, 1997 as compared to December 31, 1996 is primarily due to the increase in rental income and the decrease in depreciation expense at the Oakridge investment property, as discussed below.
The increase in current portion of long-term debt and the corresponding decrease in long-term debt at December 31, 1997 as compared to December 31, 1996 is due to the reclassification of the mortgage loan secured by the Oakridge investment property which is currently scheduled to mature in August 1998.
The increase in accounts payable at December 31, 1997 as compared to December 31, 1996 is primarily due to an increase in accrued ground rent participation related to the increase in accrued rents receivable at the Oakridge investment property. As discussed more fully in the notes, the ground lease provides for the payment of additional ground rent related to the operations of the Oakridge investment property.
The increase in rental income for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to increased average occupancy and increased effective rental rates achieved on new leases and lease renewals during 1997 including the early lease renewal of a tenant occupying 15,268 square feet (approximately 5% of the total gross leasable area) at the Oakridge investment property. The increase in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to an increase in occupancy of temporary tenants at the Oakridge investment property as a result of the completion of the mall expansion and remodeling project as well as increased sales at the property during 1996.
The decrease in interest income for the year ended December 31, 1997 as compared to the year ended December 31, 1996 and the year ended December 31, 1996 as compared to December 31, 1995 is primarily due to a decrease in the amount of cash available for short-term investments as a result of Oakridge venture distributions made to its partners and the subsequent distribution by the Partnership to its Partners during 1996.
The decrease in depreciation expense for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is due to the Oakridge investment property being classified as held for sale as of December 31, 1996, and therefore, no longer subject to continued depreciation. The increase in depreciation expense for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the capital additions incurred during 1996 and 1995 at the Oakridge investment property.
The increase in property operating expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the increase in ground rent participation expense (discussed above) and increased HVAC and parking lot repairs at the Oakridge investment property in 1997. The increase in property operating expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to increased ground rent expense and increased occupancy at the Oakridge investment property.
The decrease in amortization of deferred expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the full amortization of certain tenant lease commissions at the Oakridge investment property during 1997. The increase in amortization of deferred expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the amortization of costs associated with the refinancing in 1995 of the mortgage debt secured by the Oakridge investment property.
The increase in general and administrative expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to an increase in investor report printing costs, professional liability insurance costs and outsource service fees in 1997. The increase in general and administrative expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to an increase in professional services as a result of the outsourcing of certain services in October 1995.
The increase in venture partner's share of venture's operations for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the increase in rental income and the decrease in depreciation expense at the Oakridge investment property in 1997 as discussed above. The decrease in venture partner's share of venture's operations for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the increases in depreciation expense, property operating expenses and amortization of deferred expenses as well as the decrease in interest income, partially offset by the increase in rental income, as discussed above.
The extraordinary item, net of venture partner's share, for the year ended December 31, 1995 was due to the retirement of indebtedness related to the refinancing in February 1995 of the mortgage debt secured by the Oakridge investment property.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's sole remaining property have escalation clauses covering increases in the cost of operating and maintaining the property as well as real estate taxes. Therefore, there should be little effect on operating earnings if the property remains substantially occupied. In addition,
substantially all of the leases contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations, years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
SCHEDULE
Consolidated Real Estate and Accumulated DepreciationIII
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII:
We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - VII (a limited partnership) and consolidated venture as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 the General Partners of the Partnership, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlyle Real Estate Limited Partnership - VII and consolidated venture at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois March 23, 1998
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (through a joint venture) an equity investment in a shopping center in San Jose, California. Business activities consist of rentals to a variety of retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment and wind up its affairs not later than December 31, 1999, perhaps in 1998, barring any unforeseen economic developments.
The accompanying consolidated financial statements include the accounts of the Partnership and its consolidated venture, Oakridge Associates ("Oakridge"), in which the Partnership has certain preferential claims and rights, as discussed below. The effect of all transactions between the Partnership and the consolidated venture has been eliminated in the consolidated financial statements.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments where applicable to reflect the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to include the accounts of the venture as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 1997 and 1996 is summarized as follows:
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each year (18,005). Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial and Federal income tax purposes.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of 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 those estimates.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($3,219,670 and $2,979,126 at December 31, 1997 and 1996, respectively) as cash equivalents, which includes investments in commercial paper and an institutional mutual fund which holds U.S. Government obligations. Remaining amounts, if any, (generally with original maturities of one year or less) are reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of commitment fees incurred in connection with the acquisition and financing of the Partnership's sole operating property along with lease commissions paid on the Partnership's sole operating property. Deferred loan fees and leasing fees are amortized using the straight-line method over the terms stipulated in the related agreements.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in minimum lease payments over the term of the lease, the Partnership accrues rental income for the full period of occupancy on a straight-line basis.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership. However, in certain instances, the Partnership has been or may be required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to Partners.
The Partnership has or had acquired, either directly or through joint ventures, eight apartment complexes and four shopping centers. All of the properties have been sold or disposed of, except one shopping center. The remaining investment property owned at December 31, 1997 is operating. The cost of the remaining investment property represents the total cost to the Partnership and its venture, plus miscellaneous acquisition costs.
Depreciation on the Partnership's remaining property has been provided over the estimated useful lives of its various components as follows:
YEARS ----- Building and improvements (new)-- straight-line or 150% declining-balance. . . 5-40 Building and improvements (used)-- 125% declining-balance or straight-line. . . . . . . . . . . . . . . . 5-40 ====
The investment property is pledged as security for the long-term debt, for which there is no recourse to the Partnership.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
The Partnership adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its property to be held for investment whenever its carrying value cannot be fully recovered through estimated undiscounted future cash flows from its operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell such property and active marketing activity has commenced or is expected to commence in the near term. In accordance with SFAS 121, any property identified as "held for sale or disposition" is no longer depreciated. Adjustments for impairment loss for such property (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or fair value less costs to sell. The adoption of SFAS 121 did not have any effect on the Partnership's financial position, results of operations or liquidity.
As the venture had committed to a plan to sell the Partnership's remaining property, the property was classified as held for sale as of December 31, 1996, and therefore, is not subject to continued depreciation beginning January 1, 1997. The results of operations of the Partnership's remaining property included in the accompanying consolidated financial statements were net income of $3,398,168, $1,440,046 and $1,939,659 for the years ended December 31, 1997, 1996 and 1995, respectively.
During the second quarter of 1997, Statements of Financial Accounting Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of Information about Capital Structure") were issued. These standards became effective for reporting periods after December 15, 1997. As the Partnership's capital structure only has general and limited partnership interests, the Partnership will not experience any significant impact on its consolidated financial statements.
The Partnership at December 31, 1997 is a party to one operating joint venture agreement. Pursuant to such agreement, the Partnership made initial capital contributions of $3,352,642 (before legal and other acquisition costs and its share of operating deficits as discussed below). In general, the joint venture partner, who was the seller of the property investment being acquired, made no cash contributions to the venture, but its retention of an interest in the property, through the joint venture, was taken into account in determining the purchase price of the Partnership's interest (which was determined by arm's-length negotiations).
Under certain circumstances, either pursuant to the venture agreement or due to the Partnership's obligation as a general partner, the Partnership may be required to make additional cash contributions to the venture.
The Partnership has acquired, through the one remaining venture, one regional shopping mall. The joint venture partner (who was primarily responsible for constructing the property) was to contribute any excess of cost over the aggregate amount available from Partnership contributions and financing and, to the extent such funds exceeded the aggregate costs, was to retain such excesses. The venture property has been financed under the long-term debt arrangement as described below.
INVESTMENT PROPERTY
OAKRIDGE MALL
The Partnership is a general partner in the Oakridge Associates Ltd. venture with the seller of the property.
Pursuant to the venture agreement, beginning January 1, 1983, any net cash flow is to be and has been distributed equally to the Partnership and the seller. The Partnership has a preferred position (related to the Partnership's cash investment in the venture) with respect to distributions of sale or refinancing proceeds from the venture. Once the preferred position has been satisfied, any excess sale or refinancing proceeds from the venture are to be distributed so that the Partnership and the venture partner equally share the proceeds.
Venture operating profits and losses are allocated to the venture partners generally in proportion to their distributions of net cash flow. In 1997, 1996 and 1995, profits and losses were allocated 50% to the Partnership and 50% to the venture partner. An affiliate of the venture partner manages the property pursuant to an agreement which provides for a management fee calculated at a percentage of certain types of income.
The Partnership has been in discussions with potential buyers for the Oakridge Shopping Mall (on behalf of the venture) or the Partnership's interest in the property.
In March 1998, an agreement in principle was reached to sell the Partnership's interest in the property to the venture partner. If the sale is consummated on the proposed terms, the Partnership would recognize a gain for financial reporting and Federal income tax purposes. There can be no assurances that the sale will be consummated under the terms of the agreement or under any other terms.
In October 1990, the Partnership and its Oakridge venture partner finalized negotiations with the lessors to amend the ground lease at the Oakridge Mall by adding a "purchase option" provision. The price for obtaining the purchase option was $2,000,000. The Partnership and its venture partner funded their respective 50% shares of these costs from the cash flow of the property. The option (which may be exercised five years after the death of both lessors) provides for the price of the land to be determined by a formula related to ground rent paid during the most recent few years of the lease, and is payable in addition to the cost of the purchase option discussed above.
In February 1995, Oakridge refinanced the existing mortgage loan secured by the property (which had a balance of approximately $14,165,000 at the February 1995 closing) in the amount of $27,000,000. The mortgage loan was scheduled to mature in February 1998, however, the venture exercised its option to extend the loan for six months to August 1998. Accordingly, the mortgage loan has been classified as current in the accompanying consolidated financial statements at December 31, 1997. Such short-term extension is currently considered adequate given the venture's current property sale plans. However, if the venture is unsuccessful in selling the property before the current loan maturity date, the venture would seek an additional loan extension from the current lender or would seek to refinance the mortgage loan.
At the February 1995 refinancing, the venture received approximately $4,300,000 in net proceeds (after payoff of the existing loan including a prepayment penalty of approximately $708,000 and closing costs). These proceeds were utilized for capital expenditures, including the replacement of the roof, and previously deferred maintenance at the mall. Such refinancing resulted in recognition of an extraordinary item of $782,020 (including deferred mortgage costs and accrued interest), of which the Partnership's share was $391,010. The lender held back $8,000,000 of the loan proceeds for the construction of an expansion and remodeling of the mall which commenced in April 1995 and was completed in 1996. As a result
of the venture completing the renovation and remodel of the mall in 1996, approximately $2,800,000 of excess proceeds from the refinancing was released from escrow by the lender. Additionally, after the venture's review of the requirements for operating reserves, repairs and deferred maintenance projects, the remaining loan proceeds of $4,294,143 were distributed to the partners of the venture. As a result of this distribution of refinancing proceeds, the Partnership's preferential position in the venture, as discussed above, was satisfied. Accordingly, any additional distributions of sale or refinancing proceeds will be allocated equally to the partners of the venture.
Nordstrom (which owned its own store) left the center in March 1995. Nordstrom assigned, transferred and conveyed its interest in its land, building and Reciprocal Easement Agreement ("REA") to Sears Roebuck and Co. which opened its new store on October 28, 1995. The Nordstrom closing and Sears Roebuck and Co. opening did not have a significant adverse impact on the operations of the mall. The property's other anchor tenants, Montgomery Ward and R.H. Macy, are also subject to the REA. The REA requirement for each anchor tenant to operate a department store under it's specific name expired in August 1993 and in addition, the REA requirement for each anchor tenant to operate a department store under any name expires in August 1998. The Partnership and its joint venture partner have decided not to pursue extensions of the operating covenants in the REA until such time, if ever, that negotiations for such extensions are deemed to be in the best interest of Oakridge.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and 1996: 1997 1996 ----------- ----------- 9.19% mortgage note; secured by the Oakridge Mall Shopping Center in San Jose, California; balance payable in monthly installments of $310,165 (including interest) until maturity in August 1998 . . . $23,002,015 24,532,837
Less current portion of long-term debt . . . . 23,002,015 1,530,822 ----------- -----------
Total long-term debt. . . $ -- 23,002,015 =========== ===========
Five year maturities of long-term debt are summarized as follows:
1998 . . . . . . . . $23,002,015 1999 . . . . . . . . -- 2000 . . . . . . . . -- 2001 . . . . . . . . -- 2002 . . . . . . . . -- ===========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or refinancing of investment properties will be allocated to the General Partners in an amount equal to the greater of any cash distributions of the proceeds of any such sale or refinancing (as described below) or 1% of the profits from the sale or refinancing. Losses from the sale or refinancing of investment properties will be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners.
An amendment to the Partnership Agreement, effective January 1, 1991, generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event that would cause the deficit balance in absolute amount in the Capital Account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of profits to the General Partners shall be increased to the extent necessary to cause the deficit balance in the Capital Account of the General Partners to be no less than their respective shares of the Partnership's indebtedness after such event. In general, the effect of this amendment is to allow the deferral of the recognition of taxable gain to the Limited Partners. Pursuant to such provisions, the General Partners were allocated in 1996 additional amounts of gain for Federal income tax purposes. Such allocations had no effect on total Partnership assets or results of operations.
The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership 6% of the selling price, and that the remaining proceeds (net after expenses and retained working capital) be distributed 85% to the Limited Partners and 15% to the General Partners. However, the Limited Partners shall receive 100% of such net sale proceeds until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership and (ii) have received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the third fiscal quarter of 1978. The Limited Partners have received cash distributions that satisfied the requirements in (i) and (ii) above.
LEASES - AS PROPERTY LESSOR
At December 31, 1997, the Partnership and its consolidated venture's principal asset is one shopping center. The Partnership has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the property, excluding cost of land, is depreciated over its estimated useful life. Leases with shopping center tenants range from one to thirty years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide for additional rent based upon percentages of tenants' sales volumes. A substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector.
Minimum lease payments including amounts representing executory costs (e.g.,taxes, maintenance, insurance) and any related profit in excess of specific reimbursements, to be received in the future under the above operating lease agreements relating to the shopping center, are as follows:
1998 . . . . . . . $ 6,387,773 1999 . . . . . . . 5,743,192 2000 . . . . . . . 4,894,754 2001 . . . . . . . 4,426,709 2002 . . . . . . . 3,881,238 Thereafter . . . . 10,688,519 ----------- Total. . . . . $36,022,185 ===========
Additional contingent rent (based on sales by property tenants) included in rental income was as follows:
1995 . . . . . . . $115,566 1996 . . . . . . . 301,074 1997 . . . . . . . 456,881 ========
LEASES - AS PROPERTY LESSEE
The following lease agreement has been determined to be an operating lease.
The Oakridge venture owns a net leasehold interest in the land underlying the San Jose, California shopping center expiring August 31, 2008, subject to renewal for twelve five-year periods. The lease provides for an annual base rent of $203,357. The lease provides that the venture pays real estate taxes applicable to the leased land and the improvements situated thereon. The lease also provides for additional annual percentage rent based upon the operations of the shopping center. In October 1990, the Partnership and the joint venture partner finalized negotiations with the lessor to amend the ground lease at Oakridge Mall by adding a "purchase option" provision.
Minimum rental expense for 1997, 1996 and 1995 under the above operating lease was $203,357 in each year. Additional rental expense under the above operating lease was $1,092,293, $850,773 and $696,896 for 1997, 1996 and 1995, respectively.
Future minimum rental commitments under the lease are as follows:
1998 . . . . . . . $ 203,357 1999 . . . . . . . 203,357 2000 . . . . . . . 203,357 2001 . . . . . . . 203,357 2002 . . . . . . . 203,357 Thereafter . . . . 1,059,198 ---------- $2,075,983 ==========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1997 and for the years ended December 31, 1997, 1996 and 1995 are as follows: UNPAID AT DECEMBER 31, 1997 1996 1995 1997 -------- -------- -------------------- Reimbursement (at cost) for out-of- pocket expenses . . $ -- 5,716 10,445 -- ------- ------ -------- ----- $ -- 5,716 10,445 -- ======= ====== ======== =====
The Limited Partners have received an amount from sale or refinancing proceeds in excess of their initial capital investment plus any deficiency in a 6% cumulative annual return on their average capital investment. The General Partners, therefore, are entitled to participate in sale and refinancing proceeds to the extent of their previously deferred disposition fees earned on the properties sold to date. All such fees, which total $940,488, were paid as of December 31, 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during fiscal year 1997 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation, substantially all of the outstanding stock of which is owned, directly or indirectly, by certain of its officers, directors, members of their families and their affiliates. JMB as the Corporate General Partner has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, AGPP Associates, L.P., an Illinois limited partnership with JMB as its sole general partner. The limited partners of the Associate General Partner are generally officers, directors and affiliates of JMB or its affiliates. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants and/or for the sale of property. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director, and the executive officers and certain other officers of the Corporate General Partner are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Corporate General Partner to be held on June 3, 1998. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on June 3, 1998. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle- XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income Properties- IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB including Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")) and Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P.) ("Arvida"). Most of such directors and officers are also partners, directly or indirectly, of certain partnerships which are associate general partners in the following real estate limited partnerships: the Partnership, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 60) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October 1969. Mr. Malkin is also a director of Urban Shopping Centers, Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant.
Neil G. Bluhm (age 60) is an individual general partner of JMB Income- IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August 1970. He is also a principal of Walton Street Real Estate Fund I, L.P. and a director of USC, Inc. Mr. Bluhm is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 59) has been associated with JMB since June 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 56) has been associated with JMB since July 1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 64) has been associated with JMB since December 1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 51) has been associated with JMB since December 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Advisors L.P., an affiliate of the Blackstone Group, L.P. He is also a director of USC, Inc., a trustee of Amli Residential Property Trust and a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. Mr. Schreiber holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 48) has been associated with JMB since March 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 50) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Gary Nickele (age 45) has been associated with JMB since February 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 49) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 62) has been associated with JMB since March 1973. He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is also made to the Notes filed with this annual report for a description of such distributions and allocations.
In 1997, 1996 and 1995, the General Partners received distributions of $0, $397,169 and $0, respectively, and a management fee of $0, $0 and $0, respectively. The General Partners received a share of Partnership earnings for tax purposes aggregating $42,966 in 1997.
JMB Realty Corporation ("JMB"), the Corporate General Partner, has earned fees aggregating $940,488 in connection with the sales of the Place II Apartments located in Phoenix, Arizona, the Wakefield Apartments located in Marietta, Georgia, the Walnut Bend Apartments located in Dallas, Texas, the Shadowridge of San Antonio Apartments located San Antonio, Texas, the Bush River Mall Shopping Center located in Columbia, South Carolina, the Spice Island Apartments located in Houston, Texas, the Bellfort II Apartments located in Houston, Texas and the Windridge Apartments located in Dallas, Texas.
The Limited Partners have received an amount from sale or refinancing proceeds in excess of their initial capital investment plus any deficiency in a 6% cumulative annual return on their average capital investment. The General Partners, therefore, are entitled to participate in sale and refinancing proceeds to the extent of their previously deferred disposition fees earned on the properties sold to date which total $940,488, all of which were paid as of December 31, 1997.
The General Partners of the Partnership may be reimbursed for their direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. In 1997, the Corporate General Partner of the Partnership was not due any reimbursement for such out-of-pocket expenses.
The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. The relationship of the Corporate General Partner to its affiliates is set forth above in Item 10 and Exhibit 21 hereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits
3-A.* The Prospectus of the Partnership dated October 17, 1977, as supplemented on December 5, 1977, January 16, 1978 and March 28, 1978, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, and which agreement is hereby incorporated herein by reference.
4-A. Secured promissory note #1 dated February 15, 1995 in the amount of $23,900,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
4-B. Secured promissory note #2 dated February 15, 1995 in the amount of $3,100,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended.
10-B. Closing statement dated February 15, 1995 relating to the refinancing by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule - ----------
* Previously filed as Exhibit 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1993 on Form 10-K of the Securities Exchange Act of 1934 (File No. 0-8915) filed on March 25, 1994 and hereby incorporated herein by reference.
No annual report or proxy material for the fiscal year 1997 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By Gailen J. Hull Senior Vice President Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1998
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1998
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1998
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1998
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1998
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 1998
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1998
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ----
3-A. The Prospectus of the Partnership dated October 17, 1977 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Secured Promissory Note #1 secured by Oakridge Mall in San Jose, California Yes
4-B. Secured Promissory Note #2 secured by Oakridge Mall in San Jose, California Yes
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended Yes
10-B. Closing statement relating to the refinancing by Oakridge Associates, Ltd. of Oakridge Mall located in San Jose, California Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item 1, the Partnership had approximately $16,270,000 (after deducting selling expenses and other offering costs) with which to make investments in income-producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such investments and for working capital reserves. A portion of such proceeds were utilized to acquire the properties described in Item 1 above.
During 1996, some of the Holders of Interests in the Partnership received from unaffiliated third parties unsolicited tender offers to purchase up to 4.9% of the Interests in the Partnership for amounts ranging from $335 to $475 per Interest. The Partnership recommended against acceptance of these offers on the basis that, among other things, the offer prices were inadequate. Such offers have expired.
The board of directors of JMB Realty Corporation ("JMB"), the Corporate General Partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offers. The Special Committee has retained independent counsel to advise it in connection with any potential tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to any additional potential tender offers for Interests.
The Partnership is also aware that, in June 1997, two other unaffiliated third parties made unsolicited tender offers to some of the Holders of Interests. These offers each sought to purchase up to 4.9% of the Interests in the Partnership at amounts between $350 and $485 per Interest. These offers expired in August 1997. The Special Committee recommended against acceptance of these offers on the basis that, among other things, the offer prices were inadequate. As of the date of this report, the Partnership is aware that 3.78% of the outstanding Interests have been purchased by such unaffiliated third parties either pursuant to such tender offers or through negotiated purchases.
It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn.
At December 31, 1997, the Partnership and its consolidated venture had cash and cash equivalents of approximately $4,078,000. Such funds will be utilized for working capital requirements and distributions to partners. The Partnership and its consolidated venture have currently budgeted approximately $132,000 in 1998 for tenant improvements and other capital expenditures at the Oakridge investment property. The Partnership's share of such items in 1998 is currently budgeted to be approximately $66,000. Actual amounts expended in 1998 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. The sources of capital (in addition to the cash and cash equivalents) for such items and for both short-term and long-term future liquidity and distributions are expected to be through net cash generated by Oakridge and from its sale and/or refinancing. In such regard, reference is made to the Partnership's property specific discussion below and also to the Partnership's disclosure of property lease expirations in Item 6. The Partnership's and its venture's mortgage obligation secured by the Oakridge investment property is non-recourse and is secured solely by the investment property. The Partnership and its venture are not personally liable for the payment of the mortgage indebtedness.
There are certain risks associated with the Partnership's investment made through a joint venture including the possibility that the Partnership's joint venture partner in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partner may have economic or business interests or goals that are inconsistent with those of the Partnership.
OAKRIDGE MALL
The Partnership has been in discussions with potential buyers for the Oakridge Shopping Mall (on behalf of the venture) or the Partnership's interest in the property. In March 1998, an agreement in principle was reached to sell the Partnership's interest in the property to the venture partner. If the sale is consummated on the proposed terms, the Partnership would recognize a gain for financial reporting and Federal income tax purposes. There can be no assurances that the sale will be consummated under the terms of the agreement or under any other terms. However, upon the ultimate sale of the property or the Partnership's interest in the property, the Partnership would then proceed to terminate its affairs.
The mortgage loan was scheduled to mature in February 1998, however, the venture exercised its option to extend the loan for six months to August 1998. Accordingly, the mortgage loan has been classified as current in the accompanying consolidated financial statements at December 31, 1997.
Such short-term extension is currently considered adequate given the venture's current property sale plans. However, if the venture is unsuccessful in selling the property before the current loan maturity date, the venture would seek an additional loan extension from the current lender or would seek to refinance the mortgage loan.
Montgomery Ward, an anchor department store, which owns its own facility at Oakridge Mall, filed for bankruptcy protection pursuant to Chapter 11 of the Federal Bankruptcy Code on July 7, 1997. The anchor store continues to operate and fulfill its obligations under its operating agreement.
The property underwent a major remodeling and expansion which was completed in 1996. Capital expenditures related to the expansion and remodeling and tenant improvement and other leasing costs associated with the mall expansion were funded by a separate $8,000,000 construction holdback from the February 1995 refinancing. Pursuant to the Oakridge venture agreement, 50% of any partner funding obligations for items such as capital costs were required to be funded by each venture partner. However, additional partner fundings related to the expansion and remodeling were not required.
In July 1996, Oakridge venture distributed $5,400,000 (of which the Partnership's share was $2,700,000) of previously restricted refinancing proceeds. Subsequently, in August 1996, the Partnership distributed $2,250,625 ($125 per Interest) of such refinancing proceeds to the Limited Partners and $397,169 to the General Partners. During the fourth quarter of 1996, Oakridge venture distributed an additional $1,500,000 to its partners (of which the Partnership's share was $750,000).
The property has been considered held for sale or disposition as of December 31, 1996. Therefore, the property is no longer subject to continued depreciation.
GENERAL
The Partnership continues to conserve its working capital. All expenditures are carefully analyzed and certain capital projects are deferred when appropriate. By conserving working capital, the Partnership will be in a better position to meet its future needs since the availability of satisfactory outside sources of capital may be limited given the portfolio's current debt levels. The Partnership has held its remaining investment property longer than originally anticipated in an effort to maximize the return to the Limited Partners. After reviewing the
sole remaining property, Oakridge Mall, and its competitive marketplace, and considering the renovation that was completed in 1996, the General Partners of the Partnership expect to be able to liquidate the remaining asset as quickly as practicable. The affairs of the Partnership are expected to be wound up no later than December 31, 1999, perhaps in 1998, barring unforeseen economic developments.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents at December 31, 1997 as compared to December 31, 1996 is primarily due to the temporary investment of cash generated from operations at the Oakridge investment property.
The increase in rents and other receivables at December 31, 1997 as compared to December 31, 1996 is primarily due to the timing of and increase in lump sum recoveries due from tenants at the Oakridge investment property.
The increase in escrow deposits and other assets at December 31, 1997 as compared to December 31, 1996 is primarily due to the prepayment of commissions for certain tenant leases which are considered prepaid expenses as the leases do not commence until 1998 at the Oakridge investment property.
The increase in accrued rents receivable at December 31, 1997 as compared to December 31, 1996 is due to new tenant leases and lease renewals at the Oakridge investment property which provide for increases in minimum lease payments over the terms of the leases. The Partnership accrues rental income related to these leases for the full period of occupancy on a straight-line basis.
The decrease in venture partner's deficit in venture at December 31, 1997 as compared to December 31, 1996 is primarily due to the increase in rental income and the decrease in depreciation expense at the Oakridge investment property, as discussed below.
The increase in current portion of long-term debt and the corresponding decrease in long-term debt at December 31, 1997 as compared to December 31, 1996 is due to the reclassification of the mortgage loan secured by the Oakridge investment property which is currently scheduled to mature in August 1998.
The increase in accounts payable at December 31, 1997 as compared to December 31, 1996 is primarily due to an increase in accrued ground rent participation related to the increase in accrued rents receivable at the Oakridge investment property. As discussed more fully in the notes, the ground lease provides for the payment of additional ground rent related to the operations of the Oakridge investment property.
The increase in rental income for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to increased average occupancy and increased effective rental rates achieved on new leases and lease renewals during 1997 including the early lease renewal of a tenant occupying 15,268 square feet (approximately 5% of the total gross leasable area) at the Oakridge investment property. The increase in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to an increase in occupancy of temporary tenants at the Oakridge investment property as a result of the completion of the mall expansion and remodeling project as well as increased sales at the property during 1996.
The decrease in interest income for the year ended December 31, 1997 as compared to the year ended December 31, 1996 and the year ended December 31, 1996 as compared to December 31, 1995 is primarily due to a decrease in the amount of cash available for short-term investments as a result of Oakridge venture distributions made to its partners and the subsequent distribution by the Partnership to its Partners during 1996.
The decrease in depreciation expense for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is due to the Oakridge investment property being classified as held for sale as of December 31, 1996, and therefore, no longer subject to continued depreciation. The increase in depreciation expense for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the capital additions incurred during 1996 and 1995 at the Oakridge investment property.
The increase in property operating expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the increase in ground rent participation expense (discussed above) and increased HVAC and parking lot repairs at the Oakridge investment property in 1997. The increase in property operating expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to increased ground rent expense and increased occupancy at the Oakridge investment property.
The decrease in amortization of deferred expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the full amortization of certain tenant lease commissions at the Oakridge investment property during 1997. The increase in amortization of deferred expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the amortization of costs associated with the refinancing in 1995 of the mortgage debt secured by the Oakridge investment property.
The increase in general and administrative expenses for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to an increase in investor report printing costs, professional liability insurance costs and outsource service fees in 1997. The increase in general and administrative expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to an increase in professional services as a result of the outsourcing of certain services in October 1995.
The increase in venture partner's share of venture's operations for the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to the increase in rental income and the decrease in depreciation expense at the Oakridge investment property in 1997 as discussed above. The decrease in venture partner's share of venture's operations for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the increases in depreciation expense, property operating expenses and amortization of deferred expenses as well as the decrease in interest income, partially offset by the increase in rental income, as discussed above.
The extraordinary item, net of venture partner's share, for the year ended December 31, 1995 was due to the retirement of indebtedness related to the refinancing in February 1995 of the mortgage debt secured by the Oakridge investment property.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's sole remaining property have escalation clauses covering increases in the cost of operating and maintaining the property as well as real estate taxes. Therefore, there should be little effect on operating earnings if the property remains substantially occupied. In addition,
substantially all of the leases contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations, years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
SCHEDULE
Consolidated Real Estate and Accumulated DepreciationIII
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII:
We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - VII (a limited partnership) and consolidated venture as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 the General Partners of the Partnership, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlyle Real Estate Limited Partnership - VII and consolidated venture at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois March 23, 1998
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (through a joint venture) an equity investment in a shopping center in San Jose, California. Business activities consist of rentals to a variety of retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment and wind up its affairs not later than December 31, 1999, perhaps in 1998, barring any unforeseen economic developments.
The accompanying consolidated financial statements include the accounts of the Partnership and its consolidated venture, Oakridge Associates ("Oakridge"), in which the Partnership has certain preferential claims and rights, as discussed below. The effect of all transactions between the Partnership and the consolidated venture has been eliminated in the consolidated financial statements.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments where applicable to reflect the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to include the accounts of the venture as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 1997 and 1996 is summarized as follows:
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each year (18,005). Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial and Federal income tax purposes.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of 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 those estimates.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($3,219,670 and $2,979,126 at December 31, 1997 and 1996, respectively) as cash equivalents, which includes investments in commercial paper and an institutional mutual fund which holds U.S. Government obligations. Remaining amounts, if any, (generally with original maturities of one year or less) are reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of commitment fees incurred in connection with the acquisition and financing of the Partnership's sole operating property along with lease commissions paid on the Partnership's sole operating property. Deferred loan fees and leasing fees are amortized using the straight-line method over the terms stipulated in the related agreements.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in minimum lease payments over the term of the lease, the Partnership accrues rental income for the full period of occupancy on a straight-line basis.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership. However, in certain instances, the Partnership has been or may be required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to Partners.
The Partnership has or had acquired, either directly or through joint ventures, eight apartment complexes and four shopping centers. All of the properties have been sold or disposed of, except one shopping center. The remaining investment property owned at December 31, 1997 is operating. The cost of the remaining investment property represents the total cost to the Partnership and its venture, plus miscellaneous acquisition costs.
Depreciation on the Partnership's remaining property has been provided over the estimated useful lives of its various components as follows:
YEARS ----- Building and improvements (new)-- straight-line or 150% declining-balance. . . 5-40 Building and improvements (used)-- 125% declining-balance or straight-line. . . . . . . . . . . . . . . . 5-40 ====
The investment property is pledged as security for the long-term debt, for which there is no recourse to the Partnership.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
The Partnership adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its property to be held for investment whenever its carrying value cannot be fully recovered through estimated undiscounted future cash flows from its operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell such property and active marketing activity has commenced or is expected to commence in the near term. In accordance with SFAS 121, any property identified as "held for sale or disposition" is no longer depreciated. Adjustments for impairment loss for such property (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or fair value less costs to sell. The adoption of SFAS 121 did not have any effect on the Partnership's financial position, results of operations or liquidity.
As the venture had committed to a plan to sell the Partnership's remaining property, the property was classified as held for sale as of December 31, 1996, and therefore, is not subject to continued depreciation beginning January 1, 1997. The results of operations of the Partnership's remaining property included in the accompanying consolidated financial statements were net income of $3,398,168, $1,440,046 and $1,939,659 for the years ended December 31, 1997, 1996 and 1995, respectively.
During the second quarter of 1997, Statements of Financial Accounting Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of Information about Capital Structure") were issued. These standards became effective for reporting periods after December 15, 1997. As the Partnership's capital structure only has general and limited partnership interests, the Partnership will not experience any significant impact on its consolidated financial statements.
The Partnership at December 31, 1997 is a party to one operating joint venture agreement. Pursuant to such agreement, the Partnership made initial capital contributions of $3,352,642 (before legal and other acquisition costs and its share of operating deficits as discussed below). In general, the joint venture partner, who was the seller of the property investment being acquired, made no cash contributions to the venture, but its retention of an interest in the property, through the joint venture, was taken into account in determining the purchase price of the Partnership's interest (which was determined by arm's-length negotiations).
Under certain circumstances, either pursuant to the venture agreement or due to the Partnership's obligation as a general partner, the Partnership may be required to make additional cash contributions to the venture.
The Partnership has acquired, through the one remaining venture, one regional shopping mall. The joint venture partner (who was primarily responsible for constructing the property) was to contribute any excess of cost over the aggregate amount available from Partnership contributions and financing and, to the extent such funds exceeded the aggregate costs, was to retain such excesses. The venture property has been financed under the long-term debt arrangement as described below.
INVESTMENT PROPERTY
OAKRIDGE MALL
The Partnership is a general partner in the Oakridge Associates Ltd. venture with the seller of the property.
Pursuant to the venture agreement, beginning January 1, 1983, any net cash flow is to be and has been distributed equally to the Partnership and the seller. The Partnership has a preferred position (related to the Partnership's cash investment in the venture) with respect to distributions of sale or refinancing proceeds from the venture. Once the preferred position has been satisfied, any excess sale or refinancing proceeds from the venture are to be distributed so that the Partnership and the venture partner equally share the proceeds.
Venture operating profits and losses are allocated to the venture partners generally in proportion to their distributions of net cash flow. In 1997, 1996 and 1995, profits and losses were allocated 50% to the Partnership and 50% to the venture partner. An affiliate of the venture partner manages the property pursuant to an agreement which provides for a management fee calculated at a percentage of certain types of income.
The Partnership has been in discussions with potential buyers for the Oakridge Shopping Mall (on behalf of the venture) or the Partnership's interest in the property.
In March 1998, an agreement in principle was reached to sell the Partnership's interest in the property to the venture partner. If the sale is consummated on the proposed terms, the Partnership would recognize a gain for financial reporting and Federal income tax purposes. There can be no assurances that the sale will be consummated under the terms of the agreement or under any other terms.
In October 1990, the Partnership and its Oakridge venture partner finalized negotiations with the lessors to amend the ground lease at the Oakridge Mall by adding a "purchase option" provision. The price for obtaining the purchase option was $2,000,000. The Partnership and its venture partner funded their respective 50% shares of these costs from the cash flow of the property. The option (which may be exercised five years after the death of both lessors) provides for the price of the land to be determined by a formula related to ground rent paid during the most recent few years of the lease, and is payable in addition to the cost of the purchase option discussed above.
In February 1995, Oakridge refinanced the existing mortgage loan secured by the property (which had a balance of approximately $14,165,000 at the February 1995 closing) in the amount of $27,000,000. The mortgage loan was scheduled to mature in February 1998, however, the venture exercised its option to extend the loan for six months to August 1998. Accordingly, the mortgage loan has been classified as current in the accompanying consolidated financial statements at December 31, 1997. Such short-term extension is currently considered adequate given the venture's current property sale plans. However, if the venture is unsuccessful in selling the property before the current loan maturity date, the venture would seek an additional loan extension from the current lender or would seek to refinance the mortgage loan.
At the February 1995 refinancing, the venture received approximately $4,300,000 in net proceeds (after payoff of the existing loan including a prepayment penalty of approximately $708,000 and closing costs). These proceeds were utilized for capital expenditures, including the replacement of the roof, and previously deferred maintenance at the mall. Such refinancing resulted in recognition of an extraordinary item of $782,020 (including deferred mortgage costs and accrued interest), of which the Partnership's share was $391,010. The lender held back $8,000,000 of the loan proceeds for the construction of an expansion and remodeling of the mall which commenced in April 1995 and was completed in 1996. As a result
of the venture completing the renovation and remodel of the mall in 1996, approximately $2,800,000 of excess proceeds from the refinancing was released from escrow by the lender. Additionally, after the venture's review of the requirements for operating reserves, repairs and deferred maintenance projects, the remaining loan proceeds of $4,294,143 were distributed to the partners of the venture. As a result of this distribution of refinancing proceeds, the Partnership's preferential position in the venture, as discussed above, was satisfied. Accordingly, any additional distributions of sale or refinancing proceeds will be allocated equally to the partners of the venture.
Nordstrom (which owned its own store) left the center in March 1995. Nordstrom assigned, transferred and conveyed its interest in its land, building and Reciprocal Easement Agreement ("REA") to Sears Roebuck and Co. which opened its new store on October 28, 1995. The Nordstrom closing and Sears Roebuck and Co. opening did not have a significant adverse impact on the operations of the mall. The property's other anchor tenants, Montgomery Ward and R.H. Macy, are also subject to the REA. The REA requirement for each anchor tenant to operate a department store under it's specific name expired in August 1993 and in addition, the REA requirement for each anchor tenant to operate a department store under any name expires in August 1998. The Partnership and its joint venture partner have decided not to pursue extensions of the operating covenants in the REA until such time, if ever, that negotiations for such extensions are deemed to be in the best interest of Oakridge.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and 1996: 1997 1996 ----------- ----------- 9.19% mortgage note; secured by the Oakridge Mall Shopping Center in San Jose, California; balance payable in monthly installments of $310,165 (including interest) until maturity in August 1998 . . . $23,002,015 24,532,837
Less current portion of long-term debt . . . . 23,002,015 1,530,822 ----------- -----------
Total long-term debt. . . $ -- 23,002,015 =========== ===========
Five year maturities of long-term debt are summarized as follows:
1998 . . . . . . . . $23,002,015 1999 . . . . . . . . -- 2000 . . . . . . . . -- 2001 . . . . . . . . -- 2002 . . . . . . . . -- ===========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or refinancing of investment properties will be allocated to the General Partners in an amount equal to the greater of any cash distributions of the proceeds of any such sale or refinancing (as described below) or 1% of the profits from the sale or refinancing. Losses from the sale or refinancing of investment properties will be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners.
An amendment to the Partnership Agreement, effective January 1, 1991, generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event that would cause the deficit balance in absolute amount in the Capital Account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of profits to the General Partners shall be increased to the extent necessary to cause the deficit balance in the Capital Account of the General Partners to be no less than their respective shares of the Partnership's indebtedness after such event. In general, the effect of this amendment is to allow the deferral of the recognition of taxable gain to the Limited Partners. Pursuant to such provisions, the General Partners were allocated in 1996 additional amounts of gain for Federal income tax purposes. Such allocations had no effect on total Partnership assets or results of operations.
The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership 6% of the selling price, and that the remaining proceeds (net after expenses and retained working capital) be distributed 85% to the Limited Partners and 15% to the General Partners. However, the Limited Partners shall receive 100% of such net sale proceeds until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership and (ii) have received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the third fiscal quarter of 1978. The Limited Partners have received cash distributions that satisfied the requirements in (i) and (ii) above.
LEASES - AS PROPERTY LESSOR
At December 31, 1997, the Partnership and its consolidated venture's principal asset is one shopping center. The Partnership has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the property, excluding cost of land, is depreciated over its estimated useful life. Leases with shopping center tenants range from one to thirty years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide for additional rent based upon percentages of tenants' sales volumes. A substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector.
Minimum lease payments including amounts representing executory costs (e.g.,taxes, maintenance, insurance) and any related profit in excess of specific reimbursements, to be received in the future under the above operating lease agreements relating to the shopping center, are as follows:
1998 . . . . . . . $ 6,387,773 1999 . . . . . . . 5,743,192 2000 . . . . . . . 4,894,754 2001 . . . . . . . 4,426,709 2002 . . . . . . . 3,881,238 Thereafter . . . . 10,688,519 ----------- Total. . . . . $36,022,185 ===========
Additional contingent rent (based on sales by property tenants) included in rental income was as follows:
1995 . . . . . . . $115,566 1996 . . . . . . . 301,074 1997 . . . . . . . 456,881 ========
LEASES - AS PROPERTY LESSEE
The following lease agreement has been determined to be an operating lease.
The Oakridge venture owns a net leasehold interest in the land underlying the San Jose, California shopping center expiring August 31, 2008, subject to renewal for twelve five-year periods. The lease provides for an annual base rent of $203,357. The lease provides that the venture pays real estate taxes applicable to the leased land and the improvements situated thereon. The lease also provides for additional annual percentage rent based upon the operations of the shopping center. In October 1990, the Partnership and the joint venture partner finalized negotiations with the lessor to amend the ground lease at Oakridge Mall by adding a "purchase option" provision.
Minimum rental expense for 1997, 1996 and 1995 under the above operating lease was $203,357 in each year. Additional rental expense under the above operating lease was $1,092,293, $850,773 and $696,896 for 1997, 1996 and 1995, respectively.
Future minimum rental commitments under the lease are as follows:
1998 . . . . . . . $ 203,357 1999 . . . . . . . 203,357 2000 . . . . . . . 203,357 2001 . . . . . . . 203,357 2002 . . . . . . . 203,357 Thereafter . . . . 1,059,198 ---------- $2,075,983 ==========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1997 and for the years ended December 31, 1997, 1996 and 1995 are as follows: UNPAID AT DECEMBER 31, 1997 1996 1995 1997 -------- -------- -------------------- Reimbursement (at cost) for out-of- pocket expenses . . $ -- 5,716 10,445 -- ------- ------ -------- ----- $ -- 5,716 10,445 -- ======= ====== ======== =====
The Limited Partners have received an amount from sale or refinancing proceeds in excess of their initial capital investment plus any deficiency in a 6% cumulative annual return on their average capital investment. The General Partners, therefore, are entitled to participate in sale and refinancing proceeds to the extent of their previously deferred disposition fees earned on the properties sold to date. All such fees, which total $940,488, were paid as of December 31, 1997.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during fiscal year 1997 and 1996.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation, substantially all of the outstanding stock of which is owned, directly or indirectly, by certain of its officers, directors, members of their families and their affiliates. JMB as the Corporate General Partner has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, AGPP Associates, L.P., an Illinois limited partnership with JMB as its sole general partner. The limited partners of the Associate General Partner are generally officers, directors and affiliates of JMB or its affiliates. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants and/or for the sale of property. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director, and the executive officers and certain other officers of the Corporate General Partner are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Corporate General Partner to be held on June 3, 1998. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on June 3, 1998. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle- XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income Properties- IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB including Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")) and Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P.) ("Arvida"). Most of such directors and officers are also partners, directly or indirectly, of certain partnerships which are associate general partners in the following real estate limited partnerships: the Partnership, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 60) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October 1969. Mr. Malkin is also a director of Urban Shopping Centers, Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant.
Neil G. Bluhm (age 60) is an individual general partner of JMB Income- IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August 1970. He is also a principal of Walton Street Real Estate Fund I, L.P. and a director of USC, Inc. Mr. Bluhm is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 59) has been associated with JMB since June 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 56) has been associated with JMB since July 1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 64) has been associated with JMB since December 1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 51) has been associated with JMB since December 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Advisors L.P., an affiliate of the Blackstone Group, L.P. He is also a director of USC, Inc., a trustee of Amli Residential Property Trust and a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. Mr. Schreiber holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 48) has been associated with JMB since March 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 50) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Gary Nickele (age 45) has been associated with JMB since February 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 49) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 62) has been associated with JMB since March 1973. He is a Certified Public Accountant.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is also made to the Notes filed with this annual report for a description of such distributions and allocations.
In 1997, 1996 and 1995, the General Partners received distributions of $0, $397,169 and $0, respectively, and a management fee of $0, $0 and $0, respectively. The General Partners received a share of Partnership earnings for tax purposes aggregating $42,966 in 1997.
JMB Realty Corporation ("JMB"), the Corporate General Partner, has earned fees aggregating $940,488 in connection with the sales of the Place II Apartments located in Phoenix, Arizona, the Wakefield Apartments located in Marietta, Georgia, the Walnut Bend Apartments located in Dallas, Texas, the Shadowridge of San Antonio Apartments located San Antonio, Texas, the Bush River Mall Shopping Center located in Columbia, South Carolina, the Spice Island Apartments located in Houston, Texas, the Bellfort II Apartments located in Houston, Texas and the Windridge Apartments located in Dallas, Texas.
The Limited Partners have received an amount from sale or refinancing proceeds in excess of their initial capital investment plus any deficiency in a 6% cumulative annual return on their average capital investment. The General Partners, therefore, are entitled to participate in sale and refinancing proceeds to the extent of their previously deferred disposition fees earned on the properties sold to date which total $940,488, all of which were paid as of December 31, 1997.
The General Partners of the Partnership may be reimbursed for their direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. In 1997, the Corporate General Partner of the Partnership was not due any reimbursement for such out-of-pocket expenses.
The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. The relationship of the Corporate General Partner to its affiliates is set forth above in Item 10 and Exhibit 21 hereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits
3-A.* The Prospectus of the Partnership dated October 17, 1977, as supplemented on December 5, 1977, January 16, 1978 and March 28, 1978, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, and which agreement is hereby incorporated herein by reference.
4-A. Secured promissory note #1 dated February 15, 1995 in the amount of $23,900,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
4-B. Secured promissory note #2 dated February 15, 1995 in the amount of $3,100,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended.
10-B. Closing statement dated February 15, 1995 relating to the refinancing by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule - ----------
* Previously filed as Exhibit 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1993 on Form 10-K of the Securities Exchange Act of 1934 (File No. 0-8915) filed on March 25, 1994 and hereby incorporated herein by reference.
No annual report or proxy material for the fiscal year 1997 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By Gailen J. Hull Senior Vice President Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1998
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1998
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1998
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1998
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1998
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 1998
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1998
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ----
3-A. The Prospectus of the Partnership dated October 17, 1977 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Secured Promissory Note #1 secured by Oakridge Mall in San Jose, California Yes
4-B. Secured Promissory Note #2 secured by Oakridge Mall in San Jose, California Yes
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended Yes
10-B. Closing statement relating to the refinancing by Oakridge Associates, Ltd. of Oakridge Mall located in San Jose, California Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits
3-A.* The Prospectus of the Partnership dated October 17, 1977, as supplemented on December 5, 1977, January 16, 1978 and March 28, 1978, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, and which agreement is hereby incorporated herein by reference.
4-A. Secured promissory note #1 dated February 15, 1995 in the amount of $23,900,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
4-B. Secured promissory note #2 dated February 15, 1995 in the amount of $3,100,000 relating to the refinancing of the mortgage note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended.
10-B. Closing statement dated February 15, 1995 relating to the refinancing by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose, California is hereby incorporated herein by reference to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11, 1995).
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule - ----------
* Previously filed as Exhibit 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1993 on Form 10-K of the Securities Exchange Act of 1934 (File No. 0-8915) filed on March 25, 1994 and hereby incorporated herein by reference.
No annual report or proxy material for the fiscal year 1997 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By Gailen J. Hull Senior Vice President Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1998
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1998
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1998
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1998
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1998
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 1998
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1998
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ----
3-A. The Prospectus of the Partnership dated October 17, 1977 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Secured Promissory Note #1 secured by Oakridge Mall in San Jose, California Yes
4-B. Secured Promissory Note #2 secured by Oakridge Mall in San Jose, California Yes
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in Oakridge Mall in San Jose, California, are hereby incorporated herein by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-59231) dated October 17, 1977 as amended Yes
10-B. Closing statement relating to the refinancing by Oakridge Associates, Ltd. of Oakridge Mall located in San Jose, California Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No