Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - Resource Real Estate Investors 7, L.P. | r7-20170331xex322.htm |
| EX-32.1 - EXHIBIT 32.1 - Resource Real Estate Investors 7, L.P. | r7-20170331xex321.htm |
| EX-31.2 - EXHIBIT 31.2 - Resource Real Estate Investors 7, L.P. | r7-20170331xex312.htm |
| EX-31.1 - EXHIBIT 31.1 - Resource Real Estate Investors 7, L.P. | r7-20170331xex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2017
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to __________
Commission file number 0-53962
Resource Real Estate Investors 7, L.P.
(Exact name of registrant as specified in its charter)
Delaware | 26-2726308 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
One Crescent Drive, Suite 203, Navy Yard Corporate Center, Philadelphia, PA 19112 |
(Address of principal executive offices) (Zip code) |
(215) 231-7050 |
(Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | þ |
Emerging growth company | o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
RESOURCE REAL ESTATE INVESTORS 7, L.P.
INDEX TO ANNUAL REPORT
ON FORM 10-Q
PAGE | ||
PART I | FINANCIAL INFORMATION | |
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II | OTHER INFORMATION | |
ITEM 6. | ||
PART I. FINANCIAL INFORMATION | |||
ITEM 1. FINANCIAL STATEMENTS
RESOURCE REAL ESTATE INVESTORS 7, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Cash | 484 | 1,570 | |||||
Accounts receivable | 3 | 59 | |||||
Accounts receivable due from related parties | 121 | 121 | |||||
Prepaid expenses and other assets | 26 | — | |||||
Total assets | $ | 634 | $ | 1,750 | |||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||
Liabilities: | |||||||
Accounts payable and accrued expenses | 19 | 27 | |||||
Payables to related parties | 49 | 24 | |||||
Total liabilities | 68 | 51 | |||||
Partners’ capital | 566 | 1,699 | |||||
Total liabilities and partners’ capital | $ | 634 | $ | 1,750 | |||
The accompanying notes are an integral part of these consolidated financial statements.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
(unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Revenues: | ||||||||
Rental income | $ | 12 | $ | 2,039 | ||||
Expenses: | ||||||||
Rental operating | 18 | 1,217 | ||||||
Management fees – related parties | — | 148 | ||||||
General and administrative | 87 | 208 | ||||||
Depreciation and amortization | — | 377 | ||||||
Total expenses | 105 | 1,950 | ||||||
(Loss) income before other income (expenses) | (93 | ) | 89 | |||||
Other income (expenses): | ||||||||
Interest expense, net | — | (359 | ) | |||||
Gain on sale of rental properties | — | 10 | ||||||
Loss on disposal of fixed assets | — | (1 | ) | |||||
Total other income (expenses) | $ | — | $ | (350 | ) | |||
Net loss | $ | (93 | ) | $ | (261 | ) | ||
Weighted average number of limited partner units outstanding | 3,270 | 3,270 | ||||||
Net loss per weighted average limited partner unit, basic and diluted | $ | (0.03 | ) | $ | (0.08 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(in thousands, except units)
(unaudited)
General | Limited Partners | |||||||||||||
Partner | Units | Amount | Total | |||||||||||
Balance at January 1, 2017 | $ | 340 | 3,269,655 | $ | 1,359 | $ | 1,699 | |||||||
Distributions | (166 | ) | — | (874 | ) | (1,040 | ) | |||||||
Net loss | — | — | (93 | ) | (93 | ) | ||||||||
Balance at March 31, 2017 | $ | 174 | 3,269,655 | $ | 392 | $ | 566 | |||||||
The accompanying notes are an integral part of this consolidated financial statement.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (93 | ) | (261 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||
Gain on sale of rental properties | — | (10 | ) | ||||
Depreciation and amortization | — | 377 | |||||
Amortization of deferred financing costs | — | 21 | |||||
Loss on disposal of fixed assets | — | 1 | |||||
Changes in operating assets and liabilities: | |||||||
Restricted cash | — | 799 | |||||
Tenant receivables, net | — | 60 | |||||
Accounts receivable | 56 | — | |||||
Prepaid expense and other assets | (26 | ) | 25 | ||||
Accounts receivable due from related parties | — | 85 | |||||
Accounts payable and accrued expenses | (8 | ) | (50 | ) | |||
Real estate tax payable | — | (825 | ) | ||||
Accrued interest | — | (1 | ) | ||||
Payables to related parties | 25 | 8 | |||||
Security deposits | — | (1 | ) | ||||
Net cash (used in) provided by operating activities | (46 | ) | 228 | ||||
Cash flows from investing activities: | |||||||
Capital expenditures | — | (139 | ) | ||||
Proceeds from sale of rental properties | — | 10 | |||||
Net cash used in investing activities | — | (129 | ) | ||||
Cash flows from financing activities: | |||||||
Distributions to partners | (1,040 | ) | (240 | ) | |||
Principal payments on mortgage notes payable | — | (112 | ) | ||||
Net cash used in financing activities | (1,040 | ) | (352 | ) | |||
Net decrease in cash | (1,086 | ) | (253 | ) | |||
Cash at beginning of period | 1,570 | 6,702 | |||||
Cash at end of period | $ | 484 | $ | 6,449 | |||
The accompanying notes are an integral part of these consolidated financial statements.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2017
(unaudited)
NOTE 1 - NATURE OF BUSINESS AND OPERATIONS
Resource Real Estate Investors 7, L.P. (“R-7” or the “Partnership”) is a Delaware limited partnership which, until November 21, 2016, owned and operated multifamily residential rental properties. The Partnership was formed on March 28, 2008 and commenced operations on June 16, 2008. The Partnership's general partner, Resource Capital Partners, Inc. (“RCP”, the “General Partner”, or the “GP”), is in the business of sponsoring and managing real estate investment limited partnerships and tenant in common programs. RCP contributed $1,000 in cash as its minimum capital contribution to the Partnership. In addition, RCP held a 5.62% limited partnership interest in the Partnership at March 31, 2017 and December 31, 2016. RCP is an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”), a company operating in the real estate, financial fund management and commercial finance sectors.
RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate services company engaged in a broad range of activities. C-III controls our Advisor, Resource Securities, Inc. ("Resource Securities"), the Company's dealer manager, and Resource Apartment Manager III, LLC, the Company's property manager. C-III also controls all of the shares of the Company's common stock held by RAI and the Advisor.
The General Partner has complete and exclusive discretion in the management of the Partnership's business. Pursuant to the Partnership's limited partnership agreement, the Partnership's term was set to expire on March 28, 2016. On February 12, 2016, by written notice to the partners, the General Partner elected to extend the term for one additional year through March 28, 2017. The Partnership is now in the dissolution and wind-up phase pursuant to the Partnership's limited partnership agreement.
The Partnership's First Amended and Restated Agreement of Limited Partnership (the "Agreement") provides that income is allocated as follows: first, to the Limited Partners (“LPs”) and the GP (collectively, the “Partners”) in proportion to and to the extent of the deficit balances, if any, in their respective capital accounts; second, to the Partners in proportion to the allocations of Distributable Cash (as defined in the Agreement); and third, 100% to the LPs. All losses are allocated as follows: first, 100% to the LPs until the LPs have been allocated losses equal to the excess, if any, of their aggregate capital account balances over the aggregate Adjusted Capital Contributions (as defined in the Agreement); second, to the Partners in proportion to and to the extent of their respective remaining positive capital account balances, if any; and third, 100% to the LPs.
Distributable cash from operations, payable monthly, as determined by the GP, is first allocated 100% to the LPs until the LPs have received their Preferred Return (as defined in the Agreement); and thereafter, 80% to the LPs and 20% to the GP.
Distributable cash from capital transactions, as determined by the GP, is first allocated 100% to the LPs until the LPs have received their Preferred Return; second, 100% to the LPs until their Adjusted Capital Contributions have been reduced to zero; and thereafter, 80% to the LPs and 20% to the GP.
The consolidated financial statements and the information and tables contained in the notes thereto as of March 31, 2017 are unaudited. The consolidated balance sheet as of March 31, 2017 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2016. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three months ended March 31, 2017 may not necessarily be indicative of the results of operations for the full year ending December 31, 2017.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2017
(unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with GAAP.
The consolidated financial statements include the accounts of the Partnership and its wholly-owned subsidiaries, as follows:
Subsidiaries |
RRE Tamarlane Holdings, LLC, or Tamarlane Apartments (“Tamarlane”) (1) |
RRE Bent Oaks Holdings, LLC, or Bent Oaks Apartments (“Bent Oaks”) (2) |
RRE Cape Cod Holdings, LLC, or Cape Cod Apartments (“Cape Cod”) (3) |
RRE Woodhollow Holdings, LLC, or Woodhollow Apartments (“Woodhollow”) (4) |
RRE Woodland Hills Holdings, LLC (“Hills”) (5) |
RRE Woodland Village Holdings, LLC, or Woodland Village Apartments (“Village”) (6) |
(1) Tamarlane, a 115 unit multifamily apartment complex in Maine, was sold on December 1, 2015.
(2) Bent Oaks, a 146 unit multifamily apartment complex in Texas, was sold on September 12, 2016.
(3) Cape Cod, a 212 unit multifamily apartment complex in Texas, was sold on November 21, 2016.
(4) Woodhollow, a 108 unit multifamily apartment complex in Texas, was sold on September 12, 2016.
(5) Hills, a 228 unit multifamily apartment complex in Georgia, was sold on March 19, 2015.
(6) Village, a 308 unit multifamily apartment complex in South Carolina, was sold on September 30, 2016.
All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Partnership estimates the allowance for uncollectible receivables and adjusts the balance quarterly. Actual results could differ from those estimates.
Supplemental Disclosure of Cash Flow Information
During the three months ended March 31, 2017 and 2016, the Partnership paid $0 and $340,000, respectively, in cash for interest.
Advertising
The Partnership expenses advertising costs as they are incurred. Advertising costs, which are included in rental operating expenses, totaled $1,000 and $26,000 for the three months ended March 31, 2017 and 2016, respectively.
Reclassification
Certain amounts in the 2016 consolidated financial statements have been reclassified to conform to the 2017 presentation.
RESOURCE REAL ESTATE INVESTORS 7, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2017
(unaudited)
Sale of Rental Property
The Partnership recognized the gains on sales of rental properties separately in the Consolidated Statement of Operations. Sales of rental properties completed by the Partnership do not represent a significant strategic shift in operations and , accordingly, the Partnership does not present discontinued operations.
Income Taxes
Income taxes or credits resulting from earnings or losses are payable by, or accrue to the benefit of, the partners; accordingly, no provision has been made for income taxes in these consolidated financial statements.
The Partnership evaluates the benefits of tax positions taken or expected to be taken in its tax returns under a two-step recognition and measurement process. Only the largest amount of benefits from the tax positions that will more likely than not be sustainable upon examination are recognized by the Partnership. The Partnership does not have any unrecognized tax benefits, nor interest and penalties, recorded in the Consolidated Balance Sheets or Consolidated Statements of Operations and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.
The Partnership is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in those states in which the Partnership has significant business operations. The Partnership is not currently undergoing any examinations by taxing authorities. The Partnership may be subject to U.S. federal income tax and state/local income tax examinations for years 2013 through 2016.
Revenue Recognition
Revenue is primarily derived from the rental of residential housing units with lease agreement terms of generally one year or less. The Partnership recognizes revenue in the period that rent is earned, which is on a monthly basis. The Partnership recognizes rent as income on a straight-line basis over the term of the related lease. Additionally, any incentives included in the lease are amortized on a straight-line basis over the term of the related lease.
Included within rental income are other income amounts such as utility reimbursements, late fees, parking fees, pet fees and lease application fees which are recognized when earned and/or received. For the three months ended March 31, 2017 and March 31, 2016, other income totaled $12,000 and $223,000, respectively. Substantially all rental income recorded for the three months ended March 31, 2017 pertains to collections written off during the year ended December 31, 2016 that were recovered in 2017.
Long-Lived Assets
The Partnership reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value. The Partnership has estimated that the future cash flows from its properties will be sufficient to recover their
carrying amounts and, as a result, the Partnership did not recognize any impairment losses with respect to its properties for the
three months ended March 31, 2017 and 2016.
Rental Properties
Rental properties are carried at cost, net of accumulated depreciation. Buildings and improvements and personal property are depreciated for financial reporting purposes on the straight-line method over their estimated useful lives. The value of in-place leases is amortized over the average remaining term of the respective leases on a straight-line basis. Useful lives used for calculating depreciation for financial reporting purposes are as follows:
Buildings and improvements | 5 - 27.5 years | ||
Personal property | 3 - 15 years | ||
RESOURCE REAL ESTATE INVESTORS 7, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2017
(unaudited)
Tenant Receivables
Tenant receivables are stated at amounts due from tenants net of an allowance for uncollectible receivables. Payment terms vary and receivables outstanding longer than the payment terms are considered past due. The Partnership determines its allowance by considering a number of factors, including the length of time receivables are past due, security deposits held, the Partnership’s previous loss history, the tenants’ current ability to pay their obligations to the Partnership, the general condition of the economy and the condition of the industry as a whole. The Partnership writes off receivables when they become uncollectible. At March 31, 2017 and December 31, 2016, there were no allowances for uncollectible receivables.
Redemptions
The LPs may request redemption of their units at any time. The Partnership has no obligation to redeem any units and will do so only at the GP’s discretion. If the Partnership redeems units, the redemption price is generally the amount of the initial investment less all distributions from the Partnership to the LP, and less all organization and offering expenses charged to the LP.
NOTE 3 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In the ordinary course of its business operations, the Partnership has ongoing relationships with several related entities.
Substantially all of the receivables from related parties represents escrow funds held by RAI for self insurance. The Partnership's properties participate in insurance pools with other properties directly and indirectly managed by RAI for both property insurance and general liability. RAI holds the escrow funds related to the insurance pools on its books. The pool for the property insurance covers losses up to $2.5 million and the pool for the general liability covers losses up to the first $50,000 per incident. Catastrophic insurance would cover property losses in excess of the insurance pool up to $140 million. Therefore, unforeseen or catastrophic losses in excess of the Partnership's insured limits could have a material adverse effect on the Partnership's financial condition and operating results.
RCP is entitled to receive an annual investment management fee, payable monthly, equal to 1% of the gross offering proceeds that have been deployed in real estate investments from the offering of partnership units, net of any amounts otherwise attributable to LP interests owned by RCP. During the term of the Partnership, RCP must subordinate up to 100% of its annual investment management fee to the receipt by the LPs of their Preferred Return. As of March 31, 2017 and December 31, 2016, all subordinated investment management fees had been paid.
A wholly-owned subsidiary of RCP, Resource Real Estate Management, LLC (“RREML”), is entitled to receive property and debt management fees. RREML engaged Resource Real Estate Management, Inc (“RREMI”), an indirect wholly owned subsidiary of RAI, to manage the Partnership’s properties. As of March 31, 2017 and December 31, 2016, property management fees due totaled $0. Because the Partnership had not acquired any real estate debt investments, there were no debt management fees as of March 31, 2017 and December 31, 2016.
During the ordinary course of business, RCP and RREMI advance funds for ordinary operating expenses on behalf of the properties. As of March 31, 2017 and December 31, 2016, advances due totaled $49,000 and $5,000, respectively. Total reimbursable operating expenses incurred during the three months ended March 31, 2017 and March 31, 2016 were $54,000 and $429,000, respectively. Reimbursed expenses include payroll and miscellaneous operating expenses. Reimbursed operating expenses are included in property rental operating expenses in the consolidated statements of operations.
The Partnership pays investment management fees and property management fees to related parties. These expenses are summarized as follows (in thousands):
RESOURCE REAL ESTATE INVESTORS 7, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2017
(unaudited)
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
RCP: | |||||||
Investment management fees (1) | $ | — | $ | 46 | |||
RREML: | |||||||
Property management fees - 5% of gross cash receipts (2) | $ | — | 102 | ||||
$ | — | $ | 148 | ||||
(1) RCP is entitled to receive an annual investment management fee, payable monthly, equal to 1% of the gross proceeds that have been deployed in real estate investments from the offering of partnership units, net of any LP interest owned by RCP. During the term of the Partnership, RCP must subordinate up to 100% of its annual investment management fee to the receipt by the LPs of their Preferred Return.
(2) RREML is entitled to receive monthly property management fees equal to 5% of the gross operating revenues from the Partnership’s 100% owned Properties for managing or obtaining and supervising third party managers.
NOTE 4 - SUBSEQUENT EVENTS
The Partnership has evaluated subsequent events through the date these consolidated financial statements were issued and determined that no events, other than those disclosed above, have occurred which would require an adjustment to the consolidated financial statements.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited) |
This report contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology. Such statements are subject to the risks and uncertainties inherent in partnerships that invest in real estate and real estate assets, including those referred to in our filings under the Securities Exchange Act of 1934. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.
Overview
We are a Delaware limited partnership that was formed on March 28, 2008 and commenced operations on June 16, 2008. Through wholly owned subsidiaries, we owned in fee, operated and invested in multifamily residential rental properties.
We are in the process of dissolution and winding up of the Partnership and expect final distributions to occur in the three months ended June 30, 2017.
The following table presents our multifamily residential rental properties that were held during the life of the Partnership :
Subsidiary / Property | Purchase Date | Disposition Date | Property Location | |||
RRE Tamarlane Holdings, LLC, or Tamarlane | 07/31/2008 | 12/1/2015 | Portland, Maine | |||
RRE Bent Oaks Holdings, LLC, or Bent Oaks | 12/10/2008 | 9/12/2016 | Austin, Texas | |||
RRE Cape Cod Holdings, LLC, or Cape Cod | 12/10/2008 | 11/21/2016 | San Antonio, Texas | |||
RRE Woodhollow Holdings, LLC, or Woodhollow | 12/12/2008 | 9/12/2016 | Austin, Texas | |||
RRE Woodland Hills Holdings, LLC, or Hills | 12/19/2008 | 3/19/2015 | Decatur, Georgia | |||
RRE Woodland Village Holdings, LLC, or Village | 03/07/2012 | 9/30/2016 | Columbia, South Carolona | |||
Results of Operations
During the three months ended March 31, 2017, we were in the process of winding up the Partnership and costs were primarily related to auditing and legal fees. All properties owned by the Partnership were sold in 2016 or 2015.
Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
The following table sets forth the results of our operations for the periods indicated (in thousands, except per unit data):
March 31, | Increase (Decrease) | ||||||||||||||
2017 | 2016 | Amount | Percent | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 12 | 2,039 | (2,027 | ) | (99 | )% | ||||||||
Expenses: | |||||||||||||||
Rental operating | 18 | 1,217 | (1,199 | ) | (99 | )% | |||||||||
Management fees – related parties | — | 148 | (148 | ) | (100 | )% | |||||||||
General and administrative | 87 | 208 | (121 | ) | (58 | )% | |||||||||
Depreciation and amortization | — | 377 | (377 | ) | (100 | )% | |||||||||
Total expenses | 105 | 1,950 | (1,845 | ) | (95 | )% | |||||||||
(Loss) income before other income (expenses) | (93 | ) | 89 | (182 | ) | (204 | )% | ||||||||
Other income (expenses): | |||||||||||||||
Interest expense, net | — | (359 | ) | 359 | (100 | )% | |||||||||
Gain on sale of rental properties | — | 10 | (10 | ) | 100 | % | |||||||||
Loss on disposal of fixed assets | — | (1 | ) | 1 | (100 | )% | |||||||||
Total other income (expenses) | — | (350 | ) | 350 | |||||||||||
Net loss | $ | (93 | ) | $ | (261 | ) | $ | 168 | 60 | % | |||||
Weighted average number of limited partner units outstanding | 3,270 | 3,270 | |||||||||||||
Net loss per weighted average limited partner unit, basic and diluted | $ | (0.03 | ) | $ | (0.08 | ) | |||||||||
Liquidity and Capital Resources
The following table sets forth our sources and uses of cash (in thousands):
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Net cash (used in) provided by operating activities (1) | $ | (46 | ) | $ | 228 | |||
Net cash used in investing activities | — | (129 | ) | |||||
Net cash used in financing activities | (1,040 | ) | (352 | ) | ||||
Net decrease in cash | $ | (1,086 | ) | $ | (253 | ) | ||
(1) | Includes changes in operating assets and liabilities. |
We have begun the process of dissolution and winding up of the Partnership pursuant to the Limited Partnership Agreement. As of March 31, 2017, we own no multifamily residential rental Properties. Our liquidity needs consist primarily of the payment of professional fees to complete the dissolution. We expect that the final distribution to the partners will occur in the second quarter of 2017.
Redemption of Units
We are permitted, in our General Partner’s sole discretion, to redeem units upon a unitholder’s request. However, we have no obligation to redeem units at any time, and we can decline to redeem units for any reason. Cumulatively through March 31, 2017, a total of 5,000 units have been redeemed at an aggregate price of $46,710, although no units were redeemed in the three months then ended.
Legal Proceedings
We are a party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to certain accrued liabilities. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a discussion of our critical accounting policies and estimates, see the discussion in our Annual Report on Form 10-K for the year ended December 31, 2016.
Off-Balance Sheet Arrangements
As of March 31, 2017 and December 31, 2016, we did not have any off-balance sheet arrangements or obligations, including contingent obligations, other than guarantees by the General Partner of certain limited standard expectations to the non-recourse nature of the mortgage notes which are secured by the Properties.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
Omitted pursuant to Regulation S-K, Item 305(e).
ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our General Partner, including its chief executive officer and its chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision of the chief executive officer and chief financial officer of our General Partner, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit No. | Description | |
3.1 | Amended and Restated Agreement of Limited Partnership. (1) | |
3.2 | Certificate of Limited Partnership. (1) | |
4.1 | Forms of letters sent to limited partners confirming their investment. (1) | |
10.1 | Agreement of Purchase and Sale - Casco Bay Portfolio (Tamarlane) (incorporated by reference to the Partnership's Annual Report on Form 10-K filed March 29, 2016) | |
10.2 | Agreement of Purchase and Sale - The Hills (incorporated by reference to the Partnership's Annual Report on Form 10-K filed March 29, 2016) | |
10.3 | Agreement of Purchase and Sale - Bent Oaks (incorporated by reference to the Partnership's Annual Report on Form 10-Q filed August 12, 2016) | |
10.4 | Agreement of Purchase and Sale - Woodhollow (incorporated by reference to the Partnership's Annual Report on Form 10-Q filed August 12, 2016) | |
10.5 | Agreement of Purchase and Sale - Woodland Village (incorporated by reference to the Partnership's Annual Report on Form 10-Q filed August 12, 2016) | |
10.6 | Agreement of Purchase and Sale - Cape Cod (incorporated by reference to the Partnership's Annual Report on Form 10-K filed March 28, 2017) | |
10.7 | Reinstatement of and Amendment of Purchase and Sale- Cape Cod (incorporated by reference to the Partnership's Annual Report on Form 10-K filed March 28, 2017) | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.1 | Interactive Data Files | |
(1) | Filed previously as an exhibit to the Partnership’s registration statement on Form 10 for the year ended December 31, 2008 and by this reference incorporated herein. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RESOURCE REAL ESTATE INVESTORS 7, L.P. | |
By: Resource Capital Partners, Inc., its general partner | |
May 12, 2017 | By: /s/ Kevin M. Finkel |
KEVIN M. FINKEL | |
President | |
(Principal Executive Officer) | |
May 12, 2017 | By: /s/ Steven R. Saltzman |
STEVEN R. SALTZMAN | |
Vice President – Finance | |
(Principal Financial and Accounting Officer) | |