Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2014 | |
Document and Entity Information: | ' |
Entity Registrant Name | 'REAL ESTATE ASSOCIATES LTD VII |
Document Type | '10-Q |
Document Period End Date | 31-Mar-14 |
Amendment Flag | 'false |
Entity Central Index Key | '0000722648 |
Current Fiscal Year End Date | '--12-31 |
Entity Common Stock, Shares Outstanding | 15,055.50 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'Yes |
Entity Voluntary Filers | 'No |
Entity Well-known Seasoned Issuer | 'No |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q1 |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Cash and cash equivalents | $578 | $610 |
Receivables - limited partners | 261 | 266 |
Total assets | 839 | 876 |
Liabilities | ' | ' |
Accounts payable and accrued expenses | 9 | 26 |
Partners' Capital Equity (Deficit): | ' | ' |
General partners | -317 | -317 |
Limited partners | 1,147 | 1,167 |
Total partners' capital equity (deficit) | 830 | 850 |
Total liabilities and partners' capital equity (deficit) | $839 | $876 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Operating Expenses: | ' | ' |
Management fees - General Partner | ' | $12 |
General and administrative | 8 | ' |
Legal and accounting | 12 | 19 |
Interest | ' | 50 |
Total operating expenses | 20 | 81 |
Income (Loss) from partnership operations | -20 | -81 |
Net Income (Loss) | -20 | -81 |
Net Income (Loss) allocated to general partners (1%) | ' | -1 |
Net Income (Loss) allocated to limited partners (99%) | ($20) | ($80) |
Net Income (Loss) per limited partnership interest | ($1.33) | ($5.27) |
Statement_of_Changes_in_Partne
Statement of Changes in Partners' Capital (Deficit) (Unaudited) (USD $) | General Partners | Limited Partners | Total |
In Thousands | |||
Partners' capital equity (deficit), beginning balance at Dec. 31, 2013 | ($317) | $1,167 | $850 |
Net Income (Loss) | ' | -20 | -20 |
Partners' capital equity (deficit), ending balance at Mar. 31, 2014 | ($317) | $1,147 | $830 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net Income (Loss) | ($20) | ($81) |
Changes in accounts: | ' | ' |
Change in Accounts Receivables - limited partners | 5 | ' |
Change in Accrued interest payable | ' | 50 |
Change in Accounts payable and accrued expenses | -17 | 14 |
Net cash used in operating activities | -32 | -17 |
Net decrease in cash and cash equivalents | -32 | -17 |
Cash and cash equivalents, beginning of period | 610 | 992 |
Cash and cash equivalents, end of period | $578 | $975 |
Note_1_Organization_and_Summar
Note 1 - Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 1 - Organization and Summary of Significant Accounting Policies | ' |
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
General | |
The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Annual Report for the fiscal year ended December 31, 2013 prepared by the Partnership. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. | |
In the opinion of the Partnership’s management, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. | |
The general partners collectively share a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest which is allocated in proportion to their respective individual investments. The general partners of the Partnership are National Partnership Investments, LLC ("NAPICO or “General Partner"), a California limited liability company, and National Partnership Investments Associates II, a California limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). | |
At March 31, 2014 and December 31, 2013, respectively, the Partnership had 15,055.50 limited partnership interests outstanding. | |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. | |
Principles of Consolidation | |
The financial statements for 2013 were consolidated as they included the accounts of Real Estate Associates Limited VII and its majority-owned general partnership Real Estate Associates IV (“REA IV”). Losses in excess of the minority investment that would otherwise be attributed to the minority interest were allocated to the Partnership. | |
Method of Accounting for Investments in Local Limited Partnerships | |
The investments in Local Limited Partnerships are accounted for using the equity method. | |
Net Loss Per Limited Partnership Interest | |
Net loss per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 15,055.50 and 15,185.5 for the three months ended March 31, 2014 and 2013, respectively. | |
Variable Interest Entities | |
At March 31, 2014 and December 31, 2013, the Partnership held variable interests in zero VIEs. However, during the reporting period of the three months ended March 31, 2013 the Partnership held variable interests in three VIEs for which the Partnership was not the primary beneficiary. | |
Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Limited Partnerships, that the general partner of each of the Local Limited Partnerships is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partners conduct and manage the business of the Local Limited Partnerships; | |
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnerships’ underlying real estate properties; | |
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnerships; | |
· the general partners are obligated to fund any recourse obligations of the Local Limited Partnerships; | |
· the general partners are authorized to borrow funds on behalf of the Local Limited Partnerships; and | |
· the Partnership, as a limited partner in each of the Local Limited Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnerships that most significantly impact such entities’ economic performance. |
Note_2_Investments_in_and_Adva
Note 2 - Investments in and Advances To Local Partnerships | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 2 - Investments in and Advances To Local Partnerships | ' |
NOTE 2 - INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS | |
As of March 31, 2014, the Partnership held limited partnership interests in zero Local Limited Partnerships. At December 31, 2013, the Partnership held a general partner interest in REA IV which, in turn, held limited partnership interests in zero Local Limited Partnerships. Therefore, the Partnership held interests, either directly or indirectly through REA IV, in zero Local Limited Partnerships. The other general partner of REA IV was NAPICO. | |
The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Limited Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnerships based upon its respective ownership percentage. Distributions of surplus cash from operations from the Local Limited Partnerships are restricted by the Local Limited Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Limited Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership. | |
The individual investments are carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Limited Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Limited Partnerships reaches zero. Distributions from the Local Limited Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying unaudited statements of operations. The Partnership did not receive any operating distributions from Local Limited Partnerships during the three months ended March 31, 2014 and 2013. | |
At times, advances are made to the Local Limited Partnerships. Advances made by the Partnership to the individual Local Limited Partnerships are considered part of the Partnership's investment in limited partnerships. Advances made to Local Limited Partnerships for which the investment has been reduced to zero are charged to expense. There were no advances made during the three months ended March 31, 2014 and 2013. | |
For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Limited Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Limited Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize. | |
The Partnership has no carrying value in investments in Local Limited Partnerships as of March 31, 2014 and December 31, 2013. | |
On May 6, 2013, the Partnership assigned its limited partnership interest in Bluewater Limited Dividend Housing Association (“Bluewater”) to an affiliate of the Local Operating General Partner for the cancellation of two non-recourse notes payable (as discussed in “Note 4”) by an affiliate of the Local Operating General Partner. The Partnership had no investment balance remaining in Bluewater at March 31, 2013. In connection with the sale, the Partnership’s non-recourse notes payable of an aggregate of approximately $920,000 and associated accrued interest of approximately $2,419,000 as of March 31, 2013 were extinguished. | |
On September 17, 2013, the Partnership assigned its limited partnership interest in Tradewinds East to an affiliate of the Operating General Partner. The fund received no proceeds from the transaction. The Partnership's investment balance in this local partnership was zero at both March 31, 2014 and 2013. | |
In August 2007, the mortgage lender for the mortgage encumbering Newton Apartments sent notice accelerating the debt. The Local Operating General Partner requested that the lender restructure or write down the debt. The Local Operating General Partner conducted mediation with the lender in June 2010. The mortgage lender was unwilling to write down or restructure the debt, but did agree to give the Local Operating General Partner additional time to complete a sale of the property. | |
On December 27, 2013, the Partnership sold the limited partnership interests it held in Newton Apartments for $5,000. The Partnership's investment balance in this local partnership was zero at the date of sale. |
Note_3_Notes_Payable
Note 3 - Notes Payable | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 3 - Notes Payable | ' |
NOTE 3 - NOTES PAYABLE | |
Twelve of the original investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. These notes matured between December 1999 and December 2004. These obligations and related interest at 9.5 percent were collateralized by the Partnership's investments in the Local Limited Partnerships and payable only out of cash distributions from the Local Limited Partnerships, as defined in the notes. Unpaid interest was due at maturity of the notes. | |
The Partnership had entered into an agreement with the holders of the non-recourse notes payable collateralized by the Partnership’s investment in twelve Local Limited Partnerships with notes payable in which the note holder agreed to forebear taking any action under these notes pending the purchase by the note holder. All twelve of these Local Limited Partnerships sold their respective investment properties to the note holders during 2012 and 2013. In connection with these sales, non-recourse notes payable and associated accrued interest totaling approximately $21,806,000 were extinguished. | |
There were no principal or interest payments made on these notes during the three months ended March 31, 2013. |
Note_4_Transactions_With_Affil
Note 4 - Transactions With Affiliated Parties | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 4 - Transactions With Affiliated Parties | ' |
NOTE 4 – TRANSACTIONS WITH AFFILIATED PARTIES | |
Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee equal to 0.5 percent of the original remaining invested assets of the remaining partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective partnerships. The fee was approximately $0 and $12,000 for the three months ended March 31, 2014 and 2013, respectively. | |
Bethesda Holdings II, LLC (“Bethesda”) and its affiliates owned 1,177.58 Limited Partnership Interests in the Partnership representing 7.82% of the outstanding interests in the Partnership at March 31, 2014. It is possible that Bethesda or its affiliates will acquire additional Limited Partnership Interests in the Partnership, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Limited Partnership Interests are entitled to take action with respect to a variety of matters, that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Bethesda as its sole stockholder. |
Note_5_Fair_Value_of_Financial
Note 5 - Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 5 - Fair Value of Financial Instruments | ' |
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS | |
Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. The notes payable and amounts due for partnership interests are collateralized by the Partnership’s investment in two Local Limited Partnerships and are payable only out of cash distributions from the Local Limited Partnerships. The operations generated by the Local Limited Partnerships, which account for the Partnership’s primary source of revenues, are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes and related accrued interest payable. At March 31, 2014, the Partnership believes that the carrying amount of its other assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments. |
Note_6_Contingencies
Note 6 - Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 6 - Contingencies | ' |
NOTE 6 - CONTINGENCIES | |
The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership. |
Note_7_Subsequent_Event
Note 7 - Subsequent Event | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 7 - Subsequent Event | ' |
NOTE 7 - SUBSEQUENT EVENT | |
The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed. |
Note_1_Organization_and_Summar1
Note 1 - Organization and Summary of Significant Accounting Policies: General (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
General | ' |
General | |
The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Annual Report for the fiscal year ended December 31, 2013 prepared by the Partnership. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. | |
In the opinion of the Partnership’s management, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. | |
The general partners collectively share a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest which is allocated in proportion to their respective individual investments. The general partners of the Partnership are National Partnership Investments, LLC ("NAPICO or “General Partner"), a California limited liability company, and National Partnership Investments Associates II, a California limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). | |
At March 31, 2014 and December 31, 2013, respectively, the Partnership had 15,055.50 limited partnership interests outstanding. |
Note_1_Organization_and_Summar2
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. |
Note_1_Organization_and_Summar3
Note 1 - Organization and Summary of Significant Accounting Policies: Principles of Consolidation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Principles of Consolidation | ' |
Principles of Consolidation | |
The financial statements for 2013 were consolidated as they included the accounts of Real Estate Associates Limited VII and its majority-owned general partnership Real Estate Associates IV (“REA IV”). Losses in excess of the minority investment that would otherwise be attributed to the minority interest were allocated to the Partnership. |
Note_1_Organization_and_Summar4
Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investment in Local Partnerships (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Method of Accounting For Investment in Local Partnerships | ' |
Method of Accounting for Investments in Local Limited Partnerships | |
The investments in Local Limited Partnerships are accounted for using the equity method. |
Note_1_Organization_and_Summar5
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Net Loss Per Limited Partnership Interest | ' |
Net Loss Per Limited Partnership Interest | |
Net loss per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 15,055.50 and 15,185.5 for the three months ended March 31, 2014 and 2013, respectively. |
Note_1_Organization_and_Summar6
Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Variable Interest Entities | ' |
Variable Interest Entities | |
At March 31, 2014 and December 31, 2013, the Partnership held variable interests in zero VIEs. However, during the reporting period of the three months ended March 31, 2013 the Partnership held variable interests in three VIEs for which the Partnership was not the primary beneficiary. | |
Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Limited Partnerships, that the general partner of each of the Local Limited Partnerships is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partners conduct and manage the business of the Local Limited Partnerships; | |
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnerships’ underlying real estate properties; | |
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnerships; | |
· the general partners are obligated to fund any recourse obligations of the Local Limited Partnerships; | |
· the general partners are authorized to borrow funds on behalf of the Local Limited Partnerships; and | |
· the Partnership, as a limited partner in each of the Local Limited Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnerships that most significantly impact such entities’ economic performance. |
Note_1_Organization_and_Summar7
Note 1 - Organization and Summary of Significant Accounting Policies: General (Details) | Mar. 31, 2014 | Dec. 31, 2013 |
Details | ' | ' |
Outstanding Limited Partnership Interests | 15,055.50 | 15,055.50 |
Note_1_Organization_and_Summar8
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' |
Number of limited partnership interests in EPS calculation | 15,055.50 | 15,185.50 |
Note_3_Notes_Payable_Details
Note 3 - Notes Payable (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Details | ' |
Repayments of Debt | $0 |