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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995, or
[ ] 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 0-17695.
HealthCare Properties, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1317327
State or other jurisdiction of (I.R.S. Employer
incorporation or
organization) Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code:
(214) 770-5600
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Limited Partnership Interest
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The Registrant s outstanding securities consist of units of
limited partnership interests which have no readily ascertainable
market value since there is no public trading market for these
securities on which to base a calculation of aggregate market
value.
Documents incorporated by reference. None
Exhibit Index Page : 40
Page 1 of 40
TABLE OF CONTENTS
PART I Page
Item 1Business 3
Item 2Properties 5
Item 3Legal Proceedings 6
Item 4Submission of Matters to a Vote of Security Holders 8
PART II
Item 5 Market for Registrant's Limited Partnership Interests
and Related Security Holder Matters 8
Item 6Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial
Condition
and Results of Operations 10
Item 8Financial Statements and Supplementary Data 14
Item 9Changes in and Disagreements with Accountants on
Accounting 14
and Financial Disclosure
PART III
Item 10Directors and Executive Officers of the Registrant 14
Item 11Executive Compensation 17
Item 12Security Ownership of Certain Beneficial Owners and
Management 17
Item 13Certain Relationships and Related Transactions 18
PART IV
Item 14Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 38
SIGNATURES 40
PART I
Item 1. Business
HealthCare Properties, L.P. ("Registrant"), is a Delaware
limited partnership formed in March 1987, for the purpose of
acquiring, leasing and operating, and disposing of existing or
newly constructed health care properties. The General Partner of
Registrant is Capital Realty Group Senior Housing, Inc.
("Capital")
Registrant was originally called Jacques-Miller Healthcare
Properties, L.P., but changed its name to Healthcare Properties,
L.P. as of July 1993.
The offering of Registrant's limited partnership interests
(the "Units") terminated on August 31, 1989, although some Units
were sold to existing investors pursuant to Registrant's
distribution reinvestment plan (the "Plan") until July of 1991
when the Plan was suspended. Registrant received gross proceeds
from the offering of $43,373,269 and net proceeds of $38,748,791.
All of the net proceeds of the offering were originally
invested in 12 properties (the Properties ) or used for working
capital reserves. Registrant originally partially financed
acquisition of eight of its properties with non-recourse debt.
Four properties were initially unleveraged. At December 31,
1995, five properties secure debt and four properties remain
unleveraged. See Item 2. "Properties" and Item 7.
Management s Discussion and Analysis of Financial Condition and
Results of Operations for a description of Registrant's
properties and their history.
As of December 31, 1995, Registrant had seven properties
leased to unaffiliated operators under triple net leases, whereby
the lessee is responsible for all operating expenses, insurance
and real estate taxes. Additionally, the lessee of an eighth
facility, Cambridge, is involved in Chapter 11 bankruptcy
proceedings. See Item 3, E. As a result of the operator's
bankruptcy filing, the General Partner currently operates this
property under authority from the Bankruptcy Court.
Additionally, Registrant has a ninth property, Countryside,
leased and operated by a wholly owned subsidiary of Registrant,
Countryside Care, L.P. which operates the Countryside facility.
Countryside, has been in default with the lender since 1992, see
Item 3, D. Legal Proceedings. The Registrant also had one
property, Foothills, leased by a wholly owned subsidiary of the
Registrant through November 30, 1994. Effective December 1,
1994, Foothills had been operated and managed by an unaffiliated
operator under receivership. On July 19, 1995, the Registrant
transferred the Foothills property to its lender, pursuant to a
deed in lieu of foreclosure. This transfer included a release of
all potential liability to the Registrant. The Registrant also
had one property, Diablo/Tamarack, leased by a wholly owned
subsidiary of the Registrant, through July 31, 1995. Effective
July 31, 1995, the Registrant transferred the property to its
lender, pursuant to a deed in lieu of foreclosure. This transfer
included a release of all potential liability to the Registrant.
On July 5, 1995, the Registrant sold the Heritage Manor facility
for $3,075,000 and the Registrant netted $1,458,287 after payment
of fees and its mortgage balance.
All of Registrant's triple net leases with unaffiliated
operators require operators to make necessary repairs and
Registrant inspects or receives reports from each facility at
least annually to insure that necessary repairs are made. With
respect to Registrant s properties which are not leased,
Registrant receives rental income from these properties net of
all such expenses. Registrant is responsible for capital
improvements and debt service payments under mortgage obligations
secured by the properties.
Both the income and expenses of operating the properties
owned by Registrant are subject to factors outside the control of
both Registrant and the operators of the facilities, such as
oversupply of similar properties resulting from overbuilding,
increases in unemployment or population shifts, reduced
availability of permanent mortgage funds, changes in taxes and
regulations, including healthcare regulations and zoning laws, or
changes in patterns or needs of users. In addition, there are
risks inherent in owning and operating health care properties
because such properties are susceptible to the impact of economic
and other conditions outside the control of Registrant.
For the year ended December 31, 1995, Registrant's
Properties accounted for, in the aggregate, in excess of 99% of
Registrant's gross revenues.
Management's plans in regard to Registrant as a whole are to
maintain its nondefaulted properties and hold them for long-term
appreciation. For information on defaulted Properties, see Item
3. Registrant may reinvest net sale or refinancing proceeds in
additional health care properties to continue Registrant's
existence. As noted above, as a result of defaults by a certain
lessee of the Registrant, a subsidiary of the Registrant is
operating one Property at December 31, 1995 and the General
Partner is operating another Property under bankruptcy authority.
See Item 6. "Selected Financial Data" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
The terms of the transactions between Registrant and
affiliates of the General Partner of Registrant are set forth in
Item 13 below to which reference is hereby made for a description
of such terms and transactions.
Transaction with Capital
In June 1993, the holders of Units ("Unit Holders") approved
the replacement of the existing general partners of the
Partnership, Jacques-Miller, Inc. ("JMI") and Jacques and
Associates, L.P. ("JA"; JA and JMI collectively the "Prior
General Partners"), with Capital as well as various amendments to
the Partnership Agreement of the Partnership (the "Partnership
Agreement").
Under the Prior General Partners, the Registrant's original
business focus involved purchasing and/or constructing health
care facilities and leasing these facilities under long-term
leases to third party lessee-operators. Under such long-term
leases, the Registrant had no role in the actual operations of
the facilities and primarily expected to receive rent with no
other active involvement. Unfortunately, during 1991 and the
first half of 1992, the Registrant experienced defaults by the
lessee-operators under eight of its property leases.
The result of these numerous defaults is that many of the
Registrant's leases have been restructured and were subject to
negotiations concerning further restructure. In certain cases,
the Registrant has been unable to make all of its required
mortgage debt payments. Additionally, the lessee-operator under
one leased property, Cambridge, became the subject of proceedings
under Chapter 11 of the United States Bankruptcy Code. As a
result, the general business focus of the Registrant changed
during 1992 and 1993 from that of an owner/lessor to one
involving complex lease and mortgage restructurings and
management of lease defaults and restructurings complicated by
actual or threatened bankruptcy proceedings and related
litigation, and the assumption of day-to-day operation of certain
of the Registrant's facilities.
Due to significant financial setbacks affecting the Prior
General Partners and their limited resources and the increased
demands on the management of the Registrant as a result of the
above mentioned financial difficulties of certain lessee-
operators of the Registrant's facilities and the resulting
financial difficulties of the Registrant, the Prior General
Partners determined that it would be in the best interest of the
Registrant to find a substitute general partner with the interest
and financial capability to manage the Registrant effectively.
The Prior General Partners proposed Capital as the replacement
general partner and the Unit Holders approved Capital in June
1993 as the replacement general partner.
Tender Offer
On November 1, 1993, Capital offered to purchase up to 80%
(subsequently reduced to 40%) of the outstanding Units of the
Registrant at a purchase price of $1.00 per unit. On December 3,
1993, the offer was closed with Capital purchasing approximately
9% of the Units (370,283 Units). See Item 12. Security
Ownership of Certain Beneficial Owners and Management for
information on the current ownership of Units by Capital and
affiliates.
Competition
The real estate business is highly competitive.
Registrant's properties are subject to competition from similar
properties in the vicinity of each property. In addition, the
health care industry segments in which Registrant's lessees
participate are also subject to intense competitive pressures,
which may impact such lessees' ability to generate sufficient
revenues to fulfill their obligations to Registrant under their
leases.
Employees
There were no employees of Registrant at December 31, 1995.
Regulatory Matters
Federal, state and local government regulations govern
fitness and adequacy, equipment, personnel and standards of
medical care at a health care facility, as well as health and
fire codes. Changes in the applicable regulations could
adversely affect the operations of a property, which could also
affect the financial results of Registrant. Risks of inadequate
cost reimbursements from various government programs such as
Medicaid and Medicare may also impact lessees' ability to fulfill
their lease obligations to Registrant. Any impact from proposed
health care legislation is not known at this time; however, such
impact could adversely affect cost reimbursements from various
government programs.
Item 2. Properties
Registrant owns 9 properties at December 31, 1995 including
five nursing homes and four rehabilitation centers purchased
between October 1987 and October 1990. Four facilities were
newly constructed when purchased. Five facilities are security
for mortgage loans for amounts equal to approximately 40% to 65%
of Registrant's purchase price paid for the facility. Three of
these loans are non-recourse to Registrant while two loans are
guaranteed by Registrant. See Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
The following table summarizes key information about each of
Registrant's properties:
HEALTHCARE PROPERTIES, L.P.
PROPERTY SUMMARY
CEDARBROOK CANE CREEK CRENSHAW CREEK SANDY BROOK
Location Nashville, TN Martin, TN Lancaster, SCM t .
Dora, FL
Type Rehab Rehab Rehab Rehab
Date Purchasdsed 10/87 11/87 6/88
9/88
Purchase Price $3,955,000 $4,000,000 $3,900,000
$4,200,000
Original Mortgage
Amount $2,000,000 $2,200,000 $0 $0
12/31/95 Mortgage
Balance $1,062,237 $987,966 $0
Mortgage
Maturity Mar 31, 1996 Dec 1, 2001 N/AN/A
End of Lease Term 2001 2001 2001
2001
COUNTRYSIDE TRINITY HILLS HEARTHSTONE MCCURDY
Location S. Haven, MI Ft. Worth, TX Round Rock, TX Evansville,
IN
Type Nursing Nursing Nursing Nursing
Date
Purchased 8/88 2/88 11/88 9/89
Purchase
Price $3,350,000 $2,700,000 $3,625,000
$7,100,000
Original
Mortgage
Amount $2,100,000 $0 $1,500,00 $4,700,000
12/31/95
Mortgage
Balance $2,068,539* $0 $1,373,879 $4,282,980
Mortgage
Maturity 12/10/95 N/A 7/1/97 4/1/2012
End of
Lease Term N/A 2000 2000 2001
CAMBRIDGE
Location Cambridge, MA
Type Nursing
Date Purchased 9/90
Purchase Price $5,100,000
Original Mortgage Amount $0
12/31/95 Mortgage Balance $0
Mortgage Maturity N/A
End of Lease Term 2002
* In default at December 31, 1995.
Item 3. Legal Proceedings
A. On April 4, 1991, Registrant initiated the filing of an
involuntary Chapter 7 bankruptcy proceeding against SentinelCare
of California, Inc. ("SentinelCare"), the lessee of Registrant's
Diablo/Tamarack facility. This action resulted in Registrant
gaining operating control of the Diablo facility on April 29,
1991. During 1994, the Registrant received net settlement
proceeds of $19,075 from the bankrupt estate of SentinelCare.
In addition to the bankruptcy claims, claims and counterclaims
have been filed by and against Registrant, SentinelCare and their
affiliates in a separate consolidated lawsuit in Virginia. The
lawsuit brought by SentinelCare against Registrant was dismissed
with prejudice on July 28, 1992. On January 21, 1992 Registrant
won a judgment against Mr. Barry Lieberman (a guarantor of
SentinelCare's lease) in connection with his guaranties and is
currently pursuing efforts to collect on that judgment in the
Connecticut courts.
B. During May 1995, the Heritage Manor loan matured. However,
on July 5, 1995, payment on the loan balance of $1,500,000 was
made upon the sale of the property. The sale price of the
property was $3,075,000 and the partnership netted $1,458,287
after payment of fees and mortgage balance.
C. With regards to the Diablo/Tamarack facility, the lender
sold the note to a third party. In November 1994, the new lender
attempted to appoint a receiver. The Registrant successfully
opposed the Motion and negotiated for a transition of this
property which will not involve ongoing liability to the
Registrant. On July 31, 1995, the facility was deeded to the
lender in lieu of foreclosure and a release of all potential
liability to Registrant was obtained.
D. With regards to the Countryside facility, due to the poor
overall financial performance of the facility and the need for
additional working capital, the prior General Partner informed
the mortgage lender in April 1992 that all debt service payments
were being suspended and that the respective mortgage obligations
of the Registrant needed to be restructured. Capital has
conducted negotiations concerning such debt restructuring;
however, the possibility of restructuring the debt appears
unlikely. The lender has filed suit in Michigan to appoint a
receiver and foreclose on the property. Additionally, the lender
has filed certain claims against the Registrant for damages. The
Registrant has answered and counterclaimed. In October 1995,
Registrant entered into a conditional agreement of sale with a
third party buyer. Registrant is negotiating with the lender to
settle the litigation and allow the sale and fully settle all
outstanding litigation. The outcome of this negotiation and
litigation is indeterminate at this time.
E. In December 1991, Registrant initiated litigation in
Massachusetts against NCA-Cambridge, Inc. (NCAC) and Richard
Wolfe (NCAC's operator/lessee and a guarantor of NCAC's lease
obligations to Registrant) in an attempt to enforce certain
obligations of NCAC and Wolfe under the terms of NCAC's lease of
Registrant's Cambridge facility. In February 1992, NCAC filed a
voluntary Chapter 11 proceeding in the Southern District of
Florida. Registrant subsequently learned that in addition to
NCAC's default under certain terms of its lease, the State of
Massachusetts asserted claims against NCAC regarding prior
Massachusetts Medicaid payments made to NCAC for fiscal years
1988 through 1991. The Massachusetts claims are against NCAC and
not against Registrant; however, Massachusetts has regulations
requiring successor operators of a facility to indemnify the
state for its losses suffered in connection with a prior operator
of the same facility. It was therefore possible that Registrant
could have been subject to such liability based on certain
interpretations of state regulations. As a result, the
Registrant could have become liable for approximately $1,400,000
in connection with the recovery of Medicaid overpayments.
Additionally, property taxes were owed to the City of Cambridge
in an amount in excess of $600,000. On May 24, 1993, Registrant
reached an agreement with the bankrupt operator of the Cambridge
facility to repossess that facility pending emergence from
Bankruptcy Court. It will be the responsibility of Registrant to
file a bankruptcy plan to take this property out of the
jurisdiction of the bankruptcy Court. In December 1995,
Registrant reached a settlement with the State of Massachusetts
and the City of Cambridge with regard to the outstanding issues
facing the Cambridge facility. This settlement has been approved
by the United States Bankruptcy Court in Florida. The settlement
eliminated the Registrant s exposure in connection with the
$1,400,000 Medicaid overpayments and allowed the Registrant to
advance $590,000 to NCAC for payment of property taxes. At this
time, the Registrant is preparing documentation to bring the
facility out of bankruptcy. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related
Security Holder Matters
At March 15, 1996, there were 2,762 Unit Holders of record
in Registrant owning an aggregate of 4,172,457 Units. There is
no public market for these Units and the General Partner does not
currently plan to list the Units on a national exchange or
automated quotation system. Registrant has had a liquidity
reserve feature which, under certain circumstances, permitted
Unit Holders to liquidate their Units. Due to inadequate
liquidity of Registrant and the adverse impact on Unit values
caused by defaults of certain of Registrant's lessees, the
General Partner suspended all redemptions pursuant to the
liquidity reserve in March of 1991. Due to the valuation formula
required to be used by Registrant in any such redemptions, it is
unlikely that the General Partner will be able to reinstate the
liquidity feature in the foreseeable future.
Pursuant to the terms of the Partnership Agreement, there
are restrictions on the ability of the Unit Holders to transfer
their Units. In all cases, the General Partner must consent in
writing to any substitution of an Unit Holder. The Revenue Act
of 1987 contains provisions which have an adverse impact on
investors in "publicly traded partnerships." Accordingly, the
General Partner has established a policy of imposing limited
restrictions on the transferability of the Unit in secondary
market transactions. Implementation of this policy should
prevent a public trading market from developing and may impact
the ability of an investor to liquidate his investment quickly.
It is expected that such policy will remain in effect until such
time, if ever, as further clarification of the Revenue Act of
1987 may permit Registrant to lessen the scope of the
restrictions.
Cash distributions of $2,020,538 were made during the first
two quarters of 1991, after which the Prior General Partners
suspended all cash distributions until defaults of certain of
Registrant's lessees could be satisfactorily resolved and
Registrant's cash working capital balances satisfactorily
strengthened. As a result of suspending cash distributions
Registrant was able to maintain normal balances of trade accounts
payable despite a severe reduction in rental revenues from
defaulting lessees. In 1993, Capital, as the new General
Partner, distributed $250,000 due to an increase in cash and
taxable income from the Rebound restructure described on page 12.
The ability of Registrant to resume any further regular
distributions of Operating Cash Flow is dependent upon improving
operational performance of assets operated by Registrant and
increased collection of rental revenues from properties leased
to third party operators. In addition, concerning two loans of
the Registrant which became due in January 1996; one loan was
extended to March 31, 1996 and the lender of the other loan
agreed to extend the loan to December 1, 2001, pending completion
of final paperwork. See Item 2. If negotiations for refinancing
the March 31, 1996 loan are unsuccessful, cash reserves of the
Registrant may be required to pay this maturing debt obligation.
See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Item 6. Selected Financial Data
HEALTHCARE PROPERTIES, L.P.
(A Delaware Limited Partnership)
December 31, 1995, 1994, 1993, 1992 and 1991
(not covered by Independent Auditors' Report)
Year Ended December 31
1995 1994 1993 1992 1991
Total
Assets $33,81
2,286 $40,9
14,99
1 $43,3
75,92
4 $45,9
79,77
4 $46,6
30,79
0
Mortgage
Debt $9,775
,601 $16,2
68,66
8 $16,7
13,02
0 $17,3
67,46
1 $18,1
83,28
6
Total
Revenue
from
Operations $8,419
,024 $12,5
74,48
1 $14,0
24,31
1 $9,77
3,866 $6,35
0,055
Weighted
Average
Number of
Units 4,172,
457 4,172
,457 4,172
,457 4,172
,457 4,160
,692
Net Income
(Loss)
Loss
Before
Extraordin
ary Item $(2,35
4,181) $(3,0
35,45
9) $(2,3
95,48
6) $(598
,318) $(1,3
00,66
2)
Extraordin
ary Gain $3,604
,514 $0 $0 $0 $0
Net
Income
(Loss) $1,250
,333 $(3,0
35,45
9) $(2,3
95,48
6)
$(598
,318) $(1,3
00,66
2)
Net Income
(Loss) Per
Unit
Loss
Before
Extraordin
ary Item
$(0.56
)
$(0.7
1)
$(0.5
6)
$(0.1
4)
$(0.3
1)
Extraordin
ary Gain $0.79 $0 $0 $0 $0
Net
Income
(Loss) $0.23 $(0.7
1) $(0.5
6) $(0.1
4) $(0.3
1)
Net Income
(Loss)
Tax $(1,69
2,342) $(393
,245) $1,71
0,132 $(648
,013) $(1,1
01,41
3)
Per
Unit $(.41) $(.09
) $.41 $(0.1
5) $(0.2
6)
Cash
Distributi
ons
$0 $0 $250,
000 $0 $2,02
0,538
Per Unit
$0 $0 $.06 $0 $0.48
The above selected financial data should be read in conjunction
with the financial statements and the related notes appearing
elsewhere in this annual report. See Footnote 3. Property and
Improvements to Consolidated Financial Statement for discussion
of property dispositions.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
1995 Compared to 1994 and 1993
Registrant ended 1995 with cash and cash equivalents of
$7,606,857 as compared with $5,606,274 at December 31, 1994.
Cash and cash equivalents primarily increased in 1995 due to the
sale proceeds from the Heritage Manor facility of $1,458,287
which is net of the payment of its mortgage balance of $1,500,000
and fees. Cash and cash equivalents increased in 1994 due to:
(1) increased cash flow resulting from operations; and (2) the
receipt of $560,000 in settlement claims. The overall 1994
increase in cash and cash equivalents was offset by an
approximate $449,000 increase in purchase of property and
improvements.
Accounts receivable at December 31, 1995 were approximately
$210,000 as compared to $567,000 at December 31, 1994. This
decrease is primarily from uncollectible accounts receivable
resulting from the transfer of the Foothills facility. Accounts
payable and accrued expenses for 1995 were approximately
$1,526,000 at December 31, 1995, as compared to $3,106,000 at
December 31, 1994. This decrease resulted largely from the
reduction of accrued interest and property taxes on the transfer
of the Foothills and Diablo/Tamarack facilities to the
noteholders in lieu of foreclosure on July 19 and 31,
respectively. Operating facility accounts payable of
approximately $83,000 at December 31, 1995, and $363,000 at
December 31, 1994, related to the Diablo/Tamarack, Countryside
and Foothills facilities. Corresponding decreases from December
31, 1994 to 1995 in property and improvements, deferred charges,
operating facility accounts payable and mortgage loans primarily
relates to the sale of Heritage Manor and the transfer of the
Diablo/Tamarack and Foothills properties.
Rental revenues were approximately $5,100,000 in 1995
compared to approximately $5,297,000 in 1994, and approximately
$5,347,000 in 1993. The decrease of rental revenues from 1994 to
1995 is due to the termination of lease revenue from Heritage
Manor upon its sale on July 5, 1995. Rental revenues were
relatively unchanged in 1994 as compared to 1993.
Patient revenues of approximately $3,269,000 for the year
ended December 31, 1995, approximately $6,699,000 for the year
ended December 31, 1994, and approximately $6,238,000 for the
year ended December 31, 1993, related to the operations at the
Countryside, Diablo/Tamarack, and Foothills facilities. The
decrease in patient revenues for 1995 as compared to 1994
resulted from the aforementioned transfers of the Diablo/Tamarack
and Foothills facilities in 1995. Patient revenues increased
from 1993 to 1994 resulting from increased rental rates from
private and third party payors.
During 1995, the net loss on sale/transfer of approximately
$1,237,000 and extraordinary gain of approximately $3,605,000
resulted from the sale of Heritage Manor and transfer of the
Diablo/Tamarack and Foothills facilities.
During 1994, other income of $579,075 primarily resulted
from the collection of $560,000 in legal claims from the former
operator of the Foothills and Countryside facilities.
During 1993, income of $1,900,000 resulted from the
collection of previously unrecorded promissory note receivable
from Relife, Inc. and a $539,025 gain recognized from the sale of
Rebound, Inc. stock.
Facility operating expenses were approximately $3,238,000 in
1995 compared to approximately $6,597,000 in 1994, and
approximately $6,151,000 in 1993. The decrease in facility
operating expenses in 1995, compared to 1994, resulted from the
transfer of the Foothills and Diablo/Tamarack facilities on July
19 and 31, respectively. The increase in facility operating
expenses in 1994, compared to 1993, resulted from additional
therapies, ancillary, laundry and travel costs.
Depreciation was approximately $1,722,000 for 1995,
$1,912,000 for 1994, and $1,952,000 for 1993. Depreciation
decreased in 1995 due to the above mentioned sale and transfer of
properties and was relatively unchanged for the years ended 1994
and 1993, respectively.
Fees to affiliates were approximately $1,279,000,
$1,582,000, and $1,668,000 for the years ended 1995, 1994, and
1993, respectively. The decrease of fees to affiliates in 1995
from 1994 resulted from decreased management fees upon transfer
of the Diablo/Tamarack and Foothills facilities. Fees to
affiliates were relatively unchanged from 1994 compared to 1993.
Lease default expenses of approximately $286,000, $453,000,
and $399,000 for the years ended 1995, 1994, and 1993,
respectively, decreased in 1995 due to the resolution of the
Diablo/Tamarack and Foothills lease defaults increased in 1994
due to additional real estate tax accruals on the Cambridge
facility.
Administrative and other expenses were approximately
$115,000, $222,000, and $284,000 for the years ended 1995, 1994,
and 1993, respectively. Administrative and other expenses
decreased from 1994 to 1995 due to decreased professional fees,
rent and travel expenses. Administrative and other expenses were
relatively unchanged for 1994 compared to 1993.
Bad debt expense was approximately $1,586,000, $920,000, and
$786,000 for the years ended 1995, 1994, and 1993, respectively.
Bad debt expense increased in 1995, compared to 1994, primarily
due to bad debt allowance provided on advances made to the NCAC
to pay property taxes on the Cambridge facility and increased in
1994, compared to 1993, due to the uncertainty of rent
collections from the operation of the Cambridge and Foothills
facilities.
Interest income was approximately $186,000, $103,000, and
$151,000 for the years ended 1995, 1994, and 1993, respectively.
Interest income increased in 1995 from 1994 due to additional
interest earned on net proceeds received upon the sale of
Heritage Manor and decreased from 1993 to 1994 due to declining
interest rates.
Amortization was approximately $171,000, $196,000, and
$212,000 for the years ended 1995, 1994, and 1993, respectively.
Amortization decreased in 1995 and 1994, compared to the prior
year, primarily due to fully amortized deferred costs for the
Diablo/Tamarack, Countryside, and Foothills facilities.
Interest expense was approximately $1,325,000, $1,646,000,
and $1,660,000 for the years ended 1995, 1994, and 1993,
respectively. Interest expense decreased in 1995 from 1994 due
to the repayment of the mortgage upon the sale of Heritage Manor
and the transfer of the Diablo/Tamarack and Foothills mortgages,
and decreased in 1994 from 1993 due to adjustments in certain
floating rate mortgage obligations.
The Registrant also owns the Cambridge facility on which
management has concluded the carrying value exceeded estimated
fair value. As a result, in the fourth quarter of 1994, this
property which had been carried at $4,185,381 was written down to
the appraised value of $2,000,000.
In 1993, management concluded that the carrying value of
three properties, Foothills, Countryside and Diablo/Tamarack
exceeded estimated fair value. These properties each secured
nonrecourse debt, the outstanding balances of which management
also believed exceeded their respective estimated fair values.
As a result, in the fourth quarter of 1993, these properties,
which had been carried at $10,048,605, were written down to their
respective nonrecourse debt values which aggregated $6,590,221.
Statement of Financial Accounting Standards No. 121 -
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of ( FAS 121 ) became effective for
financial statements for fiscal years beginning after December
15, 1995. The Registrant will adopt FAS 121 in the first quarter
of 1996. The estimated impact to the Registrant in adopting FAS
121 is immaterial.
As of December 31, 1995, the Foothills and Diablo/Tamarack
facilities were transferred to the lender, pursuant to a deed in
lieu of foreclosure.
See Item 1. "Business", for more detailed information
concerning Registrant's operations during 1995.
This item should be read in conjunction with the
consolidated financial statements and other items contained
elsewhere in this report.
Liquidity and Capital Resources
Registrant raised gross proceeds from the offering of over
$43,300,000 and purchased twelve properties. In July of 1991,
Registrant suspended its distribution/reinvestment program (DRIP)
as a result of the adverse impact on Unit value caused by
defaults of certain of Registrant's lessees. Registrant
consequently does not anticipate additional capital investments
by Unit Holders. Sources for Registrant's liquidity include
rental revenues from lessees of certain of Registrant's
properties, operational income from properties operated by
subsidiaries of Registrant, potential proceeds from mortgage
financing on one or more of Registrant's four unleveraged
properties, or potential sale proceeds from any of Registrant's
nine properties. For 1996, the Registrant anticipates sufficient
cash flow to meet debt service requirements, including the payoff
of debt maturing at March 31, 1996 if terms are not extended, and
cover all other operational expenses. For further information,
see discussion below on each individual property as well as Item
5, Market for Registrant's Common Equity and Related Security
Holder Matters.
Operations of the Registrant's Properties
Cedarbrook, Cane Creek, Crenshaw Creek and Sandy Brook
facilities. Rebound, Inc. ("Rebound") leased the Cedarbrook,
Cane Creek, Crenshaw Creek and Sandy Brook properties pursuant to
a master lease with the Registrant.
Effective November 30, 1992, the Registrant and Rebound
reached an amended master lease agreement whereby Rebound agreed
to resume increased rental payments to the Registrant, the terms
of the lease were extended from five to nine years, Registrant
gained a 10% ownership position in Rebound and substantial
penalty provisions were placed on Rebound in the event of
default. Additionally, Registrant forgave notes receivable from
Rebound and received a promissory note for $1,900,000 payable
over three years that was convertible on certain default
conditions at the option of the Registrant to additional shares
of Rebound. During the second quarter ended June 30, 1993,
Relife, Inc. acquired Rebound resulting in payment of the
$1,900,000 promissory note to the Registrant and sale of Rebound
stock for $939,025 in cash. The master lease negotiated with
Rebound will continue uninterrupted, but will be guaranteed by
Relife, Inc. Due to low occupancy of the Sandybrook facility, it
was temporarily closed in 1994 and at this time Registrant cannot
determine when it might reopen. During 1994, Relife, Inc. was
acquired by HealthSouth Rehabilitation Corporation. Rental
payments in March and April 1995 were discontinued by the new
ownership causing an interruption in the master lease.
Registrant met with the new ownership and those payments were
subsequently made in the second quarter of 1995. Subsequent to
that time period, all payments have been made on a timely basis.
Two recourse loans, Cedarbrook and Cane Creek, were due in
January 1996 in the aggregate amount of approximately $2,400,000.
The Cedarbrook note was extended through March 31, 1996. The
lender of the Cane Creek note agreed to extend the loan to
December 1, 2001, pending completion of final paperwork.
Registrant is currently negotiating with the lender to further
extend the Cedarbrook loan.
Foothills facility. The lender sold the note to a third
party. During December 1994, the Registrant was ordered to turn
over management of the Foothills facility to a court appointed
receiver. On July 19, 1995, the Registrant transferred the
property to the lender, pursuant to a deed in lieu of
foreclosure. The documents for this transfer include a release
of all potential liability to the Registrant.
Countryside facility. Due to the poor overall financial
performance of the Countryside, Diablo/Tamarack and Foothills
facilities and their need for additional working capital,
Registrant informed the mortgage lender for this facility in
April 1992 that all debt service payments were being suspended
and that the mortgage obligations of the Registrant needed to be
restructured. Capital has conducted negotiations concerning such
debt restructuring; however, the possibility of restructuring the
debt appears unlikely. The lender has filed suit in Michigan to
appoint a receiver and foreclose on the property. Additionally,
the lender has filed claims against the Registrant for damages.
In October 1995, Registrant entered into a conditional agreement
of sale with a third party buyer. Registrant is negotiating with
the lender to settle the litigation and allow the sale. If the
lender refuses to settle, Registrant is prepared to vigorously
defend itself against the claims of the lender.
Diablo/Tamarack facility With regard to the
Diablo/Tamarack note, the lender sold the note to a third party.
In November 1994, the new lender attempted to appoint a receiver.
The Registrant successfully opposed the Motion and negotiated for
a transition of this property which will not involve ongoing
liability to the Registrant. On July 31, 1995, the facility was
deeded to the lender in lieu of foreclosure and a release of all
potential liability to Registrant was obtained.
Cambridge facility The lessee of the Cambridge facility,
Nursing Centers of America-Cambridge ("NCAC"), filed a voluntary
petition under Chapter 11 of the Federal Bankruptcy Code in
February of 1992. Registrant commenced litigation against NCAC
seeking full payment of future rentals under the lease or the
removal of NCAC from the direct operational control of the
facility. See Item 3, E.
Based on certain interpretations of state regulations, the
Registrant could have become liable for approximately $1,400,000
in connection with the recovery of prior Medicaid overpayments.
Additionally, property taxes were owed to the City of Cambridge.
On May 24, 1993, Registrant reached an agreement with the
bankrupt operator of the Cambridge facility to repossess that
facility pending emergence from Bankruptcy Court. It will be the
responsibility of Registrant to file a bankruptcy plan to take
this property out of the jurisdiction of the bankruptcy Court.
In December 1995, Registrant reached a settlement with the State
of Massachusetts and the City of Cambridge with regard to the
outstanding issues facing the Cambridge facility. This
settlement was approved by the United States Bankruptcy Court in
Florida in the fourth quarter of 1995. At this time, the
Registrant is preparing documentation to bring the facility out
of bankruptcy.
Heritage Manor facility. The Heritage Manor loan matured in
May 1995 in the amount of $1,500,000, however, the payment of the
loan was made with proceeds from the sale of the property on July
5, 1995. The sale price of the property was $3,075,000 and the
partnership netted $1,458,287 after payment of fees and mortgage
balance.
Trinity Hills, McCurdy. and Hearthstone facilities The
Registrant's other facility lessees are all current in their
lease obligations to the Registrant. In addition, the Registrant
believes it likely that two of these lessees will pay additional
rental amounts to the Registrant during future years based upon
increased revenues at those facilities. However, there can be no
assurance of such increased revenue. Two of these facilities
appear to be generating cash flow sufficient to fund their lease
obligations, but Trinity Hills is, at this time, not generating
sufficient cash flow to fund its lease obligations from property
operations. However, the lessee continues to fund the deficit
lease cash flow.
Impact of Inflation
To offset some potential adverse effect of inflation,
Registrant has required each of its unaffiliated tenants to
execute "triple-net" leases with the tenant being responsible for
all operating expenses, insurance and real estate taxes. Such
leases generally require additional participating rent payments
based on certain increases in the lessee's collected revenues.
To the extent that Registrant undertakes to operate certain
facilities through wholly-owned subsidiaries, those subsidiaries,
and ultimately Registrant, will be directly exposed to the
inflationary pressures on health care industry operating costs.
Item 8. Financial Statements and Supplementary Data
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
HealthCare Properties, L.P.:
We have audited the accompanying consolidated balance sheets of
HealthCare Properties, L.P. and subsidiaries (a limited
partnership) as of December 31, 1995 and 1994, and the related
consolidated statements of operations, partnership equity and
cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of HealthCare Properties, L.P. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
F e b r u a r y 7 , 1 9 9 6
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
Cash and cash equivalents $
7,606,857 5,606,27
4
Accounts receivable, less allowance for
doubtful accounts of
of $3,489,937 in 1995 and $1,934,335 in
1994 (note 9) 210,409 567,244
Prepaid expenses 129,714 171,853
Property and improvements, net (notes 3, 4
and 5) 25,251,255 33,696,2
57
Deferred charges, less accumulated
amortization of $734,146
in 1995 and $837,348 in 1994 (note 7)
614,051
873,363
$
33,812,286 40,914,9
91
Liabilities and Partnership Equity
Accounts payable and accrued expenses (note
4) $
1,526,209 3,106,40
7
Operating facility accounts payable 83,194 362,967
Mortgage loans payable - in default (note
4) 2,068,539 6,590,22
1
Mortgage loans payable (note 4)
7,707,062 9,678,44
7
11,385,004 19,738,0
42
Partnership equity (deficit):
Limited partners (4,172,457 units) 22,449,617 21,489,2
81
General partners
(22,335)
(312,-
332)
22,427,282 21,176,9
49
Contingencies (notes 2, 3, 4 and 6)
$
33,812,286 40,914,9
91
See accompanying notes to consolidated financial statements.
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Revenues (notes 5, 6 and 9):
Net patient service $
3,268,800 6,698,751 6,237,907
Rental 5,100,085 5,296,655 5,347,379
Recovery of note receivable 1,900,000
Gain on sale of investment
539,025
Other income
50,139
579,075
8,419,024 12,574,481 14,024,311
Expenses:
Facility operating expenses 3,238,004 6,597,068 6,150,899
Depreciation 1,721,605 1,911,876 1,951,854
Fees to affiliates (note 7) 1,279,428 1,581,765 1,667,626
Bad debts 1,585,555 919,737 786,418
Lease default expenses (note
6) 286,108 453,140 399,088
Administrative and other 114,625
222,055
283,760
8,225,325 11,685,641 11,239,645
Income from operations 193,699
888,840 2,784,666
Other income (expense):
Interest income 185,650 102,511 150,984
Interest expense (1,324,845
) (1,645,647
) (1,660,471
)
Amortization (171,265) (195,782) (212,281)
Loss on disposition of
operating
properties, net (note 3) (1,237,420
)
Loss due to reduction of
carrying value of
operating properties (note
3)
(2,185,381
) (3,458,384
)
(2,547,880
) (3,924,299
) (5,180,152
)
L o s s b e f o r e
extraordinary item (2,354,181
) (3,035,459
) (2,395,486
)
Extraordinary gain on
disposition of
operating properties (note 3) 3,604,514
Net income (loss) $
1,250,333 (3,035,459
) (2,395,486
)
Allocation of net income
(loss):
Limited partners $
960,336 (2,974,750
) (2,347,576
)
General partners 289,997
(60,709)
(47,910)
$
1,250,333 (3,035,459
) (2,395,486
)
Per unit:
Loss before extraordinary item
$(.56)
(.71)
(.56)
Extraordinary gain
.79
Net income (loss)
$ .23
(.71)
(.56)
Distributions
$
.06
Weighted average number of
units 4,172,457
4,172,457 4,172,457
See accompanying notes to consolidated financial statements.
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Consolidated Statements of Partnership Equity
Years ended December 31, 1995, 1994 and 1993
Limited
Partners General
Partners Total
Equity at December 31, 1992 $
27,061,607 (203,713) 26,857,894
Net loss (2,347,576
) (47,910) (2,395,486
)
Distributions
(250,000)
(250,000)
Equity at December 31, 1993 24,464,031 (251,623) 24,212,408
Net loss
(2,974,750
) (60,709)
(3,035,459
)
Equity at December 31, 1994 21,489,281 (312,332) 21,176,949
Net income
960,336 289,997
1,250,333
Equity at December 31, 1995 $
22,449,617 (22,335) 22,427,282
See accompanying notes to consolidated financial statements.
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating
activities:
Net income (loss) $
1,250,33
3 (3,035,4
59) (2,395,4
86)
Adjustments to reconcile net
income (loss) to
net cash provided by operating
activities:
Depreciation and amortization 1,892,87
0 2,107,65
8 2,164,13
5
Bad debts 1,585,55
5 919,737 786,418
Loss on disposition of
operating properties,
net 1,237,42
0
Extraordinary gain on
disposition of
operating properties (3,604,5
14)
Loss due to reduction of
carrying value
of operating properties 2,185,38
1 3,458,38
4
Gain on sale of investment (539,025
)
Recovery of note receivable _ (1,900,0
00)
Changes in assets and
liabilities, net of
effects of property
dispositions:
Accounts receivable (1,228,7
20) (850,301
) (811,229
)
Prepaid expenses 39,406 (11,473) (101,880
)
Deferred charges (491,030
)
Accounts payable and
accrued expenses
(89,940) 1,018,87
8
696,077
Net cash provided by
operating
activities 1,082,41
0 2,334,42
1
866,364
Cash flows from investing
activities:
Purchases of property and
improvements (760) (514,406
) (65,278)
Proceeds from sale of property 2,958,28
7
Cash forfeiture on disposition
of property
held in receivership (67,969)
Proceeds from sale of investment
939,025
Recovery of note receivable
1,900,00
0
Net cash provided by
(used in)
investing activities 2,889,55
8 (514,406
) 2,773,74
7
Cash flows from financing
activities:
Payments on mortgage loans
payable (1,971,3
85) (444,352
) (654,441
)
Distributions to limited
partners
(250,000
)
Net cash used in
financing activities (1,971,3
85) (444,352
) (904,441
)
Net increase in cash and cash
equivalents 2,000,58
3 1,375,66
3 2,735,67
0
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end
of year 5,606,27
4
$
7,606,85
7 4,230,61
1
5,606,27
4 1,494,94
1
4,230,61
1
Cash paid for interest $
850,747
981,346
987,106
See accompanying notes to consolidated financial statements.
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1)General
HealthCare Properties, L.P., is a Delaware limited partnership
which began operations on October 14, 1987, for the purpose of
acquiring, leasing and operating existing or newly constructed
long-term health care properties. These properties are operated
by the Partnership or are leased to qualified operators who
provide specialized health care services. Effective February 1,
1995, Capital Senior Living, Inc., (CSL), an affiliate of Capital
Realty Group Senior Housing, Inc. (CRG), became the managing
agent for the Partnership replacing CRG, which had been managing
agent since July 1, 1992. At the time CRG began managing the
Partnership, several of the Partnership's properties were in
distress due to defaults by lessees of the respective properties
(see note 6).On June 9, 1993, a Consent Solicitation was
circulated to the limited partners soliciting their consent to
certain amendments to the Partnership Agreement. The results of
this solicitation, which became effective July 1, 1993, were as
follows: -CRG was admitted and substituted as the sole general
partner of the Partnership. -The name of the Partnership was changed
from Jacques-Miller HealthCare Properties, L.P. to HealthCare
Properties, L.P.- Certain fee and compensation arrangements with
the general partner were revised.
-Certain restrictions on refinancing Partnership debt were removed.
Retention of the Partnership's operating cash flow for the purpose
of acquiring additional Partnership properties was permitted.
-Restrictions on repurchasing limited partnership units by the
Partnership were eliminated.
Pursuant to a tender offer dated November 1, 1993, CRG acquired
372,199 limited partner units or approximately 9% of the
Partnership's limited partner units, effective December 3, 1993.
The consolidated financial statements as of and for the years
ended December 31, 1995, 1994 and 1993 include the accounts of
the Partnership and its wholly owned subsidiaries, Danville Care,
Inc., Foothills, Inc. and Countryside, Inc. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
At December 31, 1995, 1994 and 1993, the status of the
Partnership's properties was as follows:
1995 1994 1993
Operated under bankruptcy and
managed by CSL 1 1 1
Leased to unaffiliated operators on
a triple net basis 8 8
Operated by subsidiaries of the
Partnership and managed by CSL 1 2 3
Operated and managed under
receivership by an unaffiliated
operator 1
9 12 12
During 1995, one of the Partnership's leased properties was sold
to an unrelated third party and the deeds for two of the
Partnership's operated properties were transferred to the
noteholders in lieu of foreclosure (see note 3).(2)Summary of
Significant Accounting Policies
Property and improvements are stated at cost. The Partnership
assesses market values of individual properties to determine
whether events and circumstances warrant an adjustment to
carrying values. These evaluations are based on internally-
developed estimates of expected undiscounted future cash flows.
In the event the carrying value of an individual property exceeds
expected future undiscounted cash flows, the property is written
down to fair value based on either the expected future cash
flows, discounted at a rate which varies based on associated risk
or an independent third-party appraisal. Notwithstanding the
above, the carrying value of a property securing nonrecourse debt
is not reduced below the respective debt balance except to the
extent depreciation is provided subsequent to the
writedown.Depreciation is provided in amounts sufficient to
relate the cost of depreciable assets to operations over their
estimated service lives, using declining-balance and straight-
line methods, as follows: buildings and improvements, 25 to 31
years; furniture, fixtures and equipment, 5 to 10 years.The
financial statements and federal income tax returns are prepared
on the accrual method of accounting and include only those assets
and liabilities and results of operations which relate to the
business of the Partnership and its wholly owned subsidiaries.
No provision has been made for federal and state income taxes
since such taxes are the responsibility of the individual
partners. Although the Partnership's subsidiaries file federal
corporate income tax returns, none of the subsidiaries had
significant net income for financial reporting or income tax
purposes in 1995, 1994 or 1993. Accordingly, no provision has
been made for federal and state income taxes for these
subsidiaries in 1995, 1994 or 1993.
Net income (loss) of the Partnership and taxable income (loss)
are generally allocated 98% to the limited partners and 2% to the
general partners. The net income of the Partnership from the
disposition of a property is allocated (i) to partners with
deficit capital accounts on a pro rata basis (ii) to limited
partners until they have been paid an amount equal to the amount
of their Adjusted Investment (iii) to the limited partners until
they have been allocated income equal to their 12% Liquidation
Preference, and (iv) thereafter, 80% to the limited partners and
20% to the general partners. The net loss of the Partnership
from the disposition of a property is allocated (i) to partners
with positive capital accounts on a pro rata basis and (ii)
thereafter, 98% to the limited partners and 2% to the general
partners. Distributions of available cash flow are generally
distributed 98% to the limited partners and 2% to the general
partners, until the limited partners have received an annual
preferential distribution, as defined. Thereafter, available
cash flow is distributed 90% to the limited partners and 10% to
the general partners. During 1993, CRG allocated its general
partner distribution to the limited partners. No distributions
were made in 1995 or 1994.
Deferred charges primarily represent initial fees and other costs
incurred in negotiating leases and mortgage loans payable. These
costs are being amortized using the straight-line method over the
lives of the related leases or mortgage loans.Net patient service
revenue is reported at the estimated net realizable amounts due
from residents, third-party payors, and others for service
rendered. Revenue under third-party payor agreements is subject
to audit and retroactive adjustment. Provisions for estimated
third-party payor settlements are provided in the period the
related services are rendered. Differences between the estimated
amounts accrued and interim and final settlements are reported in
operations in the year of settlement. Net patient service
revenue consists of amounts earned at a one facility for the year
ended December 31, 1995 and one facility from January 1, 1995 to
July 31, 1995. Net patient service revenue consists of amounts
earned at two facilities for the years ended December 31, 1994
and 1993 and one facility from January 1, 1993 through November
30, 1994. The Partnership records accounts receivable for
contingent rentals and past due rents only when circumstances
indicate a substantial probability of collection. Existing
receivables are reserved to the extent collection is deemed
doubtful by the Partnership's management. Deductions to the
allowance for doubtful accounts were $29,953, $32,426 and $-0-
for 1995, 1994 and 1993, respectively.
The Partnership classifies all highly liquid investments with
original maturities of three months or less as cash equivalents.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
to prepare these consolidated financial statements. Actual
results could differ from those estimates.
(3)Property and Improvements
Property and improvements consist of:
December 31
1995 1994
Land $
3,570,802 6,739,171
Buildings and improvements 34,467,946 42,932,875
Furniture, fixtures and equipment 1,851,124
2,244,646
39,889,872 51,916,692
Allowance for reduction in carrying value
of
operating properties (3,026,898)
(5,643,765
)
36,862,974 46,272,927
Less accumulated depreciation 11,611,719 12,576,670
$ 25,251,255 33,696,257
The following property dispositions occurred during 1995:
Net
property
and
improvemen
ts Mortgage
loans
payable Other Net
proceeds Net gain
on
dispositi
on
Sale of Heritage
Manor
on July 5,
1995 $
2,530,645 (1,500,00
0) 63,857 (1,458,28
7) 363,785
Deed transferred
to
noteholder in
lieu
o f
foreclosure:
Foothills 2,122,178 (2,360,89
5) (872,587) 1,111,304
Diablo/Tamarack 2,071,334 (2,160,78
7) (802,552)
892,005
$
6,724,157 (6,021,68
2) (1,611,28
2) (1,458,28
7) 2,367,094
"Other" consists primarily of accrued interest payable and
deferred charges (prepaid loan fees).Effective December 1, 1994,
the Foothills property was placed in receivership. The deed to
the property was subsequently transferred to the noteholder in
lieu of foreclosure on July 19, 1995. The resulting net gain is
comprised of (1) an ordinary loss of $914,435, representing the
difference between the carrying value and the fair value of the
property and, (2) an extraordinary gain of $2,025,739
representing the difference between the fair value of the
property, and the mortgage loan payable including accrued
interest payable. The deed to the Diablo/Tamarack property
was transferred to the noteholder in lieu of foreclosure on July
31, 1995. The resulting net gain is comprised of (1) an ordinary
loss of $686,770 representing the difference between the carrying
value and the fair value of the property and, (2) an
extraordinary gain of $1,578,775 representing the difference
between the fair value of the property, and the mortgage loan
payable including accrued interest payable.
Additionally, the Partnership owns a property, Cambridge,
operated under bankruptcy proceedings (note 6). In 1994,
management concluded that the carrying value of Cambridge
exceeded its estimated fair value. As a result, in the fourth
quarter of 1994, this property, which had been carried at
$4,185,381, was written down to $2,000,000.
In 1993, management concluded that the carrying value of three
properties, Foothills, Countryside and Diablo/Tamarack exceeded
estimated fair value. These properties each secured nonrecourse
debt, the outstanding balances of which management also believed
exceeded their respective estimated fair values. As a result, in
the fourth quarter of 1993, these properties, which had been
carried at $10,048,605, were written down to their respective
nonrecourse debt values which aggregated $6,590,221 (note 4).
The Partnership is presently negotiating the sale of the
Countryside property with a unrelated third-party investor and
the lender holding the debt secured by the property. The sale is
subject to the lender accepting the sales proceeds offered by the
investor as full satisfaction of the debt, including accrued
interest payable. The sale proceeds offered by the investor are
less than the carrying value of the debt and accrued interest
payable. The outcome of these negotiations is not presently
determinable. At December 31, 1995, the carrying value of
Countryside's property and improvements was $1,779,852 which
secured a mortgage loan payable of $2,068,539 and accrued
interest payable of $766,972. Combined operating results for
Foothills, Countryside and Diablo/Tamarack follows:
1995 1994 1993
Net patient service revenue $
3,268,800 6,698,75
1 6,237,90
7
Facility operating expenses 3,238,004 6,597,06
8 6,150,89
9
Depreciation 275,815 369,401 378,045
Fees to affiliates 319,454 650,740 435,851
Bad debts 325,921 52,263 112,760
Lease default expenses 120,258
81,014
75,907
4,279,452 7,750,48
6 7,153,46
2
Loss from operations $(1,010,65
2) (1,051,7
35) (915,555
)
Interest expense $
457,691
664,306
673,365
Mortgage Loans Payable
Mortgage loans payable consist of the following:
1995 1994
Mortgage loans payable - in default (note
3) $
2,068,539 6,590,22
1
Mortgage loans payable 7,707,062
9,678,44
7
Total mortgage loans payable $
9,775,601 16,268,6
68
Mortgage loans payable (including $6,333,183 and $6,775,796
due to banks at December 31, 1995 and 1994), bear interest
ranging from 6.8% to 10.75% at December 31, 1995 and 6.8% to
13.125% at December 31, 1994. These notes are payable in monthly
installments of $94,618 at December 31, 1995 and $108,290 at
December 31, 1994, including interest. The notes are secured by
properties with net book values aggregating $14,004,632 and
$17,231,664 at December 31, 1995 and 1994, respectively.
Mortgage loans payable - in default, consists of one loan at
December 31, 1995, secured by the Countryside property and three
loans at December 31, 1994, secured by the Countryside, Foothills
and Diablo/Tamarack properties, respectively. In 1995, notes
secured by the Foothills and Diablo/Tamarack properties were
extinguished in connection with the disposition of the properties
securing the notes (see note 3). The note(s) bear interest at
10.0% at December 31, 1995 and 9.5% to 11.25% at December 31,
1994. The note(s) are payable in monthly installments of $20,796
at December 31, 1995 and $66,736 at December 31, 1994, including
interest. The note(s) are secured by property(ies) with net book
value(s) aggregating $1,779,852 and $6,248,417 at December 31,
1995 and 1994, respectively. The note(s) are in default because
of the Partnership's failure to make required debt service
payments when due and because of the failure of the former
lessees to pay required property taxes to the taxing
authorities. The Partnership had one mortgage loan aggregating
$1,062,237 and $1,219,776 at December 31, 1995 and 1994,
respectively, that was in default as a result of not meeting a
debt coverage ratio, as defined. Despite this default, the
lender waived this ratio requirement through January 1, 1997.
Accordingly, this loan balance is classified as "mortgage loans
payable" in the accompanying consolidated balance sheets.
Accrued interest payable related to mortgage loans payable - in
default aggregated $766,972 and $1,842,112 at December 31, 1995
and 1994, respectively. The Partnership leases four of its
properties under a master lease (see note 6). The rentals under
the master lease provide additional security for two notes
payable used to finance two of the master lease properties. As
consideration for lender approval of the master lease
restructuring, the Partnership reduced the outstanding principal
balances of the notes payable during December 1992 by an
aggregate $615,000. Additionally, the Partnership made an
additional $215,000 prepayment on one of these notes in 1993 and
increased the monthly principal payments for both of these notes
by $9,500, effective January 1, 1993. Both of these notes were
callable by the lenders at any time between January 1, 1993 and
November 30, 1995; however, the lenders agreed not to exercise
their call rights prior to maturity on January 31, 1996 as long
as the Partnership remained in compliance with the loan
agreements. Subsequently, one of the lenders agreed not to
exercise its call right until March 31, 1996. The Partnership is
in the process of negotiating an extension of this note. The
second lender approved an extension of the maturity date of its
note to December 1, 2001. Presented below is a summary of
required principal payments on mortgage loans payable. The
outstanding principal balances of mortgage loans payable - in
default and the note callable on March 31, 1996 are included in
amounts due currently.
1996 $ 3,266,182
1997 1,456,637
1998 127,428
1999 141,470
2000 157,061
2001 and thereafter 4,626,823
$ 9,775,601
(5) Leases The Partnership leases its property and equipment
to tenants under noncancelable operating leases. The lease terms
range from 9 to 12 years with options to renew for additional
five-year terms and options to purchase the leased property at
the current fair market value at the end of the initial lease
term. The leases generally provide for contingent rentals based
on the performance of the property. Contingent rentals
aggregated $165,042, $173,541 and $197,286 in 1995, 1994 and
1993, respectively. Minimum rentals for the next four years for
leases not in default are $3,971,328 per year, subject to change
based on changes in interest rates. Minimum rentals for the year
2000 are $3,761,252 and rentals thereafter aggregate $2,858,629.
Property and improvements less accumulated depreciation
attributable to such rentals, amounted to $21,671,891 and
$25,310,338 at December 31, 1995 and 1994, respectively.
(6)Lease DefaultsPrior to 1993, the Partnership experienced
defaults by lessees of several of its properties. In connection
with those defaults, the Partnership assumed operating
responsibility for the Countryside and Foothills properties
during 1992. NCA Cambridge, Inc., the lessee of the
Partnership's Cambridge property, petitioned for Chapter 11
bankruptcy protection in 1992. In May 1993, CRG began operating
Cambridge under the control of the bankruptcy court pursuant to a
settlement agreement with the former lessee; however, the results
of operations of this property have not been included in the
consolidated statements of operations for the three years ended
December 31, 1995 as the ultimate disposition of the property is
subject to bankruptcy proceedings. The Partnership anticipates
that bankruptcy proceedings will be resolved in 1996. In
connection with this property, the lessee was overpaid for
services to Medicaid patients during the period the lessee
operated the property. Based on certain interpretations of state
regulations, the Partnership could have been liable for
approximately $1,400,000 in connection with the recovery of these
Medicaid overpayments. During 1995, the Partnership entered
into a settlement agreement with the state of Massachusetts,
approved by the bankruptcy court, whereby the $1,400,000 became a
general, unsecured claim of the bankruptcy estate which will be
settled through bankruptcy court proceedings. Additionally, as
part of the settlement agreement with the state, the Partnership
agreed to loan NCA Cambridge, Inc. $590,000 to pay outstanding
real property taxes due on the Cambridge property. The
Partnership has fully reserved for this receivable in the
accompanying 1995 consolidated balance sheet. Four of the
Partnership's remaining properties are subject to a master lease
with a single operator. During 1993, the operator merged with
ReLife, Inc. (ReLife), an unrelated third party, resulting in the
following amendments to the existing lease agreement: A
$1,900,000 note due the Partnership was paid in full and
recognized as a recovery of note receivable in the 1993
consolidated statement of operations. The Partnership's 561,198
shares of the operator's Class B common stock were sold to ReLife
for $939,025 resulting in a $539,025 gain on sale of investment
in the 1993 consolidated statement of operations. The lessee was
given an option to renew the lease for an additional nine year
period. ReLife agreed to guarantee the obligations of the lessee under
the second
restructuring agreement. ReLife will pay contingent rentals equal
to 4% of the revenue differential, as defined, effective January
30, 1997.During 1994 ReLife was acquired by HealthSouth Rehabilitation
Corp.
Approximate expenses related to lease defaults are as follows:
1995 1994 1993
Property taxes and trade
payables $
208,000 48,000
Legal and professional fees 286,000 245,000 351,000
$
286,000 453,000 399,000
Delinquent rentals fully reserved by the Partnership as a
result of the defaults approximated $674,000 in 1995, 1994 and
1993.Other income in 1994 primarily consists of $560,000 in recovered
administrative expenses owed the Partnership from the former
operator of two of the Partnership's properties.
(7)Related Party Transactions
Approximate fees paid to the general partner and affiliates of
the general partner are as follows:
1995 1994 1993
Asset management fees $ 712,000 731,000 734,000
Property management fees 252,000 472,000
436,000
Administrative and
other expenses 235,000 266,000
389,000
General partner
management fees 80,000 113,000 109,000
$ 1,279,000 1,582,000 1,668,000
In 1994 the Partnership purchased an administrative building,
adjacent to one of its facilities, from a partnership owned by
the owners of CRG for approximately $485,000 based on an
independent appraisal. In addition, the Partnership paid CRG
fees aggregating approximately $412,500 and $78,500 in 1993 in
connection with amending the master lease and restructuring
related debt, respectively, (see note 6) which amounts are
included in deferred charges in the accompanying consolidated
balance sheets. In addition, a 50% partner in CRG is chairman
of the board of a bank where the Partnership holds the majority
of its operating cash accounts. In connection with the sale of
Heritage Manor, the general partner was paid fees aggregating
$92,250.
(8) Income Taxes
Reconciliation of financial statement basis partners' equity
to federal income tax basis partners' equity is as follows:
Years ended December 31
1995 1994 1993
Total partners' equity -
financial statement
basis $
22,427,28
2 21,176,94
9 24,212,4
08
Current year tax basis net
earnings
over (under) financial
statement basis (2,942,67
5) 2,552,427 3,424,07
7
Cumulative tax basis net
earnings over
financial statement basis
8,079,253
5,526,826
2,102,74
9
Total partners' equity -
federal income
tax basis $
27,563,86
0 29,256,20
2 29,739,2
34
Because many types of transactions are susceptible to varying
interpretations under federal and state income tax laws and
regulations, the amounts reported above may be subject to change
at a later date upon final determination by the taxing authorities.
(9)Business and Credit ConcentrationsThe Partnership's nine facilities
are
located throughout the continental United States. The four
facilities operated by a common operator (note 6) are located in
the southeastern United States and accounted for approximately
$2,367,000 (28%), $2,292,000 (18%) and $2,292,000 (16%) of
Partnership revenues in 1995, 1994 and 1993, respectively. One
property leased to an unaffiliated operator accounted for
approximately $977,000 (12%) of Partnership revenues in 1995.
The Partnership also derives revenue from Medicaid programs
funded by the states of Colorado, California and Michigan. The
Partnership derived 14% and 12% of its revenues from the Colorado
state program during 1994 and 1993, respectively, and 15% and 11%
of its revenues from the Michigan state program in 1995 and 1994,
respectively. Revenues derived from the state program of
Michigan in 1993 and the state program of California in 1995,
1994 and 1993 were individually less than 10% of the
Partnership's revenues for those years. Receivables due from
state Medicaid programs aggregated $116,933 and $473,000 at
December 31, 1995 and 1994, respectively. The Partnership does
not require collateral or other security to support financial
instruments subject to credit risk.(10) Fair Value of Financial
Instruments The following methods and assumptions were used to
estimate the fair value of each class of financial instruments
presented below.(a) Cash and Cash Equivalents, Receivables and
Payables The carrying amount approximates fair value because of
the short maturity of these instruments.(b) Mortgage Loans
PayableThe fair value of the Partnership's mortgage loans payable is
calculated by
discounting scheduled cash flows through maturity using discount
rates that are currently available to the Partnership on other
borrowings with similar risk and maturities. Issuance costs and
other expenses that would be incurred in an actual borrowing are
not reflected in this amount. The fair value of the mortgage
loan in default at December 31, 1995 is not included in the
calculation as it was not considered practicable to calculate
this amount due to the uncertainty surrounding the repayment
terms of this debt (see note 3).
Carrying
value Fair
value
Mortgage loans payable $
7,707,06
2 7,641,333
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The Registrant is a Limited Partnership managed by the
General Partner and has no directors, officers, or
significant employees.
(b) The General Partner of Registrant is:
Capital Realty Group Senior Housing, Inc., ( Capital )
a Texas corporation, that was formed under the laws of
the State of Texas in 1988.
(c) As of December 31, 1995 the officers and directors of
Capital, the General Partner, were:
Name Age Position
Jeffrey L. Beck 51 Chief Executive
Officer and Director
James A. Stroud 45 Chief Operating Officer,
Secretary and Director
Keith N. Johannessen 39 President
Fred Tanner 40 Executive Vice President
Rob L. Goodpaster 42 National Director of
Marketing
Marilyn J. Teel 42 Vice President
David Brickman 37 Vice President
Robert F. Hollister 40 Controller
James A. Stroud, age 45. Mr. Stroud has served as an
officer and a director of Capital since December 1988, most
recently serving as Chief Operating Officer and Secretary since
May 1991. He owns 50% (through a trust) of Capital Realty Group
Corporation, the parent of Capital and has served as its
President, Secretary and a Director since February 1988. From
1984 until 1985, he was Executive Vice-President of Equity
Management Corporation, Dallas, Texas, a full service real estate
company. From 1980 to 1983, he was director in charge of the Tax
Department of the law firm of Baker, Glast & Middleton, Dallas,
Texas. From 1978 until 1980, he was an associate with Brice &
Mankoff (formerly Durant and Mankoff), a law firm in Dallas,
Texas. Mr. Stroud is a Certified Public Accountant and a
licensed attorney. He received his B.B.A. from Texas Tech
University with highest honors, his J.D. from the University of
Texas with honors, and his L.L.M. in taxation from New York
University with honors. While at New York University, he was a
graduate editor of the New York University Tax Law Review and a
Wallace Scholar. Mr. Stroud is a founder and director of the
Assisted Living Facilities Association of America, a member of
the Health Industry Council, President-elect of the National
Association for Senior Living Industries ("NASLI"), and has
delivered speeches on health care topics to the NASLI, National
Investment Conference, and the Urban Land Institute.
Jeffrey L. Beck, age 51. Mr. Beck has served as an officer
and a director of Capital since December 1988, most recently
serving as Chief Executive Officer since November 1990. He owns
50% of Capital Realty Group Corporation, the parent of Capital
and has served as its Chief Executive Officer since February
1988. From 1975 to 1985, he was President of Beck Properties,
Inc., which was the predecessor of Capital. From 1973 to 1974,
he was Regional Controller with Trammell Crow & Company, a real
estate company based in Dallas, Texas. Mr. Beck is Chairman of
the Board of Directors of Park Central Bank of Dallas. Mr. Beck
serves as Chairman of the American Senior Housing Association.
Keith N. Johannessen, age 39. Mr. Johannessen became
Executive Vice President of Capital in May 1993 with
responsibility for supervising the day-to-day operations of
Capital's retirement communities. In March 1994, Mr. Johannessen
became President of Capital. From September 1992 through May
1993, Mr. Johannessen was a Senior Manager in the North Central
Region for the health care practice of Ernst & Young LLP,
responsible for assisting in the development and direction of the
firm's long term care center consulting projects in the region as
well as on a national basis. From August 1987 through September
1992, Mr. Johannessen was Executive Vice President with Oxford
Retirement Services, Inc. responsible for the sales, marketing
and operations of retirement communities and nursing homes. From
August 1978 to August 1987, Mr. Johannessen was employed by Life
Care Services Corporation in a variety of operations management
positions, from single retirement projects to multi-facility
responsibilities. He is a licensed nursing home administrator
and holds a Bachelor of Arts Degree from Nyack College, New York.
Mr. Johannessen is active in the American Senior Housing
Association, National Association for Senior Living Industries
and the American Association of Homes and Services for the Aging.
Fred Tanner, age 40. Mr. Tanner became Executive Vice
President of Capital in 1994, providing operational support to
congregate, assisted living and nursing facilities.
Additionally, he is responsible for the development and oversight
of home health programs. Prior to joining Capital, Mr. Tanner
served in similar operational roles with Greystone Communities
from May 1993 to November 1994 and Central Park Lodges from
December 1988 to May 1993. His experience includes the multiple
supervision of both endowment and rental, including independent,
assisted living and nursing care facilities. Mr. Tanner's
involvement in the industry began in 1979 at the Methodist Home
for the Aged in Charlotte, North Carolina. In 1983 he served as
an Executive Director of various retirement communities in Kansas
and Tennessee before becoming a Regional Director of Operations
for the Forum Group in Indianapolis, Indiana. Mr. Tanner is a
member of the American Senior Housing Association, where he heads
the committee formulating the association's assisted living
regulatory policy. Mr. Tanner is a graduate of the University of
North Texas Center for Studies in Aging with a M.A. in
Gerontology/Retirement Community Administration.
Rob L. Goodpaster, age 43. Mr. Goodpaster became National
Director of Marketing of Capital in December 1992, with overall
responsibility for marketing and lease-up functions of Capital's
managed properties. With 19 years of experience in the industry,
Mr. Goodpaster has an extensive background in retirement housing
marketing. His experience includes analyzing demographics,
developing and implementing marketing plans, creating outreach
and advertising programs, hiring and training sales personnel and
implementing lead management and tracking systems. Prior to
joining Capital, Mr. Goodpaster was National Director of
Marketing for Autumn America from January 1990 to November 1992.
From 1985 until December 1989, he was President of Retirement
Living Concepts, Inc. where he marketed retirement properties
throughout the United States. Mr. Goodpaster was formerly Vice
President, Marketing for U.S. Retirement Corp. from 1984 to 1985
and Vice President, Development for American Retirement Corp.
from 1980 to 1984. Mr. Goodpaster is a graduate of Ball State
University with a B.S. in Business Management and Marketing. Mr.
Goodpaster is a member of the National Association of Senior
Living Industry and the Texas Association of Retirement
Communities.
Marilyn J. Teel, age 42. Ms. Teel has served as Vice
President of Capital since 1992. Ms. Teel has over 15 years
experience in the senior housing industry. She has had extensive
experience in marketing, leasing and management operations for
retirement communities and assisted living facilities. She
joined Capital in 1991 and is currently responsible for
overseeing day-to-day property operations as well as marketing
and leasing operations for multiple retirement communities,
assisted living facilities and nursing home facilities. From
1987 through 1988, Ms. Teel was marketing director with OverCash
Goodman Company, a company located in Fort Worth, Texas,
providing nursing home and congregate care. From 1988 until
1991, Ms. Teel was the on-site administrator for various
retirement communities. She is a member of the Texas Association
of Retirement Communities and the National Association of Senior
Living Industry.
David Brickman, age 37. Mr. Brickman has served as Vice
President and Counsel of Capital since 1992. Mr. Brickman
received his bachelor of Arts degree from Brandeis University.
He holds a J.D. from the University of South Carolina Law School,
an M.B.A. from the University of South Carolina School of
Business Administration and a Masters of Health Administration
from Duke University. Prior to joining Capital in 1992, he
served as in-house counsel from 1986 through 1987 with Cigna
Health Plan, Inc., from 1987 through 1989 with American General
Group Insurance Company and from 1989 until joining Capital, with
LifeCo Travel Management Company located in Houston, Texas. In
addition to his legal responsibilities, Mr. Brickman is also
responsible for asset management activities, operational
activities and investor relations for Capital's portfolio.
Robert F. Hollister, age 40. Mr. Hollister has served as
Controller of Capital since 1992. Mr. Hollister received his
Bachelor of Science in Accounting from the University of
Maryland. His experience includes public accounting as well as
private experience in fields such as securities, construction,
and nursing homes. Prior to joining Capital in 1992, Mr.
Hollister was the chief financial officer and controller for
Kavanaugh Securities, Inc. from December 1985 until 1992. Mr.
Hollister is the property controller and supervises the day-to-
day accounting and financial aspects of Capital. Mr. Hollister
is a Certified Financial Planner and a member of both local and
national professional accounting organizations.
(d) Based solely upon a review of Forms 3, 4 and 5 and any
amendments thereto furnished to the Registrant pursuant to
Rule 16a-3(e) of the SEC rules, the Registrant is not aware
of any failure of any officer or director of Capital or
beneficial owner of more than ten percent of the Units to
timely file with the SEC any Form 3, 4 or 5 relating to the
Registrant for 1995 except that the following persons or
entities failed to file in a timely basis the following
reports: Capital filed six late reports on Form 4 reporting
fourteen transactions; Capital Retirement Group, Inc. filed
two late reports on Form 4 reporting four transactions;
Capital Senior Living Communities, L.P. filed six late
report on Form 4, reporting fourteen transactions; and each
of Messrs. Beck and Stroud filed six late report on Form 4,
reporting fourteen transactions.
Item 11. Executive Compensation
The Registrant has no officers or directors. The officers
and directors of the General Partner receive no direct current
remuneration from Registrant nor is it proposed that they receive
remuneration in such capacities. Registrant is required to pay
certain fees to the General Partner or its affiliates, make
distributions, and allocate a share of the profits and losses of
Registrant to the General Partner. The relationship of the
General Partner (and its directors and officer) to its affiliates
is set forth above in Item 10. Reference is also made to Note 7
of the Notes to the Consolidated Financial Statements included
herein, for a description of such distributions, allocations and
the compensation and reimbursements paid to the General Partner
and certain affiliates. See Item 13. "Certain Relationships and
Related Transactions" for additional information.
There are no compensatory plans or arrangements resulting
from resignation or retirement of the partners, directors or
executive officers of the General Partner which require payments
to be received from Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Aside from Capital owning 9.36% of outstanding Units of
Registrant as of March 15, 1996, and Capital Senior Living
Communities, L.P., an affiliate of Capital, owning 11.33% of
outstanding units of Registrant as of March 15, 1996, no other
person or group owns more than 5% of Registrant as of March 15,
1996
(b) No partners, officers or directors of the General
Partner directly own any Units at March 15, 1996. However,
Messrs. Beck and Stroud (through a trust) each own indirectly 50%
of Capital and they may be deemed beneficial owners of the Units
owned by Capital and Capital Senior Living Communities, L.P.
Capital also owns a 2% interest in the Registrant as the general
partner.
Item 13. Certain Relationships and Related Transactions
Under the terms of the Partnership Agreement, Registrant is
entitled to engage in various transactions involving affiliates
of the General Partner. The relationship of the General Partner
to its affiliates is set forth in Item 1. Pursuant to the
Partnership Agreement, the General Partner receives a share of
Registrant's profits and losses.
The General Partner and its affiliates are entitled to
receive an Acquisition Fee, as defined in Registrant's
Partnership Agreement, for their services rendered to Registrant
in connection with the selection and purchase of any property by
Registrant whether designated as real estate commissions or other
fees, however designated and however treated for tax or
accounting purposes. Aggregate Acquisition Fees payable to all
persons in connection with the purchase of Registrant's
properties may not exceed the lesser of: (a) 2% of the gross
proceeds of Registrant's offering; or (b) such compensation as is
customarily charged in similar arm's-length transactions. If
there are insufficient proceeds to pay such fee to the General
Partner and their affiliates, such amount will not be deferred.
No amounts were earned in 1995 and 1994 in connection with such
services. In connection with any reinvestment of sale or
refinancing proceeds as provided in the Partnership Agreement,
the Registrant will pay a reinvestment acquisition fee of 2% of
the price of additional properties payable from Net Sale or
Refinancing Proceeds utilized solely for the acquisition. No
such fees were paid in 1995 or in 1994.
Registrant may pay the General Partner or its affiliates a
Regulatory Approval Fee, as defined in the Partnership Agreement,
of up to 6% of the costs of any newly constructed property which
is acquired by Registrant. The services rendered in connection
with such fee will include: obtaining the appropriate
certificates of need, licenses, Medicare and Medicaid clearances,
regulatory approvals of transfer as is necessary, and such other
federal, state, local and other regulatory agency approvals as
are necessary, and completion of various other items which
pertain to the commencement of the operation of a newly
constructed health care facility. Said services are expected to
continue over the term for which such Registrant properties are
subject to compliance with regulatory agencies, so as to ensure
that the newly constructed property can be placed into service on
a timely basis and remain operational. This fee will not exceed
$1,150,000. The General Partner or its affiliates did not earn
any compensation in 1995 or in 1994 in connection with such
services; the Prior General Partners earned $455,000 since
inception.
Registrant may pay to the General Partner or its affiliates,
for services rendered in connection with the refinancing of a
Registrant property, a mortgage placement fee equal to the lesser
of: (a) 2% of the refinancing proceeds of the Registrant
property; or (b) fees which are competitive for similar services
in the geographical area where the Registrant property is
located. Amounts earned in 1995 were $0 and $0 in 1994.
Registrant may pay to the General Partner or its affiliates,
for services rendered in connection with the sale of a Registrant
property, and shall be entitled to receive the lessor of: (a) 3%
of the sale price of the Registrant s property, or (b) an amount
not to exceed 50% of the standard real estate commission.
Amounts earned by the General Partner in 1995 for the sale of the
Heritage Manor was $92,250.
For property management services, the General Partner or its
affiliates are entitled to receive leasing and property
management fees. Since most of Registrant's properties have
long-term, triple-net leases and others have independent fee
management engagements for most services, the General Partner or
its affiliates received 1% of the monthly gross rental or
operating revenues, totaling approximately $80,000 and $113,000
in 1995 and 1994, respectively. Property management fees paid to
the General Partner were approximately $252,000 and $472,000 in
1995 and 1994, respectively. Asset management fees paid to the
General Partner were approximately $712,000 and $731,000 in 1995
and 1994, respectively.
The General Partner may be reimbursed for its direct
expenses relating to offering and administration of Registrant.
The General Partner or its affiliates received $235,000 and
$266,000 reimbursements for such out-of-pocket expenses in 1995
and 1994, respectively.
In 1994, the Registrant purchased an administrative
building, adjacent to one of its facilities, from Tennessee
Cedarbrook Ltd., an affiliate of the General Partner, for
approximately $485,000, based on an independent appraisal.
Tennessee Cedarbrook Ltd. purchased the property from an
unrelated party in July 1993 for a purchase price of $423,000.
In addition, a 50% owner of the General Partner, Mr. Beck,
is chairman of the board and an owner of a bank, United Texas
Bank of Dallas, where the Registrant holds the majority of its
operating cash accounts.
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
The following Consolidated Financial
Statements of HealthCare Properties, L.P. and
Subsidiaries are incorporated by reference as set
forth in PART II, Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1995
and 1994
Consolidated Statements of Operations - Years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Partnership Equity -
Years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows- Years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because they
are inapplicable, not required, or the
information is included in the financial statements
or notes thereto.
(3) Exhibits
Page Nos. in
Exhibit Number
This Filing
3Restated Limited Partnership Agreement
is incorporatedN/A
by reference to Exhibit A to the Prospectus
of Registrant
dated August 31, 1987, as filed with the
Commission
pursuant to Rule 424(b).
10 Restructuring Agreement dated
November 30, 1992, N/A
between Registrant and Rebound, Inc. with
exhibits.
28Partnership Management Agreement,
dated July 29, 1992, N/A
with Capital Realty Group Properties,
Inc. as filed with
the Commission in the Third Quarter 10-
Q,
dated September 30, 1992.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of
fiscal 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HEALTHCARE PROPERTIES, L.P.
By: Capital Realty Group Senior Housing, Inc.,
General Partner
By:
James A. Stroud
Chief Operating Officer and Director
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 capacities and on the
dates indicated.
By: __________________________________ March 29,
1996
James A. Stroud
Chief Operating Officer and Director
(Chief financial, and accounting officer)
By: __________________________________ March 29,
1996
Jeffrey L. Beck
Chief Executive Officer and Director
EXHIBIT INDEX
Page Nos. in
Exhibit Description
This Filing
3 Restated
Limited
Partnership
Agreement is
incorporated by
reference to
Exhibit A to
the Prospectus
of Registrant
dated August
31, 1987, as
filed with the
Commission
pursuant to
Rule 424(b)
N/A
10 Restructuring Agreement dated November
30, 1992,
between
Registrant and
Rebound, Inc.
with
exhibits.
N/A
28 Partnership
Management
Agreement,
dated July 29,
1992, with
Capital Realty
Group
Properties,
Inc. as filed
with the
Commission in
the Third
Quarter 10-Q,
dated September
30, 1992.
N/A
March 29, 1995
Securities and Exchange Commission
450 5th Street N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: HealthCare Properties, L.P.
SEC File Number: 0-17695
Madam or Sir:
Enclosed please find Form 10-K for the year ended December 31,
1995 for the above referenced partnership.
Please acknowledge receipt of this filing by stamping and
returning the enclosed copy of this letter in the self-addressed,
stamped envelope provided. If there are any questions regarding
this filing, please contact the undersigned.
Very truly yours,
HEALTHCARE PROPERTIES, L.P.
Pamela Crace
Investor Relations Director
PJC/rlt
Enclosure