<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for use of Commission only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
American Retirement Villas Properties
a California Limited Partnership
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
American Retirement Villas Properties
a California Limited Partnership
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 14a-6(i)(1).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
================================================================
Proposed Aggregate Consideration
to be Received
for Partnership Assets Amount of Filing Fee
----------------------------------------------------------------
<S> <C>
$22,700,000 $4,540
================================================================
</TABLE>
-----------------
/X/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid: $4,540
2) Form, Schedule or Registration Statement No.: Schedule 14A
3) Filing Party: American Retirement Villas Properties
4) Date Filed: July 6, 1995
<PAGE> 2
CONSENT SOLICITATION STATEMENT
August 29, 1995
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
(the "Partnership")
Solicitation of Consents to Sell the Partnership's
Assets and Dissolve the Partnership
by
ARV ASSISTED LIVING, INC.
formerly ARV Housing Group, Inc.
("Managing Partner")
245 Fischer Avenue, Suite D-1
Costa Mesa, California 92626
To the Holders of Units Representing Limited Partnership Interests of the
Partnership (the "Unitholders"):
The Partnership has entered into an agreement (the "Agreement") with
Nationwide Health Properties, Inc., a Maryland corporation ("Purchaser"),
pursuant to which Purchaser will purchase the Maria del Sol, Rancho Park Villa,
Tamalpais Creek and Villa Bonita congregate care facilities and the real
property upon which they are located (collectively, the "Properties") from the
Partnership for a total consideration of $22,700,000 in cash (the "Purchase
Price"). The sale of the Properties (the "Transaction") is subject to the
approval of the Unitholders of record as of August 28, 1995 (the "Notice Date")
and other conditions set forth in the Agreement, the form of which is attached
hereto as Appendix A. If approved, the sale of the Properties is expected to
close on or around October 15, 1995.
If the sale of the Properties pursuant to the Agreement and dissolution
of the Partnership are approved by Unitholders who own more than 50% of the
Partnership Interests (as defined below) of the Partnership, Purchaser will,
subject to the terms and conditions set forth in the Agreement, pay the Purchase
Price for the Properties, and the net proceeds from the sale of the Properties
(the "Proceeds of Sale") will be disbursed in accordance with the terms of the
Partnership's Limited Partnership Agreement (the "Partnership Agreement").
Following the sale of the Properties, which constitute substantially all of the
Partnership's assets, the remaining assets of the Partnership (if any) will be
sold and the proceeds (if any) will be distributed in accordance with the
provisions of the Partnership Agreement and the Partnership will be dissolved.
The Managing Partner has estimated that the Unitholders will receive
liquidating proceeds of approximately $714 per Limited Partnership Unit,
including Proceeds of Sale equal to approximately $697 per Unit. The Managing
Partner has estimated that, for federal income tax purposes, taxable Unitholders
will have ordinary income of approximately $114 per Unit and Section 1231 gain
of approximately $196 per Unit, and tax-exempt investors will have an ordinary
loss of approximately $50 per Unit and no Section 1231 gain, for the
Partnership's 1995 tax year. Additionally, the Unitholders may recognize gain or
loss upon liquidation of the Partnership, as discussed in "Certain Federal
Income Tax Considerations." Furthermore, upon a sale of the Properties and the
liquidation of the Partnership, the Unitholders may, as described in "Certain
Federal Income Tax Considerations," be able to deduct for federal income tax
purposes their allocable share of any "passive activity losses" generated by the
Partnership to the extent that the Unitholders otherwise have not been able to
deduct such losses. Since the inception of the Partnership through December 31,
1994, the Partnership has allocated to taxable Unitholders approximately $71 per
Unit of net losses and $61 per Unit of capital gain, which gain was passed
through to the taxable Unitholders in 1990. Such gain or loss would be "passive
activity gain or loss" for Unitholders who have not materially participated in
the activity in which the Partnership is engaged. The actual amount of income,
gain and loss to be recognized by the Unitholders upon the sale of the
Properties and liquidation of the Partnership will depend upon the actual facts
relating to the sale of the Properties and upon each Unitholder's personal tax
situation.
-1-
<PAGE> 3
The General Partners believe that the Transaction is fair and offers
the Unitholders an opportunity to realize immediate liquidity of their
investment at the fair market value. See "Analysis of Transaction." In addition,
Robert A. Stanger & Co., Inc. ("Stanger") has delivered its opinion to the
Partnership that the consideration to be paid to the Partnership for the
portfolio of Properties is fair. See "Fairness Opinion." A copy of Stanger's
Fairness Opinion is attached hereto as Appendix B. The Properties are being sold
at their appraised fair market values as determined by Senior Living Valuation
Services, Inc., an independent appraisal firm specializing in the valuation of
senior retirement facilities ("Appraiser"). See "Analysis of the Transaction." A
copy of the appraisal report summaries for the Properties prepared by the
Appraiser is attached hereto as Appendix C.
The Managing Partner has certain conflicts of interest in connection
with the Transaction. See "Conflicts of Interest." The Managing Partner believes
the most significant of these conflicts is that the Managing Partner will
continue to have an interest in the Properties if the Transaction is approved
and completed. Concurrent with the sale of the Properties to Purchaser,
Purchaser will lease the Properties to the Managing Partner or one of its
wholly-owned subsidiaries. The Managing Partner will thus succeed the
Partnership as the operator of the Properties, will receive all of the revenue
from operating the Properties and will pay rent to Purchaser. Therefore,
although the Managing Partner believes that the terms of the Transaction are
fair, the Managing Partner is making no recommendation in connection with this
Consent Solicitation Statement.
Sale of the Properties and dissolution of the Partnership may trigger
adverse tax consequences for some Unitholders. See "Certain Federal Income Tax
Considerations." In addition, Unitholders will no longer receive quarterly
distributions and may be losing an opportunity to benefit from possible future
improvement in the fair market value of the Properties. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In the event the Transaction and dissolution of the Partnership are not
approved by the Unitholders, the Partnership will continue to own and operate
the Properties. As opportunities arise, the General Partners may pursue
strategies to increase the Unitholders' liquidity, including refinancing
existing indebtedness to take advantage of lower interest rates or to pay
greater distributions, borrowing additional funds secured by some or all of the
Properties to pay larger distributions, or soliciting offers for the sale of
one, some or all of the Properties. By continuing to own and operate the
Properties, the Partnership will continue to earn income and make distributions
to the Unitholders. The Partnership would also benefit from any increase in the
value of the Properties over time. See "Analysis of the Transaction."
This Consent Solicitation is made by the Managing Partner on behalf of
the Partnership and seeks your approval of the Transaction and the subsequent
dissolution and winding up of the Partnership. The cost of this Consent
Solicitation is being borne by the Partnership. See "Distribution of the
Proceeds of Sale."
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M. PACIFIC DAYLIGHT TIME ON
OCTOBER 2, 1995 (THE "CONSENT DATE") UNLESS EXTENDED OR TERMINATED EARLIER.
CONSENTS MAY BE REVOKED AT ANY TIME UP TO THE CONSENT DATE (SEE "APPROVAL BY THE
UNITHOLDERS").
ANY QUESTIONS ABOUT THIS CONSENT SOLICITATION OR REQUESTS FOR COPIES OF
DOCUMENTS MAY BE DIRECTED TO THE INFORMATION AGENT, THE HERMAN GROUP, INC.,
13760 NOEL ROAD, SUITE 320, DALLAS, TEXAS (BY MAIL: P.O. BOX 803248, DALLAS,
TEXAS 75380-9949), PHONE NUMBER (800) 747-2966, FACSIMILE NUMBERS (214) 991-4422
OR (214) 991-4432.
-2-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF THE TRANSACTION TO BE VOTED ON BY UNITHOLDERS . . . . . . . . . . . . . . . . . . . 5
Transaction Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Reasons for the Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disadvantages of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Annual Distributions Paid Per $1,000 Unit . . . . . . . . . . . . . . . . . . . . . . . . 8
Cumulative Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Market for the Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ANALYSIS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DISTRIBUTION OF THE PROCEEDS OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Managing Partner's Continuing Interest in the Properties . . . . . . . . . . . . . . . . . 16
Distribution to Managing Partner Upon Sale and Liquidation . . . . . . . . . . . . . . . . 16
No Independent Representative for Unitholders . . . . . . . . . . . . . . . . . . . . . . 16
Incentive Distribution to General Partners Upon Sale . . . . . . . . . . . . . . . . . . . 16
SUMMARY OF PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Summary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Terms of the Purchase and Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 17
Conditions to Purchaser's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Approval of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INFORMATION CONCERNING PROPERTY APPRAISALS . . . . . . . . . . . . . . . . . . . . . . . . . 21
Real Estate Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Summary of Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Conclusions as to Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Assumptions, Limitations, and Qualification of the Appraisals . . . . . . . . . . . . . . 25
Compensation and Material Relationships . . . . . . . . . . . . . . . . . . . . . . . . . 25
FAIRNESS OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Experience of Stanger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Summary of Materials Considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Summary of Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Limitations and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Compensation and Material Relationships . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
-3-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
RCFE/AL Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Historical Occupancy Rates of the Properties . . . . . . . . . . . . . . . . . . . . 29
Historical Monthly Rental Rates of the Properties . . . . . . . . . . . . . . . . . 30
Rancho Park Villa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Villa Bonita . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Maria del Sol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Tamalpais Creek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . 31
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Impact of Inflation and Changing Prices . . . . . . . . . . . . . . . . . . . . . . 37
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Policies and Practices Regarding Real Estate Impairment . . . . . . . . . . . . . . 38
DISSOLUTION AND WINDING UP OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . 38
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 39
Tax Consequences of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . 39
Liquidation of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
APPROVAL BY THE UNITHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Extension of Consent Date: Termination and Amendment . . . . . . . . . . . . . . . 41
Dissenter's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Method of Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ATTACHMENTS
Schedule 1 - Financial Statements and Supplementary Data
Appendix A - Form of Agreement with Nationwide Health Properties, Inc.
Appendix B - Fairness Opinion
Appendix C - Property Appraisal Summaries
Appendix D - Consent
</TABLE>
-4-
<PAGE> 6
SUMMARY OF THE TRANSACTION TO BE VOTED ON
BY UNITHOLDERS
The Managing Partner, on behalf of the Partnership, is soliciting the
consents (the "Consents") of the Unitholders with respect to the proposed sale
of the Maria del Sol, Rancho Park Villa, Tamalpais Creek and Villa Bonita
congregate care/assisted living facilities and the real property upon which they
are located (collectively, the "Properties") to Nationwide Health Properties
("Purchaser"), a Maryland corporation, and the subsequent dissolution of the
Partnership.
TRANSACTION SUMMARY. The sale of the Properties and dissolution of the
Partnership is subject to, among other things, the approval of the Unitholders
of record as of August 28, 1995 (the "Notice Date"). If the sale of the
Properties is approved by Unitholders who own more than 50% of the Units of the
Partnership, Purchaser will, subject to the terms and conditions set forth in
the Agreement (the form of which is attached as Appendix A), pay $22,700,000
(the "Purchase Price") for the Properties, and the proceeds from the sale of the
Properties (the "Proceeds of Sale") will be disbursed in accordance with the
terms of the Partnership's Limited Partnership Agreement (the "Partnership
Agreement"). Following the sale of the Properties (the "Transaction"), which
constitutes substantially all of the Partnership's assets, the remaining assets
of the Partnership (if any) will be sold and the proceeds (if any) will be
distributed in accordance with the provisions of the Partnership Agreement and
the Partnership will be dissolved.
The Purchase Price is equal to the appraised fair market value of the
Properties. See "Analysis of the Transaction." The Properties will be leased
back by the Managing Partner concurrently with the close of the sale. See
"Summary of the Purchase Agreement" and "Conflicts of Interest."
The General Partners believe that the Transaction is fair and offers
the Unitholders an opportunity to realize immediate liquidity and return on
their investment. See "Analysis of Transaction" and "Conflicts of Interest."
Total liquidation proceeds available for distribution to Unitholders (including
the Proceeds of Sale described below) will approximate $21,431,940
(approximately $714 per Unit). As explained more fully in "Distribution of the
Proceeds of Sale," the liquidation proceeds are inclusive of the distribution of
Proceeds of Sale equal to approximately $20,920,663 (approximately $697 per
Unit).
The General Partners believe that the Purchase Price is a fair price
for the portfolio of Properties. In addition, Robert A. Stanger & Co., Inc.
("Stanger") has delivered its opinion to the Partnership that the consideration
to be paid to the Partnership for the portfolio of Properties is fair, from a
financial point of view. See "Fairness Opinion." A copy of Stanger's Fairness
Opinion is attached as Appendix B.
REASONS FOR THE SALE. The General Partners believe that the Transaction
is fair for the following reasons:
- The Transaction offers the Unitholders an opportunity to liquidate
their investment in the Partnership and obtain a return of cash in the
time frame anticipated (five to seven years) when the Units were
initially sold. The presently available alternative to a Unitholder to
obtain liquidity is to transfer Units on the secondary market. The
General Partners believe that the consideration Unitholders might
receive for a sale of the Units on the secondary market would be
significantly less than the cash distribution produced by the
Transaction. See "The Partnership" and "Distribution of the Proceeds of
Sale."
-5-
<PAGE> 7
- The sale of all four Properties at the same time results in reduced
costs to the Partnership relative to a Property by Property sale. Cost
savings include the avoidance of brokerage commissions which are
typically paid when selling properties to third parties, significantly
reduced escrow fees, savings on legal fees and other savings. See
"Analysis of the Transaction." In addition, if the Properties were sold
individually, the Partnership would continue to incur Partnership costs
during the time period the Properties were being liquidated. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
- The Managing Partner believes that this may be an opportune time to
sell the Properties. The Properties have achieved more or less
stabilized occupancy and have improved operations during the last two
years. See "The Properties" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition,
conditions for the sale of assisted living properties have improved.
See "Information Concerning Property Appraisals."
- The General Partners will receive no incentive fees associated with the
sale of the Properties. The Managing Partner currently has the right to
receive a 10% Partnership Management Fee. If the Properties are sold
and the Partnership dissolved, the General Partners will receive only
1% of the Proceeds of Sale (as opposed to the 10% Partnership
Management Fee while the Partnership owns the Properties). See
"Distribution of the Proceeds of Sale" and "Conflicts of Interest."
- The Partnership engaged the services of an independent appraiser who
specializes in the valuation of senior retirement facilities to
determine the fair market value of the Properties. See "Information
Concerning Property Appraisals." The Purchase Price is equal to the
appraised fair market value of the Properties. A Fairness Opinion
attached as Appendix B was obtained by the Managing Partner from an
independent third party which concluded that the consideration to be
paid to the Partnership for the portfolio of Properties as proposed
herein is fair, from a financial point of view. See "Fairness Opinion."
- The Purchase Price is the result of arms' length negotiations with the
Purchaser which is paying cash for the Properties. See "Analysis of the
Transaction."
DISADVANTAGES OF THE TRANSACTION. In making their decision whether to
vote in favor of the Transaction and dissolution of the Partnership, the
Unitholders should consider the following:
- There are certain conflicts of interest in the Transaction, including
the fact that the Managing Partner will be leasing back the Properties
from the Purchaser if the Transaction is approved. The Managing Partner
will pay rent to Purchaser and will receive all revenue from operating
the Properties. See "Conflicts of Interest."
- Sale of the Properties and dissolution of the Partnership may trigger
adverse tax consequences for some Unitholders. See "Certain Federal
Income Tax Considerations."
- The Managing Partner has neither solicited nor received other offers to
purchase the Properties. If additional offers had been solicited or
received it is possible that the Managing Partner might have obtained a
higher purchase price for the Properties.
- In voting to sell the Properties and liquidate the Partnership at this
time, the Unitholders will no longer receive quarterly distributions
and may be losing an opportunity to benefit from possible future
improvement in the fair market value of the Properties. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
-6-
<PAGE> 8
The Managing Partner is a General Partner of the Partnership and Gary
L. Davidson and John A. Booty are both affiliates of the Managing Partner and
General Partners of the Partnership. In the event the Transaction is approved,
the Managing Partner will lease the Properties from Purchaser under terms
outlined in "Summary of the Purchase Agreement -- Lease Agreement." The Managing
Partner has substantial conflicts of interest with respect to the Transaction.
See "Conflicts of Interest." The Managing Partner therefore makes no
recommendation in connection with this Consent Solicitation.
THE PARTNERSHIP
The Partnership is a California limited partnership formed in
September, 1985. The Partnership raised $30 million from the sale of 30,000
units representing limited partnership interests of the Partnership (the
"Units") at $1,000 per Unit in a registered public offering of the Units
completed in July 1988. The Partnership received net proceeds from that offering
totalling approximately $25,650,000, all of which were invested in four
congregate care facilities (also known as "residential care facilities for the
elderly/assisted living ("RCFE/AL") facilities") or used to pay fees to the
General Partners as authorized by the Partnership Agreement. See "The
Properties." At the time the Units were sold, Unitholders' investments were
projected have a life of five to seven years, with an exit strategy planned to
be proposed in that time frame.
As of June 30, 1995, there were 3,416 Unitholders of record owning
30,000 Units. The Managing Partner owns six Units in the Partnership. In
addition, American Senior Housing Fund, L.P., a California limited partnership
controlled by the individual General Partners and an affiliate of the Managing
Partner, owns approximately 112 Units. No person is known by the Partnership to
own beneficially more than 5% of the outstanding Units.
The general partners of the Partnership are the Managing Partner,
Gary L. Davidson, John A. Booty, John S. Jason and Tony Rota (collectively, the
"General Partners"). Gary L. Davidson is the Chairman of the Board and a
Director of the Managing Partner. John A. Booty is a Director and the President
of the Managing Partner. The four individual General Partners are shareholders
of the Managing Partner and, on a combined basis, owned approximately 52% of the
shares of the Managing Partner as of June 30, 1995.
The Partnership Agreement provides that the General Partners own a 1%
interest in the Partnership's profits, losses and distributions but does not
specify how that interest is to be divided among the General Partners. By
agreement of the General Partners the four individual General Partners each own
a .2475% interest in the Partnership's profits, losses and distributions and the
Managing Partner owns a .01% interest in the Partnership's profits, losses and
distributions so long as the Partnership owns and operates the Properties. Upon
a sale of the Properties and/or dissolution of the Partnership, the General
Partners have agreed that the Managing Partner will receive all of the Proceeds
of Sale and liquidating distribution payable to the General Partners.
-7-
<PAGE> 9
For the period from inception of the Partnership through June 30, 1995,
cash distributions from operations have totalled $448.58 per Unit based on the
weighted number of Units outstanding over the life of the Partnership. A summary
of distributions is as follows.
ANNUAL DISTRIBUTIONS PAID PER $1,000 UNIT.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Weighted
Average 1989 1990 1991 1992 1993 1994 1995
1987/1988* ** ***
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTIONS % 4.27% 3.25% 11.51% 6.39% 6.50% 6.00% 5.43% 6.00%
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS**** $42.70 $32.50 $115.09 $ 63.91 $65.05 $60.03 $54.29 $15.01
----------------------------------------------------------------------------------------------------------------
</TABLE>
* Based on the weighted number of Units outstanding during years 1987 and
1988
** Includes sale of excess Rancho Park Villas land with proceeds
distributed to Unitholders. These proceeds account for 6% of the 11.51%
listed.
*** First quarter distribution only, with annualized percentage
**** Distributions per weighted average of all Units outstanding
CUMULATIVE DISTRIBUTIONS.
<TABLE>
<CAPTION>
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INITIAL TOTAL YEARS
PURCHASE DISTRIBUTIONS HELD
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT $1,000.00 $ 448.58* 7.5
----------------------------------------------------------------------------------------------
$5,000.00 $2,242.90* 7.5
----------------------------------------------------------------------------------------------
$10,000.00 $4,485.80* 7.5
----------------------------------------------------------------------------------------------
</TABLE>
* Based on the weighted number of Units outstanding over the life of the
Partnership.
The sum of the $448.58 per Unit distributions from operations since the
inception of the Partnership (based on the weighted number of Units outstanding
over the life of the Partnership) and the estimated distribution of Proceeds of
Sale and liquidation proceeds of approximately $714 per Unit will exceed by
$162.58 the original $1,000 investment per Unit invested by each initial
Unitholder.
Through August 15, 1995, Unitholders have received aggregate
distributions totalling $13,424,698. When added to Proceeds of Sale and other
amounts which will be distributed upon liquidation of the Partnership, it is
anticipated that Unitholders will have received a total of $34,633,889 on the
original total investment of $30 million. This will result in a total return of
16.25% in excess of the original investment on a pre-tax basis (from the date
the initial offering closed in July 1988).
MARKET FOR THE UNITS. The Units are not listed on any national or
regional securities exchange or quoted on the NASDAQ system, and there is no
established public trading market for the Units. Secondary sales activity for
the Units has been limited and sporadic. The Managing Partner monitors transfers
of the Units (a) because the admission of the transferee as a substitute Limited
Partner requires the consent of the General Partners under the Partnership
Agreement, and (b) in order to track compliance with safe harbor provisions to
avoid treatment as a "publicly traded partnership" for tax purposes.
Set forth in the following tables is certain information regarding sale
transactions involving the Units. The information set forth below was obtained
from the sources indicated. The transactions reflected in the tables below
represent only some of the sale transactions in the Units. There have been
-8-
<PAGE> 10
other secondary sale transactions in the Units, although specific information
regarding such transactions is not readily available. Because the information
regarding sale transactions in the Units included in the tables below is
provided without verification by the Managing Partner and because the
information provided does not reflect sufficient activity to cause the prices
shown to be representative of the values of the Units, such information should
not be relied upon as indicative of the ability of Unitholders to sell their
units in secondary sale transactions or as to the prices at which such Units may
be sold. Therefore, the information presented should not necessarily be relied
upon by Unitholders in determining how to vote their Consent.
The Managing Partner does not believe that the secondary sale prices of
the Units accurately reflect the value of the assets of the Partnership because
secondary sale prices are adversely affected by a variety of factors unrelated
to the value of the assets of a limited partnership. Limited partner interests
are generally traded on a sporadic basis. Sale prices can vary dramatically
based on the number of interests sold at once or over time. Additionally, the
Tax Reform Act of 1986 contained provisions which caused limited partnerships to
place restrictions on transfers of interests in order to avoid taxation of
income at the partnership and partner levels. Accordingly, limited partnerships
have not been well received by investors and secondary sale prices have been
adversely affected.
While the Managing Partner receives some information regarding the
prices at which secondary sale transactions in the Units have been effectuated,
the Managing Partner does not receive or maintain comprehensive information
regarding the activities of all broker/dealers and others known to facilitate
from time to time, or on a regular basis, secondary sales of the Units.
Therefore, the details of some transactions may not be reflected in the transfer
records of the Partnership. The Managing Partner provides the following
information regarding the sale transactions (i.e., excluding transactions
believed to be between related parties, family members or the same beneficial
owner) reported to it by selling Unitholders:
SECONDARY MARKET PARTNERSHIP UNIT SALES
FROM JANUARY 1, 1993 THROUGH JUNE 30, 1995
AS TRACKED BY THE MANAGING PARTNER
<TABLE>
<CAPTION>
NUMBER OF UNITS
TRANSACTION PRICE PER UNIT FOR WHICH SALE
PERIOD HIGH LOW PRICES WERE TRACKED
------ ---- --- -------------------
<S> <C> <C> <C>
1993 $750 $400 89.5
1994 $554 $390 41.5
1995 $555 $425 59.5
(First Half)
</TABLE>
Other Secondary Market Information. The information below was obtained
from Stanger, who maintains the data for publication, and summarizes
secondary-market prices for the Units based on actual transactions during the
reporting periods indicated. When no information is reported for a particular
period, it means that no trade during that period was reported to Stanger. The
Managing Partner does not know which of the secondary-market firms reported the
transactions, or the number or size of transactions, or whether the transaction
prices are before or after commissions.
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<PAGE> 11
The information set forth below is provided without verification by the
Managing Partner and is subject to the following qualifications:
"Limited partnerships are designed as illiquid, long-term investments.
Secondary-market prices generally do not reflect the current value of
partnership assets, nor are they indicative of total return since prior
cash distributions and tax benefits received by the original investor
are not reflected in the price. Transaction prices are not verified by
Robert A. Stanger & Company."
<TABLE>
<CAPTION>
TRANSACTION PRICE PER UNIT NUMBER OF
REPORTING PERIOD HIGH LOW UNITS TRADED
---------------- ---- --- ------------
<S> <C> <C> <C>
1991
Quarter 1 -- -- --
Quarter 2 $450.00 $400.00 10
Quarter 3 $600.00 $400.00 32
Quarter 4 $525.00 $400.00 35
1992
Quarter 1 $527.00 $500.00 30
Quarter 2 -- -- --
Quarter 3 $618.00 $618.00 10
Quarter 4 $598.10 $482.00 32
1993
Quarter 1 $509.00 $415.00 69
Quarter 2 $600.00 $500.00 69
Quarter 3 $546.00 $500.00 60
Quarter 4 $510.00 $374.04 49
1994
Quarter 1 $575.00 $554.02 36
Quarter 2 $554.00 $480.00 96
Quarter 3 $550.00 $390.00 50
Quarter 4 $540.00 $490.00 47
1995
Quarter 1 $506.60 $480.00 84
</TABLE>
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Partnership may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549 and its regional offices. Copies of such information also
can be obtained by mail from the Public Reference
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<PAGE> 12
Section of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549 at
rates prescribed by the Commission.
THE PURCHASER
Purchaser, Nationwide Health Properties, Inc., is a real estate
investment trust which invests in health care related facilities and provides
financing to health care providers. Purchaser's common stock is listed on the
New York Stock Exchange under the symbol "NHP." Purchaser's address is:
Nationwide Health Properties, Inc., 4675 MacArthur Court, Suite 1170, Newport
Beach, California 92660.
Based upon information set forth in Purchaser's Form 10-K and Form 10-Q
filings with the Commission as of December 31, 1994 and March 31, 1995,
Purchaser had investments in 180 and 182 facilities, respectively, located in 29
states. As of March 31, 1995, the facilities include 174 long-term health care
facilities, six assisted living facilities and two rehabilitation hospitals. For
the year ended December 31, 1994 and the quarter ended March 31, 1995, Purchaser
had net income of $44,813,000 and $11,457,000, on total revenue of $69,985,000
and $18,852,000, respectively. The Managing Partner believes that Purchaser has
adequate financial resources to complete the purchase of the Properties pursuant
to the Agreement. The Managing Partner is informed by Purchaser that Purchaser
will draw on a $100 million revolving line of credit to finance the Transaction.
Purchaser is not affiliated with any of the General Partners or their
affiliates. The Managing Partner has engaged, and may in the future engage, in
other transactions with Purchaser similar to the Transaction described herein.
ANALYSIS OF THE TRANSACTION
In the course of evaluating the merits of selling the Properties to
Purchaser, the Managing Partner obtained independent appraisals (the
"Appraisals") from Senior Living Valuation Services, Inc. (the "Appraiser") as
of June 1995(1), the executive summaries of which are attached hereto as
Appendix C and the Fairness Opinion from Stanger, a copy of which is attached
hereto as Appendix B. The Appraisals were prepared by Michael G. Boehm, MAI in
compliance with the requirements of the Uniform Standards of Professional
Appraisal Practice ("USPAP"). The Appraiser estimated the market value of each
of the Properties as a going concern based on the Appraiser's investigation of
the general economy of the industry, supply and demand factors, comparable land
and property sales, competitive property rents and occupancy and consideration
of the value of each of the Properties under the Cost Approach, Income Approach
and Sales Comparison Approach, as those approaches are defined by the USPAP. As
part of its review in rendering the Fairness Opinion, Stanger reviewed the
appraisals of the Properties.
-----------------
(1) The Appraisals have different dates: Maria Del Sol, Rancho Park
Villa and Villa Bonita were appraised as of June 9, 1995; Tamalpais Creek was
appraised as of June 13, 1995. Collectively, the Appraisals are referred to as
being dated as of June, 1995.
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<PAGE> 13
The Appraiser estimates that the total going concern value of each of
the Properties as of June 1995, was as follows:
<TABLE>
<S> <C>
Maria del Sol $ 4,125,000
Rancho Park Villa $ 5,250,000
Tamalpais Creek $ 6,125,000
Villa Bonita $ 7,200,000
-----------
TOTAL $22,700,000
==========
</TABLE>
Unitholders may review the entire Appraisals by visiting the Managing
Partner's primary business offices in Costa Mesa, California during regular
business hours or may obtain copies of the Appraisals by mail by sending a
written request to the Managing Partner. Information concerning the appraisal
methodology used by the Appraiser can be found in "Information Concerning the
Appraisals." The Appraisals are subject to certain limiting conditions and
assumptions discussed in "Information Concerning Property Appraisals" and should
be used only as one factor among many in each Unitholder's independent decision
whether to approve the Transaction.
The Managing Partner first approached the Purchaser in early 1994
concerning the possibility of obtaining financing from Purchaser to purchase
assisted living facilities from unrelated third parties. At that time, Purchaser
primarily financed nursing home and hospital projects and was not interested in
investing in assisted living facilities. Purchaser agreed, however, to purchase
one assisted living facility from an unrelated party and lease it to the
Managing Partner under a lease which is substantially similar to the leases
under which the Managing Partner will lease the Properties if the Transaction is
approved.
The success of the initial purchase and lease transaction prompted
Purchaser to increase its assisted living holdings. After closing two other
unrelated transactions in which the Managing Partner is now the lessee in the
spring of 1995, Purchaser approached the Managing Partner to determine if
Purchaser could acquire other properties which the Managing Partner would be
willing to manage.
Negotiations with Purchaser concerning the Properties commenced in late
May 1995. In early June 1995, Purchaser made a written proposal to purchase the
Properties at a price which is below the Purchase Price. While negotiations
concerning the price of the Properties progressed, Managing Partner decided, on
behalf of the Partnership, to have the Properties appraised. Both parties agreed
to consider the appraised values of the Properties in arriving at an agreed upon
price. Once the appraised fair market value of the Properties was ascertained,
Purchaser agreed to increase its offer to the Purchase Price, which is equal to
the appraised fair market value.
After negotiation, Purchaser and the Managing Partner entered into the
Agreement in the form attached as Appendix A to this Consent Solicitation
Statement. The consideration comprising the Purchase Price is equal to the
estimate set forth in the Appraisals.
In analyzing the sale of the Properties, the Managing Partner took into
consideration the cost savings that would result from a sale of all four
Properties to a single purchaser in a single transaction over individual sales
of the Properties at different times to different purchasers. Cost savings
include the avoidance of brokerage commissions which are typically paid when
selling properties to third parties. Those commissions could range from 3% to 6%
of the Purchase Price. Therefore, the proposed Transaction results in savings of
from $681,000 to $1,362,000. In addition, the Managing Partner has negotiated
significantly reduced escrow fees ($7,500 for all four Properties as opposed to
$5,000 per escrow for individual sales), resulting in savings of $12,500, title
premiums (with the basic premium being charged on the basis of $0.92 per $1,000
of the Purchase Price as opposed to a possible $1.10), resulting in savings of
over $5,000, and other savings.
-12-
<PAGE> 14
The Managing Partner has neither solicited nor received other offers to
purchase the Properties. If additional offers had been solicited or received it
is possible that the Managing Partner might have obtained a higher purchase
price for the Properties. However, based on investigations conducted on behalf
of the Partnership by the Managing Partner, the General Partners believe the
Purchase Price is a fair price for the Properties. This belief is supported by
the Stanger Fairness Opinion.
In deciding how to vote, Unitholders should consider that the Managing
Partner believes the real estate market in California is showing signs of
improvement, but prices are still considerably lower than their high point in
the mid- to late-1980s. The Properties are operating in a moderately competitive
market environment. While the Partnership could continue to hold the Properties
for several more years in the hope that the Properties may increase in value,
the Transaction offers the Partners a present opportunity to liquidate their
investment in the Partnership.
The Transaction also provides the Partners with an alternative to
continuing the Partnership. The investment climate has changed significantly
since the first Partnership units were offered for sale in 1986. For example,
the enactment of the Tax Reform Act of 1986, which established the "passive
loss" rules and extended the "at risk" rules to real estate activities,
restricted the ability of certain limited partners to use depreciation and other
deductions of the Partnership to offset income from other sources.
The Transaction would provide the Partners with an opportunity to
obtain liquidity in their investments in the Partnership, most of which were
made seven to eight years ago. Total liquidation proceeds available for
distribution to Unitholders (including the Proceeds of Sale described below)
will approximate $21,431,940, or approximately $714 per Unit upon dissolution of
the Partnership. As explained more fully in "Distribution of the Proceeds of
Sale," the Unitholders would receive an aggregate distribution of Proceeds of
Sale equal to approximately $20,920,663 (which is approximately $697 per Unit).
The Managing Partner has estimated that, for federal income tax
purposes, taxable Unitholders will have ordinary income of approximately $114
per Unit and Section 1231 gain of approximately $196 per Unit, and tax-exempt
investors will have an ordinary loss of approximately $50 per Unit and no
Section 1231 gain, for the Partnership's 1995 tax year. Additionally, the
Unitholders may recognize gain or loss upon liquidation of the Partnership, as
discussed in "Certain Federal Income Tax Considerations." Furthermore, upon a
sale of the Properties and the liquidation of the Partnership, the Unitholders
may, as described in "Certain Federal Income Tax Considerations," be able to
deduct for federal income tax purposes their allocable share of any "passive
activity losses" generated by the Partnership to the extent that the Unitholders
otherwise have not been able to deduct such losses. Since the inception of the
Partnership through December 31, 1994, the Partnership has allocated to taxable
Unitholders approximately $71 per Unit of net losses and $61 per Unit of capital
gain, which gain was passed through to the taxable Unitholders in 1990. Such
gain or loss would be "passive activity gain or loss" for Unitholders who have
not materially participated in the activity in which the Partnership is engaged.
The actual amount of income, gain and loss to be recognized by the Unitholders
upon sale of the Properties and liquidation of the Partnership will depend upon
the actual facts relating to the sale of the Properties and upon each
Unitholder's personal tax situation.
The Managing Partner is a General Partner of the Partnership and Mr.
Davidson and Mr. Booty are both affiliates of the Managing Partner and General
Partners of the Partnership. In the event the Transaction is approved, the
Managing Partner will lease the Properties from Purchaser under terms outlined
in "Summary of the Purchase Agreement -- Lease Agreement." The Managing Partner
has substantial conflicts of interest with respect to the Transaction. See
"Conflicts of Interest." While the General Partners believe the terms of the
Transaction are fair, due to these conflicts of interest, the General Partners
makes no recommendation in connection with this Consent Solicitation.
-13-
<PAGE> 15
In the event the Transaction and dissolution of the Partnership are not
approved by the Unitholders, the Partnership will continue to own and operate
the Properties. As opportunities arise, the General Partners may pursue
strategies to increase the Unitholders' liquidity, including refinancing
existing indebtedness to take advantage of lower interest rates or to pay larger
distributions, borrowing additional funds secured by some or all of the
Properties to pay larger distributions, or soliciting offers for the sale of
one, some or all of the Properties. By continuing to own and operate the
Properties, the Partnership will continue to earn income and make distributions
to the Unitholders. The Partnership would also benefit from any increase in the
value of the Properties over time.
EACH UNITHOLDER MUST MAKE HIS OR HER OWN DECISION WITH RESPECT TO THE
VOTE REQUESTED BY THIS CONSENT SOLICITATION STATEMENT BASED UPON A
NUMBER OF FACTORS INCLUDING THE UNITHOLDER'S FINANCIAL POSITION, NEED
OR DESIRE FOR LIQUIDITY, OTHER FINANCIAL OPPORTUNITIES AND TAX
POSITION.
DISTRIBUTION OF THE PROCEEDS OF SALE
Under the Partnership Agreement, "Proceeds of Sale" is defined as the
net proceeds from the sale of all or substantially all of the Partnership's
assets less any amount which the Managing Partner reasonably determines should
be retained in the Partnership for contingency reserves. The actual Proceeds of
Sale available for distribution will depend on the amount of encumbrances on the
Properties and other Partnership liabilities to be satisfied out of the Purchase
Price received.
As of June 30, 1995, Partnership encumbrances totalling $983,690
remained on the Properties. The expenses of this Consent Solicitation will be
borne by the Partnership and are estimated at $370,540, which includes legal and
accounting fees and expenses ($110,000), pre-payment penalty for early repayment
of secured indebtedness ($45,000), costs of the Fairness Opinion and the
Appraisals ($146,000), printing and distribution of the Consent Solicitation
Statement ($35,000), the costs of consent solicitation management, tabulation
and other direct expenses ($30,000) and filing fees ($4,540). Approximately
$135,000 of the Purchase Price will be held as a contingency reserve to satisfy
any remaining Partnership obligations and to pay the costs of winding up the
Partnership. Any funds remaining after all Partnership obligations have been
satisfied will be distributed as part of a final liquidating distribution. No
brokerage fees or commissions will be paid in connection with the Transaction.
The following example illustrates how the Proceeds of Sale would be
distributed following the Transaction in accordance with the terms of the
Partnership Agreement:
Given a Purchase Price of $22,700,000 and reserves, expenses,
encumbrances and other Partnership liabilities totalling approximately
$1,568,017, the Proceeds of Sale available for distribution would be
approximately $21,131,983. These Proceeds of Sale would be distributed as
follows:
First, cash would be distributed 99% to the Unitholders in an amount,
which, when added to prior cash distributions to the Unitholders, would provide
to them the return of their entire capital contribution plus 6% interest per
annum cumulative (but not compounded) from the date of each Unitholder's
investment through the date of the distribution of the Proceeds of Sale, and 1%
to the General Partners. Under this formula, the Unitholders would receive a
total priority distribution of approximately $20,920,663 (or approximately $697
per Unit), and the General Partners would receive $211,320 (all of which would
be paid to the Managing Partner pursuant to an agreement among the General
Partners - see "The Partnership"); and
-14-
<PAGE> 16
Second, any balance remaining from the proceeds of Sale would be
distributed 15% to the General Partners and 85% to the Unitholders. Because the
Proceeds of Sale will not be sufficient to return both the original investment
and the preferred return, no distribution will be made under this provision.
These amounts estimate the approximate amount that would be distributed
from the Proceeds of Sale following the Transaction, but no assurance can be
made in this regard. The actual amounts resulting from the Transaction cannot be
determined until the time of sale and may vary from the amounts used in this
example.
If the Unitholders approve the Transaction and the Partnership sells
the Properties, which are substantially all of the assets of the Partnership,
the Partnership's assets will be converted to cash, the selling expenses and
closing costs will be paid from the sales proceeds, all of the Partnership's
liabilities will be paid, and the balance of the cash will be distributed to the
Partners in accordance with the Partnership Agreement. Accordingly, the
Partnership will have no future operations and there will be no future operating
results. Subsequent to the payment of the liquidating distribution, the
Partnership will have no remaining assets or equity.
It is currently estimated that the Partnership will have cash of
approximately $516,400 to distribute as part of the liquidation of the
Partnership. The cash will be available from operating cash flow until the
Properties are sold, less the costs of winding up the Partnership. The
liquidating dividend will be distributed 99% to the Unitholders (approximately
$511,280 to all Unitholders, or $17 per Unit), and 1% to the General Partners
(approximately $5,164, all of which would be paid to the Managing Partner
pursuant to the agreement among the General Partners). Total distributions of
both Proceeds of Sale and from liquidation of the Partnership are anticipated to
be in the approximate amount of $21,431,940 to the Unitholders (approximately
$714 per Unit), and $216,485 to the General Partners (all of which would be paid
to the Managing Partner pursuant to the agreement among the General Partners).
The Managing Partner has estimated that, for federal income tax
purposes, taxable Unitholders will have ordinary income of approximately $114
per Unit and Section 1231 gain of approximately $196 per Unit, and tax-exempt
investors will have an ordinary loss of approximately $50 per Unit and no
Section 1231 gain, for the Partnership's 1995 tax year. Additionally, the
Unitholders may recognize gain or loss upon liquidation of the Partnership, as
discussed in "Certain Federal Income Tax Considerations." Furthermore, upon a
sale of the Properties and the liquidation of the Partnership, the Unitholders
may, as described in "Certain Federal Income Tax Considerations," be able to
deduct for federal income tax purposes their allocable share of any "passive
activity losses" generated by the Partnership to the extent that the Unitholders
otherwise have not been able to deduct such losses. Since the inception of the
Partnership through December 31, 1994, the Partnership has allocated to taxable
Unitholders approximately $71 per Unit of net losses and $61 per Unit of capital
gain, which gain was passed through to the taxable Unitholders in 1990. Such
gain or loss would be "passive activity gain or loss" for Unitholders who have
not materially participated in the activity in which the Partnership is engaged.
The actual amount of income, gain and loss to be recognized by the Unitholders
upon sale of the Properties and liquidation of the Partnership will depend upon
the actual facts relating to the sale of the Properties and upon each
Unitholder's personal tax situation.
For the period from inception of the Partnership through August 15,
1995, cash distributions from operations have totalled approximately
$13,424,698. The sum of the $448.58 per Unit distributions from operations since
the inception of the Partnership (based on the weighted number of Units
outstanding over the life of the Partnership) and the estimated distribution of
Proceeds of Sale and upon liquidation of approximately $714 per Unit will exceed
by approximately $162 the original $1,000 investment per Unit paid by each
initial Unitholder. Each initial Unitholder will have received a total
-15-
<PAGE> 17
return of approximately 16.25% in excess of the original $1,000 investment on a
pre-tax basis (from the date the initial offering closed in July 1988.)
No distributions from operations for the second quarter of 1995 have
been made. The second quarter distribution will be delayed pending the outcome
of the vote on the Transaction. If the vote of the Unitholders is in favor of
the Transaction, the second quarter distribution from operations will be made
with the distribution of Proceeds of Sale. If the Transaction fails to gain a
Majority Vote, the second quarter distribution will be made within 15 days
following the Consent Date.
CONFLICTS OF INTEREST
This Transaction is subject to various conflicts of interest arising
out of the relationship among the Partnership, the General Partners and
affiliates of the General Partners. These conflicts include the following:
MANAGING PARTNER'S CONTINUING INTEREST IN THE PROPERTIES. Concurrent
with the sale of the Properties to Purchaser, Purchaser will lease the
Properties to the Managing Partner or one of its wholly-owned subsidiaries. The
Managing Partner will thus succeed the Partnership as the operator of the
Properties, will receive all of the revenue from operating the Properties and
will pay rent to Purchaser. The Managing Partner currently receives 5% of gross
revenues from operations of the Properties ("Property Management Fee") pursuant
to the Limited Partnership Agreement. In addition, the Managing Partner receives
a Partnership Management Fee of 10% of cash flow before distribution. In 1994,
1993 and 1992, the Managing Partner received $387,862, $359,267 and $353,384,
respectively, for managing the Properties, and $212,238, $212,789 and $206,029,
respectively, for managing the Partnership. If the Transaction is approved, the
Managing Partner will continue to operate the Properties and may make a profit
in doing so. However, the Managing Partner will no longer receive either a
Partnership Management Fee or a Property Management Fee once the Properties are
sold (as there will be no further cash from operations) and the Partnership is
dissolved.
DISTRIBUTION TO MANAGING PARTNER UPON SALE AND LIQUIDATION. By
agreement of the General Partners, the Managing Partner will receive all of the
Proceeds of Sale and liquidating distribution payable to the General Partners
upon the sale of the Properties and dissolution of the Partnership. See "The
Partnership." Under the terms of the Agreement this distribution would be
approximately $216,485 as illustrated by the example found in "Distribution of
the Proceeds of Sale."
NO INDEPENDENT REPRESENTATIVE FOR UNITHOLDERS. No independent
representative has been engaged to represent the interests of the Unitholders.
The Managing Partner negotiated the Purchase Price and structured the Agreement
on behalf of the Partnership. In recognition of this fact, the Partnership has
obtained Appraisals of the Properties and a Fairness Opinion from independent
third parties. See "Fairness Opinion" and Appendix B, as well as "Information
Concerning Property Appraisals."
INCENTIVE DISTRIBUTION TO GENERAL PARTNERS UPON SALE. Under the terms
of the Partnership Agreement, the General Partners could be entitled to receive
an incentive distribution from the Proceeds of Sale if certain requirements were
met. Because those requirements will not be satisfied by the Transaction, no
incentive distribution will be made to the General Partners and approximately
99% of the Proceeds of Sale (after selling expenses, closing costs and
reasonable reserves) will be allocated and distributed to the Unitholders.
-16-
<PAGE> 18
SUMMARY OF PURCHASE AGREEMENT
THE DESCRIPTION OF THE TERMS OF THE AGREEMENT OF PURCHASE AND SALE AND
RELATED DOCUMENTS SET FORTH BELOW DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY, AND MADE SUBJECT TO, THE MORE COMPLETE AND
DETAILED INFORMATION SET FORTH IN THE AGREEMENT OF PURCHASE AND SALE DATED AS OF
JUNE 28, 1995, THE FORM OF WHICH IS ATTACHED AS APPENDIX A.
SUMMARY OF TERMS. Purchaser has agreed, subject to the terms and
conditions set forth in the Agreement, to purchase the Properties for
$22,700,000. The Properties will be leased back to the Managing Partner on the
terms described in "Lease Agreement" below. See "Conflicts of Interest." The
Transaction is conditioned on, among other things, approval by a majority in
interest of the Unitholders and by Purchaser's board of directors. The target
date for closing the purchase of the Properties is on or about October 15, 1995.
TERMS OF THE PURCHASE AND SALE AGREEMENT. Subject to the terms of
conditions of the Agreement, Purchaser has agreed to purchase the Properties,
including the land and all rights, titles and appurtenant interests, the
improvements, the fixtures, the personal property and certain intangible
property, for the Purchase Price of $22,700,000. The Purchase Price is allocated
among the four Properties according to their appraised fair market values: Maria
del Sol, $4,125,000; Rancho Park Villa, $5,250,000; Tamalpais Creek, $6,125,000;
and Villa Bonita, $7,200,000. One of the major terms and conditions is that the
Managing Partner lease the Properties from Purchaser concurrent with the close
of escrow for the sale of the Properties. The terms of the leases are more fully
described below under "Summary of Purchase Agreement -- Lease Terms."
CONDITIONS TO PURCHASER'S PERFORMANCE. Purchaser's obligation to
purchase the Properties is conditioned upon, among other things, the absence of
any destruction of or damage or loss from any cause whatsoever, with respect to
the Properties, which according to Purchaser's reasonable estimate, would cost,
on a per Property basis, more than $100,000 to repair, restore and replace or
would take longer than 60 days to repair, restore and replace. In addition,
Purchaser must approve: an inspection of the Properties with respect to the
physical condition thereof; an environmental assessment of the Properties;
structural, mechanical and engineering reports concerning the Properties;
evidence of compliance with all building codes, zoning ordinances and other
governmental entitlements as necessary for the operation of the Properties of
assisted living facilities; and all consents necessary or required by Purchaser
in connection with the transfer of any intangible property to Purchaser.
Finally, Purchaser must review and approve the terms and conditions of the lease
agreements with the facility residents. Purchaser has the right to waive any of
the conditions discussed herein.
CLOSING DATE. The closing date ("Closing Date") established in the
Agreement is September 30, 1995. However, either party may extend the Closing
Date to October 15, 1995 in the event the closing cannot occur prior to
September 30, 1995. In the event that the Transaction cannot be consummated on
or before October 15, 1995, either party may terminate the Agreement and the
obligations of the parties thereunder; provided, however, that such termination
shall not release any party from liability for any breach of the Agreement
occurring prior to such termination. Since the consent of the Unitholders to the
Transaction cannot be obtained until on or about October 2, the Partnership will
extend the Closing Date to October 15, 1995. The Managing Partner believes
Purchaser will agree to an additional brief extension of the Closing Date if
necessary to obtain the consent of the Unitholders.
CLOSING COSTS. The Partnership is required to pay: all state, municipal
and other documentary, transfer, sales, or use taxes in connection with the
Transaction; all expenses of or related to the issuance of a title policy in
favor of Purchaser (excluding the costs of any surveys required by Purchaser and
the title company issuing the title policy); all escrow fees and charges; all
recording and filing fees; the Partnership's legal, accounting and other
professional fees and expenses; and the cost of all instruments and documents
required to be delivered by the Partnership. Purchaser is required to pay all
costs of any
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<PAGE> 19
site inspections or environmental audits relating to the Properties; the costs
of any surveys required by Purchaser and the title company; and Purchaser's
legal, accounting and other professional fees and expenses, and the costs of all
instruments and documents required to be delivered by Purchaser under the
Agreement. All existing encumbrances are required to be paid by the Partnership.
All prorations to be made with respect to the income and expenses of the
Properties are required to be made between the Partnership (as seller), and the
Managing Partner (as the tenant following the sale of the Properties). Purchaser
shall have no obligations or liability with respect to any such income or
expenses.
REPRESENTATIONS AND WARRANTIES.
Partnership Representations and Warranties. The Partnership must make
certain representations and warranties to Purchaser, including the following.
Purchaser will acquire good, marketable and insurable title to the Properties,
free and clear of any and all leases, liens, encumbrances or other liabilities
subject only to specific exceptions and the resident leases approved by
Purchaser. To the best of the Partnership's knowledge after due inquiry, the
Properties have available to their boundaries adequate utilities; the Properties
have been constructed in good, workman-like and substantial manner, free from
material defects and in accordance with all laws; neither the zoning nor any
other right to construct upon or to use the Properties is to any extent
dependent upon or related to any real estate other than the Properties, the
improvement of such other real estate or the payment of any fees for the
improvement of such other real estate; the Properties, and each portion thereof,
are in good condition and repair and are free from material defects; there are
no soil conditions adversely affecting the Properties; there are and have been
no hazardous materials installed or stored in or otherwise existing at, on, in
or under the Properties; the Partnership has obtained all necessary consents,
approvals, licenses, permits and other permissions as are required for the use
and operation of the Properties.
Additional Partnership representations and warranties include the
following. To the best of the Partnership's knowledge after due inquiry, the
Properties are properly and fully zoned for their current use and comply with
all applicable laws; the Partnership has received no notices of non-compliance
concerning the operation or use of the Properties for assisted living
facilities, nor have any investigations been commenced or are contemplated, and
nor are there any unsatisfied requests for repairs, restorations or alterations
with regard to the Properties. The Partnership is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
California, and the Partnership has the power and authority to enter into the
Agreement and all agreements, instruments and documents required to consummate
the transactions contemplated by the Agreement. The Managing Partner is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of California, and the Managing Partner has the power and
authority to enter into all agreements, instruments and documents required to
consummate the transactions contemplated under the Agreement.
The Partnership is required to make the following representations and
warranties as well. The Agreement and all other agreements, instruments and
documents required to be executed by the Partnership and/or the Managing Partner
have been, or will be on the Closing Date, duly authorized, executed and
delivered by, and are binding in accordance with their terms upon, the
Partnership or the Managing Partner, as applicable. To the best of the
Partnership's knowledge after due inquiry, all documents, plans, surveys and
other data or information prepared by parties other than the Partnership or its
agents or employees and provided to Purchaser in connection with the Agreement
are true, correct and complete in all material respects and disclose all
material facts with no material omissions with respect thereto, and all
documents and other data or information prepared by the Partnership or its
agents or employees are true, correct and complete in all material respects with
no material omissions with respect thereto. There are no material agreements or
understandings to which the Partnership or the Managing Partner is a party or is
bound relating to the Properties or the operation or use thereof other than
title exceptions approved by Purchaser and those documents and instruments which
have been delivered to Purchaser by the Partnership and the Managing Partner
prior to the Closing Date. The
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<PAGE> 20
Partnership is not in default with respect to any of its material obligations or
liabilities pertaining to the Properties. Finally, to the best of the
Partnership's knowledge after due inquiry, there are no material actions, suits
or proceedings pending or threatened against or affecting the Partnership, the
Managing Partner, or the Properties or any portion thereof.
Purchaser Representations and Warranties. Purchaser shall represent and
warrant to the Partnership that the Agreement and all agreements, instruments
and documents provided under the Agreement to be executed by Purchaser on the
Closing Date will be duly authorized, executed and delivered by and are binding
upon Purchaser; that Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland and duly authorized
and qualified to do all things required under the Agreement; and that Purchaser
has the authority to enter into the Agreement and consummate the transactions
therein provided and nothing prohibits or restricts the right or ability of
Purchaser to close the transactions contemplated thereunder and to carry out the
terms thereof.
INDEMNIFICATION.
Indemnification of Purchaser by the Partnership. The Partnership shall
hold harmless, indemnify and defend Purchaser and the Properties from any claim
that (i) is inconsistent with any representation or warranty of the Partnership
contained in the Agreement or any related document; (ii) results from any breach
or default by the Partnership under the Agreement; or (iii) arises out of the
negligent or intentional act or omission of the Partnership, to the extent such
claim arises out of such negligent or intentional act or omission. Nothing in
the Agreement may be construed or shall be construed to relieve the Partnership
of any liability which the Partnership may have to Purchaser under any laws
relating to hazardous materials. Purchaser shall specifically acknowledge that
the Proceeds of Sale will be distributed to the Unitholders and that the
Partnership will be dissolved shortly after the Closing Date. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT, FOLLOWING SUCH DISTRIBUTION AND DISSOLUTION OF THE
PARTNERSHIP, THE INDIVIDUAL UNITHOLDERS WILL NOT BE HELD LIABLE FOR ANY BREACH
OF THE AGREEMENT OR ANY RELATED AGREEMENTS, BUT THAT PURCHASER WILL LOOK SOLELY
TO THE MANAGING PARTNER FOR ANY RECOURSE.
Indemnification of the Partnership by Purchaser. Purchaser shall hold
harmless, indemnify and defend the Partnership and the Properties from any claim
that (i) is inconsistent with any representation or warranty of Purchaser
contained in the Agreement or any related document; (ii) results from any breach
or default by Purchaser under the Agreement; or (iii) arises out the negligent
or intentional act or omission of Purchaser, to the extent such claim arises out
of such negligent or intentional act or omission.
APPROVAL OF THE AGREEMENT. Consummation of the Agreement is
specifically conditioned upon the approval of a majority in interest of the
Unitholders for the Partnership, and approval of the Board of Directors of
Purchaser of the terms set forth in the Agreement and all related documentation.
LEASE AGREEMENT. As a condition to the sale of the Properties, a Lease
and Security Agreement is required to be entered into by and between Purchaser
and the Managing Partner for each of the Properties. Because the lease
agreements will not be prepared until after the Transaction is approved (see
"Approval of the Agreement" above), a form of lease is not attached.
Nonetheless, the terms expected to be contained in the lease agreements are
summarized as follows.
Neither the Partnership nor any Unitholder (other than the Managing
Partner) will be a party to the lease agreements. The obligations and benefits
of such lease agreements will solely be for the Managing Partner.
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<PAGE> 21
Term. The initial term of each Lease will be for 12 years ("Initial
Term") with the right of the Managing Partner to renew the leases for three
additional ten-year terms. However, renewal of the leases for the Properties is
dependent not only upon renewal of each lease for the four Properties hereunder,
but also of all other leases between Purchaser and the Managing Partner
(currently there are nine such leases).
Rent. The Minimum Rent during the Initial Term for each Property will
be equal to the product of that portion of the Purchase Price allocated to each
Property and the rate equal to the average of (i) 395 basis points over
Purchaser's 20-trading day average dividend yield, and (ii) 360 basis points
over the 20-trading day average 10-year Treasury yield. Provided, however, that
in no event will the Minimum Rent rate be less than 9.5% or more than 11.5% of
that portion of the Purchase Price allocated to each Property. The Minimum Rent
will be established as of the Closing Date. As of June 12, 1995, the rate is
10.32%. Based thereon, Minimum Rent for the Initial Term of all four Properties
would be $2,342,640 per year, or $195,220 per month. In addition, Additional
Rent is payable on a quarterly basis in arrears which is equal to, in the second
lease year, 10%; in the third lease year, 15%; and in all lease years
thereafter, including any renewal term, 20% of the amount by which gross
revenues for the lease year through the applicable quarter exceed the prorated
gross revenues for the applicable portion of the first lease year. The total of
the Minimum Rent and the Additional Rent due during any lease year shall not
increase from one lease year to the next by an amount in excess of the sum of
(i) the applicable percentages set forth below, multiplied by (ii) the sum of
the Minimum Rent and the Additional Rent due during the immediately preceding
lease year.
<TABLE>
<CAPTION>
INCREASE FROM TO APPLICABLE PERCENTAGE
<S> <C> <C>
First Lease Year Second Lease Year 5.0%
Second Lease Year Third Lease Year 5.0%
Third Lease Year Fourth Lease Year 5.5%
Fourth Lease Year Fifth Lease Year 6.0%
Fifth Lease Year Sixth Lease Year 5.5%
Sixth Lease Year Seventh Lease Year 5.0%
Each Lease Year Thereafter 5.0%
</TABLE>
The total of the Minimum Rent and the Additional Rent due during each
lease year is required to increase from one lease year to the next by an amount
at least equal to one percent. To the extent that the formula included in the
table above operates to limit rent for any lease year, the amount of rent which
would have otherwise been paid or payable by the Managing Partner will be
carried forward on an accumulative basis and will be paid by the Managing
Partner to Purchaser in any subsequent lease year (other than the first lease
year of the a renewal term) in which the total of the Minimum Rent and
Additional Rent is less than 105% of the total of the Minimum Rent and
Additional Rent for the then immediately preceding lease year.
The Minimum Rent for each renewal term will be equal to the product of
the fair market value of the Properties on the date of the Managing Partner's
notice of exercise of its option to renew the leases and a percentage equal to
350 basis points over the ten-year treasury rate in effect of such notice. If
Purchaser and the Managing Partner are unable to agree on the fair market value
of the Properties for the purposes of this calculation, such fair market value
shall be established by an appraisal process. Additional Rent for each renewal
term shall also be payable, and shall be calculated as provided above.
Net Lease. The lease is an absolute net lease, and all rent payments
shall be absolutely net to Purchaser free of taxes, assessments, utility
charges, operating expenses, furnishings, insurance premiums or any other charge
or expense in connection with the Properties.
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<PAGE> 22
Use and Put Provision. The Managing Partner is required to continually
use and occupy the Properties during the term of the leases solely as assisted
living facilities/independent living facilities. If the Managing Partner fails
to comply, or if any material license relating to the operating of the
Properties is revoked, suspended or materially limited, Purchaser shall have the
right to put the Properties so affected to the Managing Partner. If Purchaser
exercises such put right, the Managing Partner must purchase the Property from
Purchaser for a cash price equal to the greater of the original Purchase Price
allocated to such Property as increased or decreased pursuant to the terms of
the Lease, or the fair market value of the Property on the date of Purchaser's
notice of exercise.
Security Deposit. On the Closing Date, the Managing Partner must
deliver to Purchaser cash in an amount equal to three months' Minimum Rent
($585,660 if the Minimum Rent is equal to 10.32% times the Purchase Price), and
a promissory note in the same amount, representing a total of six months'
Minimum Rent ($1,171,320 if the Minimum Rent is equal to 10.32% times the
Purchase Price) as a security deposit against the faithful performance of the
terms and conditions contained in the lease. The promissory note will be payable
in full within 90 days, and must be personally guaranteed by Gary L. Davidson,
John A. Booty and David P. Collins, the Chairman of the Board, President and
Senior Vice President, respectively, of the Managing Partner. The Managing
Partner shall have the right to replace the security deposit with a letter of
credit. Interest on any cash security deposit will be paid by Purchaser to the
Managing Partner on a quarterly basis in arrears.
Hazardous Materials. The Managing Partner's continuing use of the
Properties must comply with all hazardous materials laws. In the event hazardous
materials are discovered on any of the Properties in violation of any hazardous
materials law, the term of the lease is automatically extended and the lease
shall remain in full force and effect until the earlier to occur of completion
of all remedial action or monitoring, as approved by Purchaser, or the date
specified in a written notice from Purchaser to the Managing Partner terminating
the lease.
Assignment and Subletting. The Managing Partner is not permitted to
assign, mortgage, encumber or hypothecate the Lease or any interest therein or
sublet any of the Properties or any part thereof, without the prior written
consent of Purchaser, which may be withheld at Purchaser's sole discretion. The
term "assignment" of the lease includes a change in management of the
Properties.
Indemnification. The Managing Partner agrees to indemnify and save
harmless Purchaser, its directors, officers, shareholders, agents and employees
from and against any and all foreseeable or unforeseeable liability, damage or
claims, including reasonable attorneys' fees, on account of any matter or thing,
action or failure to act arising out of or in connection with the lease, the
Properties, or the operations of the Managing Partner on the Properties,
including all environmental activities, all hazardous materials claims, or any
violation by the Managing Partner of a hazardous materials law with respect to
any of the Properties.
INFORMATION CONCERNING PROPERTY APPRAISALS
REAL ESTATE APPRAISALS. Senior Living Valuation Services, Inc. was
engaged by the Partnership to appraise the Properties and has prepared and
delivered written reports of its analysis and appraisal, based upon the review,
analysis, scope and limitations described therein, as to the fair market value
of the Partnership's properties as of June 1995(2). The Partnership selected the
Appraiser to provide the
-----------------
(2) The Appraisals have different dates: Maria Del Sol, Rancho Park
Villa and Villa Bonita were appraised as of June 9, 1995; Tamalpais Creek was
appraised as of June 13, 1995. Collectively, the Appraisals are referred to as
being dated as of June, 1995. Copies of the summaries of each of the Appraisals
are attached as Appendix C, Property Appraisal Summaries.
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<PAGE> 23
Appraisals because of its experience and reputation in connection with
appraising assisted living retirement properties and its familiarity with the
Properties. The Managing Partner believes that Michael Boehm, MAI, President of
the Appraiser, is recognized as a leading authority on senior living properties.
Mr. Boehm is a frequent speaker and contributor of published materials on the
subject. Executive summaries of the Appraisals prepared by the Appraiser, which
contain a description of the assumptions and qualifications made, matters
considered and limitations on the review and analysis, are set forth in Appendix
C and should be read in their entirety. The complete Appraisals are available
for review at the offices of the Managing Partner or by requesting a copy by
writing to the Managing Partner. Certain of the material assumptions,
qualifications and limitations to the Appraisals are described below.
SUMMARY OF METHODOLOGY. At the request of the Partnership, the
Appraiser was engaged to inspect and appraise each of the Partnership's
properties in conformity with the Uniform Standards of Professional Appraisal
Practice and to estimate the fair market value of the Partnership's portfolio as
of June 1995. The Partnership placed no restriction or limitations on the
Appraisals, the scope of review and analysis, or the methodologies employed by
the Appraiser to determine the fair market value of the Properties. The
Appraiser had complete and unrestricted access to all information pertinent to
its valuation.
Valuation Approaches Utilized. In appraising the properties, all three
commonly recognized approaches to valuation were considered and utilized by the
Appraiser: the cost approach, the income approach and the sales comparison
approach. The type and age of a property, market conditions and the quantity and
quality of data affect the applicability of each approach in a specific
appraisal situation.
The "Income Approach" estimates a property's capacity to produce income
through an analysis of the rental market, operating expenses and net income. Net
income may then be processed into a value estimate through either (or a
combination) of two methods: direct capitalization or discounted cash flow
analysis.
The "Sales Comparison Approach" is based on the comparison of the
property to be appraised to the actual sales prices of recently sold comparable
properties. The underlying concept of the Sales Comparison Approach is that a
knowledgeable buyer will pay no more for a property than what other buyers
recently paid for properties of similar size, amenities and utility. The Sales
Comparison Approach is based on the actual behavior of buyers and sellers in the
market under normal conditions. However, this approach to property appraisal is
difficult to apply precisely when appraising a special purpose property for
which there are few or no comparables or where very few sales have occurred
recently in the marketplace.
The "Cost Approach" is based on the principal that a property's value
reflects the value of the land plus the value of the depreciated improvements on
the land. The Cost Approach method of valuation generally consists of five
steps, including: valuation of the land as if it were vacant; estimation of the
replacement costs of the improvements as new construction based on current
prices for labor and materials; estimation of accrued depreciation on the
existing improvements due to physical age and deterioration, functional
obsolescence and economic or locational obsolescence; deduction of the estimated
depreciation from the estimated replacement costs to determine the depreciated
value of the building and other improvements; and the summation of the
depreciated value of the building and improvements with the land value to
determine the estimated present depreciated value of the land, building and
improvements.
The Appraiser then reconciles the values arrived at through the methods
used to estimate the fair market value of the property. This is done by giving
greatest weight to the method or methods used which, under the specific facts
and circumstances of the subject property, is or are considered most likely to
reflect current fair market value.
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<PAGE> 24
Local Market Research and Property Review. In performing the Appraisals
the Appraiser analyzed the individual properties and conditions in local market
for each property. The Appraiser performed site inspections of each Property
during June 1995. During these site visits, the Appraiser inspected the physical
facilities, obtained current income, occupancy and resident census and rent roll
information, gathered information on competing properties, and interviewed each
local property administrator concerning performance of the subject property,
competitive conditions, area trends and other factors. Such inquiries included
ascertaining for each individual property any deferred maintenance, capital
budget issues, status of on-going or planned improvements, licensing issues and
other factors affecting the property. The Appraiser's analysis also included,
among other things: (a) reviewing each property's previous four years' operating
statements; (b) reviewing information submitted to the Appraiser by the
Partnership which included rental and occupancy data, subject facility
descriptions, area trends and other factors; (c) developing information from a
variety of sources about market conditions for each individual property that
included population, employment and housing trends within the neighborhood; (d)
considering income and expense data for comparable facilities; (e) considering
supply/demand conditions for assisted living facilities in each local market
based on identification and surveys of competing properties and market
saturation analyses; and (f) contacting local and state authorities to determine
tax rates, zoning, any planned development of competing properties, and
licensing of the subject and competing properties.
To determine any significant differences in quality among the various
properties in each local market, the Appraiser considered such variables as
property income growth patterns and potential, quality of location and
construction, tenant appeal, property appearance, security and potential
competition, and assisted living services and utilization.
The Appraiser also interviewed management personnel responsible for the
Partnership's properties to discuss competitive conditions, area economic trends
and industry trends affecting the properties, historical and budgeted operating
revenues and expenses, business and marketing plans for each of the Properties,
occupancy rates, and assisted living services utilization. These interviews
included ascertaining information on items of deferred maintenance, planned
capital improvements and other factors affecting the physical condition of the
properties.
The Appraiser also evaluated each Property's highest and best use both
as currently improved and as vacant. In each instance the highest and best use,
as improved, of the Properties was their continued use as assisted living
retirement properties.
Other Market Research. To define the occupancy, income and expense, and
valuation parameters to be used in developing income and cash flow projections
and valuations, the Appraiser reviewed the acquisition criteria and projection
parameters in use in the marketplace by major investors, owners, operators,
appraisers and financing sources for assisted living facilities. To obtain such
data, the Appraiser conducted a survey of approximately 300 owners, operators,
appraisers and brokers of senior housing during April 1995. In addition, the
Appraiser reviewed other published information concerning acquisition and
financing criteria in use by property investors and lenders during the second
quarter of 1995. Further, the Appraiser screened tax records and interviewed
various sources in local markets to identify sales of retirement housing
properties within the past 24 months in order to derive certain valuation
indicators. Sources for data concerning such transactions included appraisers,
property owners, real estate brokers, tax assessors and others. The Appraiser
has reviewed information compiled by the Managing Partner identifying sales and
acquisitions of retirement housing properties.
Property Valuations. The Appraiser then determined the value of each
Property in the portfolio, utilizing and reconciling the three approaches to
valuation.
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<PAGE> 25
In applying the "Income Approach," the Appraiser estimated each
property's income and expenses for the 12-month period ending June 30, 1996(3)
after reviewing historical and budgeted operating results, discussions with
property management and other pertinent information. The Appraiser estimated
each property's income for the 12-month period ending June 30, 19963 based upon
the review of current rent rolls, an analysis of historical and budgeted income
from rents, assisted living and ancillary sources, surveys of comparable
properties and consideration of competitive conditions in local markets.
Expenses were estimated based on historical and budgeted operating expenses,
certain industry expense guidelines, and expenses incurred by comparable
properties. Estimated expenses were then deducted from income to arrive at each
Property's estimated net operating income. Expenses relating solely to corporate
overhead, partnership administration, and investor reporting and accounting were
excluded.
The Appraiser then employed a direct capitalization analysis to
determine the value of each property. The direct capitalization rates used by
the Appraiser were based on current acquisition criteria among investors, rates
reflected in specific sales transactions, and required yields for debt and
equity financing sources for similar properties. Where appropriate, the
capitalization rate used for an individual property was adjusted to reflect
valuation factors unique to the property and local market conditions.
In applying the "Sales Comparison Approach," The Appraiser investigated
and analyzed the sale of similar senior housing projects to the Partnership
Properties within California during the last 24 months. These sales were
analyzed as to their conditions of sale, location, age and condition,
competitive market position, occupancy and net income producing ability. From
this analysis, comparative capitalization rates were estimated. Each of the
comparable sales was adjusted for differences in occupancy and net income
producing ability.
In applying the "Cost Approach," the Appraiser estimated the value of
each of the Partnership Property sites through comparison and adjustment of
recent comparable vacant land sales in each location. To estimate the
replacement cost new of each of the Partnership Properties, including furniture
and equipment, the Marshall Valuation Service, a nationally recognized cost
manual, was utilized and compared to the specific building costs of recently
constructed comparable properties. To these estimates, adjustments were made for
indirect costs and entrepreneurial profit to arrive at an estimated total
replacement cost new at the appraisal date for each of the Partnership
Properties. Deductions for depreciation were made considering each Property's
age, condition, and highest and best use.
The Appraiser reconciled the values indicated from the cost, sales
comparison and income approach to arrive at a final valuation conclusion. The
Appraiser gave primary emphasis to the income approach, an emphasis deemed
appropriate based on acquisition criteria currently employed in the retirement
housing market.
CONCLUSIONS AS TO VALUE. Based on the valuation methodology described
above, the Appraiser determined the market value of the Partnership's Properties
to be as follows:
<TABLE>
<S> <C>
Maria del Sol $ 4,125,000
Rancho Park Villa $ 5,250,000
Tamalpais Creek $ 6,125,000
Villa Bonita $ 7,200,000
-----------
Total Portfolio Value $22,700,000
===========
</TABLE>
-------------------------
(3) For Maria Del Sol, an additional period ending June, 1997 was
added.
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<PAGE> 26
ASSUMPTIONS, LIMITATIONS, AND QUALIFICATION OF THE APPRAISALS. The
Appraisals reflect the Appraiser's valuation of the Partnership's real estate
assets as of June 1995 in the context of the information available on such date.
Events occurring after June 1995 and before the closing of the Transaction could
affect the Properties or assumptions used in preparing the Appraisals. The
Appraiser has no obligation to update the Appraisals on the basis of subsequent
events; however, the Appraiser has informed the Partnership that, as of the date
of this Consent Solicitation Statement, the Appraiser is not aware of any event
or change in conditions that may have caused a material change in the value of
the Partnership's portfolio of real estate since that date.
In appraising the Properties, the Appraiser made certain standard
assumptions and operated under standard limiting conditions which are listed in
the Appraisals. Included in those limiting conditions was the fact that, for all
of the Properties except Villa Bonita, the Appraiser had not been given current
title reports on the Properties. The Managing Partner has received current title
reports and has compared them to the title reports provided to the Appraiser.
There are no differences of a material nature between the title reports utilized
by the Appraiser and the current title reports. Regarding Villa Bonita, a
current title report has been obtained by the Managing Partner and the Managing
Partner does not believe that there are any exceptions to title which would
cause the Appraiser to modify the appraised fair market value. In addition, the
Appraiser noted that each Property is licensed as a residential care facility
for the elderly (assisted living) with the California Department of Social
Services. The Appraiser assumes that the Properties meet all physical plant and
operating requirements as assisted living facility.
Finally, the estimates of market value set forth in the Appraisals are
partially based on current rent rolls, historical operating statements and
limited building drawings and building statistical data provided by the Managing
Partner.
COMPENSATION AND MATERIAL RELATIONSHIPS. The Partnership will pay a fee
of $16,000 to the Appraiser for preparing the Appraisals, which fee will
reimburse the Appraiser for all related out-of-pocket expenses. The Appraiser is
also entitled to indemnification against certain liabilities by the Partnership.
The fee was negotiated with the Appraiser by the Managing Partner on behalf of
the Partnership and payment is not dependent upon completion of the Transaction.
The Appraiser has previously prepared appraisals for the Partnership, the
Managing Partner and its affiliates, and is expected to continue to prepare such
appraisals.
FAIRNESS OPINION
Robert A. Stanger & Co., Inc. ("Stanger") was engaged by the
Partnership to conduct an analysis and to render its opinion (the "Fairness
Opinion") as to whether the consideration to be received by the Partnership in
connection with the proposed sale of the Properties is fair, from a financial
point of view, to the Limited Partners. The Partnership selected Stanger to
perform the analysis and render the Fairness Opinion because of Stanger's
experience and reputation in connection with the valuation of real estate and
limited partnership units and rendering fairness opinions.
The full text of the Fairness Opinion, which contains a description of
the matters considered and the assumptions, limitations and qualifications made,
is set forth in Appendix B and should be read in its entirety. The summary set
forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
EXPERIENCE OF STANGER. Stanger and its affiliates, founded in 1978,
provide information, research, investment banking and consulting services to
clients throughout the United States, including major New York Stock Exchange
member firms, insurance companies and companies engaged in the
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<PAGE> 27
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory services,
asset and securities valuations, industry and company research and analysis,
litigation support and expert witness services, and due diligence investigations
in connection with both publicly registered and privately placed securities
transactions.
Stanger, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their assets and securities in
connection with mergers, acquisitions, and reorganizations, and for estate, tax,
corporate and other purposes. Stanger's valuation practice principally involves
partnerships, partnership securities and the assets typically held by
partnerships, such as real estate, oil and gas reserves, cable television
systems and equipment leasing assets. Stanger was selected because of its
experience and national reputation in connection with real estate investment
trusts, partnerships, real estate assets and mergers and acquisitions.
SUMMARY OF MATERIALS CONSIDERED. In the course of the analysis to
render the Fairness Opinion, Stanger reviewed, among other things (i) historical
operating statements for each of the Properties for the years ended December 31,
1992, 1993 and 1994, and the six months ended June 30, 1995, including income
and expense components, capital expenditures, and occupancies; (ii) the 1995
operating budgets and ten-year projections prepared by management for each of
the Properties and the Partnership; (iii) information concerning each Property,
including its location, number of units, amenities and services, age, and land
acreage; (iv) information on real estate and market conditions in the market
area of each Property; (v) recent surveys of buyer's acquisition criteria for
income-producing properties similar to the Properties and data on sales
transactions involving similar properties; (vi) the Appraisals prepared by the
Appraiser for each of the Properties; (vii) summaries of the terms of the sale
of the Properties and the leaseback of such properties to the Managing Partner;
(viii) the preliminary Consent Solicitation Statement relating to the
Transaction; and (ix) the annual reports on Form 10-K for the Partnership for
the years ending December 31, 1992, 1993, and 1994, and the Partnership's
quarterly report on Form 10-Q for the quarter ended June 30, 1995.
SUMMARY OF ANALYSIS. The following is a summary of certain reviews
performed by Stanger in connection with and in support of its fairness opinion.
The summary of the opinion and analysis of Stanger set forth in this Consent
Solicitation Statement is qualified in its entirety by reference to the full
text of such opinion.
In the course of its review, Stanger performed a site inspection of
each Property, observed certain competing properties in the market area of each
Property, and discussed with local property management personnel conditions in
the local market, market conditions for properties similar to the Property, and
the historical and budgeted operations of the Property.
Stanger also discussed with the Managing Partner the historical
operating statements, future prospects, operating expectations, current
valuation estimates and appraisals, and factors influencing the value of each of
the Properties, industry trends and outlook, conditions in the local markets,
market conditions for sales or acquisitions of properties of the type owned by
the Partnership, and the historical financial statements and budgeted and
projected operations of the Properties and the Partnership.
In preparing its opinion, Stanger relied upon the Appraisals of the
Partnership's Properties which were prepared as of June 1995 by the Appraiser,
an independent appraisal firm. Stanger reviewed the Appraisals rendered by the
Appraiser, and discussed with the Appraiser its experience and qualifications,
the appraisal methodologies utilized, the research conducted, the assumptions
and limitations of the Appraisals, and the appraisal results.
Stanger observed that the Appraisals were certified by a Member of the
Appraisal Institute and were conducted in conformity with the Uniform Standards
of Professional Appraisals Practice utilizing all three of the commonly used
valuation approaches: the Income Approach, the Sales Comparison
-26-
<PAGE> 28
Approach, and the Cost Approach. In addition, Stanger observed that in the
course of conducting the Appraisals, the Appraiser confirmed certain parameters
utilized based upon surveys conducted by the Appraiser of buyers, owners and
managers of assisted living properties and data collected by the Appraiser
relating to capitalization rates, net operating income per unit and prices paid
per unit for actual sales transactions in the marketplace for assisted living
retirement properties.
In addition, Stanger interviewed certain buyers, owners, managers and
financing sources of assisted living facilities to establish current market
conditions and parameters relating to acquisitions and sale/leasebacks of such
properties. Stanger also reviewed summaries of the terms of recent acquisitions
and leasebacks of assisted living facilities by the Managing Partner or
affiliates of the Managing Partner.
Stanger noted that discussions with buyers, owners and managers of
assisted living properties confirmed that the income approach to valuation, and
in particular the direct capitalization technique, is the primary method
employed by buyers in current markets. Stanger observed that target
capitalization rates cited by owners and managers of assisted living properties
generally range between 11% and 12.5% and that target capitalization rates cited
by respondents of the survey conducted by the Appraiser averaged 12.01%. In
addition, capitalization rates among 17 transactions tracked by the Appraiser
involving assisted living properties throughout the western United States during
1994 through June 1995 averaged 12.1%.
Stanger observed that the capitalization rates utilized in the
Appraisals and applied to stabilized operating results ranged among the
individual properties from 11.5% to 12% and that the overall effective
capitalization rate for the Partnership's portfolio of Properties averaged (i)
approximately 11.4% based on net operating income after reserves for recurring
replacements projected by the Appraiser to be generated during the twelve-month
period subsequent to the appraisal date; and (ii) approximately 10.3% based on
net operating income after reserves for recurring replacements generated during
the twelve-month period ending May 31, 1995.
Based on the reviews cited above, Stanger concluded that (i) the
Appraiser's primary reliance on the income method of valuation was reasonable
and consistent with the current practices of buyers of assisted living
properties; (ii) the fair market value of the Partnership's portfolio of
Properties as determined by the Appraisals appeared consistent with
capitalization rates utilized in the market for assisted living properties; and
(iii) the Purchase Price proposed to be paid for the Partnership's portfolio of
Properties, and therefore the consideration to be received by the Partnership in
connection with the proposed sale, equals such appraised fair market value of
the Partnership's portfolio of Properties.
CONCLUSIONS. Based on its analysis and subject to the assumptions,
limitations and qualifications contained in its opinion, Stanger concluded that,
as of the date of the opinion, the consideration to be received by the
Partnership in connection with the proposed sale of the portfolio of Properties
is fair, from a financial point of view, to the Unitholders.
ASSUMPTIONS. In rendering its opinion, Stanger relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information that were provided
or otherwise communicated to Stanger by the Partnership, the General Partners
and/or their affiliates or management of the Properties. Stanger did not perform
an independent appraisal of the Properties or other assets and liabilities of
the Partnership and relied upon and assumed the accuracy and completeness of the
Appraisals. Stanger also relied upon the assurances of the Partnership, the
General Partners and management of the Properties that any financial statements,
budgets, projections or value estimates contained in the Consent Solicitation
Statement or otherwise provided or communicated to Stanger were reasonably
prepared on bases consistent with actual historical experience and reflect the
best currently available estimates and good faith judgments; that no material
changes have occurred in the appraised values of the Properties or the
information reviewed
-27-
<PAGE> 29
between the date of the Appraisals or the date the other information was
provided and the date of Stanger's opinion; that the Partnership, the General
Partners and/or their affiliates, and the management of the Properties are not
aware of any information or facts that would cause the information supplied to
Stanger to be incomplete or misleading in any material respect; and that the
Transaction does not violate the terms of the Partnership Agreement or any
applicable federal or state laws.
In connection with preparing the fairness opinion, Stanger was not
engaged to, and consequently did not, prepare any written report or compendium
of its analysis for internal or external use beyond the analysis set forth in
Appendix B. Stanger does not intend to deliver any additional written summary of
the analysis.
LIMITATIONS AND QUALIFICATIONS. Stanger was not requested to, and
therefore did not: (i) select the method of determining the consideration
offered to the Partnership; (ii) make any recommendation to the Partnership or
its Partners with respect to whether to approve or reject the proposed
Transaction; or (iii) express any opinion as to (a) the tax consequences of the
proposed Transaction to the Unitholders, (b) the terms of the Partnership
Agreement or any agreements or contracts between the Partnership, the General
Partners and/or their affiliates, or the terms of the lease of the Properties to
the Managing Partner, (c) any adjustments made to determine net amounts
distributable to the Partners, including, but not limited to, balance sheet
adjustments and any expenses and fees associated with the proposed Transaction,
(d) the General Partners' business decision to effect the proposed Transaction
including, but not limited to, the decision not to solicit bids for the
Properties, or (e) alternatives to the proposed Transaction. Further, Stanger
did not express any opinion as to the fairness of any terms of the proposed
Transaction other than the consideration to be paid to the Partnership in
connection with the sale of the Properties. Stanger's opinion was based on
business, economic, real estate market, and other conditions as of the date of
its analysis and addresses the proposed sale of the Properties as currently
improved in the context of information available as of the date of its analysis.
Events occurring after such date and before the closing of the proposed
Transaction could affect the Properties or the assumptions used in preparing the
Fairness Opinion. Stanger has no obligation to update the Fairness Opinion on
the basis of subsequent events.
COMPENSATION AND MATERIAL RELATIONSHIPS. The Partnership has paid
Stanger a fee of $120,000 in connection with the Fairness Opinion. No portion of
the fee attributable to the Fairness Opinion was conditioned upon or subject to
the conclusion expressed therein. In addition, the Partnership will reimburse
Stanger for all reasonable out-of-pocket expenses up to $10,000, including legal
fees, and the Partnership and the Managing Partner have agreed to indemnify
Stanger against certain liabilities, including certain liabilities under the
federal securities laws, arising out of Stanger's preparation and delivery of
the Fairness Opinion. During the past two years, no other fees or compensation
has been paid to Stanger by the Partnership or its affiliates.
No party other than Stanger was contacted to render an opinion as to
the fairness of the consideration to be received by the Partnership in
connection with the proposed sale of the Properties, and the Partnership and the
General Partners neither requested nor received any review, preliminary or
otherwise, from any party other than Stanger regarding the fairness of the
consideration to be received by the Partnership in connection with the proposed
sale of the Properties.
THE PROPERTIES
RCFE/AL FACILITIES. Housing alternatives for healthy senior citizens
include residing in his or her own home or apartment, with a relative or friend,
in a boarding house, or in a retirement facility. RCFE/AL facilities like those
owned by the Partnership are intended for the senior citizen who wishes to rent
a private room or suite in a facility that provides food service, housekeeping
and other amenities that ease the daily burdens of such tasks as shopping,
cooking and cleaning. Residents rent on a month-
-28-
<PAGE> 30
to-month basis and for one monthly rate receive all meals, mail service, linens
and laundry. The staff provides services and security on a 24-hour basis. In
addition, certain services ("Assisted Living") are provided to residents in need
of additional care such as bathing and grooming and assisting with the self
administration of medication. Higher monthly rents are charged for such Assisted
Living services. Medical treatment is not provided, however.
The Partnership's Properties are managed by the Managing Partner. The
four facilities employed a combined total of approximately 150 employees as of
August 15, 1995.
Each of the Partnership's four facilities was designed to fit in its
particular site and marketplace but share many common features. Each facility
devotes approximately 40% of its space to common areas such as recreation rooms,
dining rooms, hallways, and kitchen facilities. The kitchens are fully equipped
to serve three meals a day and snacks to all residents. Individual rooms consist
of a suite containing a bathroom and sleeping and sitting area. The buildings
are set in garden settings, including patios and other outdoor areas for
resident use.
The Partnership's Properties compete principally on the basis of rental
rate, location, quality of housing, food, recreational activities, and resident
assistance. Other RCFE/AL facilities and senior apartments (including those
owned or operated by the Managing Partner or its affiliates), mobile home parks,
conventional apartments and single family homes compete for residents.
HISTORICAL OCCUPANCY RATES OF THE PROPERTIES.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
PROPERTY DATE ACQUIRED/ AVERAGE AVERAGE AVERAGE OCCUPANCY
OPENED OCCUPANCY OCCUPANCY 1/1/95 THROUGH
1993 1994 8/15/95
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RANCHO PARK VILLA 10/87 81.74% 79.70% 78.22%
---------------------------------------------------------------------------------------------------
VILLA BONITA 1/89* 76.54% 86.83% 91.25%
---------------------------------------------------------------------------------------------------
MARIA DEL SOL 9/88 73.59% 74.82% 84.98%
---------------------------------------------------------------------------------------------------
TAMALPAIS CREEK 1/88 91.77% 98.27% 97.61%
---------------------------------------------------------------------------------------------------
</TABLE>
* The land for Villa Bonita was acquired in March, 1987. Following
construction, the facility opened to residents in January, 1989.
-29-
<PAGE> 31
HISTORICAL MONTHLY RENTAL RATES OF THE PROPERTIES.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
PROPERTY AVG. MONTHLY RENTAL RATE AVG. MONTHLY RENTAL AVG. MONTHLY RENTAL RATE
PER RESIDENT RATE PER RESIDENT PER RESIDENT
1993 1994 1/1/95 THROUGH 8/15/95
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RANCHO PARK VILLA $1,119 $1,100 $1,138
--------------------------------------------------------------------------------------------------
VILLA BONITA $1,082 $1,097 $1,107
--------------------------------------------------------------------------------------------------
MARIA DEL SOL $1,088 $1,110 $1,109
--------------------------------------------------------------------------------------------------
TAMALPAIS CREEK $1,278 $1,312 $1,335
--------------------------------------------------------------------------------------------------
</TABLE>
RANCHO PARK VILLA. Rancho Park Villa is located in the City of San
Dimas, California, approximately 30 miles east of Los Angeles. The approximately
100,000 square foot facility occupies a site consisting of approximately five
acres of useable land (approximately eight acres total) and a seven story
building containing 158 residential units, plus a two story common area attached
to the residential building by an enclosed glass walkway. In March, 1990, the
Partnership sold ten of the 18 acres originally purchased to a third party
purchaser. The sales price was $2.15 million. The Partnership received
$1,934,875 in cash (net of $115,125 selling expenses) and a $100,000 promissory
note bearing interest at the rate of 10% and due on June 20, 1991(4).
Approximately $1.819 million of the net proceeds of sale were distributed to the
Partners. The average occupancy rate for the facility for 1994 was approximately
80% and the Property was 74.9% occupied as of August 15, 1995.
VILLA BONITA. Villa Bonita is located in the City of Bonita,
California, approximately 15 miles from San Diego. The approximately 80,000
square foot facility is located on approximately two acres of land and consists
of a 130 room three story building. The average occupancy rate for the facility
for 1994 was approximately 87% and the Property was 90.8% occupied as of August
15, 1995.
MARIA DEL SOL. Maria del Sol is located in the City of Santa Maria,
California, approximately 70 miles north of Santa Barbara. The approximately
66,000 square foot facility is located on 3.5 acres of land and consists of a
four story building containing 124 residential units and an approximately 14,000
square foot single story structure housing common area and office space. The
average occupancy rate for the facility for 1994 was about 75% and the Property
was 87.1% occupied as of August 15, 1995.
TAMALPAIS CREEK. Tamalpais Creek is located in the City of Novato,
California, approximately 25 miles to the south of Santa Rosa. The approximately
80,000 square foot facility is located on approximately four acres of land and
consists of a two story building containing 120 residential units with
kitchenettes. The average occupancy rate for the facility for 1994 was
approximately 98% and the Property is 100% occupied as of August 15, 1995.
-------------------
(4) After the Partnership received approximately $27,500 of principal
and over $12,000 of interest, the purchaser failed to make any further payments.
The Managing Partner aggressively acted to collect the balance, but the
purchaser filed a bankruptcy petition. Therefore, the Managing Partner deemed
the balance of the promissory note to be uncollectible and wrote it off.
-30-
<PAGE> 32
SELECTED FINANCIAL DATA
The following table sets forth certain summarized financial information
for the Partnership. This information should be read in conjunction with the
Partnership's audited financial statements and accompanying notes, included
elsewhere in this Consent Solicitation Statement, and Management's Discussion
and Analysis of Financial Condition and results of Operations, included below.
<TABLE>
<CAPTION>
Six Months
Quarter Ended Ended Years Ended December 31,
------------------------ ------------------------ -------------------------------------
6/30/95 6/30/94 6/30/95 6/30/94 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Data:
------------
Revenue $ 2,072,205 $ 1,932,745 $ 4,094,504 $ 3,804,150 $ 7,757,243 $ 7,183,137 $ 7,082,682
Net Income 366,575 259,401 718,341 498,093 987,185 885,774 708,899
Distributions* 0 13.38 15.01 26.75 54.29 60.03 65.05
Net Income* 12.10 8.56 23.71 16.44 32.58 29.23 23.39
Balance Sheet Data at Period End:
--------------------------------
Total Assets 18,288,177 18,352,106 18,288,177 18,352,106 18,350,874 19,354,834 19,783,090
Notes Payable 983,690 989,281 983,690 989,281 989,281 1,324,439 780,000
Partners' Capital 16,810,080 16,546,472 16,810,080 16,546,472 16,546,472 17,203,158 18,136,394
<CAPTION>
Years Ended December 31,
------------------------
1991 1990
----------- -----------
<S> <C> <C>
Income Data:
------------
Revenue $ 6,519,816 $ 7,698,687
Net Income 8,274 2,003,104
Distributions* 63.91 115.09
Net Income* 0.27 66.10
Balance Sheet Data at Period End:
--------------------------------
Total Assets 20,879,590 22,707,569
Notes Payable 710,000 740,000
Partners' Capital 19,398,644 21,326,982
</TABLE>
* Per weighted average of Units outstanding
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW. The Partnership was formed for the purpose of acquiring,
developing and operating residential retirement and Assisted Living facilities.
The Partnership earns revenue from two main areas: (1) rent, and (2) revenue
from Assisted Living services. For a monthly rental fee, the Partnership
provides residents with semi-private or private rooms or suites, meals in a
communal setting, housekeeping, linens and laundry, activities programs,
security, grounds maintenance, utilities, cable television and scheduled
transportation. Assisted Living services include additional care such as
grooming, bathing and assisting with the self-administration of medication.
RESULTS OF OPERATIONS.
Three months ended June 30, 1995 compared with the three months ended
June 30, 1994.
Revenue for the three months ended June 30, 1995, and the three months
ended June 30, 1994 includes rental income and Assisted Living income from all
four Properties, interest earned on cash balances and other revenue. Total
revenues for the three months ended June 30, 1995 were $2,072,205, an increase
of approximately 7% over revenues of $1,932,745 for the three months ended
June 30, 1994.
Rent for the three months ended June 30, 1995 was $1,820,678, an
increase of approximately 6% over rent of $1,710,142 for the three months ended
June 30, 1994. Rent increased due to higher occupancy of the partnership's
facilities and a higher rental rate. The monthly average occupancy percentage
for the three months ended June 30, 1995 was 87% compared to 84% for the three
months ended June 30, 1995. The monthly average rental rate per unit for the
three months ended June 30, 1995 was $1,283 compared to $1,252 for the three
months ended June 30, 1994.
-31-
<PAGE> 33
Revenue from Assisted Living fees for the three months ended June 30,
1995 was $201,931, an increase of approximately 14% over $176,497 for the three
months ended June 30, 1994. This increase is due to a higher number of residents
on the Assisted Living program. The monthly average number of residents on
Assisted Living was 154 for the three months ended June 30, 1995 compared to 142
for the three months ended June 30, 1994. The average monthly Assisted Living
rate was $437 for the three months ended June 30, 1995 compared to $414 for the
three months ended June 30, 1994.
Other revenue for the three months ended June 30, 1995 increased by
$3,638 over the three months ended June 30, 1994. Other revenue includes
processing fees, beauty shop revenue, banquet fees and other miscellaneous
income. Other revenue increased primarily due to processing fees which are
collected upon the move in of a resident. The monthly average number of
residents for the three months ended June 30, 1995 was 519 compared to 495 for
the three months ended June 30, 1994.
Sources of revenue for the three months ended June 30, 1995 and June
30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
------------------ ------------------
<S> <C> <C>
Rent $1,820,678 $1,710,142
Assisted Living 201,931 176,497
Interest 0 148
Other 49,596 45,958
---------- ----------
$2,072,205 $1,932,745
========== ==========
</TABLE>
Total costs and expenses for the three months ended June 30, 1995 were
$1,705,629, an increase of approximately 2% over costs and expenses of
$1,673,344 for the three months ended June 30, 1994.
Rental property operations expense for the three months ended June 30,
1995 was $1,052,147 compared to $1,040,912 for the three months ended June 30,
1994. The increase in these expenses was directly related to the increase in
residents. Included in rental property operations expense were variable costs
related to the number of residents. The monthly average number of residents for
the three months ended June 30, 1995 was 519 compared to 495 for the three
months ended June 30, 1994.
Assisted Living expenses consist primarily of the related payroll
expense. Assisted Living expenses increased by $16,200 for the three months
ended June 30, 1995 compared to the three months ended June 30, 1994. Assisted
Living expenses increased due to the increase in the size of the related staff
providing Assisted Living services. The average monthly number of employees
providing Assisted Living services was 30 for the three months ended June 30,
1995 compared to 25 for the three months ended June 30, 1994.
General and administrative expenses are comprised of, but not limited
to, costs for accounting, partnership administration, bad debt, data processing,
investor relations, insurance, and professional services. General and
administrative expenses increased by $6,914 for the three months ended June 30,
1995 compared to the three months ended June 30, 1994. The increase in general
and administrative expenses is due primarily to the increase in the property
management fee which is calculated by taking 5% of the gross revenues. The
property management fee for the three months ended June 30, 1995 was $103, 610
compared to $96,635 for the three months ended June 30, 1994.
Depreciation and amortization expense increased by over 1% for the
three months ended June 30, 1995 compared to the three months ended June 30,
1994 due to capital improvements to the Properties.
-32-
<PAGE> 34
Interest expense decreased over 13% for the three months ended June 30,
1995 compared to the three months ended June 30, 1994, as a result of principal
reduction.
Selected costs and expenses for the three months ended June 30, 1995
and June 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
------------------ ------------------
<S> <C> <C>
Rental Property Operations $1,052,147 $1,040,912
Assisted Living 92,545 76,343
General and Administrative 251,743 244,829
Depreciation and Amortization 206,551 203,301
Property Taxes 62,460 63,849
Interest 23,922 27,528
</TABLE>
Primarily as a result of the foregoing, the net income increased to
$365,575 for the three months ended June 30, 1995 as compared to net income of
$259,401 for the three months ended June 30, 1994.
Six months ended June 30, 1995 compared with the six months ended June
30, 1994.
Revenue for the six months ended June 30, 1995, and the six months
ended June 30,1994 includes rental income and Assisted Living revenue from all
four facilities, interest earned on cash balances and other revenue. Total
revenues for the six months ended June 30, 1995 were $4,094,504 an increase of
approximately 8% over revenues of $3,804,150 for the six months ended June 30,
1994.
Rent for the six months ended June 30, 1995 was $3,614,392, an increase
of approximately 7% over rent of $3,372,451 for the six months ended June 30,
1994. Rent increased due to higher occupancy of the partnership's facilities and
a higher rental rate. The average monthly occupancy percentage for the six
months ended June 30, 1995 was 87% compared to 83% for the six months ended
June 30, 1994. The average monthly rental rate per unit for the six months
ended June 30, 1995 was $1,282 compared to $1,244 for the six months ended
June 30, 1994.
Revenue from Assisted Living fees for the six months ended June 30,
1995 was $384,731 an increase of approximately 17% over $328,941 for the six
months ended June 30, 1994. This increase is due to a higher number of residents
on the Assisted Living program. The monthly average number of residents on
Assisted Living was 153 for the six months ended June 30, 1995 compared to 142
for the three months ended June 30, 1994. The average monthly Assisted Living
rate was $419 for the six months ended June 30, 1995 compared to $386 for the
six months ended June 30, 1994.
Other revenue decreased by approximately 7% for the six months ended
June 30, 1995 compared to the six months ended June 30, 1994. Other revenue
includes processing fees, beauty shop revenue, banquet fees and other
miscellaneous income. Processing fees collected upon the move in of a resident
increased but all other revenue decreased in the aggregate, resulting in a net
decrease in other revenue.
-33-
<PAGE> 35
Sources of revenue for the six months ended June 30, 1995 and June 30,
1994 are summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
---------------- ----------------
<S> <C> <C>
Rent $3,614,392 $3,372,451
Assisted Living 384,731 328,941
Interest 0 304
Other 95,380 102,454
---------- ----------
$4,094,504 $3,804,150
========== ==========
</TABLE>
Total costs and expenses for the six months ended June 30, 1995 were
$3,376,163, an increase of over 2% over costs and expenses of $3,306,058 for the
six months ended June 30, 1994.
Rental property operations expense for the six months ended June 30,
1995 was $2,094,808 compared to $2,002,762 for the six months ended June 30,
1994. The increase in these expenses was directly related to the increase in
residents. Included in rental property operations expense were variable costs
related to the number of residents. The monthly average number of residents for
the six months ended June 30, 1995 was 516 compared to 490 for the six months
ended June 30, 1994.
Assisted Living expenses consist primarily of the related payroll
expense. Assisted Living expenses increased by $22,498 for the six months ended
June 30, 1995 compared to the six months ended June 30, 1994. Assisted Living
expenses increased due to the increase in the size of the related staff
providing Assisted Living services. The average monthly number of employees
providing Assisted Living services was 28 for the six months ended June 30, 1995
compared to 25 for the six months ended June 30, 1994.
General and administrative expenses are comprised of, but not limited
to, costs for accounting, partnership administration, bad debt, data processing,
investor relations, insurance, and professional services. General and
administrative expenses increased by less than 1% for the six months ended
June 30, 1995 compared to the six months ended June 30, 1994.
Depreciation and amortization expense decreased by more than 5% for the
six months ended June 30, 1995 compared to the six months ended June 30, 1994.
Depreciation and amortization decreased due to a portion of fixed assets
becoming fully depreciated.
Interest expense decreased over 20% for the six months ended June 30,
1995 compared to the six months ended June 30, 1994, as a result of paying off a
loan secured by a first deed of trust on Villa Bonita of $321,250 on or about
March 31, 1994.
-34-
<PAGE> 36
Selected costs and expenses for the six months ended June 30, 1995 and
June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
---------------- ----------------
<S> <C> <C>
Rental Property Operations $2,094,808 $2,002,762
Assisted Living 174,230 151,762
General and Administrative 499,043 495,962
Depreciation and Amortization 412,367 434,914
Property Taxes 128,658 132,156
Interest 47,402 59,017
</TABLE>
Primarily as a result of the foregoing, the net income increased to
$718,341 for the six months ended June 30, 1995 as compared to net income of
$498,093 for the six months ended June 30, 1994.
Year ended December 31, 1994 compared with the year ended December 31,
1993 and the year ended December 31, 1992.
Revenue for fiscal years ended December 31, 1994, 1993 and 1992
includes rental income and Assisted Living revenue from all four Properties,
interest earned on cash balances and other revenue. Total revenues for the year
ended December 31, 1994 was $7,757,243, an increase of 8% over revenue of $7,183
137 for the year ended December 31, 1993 which was an increase of 1.5% over
revenue of $7,082,682 for the year ended December 31, 1992.
Rent for the years ended December 31, 1994, 1993 and 1992 were
$6,890,345, $6,510,555, and $6,395,253, respectively. Rent increased due to
higher occupancy of the partnership's facilities and/or a higher rental rate.
The occupancy percentages at December 31, 1994, 1993 and 1992 were 86%, 81% and
84%, respectively. The average monthly rental rate per unit at December 31,
1994, 1993, and 1992 were $1,265, 1,236 and $1,197, respectively.
The Partnership also increased revenues from its Assisted Living
program for 1994 over prior years due to its aggressive marketing of the
Assisted Living services and the resulting increase in the number of residents
using the program. Assisted Living income increased by approximately 33% from
1993 to 1994 and by approximately 46% from 1992 to 1993.
Interest income results from interest earning cash deposits (primarily
money market accounts). The cash balances at December 31, 1994, 1993 and 1992
were $245,898, $498,543, and $93,218, respectively. The Partnership internally
manages cash balances and places funds with a number of different financial
institutions. Interest income decreased by approximately 35% from 1993 to 1994
and by approximately 95% from 1992 to 1993 as a result of lower average rates
and average balances.
Other revenue increased by approximately 17% from 1993 to 1994 and
decreased by approximately 50% from 1992 to 1993. Other revenue generally
includes processing fees, beauty shop revenue and guest meals. The increase from
1993 to 1994 is attributed to higher aggregate occupancy rates in 1994. Other
revenue for 1992 included a property tax refund of approximately $150,000.
-35-
<PAGE> 37
Sources of revenue for the years ended December 31, 1994, 1993 and 1992
and are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Rent $6,890,345 $6,510,555 $6,395,253
Assisted Living 671,543 505,722 346,077
Interest 329 503 10,576
Other 195,026 166,357 330,776(1)
---------- ---------- ----------
Total Revenue $7,757,243 $7,183,137 $7,082,682
========== ========== ==========
</TABLE>
-------------------
(1) Includes property tax refund of approximately $150,000 relating to the
Rancho Park Villa property.
Rental property operating expenses consist primarily of payroll related
expenses, utilities, food expense and maintenance and supplies. Rental property
operating expenses for the years ended December 31, 1994, 1993 and 1992 were
$4,659,539, $4,213,063 and $4,042,045, respectively. The majority of rental
property operating expenses consist of fixed costs that do not vary
significantly with changes in the aggregate occupancy levels from year to year.
The monthly average number of residents at December 31, 1994, 1993 and 1992 were
513, 479 and 502, respectively.
Assisted Living expenses consist primarily of the related payroll
expense. Assisted Living expenses increased by about 24% from 1993 to 1994 and
by approximately 18% from 1992 to 1993. Assisted Living expenses increased due
to the increases in size of the related staff providing Assisted Living
services. The average number of staff per month providing Assisted Living
services for the years ended December 31, 1994, 1993 and 1992 was 24, 19 and 17,
respectively.
General and administrative expenses are comprised of, but not limited
to, costs for accounting, partnership administration, bad debt, data processing,
investor relations, insurance, and professional services. General and
administrative expenses increased approximately 9% from 1993 to 1994 and
approximately 5% from 1992 to 1993. The 1994 increase is primarily due to
appraisal costs incurred for the Partnership's properties. The appraisal costs
were $20,000. General and administrative expenses also increased due to the
property management fee which is calculated by taking 5% of the gross revenues.
The property management fee for the years ending December 31, 1994, 1993 and
1992 were $387,862, $359,157 and $354,134, respectively.
Depreciation and amortization expense decreased by about 12% from 1993
to 1994 and by an estimated 12% from 1992 to 1993. Depreciation and amortization
decreased each year due to a portion of fixed assets becoming fully depreciated.
Interest expense increased by approximately 53% from 1993 to 1994 and
increased by about 20% from 1992 to 1993. Interest expense increased for 1993
from 1992 due to the additional debt of $300,000 obtained midyear by the
Partnership. The increase from 1993 to 1994 reflects a full year of interest
expense from the additional debt obtained by the Partnership in 1993 and rising
interest rates.
Selected costs and expenses for the years ended December 31, 1994, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Rental Property Operations $4,656,539 $4,213,063 $4,042,045
Assisted Living 299,864 242,613 205,725
General and Administrative 485,050 443,283 423,926
Depreciation and Amortization 864,396 982,452 1,113,579
Property Taxes 304,546 281,584 275,031
Interest 106,937 69,692 57,944
</TABLE>
-36-
<PAGE> 38
Primarily as a result of the foregoing, the net income increased to
$987,185 for the year ended December 31, 1994 as compared to net income of
$885,774 and $708,899 for the years ended December 31, 1993 and December 31,
1992, respectively.
Assuming the Transaction is approved and the Properties are sold, the
Partnership will have no further operations and there will be no future
operating results.
IMPACT OF INFLATION AND CHANGING PRICES. Rents, the main source of
revenue derived by the Partnership, are affected by rental rates and occupancy
rates. Rental rate increases are highly dependent upon market conditions and the
competitive environment in the properties location. Employer compensation is the
largest cost element in the operation of the Partnership's properties. Recent
price and cost trends have not significantly affected profit margins and are not
expected to have negative effects in the foreseeable future.
LIQUIDITY.
Six months ended June 30, 1995 compared with the six months ended
June 30, 1994.
No material changes in operating assets and liabilities is noted for
the six months ended June 30, 1995 and the six months ended June 30, 1994
The General Partners expect that the cash to be generated from
operations of all the Partnership's Properties will be adequate to pay operating
expenses, make necessary capital improvements, make required principal
reductions, and provide distributions to the Partners. On a long-term basis, the
Partnership's liquidity is sustained primarily from cash flow provided by
operating activities. For the six months ended June 30, 1995 and 1994 net cash
provided by operating activities was $1,030,899 and $930,466, respectively. The
unrestricted cash balances were $310,978 and $117,862 for the six months ended
June 30, 1995 and 1994, respectively.
During the six months ended June 30, 1995, the Partnership used net
cash in investing activities of $52,851 compared to $111,603 for the six months
ended June 30, 1994. The Partnership's investing activities consisted of capital
improvements made on its four Properties. The Partnership has no material
commitments for capital improvements at the six months ended June 30, 1995.
During the six months ended June 30, 1995, the Partnership used net
cash in financing activities of $912,968 compared to $1,199,544 for the six
months ended June 30, 1994. The Partnership's financing activities at June 30,
1995 and 1994 consisted of principal reduction of $5,600 and $330,000,
respectively and distributions to the partners of $907,376 and $869,458.
Distributions for the six months ended June 30, 1995 were $15.01 per unit
compared to $26.75 per unit for the six months ended June 30, 1994. The average
return of capital per Unit included in the distributions for the six months
ended June 30, 1995 was $0 compared to $10.15 for the six months ended June 30,
1994.
Year ended December 31, 1994 compared with the year ended December 31,
1993 and the year ended December 31, 1992.
No material changes in operating assets and liabilities are noted for
the years ended December 31, 1994, 1993 and 1992.
The General Partners expect that the cash to be generated from
operations of all the Partnership's Properties will be adequate to pay operating
expenses, make necessary capital improvements, make required principal
reductions, and provide distributions to the Partners. On a long-term basis, the
Partnership's liquidity is sustained primarily from cash flow provided by
operating activities. For the years ended December 31, 1994, 1993 and 1992 net
cash provided by operating activities was $1,985,296, $1,889,694 and $1,832,337,
respectively. Unrestricted cash balances were $455,919, $492,946 and $520,932 at
December 31, 1994, 1993 and 1992, respectively.
-37-
<PAGE> 39
During the year ended December 31, 1994, the Partnership used net cash
in investing activities of $220,653 compared to $145,531 and $144,201 in the
years ending December 31, 1993 and 1992, respectively. The Partnership's
investing activities consisted of capital improvements made on all four of its
properties to maintain the buildings, landscaping, and interiors.
During the year ended December 31, 1994 the Partnership used net cash
in financing activities of $2,017,288 compared to $1,338,838 and $1,873,752 for
the years ended December 31, 1993 and 1992, respectively. The Partnership's
financing activities consisted of principal reduction of $335,158, $355, 561 and
$30,000 for the years ended December 31, 1994, 1993 and 1992 respectively.
During the year ended December 31, 1993 the Partnership received net proceeds
from a bank loan for $1,000,000 and used cash of $36,281 to pay for the
associated loan fees. During the year ended December 31, 1993 cash used in
repayment of a line of credit was $100,000 compared to cash provided by the
borrowing from the line of credit of $100,000 during the year ended December 31,
1992. During the years ended December 31, 1994, 1993 and 1992 the Partnership
used cash to pay distributions to the limited partners of $1,682,130, $1,846,996
and $1,943,752, respectively. The per Unit distributions were $54.29, $60.03 and
$65.05 for the years ended December 31, 1994, 1993 and 1992, respectively. The
average return of capital per Unit included in the distributions was $21.38,
$30.50 and $41.42 for the years ended December 31, 1994, 1993 and 1992,
respectively.
The General Partners are not aware of any trends, events,
commitments or uncertainties other than national economic conditions, which have
had or which may be reasonably expected to have a material favorable or
unfavorable impact on revenues or income from the operations or sale of
Properties. The General Partners believe that if the inflation rate increases
they will be able to pass the subsequent increase in operating expenses onto the
residents of the properties by way of higher rental and Assisted Living rates.
The Partnership has long term debt of approximately $984,000, as of June 30,
1995, which matures on September 20, 2000. The amount of this indebtedness is
minor in relation to the Partnership's equity.
CAPITAL RESOURCES. In the event the sale of the Properties and
dissolution of the Partnership is not approved, the Partnership contemplates
spending approximately $200,000 for capital expenditures during 1995 for
physical improvements at its four facilities. The funds for these improvements
should be available from operations. A portion of these funds have been spent
and additional sums will have been spent by the time the sale of the Properties
closes if the Transaction is approved. The Partnership has no material
commitments for capital improvements as of June 30, 1995.
There are no known material trends, favorable or unfavorable, in the
Partnership's capital resources, and there is no expected change in the mix of
such resources.
POLICIES AND PRACTICES REGARDING REAL ESTATE IMPAIRMENT. Real estate
investments are carried at cost less accumulated depreciation. The Partnership
considers quarterly whether there are any events or changes in circumstances
that indicate that the carrying amount of its individual real estate investments
may not be recoverable. In the event that there are indications of the possible
existence of impairment of an individual real estate asset, the Partnership will
estimate the gross future cash flows resulting from the operation of the related
real estate and its ultimate disposition. If the estimated undiscounted cash
flows are less than the real estate's carrying value, a loss will be recognized
based on the difference between the carrying value of the real estate and its
estimated fair market value. Assets held for sale are recorded at the lower of
carrying value or estimated fair market value less costs to dispose.
DISSOLUTION AND WINDING UP OF THE PARTNERSHIP
The Transaction will dispose of substantially all of the Partnership's
assets. The Partnership Agreement provides that the Partnership shall be
terminated and dissolved following the completion of the sale of all of the
Partnership's assets. Upon dissolution and termination of the Partnership, the
General Partners will take full account of the Partnership's assets and
liabilities, liquidate any remaining assets as promptly as is possible, and
apply and distribute the proceeds therefrom in the following order:
-38-
<PAGE> 40
First, to the payment of creditors of the Partnership, but
excluding secured creditors whose obligations will be assumed or
otherwise transferred on the liquidation of Partnership assets;
Second, to the repayment of any outstanding loans made by any
General Partner or Unitholder to the Partnership, and any compensation
or fees due to the Managing Partner; and
Third, to the General Partners and Unitholders or their
assignees in the same priority discussed above with respect to the
Proceeds of Sale.
Following the Transaction, there will be approximately $516,400 in
additional assets to distribute at the dissolution of the Partnership. The
Partnership holds no assets of significant value other than the Properties.
Consequently, the Proceeds of Sale will constitute most, if not all, of the
money that will be distributed to the Unitholders upon the sale and dissolution
of the Partnership.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of certain of the material federal
income tax consequences of the sale of the Properties and the liquidation of the
Partnership, as described in this Consent Solicitation. This discussion is
intended to address only those federal income tax considerations that are
generally applicable to all Unitholders in connection with the transactions
described above. The specific tax consequences of the transactions will vary for
each Unitholder because of the different circumstances of the various Partners.
This discussion is based on the Internal Revenue Code of 1986 (the "Code"), as
amended, existing and proposed Treasury Regulations thereunder, and current
administrative interpretations and court decisions.
It is not possible or practical to discuss here all aspects of federal
income tax law that may have relevance with respect to the transactions
described herein based on the individual circumstances of particular Unitholders
in light of their personal investment or tax circumstances, or to certain types
of investors (including insurance companies, financial institutions or broker-
dealers, tax-exempt organizations and foreign corporations and persons who are
not citizens or residents of the United States) subject to special treatment
under the federal income tax laws. The following description is general in
nature, and is not exhaustive of all possible tax considerations. This analysis
is not tax advice, and is not intended as a substitute for careful tax planning.
UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS, ATTORNEYS OR
ACCOUNTANTS WITH SPECIFIC REFERENCE TO THEIR OWN TAX SITUATION AND POTENTIAL
CHANGES IN THE APPLICABLE LAW. No representations are made as to state, local or
foreign tax consequences to any Unitholder resulting from the transactions
described in this Consent Solicitation Statement. The discussion set forth below
is based upon the assumption that interests in the Partnership held by the
Unitholders constitute capital assets in the hands of such investors and that
the Partnership is classified for federal income tax purposes as a partnership,
rather than an association taxable as a corporation. Upon the formation of the
Partnership in 1985, the Partnership received an opinion from its tax counsel,
Donald J. Regan, P.C., that the Partnership was properly classified as a
partnership for federal income tax purposes. The Partnership did not request a
ruling from the Internal Revenue Service as to its tax status as a partnership,
however. Moreover, the opinion of counsel referred to above was and is subject
to the continuous satisfaction by the Partnership of certain factual conditions.
If, for any reason, the Partnership is or was classified for tax purposes as an
association taxable as a corporation, the tax consequences of the proposed
transactions would differ materially from that described below.
UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
TRANSACTIONS DESCRIBED HEREIN.
TAX CONSEQUENCES OF THE TRANSACTION. The sale of the Properties (or
other Partnership assets) by the Partnership will be a fully taxable transaction
in which the Partnership will recognize taxable gain or loss in an amount equal
to the difference between (i) the amount realized on the sale (including the
amount of any liabilities assumed or
-39-
<PAGE> 41
taken subject to by Purchaser) of the Properties (or other assets) over (ii) the
Partnership's adjusted tax basis in the Properties (or other assets). Each
Unitholder will be required to recognize his or her allocable share of the
taxable gain or loss recognized by the Partnership, as set forth in the
Partnership Agreement. To the extent the Partnership's gain or loss is treated
as realized from the sale of "Section 1231" assets (i.e., real property and
depreciable assets used in a trade or business and held for more than one year),
each Unitholder would combine his or her share of gain or loss from the sale of
the Partnership's Section 1231 assets with any other Section 1231 gains and
losses recognized by such partner in that year. If the result is a net loss,
such loss will be characterized as an ordinary loss. If the result is a net
gain, such gain will be characterized as capital gain; provided, however, that
such gain will be treated as ordinary income to the extent the Unitholder has
"non-recaptured" Section 1231 losses. For these purposes, "non-recaptured"
Section 1231 losses means a Unitholder's aggregate Section 1231 losses for the
five most recent prior years that have not previously been recaptured. In
addition, a Unitholder's net gain will be treated as ordinary income to the
extent such gain is attributable to depreciation recapture, sale of inventory or
certain other items.
It is anticipated that the sale of the Partnership's Properties (or
other assets) to Purchaser will result in a taxable gain to the Partnership. In
general, the Partnership Agreement allocates such gain to the Partners in the
following order: (i) to those Partners, if any, who have negative capital
accounts to the extent of their negative capital accounts; (ii) to those
Partners who have previously been allocated depreciation deductions attributable
to the Properties (or other assets) sold to Purchaser, but only to the extent
such deductions exceed the gain allocated in (i) above; (iii) to the
Unitholders, to the extent necessary to align their capital account balances
with the number of Units held by each Unitholder; (iv) to the Partners in
proportion to the distribution of proceeds of certain sales or refinancings; and
(v) the balance, if any, 85% to the Unitholders and 15% to the General Partners.
In addition, the Partnership Agreement provides that the allocation provisions
are intended to result in the capital accounts of the Unitholders equalling zero
following the liquidation of the Partnership and that such provisions shall be
construed to achieve this result. There can be no assurance, however, that such
allocations will be respected for federal income tax purposes if challenged by
the Internal Revenue Service. If the Internal Revenue Service successfully
challenges the allocations of income or loss under the Partnership Agreement,
Unitholders may (among other things) be allocated amounts of income or loss in
the year of the liquidation of the Partnership which are different from the
amounts set forth herein and Unitholders may be allocated different amounts of
depreciation deductions in prior years.
Gain or loss recognized on the sale of the Properties (or other
Partnership assets) generally will be treated as passive activity income or
loss, under the passive activity loss rules of Section 469 of the Code, for
Unitholders who do not materially participate in the activity in which the
Partnership is engaged. The passive activity loss rules of the Code provide that
certain taxpayers (including individuals) may not deduct their "passive activity
loss" for a taxable year (i.e., the amount by which their aggregate losses from
all passive activities for the taxable year exceed their aggregate income from
all such activities for such year). The Code provides, however, that a taxpayer
who disposes of his or her entire interest in a passive activity during a
taxable year to an unrelated taxpayer is entitled to treat the excess of passive
losses from such activity (including suspended passive losses from prior periods
plus any loss recognized on the disposition) over that year's income or gains
from all of the taxpayer's passive activities as not being subject to passive
activity loss limitations. Accordingly, Unitholders who (i) are not related (as
defined in Section 469 of the Code) to the Purchaser and (ii) are disposing of
their entire interest in the activity in which the Partnership is engaged,
should be able to utilize this provision of the Code with respect to losses
generated by the Partnership.
The Partnership may be required to withhold a portion of the
distributions to be made to any Unitholders who fail to provide appropriate
certification as to their non-foreign status or their status as a California
resident.
LIQUIDATION OF THE PARTNERSHIP. In general, each Unitholder will
recognize additional gain or loss on the liquidation of the Partnership in an
amount equal to the difference (if any) between (a) the sum of (i) the amount of
cash received and (ii) any reduction in such Unitholder's share of liabilities
of the Partnership, and (b) the Unitholder's adjusted tax basis in his or her
interest in the Partnership (including the Unitholder's share of Partnership
liabilities and as increased or decreased by his or her share of the Partnership
gain or loss from the sale of the Properties and other assets of the
Partnership). A Unitholder's gain or loss (if any) will generally be capital
gain or loss, and will be long-term if the Unitholder has held his or her
interest in the Partnership for more than one year.
-40-
<PAGE> 42
APPROVAL BY THE UNITHOLDERS
VOTE REQUIRED. Unitholders of record as of the Notice Date constituting
more than 50% of the Partnership Interests must approve ("Majority Approval")
the Transaction as contemplated by the Agreement and the termination,
dissolution and winding up of the Partnership. Each Unitholder's "Partnership
Interest" will be determined by the ratio which the number of Units owned bears
to the total number of Units outstanding as of the Notice Date. Each Unitholder
shall be entitled to cast one vote for each Unit which he or she owns. The
Partnership Agreement permits this vote to be taken by written consent without a
meeting of the Unitholders.
Unitholders may vote to approve or disapprove the Transaction and the
termination, dissolution and winding up of the Partnership, or may abstain.
Signed but unmarked Consents returned to the Managing Partner will be deemed to
approve the Transaction, the termination, dissolution and winding up of the
Partnership and will be deemed, pursuant to the Partnership Agreement, to have
directed the Managing Partner to vote to approve the Transaction. Because
Majority Approval is required, the failure to vote or a vote to abstain has the
same effect as a vote to disapprove.
As of June 30, 1995, there were 3,416 Unitholders of record owning
30,000 Units. The Managing Partner owns six Units in the Partnership. In
addition, American Senior Housing Fund, L.P., a California limited partnership
controlled by the individual General Partners and an affiliate of the Managing
Partner, owns approximately 112 Units. No person is known by the Partnership to
own beneficially more than 5% of the outstanding Units.
EXTENSION OF CONSENT DATE: TERMINATION AND AMENDMENT. The Managing
Partner expressly reserves the right, in its sole discretion, at any time and
from time to time (i) to extend the Consent Date up to 60 days from the date the
first Consent Solicitation Statement was mailed or given to a Unitholder, (ii)
to terminate this Consent Solicitation at any time after Unitholders holding
more than 50% of the interests of the Partnership have voted to approve the
Transaction and the distribution of proceeds, termination, dissolution and
winding up of the Partnership, or (iii) to amend or supplement this Consent
Solicitation Statement. Any extension, termination or amendment will be followed
as promptly as practicable by written notice. Without limiting the manner in
which the Managing Partner may choose to make any written notice, except as
provided by applicable law, the Managing Partner will have no obligation to
publish, advertise or otherwise communicate such notice by public announcement.
DISSENTER'S RIGHTS. Neither the Partnership Agreement nor California
law provides any right for Unitholders to have their respective Units appraised
or redeemed in connection with or as a result of this Consent Solicitation.
REVOCATION. Every Consent given in accordance with this Consent
Solicitation continues in full force and effect unless otherwise revoked prior
to the Consent Date. Such revocation may be effected by a writing delivered to
the Managing Partner stating that the Consent is revoked or by a subsequent
Consent executed by a Unitholder and specifying that it supersedes the prior
Consent. The dates contained on the Consent form shall determine the order of
execution regardless of the postmark dates on the envelopes in which they are
mailed. A consent is not revoked by the death or incapacity of the Unitholder
unless, before the Consent Date, written notice of such death or incapacity is
received by the Managing Partner.
METHOD OF SOLICITATION. This solicitation of Consents is made by the
Managing Partner on behalf of the Partnership. This Consent Solicitation
Statement is the primary method by which the Managing Partner will solicit the
Consents of the Unitholders. The Partnership has engaged an independent investor
solicitation management company, The Herman Group, Inc., to manage the
solicitation of the Consents and tabulate the results. The Herman Group is
assisting the Managing Partner with the planning and management of the
solicitation effort, updating the Unitholder database, coordination of printing
and mailing of solicitation materials, providing inbound information and
assistance and outbound telephone follow-up to Unitholders and the tabulation of
Consents. For these services the Partnership will pay The Herman Group a
management fee of $10,000 and associated costs estimated at $20,000. In
addition, members of the Managing Partner's Investor Relations Department may
contact brokers who originally sold Partnership Units to provide information
regarding the Consent Solicitation Statement and the progress of the
solicitation of Consents. The brokers will not be asked to solicit Consents and
no commissions or fees will be paid to the brokers. There will be no additional
cost to the Partnership for telephone calls made by the Managing Partner's
Investor
-41-
<PAGE> 43
Relations Department. Finally, designated members of the Investor Relations
Department and officers of the Managing Partner will be available to answer
questions from Unitholders regarding the Consent Solicitation.
THIS SOLICITATION OF CONSENTS EXPIRES ON OCTOBER 2, 1995, UNLESS
EXTENDED OR TERMINATED EARLIER.
Accordingly, it is important that Unitholders complete and return the
enclosed Consent (or a facsimile thereof) so that it will be received before the
deadline. If you have any questions regarding this Consent Solicitation or the
transactions covered thereby, please contact the Information Agent:
The Herman Group, Inc.
By Telephone: (800) 747-2966
By Facsimile: (214) 991-4422
or
(214) 991-4432.
No other person has been authorized to give any information or to make any
representation on behalf of the Partnership or the Managing Partner not
contained herein and, if given or made, such information or representation must
not be relied upon as having been authorized.
-42-
<PAGE> 44
SCHEDULE 1
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE> 45
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Annual Report--Form 10-K
Items 8 and 14(a)
Index to Financial Statements and Schedule
<TABLE>
<CAPTION>
<S> <C>
Financial Statements
--------------------
Independent Auditors' Report F-2
Balance Sheets--December 31, 1994 and 1993 F-3
Statements of Income--Years ended
December 31, 1994, 1993 and 1992 F-4
Statements of Partners' Capital--Years ended
December 31, 1994, 1993 and 1992 F-5
Statements of Cash Flows--Years ended
December 31, 1994, 1993 and 1992 F-6
Notes to Financial Statements F-7
Schedule
Real Estate and Related Accumulated Depreciation--
December 31, 1994 F-13
</TABLE>
All other schedules are omitted, as the required information is inapplicable or
the information is presented in the financial statements or related notes.
<TABLE>
<CAPTION>
<S> <C>
Form 10-Q/A
-----------
Form 10-Q/A for Quarter Ended
June 30, 1995 F-14
</TABLE>
F-1
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
To ARV Housing Group, Inc. as the Managing General Partner of
American Retirement Villas Properties:
We have audited the financial statements of American Retirement Villas
Properties, a California limited partnership, listed in the accompanying index.
In connection with our audits of the financial statements, we have also audited
the financial statement schedule listed in the accompanying index. These
financial statements and financial statement schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Retirement Villas
Properties as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Orange County, California
March 22, 1995
F-2
<PAGE> 47
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Balance Sheets
December 31, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Properties, at cost (notes 4 and 6):
Land $ 2,695,099 2,695,099
Buildings and improvements, less accumulated
depreciation of $4,689,608 in 1994 and
$3,974,068 in 1993 15,035,175 15,622,928
Furniture, fixtures and equipment, less
accumulated depreciation of $330,734 in
1994 and $900,125 in 1993 239,999 288,194
---------- ----------
Net properties 17,970,273 18,606,221
Cash and cash equivalents 245,898 498,543
Other assets 135,935 250,070
---------- ----------
$ 18,352,106 19,354,834
========== ==========
Liabilities and Partners' Capital
---------------------------------
Notes payable (note 6) $ 989,281 1,324,439
Accounts payable and accrued expenses 350,833 324,105
Amounts payable to affiliate (note 3) 9,601 10,186
Distributions payable to Partners 455,919 492,946
---------- ----------
Total liabilities 1,805,634 2,151,676
---------- ----------
Partners' capital (deficit) (note 2):
General partners' deficit (202,627) (197,280)
Limited partners' capital, 30,000
limited partnership units authorized,
issued and outstanding 16,749,099 17,400,438
---------- ----------
Total partners' capital 16,546,472 17,203,158
---------- ----------
$ 18,352,106 19,354,834
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 48
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Statements of Income
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rent $ 6,890,345 6,510,555 6,395,253
Assisted living 671,543 505,722 346,077
Interest 329 503 10,576
Other 195,026 166,357 330,776
--------- --------- ---------
Total revenues 7,757,243 7,183,137 7,082,682
--------- --------- ---------
Costs and expenses:
Rental property operations (including
$2,429,622, $2,166,911 and $2,100,283
related to affiliates in 1994, 1993
and 1992, respectively)
(notes 3 and 7) 4,656,539 4,213,063 4,042,045
Assisted living (all related
to affiliates)
(note 3) 299,864 242,613 205,725
General and administrative (including
$363,844, $378,248 and $382,168
related to affiliates in 1994, 1993
and 1992, respectively) (note 3) 485,050 443,283 423,926
Depreciation and amortization 864,396 982,452 1,113,579
Property taxes 304,546 281,584 275,031
Advertising 43,307 47,308 48,605
Interest (note 6) 106,937 69,692 57,944
Legal 7,736 12,149 88,386
Bad debt 1,683 5,219 118,542
--------- --------- ---------
Total costs and expenses 6,770,058 6,297,363 6,373,783
--------- --------- ---------
Net income $ 987,185 885,774 708,899
========= ========= =========
Net income allocated:
To the General Partner $ 9,872 8,858 7,089
To the Limited Partner 977,313 876,916 701,810
--------- --------- ---------
$ 987,185 885,774 708,899
========= ========= =========
Net income per limited partner unit
(30,000) units outstanding $ 32.58 29.23 23.39
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 49
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partners Partners Capital
-------- -------- ---------
<S> <C> <C> <C>
Balance (deficit) at December 31, 1991 $(175,327) 19,573,971 19,398,644
Distributions to partners ($65.05 per
limited partner unit) (19,710) (1,951,439) (1,971,149)
Net income 7,089 701,810 708,899
-------- ---------- ----------
Balance (deficit) at December 31, 1992 (187,948) 18,324,342 18,136,394
Distributions to partners ($60.03 per
limited partner unit) (18,190) (1,800,820) (1,819,010)
Net income 8,858 876,916 885,774
-------- ---------- ----------
Balance (deficit) at December 31, 1993 (197,280) 17,400,438 17,203,158
Distributions to partners ($54.29 per
limited partner unit) (15,219) (1,628,652) (1,643,871)
Net income 9,872 977,313 987,185
-------- ---------- ----------
Balance (deficit) at December 31, 1994 $ 202,627 16,749,099 16,546,472
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 50
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 987,185 885,774 708,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 864,396 982,452 1,113,579
Write-off of note receivable from sale of land - 72,642
Change in assets and liabilities:
Decrease (increase) in other assets 106,402 32,941 (131,136)
Increase (decrease) in accounts payable and
accrued expenses 26,728 (5,077) 54,384
Increase (decrease) in amounts payable to
affiliates 585 (6,396) 13,969
---------- ---------- ----------
Net cash provided by operating
activities 1,985,296 1,889,694 1,832,337
---------- ---------- ----------
Cash flows from investing activities--
capital expenditures (220,653) (145,531) (144,201)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from notes payable - 1,000,000 -
Net borrowings (payments) under line-of-credit
agreement - (100,000) 100,000
Principal repayments of notes payable (335,158) (355,561) (30,000)
Payment of loan fees - (36,281) -
Distributions paid (1,682,130) (1,846,996) (1,943,752)
---------- ---------- ----------
Net cash used in financing
activities (2,017,288) (1,338,838) (1,873,752)
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (252,645) 405,325 (185,616)
Cash and cash equivalents at beginning of year 498,543 93,218 278,834
---------- ---------- ----------
Cash and cash equivalents at end of year $ 245,898 498,543 93,218
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 106,937 64,942 57,944
========== ========== ==========
Supplemental schedule of noncash investing and
financing activities:
Distributions accrued to partners $ 455,919 492,946 520,932
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 51
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
Basis of Accounting
American Retirement Villas Properties (the "Partnership") maintains
its records on the accrual method of accounting for financial
reporting and Federal and state tax purposes.
Carrying Value of Real Estate
Real estate investments are carried at cost less accumulated
depreciation. The Partnership considers quarterly whether there are
any events or changes in circumstances that indicate that the carrying
amount of its individual real estate investments may not be
recoverable. In the event that there are indications of the possible
existence of impairment of an individual real estate asset, the
Partnership will estimate the gross future cash flows resulting from
the operation of the related real estate and its ultimate disposition.
If the estimated undiscounted cash flows are less than the real
estate's carrying value, a loss will be recognized based on the
difference between the carrying value of the real estate and its
estimated fair market value. Assets held for sale are recorded at the
lower of carrying value or estimated fair market value less cost to
dispose.
In March 1995 the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS 121"). This statement is effective for fiscal
years beginning after December 15, 1995 and accordingly the
Partnership will be required to adopt SFAS 121 in its fiscal year
ending December 31, 1996. The Partnership's current accounting policy
is consistent with the requirements of SFAS 121 and there would be no
effect on the Partnership had this statement been effective at
December 31, 1994.
Depreciation is computed using the straight-line method over the
estimated useful lives of buildings and improvements, furniture,
fixtures and equipment, ranging from 3 to 27-1/2 years.
Loan Fees
Loan fees are amortized using the straight-line method over the term
of the related note payable and are included in other assets.
Rental Income
Rent agreements with tenants are on a month-to-month basis. Advance
deposits are applied to the first month's rent.
Revenue Recognition
The Partnership recognizes rental and assisted living services revenue
from the properties when earned.
Income Taxes
Under provisions of the Internal Revenue Code and the California
Revenue and Taxation Code, partnerships are generally not subject to
income taxes. For tax purposes, any income or losses realized are
those of the individual partners, not the Partnership.
The Partnership has not requested a ruling from the Internal Revenue
Service to the effect that it will be treated as a partnership and not
an association taxable as a corporation for Federal income tax
purposes. The Partnership has received an opinion of counsel as to
its tax status prior to its effectiveness for the offering of limited
partnership units, but such opinion is not binding upon the Internal
Revenue Service.
(Continued)
F-7
<PAGE> 52
2
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
Following are the Partnership's assets and liabilities as determined
in accordance with generally accepted accounting principles ("GAAP")
and for Federal income tax reporting purposes at December 31:
<TABLE>
<CAPTION>
1994 1993
----------------------------- -----------------------------
GAAP Basis Tax Basis(1) GAAP Basis Tax Basis(1)
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Total assets $ 18,350,874 18,778,064 19,354,834 24,093,135
Total liabilities $ 1,805,634 1,754,206 2,151,676 2,151,676
</TABLE>
Following are the differences between the financial statement and tax
return income:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income per financial
statements $ 987,185 885,774 708,899
Depreciation differences on
properties (1) (201,370) (39,935) 107,583
Amortization differences on
intangible assets (1) 8,413 18,052 (59,580)
Bad debt accrual (1) - (109,251) 109,251
Other (1) (1,756) 3,890 (25,401)
------- -------- -------
Taxable income per Federal tax
return (1) $ 792,472 758,530 840,752
======= ======== =======
</TABLE>
(1) Unaudited
Net Income per Limited Partner Unit
Net income per limited partner unit was based on the weighted average
number of limited partner units outstanding of 30,000 in 1994, 1993
and 1992.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
(Continued)
F-8
<PAGE> 53
3
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
Reclassifications
Certain 1993 and 1992 amounts have been reclassified to conform to
1994 presentation.
(2) Organization and Partnership Agreement
The Partnership was formed on September 9, 1985 for the purpose of
acquiring, developing and operating residential retirement facilities.
The term of the Partnership is 60 years and may be dissolved earlier
under certain circumstances.
Limited partner units (minimum of 2 units per investor) were offered
for sale to the general public. A maximum number of 30,000 units were
offered at $1,000 per unit. The Partnership obtained the maximum
capitalization in July 1988, representing a total capital investment
of $30,000,000. No additional capital contributions are required from
any Limited Partner. Under the Partnership Agreement, the maximum
liability of the Limited Partners is the amount of their capital
contribution.
The Managing General Partner is ARV Housing Group, Inc. ("ARVHG"), a
California corporation, and the individual General Partners are John
A. Booty, John S. Jason, Gary L. Davidson and Tony Rota. The
individual General Partners are substantially all of the stockholders
of the Managing General Partner. The General Partners are not
required to make capital contributions to the Partnership.
Profits and losses from operations are allocated, 1% to the General
Partners and 99% to the Limited Partners.
Cash available for distribution from operations is to be distributed
1% to the General Partners and 99% to the Limited Partners.
Upon any sale, refinancing or other disposition of the Partnership's
real properties, distributions are to be made 1% to the General
Partners and 99% to the Limited Partners until the Limited Partners
have received an amount equal to 100% of their capital contributions
plus an amount equal to a 12% cumulative but not compounded per annum
return from the date of each partner's investment until the close of
the offering and 6% per annum thereafter. The 6% cumulative return
will be reduced, but not below zero, by the aggregate amount of prior
distributions from all sources. Thereafter, distributions are to be
15% to the General Partners and 85% to the Limited Partners, except
that after the sale of the properties, the proceeds of sale of any
last remaining assets owned by the Partnership are to be distributed
in accordance with the partners' positive capital account balances.
(Continued)
F-9
<PAGE> 54
4
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
(3) Transactions with Affiliates
The Partnership has an agreement with ARVHG providing for a property
management fee of 5% of gross revenues and a Partnership management fee
of 10% of cash flow before distribution, as defined in the Partnership
Agreement, amounting to $387,862, $359,267, $353,384 and $212,238,
$212,789, $206,029, respectively, at December 31, 1994, 1993 and 1992,
respectively.
ARVHG pays certain expenses such as repairs and maintenance, supplies,
payroll and retirement benefit expenses on behalf of the Partnership
and is subsequently reimbursed by the Partnership. The retirement
benefit expense (see note 7) of $58,143, $53,710 and $39,133 at
December 31, 1994, 1993 and 1992, respectively, consists of
contributions made to an employee stock ownership plan ("ESOP"). The
total reimbursements to ARVHG, including the retirement benefit
expense, are included in rental property operations and general and
administrative expenses in the accompanying statements of operations
and amounted to $2,493,230, $2,215,716 and $2,128,763 at December 31,
1994, 1993 and 1992, respectively.
Amounts payable to affiliates at December 31, 1994 and 1993 includes
expense reimbursements and accrued property management fees.
(4) Properties
Villa Bonita
In March 1987, the Partnership purchased the Villa Bonita land in San
Diego County and constructed a residential retirement facility.
Rancho Park Villa
In October 1987, the Partnership purchased Rancho Park Villa, an
existing residential retirement facility in San Dimas, California.
Tamalpais Creek
In January 1988, the Partnership purchased Tamalpais Creek, an
existing residential retirement facility in Novato, California.
Maria del Sol
In September 1988, the Partnership purchased Maria del Sol, an
existing residential retirement facility in Santa Maria, California.
(Continued)
F-10
<PAGE> 55
5
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
(5) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of December 31, 1994 and 1993
consists of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Trade payables $ 162,878 122,040
Accrued payroll 95,055 72,394
Other 92,900 129,671
------- -------
$ 350,833 324,105
======= =======
</TABLE>
(6) Notes Payable
At December 31, 1994 and 1993, notes payable included the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Note payable to bank, secured by deed of trust on the
Villa Bonita property; all principal and interest paid on
March 31, 1994. $ - 325,000
Note payable to bank, secured by deed of trust on the
Rancho Park Villa property, interest at 9.5%; payable
in monthly principal and interest installments of
$8,832; all unpaid principal and interest due on
September 20, 2000. 989,281 999,439
------- ---------
$ 989,281 1,324,439
======= =========
</TABLE>
The annual principal payments of the notes payable are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1995 $ 12,540
1996 13,785
1997 15,153
1998 16,657
1999 18,310
Thereafter 912,836
-------
$ 989,281
=======
</TABLE>
(Continued)
F-11
<PAGE> 56
6
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Notes to Financial Statements
The Partnership also maintains a revolving line of credit that expires
on July 15, 1995. There were no borrowings against this line of
credit as of December 31, 1994.
(7) ESOP
ARVHG offers an Employee Stock Ownership Plan ("ESOP") to all eligible
employees which includes the employees of the Partnership. The amount
of stock contributed annually to the ESOP is at the discretion of
ARVHG. During 1994, 1993 and 1992, ARVHG's Board of Directors
declared a contribution that approximated 3% of each employee's
payroll expense. The Partnership contributed $58,143, $53,710 and
$39,133 to the ESOP (as a reimbursement to ARVHG) in 1994, 1993 and
1992, respectively.
F-12
<PAGE> 57
Schedule III
AMERICAN RETIREMENT VILLAS PROPERTIES
(A California Limited Partnership)
Real Estate and Related Accumulated Depreciation
December 31, 1994
<TABLE>
<CAPTION>
Costs
Initial Cost Capitalized
------------------------- Subsequent to
Building Acquisition
and Im- or
Description Encumbrances Land provements Construction Retirements
----------- ------------ ---- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Villa Bonita $ - 976,000 5,454,933 197,018 -
Rancho Park Villa 989,281 441,775 3,444,769 1,069,692 157,346
Tamalpais Creek - 900,000 5,200,000 1,026,562 -
Maria del Sol - 350,000 2,950,000 566,479 -
------- --------- ---------- --------- -------
$ 989,281 2,667,775 17,049,702 2,859,751 157,346
======= ========= ========== ========= =======
<CAPTION>
Gross Amount Date of
-------------------------- ---------------------- Depre-
Building Accumu- Completion ciable
and Improve- lated De- on Con- Acqui- Lives
Description Land ments Total (1) preciation struction sition (Years)
----------- ---- ------------ ---------- ---------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Villa Bonita 1,146,000 5,481,951 6,627,951 1,193,191 1/89 3/87 27-1/2
Rancho Park Villa 291,079 4,507,811 4,798,890 1,158,318 N/A 10/87 27-1/2
Tamalpais Creek 902,734 6,223,828 7,126,562 1,549,671 N/A 1/88 27-1/2
Maria del Sol 355,286 3,511,193 3,866,479 788,428 N/A 9/88 27-1/2
--------- ---------- ---------- ---------
2,695,099 19,724,783 22,419,882 4,689,608
========= ========== ========== =========
</TABLE>
Following is a summary of investment in properties for the years ended
December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 22,292,095 22,261,390 22,230,928
Improvements/construction 127,787 30,705 30,462
---------- ---------- ----------
Balance at end of year $ 22,419,882 22,292,095 22,261,390
========== ========== ==========
</TABLE>
Following is a summary of accumulated depreciation of investment in properties
for the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 3,974,068 3,262,130 2,551,277
Additions charged to expense 715,540 711,918 710,853
--------- --------- ---------
Balance at end of year $ 4,689,608 3,974,068 3,262,130
========= ========= =========
</TABLE>
____________
(1) Aggregate cost for Federal income tax purposes is $22,419,882 at December
31, 1994.
F-13
<PAGE> 58
Securities and Exchange Commission
Washington, D.C. 20549
Form 10 Q/A
Quarterly Report under section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the Quarter Ended June 30, 1995
Commission file number 33-633
American Retirement Villas Properties
-------------------------------------
(Exact name of Registrant as specified in it's charter)
California 33-0154077
---------- ----------
state or other jurisdiction (IRS Employer Iden-
of organization tification number)
245 Fischer Avenue, Suite D-1
Costa Mesa, California 92626
---------------------- -----
(address of principal executive (zip code)
office)
Registrant's telephone number,
including area code (714) 751-7400
--------------
Indicate by a check mark whether the registrant (1) has filed all the
reports to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months, (or for such
shorter period that the registrant was required to file reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
------- -------
F-14
<PAGE> 59
PART I ITEM 1
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Balance Sheets (Unaudited)
June 30, 1995 (unaudited) and December 31, 1994 (audited)
<TABLE>
<CAPTION>
Assets
------ 1995 1994
(unaudited) (audited)
----------- -----------
<S> <C> <C>
Properties, at cost (notes 4 and 5)
Land $ 2,695,099 $ 2,695,099
Building and improvements, less
accumulated depreciation of $5,048,555
in 1995 and $4,689,608 in 1994 14,707,999 15,035,175
Furniture, fixtures and equipment less
accumulated depreciation of $334,697
in 1995 and $330,734 in 1994 257,116 239,999
----------- -----------
Net Properties 17,660,214 17,970,273
Cash and cash equivalents 310,977 245,898
Loan fees, less accumulated amortization
of $8,043 in 1995 and $5,630 in 1994 25,738 28,151
Other assets 291,247 107,784
----------- -----------
Total assets $18,288,177 $18,352,106
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Notes payable (note 6) $ 983,690 $ 989,281
Accounts payable and accrued expenses 426,733 350,833
Amounts payable to affiliate (note 3) 14,942 9,601
Distribution payable to partners 52,731 455,919
----------- -----------
Total Liabilities 1,478,097 1,805,634
Partners' capital (note 2)
30,000 units outstanding at June
30, 1995 and December 31, 1994 16,810,080 16,546,472
----------- -----------
Total liabilities and partners' capital $18,288,177 $18,352,106
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE> 60
PART I ITEM 1 (continued)
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Statements of Operations (unaudited)
For the quarter ended June 30, 1995
For the quarter ended June 30, 1994
For the six months ended June 30, 1995
For the six months ended June 30, 1994
<TABLE>
<CAPTION>
Quarter Quarter Six months Six months
ended June ended June ended June ended June
30, 1995 30, 1994 30, 1995 30, 1994
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rent 1,820,678 1,710,142 3,614,392 3,372,451
Assisted living 201,931 176,497 384,731 328,941
Interest 0 148 0 304
Other 49,596 45,958 95,380 102,454
---------- ---------- ---------- ----------
Total Revenues 2,072,205 1,932,745 4,094,504 3,804,150
---------- ---------- ---------- ----------
Costs and expenses:
Rental property operations (note 3 and 7) 1,052,147 1,040,912 2,094,808 2,002,762
Assisted living (note 3) 92,545 76,343 174,230 151,762
General and administrative (note 3) 251,743 244,829 499,043 495,962
Depreciation and amortization 206,551 203,301 412,367 434,914
Property taxes 62,460 63,849 128,658 132,156
Advertising 8,344 12,027 7,610 22,086
Interest (note 6) 23,922 27,528 47,402 59,017
Legal 7,212 2,946 9,786 5,791
Bad debt 705 1,608 2,260 1,608
---------- ---------- ---------- ----------
Total costs and expenses 1,705,629 1,673,344 3,376,163 3,306,058
Net income $ 366,575 $ 259,401 $ 718,341 $ 498,093
========== ========== ========== ==========
Net income to General Partner $ 3,666 $ 2,594 $ 7,183 $ 4,981
Net income to limited partner $ 362,909 $ 256,807 $ 711,157 $ 493,112
========== ========== ========== ==========
Net income per limited partners unit $ 12.10 $ 8.56 $ 23.71 $ 16.44
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE> 61
PART I ITEM 1
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Statement of Cash Flows (unaudited)
For the six months ended June 30, 1995
For the six months ended June 30, 1994
<TABLE>
<CAPTION>
1995 1994
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 718,341 $ 498,093
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 412,367 434,914
Change in assets and liabilities:
Increase in other assets (183,463) (48,292)
Decrease in loan fees 2,413 6,052
Increase in accounts
payable and accrued expenses 75,900 45,394
Increase (decrease) in amounts payable
to affiliates 5,341 (5,695)
---------- -----------
Total adjustments 312,558 432,373
Net cash provided by operating activities 1,030,899 930,466
---------- -----------
Cash flows from investing activities:
Capital expenditures (52,851) (111,603)
---------- -----------
Net cash used in investing activities (52,851) (111,603)
Cash flows from financing activities:
Principal reduction of notes payable (5,591) (330,086)
Distributions paid (907,376) (869,458)
---------- -----------
Net cash used in financing activities (912,968) (1,199,544)
---------- -----------
Increase (Decrease) in cash 65,080 (380,681)
Cash at the beginning of the period 245,898 498,543
---------- -----------
Cash at the end of the period $ 310,978 $ 117,862
========== ===========
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE> 62
PART I ITEM 1
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Notes to Financial Statements (unaudited)
June 30, 1995
(1) Summary of Significant Accounting Policies
-----------------------------------------------
Basis of Accounting
-------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Carrying Value of Real Estate
-----------------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Loan Fees
---------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Rental Income
-------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Income Taxes
------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Net Income Per Limited Partner Unit
-----------------------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
The weighted average number of units outstanding at March 31,
1995 and March 31, 1994 was 30,000. (continued)
F-18
<PAGE> 63
PART I ITEM 1
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Notes to Financial Statements (unaudited)
June 30, 1995
Cash and Cash Equivalents
-------------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Reclassifications
-----------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(2) Organization and Partnership Agreement
------------------------------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(3) Transactions with Affiliates
--------------------------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference, except
for the following additional comments. For the three months ended
June 30, 1995 property management and partnership management fees
of $103,610 and $65,332 respectively, were paid or accrued to the
Managing General Partner.
(4) Properties
--------------
Villa Bonita:
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Rancho Park Villa:
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
Tamalpais Creek:
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(continued)
F-19
<PAGE> 64
PART I ITEM 1
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Notes to Financial Statements (unaudited)
June 30, 1995
Maria del Sol:
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(5) Accounts Payable and Accrued Expenses
------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(6) Notes Payable
------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
(7) ESOP
------------
Pursuant to Regulation S-X Rule 10-1(5) the material stated in the
December 31, 1994 Form 10K is incorporated by this reference.
F-20
<PAGE> 65
PART I ITEM II
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Liquidity.
The General Partners expect that the cash to be generated from
operations of all the Registrant's properties will be adequate to pay operating
expenses, make necessary capital improvements, make required principal
reductions, and provide distributions to the Partners. On a long-term basis,
the Registrant's liquidity is sustained primarily from cash flow provided by
operating activities. During the six months ended June 30, 1995, net cash
provided by operating activities was approximately $1,030,899 as compared to
cash provided by operating activities of approximately $930,466 for the six
months ending June 30, 1994.
During the six months ended June 30, 1995, the Registrant used net
cash in investing activities of $52,851 compared to $111,603 for the six months
ended June 30, 1994. The Registrant's investing activities consisted of
capital improvements made on its four properties.
During the six months ended June 30, 1995, the Registrant used net
cash in financing activities of $912,968 compared to $1,199,544 for the six
months ended June 30, 1994. The Registrant's investing activities consisted of
principal reduction on notes payable and distributions paid to the Partners.
The General Partners are not aware of any trends, other than national
economic conditions, which have had or which may be reasonably expected to have
a material favorable or unfavorable impact on revenues or income from the
operations or sale of properties. The General Partners believe that if the
inflation rate increases they will be able to pass the subsequent increase in
operating expenses onto the residents of the properties by way of higher rental
and Assisted Living rates. The Registrant has long term debt of approximately
$984,000 ,as of June 30, 1995, which matures on September 20, 2000. The amount
of this indebtedness is minor in relation to the Registrant's equity.
(2) Capital Resources.
Registrant contemplates spending approximately $200,000 for capital
expenditures during 1995 for physical improvements at its four facilities. The
funds for these improvements should be available from operations.
There are no known material trends, favorable or unfavorable, in the
Registrant's capital resources, and there is no expected change in the mix of
such resources.
F-21
<PAGE> 66
(3) Results of Operations.
Three months ended June 30, 1995 compared with the three months ended
June 30, 1994.
Revenue for the three months ended June 30, 1995, and the three months
ended June 30, 1994 includes rental income and Assisted Living income from all
four properties, interest earned on cash balances and other revenue. Total
revenues for the three months ended June 30, 1995 were $2,072,205, an increase
of approximately 7% over revenues of $1,932,745 for the three months ended June
30, 1994.
The largest component of revenue, rent, increased by approximately 6%
from the three months ended June 30, 1994 to the three months ended June 30,
1995. The increase in rent was due to an increase in occupancy of approximately
6% and an increase in rental rates of over 1%.
Revenue from Assisted Living increased by approximately 14% from the
three months ended June 30, 1994 to the three months ended June 30, 1995. The
increase in Assisted Living was due to aggressive marketing of the Assisted
Living services and the resulting increase in the number of residents using the
program.
Interest and other revenue increased by over 7% from the three months
ended June 30, 1994 to the three months ended June 30, 1995. Interest income
results from interest earned on cash deposits. Other revenue generally
includes processing fees and beauty shop revenue.
Sources of revenue for the three months ended June 30, 1995 and June
30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
------------------ ------------------
<S> <C> <C>
Rent $1,820,678 $1,710,142
Assisted Living 201,931 176,497
Interest and Other 45,596 46,106
---------- ----------
$2,072,205 $1,932,745
========== ==========
</TABLE>
Total costs and expenses for the three months ended June 30, 1995 were
$1,705,629, an increase of approximately 2% over costs and expenses of
$1,673,344 for the three months ended June 30, 1994.
F-22
<PAGE> 67
The largest component of expenses, rental property operations, consist
primarily of property management costs, payroll related expenses, utilities,
food expenses and maintenance and supplies. Rental property operations
expenses increased by 1% from the three months ended June 30, 1994 to the three
months ended June 30, 1995. The increase in rental property operating expenses
is primarily due to increases in payroll expenses and increases in occupancy
which generate increases in expenses.
Assisted Living expenses consist primarily of the related payroll
expense. Assisted living expenses increased by over 21% from the three months
ended June 30, 1994 to the three months ended June 30, 1995. Assisted Living
expenses increased due to the increases in size of the related staff providing
Assisted Living services. This increase corresponds to the increase in
Assisted Living revenue.
General and administrative expenses are comprised of, but not limited
to, costs for accounting, partnership administration, bad debt, data
processing, investor relations, insurance, and professional services. General
and administrative expenses increased about 3% from the three months ended June
30, 1994 to the three months ended June 30, 1995.
Depreciation and amortization expense increased by over 1% from the
three months ended June 30, 1994 to the three months ended June 30, 1995.
Interest expense decreased over 13% for the three months ended June
30, 1994 compared to the three months ended June 30, 1995, as a result of
principal reduction.
Selected costs and expenses for the three months ended June 30, 1995
and June 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
------------------ ------------------
<S> <C> <C>
Rental Property Operations $1,052,147 $1,040,912
Assisted Living 92,545 76,343
General and Administrative 251,743 244,829
Depreciation and Amortization 206,551 203,301
Property Taxes 62,460 63,849
Interest 23,922 7,528
</TABLE>
F-23
<PAGE> 68
Six months ended June 30, 1995 compared with the six months ended June
30, 1994.
Revenue for the six months ended June 30, 1995, and the six months
ended June 30,1994 includes rental income and Assisted Living revenue from all
four facilities, interest earned on cash balances and other revenue. Total
revenues for the six months ended June 30, 1995 were $4,094,504 an increase of
approximately 8% over revenues of $3,804,150 for the six months ended June 30,
1994.
The largest component of revenue, rent, increased by almost 7% from
the six months ended June 30, 1994 to the six months ended June 30, 1995. This
increase in rent was due to an increase in occupancy of approximately 6% and an
increase in rental rates of over 1%.
Revenue from Assisted Living increased by almost 17% from the six
months ended June 30, 1994 to the six months ended June 30, 1995. The increase
in Assisted Living was due to aggressive marketing of the Assisted Living
services and the resulting increase in the number of residents using the
program.
Interest and other revenue decreased by approximately 7% from the six
months ended June 30, 1994 to the six months ended June 30, 1995. Interest
income results from interest earned on cash deposits. Other revenue generally
includes processing fees and beauty shop revenue.
Sources of revenue for the six months ended June 30, 1995 and June 30,
1994 are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994
---------------- ----------------
<S> <C> <C>
Rent $3,614,392 $3,372,451
Assisted Living 384,731 328,941
Interest and Other 95,380 102,758
---------- ----------
Total Revenue $4,094,504 $3,804,150
========== ==========
</TABLE>
Total costs and expenses for the six months ended June 30, 1995 were
$3,376,163, an increase of over 2% over costs and expenses of $3,306,058 for
the six months ended June 30, 1994.
The largest component of expenses, rental property operations, consist
primarily of the property management costs, payroll related expenses,
utilities, food expenses and maintenance and supplies. Rental property
operations expense increased by almost 5% from the six months ended June 30,
1994 to the six months ended June 30, 1995. The increase in rental property
operating expenses is primarily due to increased in payroll expenses and
increases in occupancy which generate increases in expenses.
F-24
<PAGE> 69
Assisted Living expenses consist primarily of the related payroll
expense. Assisted Living expenses increased by over 15% from the six months
ended June 30, 1994 to the six months ended June 30, 1995. Assisted Living
expenses increased due to the increases in size of the related staff providing
Assisted Living services. This increase corresponds to the increase in
Assisted Living revenue.
General and administrative expenses are comprised of, but not limited
to, costs for accounting, partnership administration, bad debt, data
processing, investor relations, insurance, and professional services. General
and administrative expenses increased about 1% from the six months ended June
30, 1994 to the six months ended June 30, 1995.
Depreciation and amortization expense decreased by more than 5% from
the six months ended June 30, 1994 to the six months ended June 30, 1995.
Depreciation and amortization decreased due to a portion of fixed assets
becoming fully depreciated.
Interest expense decreased over 20% for the six months ended June 30,
1994 compared to the six months ended June 30, 1995, as a result of paying off
a loan secured by a first deed of trust on Villa Bonita of $321,250 on or about
March 31, 1994.
Selected costs and expenses for the six months ended June 30, 1995 and
June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
---------------- ----------------
<S> <C> <C>
Rental Property Operations $2,094,808 $2,002,762
Assisted Living 1,230 151,762
General and Administrative 499,043 495,962
Depreciation and Amortization 412,367 434,914
Property Taxes 128,658 132,156
Interest 47,402 59,017
</TABLE>
F-25
<PAGE> 70
PART II
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Item 1 Legal Proceedings
---------------------
None
Item 2 Change in Securities
----------------------
None
Item 3 Defaults Upon Senior Securities
---------------------------
None
Item 4 Submission of Matters to Vote of Security Holders
------------------------------------------
None
Item 5 Other Information
----------------------
On May 25, 1995 the Managing General Partner had a name change from ARV
Housing Group, Inc. to ARV Assisted Living, Inc..
Item 6 Exhibits and Reports on Form 8K
------------------------------
A. Exhibit 27 - Financial Data Schedule
B. None
(continued)
F-26
<PAGE> 71
PART II
AMERICAN RETIREMENT VILLAS PROPERTIES
(a California Limited Partnership)
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN RETIREMENT VILLAS PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
By ARV ASSISTED LIVING, INC.
-------------------------------
Managing General Partner
Date: August 18, 1995 By GARY L. DAVIDSON
-------------------------------
Gary L. Davidson
Chairman of the Board
Date: August 18, 1995 By JOHN A. BOOTY
-------------------------------
John A. Booty
President
F-27
<PAGE> 72
APPENDIX A
FORM OF AGREEMENT WITH
NATIONWIDE HEALTH PROPERTIES, INC.
<PAGE> 73
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
("SELLER")
AND
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
("BUYER")
June 28, 1995
MARIA DEL SOL
RANCHO PARK VILLA
TAMALPAIS CREEK
VILLA BONITA
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II AGREEMENT OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III CLOSING AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1. Closing Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Delivery to Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Delivery to Parties at Closing Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7. Outside Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8. Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV COSTS AND PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1. Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1. Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3. Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1. Brokers and Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3. Further Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5. Entire Agreement; Amendments; Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.7. Incorporation of Exhibits and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8. Time of the Essence; Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.9. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.10. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.11. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.13. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.16. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
2
<PAGE> 75
<TABLE>
<S> <C> <C>
EXHIBIT A LEGAL DESCRIPTION OF LAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B FORM OF BILL OF SALE AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C FORM OF CERTIFICATE OF NON-FOREIGN STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D FORM OF CLOSING CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E FORM OF DEED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F PATIENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G-1 PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1-1
EXHIBIT G-2 EXCLUDED PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-2-1
EXHIBIT H FORM OF CLOSING PROCEDURE LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
EXHIBIT I FORM OF WRITTEN AUTHORIZATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
</TABLE>
3
<PAGE> 76
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made as
of June 28, 1995, by and between AMERICAN RETIREMENT VILLAS PROPERTIES, a
California limited partnership ("SELLER") and NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation ("BUYER").
R E C I T A L S
A. Seller is the fee owner of those certain parcels of
real property more particularly described in Exhibit A attached hereto and by
this reference incorporated herein (each individually, a "PARCEL", and
collectively, the "LAND").
B. The Land is improved with certain buildings and other
Improvements (as hereinafter defined) and each Parcel together with the
Improvements thereon is presently being operated as an assisted living
facility.
C. Seller desires to sell, and Buyer desires to buy, all
of the Property (as hereinafter defined) upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals,
the mutual covenants, agreements and conditions set forth herein and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used herein (including any Exhibits attached hereto), the
following terms shall have the following meanings:
"ARV" shall mean ARV Assisted Living, Inc., a California
corporation.
"ASSIGNMENT OF LESSOR'S INTEREST IN LEASES" shall mean four
(4) separate assignments in favor of Buyer of all of Seller's right, title and
interest in and to the Patient Agreements in form acceptable to Buyer.
"ASSIGNMENT OF RENTS" shall mean an Assignment of Leases,
Rents, Income and Profits with respect to each of the four (4) Parcels and in
form acceptable to Buyer to be executed by ARV, as assignor, in favor of Buyer,
as assignee.
"BILL OF SALE" shall mean a bill of sale in the form attached
as Exhibit B hereto and sufficient to transfer to Buyer all Personal Property.
"BUSINESS AGREEMENT" shall mean any management agreement,
Patient Agreement, loan agreement, mortgage, easement, covenant, restriction or
other agreement or instrument affecting all or a portion of the Property and
which is presently in effect or binding upon Seller or all or any portion of
the Property.
"CASH DEPOSIT" shall mean the cash portion of the security
deposit due from ARV to Buyer under the terms of the Lease and shall be equal
to
4
<PAGE> 77
twenty-five percent (25%) of the annual Minimum Rent due under the Lease. For
example, if the annual Minimum Rent due under the Lease is equal to ten and
thirty-two one-hundredths percent (10.32%) of the Purchase Price, the Cash
Deposit due from ARV shall be equal to Five Hundred Eighty-Five Thousand Six
Hundred Sixty Dollars ($585,660).
"CERTIFICATE OF NON-FOREIGN STATUS" shall mean a certificate
dated as of the Closing Date, addressed to Buyer and duly executed by Seller,
in the form of Exhibit C attached hereto.
"CLAIM" shall mean any obligation, liability, lien,
encumbrance, loss, damage, cost, expense or claim, including, without
limitation, any claim for damage to property or injury to or death of any
person or persons.
"CLOSING" shall mean the consummation of the sale and purchase
provided for herein.
"CLOSING CERTIFICATE" shall mean a certificate in the form of
Exhibit D wherein Seller shall represent that the representations and
warranties of Seller contained in this Agreement are true and correct without
exception as of the Closing Date as if made on and as of the Closing Date.
"CLOSING CONFERENCE" shall mean a conference held on the
Closing Date in order to bring about the Closing at the offices of Buyer's
counsel, or such other place as the parties hereto may hereafter mutually agree
upon.
"CLOSING DATE" shall mean September 30, 1995, or such earlier
or later date as shall be hereafter agreed upon by the parties hereto.
"CLOSING PROCEDURE LETTER" shall mean a letter to the Title
Company executed by Seller and Buyer setting forth directions for the Title
Company in connection with the Closing and in the form of Exhibit H attached
hereto.
"COUNTIES" shall mean, collectively, the four counties in
which the Land is located, which are the County of Santa Barbara, the County of
Los Angeles, Marin County and San Diego County.
"DEED" shall mean a general warranty deed with respect to each
of the four (4) Parcels substantially in the form of Exhibit E attached hereto,
executed by Seller, as grantor, in favor of Buyer, as grantee, conveying the
Land and Improvements to Buyer, subject only to the Permitted Exceptions.
"EXISTING ENCUMBRANCES" shall have the meaning given such term
in Section 4.1(c).
"FINANCING STATEMENT" shall mean a UCC-1 Financing Statement
executed by ARV, as debtor, in favor of Buyer, as secured party, to be filed in
the Office of the California Secretary of State in connection with the Lease.
"FIXTURE" shall mean all property now or upon the Closing Date
located on or about the Property which is attached or appurtenant thereto.
"FIXTURE FILING" shall mean a UCC-1 Financing Statement with
respect to each of the four (4) Parcels executed by ARV, as debtor, in favor of
Buyer, as secured party, to be recorded in the Official Records of the Counties
in connection with the Lease.
5
<PAGE> 78
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous waste, substance or material, pollutant or contaminant, as defined
for purposes of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended, or the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as
amended, or any other federal, state or local law, ordinance, rule or
regulation applicable to the Property, or any substance which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous to the environment or to human health or
safety, or any substance which contains gasoline, diesel fuel or other
petroleum hydrocarbons or byproducts, polychlorinated biphenyls (PCBs), or
radon gas, urea formaldehyde, asbestos or lead.
"IMPROVEMENTS" shall mean all buildings, improvements,
structures and Fixtures now or on the Closing Date located on the Land,
including, without limitation, parking lots and structures, roads, drainage and
other utility structures and other so- called "infrastructure" improvements.
"INTANGIBLE PROPERTY" means all Permits and other intangible
property or any interest therein now or on the Closing Date owned or held by
Seller in connection with the Land, the Improvements or the Fixtures, or any
business or businesses now or hereafter conducted by Seller thereon or with the
use thereof, including all rights of Seller in and to all Plans and
Specifications, leases, contract rights, agreements, water rights and
reservations, zoning rights, business licenses and warranties (including those
relating to construction or fabrication) related to the Land, the Improvements
or the Fixtures, or any part thereof; provided, however, "Intangible Property"
shall not include Patient Agreements, trade names relating to the Property or
the general corporate trademarks, servicemarks, logos or insignia or books and
records of Seller or relating to the Property.
"LAND" shall have the meaning given such term in Recital A
hereof.
"LAWS" means all federal, state and local laws, moratoria,
initiatives, referenda, ordinances, rules, regulations, standards, orders and
other governmental requirements, including, without limitation, those relating
to the environment, health and safety, or handicapped persons, where the
failure to abide by the same would have a material adverse effect on Buyer,
Seller or the Property or the operation or use thereof.
"LEASE" shall mean a Lease and Security Agreement with respect
to the each of the four (4) Parcels and in form and substance acceptable to
Buyer to be executed on or before the Closing Date between Buyer, as landlord,
and ARV, as tenant.
"LEASEHOLD POLICY" shall mean an ALTA Extended Coverage
Leasehold Policy of Title Insurance, together with such endorsements thereto as
are reasonably requested by ARV, with liability in the amount of the Purchase
Price, dated as of the Closing Date, issued by the Title Company, insuring
ARV's leasehold fee interest in the Real Property pursuant to the Lease.
"MEMORANDUM OF LEASE" shall mean a memorandum of lease with
respect to each of the four (4) Parcels executed by ARV, as tenant, and Buyer,
as landlord, to be recorded in the Official Records of the Counties.
"PARCEL" shall have the meaning given such term in Recital A
hereof.
6
<PAGE> 79
"PATIENT AGREEMENTS" shall mean all leases, rental and
occupancy agreements, lease commitments, nursing care admission and payment
documents, reservation agreements and concessions, and all deposits made
thereunder with respect to the period from and after the Closing Date, relating
to the Property, as more particularly described on Exhibit F attached hereto.
"PERMITS" means all permits, licenses, approvals, entitlements
and other governmental and quasi-governmental authorizations including, without
limitation, certificates of occupancy, required in connection with the
ownership, planning, development, construction, use, operation or maintenance
of each of the Parcels as an assisted living facility, and all amendments,
modifications, supplements, general conditions and addenda thereto. As used
herein, "quasi-governmental" shall include the providers of all utility
services to the Property.
"PERMITTED EXCEPTIONS" shall mean those title exceptions or
defects which have been approved in writing by Buyer to appear as exceptions on
the Title Policy.
"PERSONAL PROPERTY" shall mean all Intangible Property and all
furnishings, equipment (including, without limitation, the equipment described
on Exhibit G-1 attached hereto), tools, machinery, fixtures, appliances and all
other tangible personal property, other than the Fixtures, now or on the
Closing Date located on or about the Land or Improvements or used in connection
with the operation thereof which is owned by Seller, specifically excluding
accounts receivable, patient trust accounts, computer equipment, food,
pharmaceuticals, supplies, linens, clothing, medical records, vehicles and
other personal property owned by patients, tenants and invitees of the Property
and specifically excluding the personal property described on Exhibit G-2
attached hereto.
"PLANS AND SPECIFICATIONS" shall mean all drawings, plans,
specifications, blueprints, studies, structural reviews, and engineering, soil,
seismic, geologic, architectural and other reports relating to the Property.
"PROPERTY" means, collectively, the Land and all rights,
titles, and appurtenant interests, the Improvements, the Fixtures, the Personal
Property and the Intangible Property. As used in the foregoing, "appurtenant
interests" shall mean those interests which pass by operation of law with the
conveyance of the fee simple estate in the Land and Improvements.
"PURCHASE PRICE" shall mean an amount equal to Twenty-Two
Million Seven Hundred Thousand Dollars ($22,700,000), which sum shall be
allocated among the Parcels as follows: (a) Maria del Sol = $4,125,000; (b)
Rancho Park Villa = $5,250,000; (c) Tamalpais Creek = $6,125,000; and (d) Villa
Bonita = $7,200,000.
"REAL PROPERTY" shall mean the Land, the Improvements and the
Fixtures.
"TITLE COMPANY" shall mean the underwriter of the Title Policy
and shall be First American Title Insurance Company, or such other title
insurer as is approved by Buyer in its reasonable discretion.
"TITLE POLICY" shall mean an ALTA Extended Coverage Owner's
Policy of Title Insurance (1970 Form B), together with such endorsements
thereto as are reasonably requested by Buyer, with liability in the amount of
the Purchase Price, dated as of the Closing Date, issued by the Title Company,
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insuring title to the fee interest in the Real Property in Buyer, subject only
to the Permitted Exceptions and to the standard printed exceptions included in
the ALTA standard form owner's extended coverage policy of title insurance.
"WARRANTIES" shall mean all warranties, representations and
guaranties with respect to the Property, whether express or implied, which
Seller now holds or under which Seller is the beneficiary.
"WRITTEN AUTHORIZATION TO CLOSE" shall mean a letter to the
Title Company, in the form of Exhibit I, executed by Buyer and Seller,
directing the Title Company to comply with the instructions in the Closing
Procedure Letter.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE
2.1. AGREEMENT TO PURCHASE AND SELL. Seller hereby agrees to
sell, convey and assign the Property to Buyer, and Buyer agrees to buy and
accept the Property from Seller, on the terms and conditions and for the
Purchase Price as hereinafter set forth.
ARTICLE III
CLOSING AND CONDITIONS
3.1. CLOSING CONFERENCE. The Closing shall take place at the
Closing Conference on or before the Closing Date.
3.2. DELIVERY TO TITLE COMPANY.
(a) DELIVERIES BY SELLER. On or before the Closing Date
Seller shall deliver or cause to be delivered to Title Company:
(i) a duly executed and acknowledged Deed for each
of the four (4) Parcels, together with any and all transfer
declarations or disclosure documents, duly executed by the appropriate
parties, required in connection with such Deeds by any state, city or
county agency having jurisdiction over the Property or the
transactions contemplated hereby;
(ii) a duly executed and acknowledged Assignment of
Lessor's Interest in Leases for each of the four (4) Parcels;
(iii) a Fixture Filing, duly executed by ARV with
respect to each of the four (4) Parcels;
(iv) a Memorandum of Lease and the Assignment of
Rents, duly executed and acknowledged by ARV with respect to each of
the four (4) Parcels;
(v) payoff letters from the holders or claimants
of, or with respect to, any encumbrance or monetary lien affecting
the Property;
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(vi) a wire transfer from ARV for the account of
Buyer in an amount equal to the sum of the Minimum Rent due under the
Lease for the period commencing on the Closing Date and ending on
October 31, 1995); and
(vii) a wire transfer from ARV for the account of
Buyer in the amount of the Cash Deposit, representing the cash portion
of the security deposit required pursuant to Section 11 of the Lease;
(b) DELIVERIES BY BUYER. On or before the
Closing Date Buyer shall deliver to the Title Company:
(i) a duly executed and acknowledged Memorandum
of Lease with respect to each of the four (4) Parcels; and
(ii) the Purchase Price by wire transfer to the
Title Company in same day available funds.
(c) CLOSING PROCEDURE LETTER. The deliveries to be made
to Title Company under this Section 3.2 shall be made in accordance with
and subject to the Closing Procedure Letter.
3.3. DELIVERY TO PARTIES AT CLOSING CONFERENCE. Upon
satisfaction of all the conditions in the Closing Procedure Letter for
recordation of the instruments described above and upon receipt by Buyer and
Seller of written advice from Title Company that such conditions have been
satisfied and that Title Company is prepared to record the Deeds, disburse funds
and issue its unconditional, irrevocable commitment to issue the Title Policy,
the following items are to be delivered at the Closing Conference:
(a) ITEMS TO BE DELIVERED BY SELLER. Seller shall
deliver to Buyer the following items, all of which shall be in form and
substance acceptable to Buyer, and each of which shall be executed by
Seller (or other appropriate party) and acknowledged by a notary public
where applicable:
(i) The Bill of Sale;
(ii) The Certificate of Non-Foreign Status;
(iii) The Lease, duly executed by ARV;
(iv) The Financing Statement with respect to the
Tenant Personal Property (as defined in the Lease), duly executed by
ARV;
(v) A Closing Certificate, dated as of the Closing
Date;
(vi) A Certificate of Partnership Authorization of
Seller;
(vii) Certificates of insurance for the Property from
ARV as are required pursuant to the Lease, showing Buyer as an
additional insured and loss payee thereunder, with appropriate
provisions for prior notice to Buyer in the event of cancellation or
termination of such policies;
(viii) Such evidence of the due execution, delivery
and authorization of documents executed by Seller and ARV in
connection
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with this Agreement and the transactions contemplated hereunder as
Buyer may reasonably request;
(ix) A promissory note in the original principal
amount of the Cash Deposit executed by ARV, as maker, in favor of
Buyer, as holder (the "NOTE"), representing the balance of the
security deposit required pursuant to Section 11 of the Lease; and
(x) A repayment guaranty with respect to the Note
executed by Gary L. Davidson, John A. Booty and David P. Collins, as
guarantors, in favor of Buyer.
(b) ITEMS TO BE DELIVERED BY BUYER. Buyer shall deliver
to Seller the following items, all of which shall be in form and substance
acceptable to Seller, and each of which shall be executed by Buyer (or
other appropriate party) and acknowledged by a notary public where
applicable:
(i) The Lease;
(ii) A Certificate of Secretary of Buyer; and
(iii) Such evidence of the due execution, delivery
and authorization of documents executed by Buyer in connection with this
Agreement and the transactions contemplated hereunder as Seller may
reasonably request.
(c) ITEMS TO BE DELIVERED BY BOTH BUYER AND SELLER.
Buyer and Seller shall jointly deliver all notices of change of ownership
or other similar notices required by any governmental or quasi-governmental
authority or agency having jurisdiction over the Property or any portion
thereof or any activities occurring on the Property or deemed reasonably
advisable by Buyer.
(d) WRITTEN AUTHORIZATION TO CLOSE. Upon receipt of the
items described in this Section 3.3, and upon compliance with the other
terms and conditions of this Agreement, Seller and Buyer shall execute and
deliver to Title Company the Written Authorization to Close.
3.4. TITLE INSURANCE. As a condition to Buyer's obligation
to consummate the transactions herein contemplated, Buyer shall receive on the
Closing Date a proforma of the Title Policy acceptable to Buyer and an
unconditional, irrevocable commitment from the Title Company to issue the Title
Policy in conformity with the aforementioned proforma. Seller shall deliver to
Title Company such instruments, documents, payments, indemnities, releases and
agreements and shall perform such other acts as Title Company shall reasonably
require in order to issue the Title Policy.
3.5. ADDITIONAL CONDITIONS.
(a) MUTUAL CONDITIONS. In addition to the conditions
provided in other provisions of this Agreement, each party's obligation to
perform its undertakings provided in this Agreement is conditioned upon the
following:
(i) PERFORMANCE BY OTHER PARTY. The due
performance by the other party of each and every material undertaking
and agreement to be performed by it hereunder (including the delivery
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by such other party of the items specified in Sections 3.2 and 3.3
above).
(ii) REPRESENTATIONS AND WARRANTIES. Each
representation and warranty made by the other party in this Agreement
shall be true and correct in all material respects on the date hereof
and at all times up to and including the Closing Date.
(iii) NO BANKRUPTCY OR DISSOLUTION. None of the
following shall have been done by, against or with respect to Buyer,
Seller or any person or entity as to which Seller or its principals
have effective management control: (A) the commencement of a case
under Title 11 of the U.S. Code, as now constituted or hereafter
amended, or under any other applicable federal or state bankruptcy law
or other similar law; (B) the appointment of a trustee or receiver of
any property interest; (C) an assignment for the benefit of creditors;
(D) an attachment, execution or other judicial seizure of a
substantial property interest; (E) the taking of, failure to take, or
submission to any action indicating an inability to meet its financial
obligations as they accrue; (F) a dissolution or liquidation; or (G)
any material adverse change in the financial condition of such party.
(b) CONDITIONS TO BUYER'S PERFORMANCE. In addition to
the conditions provided elsewhere in this Agreement, Buyer's obligation to
perform its undertakings provided in this Agreement is conditioned upon the
following:
(i) NO DAMAGE. Prior to the Closing Date, no
destruction of or damage or loss from any cause whatsoever, shall have
occurred with respect to the Property which, according to Buyer's
reasonable estimate, would cost, in the aggregate, more than One
Hundred Thousand Dollars ($100,000) to repair, restore and replace or
would cost more than One Hundred Thousand Dollars ($100,000) to
repair, restore and replace with respect to the Property, or would
take longer than sixty (60) days to repair, restore and replace.
Notwithstanding the foregoing, in the event that, despite destruction
of or loss or damage to the Property, the transaction herein provided
shall be consummated, Seller shall, at its sole cost and expense,
repair, or cause to be repaired such destruction, loss or damage as
soon as possible.
(ii) NO TAKING. No taking, threatened taking (or
consideration by a governmental authority of a taking) of any one of
the Parcels or any material part thereof by eminent domain shall have
occurred which would materially and adversely affect the value or use
of any such Parcel.
(iii) APPROVAL OF DUE DILIGENCE RESULTS. On or
before the Closing Date, Buyer shall have completed or received, as
applicable, and approved:
(A) the inspection of the Property with
respect to the physical condition thereof by agents or
contractors selected by Buyer;
(B) an environmental assessment of the Real
Property by a qualified environmental consultant selected by
Buyer;
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(C) structural, mechanical and engineering
reports with respect to the Property by a consultant selected by
Buyer;
(D) evidence of compliance with all building
codes, zoning ordinances and other governmental entitlements as
necessary for the operation of each of the Parcels as an assisted
living facility, including without limitation, certificates of
occupancy and such other permits, licenses, approvals, agreements
and authorizations as are required for the operation of the
Property for such uses; and
(E) all consents necessary or required by
Buyer in connection with the transfer of the Intangible Property
to Buyer.
(iv) APPROVAL OF PATIENT AGREEMENTS. Buyer shall
have completed its review of and shall have approved the terms and
conditions of the Patient Agreements and all documents, agreements,
letters of credit, deposits and other matters executed or delivered in
connection with the Property or the Patient Agreements.
(v) BOARD APPROVAL. The transactions contemplated
by this Agreement shall have been approved by the Board of Directors
of Buyer.
(c) CONDITIONS TO SELLER'S PERFORMANCE. In addition to
the conditions provided elsewhere in this Agreement, Seller's obligation to
perform its undertakings provided in this Agreement is conditioned upon its
receipt of the approval of the transactions contemplated hereunder by more
than fifty percent (50%) of Seller's limited partners.
3.6. WAIVER OF CONDITIONS. Any party may at any time or
times, in its sole discretion, waive any of the conditions to its obligations
hereunder, but any such waiver shall be effective only if contained in a writing
signed by such party. No waiver by a party of any breach of this Agreement or
of any warranty or representation hereunder by the other party shall be deemed
to be a waiver of any other breach by such other party (whether preceding or
succeeding and whether or not of the same or similar nature), and no acceptance
of payment or performance by a party after any breach by the other party shall
be deemed to be a waiver of any breach of this Agreement or of any
representation or warranty hereunder by such other party, whether or not the
first party knows of such breach at the time it accepts such payment or
performance. No failure or delay by a party to exercise any right it may have
by reason of the default of the other party shall operate as a waiver of such
default or as a modification of this Agreement nor shall any such failure or
delay prevent the exercise of any right by the nonbreaching party while the
default continues. Without limiting the generality of the foregoing, in the
event that for any reason any item required to be delivered to Buyer or Seller
hereunder shall not be delivered when required, then the party obligated to make
such delivery shall nevertheless remain obligated to deliver the same to the
party entitled to receive such delivery provided the other party delivers a
written request for such delivery within six (6) months following the Closing
Date and nothing (including the closing of the transaction hereunder) shall be
deemed a waiver by the party entitled to receive such delivery of any such
requirement, except an express written waiver or a failure to make such request
within the foregoing time period.
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3.7. OUTSIDE DATE. In the event that for any reason the
transactions contemplated hereby shall not be consummated on or before the
Closing Date, either party hereto may extend the Closing Date to October 15,
1995, by delivering written notice of such election to the other party. In the
event that for any reason the transactions contemplated hereby shall not be
consummated on or before October 15, 1995, then (unless Buyer commences an
action to specifically enforce this Agreement within 30 days thereafter) either
party may at any time after the Closing Date, by written notice to the other
party, terminate this Agreement and the obligations of the parties hereunder;
provided, however, that such termination shall not release any party from
liability for any breach of this Agreement occurring prior to such termination.
3.8. BULK SALES COMPLIANCE. Buyer and Seller hereby waive
compliance with the notice provisions of the California Bulk Sales Statute
(California UCC Code Section 6101 et seq.). Seller shall indemnify, defend and
hold harmless Buyer from and against any and all claims, losses, damages,
liabilities, costs and expenses (including reasonable legal fees and expenses)
paid or incurred by Buyer and arising directly or indirectly out of
noncompliance with bulk sales statutes.
ARTICLE IV
COSTS AND PRORATIONS
4.1. CLOSING COSTS.
(a) SELLER'S COSTS. Seller shall pay:
(i) any and all state, municipal or other
documentary, transfer, sales or use taxes payable in connection
with the delivery of any instrument or document provided in or
contemplated by this Agreement, any agreement or commitment
described or referred to herein or the transactions
contemplated herein;
(ii) all expenses of or related to the issuance of
the Title Policy (excluding the costs of any surveys required
by Buyer and the Title Company) and all escrow fees and
charges;
(iii) the charges for or in connection with the
recording and/or filing of any instrument or document provided
herein or contemplated by this Agreement or any agreement or
document described or referred to herein;
(iv) any and all broker's fees or similar fees
claimed by any party employed by Seller in connection with the
transactions contemplated herein; and
(v) Seller's legal, accounting and other
professional fees and expenses and the cost of all instruments
and documents required to be delivered, or to cause to be
delivered, by Seller hereunder, including without limitation,
the cost of all performances by Seller of its obligations
hereunder.
(b) BUYER'S COSTS. Buyer shall pay:
(i) any and all broker's fees or similar fees
claimed by any party employed by Buyer in connection with the
transactions hereunder, provided, however, Buyer shall not be
deemed to have
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employed any party by merely receiving information concerning
Seller, the Property or related to the transactions
contemplated hereunder or by executing any agreement to hold
such information confidential;
(ii) all costs of any site inspections or
environmental audits relating to the Property;
(iii) the costs of any surveys required by Buyer and
the Title Company; and
(iv) Buyer's legal, accounting and other
professional fees and expenses and the cost of all instruments
and documents required to be delivered by Buyer hereunder,
including, without limitation, the cost of all performances by
Buyer of its obligations hereunder.
(c) EXISTING FINANCING. The Property is presently
encumbered by certain deeds of trust and certain other security instruments
(individually and collectively, the "EXISTING ENCUMBRANCES"). Seller shall
cause the Existing Encumbrances and all indebtedness secured thereby to be
fully satisfied, released and discharged of record on or prior to the
Closing Date (recognizing that Seller may use the proceeds of the sale
contemplated hereby to satisfy the same) so that Buyer shall take title to
the Property free of the Existing Encumbrances. Seller acknowledges that
such satisfaction, release and discharge may involve prepayment penalties
or premiums and other costs or expenses, all of which shall be paid by
Seller at its sole cost and expense on or before the Closing Date.
4.2. PRORATIONS.
(a) ITEMS TO BE PRORATED. All prorations to be made
with respect to the income and expenses of the Property shall be made
between ARV and Seller. Buyer shall have no obligations or liability with
respect to any such income or expenses.
(b) INDEBTEDNESS. Seller shall pay all amounts which
are due or accrue under the Existing Encumbrances prior to and including
the Closing Date, including, without limitation, all interest accrued on
all of the same prior to and including the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Buyer the following:
(a) TITLE. Buyer will acquire hereunder good,
marketable and insurable title to, and the entire right, title, and
interest in, the Property, free and clear of any and all leases, liens,
encumbrances, or other liabilities, subject only to the Permitted
Exceptions and the Patient Agreements approved by Buyer.
(b) UTILITIES. To the best of Seller's knowledge
after due inquiry, each of the Parcels has available to its boundaries
adequate utilities, including without limitation, adequate water supply,
storm and sanitary sewage facilities, telephone, gas, electricity and fire
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protection, as is required for the operation of each of the Parcels as an
assisted living facility.
(c) PHYSICAL CONDITION; COMPLETENESS.
(i) To the best of Seller's knowledge after due
inquiry, the Property has been constructed in a good,
workmanlike and substantial manner, free from material
defects and in accordance with all Laws.
(ii) To the best of Seller's knowledge after due
inquiry, neither the zoning nor any other right to construct
upon or to use the Property is to any extent dependent upon or
related to any real estate other than the Property, the
improvement of such other real estate or the payment of any
fees for the improvement of such other real estate.
(iii) To the best of Seller's knowledge after due
inquiry, the Property, and each portion thereof, is in good
condition and repair and is free from material defects.
(iv) To the best of Seller's knowledge after due
inquiry, there are no soil conditions adversely affecting the
Property.
(v) To the best of Seller's knowledge after due
inquiry, there are and have been no Hazardous Materials
installed or stored in or otherwise existing at, on, in or
under the Property which are or have been at any time in
violation of any applicable Laws or which are or have been at
any time in amounts or concentrations sufficient to require the
reporting of such materials to any governmental authority.
(d) COMPLIANCE. Seller has obtained all consents,
approvals, licenses, permits and other permissions related to the
transactions contemplated herein as are required under any Business
Agreement or Laws and as are required for the use and operation of the
Property. Notwithstanding the foregoing, if any additional consents,
approvals, licenses, permits or other permissions are required in
connection with such transactions or the Property, Seller hereby agrees
that Seller shall, as promptly as practical, use its best efforts to
obtain all such additional consents, approvals, licenses, permits and
other permissions related to the transactions contemplated herein or
the Property.
(e) ZONING. To the best of Seller's knowledge after due
inquiry, the Property is properly and full zoned for its current use
and the Property and the operation and use thereof, including, without
limitation, all boundary line adjustments to the Property, comply with
all applicable Laws.
(f) NO NOTICES OF NON-COMPLIANCE. Seller has received
no notice that and, after due inquiry Seller has no knowledge that (I)
any government agency or any employee or official thereof considers
that the operation or use of any of the Parcels as an assisted living
facility to have failed or will fail to comply with any Law, (ii) any
investigation has been commenced or is contemplated respecting any such
possible or actual failure of the operation or use of any of the
Parcels as an assisted living facility to comply with any Law, and
(iii) there are any unsatisfied requests for repairs, restorations or
alterations with regard to the Property from any person, entity or
authority, including,
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but not limited to, any tenant, lender, insurance carrier or government
authority.
(g) DUE AUTHORIZATION, EXECUTION, ORGANIZATION, ETC.
(i) This Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to
be executed by Seller or ARV, and on the Closing Date will be,
duly authorized, executed and delivered by and are binding in
accordance with their terms upon, Seller or ARV, as applicable,
subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
application and of legal or equitable principles generally and
covenants of good faith and fair dealing.
(ii) Seller is a limited partnership, duly
organized, validly existing and in good standing under the laws
of the State of California. Seller has the power and authority
to enter into this Agreement and all agreements, instruments
and documents herein provided and to consummate the
transactions contemplated thereby.
(iii) ARV is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
California. ARV has the power and authority to enter into all
agreements, instruments and documents herein provided and to
consummate the transactions contemplated thereby.
(iv) Neither this Agreement nor any agreement,
document or instrument executed or to be executed in connection
with this Agreement, nor anything provided in or contemplated
by this Agreement or any such other agreement, document or
instrument, does now or shall hereafter breach, invalidate,
cancel, make inoperative or interfere with, or result in the
acceleration or maturity of, any agreement, document,
instrument, right or interest, affecting or relating to Seller,
ARV or the Property.
(h) TRUE, CORRECT AND COMPLETE INFORMATION.
(i) To the best of Seller's knowledge after due
inquiry, all documents, plans, surveys and other data or
information prepared by parties other than Seller or Seller's
agents or employees and provided to Buyer in connection
herewith are true, correct and complete in all material
respects and disclose all material facts with no material
omissions with respect thereto.
(ii) All documents and other data or information
prepared by Seller or Seller's agents or employees are true,
correct and complete in all material respects with no material
omissions with respect thereto.
(i) EXISTING AGREEMENTS. There are no material
agreements or understandings (whether written or oral) to which Seller
or ARV is a party or is bound, including, without limitation, any
Business Agreements, relating to the Property or the operation or use
thereof other than the Permitted Exceptions and those documents and
instruments which have been delivered to Buyer by Seller and ARV prior
to the Closing Date.
(j) DEFAULT. Seller is not in default with respect to
any of its material obligations or liabilities pertaining to the
Property.
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Without limiting the foregoing, the Permitted Exceptions are free from
material default by Seller and, to the best of Seller's actual
knowledge, by any other party thereto.
(k) LITIGATION; CONDEMNATION. To the best of Seller's
knowledge after due inquiry, there are no material actions, suits or
proceedings pending or threatened before or by any judicial,
administrative or union body, any arbiter or any governmental
authority, against or affecting Seller, ARV or the Property or any
portion thereof. To the best of Seller's knowledge after due inquiry,
there are no existing, proposed or threatened eminent domain or similar
proceedings which would affect the Land or Improvements in any manner
whatsoever.
(l) WARRANTIES. Seller has delivered to Buyer true,
correct and complete copies of all material Warranties. To the best of
Seller's knowledge after due inquiry, the Warranties are in full force
and effect with no defaults thereunder. The Warranties have not been
assigned to or by any other party and Seller has the right and
authority to assign the Warranties to Buyer.
5.2. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller as follows:
(a) This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be executed
by Buyer are and on the Closing Date will be duly authorized, executed
and delivered by and are binding upon Buyer, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application and by legal or equitable principles
relating to, limiting or affecting the enforceability of creditors'
rights generally.
(b) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland
and duly authorized and qualified to do all things required of it under
this Agreement.
(c) Buyer has the authority to enter into this Agreement
and consummate the transactions herein provided and nothing prohibits
or restricts the right or ability of Buyer to close the transactions
contemplated hereunder and carry out the terms hereof.
5.3. INDEMNIFICATIONS.
(a) INDEMNIFICATION BY SELLER. Seller shall hold
harmless, indemnify and defend Buyer and the Property from and against
any Claim that (I) is inconsistent with (or results from any actual or
alleged fact that is inconsistent with) any representation or warranty
of Seller contained in this Agreement, in any document executed in
connection with this Agreement, (ii) results from any breach or default
by Seller under this Agreement, or (iii) arises out of the negligent or
intentional act or omission of Seller, to the extent such Claim arises
out of such negligent or intentional act or omission. Nothing in this
Agreement shall be construed to relieve Seller of any liability which
Seller may have to Buyer under any Laws relating to Hazardous
Materials.
(b) INDEMNIFICATION BY BUYER. Buyer shall hold
harmless, indemnify and defend Seller from and against any Claim that
(I) is inconsistent with (or results from any actual or alleged fact
that is inconsistent with) any representation or warranty of Buyer
contained in this Agreement or in any document executed in connection
with this
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Agreement, (ii) results from any breach or default by Buyer under this
Agreement, or (iii) arises out of the negligent or intentional act or
omission of Buyer, to the extent such Claim arises out of such
negligent or intentional act or omission of Buyer occurring after the
Closing Date or occurring during the course of Buyer's inspection of
the Property prior to the Closing Date.
(c) GENERAL INDEMNITY PROVISIONS. Each indemnity
provided for under this Agreement shall be subject to the following
provisions:
(i) The indemnity shall cover the costs and expenses
of the indemnitee, including reasonable attorneys' fees and
costs (including expert fees), related to any actions, suits or
judgments incident to any of the matters covered by such
indemnity.
(ii) The indemnitee shall notify the indemnitor of
any Claim against the indemnitee covered by the indemnity
within one hundred eighty (180) days after it has notice of
such Claim, but failure to notify the indemnitor shall in no
case prejudice the rights of the indemnitee under this
Agreement unless the indemnitor shall be prejudiced by such
failure and then only to the extent the indemnitor shall be
prejudiced by such failure. Should the indemnitor fail to
discharge or undertake to defend the indemnitee against such
liability upon learning of the same, then the indemnitee may
settle such liability, and the liability of the indemnitor
hereunder shall be conclusively established by such settlement,
the amount of such liability to include both the settlement
consideration and the reasonable costs and expenses, including
attorneys' fees and costs (including expert fees), incurred by
the indemnitee in effecting such settlement.
(iii) The indemnity shall also run in favor of any
officer, director, employee, advisor, accountant, attorney,
partner or shareholder of the indemnitee or any person or
entity having a direct or indirect ownership interest in the
indemnitee.
(d) LIMITATIONS ON BUYER'S RECOURSE. Notwithstanding any
of the other provisions of this Section 5.3, Buyer acknowledges and
agrees that (I) the transactions contemplated under this Agreement
constitute the sale of substantially all of the assets of Seller; (ii)
promptly following the Closing Date, Seller shall disburse the net
proceeds of the sale and any other remaining assets to its partners in
accordance with the terms of Seller's limited partnership agreement;
(iii) the limited partnership comprising Seller shall thereafter be
dissolved; and (iv) Buyer shall have no recourse against any of the
limited partners of Seller (except for any such limited partners that
are also a general partner of Seller) for any Claim arising out of the
provisions of Section 5.3(a) above, and any such Claim by Buyer shall
be brought solely against the general partners of Seller; provided,
however, that Buyer may assert a Claim in the name of Seller if it is
considered necessary in Buyer's judgment to enforce Seller's
indemnifications against the general partners of Seller.
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ARTICLE VI
MISCELLANEOUS
6.1. BROKERS AND CONSULTANTS. Seller represents and warrants
to Buyer that Seller shall be solely responsible for the payment of any
brokerage commissions or finder's fee due or claimed to be due in connection
with the transactions contemplated hereby and Seller shall indemnify, defend and
save Buyer harmless from and against any such liability. Notwithstanding the
foregoing, Buyer represents and warrants to Seller that no broker or finder has
been engaged by Buyer in connection with any of the transactions contemplated by
this Agreement. In the event of a claim for broker's or finder's fee or
commissions in connection herewith based upon any agreement inconsistent with
the foregoing representation and warranty by Buyer, Buyer shall indemnify and
defend Seller from such claim. For purposes of this Section 6.1, Buyer shall
not be deemed to have engaged any broker or finder by merely receiving
information concerning Seller, the Property or related to the transactions
contemplated hereunder or by executing any agreement to hold such information
confidential.
6.2. SURVIVAL. All warranties, representations, covenants,
obligations and agreements contained in this Agreement shall survive the Closing
hereunder and the transfer and conveyance of the Property hereunder and any and
all performances hereunder. All warranties and representations shall be
effective regardless of any investigation made or which could have been made.
6.3. FURTHER INSTRUMENTS. Each party will, whenever and as
often as it shall be reasonably requested so to do by the other, cause to be
executed, acknowledged or delivered, any and all such further instruments and
documents as may be necessary or proper, in the reasonable opinion of the
requesting party, in order to carry out the intent and purpose of this
Agreement.
6.4. LIMITATION OF LIABILITY. No advisor, trustee, director,
officer, employee, accountant, attorney, beneficiary, shareholder, partner,
participant or agent of or in Buyer or Seller shall have any personal liability,
directly or indirectly, under or in connection with this Agreement or any
agreement made or entered into under or pursuant to the provisions of this
Agreement, or any amendment or amendments to any of the foregoing made at any
time or times, heretofore or hereafter. Seller and Buyer and their respective
successors and assigns and, without limitation, all other persons and entities,
shall look solely to Seller's or Buyer's, as applicable, assets for the payment
of any claim or for any performance, and Buyer and Seller hereby waive any and
all such personal liability except as set forth herein. The limitations of
liability provided in this Section are in addition to, and not in limitation of,
any limitation on liability applicable to Seller or Buyer, as applicable,
provided by law or by any other contract, agreement or instrument.
6.5. ENTIRE AGREEMENT; AMENDMENTS; CAPTIONS. This Agreement
and the documents referenced herein contain the entire agreement between the
parties respecting the matters herein set forth and supersede all prior or
contemporaneous agreements or understandings, verbal or written, between the
parties hereto respecting such matters. This Agreement may be amended by
written agreement of amendment executed by both parties hereto, but not
otherwise. Section headings shall not be used in construing this Agreement.
6.6. CONSENTS AND APPROVALS. Except as otherwise expressly
provided herein, any approval or consent provided to be given by a party
hereunder may be given or withheld in the absolute discretion of such party.
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<PAGE> 92
6.7. INCORPORATION OF EXHIBITS AND RECITALS. All exhibits
attached and referred to in this Agreement and all Recitals set forth at the
beginning of this Agreement are hereby incorporated herein as fully set forth
in this Agreement.
6.8. TIME OF THE ESSENCE; NON-BUSINESS DAYS. Subject to the
next full sentence, time is of the essence of this Agreement. Whenever action
must be taken (including the giving of notice or the delivery of documents)
under this Agreement during a certain period of time or by a particular date
that ends or occurs on a non-business day, then such period or date shall be
extended until the immediately following business day. As used herein,
"business day" means any day other than Saturday, Sunday or a federal holiday.
6.9. TERMINOLOGY. Whenever the words "including", "include"
or "includes" are used in this Agreement, they should be interpreted in a
non-exclusive manner as though the words ", without limitation," immediately
followed the same. Except as otherwise indicated, all Section and Exhibit
references in this Agreement shall be deemed to refer to the Sections and
Exhibits in or to this Agreement.
6.10. ATTORNEYS' FEES. In the event any legal action or
proceeding is commenced to interpret or enforce the terms of, or obligations
arising out of, this Agreement, or to recover damages for the breach thereof,
the party prevailing in any such action or proceedings shall be entitled to
recover from the non-prevailing party all attorneys' fees and reasonable costs
and expenses incurred by the prevailing party, including such fees and costs
incurred with respect to appeals, arbitrations and bankruptcy proceedings. As
used herein, "attorneys' fees" shall mean the fees and expenses of counsel to
the parties hereto, which may include printing, photostating, duplicating and
other expenses, air freight charges, and fees billed for law clerks, paralegals,
librarians and others not admitted to the bar but performing services under the
supervision of an attorney. The term "attorneys' fees" shall also include,
without limitation, all such fees and expenses incurred with respect to appeals,
arbitrations and bankruptcy proceedings.
6.11. CUMULATIVE REMEDIES. No remedy conferred upon a party in
this Agreement is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law, in
equity or by statute (except as otherwise expressly herein provided).
6.12. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of California,
without regard to the rules governing choice of law.
6.13. SUCCESSORS AND ASSIGNS. Neither Buyer nor Seller may
assign or transfer its rights or obligations under this Agreement without the
prior written consent of the other party (in which event such transferee shall
assume in writing all of the transferor's obligations hereunder, but such
transferor shall not be released from its obligations hereunder). No consent
given by either party hereto to any transfer or assignment of the other party's
rights or obligations hereunder shall be construed as a consent to any other
transfer or assignment of such other party's rights or obligations hereunder. No
transfer or assignment in violation of the provisions hereof shall be valid or
enforceable. Subject to the foregoing and the provisions of Section 3.8, this
Agreement and the terms and provisions hereof shall
20
<PAGE> 93
inure to the benefit of and be binding upon the successors and assigns of the
parties.
6.14. NOTICES. Any notice which a party is required or may
desire to give the other shall be in writing and shall be sent by personal
delivery or by either (I) United States registered or certified mail, return
receipt requested, postage prepaid, or (ii) Federal Express or similar generally
recognized overnight carrier regularly providing proof of delivery, addressed as
follows:
To Seller: To Buyer:
American Retirement Villas Nationwide Health Properties, Inc.
c/o ARV Assisted Living, Inc. 4675 MacArthur Court
245 Fischer Avenue, Bldg. D-1 Suite 1170
Costa Mesa, CA 92626 Newport Beach, CA 92660
Attn: Sheila M. Muldoon, Esq. Attn: Mr. R. Bruce Andrews
With Copy To:
Sherry & Holthouse
18301 Von Karman Avenue
Suite 420
Irvine, CA 92715
Attn: Kevin L. Sherry, Esq.
Any notice so given by mail shall be deemed to have been given as of the date
of delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the case may
be, whether accepted or refused. Any such notice not so given shall be deemed
given upon receipt of the same by the party to whom the same is to be given.
Any party hereto may designate a different address for itself by notice to the
other party in accordance with this Section 6.14. In the event a party is not
a natural person, delivery to an officer, director or partner of such party
shall be deemed delivery to such party.
6.15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
6.16. BOOKS AND RECORDS. In the event Buyer reasonably requires
copies thereof, Seller hereby covenants and agrees that it shall cooperate and
comply in a timely fashion with Buyer's reasonable requests for delivery of any
financial documents, instruments, bills, checks, invoices and other books and
records relating to all or any part of the Property.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 94
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: ____________________________________
T. Andrew Stokes
Its: Vice President
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
22
<PAGE> 95
EXHIBIT A
LEGAL DESCRIPTION OF LAND
MARIA DEL SOL PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
LOT 1 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 3, PAGE 67 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL TWO:
THE EASEMENT FOR INGRESS AND EGRESS WITH THE RIGHT TO GRANT THE SAME TO OTHERS
OVER THAT PORTION OF LOT 2 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA
MARIA, COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK
3, PAGE 67 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2, THENCE NORTHERLY ALONG THE
EASTERLY LINE OF SAID LOT 78.00 FEET, THENCE IN A DIRECT LINE TO A POINT IN THE
SOUTHERLY LINE OF SAID LOT 2, DISTANCE WESTERLY 10.00 FEET FROM THE SOUTHEAST
CORNER THEREOF, THENCE EASTERLY ALONG SAID SOUTHERLY LINE 10.00 FEET TO THE
POINT OF BEGINNING.
RANCHO PARK VILLA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SAN DIMAS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
PARCEL 2 OF PARCEL MAP NO. S.D. 72-5 COUNTY MAP NO. 2944, IN THE CITY OF SAN
DIMAS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THAT PORTION THEREOF INCLUDED WITHIN THE BOUNDARIES OF LAND
DESCRIBED AS PARCEL 1 IN THE TRUSTEE'S DEED RECORDED APRIL 1, 1976 AS
INSTRUMENT NO. 3191, IN BOOK D-7025, PAGE 783, OFFICIAL RECORDS.
PARCEL TWO:
THAT PORTION OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 1 SOUTH, RANGE 9
WEST, IN THE SUBDIVISION OF RANCHO ADDITION TO SAN JOSE, AND A PORTION OF
RANCHO SAN JOSE, IN THE CITY OF SAN DIMAS, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 22, PAGES 21 TO 23 INCLUSIVE OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTER LINE OF VALLEY CENTER AVENUE, AS
SHOWN ON SAID MAP, WITH THE CENTER LINE OF CYPRESS AVENUE (FORMERLY UNNAMED),
AS SHOWN ON SAID MAP; THENCE SOUTH 0 DEGREES 16' 08" EAST ALONG SAID CENTER
LINE OF VALLEY CENTER AVENUE A DISTANCE OF 432.27 FEET, TO
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<PAGE> 96
POINT "A" OF THIS DESCRIPTION; THENCE SOUTH 56 DEGREES 56' 12" WEST TO THE
WESTERLY LINE OF SAID VALLEY CENTER AVENUE AND THE TRUE POINT OF BEGINNING OF
THIS DESCRIPTION; THENCE CONTINUING SOUTH 56 DEGREES 56' 12" WEST, 488.06 FEET
TO A POINT THAT IS SOUTH 56 DEGREES 56' 12" WEST, 523.75 FEET FROM SAID POINT
"A" AND THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHEASTERLY, HAVING A RADIUS
OF 474.56 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE
OF 22 DEGREES 12' 28", AN ARC DISTANCE OF 183.94 FEET TO THE BEGINNING OF A
REVERSE CURVE CONCAVE NORTHWESTERLY AND HAVING A RADIUS OF 400.00 FEET; THENCE
SOUTHWESTERLY ALONG SAID LAST MENTIONED CURVE THROUGH A CENTRAL ANGLE OF 27
DEGREES 34' 56", AN ARC DISTANCE OF 192.56 FEET; THENCE NORTH 27 DEGREES 41'
20" WEST, 270.00 FEET; THENCE NORTH 42 DEGREES 45' 32" EAST, 490.64 FEET;
THENCE NORTH 89 DEGREES 43' 52" EAST, 475.00 FEET TO SAID WESTERLY LINE OF
VALLEY CENTER AVENUE; THENCE ALONG SAID VALLEY CENTER AVENUE, SOUTH 0 DEGREES
16' 08" EAST TO THE TRUE POINT OF BEGINNING.
SAID LAND, EXCEPT THE EASTERLY 10 FEET THEREOF, IS NOW A PORTION OF PARCEL 2,
AS SHOWN ON PARCEL MAP NO S.D. 72-5, COUNTY MAP NO. 2944, FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS.
TAMALPAIS CREEK PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF NOVATO, COUNTY OF MARIN,
STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT LYING NORTH 24 DEGREES 17'00" WEST 37.304 FEET FROM A POINT
ON THE SOUTHEASTERLY LINE OF LOT 59, AS SHOWN UPON THAT CERTAIN MAP ENTITLED
"MAP OF SUBDIVISIONS A AND B OF THE NOVATO LAND CO., SURVEYED TO J.F. MASSIE,
SURVEYOR", FILED NOVEMBER 18, 1909 IN VOLUME 3 OF MAPS, AT PAGE 36, MARIN COUNTY
RECORDS; DISTANCE THEREON SOUTH 29 DEGREES 15'00" WEST 538.500 FEET, FROM THE
MOST EASTERLY CORNER OF SAID LOT 59; RUNNING THENCE NORTH 24 DEGREES 17'00" WEST
75.046; THENCE NORTH 51 DEGREES 42'00" WEST 71.970 FEET; THENCE NORTH 66 DEGREES
42'24" WEST 171.481 FEET TO A POINT ON THE NORTHWESTERLY LINE OF LOT 59; THENCE
NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST
19.250 FEET; THENCE NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE SOUTH 29
DEGREES 15'00" WEST 200.000 FEET; THENCE SOUTH 60 DEGREES 45'00" EAST 130.000
FEET; THENCE SOUTH 29 DEGREES 15'00" WEST 260.000 FEET; THENCE SOUTH 60 DEGREES
45'00" EAST 252.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST 60.000 FEET;
THENCE SOUTH 60 DEGREES 45'00" EAST 117.977 FEET TO A POINT LYING 30.000 FEET
NORTHWESTERLY OF THE CENTERLINE OF TAMALPAIS AVENUE; THENCE NORTH 29 DEGREES
15'00" EAST, PARALLEL TO SAID CENTERLINE OF TAMALPAIS AVENUE, 342.672 FEET TO
THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT CERTAIN PARCEL OF LAND AS DESCRIBED IN THE DEED FROM
TAMALPAIS CREEK, A LIMITED PARTNERSHIP, TO THE CITY OF NOVATO, A MUNICIPAL
CORPORATION, RECORDED OCTOBER 26, 1979 IN BOOK 3633 OF OFFICIAL RECORDS, AT
PAGE 196, MARIN COUNTY RECORDS.
VILLA BONITA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 1 OF SANDAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF NO. 8290, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, APRIL 1, 1976.
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<PAGE> 97
EXHIBIT B
FORM OF BILL OF SALE AND ASSIGNMENT
THIS BILL OF SALE AND ASSIGNMENT is made as of _________, 1995, by
AMERICAN RETIREMENT VILLAS PROPERTIES, a California limited partnership
("SELLER"), in favor of NATIONWIDE HEALTH PROPERTIES, INC., a Maryland
corporation ("BUYER"), pursuant to that certain Purchase and Sale Agreement
dated as of June 28, 1995, by and between Buyer and Seller (the "PURCHASE
AGREEMENT"). All initially-capitalized terms used herein and not otherwise
defined herein shall have the same meaning given such terms in the Purchase
Agreement.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Seller
does hereby grant, bargain, sell, convey, assign, transfer, set over, deliver
to and vest in Buyer, its successors and assigns forever, all of Seller's
right, title and interest in and to all of the following property, whether now
existing or hereafter arising:
(a) All Fixtures to the real property more particularly described
on Exhibit A attached hereto;
(b) All of the Personal Property;
(c) All of the Intangible Property;
(d) All utility deposits made (and any refunds thereof) and any
and all other funds deposited as security for the fulfillment
of any of the obligations of Seller in connection with the
Property or any portion thereof;
(e) All deposits and bonds of Seller relating to the Property or
any portion thereof, including, without limitation, deposits
and bonds provided to any governmental agency for
construction, use or operation of the Property;
(f) All contracts of sale, if any, affecting the Property or any
portion thereof and all deposits in connection therewith; and
(g) All casualty and liability insurance policies.
Seller hereby represents and warrants to Buyer that Seller is the
owner of all right, title and interest in and to the above property, that, said
property is free and clear of all liens, charges and encumbrances created by or
imposed against Seller and that Seller has full right, power and authority to
sell said property and to make this Bill of Sale and Assignment. Seller shall
warrant and forever defend title to said property unto Buyer.
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<PAGE> 98
IN WITNESS WHEREOF, Seller has executed this Bill of Sale and
Assignment as of the day and year first above written.
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
26
<PAGE> 99
SCHEDULE 1 TO EXHIBIT B
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
MARIA DEL SOL PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
LOT 1 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 3, PAGE 67 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL TWO:
THE EASEMENT FOR INGRESS AND EGRESS WITH THE RIGHT TO GRANT THE SAME TO OTHERS
OVER THAT PORTION OF LOT 2 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA
MARIA, COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK
3, PAGE 67 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2, THENCE NORTHERLY ALONG THE
EASTERLY LINE OF SAID LOT 78.00 FEET, THENCE IN A DIRECT LINE TO A POINT IN THE
SOUTHERLY LINE OF SAID LOT 2, DISTANCE WESTERLY 10.00 FEET FROM THE SOUTHEAST
CORNER THEREOF, THENCE EASTERLY ALONG SAID SOUTHERLY LINE 10.00 FEET TO THE
POINT OF BEGINNING.
RANCHO PARK VILLA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SAN DIMAS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
PARCEL 2 OF PARCEL MAP NO. S.D. 72-5 COUNTY MAP NO. 2944, IN THE CITY OF SAN
DIMAS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THAT PORTION THEREOF INCLUDED WITHIN THE BOUNDARIES OF LAND
DESCRIBED AS PARCEL 1 IN THE TRUSTEE'S DEED RECORDED APRIL 1, 1976 AS
INSTRUMENT NO. 3191, IN BOOK D-7025, PAGE 783, OFFICIAL RECORDS.
PARCEL TWO:
THAT PORTION OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 1 SOUTH, RANGE 9
WEST, IN THE SUBDIVISION OF RANCHO ADDITION TO SAN JOSE, AND A PORTION OF
RANCHO SAN JOSE, IN THE CITY OF SAN DIMAS, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 22, PAGES 21 TO 23 INCLUSIVE OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTER LINE OF VALLEY CENTER AVENUE, AS
SHOWN ON SAID MAP, WITH THE CENTER LINE OF CYPRESS AVENUE (FORMERLY UNNAMED),
AS SHOWN ON SAID MAP; THENCE SOUTH 0 DEGREES 16' 08" EAST ALONG
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<PAGE> 100
SAID CENTER LINE OF VALLEY CENTER AVENUE A DISTANCE OF 432.27 FEET, TO POINT
"A" OF THIS DESCRIPTION; THENCE SOUTH 56 DEGREES 56' 12" WEST TO THE WESTERLY
LINE OF SAID VALLEY CENTER AVENUE AND THE TRUE POINT OF BEGINNING OF THIS
DESCRIPTION; THENCE CONTINUING SOUTH 56 DEGREES 56' 12" WEST, 488.06 FEET TO A
POINT THAT IS SOUTH 56 DEGREES 56' 12" WEST, 523.75 FEET FROM SAID POINT "A"
AND THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF
474.56 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF
22 DEGREES 12' 28", AN ARC DISTANCE OF 183.94 FEET TO THE BEGINNING OF A
REVERSE CURVE CONCAVE NORTHWESTERLY AND HAVING A RADIUS OF 400.00 FEET; THENCE
SOUTHWESTERLY ALONG SAID LAST MENTIONED CURVE THROUGH A CENTRAL ANGLE OF 27
DEGREES 34' 56", AN ARC DISTANCE OF 192.56 FEET; THENCE NORTH 27 DEGREES 41'
20" WEST, 270.00 FEET; THENCE NORTH 42 DEGREES 45' 32" EAST, 490.64 FEET;
THENCE NORTH 89 DEGREES 43' 52" EAST, 475.00 FEET TO SAID WESTERLY LINE OF
VALLEY CENTER AVENUE; THENCE ALONG SAID VALLEY CENTER AVENUE, SOUTH 0 DEGREES
16' 08" EAST TO THE TRUE POINT OF BEGINNING.
SAID LAND, EXCEPT THE EASTERLY 10 FEET THEREOF, IS NOW A PORTION OF PARCEL 2,
AS SHOWN ON PARCEL MAP NO S.D. 72-5, COUNTY MAP NO. 2944, FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS.
TAMALPAIS CREEK PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF NOVATO, COUNTY OF MARIN,
STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT LYING NORTH 24 DEGREES 17'00" WEST 37.304 FEET FROM A POINT
ON THE SOUTHEASTERLY LINE OF LOT 59, AS SHOWN UPON THAT CERTAIN MAP ENTITLED
"MAP OF SUBDIVISIONS A AND B OF THE NOVATO LAND CO., SURVEYED TO J.F. MASSIE,
SURVEYOR", FILED NOVEMBER 18, 1909 IN VOLUME 3 OF MAPS, AT PAGE 36, MARIN COUNTY
RECORDS; DISTANCE THEREON SOUTH 29 DEGREES 15'00" WEST 538.500 FEET, FROM THE
MOST EASTERLY CORNER OF SAID LOT 59; RUNNING THENCE NORTH 24 DEGREES 17'00" WEST
75.046; THENCE NORTH 51 DEGREES 42'00" WEST 71.970 FEET; THENCE NORTH 66 DEGREES
42'24" WEST 171.481 FEET TO A POINT ON THE NORTHWESTERLY LINE OF LOT 59; THENCE
NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST
19.250 FEET; THENCE NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE SOUTH 29
DEGREES 15'00" WEST 200.000 FEET; THENCE SOUTH 60 DEGREES 45'00" EAST 130.000
FEET; THENCE SOUTH 29 DEGREES 15'00" WEST 260.000 FEET; THENCE SOUTH 60 DEGREES
45'00" EAST 252.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST 60.000 FEET;
THENCE SOUTH 60 DEGREES 45'00" EAST 117.977 FEET TO A POINT LYING 30.000 FEET
NORTHWESTERLY OF THE CENTERLINE OF TAMALPAIS AVENUE; THENCE NORTH 29 DEGREES
15'00" EAST, PARALLEL TO SAID CENTERLINE OF TAMALPAIS AVENUE, 342.672 FEET TO
THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT CERTAIN PARCEL OF LAND AS DESCRIBED IN THE DEED FROM
TAMALPAIS CREEK, A LIMITED PARTNERSHIP, TO THE CITY OF NOVATO, A MUNICIPAL
CORPORATION, RECORDED OCTOBER 26, 1979 IN BOOK 3633 OF OFFICIAL RECORDS, AT
PAGE 196, MARIN COUNTY RECORDS.
VILLA BONITA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 1 OF SANDAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF NO. 8290, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, APRIL 1, 1976.
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EXHIBIT C
FORM OF CERTIFICATE OF NON-FOREIGN STATUS
AMERICAN RETIREMENT VILLAS PROPERTIES, a California limited
partnership ("SELLER"), is the owner of that certain real property more
particularly described in Exhibit A attached hereto and incorporated herein by
this reference (the "PROPERTY"). Seller is the Seller under that certain
Purchase and Sale Agreement dated June 28, 1995 (the "PURCHASE AND SALE
AGREEMENT"), with respect to the Property, executed by Seller and NATIONWIDE
HEALTH PROPERTIES, INC., a Maryland corporation ("BUYER").
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"CODE") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform Buyer that
withholding of tax will not be required when the Property is transferred
pursuant to the Purchase and Sale Agreement, the undersigned hereby certifies
the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate, as those terms are defined in the Code and
the Income Tax Regulations promulgated thereunder;
2. Seller's U.S. employer identification number is __________;
and
3. Seller's office address is 245 Fischer Avenue, Bldg. D-1,
Costa Mesa, California 92626.
Seller understands that this Certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement contained herein
could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of Seller.
Dated as of: ___________, 1995
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
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SCHEDULE 1 TO EXHIBIT C
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
MARIA DEL SOL PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
LOT 1 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA MARIA, COUNTY OF SANTA
BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 3, PAGE 67 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL TWO:
THE EASEMENT FOR INGRESS AND EGRESS WITH THE RIGHT TO GRANT THE SAME TO OTHERS
OVER THAT PORTION OF LOT 2 OF PARCEL MAP TRACT NO. 5009, IN THE CITY OF SANTA
MARIA, COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK
3, PAGE 67 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2, THENCE NORTHERLY ALONG THE
EASTERLY LINE OF SAID LOT 78.00 FEET, THENCE IN A DIRECT LINE TO A POINT IN THE
SOUTHERLY LINE OF SAID LOT 2, DISTANCE WESTERLY 10.00 FEET FROM THE SOUTHEAST
CORNER THEREOF, THENCE EASTERLY ALONG SAID SOUTHERLY LINE 10.00 FEET TO THE
POINT OF BEGINNING.
RANCHO PARK VILLA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF SAN DIMAS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL ONE:
PARCEL 2 OF PARCEL MAP NO. S.D. 72-5 COUNTY MAP NO. 2944, IN THE CITY OF SAN
DIMAS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THAT PORTION THEREOF INCLUDED WITHIN THE BOUNDARIES OF LAND
DESCRIBED AS PARCEL 1 IN THE TRUSTEE'S DEED RECORDED APRIL 1, 1976 AS
INSTRUMENT NO. 3191, IN BOOK D-7025, PAGE 783, OFFICIAL RECORDS.
PARCEL TWO:
THAT PORTION OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 1 SOUTH, RANGE 9
WEST, IN THE SUBDIVISION OF RANCHO ADDITION TO SAN JOSE, AND A PORTION OF
RANCHO SAN JOSE, IN THE CITY OF SAN DIMAS, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 22, PAGES 21 TO 23 INCLUSIVE OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTER LINE OF VALLEY CENTER AVENUE, AS
SHOWN ON SAID MAP, WITH THE CENTER LINE OF CYPRESS AVENUE (FORMERLY UNNAMED),
AS SHOWN ON SAID MAP; THENCE SOUTH 0 DEGREES 16' 08" EAST ALONG
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SAID CENTER LINE OF VALLEY CENTER AVENUE A DISTANCE OF 432.27 FEET, TO POINT
"A" OF THIS DESCRIPTION; THENCE SOUTH 56 DEGREES 56' 12" WEST TO THE WESTERLY
LINE OF SAID VALLEY CENTER AVENUE AND THE TRUE POINT OF BEGINNING OF THIS
DESCRIPTION; THENCE CONTINUING SOUTH 56 DEGREES 56' 12" WEST, 488.06 FEET TO A
POINT THAT IS SOUTH 56 DEGREES 56' 12" WEST, 523.75 FEET FROM SAID POINT "A"
AND THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF
474.56 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF
22 DEGREES 12' 28", AN ARC DISTANCE OF 183.94 FEET TO THE BEGINNING OF A
REVERSE CURVE CONCAVE NORTHWESTERLY AND HAVING A RADIUS OF 400.00 FEET; THENCE
SOUTHWESTERLY ALONG SAID LAST MENTIONED CURVE THROUGH A CENTRAL ANGLE OF 27
DEGREES 34' 56", AN ARC DISTANCE OF 192.56 FEET; THENCE NORTH 27 DEGREES 41'
20" WEST, 270.00 FEET; THENCE NORTH 42 DEGREES 45' 32" EAST, 490.64 FEET;
THENCE NORTH 89 DEGREES 43' 52" EAST, 475.00 FEET TO SAID WESTERLY LINE OF
VALLEY CENTER AVENUE; THENCE ALONG SAID VALLEY CENTER AVENUE, SOUTH 0 DEGREES
16' 08" EAST TO THE TRUE POINT OF BEGINNING.
SAID LAND, EXCEPT THE EASTERLY 10 FEET THEREOF, IS NOW A PORTION OF PARCEL 2,
AS SHOWN ON PARCEL MAP NO S.D. 72-5, COUNTY MAP NO. 2944, FILED IN BOOK 44,
PAGE 26 OF PARCEL MAPS.
TAMALPAIS CREEK PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF NOVATO, COUNTY OF MARIN,
STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT LYING NORTH 24 DEGREES 17'00" WEST 37.304 FEET FROM A POINT
ON THE SOUTHEASTERLY LINE OF LOT 59, AS SHOWN UPON THAT CERTAIN MAP ENTITLED
"MAP OF SUBDIVISIONS A AND B OF THE NOVATO LAND CO., SURVEYED TO J.F. MASSIE,
SURVEYOR", FILED NOVEMBER 18, 1909 IN VOLUME 3 OF MAPS, AT PAGE 36, MARIN COUNTY
RECORDS; DISTANCE THEREON SOUTH 29 DEGREES 15'00" WEST 538.500 FEET, FROM THE
MOST EASTERLY CORNER OF SAID LOT 59; RUNNING THENCE NORTH 24 DEGREES 17'00" WEST
75.046; THENCE NORTH 51 DEGREES 42'00" WEST 71.970 FEET; THENCE NORTH 66 DEGREES
42'24" WEST 171.481 FEET TO A POINT ON THE NORTHWESTERLY LINE OF LOT 59; THENCE
NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST
19.250 FEET; THENCE NORTH 60 DEGREES 45'00" WEST 99.000 FEET; THENCE SOUTH 29
DEGREES 15'00" WEST 200.000 FEET; THENCE SOUTH 60 DEGREES 45'00" EAST 130.000
FEET; THENCE SOUTH 29 DEGREES 15'00" WEST 260.000 FEET; THENCE SOUTH 60 DEGREES
45'00" EAST 252.000 FEET; THENCE NORTH 29 DEGREES 15'00" EAST 60.000 FEET;
THENCE SOUTH 60 DEGREES 45'00" EAST 117.977 FEET TO A POINT LYING 30.000 FEET
NORTHWESTERLY OF THE CENTERLINE OF TAMALPAIS AVENUE; THENCE NORTH 29 DEGREES
15'00" EAST, PARALLEL TO SAID CENTERLINE OF TAMALPAIS AVENUE, 342.672 FEET TO
THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT CERTAIN PARCEL OF LAND AS DESCRIBED IN THE DEED FROM
TAMALPAIS CREEK, A LIMITED PARTNERSHIP, TO THE CITY OF NOVATO, A MUNICIPAL
CORPORATION, RECORDED OCTOBER 26, 1979 IN BOOK 3633 OF OFFICIAL RECORDS, AT
PAGE 196, MARIN COUNTY RECORDS.
VILLA BONITA PARCEL:
THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 1 OF SANDAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF NO. 8290, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, APRIL 1, 1976.
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EXHIBIT D
FORM OF CLOSING CERTIFICATE
THIS CLOSING CERTIFICATE is made as of the ____ day of ___________,
1995, by AMERICAN RETIREMENT VILLAS PROPERTIES, a California limited
partnership ("SELLER"), to NATIONWIDE HEALTH PROPERTIES, INC., a Maryland
corporation ("BUYER").
R E C I T A L S
A. Seller and Buyer are parties to that certain Purchase and
Sale Agreement (the "AGREEMENT"), dated as of June 28, 1995, pursuant to which
and subject to the terms and conditions therein set forth, Seller agrees to
sell to Buyer certain Property as defined therein.
B. Section 3.3 of the Agreement requires the delivery of this
Closing Certificate.
NOW THEREFORE, pursuant to Section 3.3, of the Agreement, Seller
does hereby represent and warrant to Buyer that each and all of the
representations and warranties of Seller contained in the Agreement are true
and correct as of the date hereof as if made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of the day and year first above written.
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
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EXHIBIT E
FORM OF DEED
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Sherry & Holthouse
18301 Von Karman Avenue
Suite 420
Irvine, California 92715
Attn: Kevin L. Sherry, Esq.
Mail Tax Statements To:
Nationwide Health Properties, Inc.
4675 MacArthur Court
Suite 1170
Newport Beach, California 92660
GRANT DEED
The undersigned grantor(s) declare(s):
Documentary Transfer Tax is $_______________
( X) Computed on full value of property conveyed, or
( ) Computed on full value less value of liens and encumbrances remaining at
time of sale.
( ) Unincorporated area: ( X) City of ____________; and
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, AMERICAN
RETIREMENT VILLAS PROPERTIES, a California limited partnership, hereby GRANTS
to NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation, the following
described real property in the County of ____________, State of California:
The real property described on Exhibit A attached hereto and made a
part hereof, together with all improvements and fixtures located
thereon or attached thereto.
This conveyance is made and accepted expressly subject to the matters more
particularly described on Exhibit B attached hereto and made a part hereof.
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IN WITNESS WHEREOF, Grantor has executed this instrument as of ___________,
1995.
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
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<PAGE> 107
SCHEDULE 1 TO EXHIBIT E
EXHIBIT A
LEGAL DESCRIPTION
35
<PAGE> 108
SCHEDULE 2 TO EXHIBIT E
EXHIBIT B
PERMITTED EXCEPTIONS
36
<PAGE> 109
EXHIBIT F
PATIENT AGREEMENTS
The schedule of Patient Agreements is to be provided by Seller and approved by
Buyer in its reasonable discretion prior to the Closing Date.
37
<PAGE> 110
EXHIBIT G-1
PERSONAL PROPERTY
The schedule of Personal Property is to be provided by Seller and approved by
Buyer in its reasonable discretion prior to the Closing Date.
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<PAGE> 111
EXHIBIT G-2
EXCLUDED PERSONAL PROPERTY
The schedule of Excluded Personal Property, if any, is to be provided by Seller
and approved by Buyer in its reasonable discretion prior to the Closing Date.
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<PAGE> 112
EXHIBIT H
FORM OF CLOSING PROCEDURE LETTER
____
1 9 9 5
[Title Company]
________________________________
Attention: ____________________
Re: Purchase and Sale Agreement dated June 28, 1995, (the
"PURCHASE AGREEMENT") by and between American Retirement
Villas Properties, a California limited partnership
("SELLER") and Nationwide Health Properties, Inc., a Maryland
corporation ("BUYER"); Your Escrow No:
Ladies and Gentlemen:
Please refer to the Purchase Agreement, a copy of which is being
delivered to you with this letter. Except as otherwise defined herein, all
initially-capitalized terms used herein shall have the same meaning given such
terms in the Purchase Agreement. To summarize the transaction, Buyer is
purchasing the property described in the Purchase Agreement from Seller and
concurrently leasing the property to ARV Assisted Living, Inc., a California
corporation ("ARV").
This letter shall constitute your instructions with respect to the
"Funds" and "Documents" described herein.
A. DELIVERY OF FUNDS.
On or before ____________, 1995, (the "CLOSING DATE"), Buyer shall
wire-transfer to you Twenty-Two Million Seven Hundred Thousand Dollars
($22,700,000) (the "FUNDS").
B. DELIVERY OF DOCUMENTS.
1. DELIVERY OF RECORDATION DOCUMENTS. On or before the Closing
Date, the following documents shall have been delivered to you for
recordation (the "RECORDATION DOCUMENTS"):
(a) Seller shall deliver to you one original of each of
the following documents, fully executed and acknowledged by Seller:
(i) A Deed for each of the four (4) Parcels (the "DEEDS");
and
(ii) An Assignment of Lessor's Interest in Leases
with respect to each of the four (4) Parcels ("LEASE
ASSIGNMENTS").
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(b) ARV shall deliver to you one original of each of the
following documents, fully executed and acknowledged by ARV:
(i) An Assignment of Rents with respect to each of the four
(4) Parcels (the "ASSIGNMENT OF RENTS");
(ii) A Fixture Filing with respect to each of the four (4)
Parcels (the "FIXTURE FILINGS"); and
(iii) A Memorandum of Lease with respect to each of the four
(4) Parcels.
(c) Buyer shall deliver to you one original of each of the
following documents, fully executed and acknowledged by Buyer:
(i) A Memorandum of Lease with respect to each of the four
(4) Parcels.
2. DELIVERY AND APPROVAL OF CLOSING STATEMENT. On or before the
Closing Date, you shall prepare and Seller, ARV and Buyer shall approve and
execute a closing statement showing the source and application of funds
received by you and the costs and expenses incurred in connection herewith
(the "CLOSING STATEMENT").
3. DEFINITION OF DOCUMENTS. As used herein, "DOCUMENTS" shall
mean, collectively, the Recordation Documents and the Closing Statement.
C. CONDITIONS TO CLOSING.
The Funds shall not be disbursed and the Documents shall not be recorded or
delivered to any person or entity until each of the following conditions is
satisfied:
1. You have received the Funds and are unconditionally and irrevocably
prepared to wire the same in accordance with Paragraph D hereof.
2. You have received the Documents and are unconditionally and
irrevocably prepared to record the Recordation Documents in
accordance with Paragraph D hereof.
3. You are unconditionally and irrevocably committed to issue the
Owner's Title Policy naming Buyer as insured (the "OWNER'S POLICY")
and the Leasehold Title Policy naming ARV as insured (the "LEASEHOLD
POLICY"), subject only to those exceptions (the "PERMITTED
EXCEPTIONS") which appear on the proforma title policy attached
hereto as Exhibit A.
4. You have received from ARV, by wire transfer for the account of
Seller, the amount of $__________ (representing a proration of the
rent due under the Lease for the period commencing on the Closing
Date and ending on October 31, 1995) (the "RENT PAYMENT");
5. You have received from ARV, by wire transfer for the account of
Seller, the amount of $_________, representing the security deposit
as required by the Lease (the "DEPOSIT");
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<PAGE> 114
6. You have received a fully-executed copy of the Written Authorization
to Close in the form attached hereto as Exhibit B.
7. You have received all the necessary information for filing the form
then required to be filed pursuant to Section 6045 of the Internal
Revenue Code (the "INFORMATION RETURN") with respect to the
transactions contemplated by the Purchase Agreement and you are
unconditionally and irrevocably prepared to file the same. Buyer
and Seller hereby agree, as between themselves, to cooperate in
providing any information within their possession or control that is
necessary for filing. The purchase and sale of the Property is the
sale of "reportable real estate" within the meaning of U.S.
Treasury Regulations Section 1.605-4 (the "REGULATIONS").
YOU ARE THE "REAL ESTATE REPORTING PERSON" WITHIN THE MEANING OF THE
REGULATIONS AND SHALL MAKE ALL REPORTS TO THE FEDERAL GOVERNMENT AS
REQUIRED BY THE REGULATIONS.
D. CLOSING. If the conditions specified in Paragraph C above are
satisfied on or before the Closing Date, then you shall immediately deliver to
Buyer and Seller a written confirmation of such satisfaction in the form of
Exhibit C hereto (which confirmation shall evidence your agreement to
immediately take or cause to be taken the actions hereinafter specified), and
thereafter you shall immediately:
1. Record the Recordation Documents in the following order in the
respective Counties in which the Parcels are located:
(A) The Lease Assignments;
(B) The Deeds;
(C) The Memorandum of Lease;
(D) The Assignment of Rents; and
(E) The Fixture Filings.
2. Wire the respective amounts due to third parties (e.g., lien
holders) under the Closing Statement in accordance with the
respective instructions (the "THIRD PARTY INSTRUCTIONS") from such
third parties.
3. Wire the amount due Seller under the Closing Statement in accordance
with the wiring instructions delivered to you by Seller (the "SELLER
WIRING INSTRUCTIONS").
4. Wire the Rent Payment, the Deposit and any amounts due Buyer under
the Closing Statement in accordance with the following wiring
instructions (the "BUYER WIRING INSTRUCTIONS"):
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<PAGE> 115
Wells Fargo Bank
420 Montgomery Street
San Francisco, California
ABA No. 121000248
for the benefit of
Nationwide Health Properties, Inc.
Account No. 4692089329
Upon receipt, notify Mark Desmond by telephone at
(714) 251-1211
5. Issue the Owner's Title Policy and deliver the same to Sherry &
Holthouse, at the address specified in Paragraph E hereof, within 20
working days.
6. Issue the Leasehold Title Policy and deliver the same to ARV, at the
address specified in Paragraph E hereof, within 20 working days.
7. File the Informational Return and all other filings and reports
required pursuant to the Regulations and deliver copies of the same
to counsel for Buyer and Seller (at the respective addresses set
forth below) within 3 working days.
E. DELIVERY OF DOCUMENTS. As soon as they are available, please deliver
the Documents as follows:
1. To Sherry & Holthouse, 18301 Von Karman Avenue, Suite 420, Irvine,
California 92715, Attention: Kevin L. Sherry, Esq., the following:
(a) A conformed copy of each of the Recordation Documents;
and
(b) The originals of the Documents other than the Recordation
Documents.
2. To Seller and ARV Assisted Living, Inc., 245 Fischer Avenue, D-1,
Costa Mesa, California, Attention: Sheila M. Muldoon, Esq. the
following:
(a) A conformed copy of each of the Recordation Documents;
and
(b) A copy of the Documents other than the Recordation
Documents.
F. CLOSING COSTS. All closing costs incurred in carrying out your duties
under this letter are to be billed in accordance with Section 4.1 of the
Purchase Agreement.
G. INVESTMENT OF FUNDS.
1. BUYER'S FUNDS. As soon as you receive any portion of the Funds,
you shall notify Buyer of such fact. If Buyer gives you written
instructions to do so, you shall invest the Funds in treasury bills (or
such other short-term investment as may be authorized by Buyer) for the
benefit of Buyer. The interest accrued on the Funds shall be delivered to
Buyer, in accordance with the Buyer Wiring Instructions, upon the closing
(or, if sooner, from time to time upon the oral or written request of
Buyer).
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<PAGE> 116
H. CANCELLATION OF INSTRUCTIONS. Notwithstanding anything to the contrary
herein, if the conditions specified in Paragraph C hereof are not satisfied on
or before the Closing Date, then, if you receive written instructions to cancel
this transaction from any one of the undersigned parties hereto, the
instructions set forth in Paragraphs A through E above shall be deemed
cancelled, you shall immediately return the Funds (and any interest thereon) to
Buyer in accordance with the Buyer Wiring Instructions and you shall destroy
the Documents on the next business day thereafter.
I. LIMITATION OF LIABILITY. You are acting solely as closing agent, and
you shall be liable solely for your failure to comply with the terms of this
letter. The foregoing will not limit your liability as title insurer under the
terms of the Owner's Title Policy and the Leasehold Title Policy (such
liability being in accordance with the terms of such policies).
J. EXECUTION BY COUNTERPARTS. This letter of instructions may be executed
in two or more counterparts, each of which shall be an original, but all of
which shall constitute one and the same letter of instructions.
K. INTERPLEADER. Buyer, Seller and ARV expressly agree that if they give
you contradictory instructions, you shall have the right, at your election, to
file an action in interpleader requiring the Buyer, Seller and ARV to answer
and litigate their several claims and rights between themselves and you are
authorized to deposit with the clerk of the court all documents and funds held
by you. In the event such action is filed, Buyer, Seller and ARV agree to pay
your cancellation charges and costs, expenses and reasonable attorneys' fees
which you are required to expend or incur in the interpleader action, the
amount thereof to be fixed and judgment therefor to be rendered by the court.
Upon the filing of such an
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<PAGE> 117
action, you shall be fully released and discharged from all obligations to
perform further any duties or obligations imposed hereunder.
Very truly yours,
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: _____________________________________
Its: _______________________________
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
"ARV"
ARV ASSISTED LIVING, INC.,
a California corporation,
By: ____________________________________
Its: ______________________________
ACCEPTED AND AGREED TO
as of the date first
above written:
[TITLE COMPANY]
By: ___________________________
Its: ______________________
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<PAGE> 118
SCHEDULE 1 TO EXHIBIT H
EXHIBIT A
PRO-FORMA TITLE POLICY
46
<PAGE> 119
SCHEDULE 2 TO EXHIBIT H
EXHIBIT B
CONFIRMATION BY TITLE COMPANY
_________, 1995
Nationwide Health Properties, Inc.
c/o Sherry & Holthouse
18301 Von Karman Avenue
Suite 420
Irvine, California 92715
Attention: Kevin L. Sherry, Esq.
American Retirement Villas Properties
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, Bldg. D-1
Costa Mesa, California 92626
Attention: Sheila M. Muldoon, Esq.
ARV Assisted Living, Inc.
245 Fischer Avenue, Bldg. D-1
Costa Mesa, California 92626
Attention: Sheila M. Muldoon, Esq.
Re: Purchase and Sale Agreement dated June 28, 1995, (the
"PURCHASE AGREEMENT") by and between American Retirement
Villas Properties, a California limited partnership
("SELLER") and Nationwide Health Properties, Inc., a Maryland
corporation ("BUYER"); Our Escrow No:
Ladies and Gentlemen:
Please refer to that certain letter (the "LETTER OF INSTRUCTIONS")
captioned "CLOSING PROCEDURE LETTER", dated as of ___________, 1995, from
Seller and Buyer to the undersigned.
Pursuant to Paragraph D of the Letter of Instructions, we hereby
confirm that each of the conditions to disbursement and recordation set forth
in Paragraph C of the Letter of Instructions has been satisfied.
Very truly yours,
[TITLE COMPANY]
By: _______________________________
Its: _________________________
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<PAGE> 120
EXHIBIT I
FORM OF WRITTEN AUTHORIZATION TO CLOSE
____
1 9 9 5
[Title Company]
________________________________
________________________________
Attention: ____________________
Re: Purchase and Sale Agreement dated June 28, 1995, (the
"PURCHASE AGREEMENT") by and between American Retirement
Villas Properties, a California limited partnership
("SELLER") and Nationwide Health Properties, Inc., a Maryland
corporation ("BUYER"); Your Escrow No:
Ladies and Gentlemen:
You are hereby authorized to comply with the instructions delivered
to you in our Closing Procedure Letter dated __________, 1995.
Please confirm your receipt hereof and compliance with the
aforementioned instructions by contacting, via telephone, Kevin L. Sherry,
Esq., at (714) 622-1852 and Sheila M. Muldoon, Esq., at (714) 751-7400.
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: __________________________________
Its: ___________________________
"SELLER"
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
BY: ARV ASSISTED LIVING, INC.,
a California corporation,
Managing Partner
By: _____________________________
Its: _______________________
"ARV"
ARV ASSISTED LIVING, INC.,
a California corporation,
By: ____________________________________
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<PAGE> 121
APPENDIX B
FORM OF FAIRNESS OPINION
American Retirement Villas Properties
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Gentlemen:
You have advised us that the general partners (the "General Partners")
of American Retirement Villas Properties, a California limited partnership (the
"Partnership") are contemplating a transaction in which the real estate owned by
the Partnership -- four assisted living retirement housing properties (the
"Properties") -- will be sold to Nationwide Health Properties, Inc. (the
"Purchaser") subject to, among other matters, the requisite approval of the
limited partners of the Partnership (the "Proposed Sale"). You have further
advised us that in connection with the Proposed Sale the Properties will be sold
to the Purchaser for $22,700,000 in cash (the "Consideration"), and that the
Properties will simultaneously be leased back to ARV Assisted Living, Inc., the
Managing Partner (the "Leaseback").
You have requested that Robert A. Stanger & Co., Inc. ("Stanger")
provide to the Partnership an opinion as to whether the Consideration to be
received by the Partnership in connection with the Proposed Sale is fair to the
limited partners from a financial point of view.
In the course of our analysis for rendering this opinion, we have,
among other things:
- Reviewed the historical operating statements for each of the Properties
for the years ended December 31, 1992, 1993, and 1994, and the six
months ended June 30, 1995;
- Reviewed the 1995 operating budget for each of the Properties;
- Reviewed descriptive information concerning each Property, including
location, number of units, amenities and services, age, and land
acreage;
- Reviewed data concerning conditions in the market of each Property and
surveys prepared by management of each Property of competitive
facilities in the market area of the subject;
- Discussed with management of the Partnership and the Properties the
historical operating statements, future prospects, operating
projections, and current valuation estimates and appraisals, and
factors influencing values for each Property;
- Performed site inspections of each of the Properties, and observed
certain competitive properties in the market area of each Property;
- Discussed with management industry trends and outlook, conditions in
the local markets and market conditions for sales and acquisitions of
properties of the type owned by the Partnership, and the historical
financial statements and budgeted and projected operations of the
Properties and the Partnership;
- Reviewed Appraisals of the Properties provided by an independent
appraisal firm, Senior Living Valuation Services, Inc. (the
"Appraiser"), and discussed with the Appraiser the firm's experience
and qualifications, the appraisal methodologies employed, research
conducted, assumptions and limitations of the appraisals, and appraisal
results;
- Reviewed recent surveys of buyer's acquisition criteria for
income-producing properties similar to the Properties and data on sales
transactions involving similar properties;
<PAGE> 122
- Reviewed summaries prepared by management relating to the terms of the
Proposed Sale and Leaseback of the Properties;
- Reviewed the annual reports of the Partnership on Form 10-K for the
years ending December 31, 1992, 1993 and 1994 and the quarterly report
of the Partnership on Form 10-Q for the quarter ended June 30, 1995;
and
- Conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information that were provided
or otherwise communicated to us by the Partnership, the General Partners or
management of the Properties. We have not performed an independent appraisal of
the Properties or other assets and liabilities of the Partnership and have
relied upon and assumed the accuracy and completeness of the appraisal. We have
also relied upon the assurances of the Partnership, the General Partners and
management of the Properties that any financial statements, budget projections,
or value estimates contained in the Consent Solicitation Statement or otherwise
provided or communicated to us were reasonably prepared on bases consistent with
actual historical experience and reflecting the best currently available
estimates and good faith judgments; that no material changes have occurred in
the appraised values of the Properties or the information reviewed between the
date of the Appraisals or the date the other information was provided and the
date of this letter; that the Partnership, the General Partners and/or their
affiliates, and the management of the Properties are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading in any material respect; and that the Proposed Sale
does not violate the terms of the Partnership Agreement or any applicable
federal or state law.
We have not been requested to, and therefore did not: (i) select the
method of determining the Consideration offered to the Partnership; (ii) make
any recommendation to the Partnership or its partners with respect to whether to
approve or reject the Proposed Sale; (iii) express any opinion as to (a) the tax
consequences of the Proposed Sale to the limited partners, (b) the terms of the
Partnership Agreement or any agreements or contracts between the Partnership,
the General Partners and/or their affiliates, or the terms of the Leaseback of
the Properties, (c) any adjustments made to arrive at the net amounts
distributable to the partners, including, but not limited to, balance sheet
adjustments, and other expenses and fees associated with the Proposed Sale, (d)
the General Partners' business decision to effect the Proposed Sale, including,
but not limited to, the decision not to solicit bids for the Properties, or (e)
alternatives to the Proposed Sale. Further, we are not expressing any opinion
as to the fairness of any terms of the Proposed Sale other than the
Consideration to be paid to the Partnership. Our opinion is based on business,
economic, real estate market, and other conditions as of the date of our
analysis and addresses the Proposed Sale of the Property as currently improved
in the context of information available as of the date of our analysis. Events
occurring after that date could affect the Properties or the assumptions used in
preparing the opinion.
Based upon and subject to the foregoing, it is our opinion that as of
the date of this letter the Consideration to be received by the Partnership in
connection with the Proposed Sale of the Partnership's portfolio of Properties
is fair to the limited partners of the Partnership from a financial point of
view.
Yours truly,
/s/ ROBERT A. STANGER & CO., INC.
---------------------------------
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
August 29, 1995
<PAGE> 123
APPENDIX C
PROPERTY APPRAISAL SUMMARIES
<PAGE> 124
FORM OF PROPERTY APPRAISAL SUMMARY
June 21, 1995
American Retirement Villa Properties I., L.P.
c/o ARV Housing Group
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Graham Espley-Jones
Re: Rancho Park Villa
1500 West Cypress Street
San Dimas, California
SLVS File No. 95-06-37
Gentlemen:
In accordance with your request, we have conducted the required investigation,
gathered the necessary data, and made certain analyses that have enabled us to
form an opinion of the market value of the above captioned property. This
report has been prepared to be in compliance with the requirements of the
Uniform Standards of Professional Appraisal Practice.
The value stated herein is based on our understanding of the site and
improvement descriptions as represented to us by the client and/or the client's
representatives and professional consultants as well as other available
sources. We direct your attention to the "Introduction," "Site Description,"
and "Description of Improvements" sections of this appraisal report. It is
your responsibility to read the report and inform the appraiser of any errors
or omissions you are aware of prior to utilizing the report or making it
available to any third party.
Based on an inspection of the property and the investigation and analysis
undertaken, we have formed the opinion, subject to the assumptions and limiting
conditions set forth in this report, that as of June 9, 1995, the fee simple
total going concern interest of the subject, as is, has a market value of:
FIVE MILLION TWO HUNDRED FIFTY THOUSAND ($5,250,000) DOLLARS
<PAGE> 125
Mr. Graham Espley-Jones
June 21, 1995
Page 2
This total going concern value estimate can be allocated to the following
components:
<TABLE>
<CAPTION>
Market Value
As is -
6/9/95
------------
<S> <C>
Real Estate Value $4,300,000
Furniture, Fixtures & Equipment 200,000
Business Value 750,000
----------
Total Going Concern Value $5,250,000
==========
</TABLE>
The narrative appraisal report that follows sets forth the identification of the
property and limiting conditions, pertinent facts about the area and the subject
property, comparable data, results of our investigation and analyses and the
reasoning leading to the conclusions set forth. Should you desire a quick
reference to the most important information, I direct your attention to the
"Introduction, " "Executive Summary" and the Reconciliation and Conclusion"
sections of this report.
Respectfully submitted,
SENIOR LIVING VALUATION SERVICES, INC.
/s/
Michael G. Boehm, MAI
President
<PAGE> 126
FORM OF PROPERTY APPRAISAL SUMMARY
July 3, 1995
American Retirement Villa Properties I., L.P.
c/o ARV Housing Group
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Graham Espley-Jones
Re: Villa Bonita
3434 Bonita Road
Chula Vista, California
SLVS File No. 95-06-38
Gentlemen:
In accordance with your request, we have conducted the required investigation,
gathered the necessary data, and made certain analyses that have enabled us to
form an opinion of the market value of the above captioned property. This
report has been prepared to be in compliance with the requirements of the
Uniform Standards of Professional Appraisal Practice.
The value stated herein is based on our understanding of the site and
improvement descriptions as represented to us by the client and/or the client's
representatives and professional consultants as well as other available
sources. We direct your attention to the "Introduction," "Site Description,"
and "Description of Improvements" sections of this appraisal report. It is
your responsibility to read the report and inform the appraiser of any errors
or omissions you are aware of prior to utilizing the report or making it
available to any third party.
Based on an inspection of the property and the investigation and analysis
undertaken, we have formed the opinion, subject to the assumptions and limiting
conditions set forth in this report, that as of June 9, 1995, the fee simple
total going concern interest of the subject, as is, has a market value of:
SEVEN MILLION TWO HUNDRED THOUSAND ($7,200,000) DOLLARS
<PAGE> 127
Mr. Graham Espley-Jones
July 3, 1995
Page 2
This total going concern value estimate can be allocated to the following
components:
<TABLE>
<CAPTION>
Market Value
As is -
6/9/95
------------
<S> <C>
Real Estate Value $6,162,500
Furniture, Fixtures & Equipment 162,500
Business Value 875,000
----------
Total Going Concern Value $7,200,000
==========
</TABLE>
The narrative appraisal report that follows sets forth the identification of
the property and limiting conditions, pertinent facts about the area and the
subject property, comparable data, results of our investigation and analyses
and the reasoning leading to the conclusions set forth. Should you desire a
quick reference to the most important information, I direct your attention to
the "Introduction, " "Executive Summary" and the Reconciliation and Conclusion"
sections of this report.
Respectfully submitted,
SENIOR LIVING VALUATION SERVICES, INC.
/s/
Michael G. Boehm, MAI
President
<PAGE> 128
FORM OF PROPERTY APPRAISAL SUMMARY
July 3, 1995
American Retirement Villa Properties I., L.P.
c/o ARV Housing Group
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Graham Espley-Jones
Re: Tamalpais Creek
853 Tamalpais Avenue
Novato, California
SLVS File No. 95-06-35
Gentlemen:
In accordance with your request, we have conducted the required investigation,
gathered the necessary data, and made certain analyses that have enabled us to
form an opinion of the market value of the above captioned property. This
report has been prepared to be in compliance with the requirements of the
Uniform Standards of Professional Appraisal Practice.
The value stated herein is based on our understanding of the site and
improvement descriptions as represented to us by the client and/or the client's
representatives and professional consultants as well as other available
sources. We direct your attention to the "Introduction," "Site Description,"
and "Description of Improvements" sections of this appraisal report. It is
your responsibility to read the report and inform the appraiser of any errors
or omissions you are aware of prior to utilizing the report or making it
available to any third party.
Based on an inspection of the property and the investigation and analysis
undertaken, we have formed the opinion, subject to the assumptions and limiting
conditions set forth in this report, that as of June 13, 1995, the fee simple
total going concern interest of the subject, as is, has a market value of:
SIX MILLION ONE HUNDRED TWENTY FIVE THOUSAND ($6,125,000) DOLLARS
<PAGE> 129
Mr. Graham Espley-Jones
July 3, 1995
Page 2
This total going concern value estimate can be allocated to the following
components:
<TABLE>
<CAPTION>
Market Value
As is -
6/13/95
------------
<S> <C>
Real Estate Value $5,050,000
Furniture, Fixtures & Equipment 150,000
Business Value 925,000
----------
Total Going Concern Value $6,125,000
==========
</TABLE>
The narrative appraisal report that follows sets forth the identification of
the property and limiting conditions, pertinent facts about the area and the
subject property, comparable data, results of our investigation and analyses
and the reasoning leading to the conclusions set forth. Should you desire a
quick reference to the most important information, I direct your attention to
the "Introduction, " "Executive Summary" and the Reconciliation and Conclusion"
sections of this report.
Respectfully submitted,
SENIOR LIVING VALUATION SERVICES, INC.
/s/
Michael G. Boehm, MAI
President
<PAGE> 130
FORM OF PROPERTY APPRAISAL SUMMARY
July 3, 1995
American Retirement Villa Properties I., L.P.
c/o ARV Housing Group
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Graham Espley-Jones
Re: Maria Del Sol
1405 E. Main Street
Santa Maria, California
SLVS File No. 95-06-36
Gentlemen:
In accordance with your request, we have conducted the required investigation,
gathered the necessary data, and made certain analyses that have enabled us to
form an opinion of the market value of the above captioned property. This
report has been prepared to be in compliance with the requirements of the
Uniform Standards of Professional Appraisal Practice.
The value stated herein is based on our understanding of the site and
improvement descriptions as represented to us by the client and/or the client's
representatives and professional consultants as well as other available
sources. We direct your attention to the "Introduction," "Site Description,"
and "Description of Improvements" sections of this appraisal report. It is
your responsibility to read the report and inform the appraiser of any errors
or omissions you are aware of prior to utilizing the report or making it
available to any third party.
Based on an inspection of the property and the investigation and analysis
undertaken, we have formed the opinion, subject to the assumptions and limiting
conditions set forth in this report, that as of June 9, 1995, the fee simple
total going concern interest of the subject, as is, has a market value of:
FOUR MILLION ONE HUNDRED TWENTY FIVE THOUSAND ($4,125,000) DOLLARS
<PAGE> 131
Mr. Graham Espley-Jones
July 3, 1995
Page 2
This total going concern value estimate can be allocated to the following
components:
<TABLE>
<CAPTION>
Market Value
As is -
6/9/95
------------
<S> <C>
Real Estate Value $3,435,000
Furniture, Fixtures & Equipment 140,000
Business Value 550,000
----------
Total Going Concern Value $4,125,000
==========
</TABLE>
The narrative appraisal report that follows sets forth the identification of
the property and limiting conditions, pertinent facts about the area and the
subject property, comparable data, results of our investigation and analyses
and the reasoning leading to the conclusions set forth. Should you desire a
quick reference to the most important information, I direct your attention to
the "Introduction, " "Executive Summary" and the Reconciliation and Conclusion"
sections of this report.
Respectfully submitted,
SENIOR LIVING VALUATION SERVICES, INC.
/s/
Michael G. Boehm, MAI
President
<PAGE> 132
APPENDIX D
FORM OF CONSENT
<PAGE> 133
(front of card)
CONSENT CONSENT
AMERICAN RETIREMENT VILLAS PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
(THE "PARTNERSHIP")
THIS CONSENT is solicited on behalf of the Partnership by the Managing
Partner, ARV Assisted Living, Inc. THIS SOLICITATION OF CONSENTS EXPIRES ON
OCTOBER 2, 1995 UNLESS EXTENDED OR TERMINATED EARLIER. YOUR VOTE WILL BE
RECORDED IN ACCORDANCE WITH THE INSTRUCTIONS BELOW. IF NO INSTRUCTIONS ARE
INDICATED ON THIS CONSENT, BY YOUR SIGNATURE YOU WILL BE DEEMED TO HAVE
CONSENTED TO THE PROPOSAL.
The Proposal is to authorize:
o the sale of the Properties pursuant to the Agreement dated as of June
28, 1995 between the Partnership and Nationwide Health Properties,
Inc. and, following such sale, the distribution of the Proceeds of
Sale (as defined in the Statement) in accordance with the terms of the
Partnership Agreement, and the subsequent termination, dissolution and
winding up of the Partnership ("Sale and Liquidation").
You may vote on the Proposal described below by marking one of the
following boxes:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
SIGNED BUT UNMARKED CONSENTS WILL BE DEEMED TO APPROVE THE SALE AND LIQUIDATION,
AND WILL BE DEEMED, PURSUANT TO THE PARTNERSHIP AGREEMENT, TO HAVE DIRECTED THE
MANAGING PARTNER TO VOTE TO APPROVE THE TRANSACTION.
(continued on reverse side)
(back side of card)
The undersigned, a Unitholder of the Partnership, acting with respect
to all of the Partnership units held by the undersigned, hereby acknowledges
receipt of the Consent Solicitation Statement dated August 29, 1995
("Statement"), including the form of Agreement dated as of June 28, 1995
between the Partnership and Nationwide Health Properties, Inc. and acts and
concerns as follows: Dated: 1995
-------------------------------,
-------------------------------------------
Signature
-------------------------------------------
Signature (if held jointly)
-------------------------------------------
Title
Please sign exactly as name appears hereon.
When interests are held by joint tenants,
both should sign. When signing as an
attorney, as executor, administrator,
trustee or guardian, please give full title
as such. If a corporation, please sign in
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE OR DELIVER TO : The Herman Group, Inc., 13760 Noel Road,
Suite 320, Dallas, Texas 75240. If you have any questions, please call (800)
747-2966. Facsimile copies of the Consent properly completed and duly executed,
will be accepted at (214) 991-4422 or (214) 991-4432.
<PAGE> 134
AMERICAN RETIREMENT VILLAS PROPERTIES
A CALIFORNIA LIMITED PARTNERSHIP
A postage paid envelope has been enclosed with the Consent materials for your
convenience. However, in order to insure that Consents are received in time,
Unitholders may wish to send the Consent by using an overnight courier delivery
or, if the Consent is to be delivered by United States mail, you may wish to use
certified or registered mail, return receipt requested.
To be counted, a duly completed and signed Consent (or facsimile thereof) must
be received by the Information Agent at the address (or facsimile number) set
forth below before 5:00 P.M. Pacific Daylight Time, on Monday, October 2, 1995,
unless extended or terminated earlier.
By Mail: THE HERMAN GROUP, INC.
P.O. Box 803248
Dallas, TX 75380-9949
By Hand Delivery: 13760 Noel Road, Suite 320
Dallas, TX 75240
By Facsimile: (214) 991-4422
or
(214) 991-4432
For Information Call: (800) 747-2966
<PAGE> 135
CONSENT SOLICITATION
AMERICAN RETIREMENT VILLAS PROPERTIES,
a California limited partnership
(the "Partnership")
Solicitation of Consents to Sell the Partnership's
Assets and Dissolve the Partnership
Pursuant to the
Consent Solicitation Statement dated August 29, 1995
(the "Consent Solicitation Statement")
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M. PACIFIC DAYLIGHT TIME ON
OCTOBER 2, 1995 (THE "CONSENT DATE") UNLESS EXTENDED OR TERMINATED EARLIER.
CONSENTS MAY BE REVOKED AT ANY TIME UP TO THE CONSENT DATE UNDER THE
CIRCUMSTANCES DESCRIBED IN THE CONSENT SOLICITATION STATEMENT.
AUGUST 29, 1995
To Brokers and Dealers:
ARV Assisted Living, Inc. (formerly ARV Housing Group, Inc.) (the
"Managing Partner") is soliciting (the "Consent Solicitation") consents (the
"Consents") from the Unitholders (as defined in the Consent Solicitation
Statement) with respect to the proposed sale of the Maria del Sol, Rancho Park
Villa, Tamalpais Creek and Villa Bonita congregate care facilities and the real
property upon which they are located (collectively, the "Properties") to
Nationwide Health Properties and the subsequent dissolution of the Partnership.
The sale of the Properties and subsequent dissolution of the
Partnership is conditioned upon, among other things, approval by Unitholders who
own more than 50% of the Partnership Interests (as defined in the Consent
Solicitation Statement).
The Partnership and the Managing Partner will not pay any fees or
commissions to any broker, dealer or other person other than The Herman Group,
Inc. for soliciting Consents pursuant to the Consent Solicitation.
<PAGE> 136
Enclosed are copies of the following documents:
1. Consent Solicitation Statement;
2. A form of Consent;
3. A cover letter from John A. Booty, President of the Managing
Partner; and
4. A list of your clients.
With the exception of item 4, all of the documents have been mailed
to your clients.
The term "Consent Date" shall mean 5:00 p.m. Pacific Daylight Time
on October 2, 1995, unless the Consent Solicitation is extended or terminated
earlier, in which case the term "Consent Date" shall mean the date and time to
which the Consent Solicitation is extended or terminated.
In order to participate in the Consent Solicitation, a duly executed
and properly completed Consent and any other required documents must be
delivered to the Information Agent, all in accordance with the instructions set
forth in the Consent and the Consent Solicitation Statement.
Any inquiries you have with respect to the Consent Solicitation or
requests for additional copies of the documents listed above should be directed
to the Information Agent at the telephone number set forth below.
Very truly yours,
ARV Assisted Living, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF THE MANAGING PARTNER, THE PARTNERSHIP
OR THEIR AFFILIATES, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENTS OR REPRESENTATIONS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE
CONSENT SOLICITATION, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE CONSENT
SOLICITATION STATEMENT OR THE CONSENT.
Information Agent:
The Herman Group
1-800-747-2966
1
<PAGE> 137
August 29, 1995
Dear Holders of Units Representing Partnership Interests
of American Retirement Villas Properties:
ARV Assisted Living, Inc. (formerly ARV Housing Group, Inc.) (the
"Managing Partner") is soliciting the consents (the "Consents") of the holders
of Units representing partnership interests of American Retirement Villas
Properties (the "Unitholders"), as more fully described in the accompanying
Consent Solicitation Statement dated August 29, 1995 (the "Consent
Solicitation Statement"), with respect to the proposed sale of the Maria del
Sol, Rancho Park Villa, Tamalpais Creek and Villa Bonita congregate
care/assisted living facilities and the real property upon which they are
located (collectively, the "Properties") to Nationwide Health Properties
("Purchaser"), a Maryland corporation, and the subsequent dissolution of the
Partnership.
The sale of the Properties is subject to, among other things, the
approval of the Unitholders of record as of August 28, 1995 (the "Notice Date").
If the sale of the Properties is approved by Unitholders who own more than 50%
of the Units of the Partnership, Purchaser will, subject to the terms and
conditions set forth in the Agreement (the form of which is attached as Appendix
A), pay $22,700,000 (the "Purchase Price") for the Properties, and the proceeds
from the sale of the Properties (the "Proceeds of Sale") will be disbursed in
accordance with the terms of the Partnership's Limited Partnership Agreement
(the "Partnership Agreement"). Following the sale of the Properties (the
"Transaction"), which constitutes substantially all of the Partnership's assets,
the remaining assets of the Partnership (if any) will be sold and the proceeds
(if any) will be distributed in accordance with the provisions of the
Partnership Agreement and the Partnership will be dissolved.
The Purchase Price is equal to the appraised fair market value of the
Properties. See "Analysis of the Transaction." The Properties will be leased
back by the Managing Partner concurrently with the close of the sale. See
"Summary of the Purchase Agreement" and "Conflicts of Interest."
Total liquidation proceeds available for distribution to Unitholders
(including the Proceeds of Sale described below) will approximate $21,431,940
(approximately $714 per Unit). As explained more fully in "Distribution of the
Proceeds of Sale," the liquidation proceeds are inclusive of the distribution of
Proceeds of Sale equal to approximately $20,920,660 (approximately $697 per
Unit).
The Managing Partner believes that the Transaction is fair and offers the
Unitholders an opportunity to realize immediate liquidity and return on their
investment. See "Analysis of Transaction" and "Conflicts of Interest." In
addition, Robert A. Stanger & Co., Inc. ("Stanger") has delivered its opinion to
the Partnership that the consideration to be paid to the Partnership for the
portfolio of Properties is fair, from a financial point of view. See "Fairness
Opinion." A copy of Stanger's Fairness Opinion is attached as Appendix B.
The Managing Partner has certain conflicts of interest in connection with
the Transaction. See "Conflicts of Interest." The Managing Partner believes
the most significant of these conflicts is that the Managing Partner will
continue to have an interest in the Properties if the Transaction is approved
and completed. Concurrent with the sale of the Properties to Purchaser,
Purchaser will
<PAGE> 138
lease the Properties to the Managing Partner or one of its wholly-owned
subsidiaries. The Managing Partner will thus succeed the Partnership as the
operator of the Properties, will receive all of the revenue from operating the
Properties and will pay rent to Purchaser. Therefore, although the Managing
Partner believes that the terms of the Transaction are fair, the Managing
Partner is making no recommendation in connection with this Consent Solicitation
Statement.
Sale of the Properties and dissolution of the Partnership may trigger
adverse tax consequences for some Unitholders. See "Certain Federal Income Tax
Considerations." In addition, Unitholders will no longer receive quarterly
distributions and may be losing an opportunity to benefit from possible future
improvement in the fair market value of the Properties. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In the event the Transaction and dissolution of the Partnership are not
approved by the Unitholders, the Partnership will continue to own and operate
the Properties. As opportunities arise, the General Partners may pursue
strategies to increase the Partnership's or the Unitholders' liquidity,
including refinancing existing indebtedness, borrowing additional funds secured
by some or all of the Properties, or soliciting offers for the sale of one, some
or all of the Properties. By continuing to own and operate the Properties, the
Partnership will continue to earn income and make distributions to the
Unitholders. The Partnership would also benefit from any increase in the value
of the Properties over time. See "Analysis of the Transaction."
This Consent Solicitation is made by the Managing Partner on behalf of the
Partnership and seeks your approval of the Transaction and the subsequent
dissolution and winding up of the Partnership. The cost of this Consent
Solicitation is being borne by the Partnership. See "Distribution of the
Proceeds of Sale." Any inquiries you have with respect to the Consent
Solicitation should be directed to the Information Agent at the address or
telephone number set forth below and in the Consent Solicitation Statement.
In order for you to participate in the Consent Solicitation, a duly
executed and properly completed Consent and any other required documents must be
delivered to the Information Agent in accordance with the instructions set forth
in the Consent and the Consent Solicitation Statement no later than the Consent
Date. The term "Consent Date" shall mean 5:00 p.m. Pacific Daylight Time on
October 2, 1995, unless the Consent Solicitation is extended or terminated
earlier, in which case the term "Consent Date" shall mean the date and time to
which the Consent Solicitation is extended or terminated. Therefore, please
complete, sign and date the enclosed Consent form and return it to the
Information Agent as promptly as possible. Thank you in advance for your
cooperation.
Sincerely,
John A. Booty
President
<PAGE> 139
APPENDIX A
FORM OF CONSENT
<PAGE> 140
(front of card)
CONSENT CONSENT
AMERICAN RETIREMENT VILLAS PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
(THE "PARTNERSHIP")
THIS CONSENT is solicited on behalf of the Partnership by the Managing
Partner, ARV Assisted Living, Inc. THIS SOLICITATION OF CONSENTS EXPIRES ON
OCTOBER 2, 1995 UNLESS EXTENDED OR TERMINATED EARLIER. YOUR VOTE WILL BE
RECORDED IN ACCORDANCE WITH THE INSTRUCTIONS BELOW. IF NO INSTRUCTIONS ARE
INDICATED ON THIS CONSENT, BY YOUR SIGNATURE YOU WILL BE DEEMED TO HAVE
CONSENTED TO THE PROPOSAL.
The Proposal is to authorize:
o the sale of the Properties pursuant to the Agreement dated as of June
28, 1995 between the Partnership and Nationwide Health Properties,
Inc. and, following such sale, the distribution of the Proceeds of
Sale (as defined in the Statement) in accordance with the terms of the
Partnership Agreement, and the subsequent termination, dissolution and
winding up of the Partnership ("Sale and Liquidation").
You may vote on the Proposal described below by marking one of the
following boxes:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
SIGNED BUT UNMARKED CONSENTS WILL BE DEEMED TO APPROVE THE SALE AND LIQUIDATION,
AND WILL BE DEEMED, PURSUANT TO THE PARTNERSHIP AGREEMENT, TO HAVE DIRECTED THE
MANAGING PARTNER TO VOTE TO APPROVE THE TRANSACTION.
(continued on reverse side)
(back side of card)
The undersigned, a Unitholder of the Partnership, acting with respect
to all of the Partnership units held by the undersigned, hereby acknowledges
receipt of the Consent Solicitation Statement dated August 29, 1995
("Statement"), including the form of Agreement dated as of June 28, 1995
between the Partnership and Nationwide Health Properties, Inc. and acts and
concerns as follows: Dated: 1995
-------------------------------,
-------------------------------------------
Signature
-------------------------------------------
Signature (if held jointly)
-------------------------------------------
Title
Please sign exactly as name appears hereon.
When interests are held by joint tenants,
both should sign. When signing as an
attorney, as executor, administrator,
trustee or guardian, please give full title
as such. If a corporation, please sign in
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE OR DELIVER TO : The Herman Group, Inc., 13760 Noel Road,
Suite 320, Dallas, Texas 75240. If you have any questions, please call (800)
747-2966. Facsimile copies of the Consent properly completed and duly executed,
will be accepted at (214) 991-4422 or (214) 991-4432.
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APPENDIX B
FORM OF FAIRNESS OPINION
American Retirement Villas Properties
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Gentlemen:
You have advised us that the general partners (the "General Partners") of
American Retirement Villas Properties, a California limited partnership (the
"Partnership") are contemplating a transaction in which the real estate owned by
the Partnership -- four assisted living retirement housing properties (the
"Properties") -- will be sold to Nationwide Health Properties, Inc. (the
"Purchaser") subject to, among other matters, the requisite approval of the
limited partners of the Partnership (the "Proposed Sale"). You have further
advised us that in connection with the Proposed Sale the Properties will be sold
to the Purchaser for $22,700,000 in cash (the "Consideration"), and that the
Properties will simultaneously be leased back to ARV Assisted Living, Inc., the
Managing Partner (the "Leaseback").
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
to the Partnership an opinion as to whether the Consideration to be received by
the Partnership in connection with the Proposed Sale is fair to the limited
partners from a financial point of view.
In the course of our analysis for rendering this opinion, we have, among
other things:
- Reviewed the historical operating statements for each of the Properties
for the years ended December 31, 1992, 1993, and 1994, and the six months
ended June 30, 1995;
- Reviewed the 1995 operating budget for each of the Properties;
- Reviewed descriptive information concerning each Property, including
location, number of units, amenities and services, age, and land acreage;
- Reviewed data concerning conditions in the market of each Property and
surveys prepared by management of each Property of competitive facilities
in the market area of the subject;
- Discussed with management of the Partnership and the Properties the
historical operating statements, future prospects, operating projections,
and current valuation estimates and appraisals, and factors influencing
values for each Property;
- Performed site inspections of each of the Properties, and observed certain
competitive properties in the market area of each Property;
- Discussed with management industry trends and outlook, conditions in the
local markets and market conditions for sales and acquisitions of
properties of the type owned by the Partnership, and the historical
financial statements and budgeted and projected operations of the
Properties and the Partnership;
- Reviewed Appraisals of the Properties provided by an independent appraisal
firm, Senior Living Valuation Services, Inc. (the "Appraiser"), and
discussed with the Appraiser the firm's
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experience and qualifications, the appraisal methodologies employed,
research conducted, assumptions and limitations of the appraisals, and
appraisal results;
- Reviewed recent surveys of buyer's acquisition criteria for
income-producing properties similar to the Properties and data on sales
transactions involving similar properties;
- Reviewed summaries prepared by management relating to the terms of the
Proposed Sale and Leaseback of the Properties;
- Reviewed the annual reports of the Partnership on Form 10-K for the years
ending December 31, 1992, 1993 and 1994 and the quarterly report of the
Partnership on Form 10-Q for the quarter ending June 30, 1995; and
- Conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information that were provided
or otherwise communicated to us by the Partnership, the General Partners or
management of the Properties. We have not performed an independent appraisal of
the Properties or other assets and liabilities of the Partnership and have
relied upon and assumed the accuracy and completeness of the appraisal. We have
also relied upon the assurances of the Partnership, the General Partners and
management of the Properties that any financial statements, budget projections,
or value estimates contained in the Consent Solicitation Statement or otherwise
provided or communicated to us were reasonably prepared on bases consistent with
actual historical experience and reflecting the best currently available
estimates and good faith judgments; that no material changes have occurred in
the appraised values of the Properties or the information reviewed between the
date of the Appraisals or the date the other information was provided and the
date of this letter; that the Partnership, the General Partners and/or their
affiliates, and the management of the Properties are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading in any material respect; and that the Proposed Sale
does not violate the terms of the Partnership Agreement or any applicable
federal or state law.
We have not been requested to, and therefore did not: (i) select the
method of determining the Consideration offered to the Partnership; (ii) make
any recommendation to the Partnership or its partners with respect to whether to
approve or reject the Proposed Sale; (iii) express any opinion as to (a) the tax
consequences of the Proposed Sale to the limited partners, (b) the terms of the
Partnership Agreement or any agreements or contracts between the Partnership,
the General Partners and/or their affiliates, or the terms of the Leaseback of
the Properties, (c) any adjustments made to arrive at the net amounts
distributable to the partners, including, but not limited to, balance sheet
adjustments, and other expenses and fees associated with the Proposed Sale, (d)
the General Partners' business decision to effect the Proposed Sale, including,
but not limited to, the decision not to solicit bids for the Properties, or (e)
alternatives to the Proposed Sale. Further, we are not expressing any opinion
as to the fairness of any terms of the Proposed Sale other than the
Consideration to be paid to the Partnership. Our opinion is based on business,
economic, real estate market, and other conditions as of the date of our
analysis and addresses the Proposed Sale of the Property as currently improved
in the context of information available as of the date of our analysis. Events
occurring after that date could affect the Properties or the assumptions used in
preparing the opinion.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Consideration to be received by the Partnership in
connection with the Proposed Sale of the
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Partnership's portfolio of Properties is fair to the limited partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
_______________________, 1995
