SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period
From to
Commission file number 0-14752.
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
(Exact name of Small Business Issuer as Specified in Its Charter)
DELAWARE 35-1665759
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
14160 DALLAS PARKWAY, SUITE 300, DALLAS, TEXAS 75240
(Address of Principal Executive Offices)
(972) 770-5600
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x No
---- ----
Transitional Small Business Disclosure Format Yes No X
------- -------
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CAPITAL SENIOR LIVING COMMUNITIES, LP
<TABLE>
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSET
PROPERTY AND EQUIPMENT, Net $ 31,225,509 $ 12,576,523
OTHER ASSETS:
Cash and cash equivalents 12,223,917 10,463,887
Cash and cash equivalents, restricted 63,798,552 206,376
Accounts receivable, net of allowance for doubtful accounts
of $4,435,476 in 1997 and $164,822 in 1996 2,457,160 373,163
Prepaid expenses and other 168,757 92,302
Deferred charges, less accumulated amortization
of $42,142 in 1997 and $311,938 in 1996 43,213 201,440
Investment in limited partnerships (Note 4) 10,792,192 8,275,920
------------- -------------
Total assets $ 120,709,300 $ 32,189,611
============= =============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other liabilities $ 3,027,380 $ 1,303,833
Customer deposits 269,483 248,458
Notes payable 76,953,721 --
------------- -------------
Total liabilities 80,250,584 1,552,291
------------- -------------
DEFERRED INCOME (Note 4) -- 3,400,684
MINORITY INTEREST 10,894,009 --
PARTNERS' CAPITAL:
General partner 105,414 72,526
Limited partner 1 1
Beneficial unit certificates, 1,264,000
issued and 1,117,692 outstanding 31,682,399 28,426,464
Repurchased beneficial unit certificates (2,223,107) (1,262,355)
------------- -------------
Total partners' capital 29,564,707 27,236,636
------------- -------------
Total liabilities and partners' capital $ 120,709,300 $ 32,189,611
============= =============
</TABLE>
See notes to financial statements
1
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Three Months ended September 30,
1997 1996
---- ----
RENTAL AND OTHER INCOME
Multi-family $ -- $ 339,065
Independent 1,936,839 1,844,799
Assisted Living 435,702 394,120
Nursing 1,933,354 1,067,569
Facility lease income 1,056,067 --
Other 592,034 246,521
----------- -----------
Total rental and other income 5,953,996 3,892,074
EXPENSES:
Salaries, wages and benefits 2,360,785 1,466,581
Operating and other administrative expenses 2,311,541 1,633,008
Depreciation and amortization 646,797 401,928
----------- -----------
Total expenses 5,319,123 3,501,517
----------- -----------
Income from operations 634,873 390,557
OTHER INCOME (EXPENSE):
Interest income 1,271,524 76,541
Interest expense (1,092,271) (55,113)
Income on investments -- 57,555
Other income 22,200 --
Minority interest (126,190) --
----------- -----------
Total other income (expense) 75,263 78,983
----------- -----------
NET INCOME $ 710,136 $ 469,540
=========== ===========
NET INCOME ALLOCATION:
General partner $ 7,101 $ 4,695
Beneficial unit certificate holders 703,035 464,845
----------- -----------
Total $ 710,136 $ 469,540
=========== ===========
NET INCOME PER BENEFICIAL UNIT
CERTIFICATE $ .62 $ .38
=========== ===========
OUTSTANDING BENEFICIAL UNIT
CERTIFICATES 1,117,692 1,215,508
=========== ===========
See notes to financial statements
2
<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
Nine Months ended June 30,
1997 1996
---- ----
<S> <C> <C>
RENTAL AND OTHER INCOME
Multi-family $ -- $ 986,653
Independent 5,684,104 5,452,522
Assisted Living 1,288,780 1,198,940
Nursing 7,388,881 3,500,975
Facility lease income 3,214,040 --
Other 1,053,444 684,565
------------ ------------
Total rental and other income 18,629,249 11,823,655
EXPENSES:
Salaries, wages and benefits 6,867,567 4,356,034
Operating and other administrative expenses 6,963,769 4,814,573
Depreciation and amortization 1,590,240 1,220,242
------------ ------------
Total expenses 15,421,576 10,390,849
------------ ------------
Income from operations 3,207,673 1,432,806
OTHER INCOME (EXPENSE):
Interest income 2,059,220 281,080
Interest expense (1,478,618) (168,072)
Income on investments -- 516,598
Other income 22,200 --
Minority interest (521,652) --
------------ ------------
Total other income (expense) 81,150 629,606
------------ ------------
NET INCOME $ 3,288,823 $ 2,062,412
============ ============
NET INCOME ALLOCATION:
General partner $ 32,888 $ 20,624
Beneficial unit certificate holders 3,255,935 2,041,788
------------ ------------
Total $ 3,288,823 $ 2,062,412
============ ============
NET INCOME PER BENEFICIAL UNIT
CERTIFICATE $ 2.87 $ 1.68
============ ============
OUTSTANDING BENEFICIAL UNIT
CERTIFICATES 1,117,692 1,215,508
============ ============
</TABLE>
See notes to financial statements
3
<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
Beneficial Repurchased
Unit Beneficial Limited General
Certificates Unit Certificates Partner Partner Total
------------ ----------------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 28,426,464 $ (1,262,355) $ 1 $ 72,526 $ 27,236,636
Net Income 3,255,935 -- -- 32,888 3,288,823
Repurchased Beneficial Unit
Certificates -- (960,752) -- -- (960,752)
-------------------- ------------ ---------------- ------------ ------------
BALANCE, September 30, 1997 $ 31,682,399 $ (2,223,107) $ 1 $ 105,414 $ 29,564,707
==================== ============ ================ ============ ============
</TABLE>
See notes to financial statements
4
<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,288,823 $ 2,062,412
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 1,266,044 1,106,613
Amortization of deferred financing charges 324,196 113,629
Provision for bad debt 43,061 16,500
Amortization of deferred income -- (76,296)
Equity in earnings of investee -- (414,778)
Minority interest 521,652 --
Changes in assets and liabilities, net of effects of acquisitions:
Cash, restricted (63,472,007) (840)
Accounts receivable (1,271,229) 60,081
Prepaid expenses and other 7,607 (72,662)
Accrued expenses and other liabilities 446,445 402,142
Customer Deposits 21,025 31,122
------------ ------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (58,824,383) 3,227,923
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired upon consolidation of HCP 8,875,286 --
Additions to property and equipment (1,195,016) (306,200)
Investments in limited partnerships (15,571,261) (3,144,313)
------------ ------------
NET CASH USED IN
INVESTING ACTIVITIES (7,890,991) (3,450,513)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on notes 76,131,267 --
Payments on notes payable (6,384,961) (37,995)
Deferred charges (85,355) (22,852)
Repurchase of beneficial unit certificates (960,752) (582,004)
Distributions (224,795) --
------------ ------------
NET CASH PROVIDED (USED) IN
FINANCING ACTIVITIES 68,475,404 (642,851)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,760,030 (865,441)
CASH AND CASH EQUIVALENTS, Beginning of Period 10,463,887 9,743,330
------------ ------------
CASH AND CASH EQUIVALENTS, End of Period $ 12,223,917 $ 8,877,889
============ ============
</TABLE>
See notes to financial statements
5
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principals of Consolidation
The accompanying consolidated balance sheet, as of September 30, 1997, includes
the accounts of the Partnership, its 99%-owned subsidiary, Retirement
Partnership, Ltd., and HealthCare Properties, L.P. (HCP). HCP includes the
accounts of HCP and its wholly owned subsidiaries, Danville Care, Inc.,
Foothills Care, Inc., Countryside Care, Inc., Countryside Care, L.P., and
Cambridge Nursing Home Limited Liability Company. All significant intercompany
accounts and transactions have been eliminated in consolidation. The 1% minority
interest in Retirement Partnership, Ltd. is not presented separately due to its
immateriality.
By September 30, 1997, the Partnership had increased its ownership in HCP to
56%. In the accompanying consolidated financial statements, HCP is consolidated
as though a controlling financial interest in HCP had been acquired by the
Partnership at January 1, 1997. At December 31, 1996 the Partnership owned
approximately 31% of HCP's limited partner units and accounted for its
investment in HCP on the equity method. Preacquisition earnings for 1997
applicable to HCP are included in minority interest. HCP is a Delaware limited
partnership established for the purpose of acquiring, leasing, and operating
existing or newly constructed long-term health care properties. One property is
operated by HCP and seven properties are leased to qualified operators who
provide specialized health care services. Capital Realty Group Senior Housing,
Inc. (CRGSH) is the general partner. CRGSH is an affiliate of the general
partner of the Partnership.
The financial information has been prepared in accordance with the Partnership's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature. The financial statements should be read in conjunction with
the consolidated financial statements and the footnotes thereto included in the
Partnership's annual report filed in Form 10-KSB for the year ended December 31,
1996.
Property and Equipment
The Partnership provides for depreciation and amortization on property and
equipment using the straight-line method by charges to operations in amounts to
allocate the cost of the property and equipment over their estimated useful
lives.
The carrying value of property and equipment is reviewed if the facts and
circumstances suggest that it may be impaired. The consolidation of HCP at
January 1, 1997 includes a reserve for impaired value of $2,185,381. For the
nine months ending September 30, 1997, no additional reserve for impaired value
has been provided.
Cash Equivalents
The Partnership considers investments with original maturities of three months
or less to be cash equivalents.
Revenue Recognition
Revenue from the four retirement living communities is recognized in the period
in which the unit rental and/or food services relate.
6
<PAGE>
Revenue from the two Projects (Towne Centre and Canton Regency) which offer
assisted living, intermediate, and skilled health care (in addition to
retirement living), is recognized as services are performed. The Towne Centre
health care center (the "Center") is a provider of services under the Indiana
Medicaid program. Accordingly, the Center is entitled to reimbursement under the
foregoing program at rates which are lower than private pay rates. Patient
service revenue for Medicaid patients is recorded at the reimbursement rates.
The Towne Centre and Canton Regency health care centers (the "Centers") are also
providers of services under the Medicare program.
The Centers are entitled to reimbursement under the foregoing program in amounts
which approximate the lower of cost or charges for caring for these patients.
During the period, the Centers received payments from this program on an
estimated basis. Any differences between estimated and actual reimbursements are
recognized in the subsequent year.
2. COMMITMENTS AND CONTINGENCIES:
The Partnership had $19,960 and $56,376 in certificates of deposit at September
30, 1997 and December 31, 1996 respectively, restricted for utility deposits.
The certificates of deposit mature one year from the original purchase date.
In conjunction with the Partnership's mortgage loan arrangement with Lehman
Brothers on July 1, 1997 (see LIQUIDITY AND CAPITAL RESOURCES), there is
$63,658,423 of restricted U.S. Treasury bills sold under a repurchase agreement.
In addition, HCP has a compensating balance of $120,169 for this mortgage loan
arrangement at September 30, 1997.
3. TRANSACTIONS WITH RELATED PARTIES:
In accordance with the Partnership Agreement, the general partner, Retirement
Living Communities, L.P. ("RLC"), does not receive any fees from the Partnership
but may be reimbursed by the Partnership for any actual costs and expenses
incurred in connection with the operations of the Partnership. In addition, an
affiliate of RLC, CRGSH, is managing the assets of the Partnership and of HCP.
CRGSH also receives reimbursements and fees from HCP.
In addition, the Partnership and HCP have no employees. An affiliate of RLC and
CRGSH makes gross payroll deposits and health insurance premium payments on
behalf of the properties owned by the Partnership and HCP, which are reimbursed
by the Partnership, and is required to fund any excess health insurance claims
not covered by the Partnership's health premiums or related insurance policy.
Reimbursements and fees paid to the general partner and affiliates of the
general partner from the Partnership and HCP are as follows:
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
Salary and benefit reimbursements $ 6,469,374 4,072,781
Administrative reimbursements 442,531 274,974
Asset management fees 345,967 -
Property management fees 1,010,229 749,152
General partner management fees 68,101 -
-------------- --------------
$ 8,336,202 5,096,907
============== ==============
In connection with the extension of the Silver Lakes mortgage, an affiliate of
RLC received a 1% financing fee of $20,352 in the first quarter of 1996.
In the second quarter of 1997, the Partnership received a loan from two
affiliates of the general partner totaling $500,000. The loan was repaid in the
second quarter of 1997 and paid accrued interest at 10% of $3,014.
In conjunction with the November 3, 1997 asset sale (see DISPOSITION OF
PROPERTY) an affiliate of RLC received a 6% brokerage and other fee on the sale
of the assets, totaling $4,597,080.
In addition, a 50% shareholder of the general partner of RLC is chairman of the
board of a bank where the Partnership holds the majority of its operating cash
accounts.
The general partner and managing agent of NHP Retirement Housing Partners I,
Limited Partnership ("NHP") is CRGSH, an affiliate of RLC. See Note 4.
7
<PAGE>
4. ACQUISITION OF INVESTMENTS
During 1997, 1996 and 1995, the Partnership made various purchases of limited
partnership interests in HCP and paid $5,567,171, $3,200,685 and $308,825,
respectively. As of September 30, 1997, the Partnership has cumulatively paid
and committed $9,076,681 for a 56% ownership in HealthCare Properties, L.P.
In the second quarter of 1996, 9.36% in limited partnership interests in HCP
were purchased from CRGSH, who had acquired the interests in 1993. The
Partnership paid $1,269,077 to such affiliate, who recognized a $878,592 gain on
the transaction. Because of this purchase, the Partnership exceeded 20%
ownership and changed its method of accounting from the cost method to the
equity method. Thereafter, the Partnership continued purchasing limited
partnership interests in HCP from individual limited partners in HCP in
privately negotiated transactions. In June 1997, the Partnership exceeded 50%
ownership of HCP and changed its method of accounting from the equity method to
a consolidated basis, effective January 1, 1997.
During 1997, 1996 and 1995, the Partnership made various purchases of
outstanding Pension Notes of NHP and paid $10,004,090, $199,158 and $587,580,
respectively. As of September 30, 1997, the Partnership has cumulatively paid
$10,790,828 for a 31% ownership of outstanding Pension Notes of NHP. NHP owns a
portfolio of 5 independent living retirement facilities. The Pension Notes bear
simple interest at 13% per annum. Interest of 7% is paid quarterly, with the
remaining 6% interest deferred. Deferred interest and principal matures on
December 31, 2001. The Partnership accrued interest on the Pension Notes at 7%
through March 31, 1997 and at 10.5% from April 1, 1997 through September 30,
1997, due to uncertainties regarding their ultimate realization. The ultimate
realization of the Pension Notes is expected to be based primarily upon the
value of the underlying properties. During 1996, the Partnership paid $1,364 for
a 3.1% ownership of limited partnership interests in NHP.
5. DISPOSITION OF PROPERTY
On November 5, 1996, the Partnership sold the Lakeridge and Silver Lakes
Apartments to an unrelated party at a combined sales price of $4,793,000, paid
in cash. After payment of the mortgage loan on the Silver Lakes Apartments and
refund of its escrow balance, the Partnership received cash of approximately
$2,549,000 on the sale. Due to the sale of Silver Lakes and Lakeridge,
Partnership total revenues for the nine months ended September 30, 1997 would
have decreased approximately $986,653, and there would not have been a
significant impact to net income.
As of July 8, 1997, the Partnership entered into an asset purchase agreement
with an affiliate of RLC pursuant to which the Partnership has agreed to sell
substantially all of its assets, other than working capital, to such affiliate
conditioned upon, among other things, the funding of such affiliate's initial
public offering. On November 3, 1997, the Partnership sold its four retirement
projects, its interest in Encore Limited Partnership, its interest in HCP and
its interest in the Pension Notes and limited partnership interests of NHP to an
affiliate of RLC, Capital Senior Living Properties, Inc., for $76,617,993. The
Partnership has obtained independent valuations of properties from third party
valuation firms, which were utilized in determining the sales price. Sales
proceeds were paid by the assumption of the Lehman loan (see LIQUIDITY AND
CAPITAL RESOURCES) of $70,833,798 and by delivery of a short term note of
$5,784,195. The short term note was subsequently paid in full on November 6,
1997. Effective November 6, 1997, the restrictions on the U.S. Treasury bills
were released and such U.S. Treasury bills in the principal amount of
$64,202,685 became an unrestricted asset of the Partnership. In conjunction with
the sale of the Partnership's investment in HCP, and in compliance with section
16b of the Securities and Exchange Act, the Partnership paid to HCP $440,007 in
short swing profits made on purchases of HCP within a six month period prior to
the sale.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This discussion should be read in conjunction with the financial statements of
Capital Senior Living Communities, L.P. (the "Partnership") included in this
Report.
As of September 30, 1997, the Partnership's assets included four retirement
projects (Harrison, Cottonwood Village, Canton Regency, and Towne Centre), a 3%
interest in Encore Limited Partnership, a 56% limited partnership interest in
HCP, 31% of the outstanding Pension Notes of NHP, a 3.1% limited partnership
interest in NHP, and a 99% interest in Retirement Partnership, Ltd. (the
"Partnership Subsidiary").
8
<PAGE>
RESULTS OF OPERATIONS
The Partnership's primary source of funds is net rental income from the
ownership and management of the four real estate projects owned by the
Partnership.
FIRST NINE MONTHS OF 1997 COMPARED WITH FIRST NINE MONTHS OF 1996
Rental and other income for the nine months ended September 30, 1997 and 1996
was $18,629,249 and $11,823,655, respectively. Rental and other income increased
$6,805,594, or 57.6% from the nine months ended September 30, 1996 to 1997. The
inclusion of HCP revenues in 1997 from January 1, 1997 contributed $6,883,141 of
this increase, as HCP was not consolidated in 1996. Of this amount, $3,669,101
in nursing income and $3,214,040 in facility lease income was attributable to
the HCP consolidation. Multi-family income of $986,653 decreased from 1996 to
1997 due to the sale of the Silver Lakes and Lakeridge Apartments in November
1996. Independent, assisted living, and other income increased from 1996 to 1997
due to higher rents and increased occupancies at the Partnership's properties.
Apart from consolidated HCP income, nursing home income increased $218,805 from
1996 to 1997 and was mainly attributable to prior year Medicare cost report
settlements. Interest income for the nine months ended September 30, 1997 and
1996, was $2,059,220 and $281,080, respectively. Interest income increased
$1,778,140 from the nine months ended September 30, 1996 to 1997 primarily as a
result of $256,456 attributable to the consolidation of HCP, $823,282 of
interest accrued on U.S. Treasury bills, and $698,402 associated with the
Partnership's increased investment in NHP Pension Notes and its accrual of a
portion of deferred interest on these Pension Notes. No income was recorded for
income on investments for the nine months ended September 30, 1997 due to the
consolidation of HCP. During the nine months ended September 30, 1996, income on
investment of $516,598 was recognized, of which $25,523 was received from the
Partnership's investment in Encore Limited Partnership and $491,075 recognized
on equity participation and amortization of deferred income relating to the
Partnership's investment in HCP. Operating expenses are maintained by property
and by natural expense classification, but are not allocated by revenue type.
Salaries, wages, and benefits of $6,867,567 and $4,356,034 were paid by the
Partnership for the nine months ended September 30, 1997 and 1996, respectively.
The increase in such payments of $2,511,533, or 57.7% from 1996 to 1997 was
attributable to $2,502,974 of HCP salary costs upon consolidation and a small
increase of $8,559 in Partnership salaries, wages and benefits for the nine
months ended September 30, 1997. Operating and other administrative expenses
increased $2,149,196 from 1996 to 1997, or 44.6%, and was mainly attributable to
$2,126,396 of HCP operating expenses upon consolidation and a small increase of
$22,800 in Partnership operating and other administrative expenses for the nine
months ended September 30, 1997. Depreciation and amortization for 1997 was
$1,590,240 and $1,220,242 in 1996. The increase in depreciation and amortization
expense of $369,998, or 30.3% from 1996 to 1997 was due to $856,429 of HCP
depreciation expense upon consolidation and a decrease of $486,431 in
Partnership depreciation resulting from the sale of the Silver Lakes and
Lakeridge Apartments in November, 1996. Interest expense increased $1,310,546
from 1996 to 1997, of which $512,651 was HCP interest expense upon consolidation
and an increase of $797,895 in Partnership interest expense resulting from the
interest expense incurred on the Lehman Brothers loan. Minority interest of
$521,652 for the nine months ended September 30, 1997 is the result of
consolidation of HCP.
For the three months ended September 30, 1997 as compared with the three months
ended September 30, 1996, the Partnership's revenue was impacted by the same
shifts of revenue as discussed above. Similarly, a comparison of third quarter
1997 operating expenses versus third quarter 1996 reflects the same variances as
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The General Partner believes cash and cash equivalents of $12,223,917 at
September 30, 1997 is adequate for the working capital needs of the Partnership.
These reserves will be used to support ongoing working capital needs, pay
existing obligations, and fund future acquisitions or development of real estate
projects.
The Partnership's business is no longer the ownership of tax-exempt bonds.
Instead, since 1991 the Partnership has held and operated real properties. This
has adversely impacted the tax-exempt nature of the Partnership's operations in
that it caused the operations of the Partnership to be fully taxable for federal
income tax purposes and will require the individual BUC holders to report their
respective shares of any taxable income of the Partnership. Moreover, as a
result of federal tax law changes in 1986, BUC holders will not be able to use
losses from any other source, other than "passive activity" losses, to offset
their share of the Partnership's taxable income.
9
<PAGE>
On July 29, 1994, the Partnership obtained a $12,000,000 open-end mortgage loan
commitment from a non-affiliated mortgage company, and pledged the Cottonwood,
Harrison, Towne Centre and Canton Regency Retirement Community as collateral. On
June 30, 1995, the Partnership increased its mortgage loan commitment from
$12,000,000 to $17,500,000. The Partnership borrowed $5,500,000 under this loan
commitment in the second quarter of 1997, which was repaid on July 1, 1997.
At September 30, 1997, mortgage loans for HCP amounted to $6,822,454. These
mortgage loans bear interest ranging from 6.8% to 10.75% and mature from 1997 to
2012. One note, with a balance outstanding of $643,847, was due on June 30,
1997. HCP is currently negotiating the extension of this note until December 1,
2001.
On June 30, 1997, the Partnership entered into a $77,000,000 mortgage loan
agreement with Lehman Brothers and pledged the Cottonwood, Harrison, Towne
Centre, and Canton Regency retirement communities and its investment in HCP and
NHP as collateral. The loan agreement matures December 31, 1997. On July 1,
1997, approximately $70,000,000 became outstanding under this loan agreement;
$5,500,000 was used to repay an outstanding mortgage loan commitment and
approximately $64,500,000 was used to fund the liquidity requirement under the
loan agreement through the purchase of three-month U.S. Treasury bills. The U.S.
Treasury bills were sold under a repurchase agreement with a term equal to their
maturity. Interest costs are based on 30-day LIBOR plus 50 basis points. On
November 3, 1997, the Partnership sold substantially all its assets (see
DISPOSITION OF PROPERTY) to an affiliate of RLC, resulting in the transfer of
the Lehman Brothers' loan to the purchaser and the release of the liquidity
requirement on the U.S. Treasury bills on November 6, 1997.
PARTNERSHIP PROPERTIES
The following table sets forth summary information concerning the four
income-producing real properties owned by the Partnership as of September 30,
1997. These four properties have subsequently been sold (see DISPOSITION OF
PROPERTY). As discussed above, the Lakeridge and Silver Lakes Apartments were
previously sold on November 5, 1996.
Number of Units At Occupancy
Project Name/Location September 30, 1997 09/30/96 09/30/97
--------------------- ------------------ -------- --------
Cottonwood Retirement 65 - residential 92% 100%
Community
Cottonwood, Arizona
The Harrison Retirement 124 - residential 89% 98%
Community
Indianapolis, Indiana
Towne Centre Retirement 147 - residential 93% 92%
Community 34 - assisted living
Merrillville, Indiana 64 - nursing
Canton Regency Retirement 147 - residential 95% 97%
Community 34 - assisted living
Canton, Ohio 50 - nursing
10
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On or about September 19, 1997, an Information Statement was submitted to the
holders of Beneficial Unit Certificates ("BUCs"). The Information Statement
provided information to BUC Holders concerning the intention of the general
partner of the Partnership and its affiliates, who own approximately 66.46% of
the outstanding BUCs, to approve an amendment (the "Amendment") to the
partnership agreement of the Partnership which would allow sale of all or
substantially all of the assets of the Partnership without effecting the
dissolution of the Partnership and to approve the sale of the assets of the
Partnership (the "Sale") as described herein under DISPOSITON OF PROPERTY. The
general partner and its affiliates subsequently approved the Amendment and the
Sale.
Item 5. Other Information
On November 3, 1997, the Partnership sold the assets set forth under DISPOSITION
OF PROPERTY herein. The information concerning this sale set forth herein is
filed in lieu of a Form 8-K.
Item 6. (a) Exhibits and Reports on Form 8-K
Exhibit No. Description of Exhibit
----------- ----------------------
27 Financial Data Schedule required by
Item 601 of Regulation S-B filed
herewith.
(b) No reports on Form 8-K have been filed by the registrant during
the quarter ended September 30, 1997.
11
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
By: RETIREMENT LIVING COMMUNITIES, L.P.
General Partner
By: CAPITAL RETIREMENT GROUP, INC.
General Partner
Date: November 13, 1997 By:/s/ Keith Johannesses
-----------------------
Keith Johannessen
President
By:/s/ James A. Stroud
-----------------------
James A. Stroud
Chief Operating Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000789283
<NAME> CAPITAL SENIOR LIVING COMMUNITIES, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 76,022,469
<SECURITIES> 10,792,192
<RECEIVABLES> 6,892,636
<ALLOWANCES> (4,435,476)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 53,546,489
<DEPRECIATION> (22,320,980)
<TOTAL-ASSETS> 120,709,300
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,564,707
<TOTAL-LIABILITY-AND-EQUITY> 120,709,300
<SALES> 0
<TOTAL-REVENUES> 20,710,669
<CGS> 0
<TOTAL-COSTS> 15,421,576
<OTHER-EXPENSES> 521,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,478,618
<INCOME-PRETAX> 3,288,823
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,288,823
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
