CAPITAL SENIOR LIVING COMMUNITIES L P, 10KSB, 1999-03-31

CAPITAL SENIOR LIVING COMMUNITIES L P
10KSB, 1999-03-31
ASSET-BACKED SECURITIES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required) For the fiscal year ended December
31, 1998, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------- ---------------

Commission file number 0-14752.
-------

CAPITAL SENIOR LIVING COMMUNITIES, L.P.
(Exact name of registrant 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 officers) (Zip Code)

Registrant's telephone number, including area code: (972) 770-5600
---------------

Securities registered pursuant to Section 12(b) of the Act: None
----

Securities registered pursuant to Section 12(g) of the Act: Beneficial Unit
Certificates
---------------
(Title of Class)

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and none will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ]

The registrant's revenues for its most recent fiscal year were: $(75,053)

As of December 31, 1998, there were 1,117,692 Beneficial Unit Certificates of
limited partnership interest of the Partnership ("BUCs") outstanding, of which
580,161 were held by affiliates of the registrant. The BUCs are not quoted on
the NASDAQ System.

Documents incorporated by reference. None.
----

Transitional small business disclosure format (check one): Yes No X
--- ---
Page 1 of 38
Exhibit Index: Page 32
<PAGE>

PART I
Item 1. DESCRIPTION OF BUSINESS
-----------------------

General
- - -------

Capital Senior Living Communities, L.P. (formerly known as Retirement Living
Tax-Exempt Mortgage Fund Limited Partnership) (the "Partnership") was formed on
December 17, 1985, under the Delaware Revised Uniform Limited Partnership Act,
and will continue until December 31, 2016, unless terminated earlier under
certain provisions of the partnership agreement. In 1986, the Partnership issued
to the public a total of 1,264,000 Beneficial Unit Certificates ("BUCs"),
representing assignments of limited partnership interest. This issuance
generated funds of $28,758,000, net of issuance costs, which were used
principally to acquire the Mortgage Loans (as defined below) on April 11, 1986.

The Partnership was originally formed to acquire a portfolio of five federally
tax exempt, participating, non-recourse first mortgage bonds issued by
governmental issuers (the "Bonds") to finance the construction and/or ownership
of real estate projects (the "Projects"). Each of the Bonds was secured by a
non-recourse note from the owner of a Project and a mortgage on such Project
(the "Mortgage Loans"). The Projects consisted of four retirement living centers
and one multi-family residential apartment complex. Each Project was owned by a
partnership (called herein a "Project Owner"). The partners of each Project
Owner ("Guarantors") guaranteed the Mortgage Loan on such Project until that
Project met a base interest target and also guaranteed all unpaid base interest
on such Mortgage Loan until the earlier of maturity or acceleration (the
"Guarantees"). The Project Owners defaulted under the Mortgage Loans, and
effective September 11, 1991, the Project Owners transferred to a 99%-owned
subsidiary of the Partnership ("Retirement Partnership, Ltd.", the "Partnership
Subsidiary"), through a negotiated settlement (the "Negotiated Settlement"): (a)
the five Projects securing the Mortgage Loans; (b) an option to acquire an
additional 132-unit apartment project owned by an affiliate of the Project
Owners and Guarantors (the "Village Green I Apartments") (this acquisition was
effective December 6, 1991); and (c) an approximate 12% interest in Encore
Limited Partnership, a limited partnership which invests in retirement living
communities and is not affiliated with the Project Owners or Guarantors. The
Partnership's interest in Encore Limited Partnership was subsequently diluted to
a 3% interest after the reorganization of the Encore Limited Partnership in
December, 1995.

In exchange for the transfer of these properties to the Partnership, the
Partnership agreed to (i) forgive approximately $6,000,000 of the principal owed
under the Mortgage Loans; (ii) release the Project Owners from any liability
under the remaining balance of the Mortgage Loans; (iii) release the Guarantors
from any obligations under their personal guarantees of the Mortgage Loans; (iv)
purchase the Village Green I Apartments for $2,633,202, payable $430,000 in cash
and by taking the project subject to a nonrecourse first lien mortgage payable
to Banc One Mortgage Corporation in the amount of approximately $2,203,202; and
(v) release the Project Owners and Guarantors from their obligation to reimburse
the Partnership for $203,500 in costs related to the Partnership's efforts to
collect unpaid base interest on the Mortgage Loans in 1989. Additionally, in
order to acquire the Projects, the Partnership surrendered the Bonds to the
government issuers for cancellation.

In addition, the Partnership invested in limited partnership interests in
HealthCare Properties, L.P. ("HCP") during 1996 and 1997. During 1997, the
Partnership's interest in the HCP was approximately 56% prior to the sale of

1
<PAGE>

this interest to an affiliate. The Partnership also invested in Pension Notes of
NHP Retirement Housing Partners I, Limited Partnership ("NHP") and acquired a
30.8% ownership of such Pension Notes.

Through October 31, 1997, the Partnership operated the four retirement living
centers through management agreements between the general partner of the
Partnership and an affiliate of the general partner. The two multi-family
residential apartment complexes were sold on November 1, 1996 to an unaffiliated
third party purchaser. The four retirement living centers and Partnership
investments were sold on November 3, 1997 (with an effective date of November 1,
1997) to an affiliate of the general partner. At December 31, 1998 the
Partnership had no operations. See "Acquisition and Divestiture" and "Item 12.
Certain Relationships and Related Transactions."

General Partner
- - ---------------

The general partner of the Partnership is Retirement Living Communities, L.P.
("RLC"), an Indiana limited partnership, whose sole general partner was Capital
Realty Group Senior Housing, Inc. ("Senior Housing"). Effective July 1, 1995,
Senior Housing assigned its general partnership interest to Capital Retirement
Group, Inc. ("Retirement Group"), a Texas corporation and until June 10, 1998,
an affiliate of Senior Housing. The address of the principal executive offices
of RLC and its general partner is the same as the Partnership: 14160 Dallas
Parkway, Suite 300, Dallas, Texas 75240, and their telephone number at such
address is the same as the Partnership (972) 770-5600. The limited partner of
the Partnership is Retirement Living Fiduciary Corporation, an Indiana
corporation ("RLFC").

Prior to March 23, 1990, the Project Owners were affiliates of RLC and RLFC.
However, on March 23, 1990, the general partners of RLC sold all of the general
partnership interests in RLC and all of the outstanding shares of RLFC to Senior
Housing, which is not an affiliate of the Project Owners, and the limited
partners of RLC sold all of the limited partnership interests in RLC to Capital
Realty Group Properties, Inc. ("CRGP"), a Texas corporation and an affiliate of
Senior Housing and Retirement Group. Effective January 1, 1991, CRGP transferred
its limited partnership interest in RLC to two individuals affiliated with
Senior Housing and Retirement Group. See "Item 9. Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act." Accordingly, Retirement Group has sole management authority and control
over the affairs of RLC. On September 12, 1990, RLC completed a tender offer
solicitation of BUC holders in order to acquire BUCs, resulting in the
acquisition of 561,336 BUCs by RLC, representing approximately 44% of the total
BUCs outstanding. As of December 31, 1998 RLC owns 580,161 BUCs, representing
51.9% of the total BUCs outstanding. See "Item 11. Security Ownership of Certain
Beneficial Owners and Management" for further disclosure of affiliated
ownership.

Status for Federal Income Taxes
- - -------------------------------

The Partnership's operations are fully taxable for federal income tax purposes
and the individual BUC holders are required 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 are not able to use losses from any other source
other than "passive activity" losses, to offset their share of the Partnership
taxable income.

2
<PAGE>

distributions to the BUC holders would be treated as fully taxable dividends to
the extent of current and accumulated earnings and profits, while distributions
in excess of current and accumulated earnings and profits would be treated as
the non-taxable return of capital to the extent of each BUC holder's basis in
the BUCs. RLC does not believe the Partnership will be taxed as "publicly
traded" for fiscal 1998 based on its interpretation of Section 7704 and no
provision for income taxes has been reflected in the accompanying statements of
income. No ruling has been requested from the Internal Revenue Service regarding
this matter and there can be no certainty as to the ultimate outcome of this
matter at this time.

Employees
- - ---------

The Partnership has no employees. Certain services were provided to the
Partnership by employees or affiliates of RLC and Retirement Group during 1998,
and the Partnership reimburses the affiliates for such services at cost. The
Partnership is not charged and does not pay for salaries or fringe benefits of
any principals of Retirement Group.

Government Regulations and Reimbursement
- - ----------------------------------------

Through the date of divestiture, two of the Partnership's properties, Towne
Centre and Canton Regency, participated in the Medicaid and Medicare programs.
Medicaid is a medical assistance program for the indigent, operated by
individual states with the financial participation of the federal government.
Medicare is a health insurance program for the aged and certain other
chronically disabled individuals, operated by the federal government. The Towne
Centre project was a provider of services under the Indiana Medicaid program.
Accordingly, Towne Centre was entitled to reimbursement under the foregoing
program at established rates which are lower than private pay rates. Payments
from the Medicaid program are adjusted prospectively, based on the filing of an
annual cost report. The Towne Centre and Canton Regency projects were also
providers of services under the Medicare program. These Projects were entitled
to reimbursement under the foregoing program in amounts determined based on the
filing of an annual cost report prepared in accordance with Federal regulations,
which reports are subject to audit and retroactive adjustment in future periods.
Under Federal regulations, Medicare reimbursements to these projects are limited
to routine cost limits determined on a geographical region. The Partnership has
filed exception reports to request reimbursement in excess of its routine cost
limits for the years of 1992 through 1997. There can be no assurance that an
exception to the properties routine cost limit will be granted. These Projects
receive payments from this program based on established rates and are adjusted
for differences between such rates and estimated amounts reimbursable from the
program. During fiscal 1997, the Medicaid and Medicare programs accounted for
approximately 28% of the Partnership's revenues.

Acquisition and Divestiture
- - ---------------------------

On July 8, 1997, the Partnership entered into an asset purchase agreement with
an affiliate of RLC, Capital Senior Living Properties, Inc. ("CSLP"), a
wholly-owned subsidiary of Capital Senior Living Corporation, pursuant to which
the Partnership agreed to sell substantially all of its assets, other than
working capital, to CSLP conditioned upon, among other things, the funding of
the parent company of CSLP's initial public offering. In conjunction with the
asset purchase agreement, 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. On July 1, 1997, approximately

3
<PAGE>

$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 its four retirement projects, its interest in Encore Limited
Partnership, its interest in HCP and its interest in the NHP Pension Notes and
limited partnership interests of NHP to CSLP for $76,617,993. The Partnership
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 Brothers loan 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. After payment of closing costs and broker fees, net cash
proceeds to the Partnership were $336,736. The sale resulted in a gain of
$36,795,949 to the Partnership. 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 of 1934, 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.

During 1997, the Partnership made various purchases of limited partnership
interests in HCP. During 1997, the Partnership paid $5,604,945 for partnership
interests in HCP. Prior to the sale on November 3, 1997, the Partnership had
cumulatively paid $9,114,455 for a 56% ownership in HCP. HCP owned a portfolio
of 8 nursing home or rehabilitation facilities.

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. Prior to the sale of HCP interests on November 3, 1997,
operations of HCP were consolidated with the Partnership from January 1, 1997 to
October 31, 1997.

Until June 10, 1998, the managing agent of HCP and NHP was an affiliate of RLC.
Capital Senior Living Corporation, HCP, and NHP are also subject to the
reporting requirements of the Securities and Exchange Commission.

The Partnership's Properties
- - ----------------------------

At December 31, 1998, the Partnership owns no properties.

The Partnership had a $17,500,000 open end mortgage loan commitment for future
acquisition and development of properties from a non-affiliated mortgage
company, and pledged the Cottonwood Retirement Community, The Harrison
Retirement Community, Towne Centre Retirement Community and Canton Regency
Retirement Community as collateral. The Partnership borrowed $5,500,000 under
this loan commitment in the second quarter of 1997, which was repaid July 1,
1997 with proceeds from the Lehman Brothers loan.

4
<PAGE>

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. This loan was assumed by CSLP and repaid with the sale of the
properties on November 3, 1997 (See Acquisition and Divestiture).

Item 2. DESCRIPTION OF PROPERTY
-----------------------

At December 31, 1998, the Partnership does not own or lease any significant
physical properties. The Partnership operates out of, and uses the premises of,
Retirement Group at no direct cost to the Partnership.

Item 3. LEGAL PROCEEDINGS
-----------------

There are no material pending legal proceedings to which the Partnership is a
party.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------

None.

PART II

Item 5. MARKET FOR REGISTRANT'S PARTNERSHIP INTERESTS AND
RELATED PARTNERSHIP MATTERS
---------------------------

Until July 18, 1989, the BUCs were quoted on the NASDAQ System under the symbol
RLIVZ. The BUCs are not presently listed or traded on any exchange or quoted on
the NASDAQ System. Bid and asked prices were reported in the "pink sheets"
during the second and third quarters of 1989. However, no bid or asked prices
have been reported since the third quarter of 1989. There is presently no
established trading market for the BUCs.

The number of BUC holders of record as of December 31, 1998 was 690.

Due to the sale of the Partnership's assets on November 3, 1997, it is the
general partner's intention to substantially distribute the Partnership's cash
holding, leaving a small working capital reserve available for obligations that
may result from future contingencies.

On March 12, 1998, a distribution of $61,000,000 was made available, of which
$60,430,043 has been disbursed to the current BUC Holders, and a $1,802,800
distribution was disbursed to the general partner.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------

This discussion should be read in conjunction with the consolidated financial
statements of the Partnership included in this Report.

Prior to the sale of Partnership assets on November 3, 1997, the Partnership's
assets included four retirement projects (Harrison, Cottonwood Village, Canton

5
<PAGE>

Regency, and Towne Centre), a 3% limited partnership interest in Encore Limited
Partnership, (diluted from 12% on December 15, 1995), a 56% ownership of limited
partnership interests in HCP, a 30.8% ownership of outstanding Pension Notes of
NHP, and a 3.1% ownership of limited partnership interests in NHP. See "Item 1.
Description of Business - Acquisition and Divestiture".

Results of Operations
- - ---------------------

1998 Compared with 1997
- - -----------------------

Rental and other income for fiscal 1998 and 1997 was $(75,053) and $21,123,078,
respectively, and the decrease in revenues from 1997 to 1998 was due to the sale
of Partnership properties on November 3, 1997. The Partnership incurred
adjustments of $75,933 in Medicare cost report settlements during 1998.
Operating and general and administrative expenses for fiscal 1998 and 1997 was
$(21,752) and $17,454,612, respectively, and the decrease in expenses from 1997
to 1998 was due to the sale of Partnership properties on November 3, 1997. The
Partnership received $113,792 in workers compensation reimbursements, thus
resulting in a $113,792 credit in salaries, wages and benefits for fiscal 1998.
In addition, the Partnership also recovered $93,140 in collection of accounts
receivable that had previously been expensed as bad debts, thus resulting in a
$93,140 credit in bad debt expense for fiscal 1998. Interest income decreased
$2,052,431 from 1997 to 1998, due to less cash available for investment
resulting from cash distributions made during 1998. Interest expense, gain on
sale of properties and minority interest all decrease to $0 in 1998 from 1997
due to the sale of Partnership properties on November 3, 1997. Other income
increased $52,421 from 1997 to 1998 and was due to a settlement of a legal
claim.

Liquidity and Capital Resources
- - -------------------------------

As of December 31, 1998, the Partnership had cash and cash equivalents of
$6,111,572. It is the intention of the general partner to wind down the business
affairs of the Partnership and to substantially distribute its cash holdings,
leaving a small working capital reserve available for obligations that may
result from future contingencies. On March 12, 1998, a distribution of
$61,000,000 was made available, of which $60,430,043 has been disbursed to the
BUC Holders and a $1,802,800 distribution was disbursed to the general partner.

Cash and cash equivalents decreased in the amount of $60,706,714 from the end of
fiscal year 1997 to the end of fiscal year 1998. Cash sources consisted of
$1,526,129 from operating activities. Cash uses during fiscal year 1998 were
distributions of $62,232,843.

For 1998, the Partnership's taxable income was $836,061, which is approximately
$0.75 for each outstanding BUC.

6
<PAGE>

the BUCs. RLC does not believe the Partnership will be taxed as "publicly
traded" for fiscal 1998 based on its interpretation of Section 7704 and no
provision for income taxes has been reflected in the accompanying consolidated
statements of income. No ruling has been requested from the Internal Revenue
Service regarding this matter and there can be no certainty as to the ultimate
outcome of this matter at this time.

To the extent the Partnership is taxed as a corporation because it is "publicly
traded" under Section 7704, payments of federal income tax by the Partnership
will reduce the liquidity and net cash flow of the Partnership. On the other
hand, in such event, the BUC Holders would not be required to report any income
of the Partnership in their personal federal income tax returns absent any cash
distributions to them.

Year 2000 Issue
- - ---------------

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize the Year 2000 as a date other than the Year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. Based on ongoing
assessments, the Partnership has developed a program to modify or replace
significant portions of its software and certain hardware, which are generally
PC-based systems, so that those systems will properly utilize dates beyond
December 31, 1999. The Partnership expects to substantially complete software
reprogramming and software and hardware replacement by mid 1999, with 100%
completion targeted for September 30, 1999. The Partnership presently believes
that these modifications and replacements of existing software and certain
hardware will mitigate the Year 2000 Issue. However, if such modifications and
replacements are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Partnership.

The Partnership has assessed its exposure to operating equipment, and such
exposure is not significant due to the nature of the Partnership's business.

The Partnership is not aware of any external agent with a Year 2000 Issue that
would materially impact the Partnership's results of operations, liquidity, or
capital resources. However, the Partnership has no means of determining whether
or ensuring that external agents will be Year 2000 ready. The inability of
external agents to complete their Year 2000 resolution process in a timely
fashion could materially impact the Partnership.

Management of the Partnership believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Partnership
has completed most but not all necessary phases of its Year 2000 program. In the
event that the Partnership does not complete the current program or any
additional phases, the Partnership could incur disruptions to its operations. In
addition, disruptions in the economy generally resulting from Year 2000 Issues
could also materially adversely affect the Partnership. The Partnership could be
subject to litigation for computer systems failure. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.

The Partnership currently has no contingency plans in place in the event it does
not complete all phases of its Year 2000 program. The Partnership plans to
evaluate the status of completion in mid 1999 and determine whether such a plan
is necessary.

<PAGE>

Item 7. FINANCIAL STATEMENTS
--------------------

The financial statements of the Partnership are listed in Item 13 of this report
and are contained at pages 13 through 25 of this Report.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------

None.

PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------

The Partnership has no directors or officers. RLC is the sole general partner of
the Partnership, and accordingly, manages and controls the affairs of the
Partnership. Retirement Group is the sole general partner of RLC.

Retirement Group is a privately owned corporation initially organized on August
23, 1995. Its principal business activity has been the ownership and management
of real property for its own account and for the account of various limited
partnerships of which it is the general partner. Retirement Group is a wholly
owned subsidiary of Capital Realty Group Corporation, a Texas corporation
("Capital"), with its corporate headquarters in Dallas, Texas. Capital is owned
50% by James A. Stroud (through a trust) and 50% by Jeffrey L. Beck.

The Partnership properties until February 1, 1995, were managed by Senior
Housing. On February 1, 1995, Senior Housing assigned its contract rights to
manage the Partnership properties to Capital Senior Living, Inc. ("CSL"), a
subsidiary of Capital Senior Living Corporation ("CSLC").

The following are the directors and executive officers of Retirement Group and
CSLC.

Name Position
------------------------------------------------------------------
James A. Stroud Chief Operating Officer,
Secretary and Director

Jeffrey L. Beck Chief Executive Officer and
Director

Keith N. Johannessen President

Rob L. Goodpaster Vice President, National
Director of Marketing

David Brickman Vice President

Robert F. Hollister Property Controller

James A. Stroud, age 48. Mr. Stroud has served as a director
and Chief Operating Officer of CSL, since January 1986. Mr. Stroud also serves
on the boards of various educational and charitable organizations, and in
varying capacities with several trade organizations, including as a member of
the Founder's Council and Board of Directors of the Assisted Living Federation
of America, and as Housing Commissioner, President-Elect, and as a member of the

<PAGE>

Board of Directors of the National Association For Senior Living Industries. Mr.
Stroud also serves as an Advisory Group member to the National Investment
Conference. Mr. Stroud was a Founder of the Texas Assisted Living Association
and serves as a member of its Board of Directors. Mr. Stroud has earned a
Masters in Law, is a licensed attorney and is also a Certified Public
Accountant.

Jeffrey L. Beck, age 54. Mr. Beck has served as a director
and Chief Executive Officer of CSL since January 1986. Mr. Beck also serves on
the boards of various educational, religious and charitable organizations and in
varying capacities with several trade associations. Mr. Beck served as Vice
Chairman of the American Seniors Housing Association from 1992 to 1994, and as
Chairman from 1994 to 1996, and remains a member of its Executive Board, and is
a council member of the Urban Land Institute. Mr. Beck is Chairman of the Board
of Directors of United Texas Bank of Dallas and is Chairman and President of
Beck Properties Trophy Club.

Keith N. Johannessen, age 42. Mr. Johannessen has served as
President of CSL since March 1994, and previously served as Executive
Vice-President since May 1993. From 1992 to 1993, Mr. Johannessen served as
Senior Manager in the health care practice of Ernst & Young. From 1987 to 1992,
Mr. Johannessen was Executive Vice President of Oxford Retirement Services, Inc.
Mr. Johannessen has served on the State of the Industry and Model Assisted
Living Regulations Committees of the American Seniors Housing Association. Mr.
Johannessen has been active in operational aspects of senior housing for 19
years.

Rob L. Goodpaster, age 46. Mr. Goodpaster has served as Vice
President - National Marketing of CSL since December 1992. From 1990 to 1992,
Mr. Goodpaster was National Director for Marketing for Autumn America, an owner
and operator of senior housing facilities. Mr. Goodpaster is a member of the
Board of Directors of the National Association For Senior Living Industries. Mr.
Goodpaster has been active in the operational, development and marketing aspects
of senior housing for 21 years.

David Brickman, age 41. Mr. Brickman has served as Vice
President and General Counsel of CSL since July 1992. From 1989 to 1992, Mr.
Brickman served as in-house counsel with LifeCo Travel Management Company, a
corporation which provided travel services to U.S. corporations. Mr. Brickman
has earned a Masters of Business Administration and a Masters in Health
Administration. Mr. Brickman has either practiced law or performed in-house
counsel functions for 11 years.

Robert F. Hollister, age 43. Mr. Hollister, a Certified
Public Accountant, has served as Property Controller for CSL since April 1992.
From 1985 to 1992, Mr. Hollister was Chief Financial Officer and Controller of
Kavanaugh Securities, Inc., a NASD broker dealer. Mr. Hollister is a Certified
Financial Planner. Mr. Hollister is a member of the American Institute of
Certified Public Accountants and is also a member of the Texas Society of
Certified Public Accountants.

The executive officers of CSL and Retirement Group are required to spend only
such time on the Partnership's affairs as is deemed necessary in the sole
judgment of CSL and Retirement Group. A significant amount of these officers'
time is expected to be spent on matters unrelated to the Partnership.

Based solely upon a review of Forms 3, 4 and 5 furnished to the Partnership
pursuant to Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or upon written representations received by the

9
<PAGE>

Partnership, the Partnership is not aware of any failure by any officer or
director of Retirement Group or beneficial owner of more than 10% of the BUCs to
timely file with the Securities and Exchange Commission any Form 3, 4 or 5
relating to 1998.

Item 10. EXECUTIVE COMPENSATION
----------------------

RLC does not receive a fee for serving as general partner of the Partnership.
None of the executive officers or directors of Retirement Group receive a fee
from the Partnership for serving in such capacity. As discussed under "Item 12.
Certain Relationships and Related Transactions", Retirement Group and its
affiliates receive fees and expense reimbursements from the Partnership for
other services rendered.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
---------------------

As of December 31, 1998, RLC owned 580,161 BUCs (approximately 51.9% of the
total outstanding), Jeffrey L. Beck owned 10,482 BUCs individually, Janet Sue
Beck owned 70,846 BUCs individually, Capital Trust, a trust for which James A.
Stroud is the beneficiary, owned 16,943 BUCs, James A. Stroud owned 39,404 BUCs
individually and Stroud Children's Trust II owned 24,980 BUCs. Jeffrey L. Beck
and James A. Stroud may each be deemed to beneficially own the BUCs owned by
RLC. Jeffrey L. Beck disclaims beneficial ownership of the BUCs owned by Janet
Sue Beck, and Janet Sue Beck disclaims beneficial ownership of the BUCs owned by
Jeffrey L. Beck. No other person is known by the Partnership to own more than 5%
of the BUCs.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

Prior to February 1, 1995, Senior Housing managed the Partnership's properties.
Effective February 1, 1995, CSL managed the retirement living properties of the
Partnership pursuant to separate asset management agreements between the
Partnership and CSL. The management agreements provided for reimbursement of all
expenses of managing the properties, including salaries of on-site managers and
out-of-pocket expenses of CSL, and provided for payment of a property management
fee to CSL equal to 5% of the gross revenues of each Project. For the periods
ended December 31, 1998 and 1997, the Partnership paid CSL $0 and $851,577,
respectively, in property management fees for managing the Projects and paid
$46,542 in 1998 and $297,925 in 1997, for reimbursable expenses under the
management agreements. In accordance with the partnership agreement, RLC does
not receive any fees from the Partnership but it and affiliates may be
reimbursed by the Partnership for any actual costs and expenses incurred in
connection with the operations of the Partnership.

All property employees are paid by an affiliate of RLC. Reimbursed gross payroll
and health insurance premiums, which were expensed by the Partnership in 1998
and 1997, were $0 and $4,429,839, respectively.

For the ten months ended October 31, 1997, certain salary and benefit
reimbursements, administrative expenses and fees related to the operations of
HCP were paid to affiliates of RLC. These amounts are as follows:

Salary and benefits $ 2,501,798
Asset management fees 450,821
Property management fees 280,047
Administrative and other expenses 136,471
General partner management fees 75,815
----------------

$ 3,444,952
================
10
<PAGE>
In May 1995, the Partnership contracted with Quality Home Care, Inc., an
affiliate of RLC, to provide nursing services to the assisted living residents
at the Harrison facility. The contract was executed to comply with certain state
regulations. As part of the contract, the Partnership has transferred its share
of assisted living revenues and expenses for the Harrison to Quality Home Care,
Inc. resulting in an approximate decrease of $22,000 in net annualized profits.

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 interest at 10%, totaling $2,740.

Upon sale of the Partnership assets on November 3, 1997, an affiliate of RLC
received a $4,597,080 broker fee.

Jeffrey L. Beck is an approximate 50% partner in RLC and is chairman of the
board of a bank where the Partnership holds the majority of its operating cash
accounts.

On December 10, 1996, the Partnership entered into contract with Capital Senior
Development, Inc., an affiliate of RLC, to construct a 97 unit expansion of The
Cottonwood facility, consisting of 49 units for independent living and 48 units
for assisted living. The budgeted cost for the expansion was approximately
$6,756,000 and includes funding for kitchen and dining room renovation. As of
October 31, 1997, prior to its sale, expenditures for construction in process
were $990,752.

The managing agent of HCP and NHP is an affiliate of RLC.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

Financial Statements.
- - --------------------

The following financial statements of the Partnership are filed as part of this
report on pages 13 through 25 hereof:

Report of Ernst & Young LLP, Independent Auditors

Report of KPMG Peat Marwick LLP, Independent Auditors

Consolidated Balance Sheets as of December 31, 1998 and 1997

Consolidated Statements of Income for the years ended December 31,
1998 and 1997

Consolidated Statements of Partners' Capital for the years ended
December 31, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended December
31, 1998 and 1997

Notes to Consolidated Financial Statements

11
<PAGE>
Exhibits
- - --------

The list of exhibits is incorporated herein by reference to the exhibit index on
pages 27 through 31 of this report.

Reports on Form 8-K
- - -------------------

No reports on Form 8-K were filed during the last quarter of fiscal 1998.

<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Partners and Beneficial Unit Certificate Holders
Capital Senior Living Communities, L.P.

We have audited the accompanying consolidated balance sheets of Capital Senior
Living Communities, L.P. and subsidiary as of December 31, 1998 and 1997 and the
related consolidated statements of income, partners' capital, and cash flows for
each of the two years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the consolidated financial statements of HealthCare
Properties, L.P. and subsidiaries, a 56% owned subsidiary through November 3,
1997, which statements reflect total revenues of $8,977,628 for the year ended
December 31, 1997. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to data
included for HealthCare Properties, L.P., is based solely on the report of other
auditors.

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 and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Capital Senior Living
Communities, L.P. and subsidiary at December 31, 1998 and 1997 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.

Ernst & Young LLP
Dallas, Texas
February 5, 1999

13
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
HealthCare Properties, L.P.

We have audited the accompanying consolidated balance sheet of HealthCare
Properties, L.P. and subsidiaries (a Delaware limited partnership) as of
December 31, 1997, and the related consolidated statements of income,
partnership equity, and cash flows for the year ended December 31, 1997. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HealthCare
Properties, L.P. and subsidiaries as of December 31, 1997, and the results of
their operations and their cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Dallas, Texas
February 4, 1998

14
<PAGE>
<TABLE>
<CAPTION>

CAPITAL SENIOR LIVING COMMUNITIES, L.P.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 and 1997

ASSETS 1998 1997
- - ------ ---- ----
<S> <C> <C>

Cash and cash equivalents $ 6,111,572 $ 66,818,286
Cash, restricted (Note 6) 20,958 19,960
Accounts receivable, net of allowance for doubtful accounts of
$52,462 in 1998 and $145,602 in 1997 (Note 12) 46,666 599,824
Prepaid expenses and other 1,441 4,889
--------------- ---------------

Total assets $ 6,180,637 $ 67,442,959
=============== ===============

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
Accrued expenses and other liabilities (Note 9) $ 189,150 $ 147,830
--------------- ---------------

Total liabilities 189,150 147,830
--------------- ---------------

Commitments and contingencies (Note 8)

PARTNERS' CAPITAL (Notes 7 and 11):
General partner 165,446 482,718
Limited partner 1 1
Beneficial unit certificates, 1,264,000 issued and
1,117,692 outstanding in 1998 and 1997 8,049,146 69,035,516
Repurchased beneficial unit certificates (2,223,106) (2,223,106)
--------------- ---------------

Total partners' capital 5,991,487 67,295,129
--------------- ---------------

Total liabilities and partners' capital $ 6,180,637 $ 67,442,959
================ ===============

</TABLE>

The accompanying notes are an integral part of these consolidated statements.0

15
<PAGE>

CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
---------------------------------------
<S> <C> <C>

1998 1997
---- ----
RENTAL AND OTHER INCOME:
Independent $ - $ 6,333,723
Assisted living - 1,435,193
Nursing (Note 3) (75,933) 8,626,751
Facility lease income - 3,580,780
Other 880 1,146,631
--------------- ---------------

Total Rental and Other Income (75,053) 21,123,078
--------------- ---------------

EXPENSES (Note 9):
Operating Expenses:
Salaries, wages, and benefits (113,792) 7,357,896
Property taxes 754 539,763
Management fees - 1,604,227
Utilities - 744,827
Cost of meals provided (1,003) 1,086,842
Ancillary services - 1,138,348
Repairs and maintenance 3,033 268,349
Service contracts - 110,475
Insurance 5,177 177,174
Bad debt expense (recoveries) (93,140) 48,254
Other (264) 973,796
Amortization of deferred charges - 377,263
Depreciation - 1,446,683
--------------- ---------------

Total Operating Expenses (199,235) 15,873,897
--------------- ---------------

General and Administrative Expenses:
Salaries, wages and benefits 40,605 358,194
Professional fees 111,857 584,428
Office supplies, communications, and reproduction 18,918 381,016
Other 6,103 257,077
--------------- ---------------

Total General and Administrative Expenses 177,483 1,580,715
--------------- ---------------

Total Expenses (21,752) 17,454,612
--------------- ---------------

Income (loss) from Operations (53,301) 3,668,466

OTHER INCOME (EXPENSE):
Interest income 892,502 2,944,933
Interest expense - (1,854,689)
Gain on sale of properties (Note 1) - 36,795,949
Minority interest - (572,994)
Other 90,000 37,579
--------------- ---------------

Total Other Income (Expense) 982,502 37,350,778
--------------- ---------------

NET INCOME $ 929,201 $ 41,019,244
=============== ===============

NET INCOME ALLOCATION:
General partner $ 92,920 $ 410,192
Beneficial unit certificate holders 836,281 40,609,052
--------------- ---------------

Total $ 929,201 $ 41,019,244
=============== ===============

NET INCOME PER BENEFICIAL UNIT CERTIFICATE $ 0.75 $ 36.26
=============== ===============

BENEFICIAL UNIT CERTIFICATES OUTSTANDING 1,117,692 1,117,692
=============== ===============

</TABLE>

The accompanying notes are an integral part of these consolidated statements.

16
<PAGE>

CAPITAL SENIOR LIVING COMMUNITIES, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

YEARS ENDED DECEMBER 31, 1998 AND 1997

Repurchased
Beneficial Beneficial
Unit Unit Certificates Limited General
Certificates (Note 11) 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 40,609,052 - - 410,192 41,019,244

Repurchased 54,454 Beneficial
Unit Certificates - (960,751) - - (960,751)
------------ --------------- ---------- ---------- ----------------

BALANCE, December 31, 1997 69,035,516 (2,223,106) 1 482,718 $ 67,295,129

Net income 836,281 - - 92,920 929,201

Net income distribution
adjustment (Note 7) (1,392,608) - - 1,392,608 -

Distributions (60,430,043) - - (1,802,800) (62,232,843)
------------ --------------- ---------- ---------- ----------------

BALANCE, December 31, 1998 $ 8,049,146 $ (2,223,106) $ 1 $ 165,446 $ 5,991,487
============ =============== ========== ========== ================

</TABLE>

The accompanying notes are an integral part of these consolidated statements.

17
<PAGE>
<TABLE>
<CAPTION>

CAPITAL SENIOR LIVING COMMUNITIES, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1998 AND 1997

1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 929,201 $ 41,019,244
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation - 1,446,683
Amortization of deferred financing charges - 377,263
(Recoveries on) provision for bad debts (93,140) 48,254
Gain on sale of properties - (36,795,949)
Minority interest - 572,994
Changes in operating assets and liabilities:
Cash, restricted (998) 186,416
Accounts receivable 646,298 (292,879)
Prepaid expenses and other 3,448 95,158
Accrued expenses and other liabilities 41,320 (1,731,570)
Customer deposits - (51,208)
-------------- --------------

NET CASH PROVIDED BY OPERATING ACTIVITIES
1,526,129 4,874,406
-------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in limited partnerships - (15,609,035)
Proceeds from sale of properties - 336,736
Additions to property and equipment - (1,358,203)
Cash acquired upon consolidation of HCP - 8,995,455
Cash disposed upon sale of HCP - (9,993,974)
-------------- --------------

NET CASH USED IN INVESTING ACTIVITIES - (17,629,021)
-------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (62,232,843) (224,795)
Deferred loan charges paid - (99,834)
Proceeds from notes payable - 76,833,798
Payments on notes payable - (6,439,404)
Repurchase of beneficial unit certificates - (960,751)
-------------- --------------

NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (62,232,843) 69,109,014
-------------- --------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (60,706,714) 56,354,399

CASH AND CASH EQUIVALENTS, Beginning of Year 66,818,286 10,463,887
-------------- --------------

CASH AND CASH EQUIVALENTS, End of Year $ 6,111,572 $ 66,818,286
============== ==============

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ - $ 1,854,689
============== ==============
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

18
<PAGE>

CAPITAL SENIOR LIVING COMMUNITIES, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997
--------------------------

1. ORGANIZATION AND SALE OF PARTNERSHIP ASSETS:
-------------------------------------------

Capital Senior Living Communities, L.P. (formerly known as Retirement Living
Tax-Exempt Mortgage Fund Limited Partnership) (the "Partnership") was formed on
December 17, 1985, under the Delaware Revised Uniform Limited Partnership Act.
The Partnership was formed to acquire a portfolio of federally Tax-Exempt
nonrecourse participating first mortgage loans secured by income-producing real
estate consisting of four retirement living centers and one multifamily
residential apartment project (the "Projects"). The mortgage loans were acquired
on April 11, 1986. The Partnership will continue until December 31, 2016, unless
terminated earlier under certain provisions of the partnership agreement.

On April 10, 1986, the Partnership issued 1,264,000 Beneficial Unit Certificates
("BUCs") at $25 per BUC. The issuance generated funds of $28,758,000, net of
issuance costs, for the Partnership. These funds were used principally to
acquire the portfolio of mortgage loans previously discussed.

The general partner of the Partnership is Retirement Living Communities, L.P.,
an Indiana limited partnership ("RLC"). The limited partner is Retirement Living
Fiduciary Corporation, an Indiana corporation ("RLFC").

As of July 8, 1997, the Partnership entered into an asset purchase agreement
with an affiliate of RLC, Capital Senior Living Properties, Inc. ("CSLP"),
pursuant to which the Partnership had agreed to sell substantially all of its
assets, other than working capital, to CSLP conditioned upon, among other
things, the funding of the parent company of CSLP's initial public offering. On
November 3, 1997, the Partnership sold its four retirement projects, its
interest in Encore Limited Partnership, its interest in HealthCare Properties,
L.P. ("HCP") and its interest in the Pension Notes and limited partnership
interests of NHP Retirement Housing Partners I Limited Partnership ("NHP") to
CSLP for $76,617,993. The Partnership 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
of $70,833,798 and by delivery of short term note of $5,784,195. The short term
note was subsequently paid in full on November 6, 1997. After payment of closing
costs and broker fees, net cash proceeds to the Partnership were $336,736.
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 interests in HCP within a six month period prior to
the sale. This sale resulted in the recognition of a $36,795,949 gain.

It is the intention of the general partner to wind down the business affairs of
the Partnership and to substantially distribute its cash holdings, leaving a
small working capital reserve available for obligations that may result from
future contingencies. (See Note 7.)

19
<PAGE>

2. OWNERSHIP BY RLC:
----------------

On September 12, 1990, RLC completed a solicitation of BUC holders in order to
acquire BUC interests, resulting in the acquisition of 561,336 BUCs by RLC,
representing approximately 44% of the total BUCs outstanding. As of December 31,
1998, RLC owns 580,161 BUCs, representing 51.9% of the total BUCs outstanding.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------

Principles of Consolidation
- - ---------------------------

The accompanying consolidated financial statements include the accounts of the
Partnership and its 99%-owned subsidiary, Retirement Partnership, Ltd. For
year-end December 31, 1997, the Consolidated Statements of Income include the
Consolidated Financial Statements of HCP (See Note 10). 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 ("Cambridge"). 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.

Cash Equivalents
- - ----------------

The Partnership considers investments with original maturities of three months
or less to be cash equivalents.

Revenue Recognition
- - -------------------

Revenue from the previously held four retirement living communities and the two
multifamily apartment complexes is recognized in the period in which the unit
rental and/or food services relate.

Revenue from two of the projects (Towne Centre and Canton Regency) which offer
assisted living, intermediate, and skilled healthcare (in addition to retirement
living), is recognized as services are performed. The Towne Center healthcare
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 established rates which are lower than private pay rates.
Patient service revenue for Medicaid patients is recorded at the reimbursement
rates as the rates are set prospectively by the state upon the filing of an
annual cost report. The Towne Centre and Canton Regency healthcare centers (the
Centers) are also providers of services under the Medicare program. The Centers
are entitled to reimbursement under the foregoing programs in amounts determined
based on the filing of an annual cost report prepared in accordance with Federal
regulations, which reports are subject to audit and retroactive adjustments in
future periods. Revenue from the Medicare program is recorded at established
rates and adjusted for differences between such rates and estimated amounts
reimbursable from the program. Any differences between estimated and actual
reimbursements are included in operations in the year of settlement. Prior year
adjustments for the centers in 1998 and 1997 totaled $75,933 in charges and
$859,982 in credits, respectively. Included in accounts receivable at December
31, 1998 and 1997, is $0 and $415,249, respectively, for settlements due from
the Medicare program. Included in accrued expenses and other liabilities at
December 31, 1998 and 1997 is $187,040 and $134,546, respectively, for amounts
due to the Medicare program. Under Federal regulations, Medicare reimbursements
to these facilities are limited to routine cost limits determined on a
geographical region. The Partnership has filed exception reports to request

<PAGE>
reimbursement in excess of its routine cost limit for the years 1992 to 1997.
There can be no assurance that an exception to the properties routine cost
limits will be granted.

Partnership revenues in 1997 include ten months of operations of the Cambridge
facility due to the consolidation of HCP. The Cambridge facility provides
skilled healthcare and is a provider of services under the Medicare program and
the Massachusetts state Medicaid program. Prior year adjustments for the
Cambridge facility in 1997 totaled $12,246.

Laws and regulations governing the Medicare and Medicaid programs are complex
and subject to interpretation. The Partnership believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrongdoing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines and penalties.

The Partnership retained responsibility for all Medicare and Medicaid cost
reports for its owned properties through the date of the sale of the properties.

Use of Estimates
- - ----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------

The carrying amounts and fair values of financial instruments (cash and cash
equivalents) at December 31, 1998 and 1997 are comparable.

5. NOTE PAYABLE:
------------

On June 30, 1997, the Partnership entered into a $77,000,000 mortgage loan
agreement with Lehman Brothers. 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 to CSLP, resulting in the transfer of the
Lehman Brothers loan to CSLP and the release of the liquidity requirement on the
U.S. Treasury bills on November 6, 1997.

In connection with obtaining the Lehman Brothers loan, the Partnership incurred
$85,355 in deferred financing charges, which were amortized over the life of the
loan were fully amortized when the loan was transferred on November 3, 1997.

The Partnership had a $17,500,000 open-end mortgage loan commitment from a
non-affiliated mortgage company, which was retired on July 1, 1997. The

21
<PAGE>
Partnership borrowed $5,500,000 under this loan commitment in the second quarter
of 1997, which was repaid on July 1, 1997 with proceeds from the Lehman Brothers
loan.

In connection with obtaining the open end mortgage loan commitment, the
Partnership incurred $449,596 in deferred financing charges, which were being
amortized over the life of the loan, and were fully amortized when the mortgage
commitment was retired on July 1, 1997.

During the second quarter of 1997, a $500,000 loan was obtained and repaid to an
affiliate of RLC. Stated interest was at 10%.

Due to the consolidation of HCP, outstanding mortgage loans for HCP at October
31, 1997 amounted to $6,768,010. During the 10 months ending October 31, 1997,
$439,404 of note payments were made.

6. RESTRICTED CASH:
---------------

The Partnership had $20,958 in certificates of deposit at December 31, 1998 and
$19,960 in certificates of deposit at December 31, 1997, restricted for utility
deposits. The certificates of deposit mature one year from the original purchase
date.

7. CASH DISTRIBUTIONS:
------------------

Net operating income, if distributed as determined by the General Partner at its
sole discretion, is to be distributed 99% to the BUC holders and 1% to RLC until
the BUC holders receive distributions equal to a cumulative noncompounded annual
return of 11% on their adjusted capital contributions. Thereafter, remaining net
operating income is distributed 90% to the BUC holders and 10% to RLC, which is
the basis for the net income allocation in 1998. As a result of the distribution
of the gain on sale proceeds in 1998 and the impact of the cumulative annual
return, it was determined that the General Partner allocation of net income was
increased by $1,392,608.

The second amended Partnership Agreement allows the general partner sole
discretion in determining cash distributions. Prior to this amendment, cash
distributions were to be paid within 45 days of each calendar quarter. Due to
the sale of the Partnership's assets on November 3, 1997, it is the general
partner's intention to substantially distribute the Partnership's cash holdings,
leaving a small working capital reserve available for obligations that may
result from future contingencies. Distributions of $62,232,843 and $0 were made
in 1998 and 1997, respectively.

Proceeds from the refinancing, sale, or other dispositions of Partnership
assets, less expenses directly attributable thereto (net residual proceeds),
will be distributed 100% to the BUC holders until the BUC holders have received
an amount equal to the sum of their adjusted capital contributions plus an
amount equal to a cumulative noncompounded annual return of 11% on their
adjusted capital contributions. All remaining net residual proceeds will be
distributed 100% to RLC until such amount equals 1% of all net residual proceeds
distributed to the BUC holders. Thereafter, any remaining net residual proceeds
will be distributed 90% to the BUC holders and 10% to RLC.

8. INCOME TAXES:
------------

No provision has been made in the financial statements for Federal income taxes
because, under current law, no Federal income taxes are paid directly by the

22
<PAGE>
Partnership. The partners are responsible for their respective shares of
Partnership net income or loss. The Partnership reports certain transactions
differently for tax than for financial statement purposes. A reconciliation
between the financial statement net income and the net income for tax purposes
follows:
<TABLE>
<CAPTION>

For the Year Ended December 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>

Net income per
Statement of income $ 929,201 $ 41,019,244

Decrease in vacation expense accrual - (70,823)
Bad debt recoveries (93,140) (19,220)
Other non-deductible expenses - 1,041
(Decrease) increase in workers compensation
accrual - (48,420)
Excess of book over tax depreciation - -
Excess of tax over book depreciation - (472,582)
Investment income accounted for under the
equity method for book and not tax - 572,994
Tax adjustment on sale of properties - (1,380,810)
Income from joint ventures - (552,220)
------------------ ------------------

Taxable income $ 836,061 $ 39,049,204
================== ==================
</TABLE>

The tax basis of the Partner's capital accounts are as follows:

For the Year Ended December 31

1998 1997
---- ----
<S> <C> <C>

General Partner $ 63,725 $ 1,858,164
BUC Holders (106,664) 59,495,678
------------------- ----------------
$ (42,939) $ 61,353,842
=================== ================
</TABLE>

In the event the Partnership is taxed as a corporation because it is "publicly
traded" under Section 7704 of the Internal Revenue Code of 1986, then the
Partnership would be taxed at corporate rates on all of its taxable income and
distributions to the BUC holders would be treated as fully taxable dividends to
the extent of current and accumulated earnings and profits, while distributions
in excess of current and accumulated earnings and profits would be treated as
the nontaxable return of capital to the extent of each BUC holder's basis in the
BUCs. Partnership management does not believe the Partnership will be taxed as
"publicly traded" for fiscal 1998 based on its interpretation of Section 7704
and no provision for income taxes has been reflected in the accompanying
consolidated statements of income. No ruling has been requested from the
Internal Revenue Service regarding this matter and there can be no certainty as
to the ultimate outcome of this matter at this time.

9. TRANSACTIONS WITH RELATED PARTIES:
---------------------------------

In accordance with the partnership agreement, the general partner, 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. All projects are managed by affiliates of RLC. Partnership

<PAGE>
expenses incurred by RLC and affiliates, which were reimbursed and expensed by
the Partnership for the years ended December 31, 1998 and 1997, were $46,542 and
$297,925, respectively. Management fees reimbursed and expensed by the
Partnership to an affiliate of RLC for the years ended December 31, 1998 and
1997 were $0 and $851,577, respectively.

Accounts receivables from affiliates due to the Partnership at December 31, 1998
is $18,396.

Amounts due RLC and affiliates at December 31 are as follows:

1998 1997
---- ----

Overhead reimbursement $ 1,729 $ 9,263

Salary and benefits $ 2,501,798
Asset management fees 450,821
Property management fees 280,047
Administrative and other expenses 136,471
General partner management fees 75,815
---------------
$ 3,444,952

In May 1995, the Partnership contracted with Quality Home Care, Inc., an
affiliate of RLC, to provide nursing services to the assisted living residents
at the Harrison facility. The contract was executed to comply with certain state
regulations. As part of the contract, the Partnership has transferred its share
of assisted living revenues and expenses for the Harrison to Quality Home Care,
Inc. resulting in an approximate decrease of $22,000 in profits for 1997.

Upon sale of the Partnership properties on November 3, 1997, an affiliate of RLC
received a $4,597,080 broker fee.

In addition, a 50% partner in RLC is chairman of the board of a bank where the
Partnership holds the majority of its operating cash accounts.

The managing agent of HCP and NHP is an affiliate of RLC. (See Note 10.)

10. ACQUISITION OF INVESTMENTS:
--------------------------

During 1997, the Partnership made various purchases of limited partnership
interests in HCP. During 1997, the Partnership paid $5,604,945 for partnership

24
<PAGE>
interests in HCP. Prior to the sale on November 3, 1997, the Partnership had
cumulatively paid $9,114,455 for a 56% ownership in HCP, which owns a portfolio
of 8 nursing home and rehabilitation facilities. (See Note 11.)

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.

Summary financial information regarding consolidated financial position and
results of operations of HCP as of and for the ten months ended October 31, 1997
is summarized below.

Cash $ 9,993,974
Property and equipment, net 21,047,864
Other assets 1,313,703
----------------
Total assets $ 32,355,541
================

Liabilities $ 837,191
Mortgage loans 6,768,010
Equity 24,750,340
----------------
Total liabilities and equity $ 32,355,541
================

Net revenue $ 7,654,484
================
Net income $ 1,010,715
================

During 1997, the Partnership made various purchases of outstanding Pension Notes
of NHP. During 1997, the Partnership paid $10,004,090 for purchases of Pension
Notes. Prior to the sale on November 3, 1997, the Partnership had cumulatively
paid $10,790,828 for a 30.8% ownership of outstanding Pension Notes of NHP. 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.

11. REPURCHASE OF BENEFICIAL UNIT CERTIFICATES
------------------------------------------

The Partnership purchased 54,454 beneficial unit certificates for $960,751
during 1997, at an average cost of $17.64 per unit. As of December 31, 1998, the
Partnership has repurchased 146,308 beneficial unit certificates for a cost of
$2,223,106.

12. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------

The components of the allowance for doubtful accounts are as follows:

December 31,
------------
1998 1997
---- ----

Balance at beginning of year $ 145,602 $ 164,822
Provision for bad debts 0 193
Write-offs (recoveries) (93,140) (19,413)
Allowance not assumed in Asset Purchase 0 (48,061)
Allowance arising from consolidation of HCP 0 48,061
--------- ---------
Balance at end of year $ 52,462 $ 145,602
========= =========

25
<PAGE>

SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CAPITAL SENIOR LIVING COMMUNITIES, L.P.

By: RETIREMENT LIVING COMMUNITIES
General Partner

By: CAPITAL RETIREMENT GROUP, INC.
General Partner

By: /s/ James A. Stroud
-----------------------------------------
James A. Stroud, Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

/s/ James A. Stroud Chief Operating Officer March , 1999
- - ------------------- and Director (Chief financial
James A. Stroud and accounting officer)

/s/ Jeffrey L. Beck Chief Executive Officer March , 1999
- - ------------------- and Director
Jeffrey L. Beck

26
<PAGE>

EXHIBIT LIST
Page Nos.
In This
Exhibit Description Filing
- - ------- -------------------------------------- ---------

3-A Articles of Incorporation of Retirement Living Fiduciary Corporation,
filed as Exhibit 3-A to Amendment No. 3 to the Partnership's 1933 Act
Registration Statement on Form S-11 under Registration No. 33-3157
filed with the Commission on March 31, 1986, and incorporated herein
by reference.

3-B By-Laws of Retirement Living Fiduciary Corporation filed as Exhibit
3-B to Amendment No. 3 to the Partnership's 1933 Act Registration
Statement on Form S-11 under Registration No. 33-3157 filed with the
Commission on March 31, 1986, and incorporated herein by reference.

4-A Agreement of Limited Partnership and Certificate of Retirement Living
Tax-Exempt Mortgage Fund Limited Partnership filed as Exhibit 4-A to
Amendment No. 3 to the Partnership's 1933 Act Registration Statement
on Form S-11 under Registration No. 33-3157 filed with the Commission
on March 31, 1986, and incorporated herein by reference.

4-B Amended and Restated Agreement of Limited Partnership of Retirement
Living Tax-Exempt Mortgage Fund Limited Partnership filed as Exhibit
4-B to the Partnership's 1986 Form 10-K Annual Report filed with the
Commission on March 31, 1987, and incorporated herein by reference.

4-C Form of Beneficial Unit Certificates, filed as Exhibit 4-C to
Amendment No. 3 to the Partnership's 1933 Act Registration Statement
on Form S-11 under Registration No. 33-3157 filed with the Commission
on March 31, 1986, and incorporated herein by reference.

4-D Amendment Number 1 to amended and restated agreement of Limited
Partnership dated March 6, 1991, filed as Exhibit 4-D to the
Partnership's 1990 Form 10-K Annual Report filed with the Commission
on April 12, 1991, and incorporated herein by reference.

4-E Certificates of Limited Partnership and Limited Partnership
Agreements of Retirement Partnership, Ltd. and Valley View
Partnership, L.P., filed as Exhibit 4-E to the Partnership's 1990
Form 10-K Annual Report filed with the Commission on April 12, 1991,
and incorporated herein by reference.

4-F Amended and Restated Certificate of Limited Partnership of the
Partnership dated effective January 11, 1993 filed as Exhibit 4-F to
the Partnership's 1992 Form 10-K Annual Report filed with the
Commission and incorporated herein by reference.

4-G Second Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of December 24, 1992 filed as Exhibit 4-G to the
Partnership's 1992 Form 10-K Annual Report filed with the Commission
and incorporated herein by reference.

27
<PAGE>
10-A Asset Purchase Agreement between Congregate Housing Partnership
of Canton, in Indiana general partnership, Congregate Housing
Partnership of Cottonwood, an Indiana general partnership, Congregate
Housing Partnership of Indianapolis, an Indiana general partnership,
Sanibel Investment Co., an Indiana general partnership, Congregate
Housing Partnership of Merrillville, an Indiana general partnership,
and Congregate Housing Partnership, an Indiana general partnership,
Retirement Living Partnership, Ltd., a Texas limited partnership, and
Valley View Partnership, a Texas limited partnership and Retirement
Living Tax-Exempt Mortgage Fund Limited Partnership, a Delaware
limited partnership filed as Exhibit 2-A to the Partnership's 1990
Form 10-K Annual Report filed with the Commission on April 12, 1991,
and incorporated herein by reference.

10-B First Amendment of Asset Purchase Agreement (filed as Exhibit 10-A)
dated effective September 11, 1991, filed as Exhibit 2 to the
Partnership's Current Report on Form 8-K dated September 25, 1991,
and incorporated herein by reference.

10-C Real Estate Sales Contract dated effective September 11, 1991,
relating to acquisition of the Village Green I Apartments, filed as
Exhibit 3 to the Partnership's Current Report on Form 8-K dated
September 25, 1991, and incorporated herein by reference.

10-D Banc One Mortgage Corporation letter dated September 11, 1991
regarding Village Green I Apartments, filed as Exhibit 4 to the
Partnership's Current Report on Form 8-K dated September 25, 1991,
and incorporated herein by reference.

10-E Modification, Consolidation and Extension Mortgage Note between EFB
Development Company and Retirement Partnership, Ltd. and Banc One
Mortgage Corporation, dated December 6, 1991, filed as Exhibit 10-E
to the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated herein by reference.

10-F Management Agreement dated effective August 28, 1991 relating to
Village Green I Apartments, filed as Exhibit 5 to the Partnership's
Current Report on Form 8-K dated September 25, 1991, and incorporated
herein by reference.

10-G Warranty Deed executed by Retirement Partnership, Ltd. which conveys
to the Partnership the real estate known as Canton Regency Retirement
Community, filed as Exhibit 10-G to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-H Warranty Deed executed by Retirement Partnership, Ltd. which conveys
to the Partnership the real estate known as Towne Centre Retirement
Community, filed as Exhibit 10-H to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-I Warranty Deed executed by Retirement Partnership, Ltd. which conveys
to the Partnership the real estate known as The Harrison Retirement
Community, filed as Exhibit 10-I to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

28
<PAGE>
10-J Warranty Deed executed by Retirement Partnership, Ltd. which conveys
the Partnership the real estate known as Cottonwood Village
Retirement Community, filed as Exhibit 10-J to the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, and incorporated herein by reference.

10-K Warranty Deed executed by Retirement Partnership, Ltd. which conveys
to the Partnership the real estate known as Village Green Apartments
Phase II, filed as Exhibit 10-K to the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-L Management Agreement Dated September 11, 1991, between Capital Realty
Group Senior Housing, Inc. and Retirement Partnership, Ltd. for the
property management services relating to the Canton Regency
Retirement Community, filed as Exhibit 10-L to the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, and incorporated herein by reference.

10-M Management Agreement Dated September 11, 1991, between Capital Realty
Group Senior Housing, Inc. and Retirement Partnership, Ltd. for the
property management services relating to the Towne Centre Retirement
Community, filed as Exhibit 10-M to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-N Management Agreement Dated September 11, 1991, between Capital Realty
Group Senior Housing, Inc. and Retirement Partnership, Ltd. for the
property management services relating to The Harrison Retirement
Community, filed as Exhibit 10-N to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-O Management Agreement Dated September 11, 1991, between Capital Realty
Group Senior Housing, Inc. and Retirement Partnership, Ltd. for the
property management services relating to the Cottonwood Village
Retirement Community, filed as Exhibit 10-O to the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, and incorporated herein by reference.

10-P Three Management Agreements Dated March 1, 1991, between Capital
Realty Group Management, Inc. and Congregate Housing Partnership of
Indianapolis, Capital Realty Group Management, Inc. and Congregate
Housing Partnership of Cottonwood, Capital Realty Group Management,
Inc. and Sanibel Investment Company, filed as Exhibit 10-K to the
Partnership's 1990 Form 10-K Annual Report filed with the Commission
on April 12, 1991, and incorporated herein by reference.

10-Q Management Agreement Dated September 11, 1991, between Capital Realty
Group Management, Inc. and Retirement Partnership, Ltd. for the
property management services relating to Village Green Apartments
Phase II, filed as Exhibit 10-Q to the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

29
<PAGE>
10-R Management Agreement Dated December 6, 1991, between Capital Realty
Group Management, Inc. and Retirement Partnership, Ltd. for the
property management services relating to Village Green Apartments
Phase I, filed as Exhibit 10-R to the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-S Management Agreement Dated September 11, 1991, between Capital Realty
Group Management, Inc. and Retirement Partnership, Ltd. for the
property management services relating to Village Green Apartments
Phase II, filed as Exhibit 10-S to the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-T Management Agreement Dated January 1, 1992, between Capital Realty
Group Senior Housing, Inc. and the Partnership for the property
management services relating to the Canton Regency Retirement
Community, filed as Exhibit 10-T to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-U Management Agreement Dated January 1, 1992, between Capital Realty
Group Senior Housing, Inc. and the Partnership for the property
management services relating to the Towne Centre Retirement
Community, filed as Exhibit 10-U to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-V Management Agreement Dated January 1, 1992, between Capital Realty
Group Senior Housing, Inc. and the Partnership for the property
management services relating to The Harrison Retirement Community,
filed as Exhibit 10-V to the Partnership's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991, and incorporated herein
by reference.

10-W Management Agreement Dated January 1, 1992, between Capital Realty
Group Senior Housing, Inc. and the Partnership for the property
management services relating to the Cottonwood Village Retirement
Community, filed as Exhibit 10-W to the Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference.

10-X Congregate Housing Partnership, Inc. Assignment of its eleven and
two-thirds (11.6667%) percent interest in Encore Retirement Partners,
Ltd. - 1985 to Retirement Partnership, Ltd., dated April 1991, filed
as Exhibit 10-X to the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, and incorporated herein by
reference.

Retirement Partnership, Ltd. Assignment of its eleven and two-thirds
(11.6667%) percent interest in Encore Retirement Partners, Ltd. -
1985 to the Partnership, dated January 1, 1992, filed as Exhibit 10-X
to the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated herein by reference.

10-Y Beck Trophy Club, L.P. Partnership Agreement dated November 28, 1993
filed as Exhibit 10-Y to the Partnership's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1993, and incorporated
herein by reference.

10-Z Beck Trophy Club, L.P. Resale Agreement dated December 3, 1993 filed
as Exhibit 10-Z to the Partnership's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1993, and incorporated herein by
reference.

30
<PAGE>
10-AA Assignment of Limited Partnership Interest and Second Amendment to
Limited Partnership Agreement of Beck Properties Trophy Club, L.P.,
filed as Exhibit 10-AA to the Partnership's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994, and incorporated
herein by reference.

10-BB Management agreement dated February 1, 1995 between the Partnership
and CSL relating to The Harrison at Eagle Valley.

10-CC Management Agreement dated February 1, 1995 between the Partnership
and CSL relating to Towne Centre.

10-DD Management Agreement dated February 1, 1995 between the Partnership
and CSL relating to Cottonwood Village.

10-EE Management Agreement dated February 1, 1995 between the Partnership
and CSL relating to Canton Regency Retirement Community.

21 List of Subsidiaries.

27 Financial Data Schedule required by Item 601 of Regulation S-B.

28-A Orders appointing Capital Realty Group Management, Inc. as receiver
for Congregate Housing Partnership of Merrillville and Congregate
Housing Partnership of Canton, filed as Exhibit 28-A to the
Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, and incorporated herein by reference.

All exhibits have been previously filed.

<ARTICLE> 5
<LEGEND>
Capital Senior Living Communities, L.P. Financial Data Sheet
</LEGEND>
<CIK> 0000789283
<NAME> Capital Senior Living Communities, L.P.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 6,132,530
<SECURITIES> 0
<RECEIVABLES> 99,128
<ALLOWANCES> (52,462)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,180,637
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,991,487
<TOTAL-LIABILITY-AND-EQUITY> 6,180,637
<SALES> 0
<TOTAL-REVENUES> 907,449
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (21,752)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 929,201
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 929,201
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>