SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 0-16415
CUMBERLAND HEALTHCARE, L.P. I-A
(Exact name of Registrant as specified in its charter)
Delaware 59-2660778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
813-573-3800
Registrant's telephone number
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: 30,000
Title of Each Class
Units of Limited Partnership Interest
$1,000 per unit
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or 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
Number of shares outstanding of each of Registrant's classes of securities:
Number of Units
Title of Each Class at December 31, 1995
Units of Limited Partnership
Interest: $1,000 per unit 30,000
There is no public market for the trading of partnership units and therefore
no market value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part III and Part IV - Form S-11 Registration Statement
and all amendments and supplements thereto
File No. 33-4301
PART I
Item 1.Business
General Development of Business -
The Registrant is a limited partnership (the "Partnership") composed of
Medical Investments Partners (the "General Partner") and purchasers of
Partnership units as the limited partners. The General Partner is composed
of RJ Health Properties, Inc. and RJ Medical Investors, Inc., both of which
are wholly-owned subsidiaries of Raymond James Financial, Inc. The
Partnership was formed under the laws of Delaware and commenced operations
on March 13, 1986.
Financial Information about Industry Segments -
The Partnership was formed to engage in only one industry segment, the
acquisition of nursing homes subject to leases to third parties. As a
result of the bankruptcy of the original lessees of the Partnership's
nursing homes, the Partnership, on an interim basis, became the operator of
the fourteen nursing homes owned by it pending locating qualified lessees
for the nursing homes.
Narrative Description of Business -
The Partnership's business is to acquire and lease nursing homes,
primarily through operating leases expected to generate cash distributions
to the Limited Partners from leasing revenues and proceeds from the sale or
other disposition of the nursing homes.
Termination and Dissolution of the Partnership -
Subject to the Limited Partners approval, the General Partner has
recommended the Partnership be dissolved and its affairs wound up pursuant
to Article XIV of the Limited Partnership Agreement and its assets be
liquidated with the proceeds of such liquidation be expended and distributed
as required by the Limited Partnership Agreement. Upon distribution of all
of the assets of the Partnership, the Partnership will be terminated.
Nursing Home Operations
The Partnership owns 99% of Cumberland Healthcare, L.P. I-C which leases
the Hillcrest Facility Care Center to Arbor Healthcare Company ("Arbor").
The General Partner owns the remaining 1% of Cumberland Healthcare, L.P. I-
C. The lease provides for a minimum rent of $330,000 per year and
additional rent of 4% of net revenue. Total lease payments are capped
annually at $545,000. The lease will terminate on January 31, 1999 and
Arbor has an option to purchase the facility which expires February 1, 1997
for the greater of $4,624,000 or the fair market value of the facility less
authorized capital improvements made by Arbor (currently $714,000), subject
to certain prorations and adjustments. The aggregate amount of rent paid
by Arbor for the year ended December 31, 1995 was $499,193.
The Partnership leases Bel Tooren, Imperial, La Habra, Mirada Hills,
Northwalk, Rimrock and Sun City (collectively the "LCCA Homes") to Life Care
Centers of America ("LCCA"). The leases with LCCA are hereinafter referred
to as the "LCCA Leases". The Leases require an annual minimum rent of
$1,698,052 for the fiscal year ended May 31, 1995 with annual adjustments
based on 6% of the increase in resident service revenues. The LCCA Leases
also call for incentive rent based on a 50% sharing of LCCA's net profit
from the LCCA Homes. LCCA has an option to purchase the LCCA Homes
beginning June 1, 1999 and ending December 31, 1999 for a purchase price
equal to the then fair market value of the LCCA Homes; provided, however,
that the aggregate price for all the LCCA Homes, pursuant to the option, may
not be less than $24,292,000. The LCCA Leases expire in May 2000. LCCA's
obligations under the LCCA Leases have been personally guaranteed by the
principal shareholder of LCCA. During 1994, the Partnership notified LCCA
that it believed that LCCA was in violation of certain technical reporting,
rent computation and other covenants of the LCCA Leases since the reports
and certifications required to be delivered to the Partnership under the
LCCA Leases were not in the detail and form required by the LCCA Leases.
LCCA has denied that violations or breaches of the LCCA Leases have
occurred. The disputes involve the accounting methods used by LCCA to
calculate whether any incentive rent is due. The parties have disagreed as
to what credits and debits can be properly used in making the calculation
under the LCCA Leases. The General Partner estimates the aggregate amount
of these disputes to be $50,000. The Partnership has not recognized any of
the disputed amounts as revenue. Resolution of these disputes is a
condition precedent to both parties' obligations pursuant to the Purchase
Agreement and will be settled, if at all, through negotiations. The General
Partner may compromise a portion or all of the disputed amount to settle the
disputes. In addition, LCCA has informed the Partnership that it may seek
rental concessions under the LCCA Leases in the future.
The Partnership entered into an agreement with LCCA on August 4, 1995
(the "Purchase Agreement") pursuant to which LCCA has agreed to purchase the
seven nursing home facilities which it currently leases from the Partnership
located in the state of California for a purchase price of $17,900,000. The
Purchase Agreement requires the purchase price to be paid by LCCA as
follows:
(a) LCCA will assume the indebtedness secured by a mortgage on the
Rimrock Facility.
(b) LCCA will deliver a purchase money note in the amount of $1,000,000
guaranteed by its principal shareholder to the Partnership (the "LCCA
Note"). The LCCA Note matures on the fifth anniversary of its issuance but
may be accelerated at the option of the Partnership at the end of two years.
A portion of the accrued interest is payable monthly and the balance is due
on the maturity of the LCCA Note. However, if the Partnership exercises its
right to call the Note after two years, the accrued interest which would
otherwise be due at maturity will be canceled; and
(c) The balance of the purchase price will be paid in cash at closing
by federal funds wire transfer to the Partnership.
The agreement to sell the LCCA Homes to LCCA is subject to Partners'
approval.
Effective September 19, 1990, the Partnership leased its Rancho Los
Padres nursing home to FHP, Inc. ("FHP"), a large California based HMO and
the principal subsidiary of FHP International Corporation, for ten years.
The lease for Rancho Los Padres requires FHP, as lessee, to make a monthly
minimum lease payment of $22,000 ($264,000 annually) for the first year,
$24,500 ($294,000 annually) for the second year, and $24,500 plus the
greater of the percentage increase of the Medi-Cal rate or consumer price
index increase, but not less than 3% nor more than 8%, for years three
through ten of the lease. On October 25, 1995, a Lease Termination
Agreement was signed by Cumberland Healthcare and FHP, Inc. relating to FHP
- - Norwalk f/k/a Rancho Los Padres (Note 4) whereby Cumberland would receive
an early lease termination payment. A Management Agreement was also signed
whereby Cumberland would become the interim operator of the facility.
Pursuant to the Lease Termination Agreement, $1,566,174 was placed in
escrow, and payment was contingent upon Cumberland obtaining the appropriate
license to operate and maintain the FHP - Norwalk facility. In January
1996, the state of California - Department of Health Services issued a
license to Cumberland Healthcare to operate and maintain Pacific Palms
Skilled Nursing f/k/a FHP - Norwalk f/k/a Rancho Los Padres. After various
prorations, working capital advances and interest earned, the net
distribution from the escrow account to Cumberland was $1,534,334. On
October 1, 1995 there was only one patient resident in the Rancho Facility
and as of December 31, 1995 there were thirty resident patients in the home.
FHP, as part of the termination agreement, has agreed to maintain at the
nursing home an average census of its members/patients sufficient to average
not less than five patient days for each day between. September 30, 1995
and October 1, 1996 at a rate which is essentially $45 per patient day
greater than market rent. In the event of a sale or subsequent lease of all
or any interest in Rancho Prior to October 1, 1996, the Partnership is
required to pay to the lessee 50% of the sale proceeds in excess of
$1,600,000, up to a maximum total payment of $500,000.
The initial lease terms with the current lessees of the Partnership's
nursing homes (all homes except the Olympic and Paramount Facilities) were
generally 10 years. Future minimum rents under non-cancelable lease terms
as of December 31, 1995 (prior to the termination of the Rancho Los Padres
lease) were as follows:
Year Ending Amount Excluding Amount Excluding
December 31, Amount Rancho Los Padres LCCA Facilities
1996 $ 3,210,644 $ 2,851,836 $ 688,808
1997 3,210,644 2,851,836 688,808
1998 3,210,644 2,851,836 688,808
1999 2,908,144 2,549,336 386,308
2000 1,319,871 1,050,765 269,106
$13,859,947 $12,155,609 $2,721,838
In January 1993, the Partnership entered into an agreement with Mr.
Littlejohn on the joint venture expansion of Olympic Healthcare Center. The
proceeds from the refinancing were used to repay existing Partnership debt
as well as other obligations of Olympic Healthcare Center. In conjunction
with this transaction the debt on the facility was refinanced. The
Partnership Agreement for Cumberland Healthcare, L.P. I-B was amended to
admit Olympic Health Services, Inc., a Washington corporation, as a General
Partner and William W. Littlejohn, the current operator, as a Limited
Partner with a .5% economic interest (voting interest of 0.49%) and a 49.5%
interest in the Partnership, respectively. Cumberland Healthcare, L.P. I-B
was previously owned by the Partnership (99% Limited Partner) and Medical
Investments Partners (1% General Partner). The Partnership basis in the
property was adjusted to fair market value and a corresponding increase to
partners' equity of $330,036 was recorded.
As part of the agreement with Mr. Littlejohn, he and his wife personally
guaranteed a construction loan to fund the expansion of Olympic Healthcare
Center. Construction on the expansion was begun in June 1993 and completed
in July 1994. As a result of the expansion, the Olympic Healthcare Center
has added twenty four assisted living units. Mr. Littlejohn's affiliated
management company provides management services for Olympic Healthcare
Center. The management contract is for the period January 1, 1993, through
December 31, 1997, but may be terminated without cause upon 90 days written
notice. The management fee is $1,000 per month. The manager is responsible
for the day to day operations, books and records, collection of fees, an
annual budget and other reports as required. The owner is to provide
working capital, cooperation and maintain itself as to be qualified as a
nursing home operator in the state of Washington.
In April 1993, Cumberland Healthcare, L.P. I-A terminated its Rate Swap
Agreement with Prudential Global Funding, Inc. dated October, 1986. The
Rate Swap Agreement in general fixed the interest rate on the Carteret
Savings Bank and the Howard Savings Bank mortgage notes at 11.166%. The
termination of this Agreement resulted in a variable interest rate on those
notes. The rate on the mortgage note at April 15, 1993 and June 30, 1993
was approximately 5.9%. The total settlement payment made to Prudential
Global Funding, Inc. relating to this transaction was $745,000, which was
recorded as prepaid interest. This amount was being charged against
earnings over the remaining term of the mortgage note until the compromise
agreement (see Note 10) between Raymond James Financial, Inc. and Cumberland
Healthcare, L.P. I-A became effective. The balance of the prepaid interest
($616,567) has been recorded as an extraordinary item expense in the period
ending December 31, 1993.
In August 1993, Raymond James Financial, Inc., the parent company of the
corporate partners of the Partnership's general partner (Medical Investments
Partners "MIP"), purchased the Partnership's indebtedness to Carteret
Federal Savings Bank and The Howard Savings Bank for $5,779,969 plus accrued
interest, which represents an 11.2% discount from the July 31, 1993
principal balances of the indebtedness. The discount was negotiated by the
Partnership but the funds to acquire the debt were provided by Raymond James
Financial, Inc. in its capacity as agent for the General Partner. Neither
Raymond James Financial, Inc. nor any of its affiliates received any
economic or other benefit from this transaction other than interest income
on the reduced principal balance of the loan. The purchases were from the
Resolution Trust Corporation in its capacity as conservator for Carteret
Federal Savings Bank and the Federal Deposit Insurance Corporation in its
capacity as receiver for The Howard Savings Bank. Relating to these
purchases, the Partnership entered into a compromise agreement with Raymond
James Financial, Inc. The terms of the compromise agreement provide for a
reduction in the total principal and interest payments that the Partnership
will be required to make on the remaining indebtedness and a waiver of the
$15,000 annual administration fee. As a result of this transaction, the
Partnership was relieved of having to pay future principal payments in the
amount of $729,004, which has been recorded as an extraordinary gain in the
period ending December 31, 1993.
During 1994 the Partnership refinanced debt secured by the Rancho Los
Padres Convalescent Hospital (see Note 5 to Financial Statements). A
substantial portion of the proceeds of the $1,500,000 refinancing were used
to reduce other debt of the Partnership having a higher interest rate. In
January 1995, $500,000 of the proceeds of this loan were used to repay the
Raymond James Financial, Inc. indebtedness which matured in October 1994.
In consideration of this debt reduction, Raymond James Financial, Inc.
extended the maturity date of the Partnership's term debt to Raymond James
Financial, Inc. (see Note 5 to Financial Statements). In addition, Raymond
James Financial, Inc. entered into a revolving loan agreement as of December
28, 1994 which provides that Raymond James Financial, Inc. will advance to
the Partnership, on a revolving basis up to $5,000,000 at an interest rate
of 15.5%. The loan agreement contains typical representations, warranties
and covenants, including conditions and restrictions on the borrowing which
are: draw requests must be submitted ten (10) business days in advance,
disbursements shall be made once a month and borrower must not be in
default. The Partnership granted to Raymond James Financial, Inc. a
security interest in virtually all of the Partnership's real estate assets
and LCCA Leases to secure any advances under the loan agreement. The Loan
Agreement matures October 1, 1996. As of the date of this report on Form
10-K the Partnership has not requested an advance on the revolving line of
credit. However, in order to maintain the availability of such credit, the
Partnership intends to extend or replace the line of credit before October
1, 1996.
As of December 31, 1995 and 1994, the Partnership and its subsidiaries
had 170 and 167 employees, respectively. All employees of the Partnership are
located at the Partnership's operated nursing homes.
Regulation
All of the nursing homes and retirement centers leased or managed by
the Partnership are subject to certain federal statutes and regulations and
to statutory and regulatory licensing requirements by state and local
authorities. State and local agencies survey all facilities on a regular
basis to determine whether such facilities are in compliance with
governmental operating and health standards and conditions for participation
in government sponsored third-party payor programs. Such facilities are
also subject to various local building codes and other ordinances, including
fire safety codes.
Government Reimbursement Programs. The Federal government maintains
a health insurance program for the aged known as "Medicare." Individual
states have programs for medical assistance to the indigent known generally
as "Medicaid," which are partially financed by the federal government.
Federal grants are conditioned on state compliance with federal regulations.
A material portion of the current revenue derived from facilities is
received under Medicare, Medicaid, and other governmental programs.
Both the Medicare and Medicaid programs are subject to statutory and
regulatory changes, administrative rulings, interpretations of policy,
intermediary determinations, and government funding restrictions, all of
which may materially increase or decrease the rate of program payments to
health care facilities. Since 1983, Congress has consistently attempted to
limit the growth of federal spending under the Medicare and Medicaid
programs. In a January 27, 1994 report, the Congressional Budget Office
stated that despite recent deficit reduction legislation, the federal budget
deficit will begin to rise in 1998 and that "increases in spending for
Medicare and Medicaid are the dominant force pushing projected deficits back
up as the 20th century nears it end." The report projected that federal
Medicaid payments in 1999 will be $151 billion, double the 1993 level.
Recent federal budget discussions have targeted the Medicare and Medicaid
programs. Proposals to reduce taxes for the middle class and/or the
proposed constitutional amendment to require a balanced federal budget could
result in Medicare and Medicaid spending reductions. In addition, Congress
is considering several proposals that would substantially alter health care
delivery and payment systems, both public and private. These reform
proposals involve increased reliance on managed care plans that selectively
contract with providers, increased incentives for individuals to be cost-
conscious, limitations on tax deductions for employee health benefits,
provider or insurer price controls, emphasis on outpatient and home-based
alternatives to inpatient care, and/or substantial reductions in payments
under Medicare and Medicaid.
Medicaid. Medicaid is a medical assistance program for the indigent
and is operated by state governments with financial assistance
(approximately 50% of the funds available) from the federal government under
a matching program. Medicaid is subject to federally imposed requirements.
The Medicaid program refers to the various state administered reimbursement
programs created by federal law. Although Medicaid programs vary from state
to state, they typically provide for fixed rate payments to healthcare
providers based upon historical costs adjusted for inflation and subject to
restrictive limitations. Reimbursement rates are determined by the state,
while the federal government retains the right to approve or disapprove
individual state plans. There are generally two types of Medicaid
reimbursement rates: retrospective and prospective. The retrospective rate
is one which is determined after completion of the cost report and is
designed to reimburse costs after they are incurred. An interim rate based
upon historical cost factors and inflation is paid by the state during the
cost reporting period and a cost settlement is made following an audit of
the filed cost report. Such adjustments may result in additional payments
being made to the Partnership or in recoupments from the Partnership,
depending on actual performance and the limitations within an individual
state plan. The Washington Medicaid program is, at present, a retrospective
plan.
The more prevalent type of Medicaid reimbursement rate is the
prospective rate. Under a prospective plan, the state sets its rate of
payment for the period in advance of services rendered. The provider must
accept the prospective rate as payment in full for all services rendered.
There is no settlement based upon actual costs subsequent to the cost report
filing. Actual costs incurred during the period are used to establish the
prospective rate for a subsequent period. Providers must accept
reimbursement from Medicaid as payment in full for the services rendered,
since the provider may not bill the patient for more than the amount of the
Medicaid payment for services covered by the Medicaid program. Medi-Cal,
California's version of Medicaid, currently provides for reimbursement at
an established daily rate, as determined by the California Department of
Health Services, based on median costs of nursing facilities, classified by
bed and geographic location.
All of the facilities operated and leased by the Partnership
participate in the Medicaid program. Under the federal Medicaid statute and
related regulations, state Medicaid programs must provide facility rates
that are reasonable and adequate to cover the costs of efficiently and
economically operated facilities providing services in conformity with state
and federal standards. Furthermore, payments must be sufficient to enlist
enough providers so that services under the state's Medicaid plan are
available to recipients at least to the extent that those services are
available to the general population.
To date, adjustments from Medicaid audits have not had a material
adverse effect on the Partnership. While there can be no assurance that
future adjustments will not have a material adverse effect on the
Partnership, the Partnership believes that it has properly applied the
various payment formulas and that the possibility of materially adverse
adjustments is remote.
Medicare. All of the Partnership's facilities (leased and operated)
are participants in the Medicare program. Medicare is a federally funded
and administered health insurance program primarily designed for individuals
who are age 65 or over and are entitled to receive Social Security benefits.
The Medicare program consists of two parts. The first part (Part A) covers
inpatient hospital services and services furnished by other institutional
healthcare providers, such as long-term care facilities. The second part
(Part B) covers the services of doctors, suppliers of medical items and
services, home health agencies and various types of outpatient services.
Part B services include physical, speech pathology and occupational therapy,
pharmaceuticals and medical supplies, certain intensive rehabilitation and
psychiatric services, ancillary diagnostic and other services of the type
provided by long-term care or acute care facilities. Part A coverage is
limited to a specified term (generally 100 days in a long-term care
facility) and requires beneficiaries to share some of the cost of covered
services through an annual deductible and a co-insurance payment. There are
no limits on duration of coverage for Part B services, but there is an
annual deductible and a co-insurance requirement for most services covered
by Part B.
The Medicare program is a retrospective program. An interim rate based
upon historical cost factors is paid by Medicare during the cost reporting
period and a cost settlement is made based on actual costs for the period.
Final settlements are subject to an audit of the filed cost report whereby
adjustments may result in additional payments being made to the Partnership
or in recoupments from the Partnership. Under the Medicare program, the
Partnership is reimbursed for its direct costs plus an allocation of
indirect costs up to a regional limit.
Licensure and Certification. Health care facilities must comply with
licensing requirements of state and local health agencies, as well as
building, health, and life safety codes. In granting and reviewing a
facility's license, state health agencies consider the physical buildings
and equipment, the qualifications of the administrative personnel and
nursing staffs, the quality of nursing programs, and the continuing
compliance of the facility with the laws and regulations applicable to its
operations.
Separate standards for certification must be met to participate in
Medicaid and Medicare programs. As part of the Omnibus Budget
Reconciliation Act of 1987 (the "1987 Act"), Congress adopted legislation
that substantially increased the requirements for Medicare and Medicaid
certifications. The 1987 Act, as amended, created a number of new sanctions
for noncomplying facilities. On August 28, 1992, the HHS issued proposed
rules which became final late in 1994 and were implemented in 1995. States
are currently changing their rules and regulations to reflect the federal
regulations. The newly adopted rules, among other things, allow new
sanctions for facilities that are found to be out of compliance with
certification standards, including denial of or reductions in payments,
fines and the appointment by the state of a manager to operate the facility.
If a facility is found to be substandard in three consecutive annual
surveys, the state is required to deny payment for new admissions and to
appoint a monitor to oversee correction of deficiencies. The Partnership
believes that its facilities are substantially in compliance with the
applicable Medicare and Medicaid regulatory requirements. However, from
time to time the Partnership or its lessees receive notices of deficiencies
for failure to comply with various regulatory requirements. The Partnership
reviews such notices and takes or requires it lessees to take appropriate
corrective action. In most cases, the Partnership or its lessees and the
reviewing agency agree upon the measures to be taken to bring the facility
into compliance with regulatory requirements. In some cases the reviewing
agency may take various adverse actions against a facility, including the
imposition of fines, temporary suspension of admission of new patients to
the facility, suspension or decertification from participation in the
Medicare or Medicaid programs and, in extreme circumstances, revocation of
a facility's license. These actions may adversely affect the facility's
ability to continue to operate, the ability of the Partnership or its
lessees to provide certain services, and eligibility to participate in the
Medicare, Medicaid or Veterans Administration programs. Additionally,
conviction of abuse or fraudulent behavior with respect to one facility may
subject other facilities under common control or ownership to
disqualification for participation in Medicare and Medicaid programs. In
addition, some state regulations provide that all facilities under common
control or ownership within a state are subject to being delicensed if any
one or more of such facilities is delicensed. Certain of the Partnership's
facilities have received notices in the past from state agencies that, as
a result of certain alleged deficiencies, the agency was taking steps to
decertify the facility from participation in Medicare and Medicaid programs.
In all cases, such deficiencies were remedied before any facilities were
decertified.
Effective October 1, 1990, the Omnibus Budget Reconciliation Act of
1990 eliminated the different certification standards for "skilled" and
"intermediate" care nursing homes under the Medicaid Program in favor of a
single "nursing home" standard. This standard requires, among other things,
that the Partnership's managed nursing homes have at least one registered
nurse on each day shift and one licensed nurse on each other shift and
increases training requirements for nurses aids by requiring a minimum
number of training hours and a certification test before a nurse's aid can
commence work. States continue to be required to certify that nursing homes
provide "skilled" care in order to obtain Medicare reimbursement.
Fraud and Abuse. As a provider of services under the Medicare and
Medicaid programs in the U.S., the Partnership is subject to Medicare and
Medicaid fraud and abuse law. This law prohibits any bribe, kickback,
rebate or remuneration of any kind in return for the referral of Medicare
or Medicaid patients. In addition, several states in which the Partnership
operates have laws that prohibit certain direct or indirect payments or fee-
splitting arrangements between health care providers, if such arrangements
are designed to induce or encourage the referral of patients to a particular
provider. Violations of these federal or state laws may result in civil and
criminal penalties and exclusion from participation in the Medicaid and
Medicare programs. Such laws are broad, vague and seldom have been
interpreted by the courts or regulatory agencies. On July 29, 1991,
pursuant to the "Medicare and Medicaid Patient and Program Protection Act
of 1987," the Inspector General of the Department of Health and Human
Services issued "safe harbor" regulations, specifying certain business
practices which are exempt from sanctions under the fraud and abuse law.
While the Partnership intends to attempt to comply with all applicable fraud
and abuse laws, there can be no assurance that administrative or judicial
interpretation of existing laws or regulations or enactment of new laws or
regulations will not have a material adverse affect on the Partnership's
business.
Item 2. Properties
As of December 31, 1995, the Partnership owns directly or through
limited partnership investments the properties or interest in the
properties listed below.
Purchase Current
Facility Name and Location Date Investment (1)
Leased Facilities:
Sun City Convalescent Center
Sun City, California (6) 4/30/86 $ 4,177,054
Bel Tooren Villa Convalescent Hospital
Bellflower, California (6) 4/02/86 3,229,088
Hillcrest Care Center
Waterville, Ohio (3) 11/19/86 4,158,050
North Walk Villa Convalescent Hospital
Norwalk, California (6) 4/02/86 1,971,528
Rancho Los Padres Convalescent Hospital
Norwalk, California (5) 4/02/86 2,113,203
Rimrock Villa Convalescent Hospital
Barstow, California (6) 4/02/86 2,109,379
Imperial Convalescent Hospital
La Mirada, California (leasehold) (6) 4/02/86 849,658
Mirada Hills Rehabilitation and
Convalescent Hospital
La Mirada, California (6) 4/02/86 3,989,544
La Habra Convalescent Hospital
La Habra, California (6) 4/02/86 2,678,927
Operated Facilities:
Olympic Health Care Center
Sequim, Washington (2) 11/19/86 2,938,017 (4)
Paramount Chateau Convalescent Hospital
Paramount, California 4/02/86 2,180,253
$30,394,701
(1) At cost before accumulated depreciation and amortization. Investment shown
is entire investment made by owners of the property. Certain properties
are
not entirely owned by the Partnership. See other footnotes.
(2) The amount represents the entire interest of the owner of the property,
however, the Partnership only owns a 49.5% interest acquired through a
limited partnership investment.
(3) The current investment amount represents the total investment of which
Cumberland Healthcare, L.P. I-A has a 99% Limited Partner interest and
Raymond James Health Properties has a 1% interest as a General Partner.
(4) Includes revaluation of assets due to the consummation of the joint venture
entered into effective January 1, 1993.
(5) As of January 1, 1996, Rancho Los Padres Convalescent Hospital became an
operated facility (See Note 16)
(6) These are the facilities included in the LCCA Transaction.
A summary of the land, buildings, related personal property and accumulated
depreciation at December 31, 1995 is as follows:
1995 1995
Operated Leased
Land $ 920,956 $ 3,761,787
Buildings 3,277,814 16,332,237
Furniture & Fixtures 919,500 4,332,749
Leasehold Interest 0 849,658
5,118,270 25,276,431
Accum. Depreciation
and Amortization (1,621,407) (9,613,875)
$ 3,496,863 $15,662,556
Properties whose book value constitute 10% or more of the total assets have
the following occupancy and lease revenue per bed:
Patient Occupancy
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
Bel Tooren Facility 94.2% 94.2% 96.7% 93.2 96.3
Hillcrest Facility 96.3% 96.7% 95.7% 94.8 94.2
Mirada Hills
Facility 90.8% 90.8% 92.4% 92.8 93.3
Sun City Facility 91.4% 91.4% 94.5% 93.8 95.8
Lease Revenue Per Bed Per Day
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
Bel Tooren Facility
(99 Beds) 10.20 9.78 9.28 8.73 8.49
Hillcrest Facility
(100 Beds) 13.42 13.51 13.28 12.42 12.01
Mirada Hills Facility
(158 Beds) 12.53 11.96 11.35 10.81 6.11(1)
Sun City Facility
(99 Beds) 11.29 10.86 10.30 9.81 9.51
(1) The Mirada Hills Facility was not leased until June 1, 1991.
The Partnership, directly or through a manager, operates two skilled
nursing facilities. Paramount Chateau, a 99-bed facility located in
California, for the year ended December 31, 1995, maintained an average
census of 87.6% that was comprised of 9.9% private, 6.2% Medicare and 83.9%
Medicaid. The average reimbursement rates were $79.69, $244.76 and $73.89
per day for private, Medicare and Medicaid, respectively. The average
monthly revenue was $234,807. Olympic Healthcare, a 60-bed skilled nursing
facility with a 24-bed assisted living wing, for the year ended December 31,
1995, maintained an average census of 88.1% that was comprised of 31.8%
private, 11.4% Medicare and 56.8% Medicaid for the 60-bed skilled nursing
facility. The average reimbursement rates were $94.75, $173.62 and $94.45
per day for private, Medicare and Medicaid , respectively. The average
monthly revenue was $183,536. The 24-bed assisted living wing, which opened
July 1, 1994, maintained an average census of 60.3% for the year ended
December 31, 1995, which was 61% private and 39% Medicaid. The average
reimbursement rate for Private and Medicaid was $49.97 and $19.87,
respectively. The average monthly revenue was $23,644. The average
occupancy rates for all homes operated by the Partnership were 84%, 92% and
92% for the years ended December 31, 1995, 1994, and 1993, respectively.
The Partnership has no plans for any major renovations in the next 12
months.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the
Partnership is a party or to which its property is subject. Therefore, no
provision has been made in the accompanying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1995.
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
(a) The Registrant's limited partnership interests are not publicly traded.
There is no market for the Registrant's limited partnership interests and
it is unlikely that any will develop.
(b) Approximate number of Equity Security Holders:
Number of Record Holders
Title of Class as of December 31, 1995
Units of Limited Partnership Interest 1,937
General Partner Interest 1
No Limited Partner owns more than 5% of the Units. The General Partner
Interest is owned by Medical Investments Partners, The Raymond James Financial
Center, 880 Carillon Parkway, St. Petersburg, Florida 33716.
(c) Total Units of Limited Partnership (1,000 units) 30,000
Total Units Outstanding ($1,000 per unit) 30,000
1995 1994 1993
Distributions to Limited Partners $1,500,000 $1,050,000 $ 600,000
Distributions to General Partner 30,612 21,430 12,244
None of the distributions for 1995, 1994 or 1993 represent any return of capital
on a GAAP basis.
Item 6. Selected Financial Data
1995 1994 1993 1992 1991
Total Revenues(1) $ 8,809,352 $ 8,175,317 $ 7,760,425 $ 7,307,680 $ 8,686,193
Net Income(Loss)(2) 1,966,546 1,613,748 964,440 197,440 (363,843)
Total Assets 22,181,442 22,618,448 26,301,479 26,061,273 26,435,316
Mortgage Notes
Payable 7,946,917 8,782,497 10,889,660 13,415,224 13,797,030
Distributions to
Limited Partners
Per Partnership
Unit 50.00 35.00 20.00 10.00 -0-
Net Income(Loss)(2)
Per Unit $ 64.24 $ 52.72 $ 31.50 $ 6.45 $ (11.89)
(1) Includes $5,411,349 in 1995, $4,944,871 in 1994, $4,526,516 in 1993,
$4,156,002 in 1992 and $5,914,917 in 1991 from nursing home operations.
Total revenues in 1993 omit extraordinary gain on sale of minority
interest and forgiveness of indebtedness.
(2) Net Income (Loss) and Net Income (Loss) Per Unit does include the gains
referred to in the preceding footnote.
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this report. This
statement is not covered by the auditors' opinion included elsewhere in this
report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Resident service revenues increased by $466,478 (9.4%) for the year
ended December 31, 1995, compared to the same period in 1994, due to the
increase in census of the assisted living wing at the Sequim, Washington
facility which opened in July, 1994. Resident days at the Sequim,
Washington facility, skilled nursing and assisted living wing, increased by
4,851 in 1995. A decrease in census of 1,895 days at the Paramount,
California facility partially offset the resident service revenues increase
at the Sequim, Washington facility. Resident service revenues increased by
$418,355 (9.2%) for the year ended December 31, 1994, compared to the same
period in 1993, due to a continued increase in total census and favorable
census mix. Although the total increase in patient days was 145 the
increase in private and Medicare days was 2,669 versus a decline in Medicaid
days of 2,524. The higher paying private and Medicare improved the census
mix. Medicare and Medicaid revenues totaled $4,123,832, $3,951,735 and
$3,637,823 for the years ended December 31, 1995, 1994 and 1993,
respectively. Medicare and Medicaid accounts receivable balance totaled
$538,867 and $443,643 for the years ended December 31, 1995 and 1994,
respectively. The Medicare and Medicaid increased receivable balances at
December 31, 1995 as compared to December 31, 1994 are due to increased
revenue resulting from increased census and slower collections of accounts
receivables. The slower collections of accounts receivable was due to a
change in personnel in the business office which caused a gap in the billing
of Medicaid and Medicare claims until a qualified business office manager
could be retained, which occured in November 1995. There are no disputed
Medicaid or Medicare claims.
Resident service expenses increased $295,576 (6.7%) for the year ended
December 31, 1995, compared to the same period in 1994 due to an increase
in payroll and related expenses from the increased total census at the
facilities.
Resident service expenses increased by $486,163 (12.3%) for the year ended
December 31, 1994, compared to the same period in 1993, due to both an
increase in payroll expenses and ancillary costs necessary to provide care
for the increased census and higher acuity level of the residents.
Rental income increased by $141,818 (4.4%) for the year ending December
31, 1995, compared to the same period in 1994 due to escalations built into
the lease agreements. The escalation clause in the LCCA lease agreement
calls for an adjustment based on 6% of the difference between the base year
(June 1, 1993 through May 31, 1994) revenues of the seven leased homes, net
of contractuals, and the most recent period (June 1 through May 31) revenues
(net of contractuals) for the seven leased homes. Prior year adjustments
were based on a fixed rate per bed (660) per day of $9.00 for the period
June 1, 1992 through June 1, 1993, to $9.50 per bed per day for the period
June 1, 1993 through May 31, 1994, and to $10.00 per bed per day for the
period June 1, 1994 through May 31, 1995. This escalation resulted in an
increase in rental income of $115,919 from the year ending December 31, 1994
to the year ending December 31, 1995 and $120,450 from the year ending
December 31, 1993 to the year ending December 31, 1994. The Arbor lease
agreement has a fixed base rate with a contingent lease payment of 4% of the
leased home's revenues, net of contractuals, which accounted for $21,008 of
the increase in rental income from the year ending December 31, 1994 to the
year ending December 31, 1995 and $8,283 from the year ending December 31,
1993 to the year ending December 31, 1994. The balance of the increase is
from the FHP lease which calls for an increase effective October first of
each year based on the greater of that years Medi-Cal rate increase or
consumer price index increase but not less than 3% nor more than 8% for 1993
until lease termination. The FHP lease was terminated in January, 1996 as
described in Note 18 to the attached financial statements. Rental income
increased by $151,787 (5.0%) for the year ending December 31, 1994, compared
to the same period in 1993 due to escalations built into the lease
agreements. (See Note 4 for lease status).
Interest income increased $25,739 (69.4%) for the year ending December
31, 1995, compared to the same period in 1994 due to increased average cash
balances. Interest income decreased $155,250 (80.7%) for the year ending
December 31, 1994, compared to the same period in 1993 due to the prepayment
in September, 1993, of the Multicare notes receivable and the decrease in
interest bearing funds which were used to pay down notes payable having a
higher interest cost.
General and Administrative - Other expense increased by $150,785
(149.8%) due to legal and accounting expenses. The negotiation and drafting
of the sales contract with LCCA cost $136,709 in legal and accounting fees
and the lease termination agreement with FHP incurred legal and accounting
fees of $4,793. Affiliate expense increased by $34,440 (353%) for the year
ending December 31, 1995, compared to the same period in 1994 due to the
time and travel required by senior management to negotiate and execute the
LCCA sale and the FHP lease termination. Affiliate expense decreased by
$31,150 (76.1%) for the year ending December 31, 1994 compared to the same
period in 1993 due to 1993 having two major issues requiring senior
management involvement. These were the joint venture of Olympic Healthcare
and obtaining the $5,000,000 line of credit. Other expense decreased by
$29,455 (22.6%) for the year ending December 31, 1994, compared to the same
period in 1993 due to the decreased use of legal counsel. In 1993, two
major issues required additional costs for legal counsel, one being
the joint venture of Olympic Healthcare amounting to $19,485 and the other
being the legal costs amounting to $13,900 for the $5,000,000 line of
credit.
Interest expense decreased by $85,751 (10.7%) for the year ending
December 31, 1995, compared to the same period in 1994 due to the net effect
of the $500,000 payoff of the Raymond James debt balance on January 3, 1995,
the $950,000 pay down of the WMF/Huntoon debt balance with funds acquired
from the $1,500,000 First Union National Bank refinancing of the Rancho Los
Padres facility. Interest Expense - Affiliate decreased by $107,784 due to
the payoff of the Raymond James debt which had an interest rate of 13%.
Interest Expense -Other increased by $22,033 due to the net effect of the
$950,000 paydown of the WMF/Huntoon debt which had an interest rate of 10%
for the 1995 period and the new $1,500,000 First Union National Bank debt
which had an average interest rate of 8.8%. Interest expense decreased by
$508,046 (38.7%) for the year ending December 31, 1994, compared to the same
period in 1993, due to the accelerated principal payment of notes payable.
For the year ending December 31, 1993, a gain of $165,175 was realized
on the sale of a minority interest. Effective January 1, 1993, Cumberland
Healthcare, L.P. I-B sold one-half of its limited partnership economic
interest (49.5%) to William W. Littlejohn, the current operator of the
Olympic Healthcare Center (the only asset of the Partnership) and one-half
of its general partnership economic interest (.49% of the voting interest)
to Olympic Health Services, Inc., a Washington Corporation. These interests
were sold for $300,000 and resulted in a gain to the Partnership of
$165,175. This effectively terminated Cumberland
Healthcare, L.P. I-B. Simultaneously with the closing, the Partnership
agreement for Cumberland Healthcare, L.P. I-B was amended to admit Olympic
Health Services, Inc. and William W. Littlejohn as partners. This resulted
in a new partnership which is consolidated with Cumberland Healthcare, L.P.
I-A because of its continuing control.
Based upon an appraisal of the center, the basis of the property acquired
was adjusted to fair market value with a corresponding adjustment to
partners' equity of Cumberland Healthcare, I-B of $330,036. The basis
adjustment was allocated to the new partners only.
The basis of the remaining one-half interest owned by Cumberland Healthcare,
L.P. I-A was unchanged.
Depreciation expense decreased by $240,625 (25.3%) for the year ended
December 31, 1995 compared to the same period in 1994 due to the original
acquisition costs of furniture and fixtures for most of the facilities being
fully depreciated for the entire year of 1995 while starting April 1, 1994
they were fully depreciated for a partial year. Depreciation expense
decreased by $380,590 (28.6%) for the year ended December 31, 1994 compared
to the same period in 1993 due to the original acquisition costs of
furniture and fixtures for most of the facilities being fully depreciated
starting April 1, 1994 compared to none in 1993.
Also, due to the refinancing of the Carteret loan, there was, in 1993,
forgiveness of debt for $729,004, which is offset by a write-off, in 1993,
of $616,567 of prepaid interest, netting to additional 1993 income of $112,437.
As a result of the above revenue and expense items, the Partnership had
a $1,966,546 net income for the year ending December 31, 1995, $1,613,748
net income for the year ending December 31, 1994 and $964,440 net income for
the year ending December 31, 1993. Inflation and changing prices have not
had a material impact on net revenues and losses from continuing operations
over the past three years.
The operating income for the real estate rental segment increased by
$248,691 for the year ended December 31, 1995, compared to the same period
in 1994, due to escalations built into the lease agreements, lower
depreciation expense due to furniture and fixtures being fully depreciated
for the year compared to being fully depreciated for eight months in the
prior year, and continued principal reductions of the related debt thus
reducing interest expense. The operating income for the real estate rental
segment increased by $714,862 for the year ended December 31, 1994, compared
to the same period in 1993 due to escalations built into the lease
agreements, lower depreciation expense due to furniture and fixtures being
fully depreciated for eight months of the year and continued principal
reductions of the related debt thus reducing interest expense.
The operating income from the healthcare segment increased by $122,694
for the year ended December 31, 1995, compared to the same period in 1994
due to furniture and fixtures being fully depreciated for a full year
compared to only eight months in 1994 and resident service revenues increase
due to total census increasing by 2,956 total days. The operating income
from the healthcare segment decreased by $181,260 for the year ended
December 31, 1994, compared to the same period in 1993, due primarily to
1993 having a $165,175 gain on sale of minority interest and increased
interest expense due to a full year of interest expense compared to four
months in 1993 when Olympic Healthcare was refinanced for $1,350,000 in
September of 1993. This decrease was offset by $22,023 due to furniture and
fixtures being fully depreciated for eight months of the year.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of funds for the periods ending December 31, 1995,
1994 and 1993 were rental income, revenues from nursing home operations,
prepayment of the Multicare notes receivable and proceeds from notes
payable. The Multicare notes were four purchase money promissory notes
($1,250,000 at maturity) for the three nursing homes sold to Multicare,
March 31, 1990. The purchase money notes secured by Holly Manor Nursing
Home and Hopkins House Nursing Home provided for interest to accrue and to
be paid at maturity. One purchase money note secured by Quakertown Manor
Nursing Home provided for no interest until maturity and another purchase
money note secured by Quakertown Manor provided for principal payments of
$50,000 per year, plus interest compounded annually at 10% until maturity
(March 31, 1995). The notes averaged, approximately, an 11% interest rate.
In September of 1993, Multicare paid the principal and accrued interest
balances in full along with a prepayment penalty of $78,344.
These funds were used to pay nursing home expenses, pay recurring debt
service, to make cash distributions to partners and to reduce the amount of
outstanding indebtedness. As of December 31, 1995, the Partnership owned
eleven nursing homes with a net book value of $19,159,419. Net book value
is not necessarily representative of market value.
In the opinion of the General Partner, there are no material trends,
favorable or unfavorable, in the Partnership's capital resources, and the
resources will be sufficient to meet the Partnership's needs for the next
12 to 24 months.
Short-term liquidity requirements consist of funds needed to meet
commitments for debt service, administrative expenses and operations. These
short term needs will be funded by cash at December 31, 1995, plus 1996
rental income, interest income, and income from resident service revenues.
Also available to assist in meeting these commitments is a $5,000,000
revolving line of credit. The revolving line of credit is with Raymond
James Financial, Inc. and allows the Partnership advances up to $5,000,000
at an interest rate of 15.5%. There is no current borrowing against the
line of credit and the full line of $5,000,000 is available. The loan
agreement contains typical representations, warranties and covenants,
including conditions and restrictions on the borrowing. Draw requests must
be submitted ten (10) days in advance, disbursements shall be made once a
month, and borrower must not be in default. The Partnership granted to
Raymond James Financial, Inc. a security interest in virtually all of the
Partnership's real estate assets and LCCA Leases to secure any advances
under the loan agreement. The loan agreement matures on October 1, 1996.
Debt service due in 1996 of $3,358,786 is primarily comprised of
$1,272,546 of debt on the Rimrock facility and the $1,824,971 debt on the
Sun City facility. The Sun City debt is due on April 30, 1996. The Rimrock
debt of $1,272,546 is callable on thirty days notice and has been since
February, 1994. If these notes are called the Partnership will evaluate the
options at that time including but not limited to refinancing, loan
extensions, payoff of the notes or return of the properties to the
mortgagors.
In the opinion of the General Partner, the Partnership has sufficient
funds or sources of funds to remain liquid for the next 12 - 24 months.
These sources include cash flows from operations, lease revenue and the
Raymond James Financial, Inc. line of credit. The General Partner is not
aware of any trends that may significantly affect the Partnership's
liquidity. However, if the future changes in the healthcare market would
require extensive capital expenditures by the Partnership in order for its
facilities to meet new licensure and/or marketplace standards, the
Partnership may be required to seek additional capital sources or increase
its long term debt in order to meet potential future expenditure
requirements. The General Partner is unable at this time to predict the
extent of future capital expenditure needs of the facilities resulting from
future changes in the nursing home industry.
The cash balance at December 31, 1995 was $1,626,628 compared to
$1,202,175 at December 31, 1994. The Partnership's net income for 1995 was
$1,966,546. After adjusting for depreciation, amortization, and changes in
operating assets and liabilities, net cash provided by operating activities
was $2,905,347. The net cash used in investing activities was $126,497,
which includes fixed asset additions. The net cash used in financing
activities was $2,354,397 and consisted of principal payments on notes
payable and distributions to partners. Significant changes to the balance
sheet which affected the cash flow of the Partnership at December 31, 1995
are as follows:
Accounts receivable decreased $303,118 due to the net effect of the
Partnership's collection of a $525,268 receivable from First Union National
Bank and the increase in the Paramount, California facility's receivable of
$107,320 due to a change in personnel which resulted in a decrease of the
collection effort of receivables and an increase of $59,000 in receivables
from lease payments due to the Partnership. Investment properties increased
by $48,756 after taking into account depreciation. This increase was due
to new additions at the Paramount, California facility of furniture, beds,
doors and medical equipment. Construction in progress increased by $74,324
due to a laundry addition built at the Paramount, California facility.
Accounts payable decreased by $100,288 due primarily to a reduction in the
Medicaid liability of $100,000. Mortgage notes payable to affiliates
decreased by $500,000 due to the refinancing of Rancho Los Padres in 1994
and subsequent paydown of the debt with the proceeds in 1995 as referred in
collection of receivables above.
The 1995 distribution to the limited partners totaled $1,500,000 (5% of
the original capital of $30,000,000) and for 1994 totaled $1,050,000 (3.5%
of the original capital of $30,000,000). None of these distributions
represented a return of capital. Future distributions will be at a level
that is warranted by the cash flow and profits of the Partnership.
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Cumberland Healthcare, L.P. I-A
We have audited the accompanying consolidated balance sheets of
Cumberland Healthcare, L.P. I-A (a Delaware Limited Partnership) as of December
31, 1995 and 1994, and the related consolidated statements of income, partners'
equity, and cash flows for each of the three years in the period ended December
31, 1995. These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cumberland
Healthcare, L.P. I-A as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed under Item 14 in
the index are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
SPENCE, MARSTON, BUNCH, MORRIS & CO.
Certified Public Accountants
Clearwater, Florida
March 14, 1996
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
1995 1994
ASSETS (Restated)
Cash and Cash Equivalents $ 1,626,628 $ 1,202,175
Restricted Cash 59,272 52,780
Accounts Receivable (Net of Allowance
of $73,373 and $63,866) 705,511 1,008,629
Prepaid Expenses 74,681 44,683
Deferred Debt Costs (Net of Accumulated
Amortization of $42,336 and $22,898) 71,094 102,777
Intangible Assets (Net of Accumulated
Amortization of $33,285 and $22,190) 410,513 421,608
Investment Properties, at Cost (Net of
Accumulated Depreciation and Amortization
of $11,235,282 and $10,560,149) 19,159,419 19,785,796
Construction in Progress 74,324 0
Total Assets $ 22,181,442 $ 22,618,448
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 955,713 $ 1,067,429
Accrued Payroll 236,217 219,284
Interest Payable - Affiliate 0 6,582
- Other 34,646 33,569
Payable to Related Parties
- General Partner 11,054 26,435
- Affiliates 346,399 312,528
Mortgage Notes Payable
- Affiliate 0 500,000
- Other 7,946,917 8,282,947
Minority Interest 675,458 630,570
Total Liabilities 10,206,404 11,079,344
Partners' Equity:
Limited Partners (30,000 units outstanding
at December 31, 1995 and 1994) 12,261,618 11,834,403
General Partner (286,580) (295,299)
Total Partners' Equity 11,975,038 11,539,104
Total Liabilities and Partners' Equity $ 22,181,442 $ 22,618,448
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
(Restated)
Revenues:
Net Resident Service Revenues $ 5,411,349 $ 4,944,871 $ 4,526,516
Rental Income 3,335,178 3,193,360 3,041,573
Interest Income 62,825 37,086 192,336
Total Revenues 8,809,352 8,175,317 7,760,425
Expenses:
Resident Service Expenses 4,734,184 4,438,608 3,952,445
Interest Expense - Affiliate 637 108,421 177,086
- Other 716,807 694,774 1,134,155
Rent Expense 300,283 293,099 278,750
Property Management Fees -
General Partner 41,287 39,531 37,648
General and Administrative
- Affiliates 44,197 9,757 40,907
- Other 251,440 100,655 130,110
Depreciation and Amortization 709,083 949,708 1,330,298
Total Expenses 6,797,918 6,634,553 7,081,399
Operating Income 2,011,434 1,540,764 679,026
Non-Operating Income or Expense Items:
Gain on Sale of Minority Interest 0 0 165,175
Net Income Before Minority Interest 2,011,434 1,540,764 844,201
Minority Interest in Net (Income)/Loss
of Consolidated Subsidiary (44,888) 72,984 7,802
Income Before Extraordinary Items 1,966,546 1,613,748 852,003
Extraordinary Item:
Forgiveness of Indebtedness 0 0 729,004
Write-Off of Prepaid Interest 0 0 (616,567)
Net Income $ 1,966,546 $ 1,613,748 $ 964,440
Allocation of Net Income -
Limited Partners $ 1,927,215 $ 1,581,473 $ 945,151
General Partner 39,331 32,275 19,289
$ 1,966,546 $ 1,613,748 $ 964,440
Per $1,000 Limited Partnership Unit
Outstanding -
Income Before Extraordinary
Item $ 64.24 $ 52.72 $ 27.83
Extraordinary Item 0 0 3.67
Net Income $ 64.24 $ 52.72 $ 31.50
Number of Limited Partnership Units
Outstanding 30,000 30,000 30,000 <PAGE>
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Limited General Total
Partners' Partner's Partners'
Equity Equity Equity
Balance at December 31, 1992 $ 10,796,063 $ (316,489) $ 10,479,574
Net Income - 1993 945,151 19,289 964,440
Distribution (600,000) (12,244) (612,244)
Revaluation 161,716 3,300 165,016
Balance at December 31, 1993 11,302,930 (306,144) 10,996,786
Net Income - 1994 (Restated) 1,581,473 32,275 1,613,748
Distribution (1,050,000) (21,430) (1,071,430)
Balance at December 31, 1994
(Restated) 11,834,403 (295,299) 11,539,104
Net Income - 1995 1,927,215 39,331 1,966,546
Distribution (1,500,000) (30,612) (1,530,612)
Balance at December 31, 1995 $ 12,261,618 $ (286,580) $11,975,038
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
(Restated)
Cash Flows from Operating Activities:
Net Income $ 1,966,546 $ 1,613,748 $ 964,440
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 709,083 949,708 1,330,298
Gain on Sale of Minority Interest 0 0 (165,175)
Minority Interest in Net Income
(Loss) 44,888 (72,984) (7,802)
Forgiveness of Indebtedness 0 0 (729,004)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable 303,118 (635,100) 107,686
(Increase) Decrease in Prepaid
Expenses (29,998) 36,218 2,979
(Increase) Decrease in
Restricted Cash (6,492) (2,627) 73,417
Increase (Decrease) in Payable to Related
Parties 18,490 (338,906) 28,556
Increase (Decrease) in Payables
and Accruals (100,288) (19,292) (171,006)
Net Cash Provided by Operating
Activities 2,905,347 1,530,765 1,434,389
Cash Flows from Investing Activities:
(Additions) to Investment Properties (52,173) (44,820) (133,671)
(Additions) to Construction in Progress (74,324) (64,132) (10,703)
(Increase) Decrease in Notes Receivable 0 0 1,523,378
Net Cash Provided by (Used in)
Investing Activities (126,497) (108,952) 1,379,004
Cash Flows from Financing Activities:
Proceeds from Mortgage Notes Payable 0 1,500,000 1,350,000
Payments of Mortgage Notes Payable (836,030) (3,606,713) (3,146,560)
(Increase) Decrease in Deferred Debt Costs 12,245 (53,411) (48,827)
Distribution to Partners:
Limited Partners (1,500,000) (1,050,000) (600,000)
General Partner (30,612) (21,430) (12,244)
Net Cash (Used in) Financing
Activities (2,354,397) (3,231,554) (2,457,631)
Increase (Decrease) in Cash and
Cash Equivalents 424,453 (1,809,741) 355,762
Cash and Cash Equivalents
at Beginning of Year 1,202,175 3,011,916 2,656,154
Cash and Cash Equivalents at End of $ 1,626,628 $ 1,202,175 $ 3,011,916
Year
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 723,159 $ 829,887 $ 2,087,602
See Note 8 for Non-Cash Investing and Financing Activities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION:
Cumberland Healthcare, L.P. I-A (the "Partnership"), a limited
partnership, was organized under the provisions of the
Delaware Revised Uniform Limited
Partnership Act as amended. Operations commenced on March 13, 1986, for the
purpose of acquiring and leasing nursing homes. The Partnership will terminate
on December 31, 2020, or sooner, in accordance with the terms of the Limited
Partnership Agreement.
Medical Investments Partners, the General Partner, manages and controls the
business and affairs of the Partnership. Medical Investments Partners is a
Florida general partnership, whose corporate partners are RJ Health Properties,
Inc. and RJ Medical Investors, Inc., both wholly-owned subsidiaries of Raymond
James Financial, Inc.
These consolidated financial statements include the accounts of several
limited partnerships in which the Partnership is a 99% Limited Partner.
Detailed information as to the consolidated entities is as follows:
Net Book Value Income/Loss
of Investment Net Sharing
General Properties at Income Limited General
Partnership Name Partner 12/31/95 (Loss) Partners Partner
Cumberland Healthcare, Medical
L.P. I-A Investments $14,527,881 $1,681,067 N/A N/A
Partners
Cumberland Healthcare, Medical
L.P. I-B * Investments 2,084,812 44,889 99% 1%
Partners &
Olympic Health
Services, Inc.
Cumberland Healthcare, Medical
L.P. I-C Investments 2,546,726 240,590 99% 1%
Partners
Columbia Healthcare Medical
Partners, II-A, Investments 0 0 99% 1%
L.P. Partners
Columbia Healthcare Medical
Partners III-A Investments 0 0 99% 1%
Partners
Total $19,159,419 $1,966,546
* A 50% interest was sold to Olympic Health Services, Inc. and William
Littlejohn effective as of January 1, 1993.
Allocation of Net Income and Net Losses
Net income and loss of the Partnership, other than
that attributable to a sale or other disposition of the properties, shall
be allocated 98% to the Limited Partners and 2% to the General Partner. Any
distributions of cash from operations for any year shall be distributed 98%
to the limited partners and 2% to the General Partner until the limited
partners have received distributions of cash from operations for such year
equal to 9% of their respective adjusted capital contribution; thereafter,
any remaining cash from operations for such calendar year shall be
distributed 85% to the limited partners and 15% to the General Partner. In
no event shall such cash from operations distributed to the General Partner
for any calendar year exceed 10% of the total distributions of cash from
operations made for such calendar year.
Net income or loss and cash distributions from the sale or other disposition
of the Properties will be allocated as formulated in the Limited Partnership
Agreement.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared
on the accrual basis. Revenues are recognized when earned and expenses are
recognized as obligations when incurred. These financial statements include
the accounts of Cumberland Healthcare, L.P. I-B, Cumberland Healthcare, L.P.
I-C, Columbia Healthcare Partners II-A, L.P., and Columbia Healthcare
Partners III-A, in all of which the Partnership is a 99% Limited Partner
except for Cumberland Healthcare, L.P. I-B, which is owned 49 1/2% by William
Littlejohn (see Note 9). The only activity of these entities is to hold
title for certain of the properties included in these financial statements.
See Note 1 for further explanation.
Cash and Cash Equivalents
It is the Partnership's policy to include all money market funds, commercial
paper and banker's acceptances with an original maturity of three months or
less in Cash and Cash Equivalents.
Effective January 1, 1994, the Partnership adopted Statement of Financial
Accounting Standard No. 115, Accounting for Certain Investments in Debt and
Equity Securities ("FAS 115"). Under FAS 115, the Partnership is required
to categorize its debt and equity securities as held-to-maturity, available-
for-sale or trading securities. Classification is dependent upon the
Partnership's intent in holding the securities. All of the Partnership's
securities are considered held-to-maturity. There were no investments in
securities held as of December 31, 1995 and 1994.
Concentrations of Credit Risk
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of short-term investments
and receivables.
The Partnership's short-term investments are primarily in high quality
securities placed with institutions with high credit ratings. The
Partnership's investment policy limits the exposure to concentration of
credit risk.
The Partnership's receivables are related to medical services and are
primarily due from federal and state agencies in California and Washington
and are not collateralized.
The Partnership maintains deposits in excess of federally insured limits.
Statement of Financial Accounting Standards No. 105 requires disclosure
regardless of the degree of risk.
Investment Properties
These assets are carried at the lower of cost, or net realizable value
plus a revaluation increase for Olympic Health Care of Cumberland
Healthcare, L.P. I-B. Impairment in value is reflected as an adjustment to
carrying value when appropriate. There was no impairment in value in 1994
or 1995. Implementation of SFAS 121 relating to disclosure and adjustment
for impairment in value of long-term assets is not expected to have a
material effect on the Partnership.
Major additions are capitalized while replacements, maintenance and
repairs which do not improve or extend the life of the respective assets are
expensed currently. When property is retired or otherwise disposed of, the
cost of the property is eliminated from the asset account, accumulated
depreciation is charged with an amount equal to the depreciation provided,
and the difference, if any, is charged or credited to income.
Depreciation is provided for on the straight-line method over the
estimated useful lives which are as follows:
Building and Improvements: 35 Years
Furniture and Fixtures: 8 Years
Leasehold Interest: 8-28 Years
Notes Receivable
The notes receivable were recorded at their face amounts with accrued
and unpaid interest added to the principal balances. The notes were all
purchase money, promissory notes secured by real property with interest
rates averaging approximately 11%.
Payment of all notes was received from Multicare in September 1993.
At that time, principal and accrued interest balances were paid in full
along with a prepayment penalty of $78,344.
The Multicare notes were four purchase money promissory notes
($1,250,000 at maturity) for the three nursing homes sold to Multicare,
March 31, 1990. The purchase money notes secured by Holly Manor Nursing
Home and Hopkins House Nursing Home provided for interest to accrue and to
be paid at maturity. One purchase money note secured by Quakertown Manor
Nursing Home provided for no interest until maturity and another purchase
money note secured by Quakertown Manor provided for principal payments of
$50,000 per year, plus interest compounded annually at 10% until maturity
(March 31, 1995). The notes averaged, approximately, an 11% interest rate.
Deferred Debt Costs
Deferred debt costs represent the cost of obtaining financing for the
Partnership. Such costs are being amortized on a straight-line basis over
the life of each applicable loan, expiring between 1997 and 2003.
Medicare/Medicaid Settlements
The Partnership does not record any Medicare or Medi-Cal receivables
above their current rate of reimbursement. All third party receivables from
Medicare and Medi-Cal are recorded at net of contractuals. No receivables
are recorded for third party settlements. The accounts payable for third
party settlements for prior years were $378,851 and $486,152 for the years
ended December 31, 1995 and 1994, respectively.
Resident Service Revenues
Resident Service Revenues are reported net of provisions for
contractual and other adjustments in the Consolidated Statements of Income
for financial reporting purposes. There are no revenues from outside
donations included in Resident Service Revenues.
Income Taxes
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the Partners in their
individual income tax returns. Accordingly, no provision for such taxes has
been made.
Intangible Assets
Intangible assets are comprised of a licensing fee and goodwill which
were recognized upon the revaluation of assets due to the sale of one half
of the Partnership's interest in Cumberland Healthcare, L.P. I-B. (See Note
9). The licensing fee represents the value of the license to operate the
Olympic Health Care Center. Goodwill represents the excess of the cost of
the partnership interest over the fair value of the net assets as of the
revaluation date, January 1, 1993. These items are being amortized on the
straight line method over 40 years.
Leases
The Partnership accounts for all its leases under the operating method,
with the leased property recorded as an asset at cost. The leasehold
interest is being amortized over the remaining life of the lease (28 years)
on the straight-line method.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect
certain reported amounts and disclosures. These estimates are based on
management's knowledge and experience. Accordingly, actual results could
differ from these estimates.
Fair Value of Financial Instruments
The carrying values of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximated fair
value at December 31, 1995 because of the relatively short maturity of these
instruments. The difference between the carrying value and fair value of
the mortgage notes payable at December 31, 1995 is not material based on
borrowing rates currently available to the company.
Reclassification
Certain items in the 1994 and 1993 financial statements have been
reclassified for comparative purposes to conform with the financial
statement presentation used in the 1995 statements.
NOTE 3 - RELATED PARTY TRANSACTIONS:
The General Partner manages the operations of the Partnership's
investment properties and is entitled to a property management fee equal to
1.25% of gross lease payments received by the Partnership. This amounted
to $41,287, $39,531 and $37,648 for 1995, 1994 and 1993, respectively.
The General Partner is reimbursed for general and administrative costs
on an accountable basis. The General Partner's reimbursable costs were
$28,067, $6,908 and $26,387 for 1995, 1994 and 1993, respectively.
Affiliates of the General Partner are reimbursed for direct costs incurred
on behalf of the Partnership. Direct reimbursable costs amounted to $7,920,
$1,153 and $6,374 for 1995, 1994 and 1993, respectively. These costs are
included in the Consolidated Statements of Income.
The General Partner is reimbursed a general and administration fee of
up to .5% of the Partnership's aggregate capital contributions on an annual
basis for certain expenses incurred on behalf of the Partnership. The
General Partner's reimbursable expenses were $8,210, $1,696 and $8,146 for
1995, 1994 and 1993, respectively. These expenses are accrued but not
paid and are included in the Consolidated Statements of Income.
As of December 31, 1995, 1994 and 1993, the amounts payable to the
General Partner and affiliates for the above items are $357,453, $338,963
and $677,869, respectively. The payable is non-interest bearing, unsecured
and payable on demand.
NOTE 4 - LEASES AND INVESTMENT PROPERTIES:
Leases
The Partnership leases Hillcrest Care Center to Arbor Health Care
Company ("Arbor"). The lease with Arbor requires the lessee to make a
minimum rent payment of $330,000 per year and additional rent payments based
on four percent (4%) of net revenue. Total lease payments are capped
annually at $545,000. The lessee has an option to purchase the facility
which becomes effective February 1, 1995 and terminates February 1, 1997,
at an amount determined according to the lease agreement.
The Partnership leases Bel Tooren, Imperial, La Habra, Mirada Hills,
Northwalk, Rimrock and Sun City to Life Care Centers of America ("LCCA").
The Leases require a minimum rent payment of $1,698,052 annually with an
annual adjustment based on the percentage increase in resident service
revenues. These payments have amounted to $2,474,732, $2,358,813 and
$2,238,363 for 1995, 1994 and 1993, respectively. The Leases also call for
incentive rent based on an equal sharing of profits. There has been no
incentive rent to date. The Lessee has an option to purchase the facilities
beginning June 1, 1999 and ending December 31, 1999. The Leases expire in
May 2000.
LCCA's obligations under the leases have been personally guaranteed by
the principal shareholder of LCCA.
During 1994 the Partnership notified LCCA that it believed that LCCA
was in violation of certain reporting, rent computation and other covenants
of the Leases. LCCA has denied that violations or breaches of the Leases
have occurred. Negotiations and discussions between LCCA and the
Partnership are ongoing regarding these matters. While it is impossible to
predict the outcome of these discussions it is possible that a failure of
the parties to agree could lead to a termination of the Leases, and/or a
sale of one or more of the nursing homes.
The Partnership entered into an agreement with LCCA on August 4, 1995
(the "Purchase Agreement") pursuant to which LCCA has agreed to purchase the
seven nursing home facilities which it currently leases from the Partnership
located in the state of California for a purchase price of $17,900,000.
The Purchase Agreement requires the purchase price to be paid by LCCA as
follows:
(a) LCCA will assume the indebtedness secured by a mortgage on the
Rimrock Facility.
(b) LCCA will deliver a purchase money note in the amount of
$1,000,000 guaranteed by its principal shareholder to the Partnership (the
"LCCA Note"). The LCCA Note matures on the fifth anniversary of its
issuance but may be accelerated at the option of the Partnership at the end
of two years. A portion of the accrued interest is payable monthly and the
balance is due on the maturity of the LCCA Note. However, if the
Partnership exercises its right to call the Note after two years, the
accrued interest which would otherwise be due at maturity will be canceled;
and
(c) The balance of the purchase price will be paid in cash at closing
by federal funds wire transfer to the Partnership.
Closing of the LCCA transaction is contingent upon approval of the plan
by a majority interest of the Limited Partners.
Effective September 19, 1990, the Partnership entered into a ten-year
lease with FHP, Inc. ("FHP"), the principal subsidiary of FHP International
Corporation,for Rancho Los Padres. The lease requires FHP, as lessee, to
make a monthly minimum lease payment of $22,000 ($264,000 annually) for the
first year, $24,500 ($294,000 annually) for the second year, and $24,500
plus the greater of the Medi-Cal rate increase or consumer price index
increase, but not less than 3% nor more than 8%, for years three through ten
of the lease.
The following is a schedule of minimum future rentals on non-cancelable
leases:
Year Ending Amount Excluding Amount Excluding
December 31, Amount Rancho Los Padres LCCA Facilities
1996 $ 3,210,644 $ 2,851,836 $ 688,808
1997 3,210,644 2,851,836 688,808
1998 3,210,644 2,851,836 688,808
1999 2,908,144 2,549,336 386,308
2000 1,319,871 1,050,765 269,106
$13,859,947 $12,155,609 $2,721,838
Rental Income
1995 1994 1993
Contingent $ 169,193 $ 148,185 $ 139,902
Guaranteed 3,165,985 3,045,175 2,901,671
Total $ 3,335,178 $ 3,193,360 $ 3,041,573
The Partnership continues to operate Olympic nursing home pursuant to
a management contract (which continues on a month to month basis with no set
termination date) with a third party operator. Paramount Chateau is being
managed under an employment contract (which continues on an annual renewal
each September 30) with a third party operator.
Investment Properties
The schedule below reflects purchase dates and construction years for
the facilities owned by the Partnership as of December 31, 1995:
Purchase Construction
Facility Name and Location Date Year
Leased Facilities:
Sun City Convalescent Center
Sun City, California 4/30/86 1972
Bel Tooren Villa Convalescent Hospital
Bellflower, California 4/02/86 1968
Hillcrest Care Center
Waterville, Ohio 11/19/86 1966 & 1977
North Walk Villa Convalescent Hospital
Norwalk, California 4/02/86 1965
Rancho Los Padres Convalescent Hospital **
Norwalk, California 4/02/86 1964
Rimrock Villa Convalescent Hospital
Barstow, California 4/02/86 1963
Imperial Convalescent Hospital
La Mirada, California (leasehold) 4/02/86 1966
Mirada Hills Convalescent Hospital
La Mirada, California 4/02/86 1966 & 1971
La Habra Convalescent Hospital
La Habra, California 4/02/86 1955 & 1986
Operated Facilities:
Olympic Health Care Center
Sequim, Washington 11/19/86* 1978 & 1994
Paramount Chateau Convalescent Hospital
Paramount, California 4/02/86 1969
* A 50% interest was sold to Olympic Health Services, Inc. and William
Littlejohn effective January 1, 1993.
** As of January 1, 1996, Rancho Los Padres became an operated home.
A summary of the land, buildings and personal property, leasehold and
accumulated depreciation and amortization at December 31, 1995 is as
follows:
Buildings Accumulated
& Personal Depreciation & Net Book
Facility Name Land Property Total Amortization Value
Leased:
Sun City $ 283,846 $ 3,893,208 $ 4,177,054 $ 1,608,676 $2,568,378
Bel Tooren 489,845 2,739,243 3,229,088 1,152,497 2,076,591
Hillcrest 250,038 3,908,012 4,158,050 1,611,324 2,546,726
Northwalk Villa 386,908 1,584,620 1,971,528 638,582 1,332,946
Rancho Los Padres 613,149 1,500,054 2,113,203 614,110 1,499,093
Rimrock Villa 257,409 1,851,970 2,109,379 763,619 1,345,760
Mirada Hills 1,008,617 2,980,927 3,989,544 1,926,262 2,063,282
La Habra 471,975 2,206,952 2,678,927 984,490 1,694,437
Operated:
Olympic 180,000 2,758,017 2,938,017 853,205 2,084,812*
Paramount 740,956 1,439,297 2,180,253 768,202 1,412,051
Sub-total $4,682,743 $24,862,300 $29,545,043 $10,920,967 $18,624,076
Imperial (Leasehold)
and related amortization 849,658 314,315 535,343
Total All Properties $30,394,701 $11,235,282 $19,159,419
* This includes a 50% minority interest and revaluation of the assets.
A summary of the land, buildings, personal property and accumulated
depreciation for the years ended December 31, 1995 and 1994 is as follows:
1995 1995 1994 1994
Operated Leased Operated Leased
Land $ 920,956 $ 3,761,787 $ 920,956 $ 3,761,787
Buildings 3,277,814 16,332,237 3,269,812 16,332,188
Furniture & Fixtures 919,500 4,332,749 886,963 4,324,581
Leasehold Interest 849,658 0 849,658
5,118,270 25,276,431 5,077,731 25,268,214
Accum. Depreciation
and Amortization (1,621,407) (9,613,875) (1,494,858) (9,065,291)
$ 3,496,863 $15,662,556 $ 3,582,873 $16,202,923
NOTE 5 - MORTGAGE NOTES PAYABLE:
Mortgage notes payable are summarized below:
Mortgagor December 31, 1995 December 31, 1994
WMF/Huntoon, Paige $ 1,824,971 $ 1,887,330
GMAC Commercial Mortgage Corp. 1,268,902 1,289,661
U.S. Bank of Oregon 1,287,989 1,317,056
Provident Bank 2,181,722 2,288,900
First Union National Bank 1,383,333 1,500,000
Raymond James Financial, Inc. 0 500,000
$ 7,946,917 $ 8,782,947
WMF/Huntoon, Paige: December 31, 1995 - $ 1,824,971
December 31, 1994 - $ 1,887,330
The mortgage notes are payable with a variable interest rate of 3.25% over
the auction average for 6-month Treasury Bills (effective rate at 12/31/95 is
10%), adjusted every six months, payable in monthly installments of principal
and interest, based on a 30-year amortization schedule,
adjusted to reflect current
interest rates, with a balloon payment due April 30, 1996. A principal payment
of $950,000 was made in December of 1994 from proceeds received from the First
Union loan. This note is secured by Sun City Convalescent Center.
GMAC Commercial Mortgage Corp.: December 31, 1995 - $ 1,268,902
December 31, 1994 - $ 1,289,661
A 10.125% mortgage note, payable in monthly installments of principal and
interest of $12,305, with a final payment of $1,341,069, originally due December
31, 1991, secured by Rimrock Villa Convalescent Center. As of December 31,
1991, a two-year extension was elected,
the interest rate was fixed at 8.5% and the
loan became due January 1, 1994, with a final payment of $1,318,004. A second
extension was granted February 1994 by G.F.I. Commercial Mortgage, L.P. The
terms of the loan remain the same with the exception that this extension can be
terminated with 30 days written notice from G.F.I. The effective interest rate
at December 31, 1995 is 8.5% and is a fixed rate.
Provident Bank: December 31, 1995 - $ 2,181,722
December 31, 1994 - $ 2,288,900
The note with Provident Bank consists of a mortgage, secured by Hillcrest
Nursing Home, payable in monthly installments, amortized on a 15-year schedule.
The interest rate is fixed for three years at 7.59% and has a balloon payment
due on September 30, 1997 of $1,974,936.
The interest rate was reset on October 1,
1995, at 325 basis points above the average yield of United States Treasury
Securities adjusted to a constant maturity of three years.
Raymond James Financial, Inc.: December 31, 1995 - $ 0
December 31, 1994 - $ 500,000
The Raymond James Financial, Inc. (an affiliate) mortgage note payable has
a fixed interest rate of 13% and matured in October, 1994. Effective October 1,
1994, the loan was extended until October 1, 1996 with a 30-day termination
notice required. The new interest rate is fixed at 15.5% The mortgage is
secured by Bel Tooren Villa, Paramount Chateau, Norwalk Villa,
Rancho Los Padres, Mirada Hills and La Habra.
U.S. Bank of Oregon: December 31, 1995 - $ 1,287,989
December 31, 1994 - $ 1,317,056
U.S. Bank of Oregon mortgage note payable has a fixed interest rate of
8.75%, payable monthly in installments of principal and interest based on a 20-
year amortization schedule, with a balloon payment due September 1, 2013. This
note is secured by Olympic Health Care Center.
First Union National Bank December 31, 1995 - $ 1,383,333
December 31, 1994 - $ 1,500,000
First Union mortgage note has a variable interest rate based on the 90-day
LIBOR rate plus 275 basis points payable monthly in installments of principal
and interest based on a fixed principal payment of $10,606.06 plus the accrued
monthly interest with all remaining funds due May 30, 2000. This note
is secured by Rancho Los Padres Convalescent Hospital a/k/a FHP - Norwalk.
The aggregate annual maturities of all of the Partnership's mortgage notes
payable for the succeeding five years and thereafter are as follows:
Year Total
1996 $3,358,786
1997 2,235,120
1998 165,021
1999 168,466
2000 919,192
Thereafter 1,100,332
$7,946,917
Assuming the closing of the sale of the homes to LCCA, the aggregate annual
maturities in 1996 would drop to $261,268 and subsequent years would remain as
stated.
NOTE 6 - REVOLVING LINE OF CREDIT:
Raymond James Financial, Inc. entered into a revolving loan agreement as of
December 28, 1994 which provides that Raymond James Financial, Inc. will advance
to the Partnership, on a revolving basis up to $5,000,000 at an interest rate of
15.5%. The loan agreement contains typical representations, warranties and
covenants including conditions and restrictions on the borrowing which are:
draw
requests must be submitted ten (10) business days in advance, disbursements
shall be made once a month and borrower must not be in default.
The Partnership granted to Raymond James Financial, Inc. a security
interest in virtually all of the Partnership's real estate assets and
LCCA Leases to secure any advances under the loan agreement.
The Loan Agreement matures October 1, 1996. As of the date
of this report on Form 10-K the Partnership has not requested an advance on the
revolving line of credit. However, in order to maintain the
availability of such
credit, the Partnership intends to extend or replace the line of credit before
October 1, 1996.
NOTE 7 - TAXABLE INCOME:
The financial statements of the Partnership and the Partnership tax returns
are prepared on the accrual basis. The following is a reconciliation
between net income per the financial statements
and Partnership net income for tax purposes:
1995 1994 1993
Net income (loss) per
financial statements $ 1,966,546 $ 1,613,748 $ 964,440
Tax depreciation and amortization
in excess of book depreciation (539,176) (322,587) (79,631)
Gain on sale of the
interest in I-B 0 149,314
Other Adjustments 6,652 (20,139) (7,793)
Partnership income (loss) for
tax purposes $ 1,434,022 $ 1,271,022 $ 1,026,330
NOTE 8 - ADDITIONAL CASH FLOW INFORMATION:
The Partnership's non-cash investing and financing activities for the years
ended December 31, 1995 and 1994 were as follows:
December 31, 1995:
None to Report
December 31, 1994:
Reduction in Accounts Receivable from Minority Interest
for Payments of Construction in Progress of Partnership
Assets Made Directly by the Minority Interest $ 201,034
Partnership Investment Property Additions Paid Directly
by Minority Interest $ 513,580
Construction in Progress Paid in Prior Year Transferred
to Investment Property in 1994 $ 307,543
December 31, 1993:
Forgiveness of Indebtedness $ 729,004
Transactions in Conjunction With Sale of
Partnership Interest to Mr. Littlejohn (See Note 9)
Increase in Assets Resulting from Revaluation
of Partnership Interest per Appraisal $ 330,036
Payments on Construction in Progress of
Partnership Assets Made Directly by
Minority Interest $ 98,966
Transfer of Equity to Minority Interest $ 134,825
Accounts Receivable From Sale of Minority
Interest $ 300,000
Total $ 863,827
Minority Interest in Revaluation of Partnership Assets $ 165,018
NOTE 9 - SALE OF MINORITY INTEREST IN CUMBERLAND HEALTHCARE I-B PARTNERSHIP
Effective January 1, 1993, Cumberland Healthcare I-B sold one-half of its
Limited Partnership interest (49.5%) to William W. Littlejohn, the current
operator of the Olympic Healthcare Center
(the only asset of the Partnership) and
one-half of its General Partnership economic interest (.05%) to Olympic Health
Services, Inc., a Washington corporation. This effectively terminated
Cumberland Healthcare, L.P. I-B. Simultaneously, the Partnership Agreement
for Cumberland Healthcare, L.P. I-B was amended to admit Olympic Health
Services, Inc. and William W. Littlejohn as partners, creating a new
Partnership.
Prior to the sale, an appraisal of the facility was obtained. The
appraised value of the facility was $1,800,000 exclusive of related debt and
other assets and liabilities of the new partnership. The selling price to Mr.
Littlejohn was determined independently of the appraisal and resulted in a gain
to the Partnership of $165,175. The net selling price (after considering
Cumberland Healthcare, L.P. I-B's other assets and liabilities) was
$300,000 which was evidenced by an account receivable recorded on the
Partnership's books from Mr. Littlejohn. In accordance with an agreement,
Mr. Littlejohn personally made payments on
construction in progress for assets of the new partnership and transferred these
assets to the new partnership and his receivable was reduced. This resulted in
non-cash financing activities which are disclosed in Note 8.
In accordance with generally accepted accounting principles, the assets of
the new partnership were revalued, individual assets were valued based upon the
appraisal and goodwill was recorded based upon the selling price to Mr.
Littlejohn. The revaluation resulted in an increase in net assets of $330,036
which is reflected in Partners' equity of the new partnership. The appraisal
reflected a devaluation of certain depreciable assets and a corresponding
increase in intangible assets, primarily the license to operate as a skilled
nursing facility. Recognition of this reclassification of $148,537 is reflected
in the books of the new partnership. This reclassification had no effect on
operations or Partners' capital.
The new partnership is consolidated in the accompanying
financial statements of Cumberland Healthcare, L.P. I-A because I-A continues
to control the financial administrative operations of the facility. The fact
is evidenced by an amendment to the original Partnership Agreement which gives
the Managing General Partner of Cumberland Healthcare, L.P. I-A 51% voting
control over assets of Cumberland Healthcare, L.P. I-B.
As a part of the agreement with Mr. Littlejohn, Mr. Littlejohn and his wife
personally guaranteed a construction loan to fund the expansion of Olympic
Healthcare Center. Construction on the expansion was begun in June 1993 and
completed in July 1994. As a result of the expansion, the Olympic Healthcare
Center has added twenty four assisted living units. Mr. Littlejohn's affiliated
management company provides management services for Olympic Healthcare Center.
NOTE 10 - EXTRAORDINARY ITEM - FORGIVENESS OF INDEBTEDNESS
In August 1993, Raymond James Financial, Inc., the parent company of the
corporate general partners of the Partnership's General Partner (Medical
Investments Partners, "MIP"), purchased the Partnership's indebtedness to
Carteret Federal Savings Bank and The Howard Savings Bank for $5,779,969 plus
accrued interest, which represents an 11.2% discount from the July 31, 1993
principal balances of the indebtedness. The purchases were from the Resolution
Trust Corporation in its capacity of conservator for Carteret Federal Savings
Bank and the Federal Deposit Insurance Corporation in its capacity of receiver
for The Howard Savings Bank. Relating to these purchases, the Partnership
entered into a compromise agreement with Raymond James Financial, Inc.
The terms of the compromise agreement provide for a
reduction in the total principal and
interest payments that the Partnership will be required to make on the remaining
indebtedness and a waiver of the $15,000 annual administration fee. As a result
of this transaction, the Partnership was relieved of having to pay future
principal payments in the amount of $729,004, which has been recorded as an
extraordinary gain in the period ending December 31, 1993. The discount was
negotiated by the Partnership but the funds to acquire the debt were provided by
Raymond James Financial, Inc. in its capacity as agent for the General Partner.
Neither Raymond James Financial, Inc. nor any of its affiliates received any
economic or other benefit from this transaction other than interest
income on the reduced principal balance of the loan.
NOTE 11 - EXTRAORDINARY ITEM - RATE SWAP TERMINATION
In April 1993, Cumberland Healthcare L.P, I-A terminated its Rate Swap
Agreement with Prudential Global Funding, Inc. dated October, 1986. The Rate
Swap Agreement in general fixed the interest rate on the Carteret Savings Bank
and the Howard Savings Bank mortgage notes at 11.166%. The termination of this
Agreement resulted in a variable interest rate on those notes. The rate on the
mortgage note at April 15, 1993 and June 30, 1993 was approximately 5.9%. The
total settlement payment made to Prudential Global Funding, Inc. relating to
this
transaction was $745,000, which was recorded as prepaid interest. This amount
was being charged against earnings over the remaining term of the mortgage note
until the compromise agreement between Raymond James Financial, Inc. and
Cumberland Healthcare, L.P. I-A became effective. The balance of the prepaid
interest ($616,567) has been recorded as an extraordinary expense in the period
ending December 31, 1993.
NOTE 12 - LEGAL PROCEEDINGS:
The General Partner is not aware of any uninsured open claims that have
been
filed against the Partnership. Therefore, no provision has been made in the
accompanying financial statements.
NOTE 13 - COMMITMENTS:
The Partnership has a leasehold interest in Imperial Convalescent Hospital,
which expires September 30, 2014. The monthly payment effective January 1, 1995
is estimated at $25,024 and is subject to an increase on January 1 of each year
based on the Consumer Price Index and the MediCal per diem reimbursement rate.
Based on the January 1, 1995 payment, the future payments for the
succeeding five years and thereafter are as follows:
Year Total
1996 $ 300,288
1997 300,288
1998 300,288
1999 300,288
2000 300,288
Thereafter 4,128,960
$ 5,630,400
NOTE 14 - DISTRIBUTIONS:
The 1995 cash distributions to limited partners were $1,500,000 (5% of
capital contributions) and for 1994 totaled $1,050,000 (3.5% of capital
contributions). None of these distributions represented a return of capital.
Future distributions will be at a level that is warranted by the cash flow and
profits of the Partnership.
NOTE 15 - PRIOR PERIOD ADJUSTMENT:
The accompanying financial statements for 1994 have been restated to
correct
an error made in 1994 relating to depreciation expense. The effect of the
restatement was to decrease depreciation expense and increase net income for
1994
by $314,789 ($10.28 per $1,000 Limited Partnership Unit Outstanding). The error
occurred because a computer generated depreciation schedule was not properly
programmed to cease depreciation on assets whose depreciable lives ended midway
through 1994. In order to prevent further occurrences of this error, all assets
were reentered on new depreciation software. Since 1994 was the first year that
any assets became fully depreciated, no other years were affected.
Note 16 - RISKS AND UNCERTAINTIES:
Proposed federal Medicare cuts could have a significant effect on
the future
revenue stream of the Partnership if such proposals reducing Medicare growth are
signed into law in the near future.
NOTE 17 - INDUSTRY SEGMENT:
The Partnership's operations are classified into two business segments:
Healthcare and Real Estate Rental. The Healthcare operations include skilled
nursing services typically found in nursing homes including room and board,
drugs, biologicals, supplies, nursing services and other ancillary services.
The real estate rental operation leases nursing homes to unrelated third party
operators. Operating earnings by business segments are defined as revenues less
operating costs and expenses. Income and expense not allocated to business
segments include: general and administrative, legal and consulting, interest
income and non-mortgage interest expense.
Real Estate Corporate
Healthcare Rental and Other Consolidated
1995
Revenues $ 5,403,833 $ 3,335,178 $ 7,516 $ 8,746,527
Net Income
(Loss) 366,254 1,664,294 (64,002) 1,966,546
Depreciation and
Amortization
Expense 144,308 564,775 0 709,083
Identifiable Assets 4,927,250 16,663,186 591,006 22,181,442
Capital Expenditures 44,005 8,168 --- 52,173
Const. in Progress 74,324 --- --- 74,324
1994
Revenues $ 4,937,716 $ 3,193,360 $ 7,155 $ 8,138,231
Net Income
(Loss) 243,560 1,415,603 (45,415) 1,613,748
Depreciation and
Amortization
Expense 180,337 769,371 --- 949,708
Identifiable Assets 4,968,574 16,768,731 566,354 22,303,659
Capital Expenditures 44,820 --- --- 44,820
Const. in Progress 64,132 --- --- 64,132
1993
Revenues $ 4,526,516 $ 3,041,573 $ --- $ 7,568,089
Net Income
(Loss) 424,820 700,741 (161,121) 964,440
Unusual and Non-
Recurring Items (75,382) (376,010) --- (451,392)
Extraordinary Item 121,744 607,260 --- 729,004
Depreciation and
Amortization
Expense 203,078 1,127,220 --- 1,330,298
Identifiable Assets 4,623,064 17,735,183 1,943,232 24,301,479
Capital Expenditures 133,671 --- --- 133,671
Const. in Progress 10,703 --- --- 10,703
Medicare and Medicaid revenues totaled $4,123,832 for the year ended
December 31, 1995, compared to $3,951,735 for the same period in 1994. The
Medicare and Medicaid accounts receivable balance totaled $419,666 as
of December 31, 1995, compared to $523,117 at December 31, 1994.
NOTE 18 - SUBSEQUENT EVENT:
On October 25, 1995, a Lease Termination Agreement was signed by
Cumberland
Healthcare and FHP, Inc. relating to FHP - Norwalk f/k/a Rancho Los Padres (Note
4) whereby Cumberland would receive an early lease termination payment. A
Management Agreement was also signed whereby Cumberland would become the interim
operator of the facility. Pursuant to the Lease Termination Agreement,
$1,566,174 was placed in escrow, and payment was contingent upon Cumberland
obtaining the appropriate license to operate and maintain the FHP - Norwalk
facility. In January 1996, the state of California - Department of Health
Services issued a license to Cumberland Healthcare to operate and maintain
Pacific Palms Skilled Nursing f/k/a FHP - Norwalk f/k/a Rancho Los Padres.
After various prorations, working capital advances and interest earned, the net
distribution from the escrow account to Cumberland was $1,534,334 which will be
recorded as lease income in 1996.
Item 9. Disagreements on Accounting and Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner is Medical Investments Partners ("MIP"), a Florida
General Partnership with two Partners, RJ Health Properties, Inc. ("RJHP") (99%
interest in MIP) and RJ Medical Investors, Inc. ("RJMI") (1% interest in MIP).
RJHP is the Managing General Partner of MIP, who is the General Partner of
Cumberland Healthcare. RJHP is owned 100% by Raymond James Financial, Inc.
All of the officers and directors of RJHP are employees of
either Raymond James Financial, Inc. or Raymond James & Associates, Inc.
The Board of Directors of RJHP currently has two members. Directors hold
their terms until the annual meeting of the parent company at which time
they are reaffirmed. Executive officers serve at the pleasure of the Board.
RJ Health Properties, Inc. Board of Directors and Executive Officers:
Fred E. Whaley, age 50, has been the President and Director of RJ Health
Properties, Inc. since January, 1986. Mr. Whaley's term will expire in 1997.
He joined Raymond James & Associates, Inc. in 1980.
At Raymond James, Mr. Whaley is a Managing Director responsible for public
and private offerings, mergers and acquisitions and leveraged buyouts.
J. Davenport Mosby III, age 40, has been the Vice President and Director
of RJ Health Properties, Inc. since December, 1988. Mr. Mosby's term will
expire in 1997. He is a Managing Director of Raymond James & Associates,
Inc., which he joined in 1982. He is head of the Partnership Investment
Banking department, which originates and markets public and private
limited partnerships.
Item 11. Executive Compensation
The directors and officers of RJ Health Properties, Inc., managing General
Partner of Medical Investments Partners the General Partner of Cumberland
Healthcare, do not receive any compensation from the Partnership or any of its
affiliates for acting in the capacity of a director or officer of RJ Health
Properties, Inc.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The corporate partners of Medical Investments Partners, as purchasers of
Partnership units, do not own any units of the outstanding securities of the
Partnership as of December 31, 1995. Directors and officers of the General
Partners of Medical Investments Partners do own units of the outstanding
securities of the Partnership as of December 31, 1995. In a secondary market
transaction 45 units were acquired by J. Davenport Mosby, III,
Vice President and Director.
The Registrant is a Limited Partnership and therefore does not have voting
shares of stock. To the knowledge of the Partnership, no person owns of record
or beneficially more than 5% of the Partnership's outstanding units.
Item 13. Certain Relationships and Related Transactions
The Partnership has no officers or directors. However, under the terms of
the public offering, various kinds of compensation and fees are payable to the
General Partner and its affiliates during the organization and operations of the
Partnership.
The General Partner received a property management fee of $41,287, $39,531
and $37,648 for 1995, 1994 and 1993, respectively. Reimbursement to the General
Partner for general and administrative costs amounted to $28,067, $6,908 and
$26,387 for 1995, 1994 and 1993, respectively. Reimbursable expenses to the
General Partner on behalf of the Partnership amounted to $8,210, $1,696 and
$8,146 for 1995, 1994 and 1993, respectively. Direct reimbursable costs to
affiliates of the General Partner amounted to $7,920, $1,153 and $6,374 for
1995, 1994 and 1993, respectively. Total payments to the General Partner and
affiliates amounted to $364,493, $338,963 and $677,869 for 1995, 1994 and 1993,
respectively.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A. (1) Financial Statements - See accompanying index to financial statements,
Item 8.
(2) Financial Statement Schedules -
Schedule III - Real Estate and Related Depreciation
Schedule VIII - Valuation and Qualifying Accounts and Reserves
Schedule X - Supplementary Income Statement Information
All other schedules for the Partnership have been omitted as not required,
not applicable, or the information required to be shown therein is included
in the financial statements and related notes.
(3) Exhibit Index -
2 Plan of acquisition, organization, arrangement, liquidation
or succession *
3 Articles of Incorporation and By-laws *
3.10 Amended Certificate and Agreement of Limited Partnership of
Columbia Healthcare Partnership II-A, L.P. dated November
19, 1986 among Columbia Healthcare Partners Inc., Medical
Investments Partners, Alfred W. Taylor, III, and Cumberland
Healthcare, L.P. I-A **
3.11 Amended Agreement of Limited Partnership of Cumberland
Healthcare, L.P. I-C dated November 19, 1986 among Medical
Investments Partners, Frank N. Fleischer, and Cumberland
Healthcare, L.P. I-A **
3.12 Amended Certificate and Agreement of Limited Partnership of
Columbia Healthcare Partners III-A dated November 19, 1986
among Columbia Healthcare Partners, Inc., Medical Invest-
ments Partners, Alfred W. Taylor, III, and Cumberland
Healthcare, L.P. I-A **
3.13 Amended Agreement of Limited Partnership of Cumberland
Healthcare, L.P. I-B dated November 19, 1986 among Medical
Investments Partners, Frank N. Fleischer, and Cumberland
Healthcare, L.P. I-A **
4 Instruments defining the rights of security holders, including
debentures *
9 Voting Trust Agreement ***
10 Material Contracts ***
10.7 Quakertown Lease Agreement dated December 1, 1986 between
Columbia Healthcare Partners, II-A, L.P. and Columbia East
Corporation. **
10.8 First Amendment to Lease Agreement dated February 3, 1987
between Columbia Healthcare Partners II-A, L.P. and
Columbia East Corporation. **
10.9 Mortgage Note for $3,500,000 dated as of December 8, 1986
between Columbia Healthcare Partners II-A, L.P. and Rhode
Island Hospital Trust National Bank. **
10.10 Mortgage and Security Agreement dated as of December 8, 1986
between Columbia Healthcare Partners II-A, L.P. and Rhode
Island Hospital Trust National Bank. **
10.11 Subordination Agreement dated as of December 8, 1986 between
Columbia Healthcare Partners II-A, L.P., Medical Investments
Partners, Columbia East Corporation and Columbia Corporation
in favor of Rhode Island Hospital Trust National Bank. **
10.12 Conditional Assignment dated as of December 8, 1986 by
Columbia Healthcare Partners II-A, L.P. to Rhode Island
Hospital Trust National Bank. **
10.13 UCC Financing Statement dated December 8, 1986 between
Columbia Healthcare Partners II-A, L.P. and Rhode Island
Hospital Trust National Bank. **
10.14 Hillcrest Lease Agreement dated February 3, 1987 between
Cumberland Healthcare, L.P. I-C and Columbia East Corporation.**
10.15 Hopkins House Lease Agreement dated February 3, 1987 between
Columbia Healthcare Partners, III-A, and Columbia East
Corporation. **
10.16 Olympic Lease Agreement dated as of February 3, 1987 between
Cumberland Healthcare, L.P. I-B and Columbia West Corporation. **
11 Computation of per-share earnings ***
12 Computation of ratios ***
13 Annual report to security holders ***
16.1 Letter regarding change in certifying accountants **
18 Letter regarding change in accounting principles ***
19 Previously unfiled documents ***
22 Subsidiaries of the Registrant ***
23 Published report regarding matters submitted to a vote of
security holders ***
24 Consents of experts and counsel ***
25 Power of Attorney ***
28 Additional Exhibits
28.01 Excerpts from Appraisal Report for Quakertown Manor Care Center
as of February 1, 1986 **
28.02 Excerpts from Appraisal Report for Hillcrest Care Center as of
September 3, 1986 **
28.03 Excerpts from Appraisal Report for Hopkins House Nursing Home
as of July 14, 1986 **
28.04 Excerpts from Appraisal Report for Olympic Health Care Center
as of August 19, 1986 **
28.05 Letter to limited partner dated June 24, 1988 **
28.06 Restructuring Agreement by and among Cumberland Healthcare,
L.P. I-A, Cumberland Healthcare, L.P. I-B, Cumberland
Healthcare, L.P. I-C, and Columbia Healthcare Partners
III-A, and Carteret Savings Bank, F.A. and The Howard
Savings Bank, dated April 6, 1989. ****
28.07 Release and Indemnification made and entered into as of the
6th day of April, 1989, by Cumberland Healthcare, L.P. I-A,
Cumberland Healthcare, L.P. I-B, Cumberland Healthcare, L.P.
I-C, and Columbia Healthcare Partners III-A (collectively
"Borrowers") and Carteret Savings Bank, F.A., and The Howard
Savings Bank (collectively "Lenders"). ****
28.08 Assignment of Leases made as of the 6th day of April, 1989,
by and between Cumberland Healthcare, L.P. I-A ("Assignor")
Carteret Savings Bank, F.A. ("Assignee") and Life Care
Centers of America, Inc. ("Lessee"). ****
28.09 Second Amended and Restated Master Lease between Cumberland
Healthcare, L.P. I-A, Lessor, and Life Care Centers of
America, Inc., a Tennessee corporation, Lessee, dated as
of March 1, 1989 (Bel Tooren Villa, La Habra, North Walk,
and Rancho Los Padres Facilities) ****
28.10 Second Amended and Restated Management Agreement made and
entered into effective as of the 1st day of March, 1989,
by and between Cumberland Healthcare, L.P. I-A ("Owner")
and Life Care Centers of America, Inc. ("Manager"). ****
28.11 Second Amended and Restated Unconditional Guaranty of Payment
and Performance dated as of the 6th day of April, 1989 by
and between Forrest L. Preston ("Guarantor"), Cumberland
Healthcare, L.P. I-A ("Lessor"), and Life Care Centers of
America, Inc. ("Lessee"). ****
28.12 Facility Lease (Hillcrest Facility) dated as of the 1st day
of February, 1989, among Cumberland Healthcare, L.P. I-C,
("Lessor") and Arbor Health Care Company ("Lessee"). ****
28.13 Open End Mortgage and Security Agreement executed on the 18th
day of April, 1989, between Cumberland Healthcare, L.P. I-C,
("Mortgagor") and Southeast Bank, N.A. ("Lender"). ****
28.14 Note dated April 18, 1989 between Cumberland Healthcare, L.P.
I-C ("Maker") and Southeast Bank, N.A. ("Holder") in the
amount of $2,600,000. ****
28.15 Reimbursement, Indemnification and Security Agreement made
and entered into as of the 18th day of April, 1989 by and
among Raymond James Financial, Inc., RJ Health Properties,
Inc., Raymond James Partners, Inc., Medical Investments
Partners, Inc. (collectively the "Obligators") and
Cumberland Healthcare, L.P. I-C (the "Limited Partner"). ****
28.16 Assignment of Leases, Rents and Contract Rights made as of
the 18th day of April, 1989 by Cumberland Healthcare, L.P.
I-C ("Assignor") to Southeast Bank, N.A. ("Assignee"). ****
28.17 Subordination, Non-Disturbance, and Attornment Agreement
made and entered into as of the 18th day of April, 1989,
by and among Southeast Bank, N.A. ("Mortgagee") by
Cumberland Healthcare, L.P. I-C ("Landlord") and Arbor
Health Care Company ("Tenant"). ****
28.18 Indemnity Agreement made as of the 18th day of April, 1989,
from Cumberland Healthcare, L.P. I-C ("Borrower") and
Raymond James Financial Corp. ("Indemnitor") to Southeast
Bank, N.A. ("Lender"). ****
28.19 Purchase and Sale Agreement, executed August 24, 1989, by
and between Cumberland Healthcare, L.P. I-A, Columbia
Healthcare Partners II-A, L.P., Columbia Healthcare
Partners III-A, collectively, "Sellers" and Multicare
Management, Inc., a New York Corporation, Daniel E. Straus
and Moshael J. Straus, "Buyers" covering Holly Manor,
Mendham, New Jersey; Quakertown Manor, Quakertown,
Pennsylvania; and Hopkins House, Wyncote, Pennsylvania. **
28.20 Letter, dated September 13, 1989, referencing Quakertown
Manor Nursing Home, Quakertown, PA, amending certain
sections of the Purchase and Sale Agreement, dated
August 24, 1989. **
28.21 Letter, dated October 4, 1989, referencing the Purchase
and Sale Agreement as of July 1, 1989, amending Section
9.4 of the Purchase and Sale Agreement, dated August
24, 1989. **
28.22 Letter, dated October 4, 1989, referencing Quakertown
Manor Nursing Home, Quakertown, PA, amending certain
segments of the Purchase and Sale Agreement, dated
August 24, 1989. **
28.23 Purchase and Sale Agreement dated March 31, 1990, by and
among Cumberland Healthcare, L.P., Columbia Healthcare
Partners, II-A, L.P., and Columbia Healthcare Partners III-A,
as Sellers and Multicare Management, Inc., Daniel E.
Straus and Moshael J. Straus as Buyers, effective as of
July 1, 1989, as amended by those certain letter agreements,
dated August 24, 1989, September 7, 1989, September 13, 1989,
September 14, 1989, September 15, 1989, September 22, 1989,
October 4, 1989 (three letter agreements), October 6, 1989,
October 19, 1989, October 31, 1989, November 1, 1989, and
November 17, 1989 (collectively, the "Agreement"). **
28.24 Fourth Amendment to the Second Amended and Restated Master Lease
Agreement between Life Care Centers of America, Inc., a Tennessee
corporation, and Cumberland Healthcare, L.P. I-A ("Owner") a
Delaware limited partnership dated March 1, 1989. *****
28.25 Lease between Cumberland Healthcare, L.P. I-A, as lessor
("Lesssor"), a limited partnership and FHP, Inc., a California
corporation as lessee ("Lessee") dated September 19, 1990. *****
28.26 Management Contract between Olympic Health Services, Inc., a
Washington corporation ("OHS") and Cumberland Healthcare, L.P.
I-B, a Delaware limited partnership ("Owner") dated
January 1, 1993. *****
28.27 Amended and Restated Limited Partnership Agreement by and among
Medical Investments Partners, a Florida general Partnership,
("MIP"), and Olympic Health Services, Inc., a Washington
corporation ("OHS"), as General Partners, Cumberland Healthcare,
L.P. I-A, a Delaware limited partnership ("Cumberland"), and
William W. Littlejohn, a resident of the State of Washington
("Littlejohn"), as Limited Partners dated January 1, 1993. *****
28.28 Sublease among Cumberland Healthcare, L.P. I-A, as lessor
("Sublessor"), a limited partnership and Life Care Centers of
America, Inc., a Tennessee corporation as lessee ("Sublessee")
dated March 1, 1989. *****
28.29 Deed of Trust among Cumberland Healthcare, L.P. I-B, a Delaware
Limited Partnership, ("Grantor"); U.S. Bank of Washington,
National Association, ("Lender" and sometimes "Beneficiary");
and United States National Bank of Oregon ("Trustee") dated
August 25, 1993. *****
28.30 Loan Agreement between First Union National Bank of Florida, a
national banking association ("Lender") and Cumberland Healthcare,
L.P. I-A, a Delaware limited partnership ("Borrower") dated
December 28, 1994. *****
28.31 Purchase and Sale Agreement between Cumberland Healthcare, L.P. I-A,
a Delaware limited partnership (the "Seller") and Life Care
Centers of America, Inc. and permitted assigns (the "Purchaser").
******
28.32 Revolving Loan Agreement between Cumberland Healthcare, L.P. I-A,
a Delaware limited partnership ("Borrower") and Raymond James
Financial, Inc., a Florida corporation ("Lender") dated December
28, 1994. *******
29 Information from reports furnished to state insurance
regulatory authorities. ***
* Included with Form S-11, Registration No. 33-4301 previously filed
with the Securities and Exchange Commission.
** Included with Forms 8-K, as amended, previously filed with the
Securities and Exchange Commission.
*** Exhibits were omitted as not required, not applicable, or the
information required to be shown therein is included elsewhere in
this report.
**** Included as exhibits to Form 10-K for year ended December 31, 1988.
***** Included as exhibits to Form 10-K for year ended December 31, 1994.
****** Included as exhibit to Form 10-Q for period ended June 30, 1995.
******* Included as exhibit to Form 10-K for year ended December 31, 1995.
B. Reports filed on Form 8-K - None.
C. Exhibits filed with this Report -
Exhibit 28.32
SCHEDULE III - REAL ESTATE AND RELATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1995
BEL TOOREN VILLA CONVALESCENT HOSPITAL, BELLFLOWER, CA
DATE OF CONSTRUCTION: 1968
DATE ACQUIRED: 04-02-86
DEBT: NONE
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 466,246 $ 76,321 $ 542,567 $ (541,272) 8
BUILDING 2,170,579 26,097 2,196,676 (611,226) 35
LAND 489,845 0 489,845
MIRADA HILLS REHABILITATION AND CONVALESCENT HOSPITAL, LA MIRADA, CA
DATE OF CONSTRUCTION: 1966 AND 1971
DATE ACQUIRED: 04-02-86
DEBT: NONE
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 536,422 $ 285,041 $ 821,463 $ (821,463) 8
BUILDING 1,858,390 301,074 2,159,464 (1,104,799) 35
LAND 1,008,617 0 1,008,617
NORTHWALK VILLA CONVALESCENT HOSPITAL, NORWALK, CA
DATE OF CONSTRUCTION: 1965
DATE ACQUIRED: 04-25-86
DEBT: NONE
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 252,124 $ 21,771 $ 273,895 $ (273,713) 8
BUILDING 1,300,750 9,975 1,310,725 (364,869) 35
LAND 386,908 0 386,908
RANCHO LOS PADRES CONVALESCENT HOSPITAL, NORWALK, CA
DATE OF CONSTRUCTION: 1964
DATE ACQUIRED: 04-02-86
DEBT: $1,383,333
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 233,313 $ 50,083 $ 283,396 $ (283,396) 8
BUILDING 1,144,962 63,528 1,208,490 (330,714) 35
LAND 613,149 0 613,149
LA HABRA CONVALESCENT HOSPITAL, LA HABRA, CA
DATE OF CONSTRUCTION: 1955 & 1986
DATE ACQUIRED: 04-02-86
DEBT: NONE
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 482,943 $ 35,388 $ 581,331 $ (516,065) 8
BUILDING 1,627,001 61,620 1,688,621 (468,425) 35
LAND 471,975 0 471,975
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
SCHEDULE III - REAL ESTATE AND RELATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1995 (Continued)
RIMROCK VILLA CONVALESCENT HOSPITAL, BARSTOW, CA
DATE OF CONSTRUCTION: 1963
DATE ACQUIRED: 04-02-86
DEBT: $1,268,902
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 287,091 $ 36,139 $ 323,230 $ (323,230) 8
BUILDING 1,513,097 15,643 1,528,740 (440,389) 35
LAND 257,409 0 257,409
SUN CITY CONVALESCENT CENTER, SUN CITY, CA
DATE OF CONSTRUCTION: 1972
DATE ACQUIRED: 04-30-86
DEBT: $1,824,971
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 688,437 $ 73,726 $ 762,163 $ (738,293) 8
BUILDING 3,075,526 55,519 3,131,045 (870,383) 35
LAND 283,846 0 283,846
HILLCREST CARE CENTER, WATERVILLE, OH
DATE OF CONSTRUCTION: 1966 & 1977
DATE ACQUIRED: 11-19-86
DEBT: $2,181,722
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 777,119 $ 22,417 $ 799,536 $ (797,199) 8
BUILDING 3,108,476 0 3,108,476 (814,125) 35
LAND 250,038 0 250,038
IMPERIAL CONVALESCENT HOSPITAL, LA MIRADA, CA
DATE OF CONSTRUCTION: 1966
DATE ACQUIRED: 04-02-86
DEBT: NONE
INITIAL SUBSEQUENT CLOSE OF ACCUM. DEPREC.
COST CAP. COSTS PERIOD COST DEPREC. LIFE
FURN & FIX $ 0 $ 80,111 $ 80,111 $ (60,140) 8
BUILDING 688,786 80,761 769,547 (254,174) 28
LAND N/A
TOTAL $6,658,928 $23,973,049 $ 1,295,214 $25,268,263
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance at Additions Deductions Balance
Beginning Charged to From at End
of Year Expenses Reserves of Year
Reserve deducted in the
Balance Sheet from the asset
to which it applies:
Reserve for doubtful accounts:
Year Ended December 31, 1995 $ 63,866 $ 9,507 $ 0 $ 73,373
Year Ended December 31, 1994 76,927 1,170 14,231 63,866
Year Ended December 31, 1993 84,089 0 7,162 76,927
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended December 31,
1995 1994 1993
Amortization of Deferred
Debt Costs $ 19,437 $ 22,524 $ 108,040
Amortization of Leasehold
Properties 37,498 37,498 37,498
Amortization of Intangible
Assets 11,095 11,095 11,095
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.
CUMBERLAND HEALTHCARE, L.P. I-A
By: Medical Investments Partners
By: RJ Health Properties, Inc.
Managing General Partner
ATTEST:
/s/Fred E. Whaley, By: /s/J. Davenport Mosby, III,
President Vice President
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
CUMBERLAND HEALTHCARE, L.P. I-A
By: Medical Investments Partners
By: RJ Health Properties, Inc.
Managing General Partner
ATTEST:
Date: March 14, 1996 By: /s/Fred E. Whaley
President and Director
Date: March 14, 1996 By: /s/J. Davenport Mosby, III
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the year ended December 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,685,900
<SECURITIES> 0
<RECEIVABLES> 778,884
<ALLOWANCES> 73,373
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 30,394,701
<DEPRECIATION> 11,235,282
<TOTAL-ASSETS> 22,181,442
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,622,375
0
0
<COMMON> 0
<OTHER-SE> 11,975,038
<TOTAL-LIABILITY-AND-EQUITY> 22,181,442
<SALES> 0
<TOTAL-REVENUES> 8,809,352
<CGS> 0
<TOTAL-COSTS> 5,034,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 717,444
<INCOME-PRETAX> 1,966,546
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,966,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,966,546
<EPS-PRIMARY> 64.24<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>EPS is net income per $1,000 Limited Partnership Unit.
</FN>
</TABLE>
