<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
COMMISSION FILE NUMBER 0-16815
NHP RETIREMENT HOUSING PARTNERS I
LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
DELAWARE 52-1453513
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14160 DALLAS PARKWAY, SUITE 300
DALLAS, TX 75240
(Address of principal executive offices)
(Zip Code)
(214) 770-5600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- -------------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 3,470,676 $ 3,593,147
Interest receivable 3,300 1,242
Other receivables 843,825 850,991
Pension notes issuance costs 1,710,520 1,774,218
Organization and offering costs 352,210 364,654
Prepaid expenses 293,905 273,393
Rental property:
Land 6,318,028 6,318,028
Building, net of accumulated depreciation
of $10,996,745 and $10,612,319 45,545,865 45,755,329
Other assets 36,471 36,956
----------- -----------
$58,574,800 $58,967,958
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Liabilities:
Accounts payable $ 642,483 $ 502,854
Interest payable 15,979,140 15,367,450
Pension notes 42,672,000 42,672,000
Purchase installments 552,000 552,000
Other liabilities 704,041 922,454
----------- -----------
60,549,664 60,016,758
----------- -----------
Partners' equity (deficit):
General Partner-NHP/RHGP-I Limited
Partnership (1,231,430) (1,197,854)
Assignor Limited Partner-NHP RHP-I
Assignor Corporation-42,691 investment
units outstanding (743,434) 149,054
----------- -----------
(1,974,864) (1,048,800)
----------- -----------
$58,574,800 $58,967,958
=========== ===========
</TABLE>
See notes to financial statements
-1-
<PAGE> 3
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Three months
ended March 31,
------------------------
1995 1994
-------------- -------------
<S> <C> <C>
REVENUE:
Rental income $ 3,407,529 $ 3,300,615
Interest income 19,867 13,300
Other income 48,526 47,871
-------------- -------------
3,475,922 3,361,786
-------------- -------------
COSTS AND EXPENSES:
Salaries, related benefits and overhead reimbursements 999,676 906,597
Management fees, dietary fees and other services 349,072 327,584
Administrative and marketing 103,498 152,422
Utilities 225,780 238,154
Maintenance 104,736 89,874
Resident services, other than salaries 66,087 59,957
Food services, other than salaries 371,129 345,708
Depreciation 384,426 351,766
Taxes and insurance 260,930 283,392
-------------- -------------
2,865,334 2,755,454
-------------- -------------
INCOME FROM RENTAL OPERATIONS 610,588 606,332
-------------- -------------
COSTS AND EXPENSES:
Interest expense - pension notes 1,364,424 1,310,352
Amortization of pension notes
issuance costs 63,698 63,698
Amortization of organization
and offering costs 12,444 12,444
Other expenses 80,742 52,663
-------------- -------------
1,521,290 1,439,157
-------------- -------------
NET (LOSS) $ (910,702) $ (832,825)
============== =============
NET (LOSS) PER ASSIGNEE INTEREST $ (21) $ (19)
============== ============
</TABLE>
See notes to financial statements
-2-
<PAGE> 4
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
GENERAL PARTNER ASSIGNOR
CAPITAL REALTY GROUP LIMITED
SENIOR HOUSING, INC. PARTNERS TOTAL
-------------------- -------- -----------
<S> <C> <C> <C>
Equity (deficit)
at December 31, 1994 $ (1,197,854) $ 149,054 $ (1,048,800)
Distributions (15,362) 0 (15,362)
Net Loss - Three months
ended March 31, 1995 (18,214) (892,488) (910,702)
------------ ----------- ------------
Equity (deficit)
at March 31, 1995 $ (1,231,430) $ (743,434) $ (1,974,864)
============ =========== ============
Percentage interest
at March 31, 1995 2 % 98 % 100 %
============ =========== ============
</TABLE>
See notes to financial statements
-3-
<PAGE> 5
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Rent collections $ 3,414,695 $ 3,303,453
Interest received 17,809 14,883
Other income 48,526 47,871
Salary and related benefits (999,676) (917,454)
Management fees, dietary fees
and other services (349,670) (319,163)
Other operating expenses paid (1,311,097) (1,392,454)
Interest paid (752,734) (752,734)
------------- -------------
Net cash provided by (used in)
operating activities 67,853 (15,598)
------------- -------------
Cash flows from investing activities:
Capital Expenditures (174,962) (73,755)
------------- -------------
Net cash used in investing activities (174,962) (73,755)
------------- -------------
Cash flows from financing activities:
Distributions (15,362) -
------------- -------------
Net cash used in financing activities (15,362) -
------------- -------------
Net (decrease) in cash and
cash equivalents (122,471) (89,353)
Cash and cash equivalents
at beginning of period 3,593,147 3,749,110
------------- -------------
Cash and cash equivalents
at end of period $ 3,470,676 $ 3,659,757
============= =============
</TABLE>
See notes to financial statements
-4-
<PAGE> 6
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
----------- ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss $ (910,702) $ (832,825)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 384,426 351,766
Amortization of organization
and offering costs 12,444 12,444
Amortization of pension notes
issuance costs 63,698 63,698
(Increase) decrease in
interest receivable (2,058) 1,583
Decrease in other assets and receivables 7,651 4,220
Increase in prepaid expenses (20,512) (123,686)
Increase in accounts payable 139,629 90,682
Increase in interest payable 611,690 557,618
Decrease in other liabilities (218,413) (141,098)
----------- ------------
Total adjustments 978,555 817,227
----------- ------------
Net cash provided by (used in)
in operating activities $ 67,853 $ (15,598)
=========== ============
</TABLE>
See notes to financial statements
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<PAGE> 7
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES
NATURE OF BUSINESS
NHP Retirement Housing Partners I Limited Partnership (the
"Partnership") is a limited partnership organized under the laws of
the State of Delaware on March 10, 1986. The Partnership was formed
for the purpose of raising capital by issuing both Pension Notes
("Notes") to tax-exempt investors and selling additional partnership
interests in the form of Assignee Interests ("Interests") to taxable
individuals. Interests represent assignments of the limited
partnership interests of the Partnership issued to the Assignor
Limited Partner, NHP RHP-I Assignor Corporation. The proceeds from
the sale of the Notes and Interests have been invested in residential
rental properties for retirement age occupants.
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to
present a fair statement of the financial condition and results of
operations for the interim periods presented.
While the General Partner believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that
these financial statements be read in conjunction with the financial
statements and the notes included in the Partnership's Annual Reports
filed in Forms 10-K for the year ended December 31, 1994.
Certain reclassification have been made to the 1994 financial
statements in order to conform to the 1995 presentation format.
(2) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL
PARTNER
At December 31, 1994, the sole general partner of the Partnership was
NHP/RHGP-1 Limited Partnership (NHP/RHGP- 1). On December 19, 1991,
NHP/RHGP-1 executed an amended and restated purchase agreement with
Capital Realty Group Properties, Inc. (CRGP) for the transfer of the
General Partner's interest in the Partnership, subject to the approval
of Assignee Holders. CRGP's rights and obligations under the purchase
agreement were subsequently assigned to Capital Realty Group Senior
Housing, Inc. (CRGSH). Pursuant to a Consent Solicitation dated
October 25, 1994, Assignee Holders holding more than 64% of the equity
interests in the Partnership approved the election of CRGSH, as the
replacement general partner of the Partnership. Effective January 23,
1995, CRGSH has become the new sole general partner of the Partnership
and NHP/RHGP-I has withdrawn as general partner.
-6-
<PAGE> 8
Personnel working at the Property sites and certain home office
personnel who perform services for the Partnership are employees as of
February 1, 1995 of Capital Senior Living, Inc. (CSL), an affiliate of
CRGSH and prior to February 1, 1995 were employees of CRGSH. The
Partnership reimburses CRGSH or CSL for the salaries, related
benefits, and overhead reimbursements of such personnel as reflected
in the accompanying financial statements. Salary, related benefits
and overhead reimbursements reimbursed and expensed by the Partnership
to CSL and CRGSH for the first fiscal quarter ended March 31, 1995 and
1994, were $999,676 and $906,597, respectively. Management fees,
dietary fees and other services reimbursed and expensed by the
Partnership to CSL and CRGSH for the first fiscal quarter ended March
31, 1995 and 1994, were $349,072 and $327,584, respectively.
Distributions of $15,362 were made to the General Partner during the
three months ended March 31, 1995.
(3) VALUATION OF RENTAL PROPERTY
Generally accepted accounting principles require that the Partnership
evaluate whether it is probable that the estimated undiscounted future
cash flows of its properties, taken individually, will be less than
the respective net book value of the properties. If such a shortfall
exists and is material, then a write-down is warranted. The
Partnership performs such evaluations on an on-going basis. During
the three months ended March 31, 1995, based on the Partnership's
evaluation of each respective property, no additional write-down was
warranted.
-7-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The following schedule summarizes the occupancy levels at the four properties
wholly owned by the partnership and at Amberleigh in which the partnership has
a 99.9% partnership interest.
<TABLE>
<CAPTION>
Available March 31 March 31
Units 1995 1994
--------- ----------- ----------
<S> <C> <C> <C>
The Amberleigh 269 90% 92%
The Atrium at Carmichael 152 96% 91%
Crosswood Oaks 121 87% 97%
Heatherwood 160 90% 89%
Veranda Club 189 93% 96%
</TABLE>
Rent collections for the three month period increased to $3,414,695 from
$3,303,453 in 1994, or 3.4%, primarily from rental rate increases. Operating
expenses paid to the contract purchaser and other operating expenses paid
likewise increased, from $2,629,071 to $2,660,443 in 1995 or 1.2% Overall,
operating expenses increased over the prior year due to inflationary costs.
Cash generated from rental operations prior to the payment of interest expense
was sufficient to pay all of the interest on the Pension Notes, which was
$752,734 for the three month period ended March 31, 1995. Net cash provided
from operations, after the payment of interest expense, during the three months
ended March 31, 1995 was $67,853. The Partnership used cash for operations of
$15,598 for the same period in 1994. Interest on the Pension Notes is accrued
at a 13% rate, which totalled $1,364,424 and $1,310,352 for the three months
ended March 31, 1995 and 1994, respectively, but was paid based on a 7% pay
rate. The remaining 6% unpaid portion continues to be accrued and is due at
maturity. Total accrued and unpaid interest amounted to $15,979,140 and
$15,367,450 at March 31, 1995 and December 31, 1994, respectively.
The increase of $101,207 in capital expenditures from $73,755 in 1994 to
$174,962 in 1995 was due to capital improvement programs implemented at several
of the properties during 1994 and continuing during 1995.
Cash and cash equivalents at March 31, 1995 and December 31, 1994 amounted to
$3,470,676 and $3,593,147, respectively. If operations do not improve
significantly in the long-term, future funds may not be available to meet
operating requirements, including the ultimate payment of principal and
deferred interest on the Pension Notes. This cash need has caused the General
Partner to determine that it is not financially appropriate to make
distributions to Assignee Interest Holders. The General Partner anticipates
that distributions will continue to be suspended until operating results
significantly improve.
In their audit report dated February 17, 1995, the auditors added three
additional "emphasis" paragraphs to their report on the Partnership's 1994,
1993 and 1992 financial statements. The comments made in the "emphasis"
paragraphs generally repeat disclosures made by the Partnership in the
footnotes to the 1994 financial statements, primarily footnotes 9 and 10.
-8-
<PAGE> 10
In the first "emphasis paragraph, the auditors made the statement, "Should the
cash generated from operations not continue to improve over the next several
years, the Partnership's cash reserves may not be adequate to fund interest
payments or other Partnership obligations." Management shares the auditors'
concern in this area. However, we believe that significant operating
improvements have been made in recent years which mitigate this risk. The
amount of cash used in operations averaged approximately $1.5 million annually
in the three-year period ending December 31, 1991, but was reduced to $731,000
in 1992 and further reduced to 58,971 in 1993. In 1994, cash flow from
operating activities provided cash of $334,887, and for the three months ended
March 31, 1995, cash flow from operating activities provided cash of $67,853.
In their second "emphasis" paragraph, the auditors stated, in part, that "...
the carrying values of the Partnership's rental properties may exceed the
current market values of the Properties at December 31, 1994." Management
agrees that this is a possibility, however, no appraisals of the properties'
values have been performed to determine if, in fact, this is the case, nor are
current market values considered relevant in the circumstances since it is the
Partnership's intention to continue to hold the properties and use them in
operations. In this type of situation, write-downs of properties' values are
generally required only when the value of the properties can not be "realized"
through future operations. For properties such as those held by the
Partnership, generally accepted accounting principles provide for the
Partnership to evaluate whether it is probable that the estimated undiscounted
future cash flows of each of its properties, taken individually, are less than
the respective net book value of the properties. If such a shortfall exists
and is material, then a write-down equal to the shortfall would be warranted.
The Partnership performs such evaluations on an ongoing basis by comparing each
property's net book value to the estimated future operating cash flow for years
through 2001 (the year the Pension Notes mature) plus cash projected to be
received upon an assumed sale of the properties on December 31, 2001. Sales
proceeds, net of an estimated 3% cost of disposal, are estimated using a 10%
capitalization rate of the net operating income projected for each property for
the year 2001. Based on evaluations prepared at December 31, 1992, no
write-down of the properties was necessary at that time. As a result of
operating budget revisions during 1993 which reduced projected undiscounted
cash flows, evaluations prepared at September 30, 1993 indicated that
write-downs at that date were necessary. Therefore, as of September 30, 1993,
write-downs in the amounts of $2,000,000 and $800,000 were recorded on the
Crosswood Oaks and Atrium properties, respectively. The primary factors that
resulted in the reduced projected undiscounted cash flows as compared to the
previous year were increased projected future capital expenditures for these
two properties as well as reductions in the projected occupancy rates and
higher operating costs as a percentage of revenue than that originally
projected. As of December 31, 1993, an evaluation of projected future
undiscounted cash flows disclosed that additional write-downs of $400,000 and
$100,000 were required on the Crosswood Oaks and Atrium properties,
respectively. The primary factor causing the fourth quarter write-downs was a
reduction of planned 1994 net operating income for the Crosswood Oaks and
Atrium properties which occurred when the 1994 operating budgets for the
properties were finalized. After recording these additional amounts, the total
write-down recorded for 1993 was $3,300,000 and is reflected as loss due to
reduction in carrying value of rental property in the accompanying statements
of operations for the year ended December 31, 1993. Based on the Partnership's
evaluation of each respective property at December 31, 1994, no additional
write-down was taken.
The auditors second "emphasis" paragraph also stated that "Should the
Partnership be forced to dispose of one or more of its properties, it could
incur a loss." Management does not disagree with this statement, although the
chances of incurring a loss in the future have been reduced by
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<PAGE> 11
recording the write-downs discussed above. It should also be noted that the
Partnership intends to continue to hold its properties and operate them as
rental properties.
The final comment made by the auditors in their second "emphasis" paragraph is
"... there can be no assurance that further write-downs will not be needed in
the future." The Partnership will continue to evaluate the operations of all
of its Properties, and should actual cash flows fall short of projected cash
flows on any of its properties, further reductions in carrying value may be
necessary.
In their third and final "emphasis" paragraph, the auditors state that
"...there would need to be very significant improvements in the cash flows from
operations and/or increases in the values of the Properties to fund both the
accrued interest and the face value of the Pension Notes upon their maturity."
Management agrees that this is a substantial investor/ownership risk. If
interest payments continue to be deferred at the current rate, the total
accrual for unpaid interest plus the face value of the Pension Notes will
approximate $81 million at December 31, 2001, the maturity date of the Pension
Notes, which is an amount in excess of cash projected to be available for debt
servicing at that date.
RESULTS OF OPERATIONS
The Partnership's net loss for the three months ended March 31, 1995 includes
rental operations from each of the Partnership's properties. The net loss also
includes depreciation, amortization of pension notes issuance costs,
amortization of organization and offering costs and accrued pension note
interest expense which are noncash in nature.
The Partnership's net loss increased from $832,825 to $910,702 for the three
month period ending March 31, 1994 and 1995, respectively. Net loss per
Assignee Interest increased from $19 to $21 for the 42,691 Assignee Interests
respectively. This increased loss was principally due to an increase in
pension note interest expense and professional fees and other expenses. Rental
income increased to $3,407,529 for the three months ended March 31, 1995 from
$3,300,615 for the same period in 1995, or approximately 3.2% primarily as a
result of rental rate increases. Rental expenses increased to $2,865,334 from
$2,755,454 for the three month period ending March 31, 1995 and 1994,
respectively, or 4.0%. Increased rental expense was due to increased expenses
for salaries, management fees, maintenance, resident services, food services,
and depreciation. Pension note interest expense increased from $1,310,352 to
$1,364,424 for the three month periods ending March 31, 1994 and 1995
respectively. Other expenses relating to Partnership administration increased
from $52,663 to $80,724 for the three month periods ending March 31, 1994 and
1995, respectively.
As discussed previously, the Partnership performs an on-going evaluation of the
individual carrying value of each of the rental properties. Based on the
Partnership's evaluation of these carrying values at March 31, 1995, it was
determined that no additional write-downs were warranted. The Partnership will
continue to evaluate the properties in the future, and additional write-downs
may be necessary.
PART II
All items not applicable.
-10-
<PAGE> 12
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.
NHP RETIREMENT HOUSING PARTNERS I, LIMITED PARTNERSHIP
By: Capital Realty Group Senior Housing, Inc.
General Partner
By: \s\ Keith Johannessen
President
Date: May 12, 1995
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<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,470,676
<SECURITIES> 0
<RECEIVABLES> 847,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 62,860,638
<DEPRECIATION> 10,996,745
<TOTAL-ASSETS> 58,574,800
<CURRENT-LIABILITIES> 0
<BONDS> 42,672,000
<COMMON> 0
0
0
<OTHER-SE> (1,974,864)
<TOTAL-LIABILITY-AND-EQUITY> 58,574,800
<SALES> 0
<TOTAL-REVENUES> 3,475,922
<CGS> 0
<TOTAL-COSTS> 2,865,334
<OTHER-EXPENSES> 156,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,364,424
<INCOME-PRETAX> (910,702)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (910,702)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
