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 JUNE 30, 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>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
July 30, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 4,291,438 $ 3,593,147
Interest receivable 1,300 1,242
Other receivables 819,812 850,991
Pension notes issuance costs 1,646,822 1,774,218
Organization and offering costs 339,766 364,654
Prepaid expenses 234,336 273,393
Rental property:
Land 6,318,028 6,318,028
Building, net of accumulated depreciation
of $11,381,171 and $10,612,319 45,277,686 45,755,329
Other assets 40,534 36,956
$58,969,722 $58,967,958
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 642,539 $ 502,854
Interest payable 17,341,666 15,367,450
Pension notes 42,672,000 42,672,000
Purchase installments 552,000 552,000
Other liabilities 678,752 922,454
61,886,957 60,016,758
Partners' equity (deficit):
General Partner-NHP/RHGP-I Limited
Partnership (1,250,277) (1,197,854)
Assignor Limited Partner-NHP RHP-I
Assignor Corporation-42,691 investment
units outstanding (1,666,958) 149,054
(2,917,235) (1,048,800)
$ 58,969,722 $58,967,958
See notes to financial statements
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995
Three months
ENDED JUNE 30,
1995 1994
REVENUE:
Rental income $ 3,400,720 $ 3,278,687
Interest income 21,945 17,001
Other income 46,720 48,458
3,469,385 3,344,146
COSTS AND EXPENSES:
Salaries, related benefits and overhead reimbursements 998,458 946,889
Management fees, dietary fees and other services 359,788 325,052
Administrative and marketing 140,567 136,282
Utilities 210,777 212,924
Maintenance 102,774 105,314
Resident services, other than salaries 75,633 64,493
Food services, other than salaries 368,908 350,823
Depreciation 384,426 351,767
Taxes and insurance 268,379 281,966
2,909,710 2,775,510
INCOME FROM RENTAL OPERATIONS 559,675 568,636
COSTS AND EXPENSES:
Interest expense - pension notes 1,362,526 1,307,198
Amortization of pension notes
issuance costs 63,698 63,698
Amortization of organization
and offering costs 12,444 12,444
Other expenses 63,378 88,246
1,502,046 1,471,586
NET (LOSS) $ (942,371) $ (902,950)
NET (LOSS) PER ASSIGNEE INTEREST $ (22) $ (21)
See notes to financial statements
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
Six months
ENDED JUNE 30,
1995 1994
REVENUE:
Rental income $ 6,808,249 $ 6,579,302
Interest income 41,812 30,301
Other income 95,246 96,329
6,945,307 6,705,932
COSTS AND EXPENSES:
Salaries, related benefits and overhead reimbursements 1,998,134 1,853,486
Management fees, dietary fees and other services 708,860 652,636
Administrative and marketing 244,065 288,704
Utilities 436,557 451,078
Maintenance 207,510 195,188
Resident services, other than salaries 141,720 124,450
Food services, other than salaries 740,037 696,531
Depreciation 768,852 703,533
Taxes and insurance 529,309 565,358
5,775,044 5,530,964
INCOME FROM RENTAL OPERATIONS 1,170,263 1,174,968
COSTS AND EXPENSES:
Interest expense - pension notes 2,726,950 2,617,550
Amortization of pension notes
issuance costs 127,396 127,396
Amortization of organization
and offering costs 24,888 24,888
Other expenses 144,102 140,909
3,023,336 2,910,743
NET (LOSS) $ (1,853,073) $ (1,735,775)
NET (LOSS) PER ASSIGNEE INTEREST $ (43) $ (41)
See notes to financial statements
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
GENERAL PARTNER ASSIGNOR
CAPITAL REALTY GROUP LIMITED
SENIOR HOUSING, INC. PARTNERS TOTAL
Equity (deficit)
at December 31, 1994 $ (1,197,854) $ 149,054 $ (1,048,800)
Distributions (15,362) 0 (15,362)
Net Loss - Six months
ended June 30, 1995 (37,061) (1,816,012) (1,853,073)
Equity (deficit)
at June 30, 1995 $ (1,250,277) $ (1,666,958) $ (2,917,235)
Percentage interest
at June 30, 1995 2 % 98 % 100 %
See notes to financial statements
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
1995 1994
Cash flows from operating activities:
Rent collections $ 6,839,428 $ 6,578,601
Interest received 41,754 29,093
Other income 95,246 96,329
Salary and related benefits (1,998,134) (1,853,486)
Management fees, dietary fees
and other services (712,827) (658,079)
Other operating expenses paid (2,507,871) (2,459,112)
Interest paid (752,734) (1,489,253)
Net cash provided by
operating activities 1,004,862 244,093
Cash flows from investing activities:
Capital Expenditures (291,209) (167,428)
Net cash used in investing activities (291,209) (167,428)
Cash flows from financing activities:
Distributions (15,362) 0
Net cash used in financing activities (15,362) 0
Net increase in cash and
cash equivalents 698,291 76,665
Cash and cash equivalents
at beginning of period 3,593,147 3,749,110
Cash and cash equivalents
at end of period $ 4,291,438 $ 3,825,775
See notes to financial statements
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(CONTINUED)
Six Months Ended June 30,
1995 1994
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss $ (1,853,073) $ (1,735,775)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 768,852 703,533
Amortization of organization
and offering costs 24,888 24,888
Amortization of pension notes
issuance costs 127,396 127,396
Increase in interest receivable (58) (1,208)
Decrease in other assets and receivables 27,601 2,189
Decrease in prepaid expenses 39,057 20,013
Increase in accounts payable 139,685 69,377
Increase in interest payable 1,974,216 1,128,297
Decrease in other liabilities (243,702) (94,617)
Total adjustments 2,857,935 1,979,868
Net cash provided by
operating activities $ 1,004,862 $ 244,093
See notes to financial statements
<PAGE>
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.
<PAGE>
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 second fiscal quarter ended June 30, 1995 and
1994, were $998,458 and $946,889, respectively. Management fees,
dietary fees and other services reimbursed and expensed by the
Partnership to CSL and CRGSH for the second fiscal quarter ended June
30, 1995 and 1994, were $359,788 and $325,052, respectively.
Distributions of $15,362 were made to the General Partner during the
six months ended June 30, 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 six months ended June 30, 1995, based on the Partnership's
evaluation of each respective property, no additional write-down was
warranted.
<PAGE>
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.
Available June 30 June 30
UNITS 1995 1994
The Amberleigh 271 93% 91%
The Atrium at
Carmichael 153 98% 92%
Crosswood Oaks 122 88% 92%
Heatherwood 160 83% 90%
Veranda Club 189 91% 93%
Rent collections for the six month period increased to $6,839,428 from
$6,578,601 in 1994, or 4.0%, primarily from rental rate increases.
Operating expenses paid to the contract purchaser and other operating
expenses paid likewise increased, from $4,970,677 to $5,218,832 in 1995 or
5.0% 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 six month period ended June 30, 1995. Net cash
provided from operations, after the payment of interest expense, during
the six months ended June 30, 1995 was $1,004,862. Cash flow from
operations significantly increased because the Partnership is delinquent
in disbursing the first quarter pension note payment of $736,519 due to
the fact that the Partnership is in the process of replacing its investor
services agent. The Partnership expects this distribution to be made in
the third quarter of 1995. The Partnership provided cash from operations
of $244,093 for the same period in 1994. Interest on the Pension Notes is
accrued at a 13% rate, which totalled $2,726,950 and $2,617,550 for the
six months ended June 30, 1995 and 1994, respectively, but is 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
$17,341,666 and $15,367,450 at June 30, 1995 and December 31, 1994,
respectively.
The increase of $123,781 in capital expenditures from $167,428 in 1994 to
$291,209 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 June 30, 1995 and December 31, 1994 amounted
to $4,291,438 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.
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 six months ended June 30, 1995, cash flow from operating
activities provided cash of $1,004,862, or $268,343 had the first quarter
pension note distribution been timely disbursed in the second quarter of
1995.
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 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 six months ended June 30, 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 $1,735,775 to $1,853,073 for the
six month period ending June 30, 1994 and 1995, respectively. Net loss
per Assignee Interest increased from $41 to $43 for the 42,691 Assignee
Interests respectively. This increased loss was principally due to an
increase in pension note interest expense. Rental income increased to
$6,808,249 for the six months ended June 30, 1995 from $6,579,302 for the
same period in 1995, or approximately 3.5% primarily as a result of rental
rate increases. Rental expenses increased to $5,775,044 from $5,530,964
for the six month period ending June 30, 1995 and 1994, respectively, or
4.4%. 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 $2,617,550
to $2,726,950 for the six month periods ending June 30, 1994 and 1995
respectively. Other expenses relating to Partnership administration
increased from $140,909 to $144,102 for the six month periods ending June
30, 1994 and 1995, respectively.
For the three months ended June 30, 1995 as compared with the three months
ended June 30, 1994, the Partnership's revenue and expenses reflect the
same variances as discussed above, with the exception that second quarter
1995 administrative and marketing expenses increased, and second quarter
1995 maintenance and other expenses decreased in comparison to the second
quarter of 1994.
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 June 30, 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NHP RETIREMENT HOUSING PARTNERS I, LIMITED PARTNERSHIP
By: Capital Realty Group Senior Housing, Inc.
General Partner
By:
Keith Johannessen
President
Date: August 12, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NHP RETIREMENT HOUSING PARTNERS I, LIMITED PARTNERSHIP
By: Capital Realty Group Senior Housing, Inc.
General Partner
By: \S\ KEITH JOHANNESSEN
President
Date: August 12, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,291,438
<SECURITIES> 0
<RECEIVABLES> 821,112
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 62,976,885
<DEPRECIATION> 11,381,171
<TOTAL-ASSETS> 58,969,722
<CURRENT-LIABILITIES> 0
<BONDS> 42,672,000
<COMMON> 0
0
0
<OTHER-SE> (2,917,235)
<TOTAL-LIABILITY-AND-EQUITY> 58,969,722
<SALES> 0
<TOTAL-REVENUES> 3,469,385
<CGS> 0
<TOTAL-COSTS> 2,909,710
<OTHER-EXPENSES> 139,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,362,526
<INCOME-PRETAX> (942,371)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (942,371)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
