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 September 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
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<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statements of Financial Position
September 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,620,556 $ 3,593,147
Interest receivable 2,530 1,242
Other receivables 830,720 850,991
Pension notes issuance costs 1,583,124 1,774,218
Organization and offering costs 327,322 364,654
Prepaid expenses 171,158 273,393
Rental property:
Land 6,318,028 6,318,028
Building, net of accumulated depreciation
of $11,765,597 and $10,612,319 45,118,876 45,755,329
Other assets 39,709 36,956
$ 58,012,023 $ 58,967,958
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 689,758 $ 502,854
Interest payable 17,240,356 15,367,450
Pension notes 42,672,000 42,672,000
Purchase installments 552,000 552,000
Other liabilities 735,285 922,454
61,889,399 60,016,758
Partners' equity (deficit):
General Partner (1,299,112) (1,197,854)
Assignor Limited Partner-NHP RHP-I
Assignor Corporation-42,691 investment
units outstanding (2,578,264) 149,054
(3,877,376) (1,048,800)
$ 58,012,023 $ 58,967,958
See notes to financial statements
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<TABLE>
<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Operations
For the Three Months Ended September 30, 1995
Three months
ended September 30,
1995 1994
REVENUE:
<S> <C> <C>
Rental income $ 3,446,450 $ 3,267,637
Interest income 20,738 19,695
Other income 39,803 43,150
3,506,991 3,330,482
COSTS AND EXPENSES:
Salaries, related benefits and
overhead reimbursements 991,071 954,055
Management fees, dietary fees
and other services 350,389 325,585
Administrative and marketing 150,529 142,188
Utilities 218,838 210,779
Maintenance 120,997 124,534
Resident services, other than salaries 69,754 63,398
Food services, other than salaries 376,336 365,178
Depreciation 384,427 351,767
Taxes and insurance 275,416 268,525
2,937,757 2,806,009
INCOME FROM RENTAL OPERATIONS 569,234 524,473
COSTS AND EXPENSES:
Interest expense - pension notes 1,380,262 1,329,084
Amortization of pension notes
issuance costs 63,698 63,698
Amortization of organization
and offering costs 12,444 12,444
Other expenses 42,735 134,186
1,499,139 1,539,412
NET (LOSS) $ (929,905) $ (1,014,939)
NET (LOSS) PER ASSIGNEE INTEREST $ (21) $ (23)
See notes to financial statements
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</TABLE>
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<TABLE>
<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Operations
For the Nine Months Ended September 30, 1995
Nine months
ended September 30,
1995 1994
REVENUE:
<S> <C> <C>
Rental income $ 10,254,699 $ 9,846,939
Interest income 62,550 49,996
Other income 135,049 139,479
10,452,298 10,036,414
COSTS AND EXPENSES:
Salaries, related benefits
and overhead reimbursements 2,989,205 2,807,541
Management fees, dietary fees
and other services 1,059,249 978,221
Administrative and marketing 394,594 430,892
Utilities 655,395 661,857
Maintenance 328,507 319,722
Resident services, other than salaries 211,474 187,848
Food services, other than salaries 1,116,373 1,061,709
Depreciation 1,153,279 1,055,300
Taxes and insurance 804,725 833,883
8,712,801 8,336,973
INCOME FROM RENTAL OPERATIONS 1,739,497 1,699,441
COSTS AND EXPENSES:
Interest expense - pension notes 4,107,212 3,946,634
Amortization of pension notes
issuance costs 191,094 191,094
Amortization of organization
and offering costs 37,332 37,332
Other expenses 186,837 275,095
4,522,475 4,450,155
NET (LOSS) $ (2,782,978) $ (2,750,714)
NET (LOSS) PER ASSIGNEE INTEREST $ (64) $ (63)
See notes to financial statements
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</TABLE>
<TABLE>
<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Partners' Equity (Deficit)
For the Nine Months Ended September 30, 1995
GENERAL PARTNERASSIGNOR
CAPITAL REALTY GROUP LIMITED
SENIOR HOUSING, INC. PARTNER TOTAL
Equity (deficit)
<S> <C> <C> <C>
at December 31, 1994 $ (1,197,854) $ 149,054 $ (1,048,800)
Distributions (45,598) 0 (45,598)
Net Loss - Nine months
ended
September 30, 1995 (55,660) (2,727,318) (2,782,978)
Equity (deficit)
at
September 30, 1995 $ (1,299,112) $ (2,578,264) $ (3,877,376)
Percentage interest
at
September 30, 1995 2 % 98 % 100 %
See notes to financial statements
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<TABLE>
<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statements of Cash Flows
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Rent collections $ 10,274,970 $ 9,868,145
Interest received 61,262 49,055
Other income 135,049 139,479
Salary and related benefits (2,989,205) (2,807,541)
Management fees, dietary fees
and other services (1,064,175) (983,189)
Other operating expenses paid (3,593,762) (3,543,588)
Interest paid (2,234,306) (2,234,306)
Net cash provided by
operating activities 589,833 488,055
Cash flows from investing activities:
Capital Expenditures (516,826) (294,136)
Net cash used in investing activities (516,826) (294,136)
Cash flows from financing activities:
Distributions (45,598) -
Net cash used in financing activities (45,598) -
Net increase in cash and
cash equivalents 27,409 193,919
Cash and cash equivalents
at beginning of period 3,593,147 3,749,110
Cash and cash equivalents
at end of period $ 3,620,556 $ 3,943,029
See notes to financial statements
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</TABLE>
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<TABLE>
<CAPTION>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statements of Cash Flows
(Continued)
Nine Months Ended
September 30,
1995 1994
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (2,782,978) $ (2,750,714)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,153,279 1,055,300
Amortization of organization
and offering costs 37,332 37,332
Amortization of pension notes
issuance costs 191,094 191,094
Increase in interest receivable (1,288) (941)
Decrease in other assets and receivables 17,518 22,257
Decrease in prepaid expenses 102,235 121,104
Increase in accounts payable 186,904 127,083
Increase in interest payable 1,872,906 1,712,328
Decrease in other liabilities (187,169) (26,788)
Total adjustments 3,372,811 3,238,769
Net cash provided by
operating activities $ 589,833 $ 488,055
See notes to financial statements
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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
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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.
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<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 third fiscal
quarter ended September 30, 1995 and 1994, were $991,071 and
$954,055, respectively. Management fees, dietary fees and
other services reimbursed and expensed by the Partnership to
CSL and CRGSH for the third fiscal quarter ended September
30, 1995 and 1994, were $350,389 and $325,585, respectively.
Distributions of $45,598 were made to the General Partner
during the nine months ended September 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 nine months ended September 30, 1995, based on
the Partnership's evaluation of each respective property,
the Partnership did not believe that any additional write-
down was warranted.
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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 September 30 September 30
Units 1995 1994
<S> <C> <C> <C>
The Amberleigh 269 95% 92%
The Atrium at
Carmichael 152 96% 93%
Crosswood Oaks 121 95% 86%
Heatherwood 160 88% 90%
Veranda Club 189 90% 90%
</TABLE>
Rent collections for the nine month period increased to
$10,274,970 from $9,868,145 in 1994, or 4.1%, primarily from
rental rate increases. Salaries, management fees and other
operating expenses paid likewise increased, from $7,334,318 to
$7,647,142 in 1995 or 4.3% 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 $2,234,306 for the nine month period
ended September 30, 1995. Net cash provided from operations,
after the payment of interest expense, during the nine months
ended September 30, 1995 was $589,833. The Partnership provided
cash from operations of $488,055 for the same period in 1994.
Interest on the Pension Notes is accrued at a 13% rate, which
totalled $4,107,212 and $3,946,634 for the nine months ended
September 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 $17,240,356 and $15,367,450 at September 30,
1995 and December 31, 1994, respectively.
The increase of $222,690 in capital expenditures from $294,136 in
1994 to $516,826 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 September 30, 1995 and December 31,
1994 amounted to $3,620,556 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,
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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
nine months ended September 30, 1995, cash flow from operating
activities provided cash of $589,833.
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,
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<PAGE>
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
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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 nine months ended September
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 $2,750,714 to
$2,782,978 for the nine month period ending September 30, 1994
and 1995, respectively. Net loss per Assignee Interest increased
from $63 to $64 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 $10,254,699
for the nine months ended September 30, 1995 from $9,846,939 for
the same period in 1995, or approximately 4.1% primarily as a
result of rental rate increases. Rental expenses increased to
$8,712,801 from $8,336,973 for the nine month period ending
September 30, 1995 and 1994, respectively, or 4.5%. 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
$3,946,634 to $4,107,212 for the nine month periods ending
September 30, 1994 and 1995 respectively. Other expenses
relating to Partnership administration decreased from $275,095 to
$186,837 for the nine month periods ending September 30, 1994 and
1995, respectively.
For the three months ended September 30, 1995 as compared with
the three months ended September 30, 1994, the Partnership's
revenue and expenses reflect the same variances as discussed
above, with the exception that third quarter 1995 administrative
and marketing, utilities, taxes and insurance expenses increased,
and third quarter 1995 maintenance decreased in comparison to the
third 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 September 30, 1995, it was determined that no
additional write-downs were warranted. The Partnership will
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continue to evaluate the properties in the future, and additional
write-downs may be necessary.
PART II
All items not applicable.
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SIGNATURES
Pursuant to the requirements 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 Retirement Group, Inc.
General Partner
By:
Keith Johannessen
President
Date: November 14, 1995
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<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 14, 1995
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793730
<NAME> NHP RETIREMENT HOUSING PARTNERS I LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,620,556
<SECURITIES> 0
<RECEIVABLES> 833,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,202,501
<DEPRECIATION> 11,765,597
<TOTAL-ASSETS> 58,012,023
<CURRENT-LIABILITIES> 0
<BONDS> 42,672,000
<COMMON> 0
0
0
<OTHER-SE> (3,877,376)
<TOTAL-LIABILITY-AND-EQUITY> 58,012,023
<SALES> 0
<TOTAL-REVENUES> 10,452,298
<CGS> 0
<TOTAL-COSTS> 8,712,801
<OTHER-EXPENSES> 415,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,107,212
<INCOME-PRETAX> (2,782,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,782,987)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
