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, 1998
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 of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14160 DALLAS PARKWAY, SUITE 300
DALLAS, TX 75240
(Address of principal executive offices)
(Zip Code)
(972) 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
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 5,752,688 $ 4,495,733
Other receivables 10,350 31,892
Pension notes issuance costs 882,446 1,009,842
Organization and offering costs 190,438 215,326
Prepaid expenses 130,713 300,654
Rental property:
Land 6,820,468 6,820,468
Building, net of accumulated depreciation of
$16,330,464 in 1998 and $15,456,154 in 1997 42,158,054 42,670,005
Other assets 40,674 41,920
----------------- ------------------
Total assets $ 55,985,831 $ 55,585,840
================= ==================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable $ 330,278 $ 320,796
Interest payable 25,407,121 23,730,407
Pension notes 42,672,000 42,672,000
Other liabilities 1,022,042 882,625
----------------- ------------------
69,431,441 67,605,828
----------------- ------------------
Partners' deficit:
General Partner-NHP/RHGP-I Limited
Partnership (1,654,968) (1,596,670)
Assignor Limited Partner-NHP RHP-I
Assignor Corporation-42,691 investment
units outstanding (11,790,642) (10,423,318)
----------------- ------------------
Total partners' deficit (13,445,610) (12,019,988)
----------------- ------------------
Total liabilities and partners' deficit $ 55,985,831 $ 55,585,840
================== ==================
</TABLE>
See notes to financial statements.
1
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Operations
For the Three Months Ended June 30, 1998
<TABLE>
<CAPTION>
Three months ended June 30,
1998 1997
---- ----
<S> <C> <C>
REVENUE:
Rental income $ 4,031,647 $ 3,752,769
Interest income 39,653 20,142
Other income 72,230 48,607
----------------- -----------------
4,143,530 3,821,518
----------------- -----------------
COSTS AND EXPENSES:
Salaries, related benefits and overhead reimbursements 1,021,388 1,016,044
Management fees, dietary fees and other services 384,177 378,963
Administrative and marketing 147,428 153,257
Utilities 219,955 200,131
Maintenance 131,993 132,885
Resident services, other than salaries 75,792 72,747
Food services, other than salaries 404,555 395,780
Depreciation 440,253 415,549
Taxes and insurance 291,474 276,631
----------------- -----------------
3,117,015 3,041,987
----------------- -----------------
INCOME FROM RENTAL OPERATIONS 1,026,515 779,531
----------------- -----------------
COSTS AND EXPENSES:
Interest expense - pension notes 1,582,983 1,509,069
Amortization of pension notes issuance costs 63,698 63,698
Amortization of organization and offering costs 12,444 12,444
Other expenses 57,244 82,639
----------------- -----------------
1,716,369 1,667,850
----------------- -----------------
NET (LOSS) $ (689,854) $ (888,319)
================= =================
NET (LOSS) PER ASSIGNEE INTEREST $ (16) $ (21)
================= =================
</TABLE>
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Operations
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
---- ----
<S> <C> <C>
REVENUE:
Rental income $ 8,055,696 $ 7,527,334
Interest income 67,942 44,562
Other income 134,927 90,379
----------------- -----------------
8,258,565 7,662,275
----------------- -----------------
COSTS AND EXPENSES:
Salaries, related benefits and overhead reimbursements 2,029,080 2,019,387
Management fees, dietary fees and other services 762,865 752,498
Administrative and marketing 294,461 282,230
Utilities 475,809 456,476
Maintenance 247,566 248,290
Resident services, other than salaries 135,957 144,136
Food services, other than salaries 798,481 781,462
Depreciation 874,310 831,097
Taxes and insurance 587,898 556,428
----------------- -----------------
6,206,427 6,072,004
----------------- -----------------
INCOME FROM RENTAL OPERATIONS 2,052,138 1,590,271
----------------- -----------------
COSTS AND EXPENSES:
Interest expense - pension notes 3,165,966 3,018,137
Amortization of pension notes issuance costs 127,396 127,396
Amortization of organization and offering costs 24,888 24,888
Other expenses 129,117 210,119
----------------- -----------------
3,447,367 3,380,540
----------------- -----------------
NET (LOSS) $ (1,395,229) $ (1,790,269)
================= =================
NET (LOSS) PER ASSIGNEE INTEREST $ (33) $ (42)
================= =================
</TABLE>
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statement of Partners' Deficit
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
GENERAL PARTNER ASSIGNOR
CAPITAL REALTY GROUP LIMITED
SENIOR HOUSING, INC. PARTNER TOTAL
-------------------- ------- -----
<S> <C> <C> <C>
Partners' deficit
at December 31, 1997 $ (1,596,670) $ (10,423,318) $ (12,019,988)
Distributions (30,393) 0 (30,393)
Net Loss - Six months
ended June 30, 1998 (27,905) (1,367,324) (1,395,229)
------------------ ---------- ----------
Partners' deficit
at June 30, 1998 $ (1,654,968) $ (11,790,642) $ (13,445,610)
================== ========== ==========
Percentage interest
at June 30, 1998 2% 98% 100%
== === ====
</TABLE>
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Rent collections $ 8,077,238 $ 7,540,144
Interest received 67,942 45,762
Other income 134,927 90,379
Salary and related benefits (2,040,950) (2,025,702)
Management fees, dietary fees
and other services (770,054) (754,917)
Other operating expenses paid (2,330,144) (2,469,683)
Interest paid (1,489,252) (1,489,253)
---------------- ----------------
Net cash provided by
operating activities 1,649,707 936,730
---------------- ----------------
Cash flows from investing activities:
Capital Expenditures (362,359) (207,574)
---------------- -----------------
Net cash used in investing activities (362,359) (207,574)
---------------- ----------------
Cash flows from financing activities:
Distributions (30,393) (30,393)
---------------- ----------------
Net cash used in financing activities (30,393) (30,393)
---------------- ----------------
Net increase in cash and
cash equivalents 1,256,955 698,763
Cash and cash equivalents
at beginning of period 4,495,733 4,017,181
---------------- ----------------
Cash and cash equivalents
at end of period $ 5,752,688 $ 4,715,944
================ ================
</TABLE>
<PAGE>
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
A Limited Partnership
Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
Six months Ended June 30,
1998 1997
---- ----
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,395,229) $ (1,790,269)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 874,310 831,097
Amortization of organization
and offering costs 24,888 24,888
Amortization of pension notes
issuance costs 127,396 127,396
Changes in operating assets and liabilities:
Interest receivable 0 1,200
Other assets and receivables 22,788 16,454
Prepaid expenses 169,941 78,184
Accounts payable 9,482 40,032
Interest payable 1,676,714 1,528,884
Other liabilities 139,417 78,864
---------------- ----------------
Total adjustments 3,044,936 2,726,999
---------------- ----------------
Net cash provided by
operating activities $ 1,649,707 $ 936,730
================ ================
</TABLE>
<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, 1997.
(2) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL PARTNER
Until January 23, 1995, 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
holders of Interests ("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.
On June 10, 1998, the sole owner of the General Partner, Capital Group
Corporation, sold all of its shares of CRGSH common stock to Retirement
Associates, Inc. ("Associates") for $855,000. The source of the funds is
a Promissory Note for $855,000 with a five year term and bearing an
interest rate of 10% per annum. The interest will accrue on the
Promissory Note and be payable at the maturity of the Promissory Note.
Associates is the maker of the Note and Capital Realty Group Corporation
is the payee. Mr. Robert Lankford is
<PAGE>
the President of Associates and has had prior business relationships with
Messrs. Beck and Stroud, the former principals of CRGSH.
Effective July 24, 1998, Capital Senior Living Properties, Inc., a Texas
corporation, entered into a contract to determine the feasibility of
purchasing four of the five properties of the Partnership. The four
properties are The Atrium at Carmichael, Crosswood Oaks, The Heatherwood
and The Veranda Club. After the sale, The Amberleigh would then be the
only property remaining in the NHP portfolio. The appraised fair market
value of the four properties is $40,650,000. The appraisal was done by an
independent third-party appraiser.
Personnel working at the Property sites and certain home office personnel
who perform services for the Partnership are employees of Capital Senior
Living, Inc. (CSL), formerly an affiliate of CRGSH. The Partnership
reimburses 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 for the
second fiscal quarter ended June 30, 1998 and 1997, were $1,021,388 and
$1,016,045, respectively. Management fees, dietary fees and other
services reimbursed and expensed by the Partnership to CSL for the second
fiscal quarter ended June 30, 1998 and 1997, were $384,178 and $378,962,
respectively.
Distributions of $30,393 were made to the General Partner during the six
months ended June 30, 1998.
(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, 1998, based on the Partnership's evaluation of each respective
property, the Partnership did not believe that any additional write-down
was warranted.
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 1998 1997
----- ---- ----
The Amberleigh 271 97% 96%
The Atrium at Carmichael 153 99% 99%
Crosswood Oaks 122 90% 88%
Heatherwood 160 95% 86%
Veranda Club 189 90% 93%
<PAGE>
Rent collections for the six month period increased to $8,077,238 in 1998 from
$7,540,144 in 1997, or 7.1%, primarily from rental rate increases and increased
occupancies. Salaries, management fees and other operating expenses paid
likewise decreased, from $5,250,302 in 1997 to $5,141,148 in 1998 or 2.1%,
primarily from increased accounts payable and other liabilities.
Cash generated from rental operations prior to the payment of interest expense
was sufficient to pay all of the interest on the Pension Notes currently
payable, which was $1,489,252 for the six month period ended June 30, 1998. Net
cash provided from operations, after the payment of interest expense, during the
six months ended June 30, 1998 and 1997 was $1,649,707 and $936,730,
respectively. Interest on the Pension Notes is at a 13% rate per annum, which
totaled $3,165,966 and $3,018,137 for the six months ended June 30, 1998 and
1997, 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 $25,407,121 and $23,730,407 at June 30, 1998 and December
31, 1997, respectively.
Capital expenditures increased $154,785 from $207,574 in 1997 to $362,359 in
1998. Capital improvement programs implemented at several of the properties
during 1995 continued during 1996, 1997 and 1998.
Cash and cash equivalents at June 30, 1998 and December 31, 1997 amounted to
$5,752,688 and $4,495,733, 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 Holders. The General Partner anticipates that
distributions will continue to be suspended until operating results
significantly improve.
Although cash flow from operations improved in 1996 and 1997, cash generated
from operations over the several years prior to 1994 had not been adequate to
meet the Partnership's minimum interest payment requirements. The annual
shortfall was approximately $59,000 during 1993, and averaged approximately $1.5
million annually in the five-year period prior to 1993. The shortfall has been
funded by Partnership's cash reserves, which principally resulted from funds
remaining from the initial offering of Partnership Interests and Pension Notes,
after the acquisition of the Partnership's properties. Since 1993, cash
generated from operations has been sufficient to meet the Partnership's minimum
interest payment requirements. If interest payments continue to be deferred at
the current rate of 6%, the total accrual for unpaid interest and principal will
approximate $81 million at December 31, 2001, the maturity date of the Pension
Notes, which is far in excess of projected cash reserves. Accordingly, there
will need to be very significant improvements in cash flows from operations
and/or increases in the disposition and/or refinancing values of the Properties
to fund both the accrued interest and the face value of the Pension Notes upon
their maturity.
Obligations to the Pension Note holders ("Noteholders") must be met before
payments can be made to the Assignee Unit holders. The accrued interest on the
outstanding debt is currently approximately $26 million in addition to
outstanding principal of $42 million. As stated above, by December 31, 2001, the
interest accruals plus principal will reach approximately $81 million. The
General Partner believes it is critical to find a way to stop the interest
deferrals. In order to accomplish this goal, the General Partner has been
evaluating various options to halt this deferred interest. One of these options
is the sale of a substantial amount of the Partnership's properties. Effective
July 24, 1998, Capital Senior Living Properties, Inc., a Texas corporation,
entered into a contract to determine the feasibility of purchasing four of the
five properties of the
<PAGE>
Partnership as stated above. The General Partner believes such a sale could
provide the necessary capital to pay on a current basis the full amount of the
interest accruals and that the remaining revenue plus adequate reserves would be
sufficient to pay the full amount of current interest accruals on the
outstanding principal. The General Partner, however, emphasizes that there is no
guarantee, even with taking these steps, that after payment of the remaining
principal and interest, it would result in any return to the Assignee Unit
holders.
RESULTS OF OPERATIONS
The Partnership's net loss for the six months ended June 30, 1998 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 decreased from $1,790,269 to $1,395,229 for the six
month period ending June 30, 1997 and 1998, respectively. Net loss per Interest
decreased from $42 to $33 for the 42,691 Interests, respectively. This decreased
loss was principally due to increased rental income and occupancies. Rental
income increased to $8,055,696 for the six months ended June 30, 1998 from
$7,527,334 for the same period in 1997, or approximately 7.0%, primarily as a
result of rental rate increases and increased occupancies. Rental expenses
increased to $6,206,427 from $6,072,004 for the six month period ending June 30,
1998 and 1997, respectively, or 2.2%. Increased rental expense was primarily due
to inflation and additional depreciation expense due to increased capital
expenditures. Pension Note interest expense increased from $3,018,137 to
$3,165,966 for the six month periods ending June 30, 1997 and 1998 respectively.
Other expenses relating to Partnership administration decreased from $210,119 to
$129,117 for the six month periods ending June 30, 1997 and 1998, respectively.
For the three months ended June 30,1998 as compared with the three months ended
June 30, 1997, the Partnership's revenue and expenses reflect the same variances
as discussed above.
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, 1998, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
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:/s/ Robert Lankford
--------------------------------
Robert Lankford
President
Date: August 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793730
<NAME> NHP Retirement Housing Partners I,L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,752,688
<SECURITIES> 0
<RECEIVABLES> 10,350
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 65,308,986
<DEPRECIATION> (16,330,464)
<TOTAL-ASSETS> 55,985,831
<CURRENT-LIABILITIES> 0
<BONDS> 42,672,000
0
0
<COMMON> 0
<OTHER-SE> (13,445,610)
<TOTAL-LIABILITY-AND-EQUITY> 55,985,831
<SALES> 0
<TOTAL-REVENUES> 8,258,565
<CGS> 0
<TOTAL-COSTS> 6,206,427
<OTHER-EXPENSES> 281,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,165,966
<INCOME-PRETAX> (1,395,229)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,395,229)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
