<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
--------------- ---------------
Commission file number 0-17600
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(Name of Small Business Issuer in its charter)
Delaware 52-1475268
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employee
of incorporation or organization) Identification No.)
6920 Donachie Rd., #209, Baltimore, Maryland 21239
- --------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (410) 828-4344
-------------------
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interests
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for the fiscal year ended December 31, 1995 were $727,059.
The aggregate sales price of the units of Limited Partnership Interest held
by non-affiliates of the Registrant as of December 31, 1995 and as of March 15,
1996 was $4,699,352 (1,555 investors). As of December 31, 1995 and March 15,
1996, there was no market for these Units and no market is expected to develop.
The aggregate sales price is accordingly not necessarily indicative of the
price at which these Units would trade.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated February 20, 1987, and
filed pursuant to Rule 424(b) and Rule 424(c) under the Securities Act of 1933,
as amended, are incorporated by reference into Parts III and IV of this Annual
Report on Form 10-KSB. The Index to Exhibits is located on page 17.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for Units of Limited Partnership Interest and Related Security Holder Matters . . . . . . . . . . . . 11
Item 6. Management's Discussion and Analysis or Plan of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 11. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . 17
Item 12. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
FINANCIAL STATEMENTS
SIGNATURES
</TABLE>
(i)
<PAGE> 3
PART I
Item 1. Description of Business.
General.
Common Goal Health Care Participating Mortgage Fund L.P. (the "Partnership")
was organized on August 20, 1986 as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act. The Partnership's general partners
are Common Goal Capital Group, Inc. ("Common Goal" or the "Managing General
Partner") and Common Goal Limited Partnership I (the "Minority General
Partner") (collectively, the "General Partners"). With limited exceptions,
Common Goal has exclusive control over the business of the Partnership,
including the right to manage the Partnership's assets. The Partnership
commenced operations on July 21, 1987 after having accepted subscriptions for
more than the requisite minimum of 116,000 depositary units representing
beneficial assignments of limited partnership interests (the "Depositary
Units") in a public offering registered with the U.S. Securities and Exchange
Commission on Form S-11 (the "Public Offering"). The Partnership raised a
total of $19,129,110 in the Public Offering which terminated on February 20,
1989. On June 25, 1990, the Managing General Partner caused all holders of
Depositary Units to be admitted to the Partnership as Limited Partners holding
units of limited partnership interests (the "Units").
The Partnership's primary business has been to invest in or make mortgage
loans (the "Mortgage Loans"), comprised of a mix of first and junior Mortgage
Loans, secured by health care-related real properties owned by unaffiliated
entities. The Partnership does not intend to own or acquire real property,
except in the event of foreclosure when the Managing General Partner deems such
acquisition to be in the best interest of the Partnership. The Partnership has
two Mortgage Loans which remained outstanding as of March 15, 1996. See
"Existing Mortgage Loans" below.
The Partnership's objectives in making investments of the type described
above were: (i) to preserve and protect the Partnership's capital; (ii) to
provide quarterly distributions from investment income; and (iii) to provide
for potential long-term appreciation of its Mortgage Loan investments,
principally through participations payable at maturity of the Mortgage Loan or
upon the sale or refinancing of the underlying property (the "Participations").
Because Participations in facility appreciation are paid only upon maturity of
a Mortgage Loan or a sale of the underlying facility, cash distributions as a
result of Participations on the two remaining Mortgage Loans are not expected
to commence until repayment or maturity. It is not an objective of the
Partnership to provide tax-sheltered income.
Funds held pending distribution may be invested by the Partnership, at the
direction of the Managing General Partner, in United States government
securities, certificates of deposit of United States banks with a net worth of
at least $20,000,000, repurchase agreements covering the securities of the
United States government or governmental agencies, bankers' acceptances,
commercial paper rated A-1 or better by Moody's Investors Service, Inc., money
market funds
1
<PAGE> 4
having assets in excess of $100,000,000, interest-bearing time deposits in
banks and thrift institutions or any combination of these investments.
Policies for Dissolution. Since it was the intention of the Managing General
Partner to liquidate the Partnership's assets between 1999 and 2004, the
Managing General Partner has commenced an orderly liquidation and will not
reinvest loan proceeds in new Mortgage Loans. The Partnership's last remaining
Mortgage Loans, the Joint Venture Loan and Westwood Loan (expected to be
prepaid in April 1996), will mature on January 1, 2000 and March 1998,
respectively.
Other Operating and Investment Policies. Affiliates of the General Partners
(including partners, officers and directors investing for their own account or
that of others) have formed, and may in the future form, limited partnerships
or other entities with the same investment objectives and policies as the
Partnership. The Managing General Partner will attempt to resolve any
conflicts of interest between the Partnership and others by exercising the good
faith required of fiduciaries. Such conflicts will be resolved in the best
judgment of the Managing General Partner. In connection therewith, in 1990,
Common Goal Health Care Pension and Income Fund L.P. II ("Common Goal II"), an
affiliated, publicly-offered limited partnership with investment objectives
that are substantially identical to those of the Partnership and the
Partnership made a ten-year second mortgage loan in the original principal
amount of $3,430,114 (presently $1,618,254 is outstanding at December 31, 1995)
to an unaffiliated third party through a joint venture between the Partnership
and Common Goal II (the "Joint Venture Loan").
Existing Mortgage Loans.
SHALP Loan. The Partnership made its initial mortgage loan (the "SHALP
Loan") on August 12, 1987 and funded it in three phases through December 15,
1987 for a total outstanding loan principal of $3,300,000. The borrowers were
Stamford Health Associates Limited Partnership, PersonaCare of Connecticut,
Inc., Homestead Health Center, Inc., Courtland Gardens Residence Homes, Inc.
and Courtland Health Center, Inc., all of which are affiliates of PersonaCare,
Inc., ("PersonaCare"). The SHALP Loan was secured by a second mortgage on
three separate long term care facilities containing a total of 267 beds in two
nursing care facilities and 68 rooms at a residential facility, all located in
Stamford, Connecticut. The SHALP Loan had a term of 10 years (maturing in
August 1997). On July 7, 1994, the borrowers on the SHALP Loan repaid the
principal balance of $3,300,000, and paid the related prepayment penalty of
$132,000, additional interest of $60,752 based on 1994 gross revenues through
May, 1994, and $23,421 in basic interest. Since there was no appreciation in
the value of the property securing the SHALP Loan, the Partnership did not
receive any additional income. Income received on the SHALP Loan from
inception through repayment is $2,412,788 in basic interest, $900,885 in
additional interest based upon gross revenues, and $132,000 prepayment penalty
(a total of $3,445,673 earned on $3,300,000 over six years and nine months).
The Westwood Loan. On March 10, 1988, the Partnership funded a $1,300,000
mortgage loan secured by a second mortgage on a 120-bed long term nursing care
facility (the "Westwood
2
<PAGE> 5
Facilities") in Poplar Bluff, Missouri (the "Westwood Loan"). When the
Westwood Loan was funded, the loan-to-value ratio was approximately 91%. The
Westwood Loan has a term of 10 years (maturing in March 1998). The Westwood
Loan was supported by two separate guarantees; the first provided by Westwood
Hills Health Care Center, Inc. (the "Westwood Loan Borrower") and Health
Services Management Corporation (which manages the Westwood Facility) and the
second provided by John Rothert and R. William Brece, Jr. (principals of the
Westwood Loan Borrower). The guaranties were required to be maintained until
certain loan-to-value ratios and debt service coverage ratios were met. As of
November 30, 1992, the conditions for release of the guaranties were met and
the guaranties were released. The guarantee by Messrs. Rothert and Brece is
subject to reinstatement at any time during the loan term if the State of
Missouri or other regulatory agencies adjust the reimbursement rates such that
it reduces debt service coverage to less than 1.3:1.0. This guaranty will then
remain effective until the debt service ratio returns to the level it was prior
to the adjustment and holds or exceeds that level for 12 consecutive months.
The Westwood Loan balance was $1,000,000 as of December 31, 1995. In January
1996, the Partnership was notified that the Borrower intends to pay off the
Westwood Loan in April 1996.
The Winthrop Loan. On March 25, 1988, the Partnership funded a mortgage loan
in the principal amount of $1,000,000 (the "Winthrop Loan") which is secured by
a second mortgage on a 142-bed nursing care facility in Medford, Massachusetts
(the "Medford Facility"). The Partnership has also received additional
collateral in the form of a second mortgage on a 170-bed nursing care facility
owned by an affiliate of the borrower in Bryn Mawr, Pennsylvania (the "Bryn
Mawr Facility"). The Winthrop Loan has a term of 10 years (maturing in March
1998). When the Winthrop Loan was funded, the loan-to-value ratio was
approximately 91%. The Winthrop Loan is the subject of a guaranty of payment
of principal and interest by Hardie Beloff (a principal of the borrower) and
the Winthrop House Associates Limited Partnership (the "Winthrop Borrower").
This guaranty terminates upon the achievement of debt service coverage of at
least 1.3:1.0 for 36 consecutive months. As of December 31, 1995, the
conditions for release of the guaranty had not been met.
In December of 1991, the Partnership learned that state Medicare authorities
had notified the Winthrop Borrower that the state had discovered a series of
overpayments to the Winthrop Borrower in connection with the Medford Facility.
The Winthrop Borrower entered into an agreement with the senior lender on the
Medford Facility, the Partnership and the state Medicare authorities whereby
such funds would be repaid to the state. Pursuant to the agreement, the
Winthrop Borrower has paid all past due amounts of Additional Interest and is
now current with its payments of Basic Interest and Additional Interest. The
Winthrop Loan, which had been performing according to its original terms, was
repaid in full in February 1996, together with a prepayment penalty of $55,000.
Horizon Loan. On July 8, 1988, the Partnership funded a $1,400,000, ten year
mortgage loan (the "Horizon Loan") to Horizon Healthcare, an Oregon general
partnership (the "Horizon Borrower"), secured by a second lien on a 150-bed
nursing facility in Moore, Oklahoma and an 89-bed nursing facility and a
200-bed nursing facility each in Norman, Oklahoma (the "Horizon
3
<PAGE> 6
Facilities"). At the time of funding, the Horizon Facilities were leased on a
triple-net basis to a substantial not-for-profit corporation. In November of
1989, an issue arose between the Horizon Borrower (who is also the landlord)
and the tenant (the not-for-profit corporation), whereby the tenant sought a
reduction in lease payments and, as a counter-measure, the Horizon Borrower
sought possession. The landlord was granted an order for possession of the
Horizon Facilities pursuant to which it took possession on approximately
February 1, 1990. On or about July 25, 1990, the Partnership notified the
Horizon Borrower that it was in default on this loan for failure to make
payments, and that the Partnership intended to pursue all available remedies
against the borrower unless the loan was brought current. On September 7,
1990, the Partnership sent the Horizon Borrower a notice of intent to
foreclose. The Partnership was advised that the Horizon Borrower also had been
in default on the first mortgage on the Horizon Facilities since approximately
July of 1990 and that the first mortgagee (the "Senior Lender") also sent the
borrower a "notice of intent of non-judicial foreclosure." On September 21,
1990, the Senior Lender filed a petition in the District Court of Cleveland
County, Oklahoma, against the Horizon Borrower, seeking, among other relief,
monetary damages in the amount owed to it and against the Horizon Borrower, the
Partnership and others, seeking to foreclose its lien on the Horizon
Facilities. On or about November 20, 1990, the Horizon Borrower transferred
legal title to the Horizon Facilities to an affiliated corporation ("New
Owner") allegedly in violation of the mortgages of the Partnership and of the
Senior Lender, and immediately thereafter, the New Owner instituted bankruptcy
proceedings for reorganization under Chapter 11 in Federal Bankruptcy Court in
Cleveland County, Oklahoma. A plan of reorganization was approved by all
creditors of the New Owner and confirmed on May 29, 1991 (the "Plan"). Under
the terms of the Plan, the Partnership received monthly payments of $15,475.08
which is calculated by amortizing the principal amount of $1,469,000 at 12% per
annum over 25 years. After the Plan was confirmed, the Partnership received
the modified payments due it under the Plan through February, 1992. At June
30, 1992, the Horizon Loan was four months delinquent as to the principal and
interest payments required by, and therefore in default under, the Plan. On
June 18, 1992, the Partnership, together with two other creditors of HHC, Inc.,
filed an involuntary petition in bankruptcy against HHC, Inc., the successor in
interest to the assets of the Horizon Borrower. Common Goal intended to submit
a plan of reorganization to the bankruptcy court that would vest title to the
Horizon Facilities in an affiliate of Common Goal. On July 13, 1992, the Board
of Directors of Common Goal met and decided to proceed no further with attempts
to obtain control of the three properties collateralizing the Horizon Loan.
The decision was made because of the high risk involved, the low probability of
success and the amount of new investment required if the Partnership were to
obtain the properties. This action enabled the Senior Lender to proceed with
its foreclosure proceedings on the properties. Management of the Partnership
evaluated the exposure with respect to this mortgage loan receivable and
provided an allowance for loss of $993,495 in 1992 in order to fully reserve
against a loan balance of $1,393,495. As of December 31, 1992, the loan had
been charged off.
At the time the Partnership entered into its loan agreement with the Horizon
Borrower in June of 1988, the Partnership received tenant estoppel letters
executed by certain officers of Adventist Living Centers, Inc., a Wisconsin
not-for-profit corporation ("ALC"). In these letters,
4
<PAGE> 7
ALC made representations to the Partnership concerning certain leases then in
effect between the Horizon borrower and ALC.
On November 14, 1990, ALC filed a Chapter 11 bankruptcy petition in the
United States Bankruptcy Court for the Northern District of Illinois. On May
20, 1991, a proof of claim was filed on behalf of the Partnership in the ALC
bankruptcy case alleging that at the time ALC's petition was filed, ALC was
indebted to the Partnership in the amount of $1,629,404.56 based on ALC's
breach of its tenant estoppel letters. In March of 1993, the Partnership
reached a settlement of this claim and on March 19, 1993, the Partnership
received final payment of $42,500. Future settlements in the pending state
court action may require a return of funds to the creditors committee formed
under the federal bankruptcy court.
On October 23, 1991, a complaint was filed on behalf of the Partnership in
the Circuit Court of DuPage County, Illinois. Named as defendants in that
complaint are ALC, the Horizon Borrower and certain individuals and entities
either currently or formerly affiliated with ALC or the Horizon Borrower,
including the Horizon Borrower's general partners. The complaint alleges that
the defendants made false representations of material fact to the Partnership.
The complaint seeks recovery of damages in the amount of $1,400,000 plus
interest, costs and attorneys' fees.
On January 5, 1994, the DuPage County Circuit Court granted the Horizon
Borrower and its general partners leave to file an amended answer and
counterclaim against the Partnership. The Partnership was granted until
February 2, 1994 to answer or otherwise respond to the counterclaim. The
counterclaim asserted that after ALC defaulted on lease payments to Horizon,
the Partnership interfered with Horizon's attempts to renegotiate its leases
with ALC for three Oklahoma nursing home facilities for which the Partnership
provided second mortgage financing, and also interfered with the Horizon
Borrower's negotiations with an entity the Horizon Borrower proposed as a
substitute tenant for ALC. The counterclaim also asserted that the Partnership
misrepresented certain information regarding a proposal to operate the nursing
home facilities, and breached its loan agreement with Horizon by withholding
consent from proposed rent reductions to ALC. The counterclaim sought damages
from the Partnership in the amount of approximately $6.8 million. On April 25,
1994 the Circuit Court of DuPage County entered an order granting the
Partnership's Motion to Dismiss the counterplaintiffs' counterclaim with
prejudice in the Horizon Loan Litigation. The court found that the
counterplaintiffs did not have standing to assert the claims against the
Partnership. Without determining the validity of any such claims, the Court
determined that the claims could only be asserted by HHC, Inc., the successor
to Horizon Healthcare (the original borrower) which filed a bankruptcy petition
in November 1990. Subsequently, Horizon moved to have the above motion
vacated. On July 5, 1994, the Circuit Court denied the Horizon Motion to
Vacate. Following the entry of this Order, the parties engaged in substantial
discovery. After the completion of discovery, the Partnership filed an amended
complaint on September 12, 1995. This pleading named the Lake Union Conference
of Seventh-day Adventists ("Lake Union") as an additional defendant. Although
Lake Union objected to being added as a defendant, the Court ruled, on October
10, 1995, that it should be included in the case. However, the Court granted
Lake Union additional time to complete discovery. The case is currently
scheduled for a case management conference on April
5
<PAGE> 8
30, 1996. At that time, the Court will likely set the case for trial. In the
interim, the Partnership continues to prepare for trial.
The Partnership is seeking $1.4 million (principal amount of the loan to
Horizon) plus interest owing and punitive damages. As the General Partners
cannot presently predict the outcome of the other actions being considered in
connection with the Horizon Loan default, they cannot predict with any accuracy
the impact thereof for future years.
The Joint Venture Loan. On September 7, 1989, the Partnership funded a
short-term mortgage loan (the "Honeybrook Loan") in the original principal
amount of $3,370,000, to two Tennessee limited partnerships (individually, a
"Borrower" and collectively, the "Borrowers"). One of the Tennessee limited
partnerships owns a 100-bed skilled care and intermediate care facility and the
other limited partnership owns a 101-bed retirement and assisted care facility,
both of which are located in Honeybrook, Pennsylvania. The Honeybrook Loan was
originally secured by a second mortgage on the skilled and intermediate care
facility and by collateral assignments of 100% of the general partners' and
limited partners' interests in each Borrower. The security interest was taken
in the Borrower that owns the retirement and assisted care facility insofar as
the facility is subject to a HUD regulatory agreement which prohibits junior
encumbrances on the facility. The security interest is subject and subordinate
to all applicable HUD regulations. When the Honeybrook Loan was funded, the
loan-to-value ratio was approximately 89%. The Partnership elected to extend
the original term of the Honeybrook Loan and assigned its obligation to make
the long-term loan to a newly created joint venture with Common Goal II (the
"Joint Venture Loan"). The Joint Venture Loan was made on or about August 1,
1990, with the Partnership making a $3,430,114 contribution at that time to
fund the Joint Venture Loan. In 1991, Common Goal II contributed $95,600,
thereby decreasing the Partnership's contribution by that amount. The
Borrowers made a $30,000 repayment of principal in 1991, bringing the
Partnership's contribution down to $3,304,514 at December 31, 1991 and in
December 1992 made a principal paydown of $211,514 to bring the balance to
$3,093,000 on December 31, 1992. The $211,514 was received on January 7, 1993
and reclassified as a short term receivable for year end 1992. An additional
$70,000 was paid down on the principal on March 29, 1993.
On November 3, 1993, Life Care paid a total of $1,746,790 in a restructuring
of the Joint Venture Loan. Of the $1,691,477 allocated to the Partnership,
$1,455,336 was applied to principal and $145,534 to a Prepayment Penalty. A
Refinance Fee of $72,750 was negotiated, while Gross Revenue, Basic Interest
and Additional Interest were taken as set forth in the loan documents. The
Partnership's balance has been paid down to $1,567,664 while the Common Goal II
balance has also been paid down to $50,590. In connection with the repayment
of principal, the Partnership agreed to release its mortgage on the skilled
care and intermediate care facility.
The interests in the entity owning the retirement and assisted care facility
still securing the Joint Venture Loan is operated by Life Care Centers of
America, Inc. ("Life Care") or affiliates thereof. The Joint Venture Loan is
guaranteed by Life Care and by one beneficial
6
<PAGE> 9
owner of the Borrowers. In connection with the negotiation of the Refinance
Fee, two individual guarantors who are no longer employees of the Borrowers
were released from their guaranty obligations. As of December 31, 1995, Life
Care had an audited net worth of in excess of $50,000,000, a substantial amount
of which was illiquid. A substantial portion of the net worth of the
individual guarantor is also illiquid.
The table set forth below provides information concerning the basic terms and
conditions of the Mortgage Loans made and currently held by the Partnership as
of the date of this report.
7
<PAGE> 10
COMMON GOAL MORTGAGE LOANS
<TABLE>
<CAPTION>
WINTHROP WESTWOOD JOINT VENTURE
LOAN LOAN LOAN
------------ ------------ ------------------
<S> <C> <C> <C>
DATE OF LOAN 3/25/88 3/10/88 8/1/90
TYPE OF LOAN Second Mortgage on Two Second Mortgage on Second Mortgage on
Facilities Facility Facility
OUTSTANDING $1,000,000 $1,000,000 $1,567,664 (1)
PRINCIPAL AMOUNT
BASE 11.5% (2) 11.5% (3) 13.7% (4)
INTEREST RATE
MATURITY 3/25/98 3/10/98 1/1/2000
TYPE OF PROPERTY/ 142-bed skilled and 120-bed nursing home Collateral assignment of
LOCATION OF intermediate care Poplar Bluff, MO interest in 101-bed
PROPERTY SECURING facility Medford, MA and retirement and assisted
LOAN 170-bed nursing care care facility in
facility Bryn Mawr, PA Honeybrook, PA
</TABLE>
8
<PAGE> 11
Notes
(1) This amount reflects the funding provided to the Joint Venture
by the Partnership.
(2) This loan provides for payment of a participation feature
equal to 9% of the excess of either the appraised value of the
property at maturity or the gross sales price of the property
in excess of the amounts of the first mortgage loan and the
Partnership's loan. This loan also requires an annual payment
of additional interest of .7% of the gross revenues of the
property, as defined in the related loan agreement.
(3) This loan provides for payment of a participation feature of
17% of the excess of appraised value of the property at
maturity or the gross sales price of the property in excess of
the amounts of the first mortgage loan and the Partnership's
loan. The loan also requires an annual payment of additional
interest of 1.8% of the gross revenues of the property, as
defined in the related loan agreement.
(4) This loan currently requires payment of additional interest at
a rate of 1.95% of gross revenues from the Facilities in
excess of $1,694,000 per annum. This provision is currently
the subject of negotiation as a result of the refinancing of
this loan and the release of the Joint Venture's lien on one
of the Facilities. The Partnership believes that the
negotiations will not have a material effect on the amount of
additional interest received. The loan also provides for
payment of a participation equal to 30% of the first
$1,000,000 of increase in the fair market value (or gross
sales price) of the Facilities over aggregate secured
indebtedness (including the Joint Venture Loan) as of the date
of funding of the Joint Venture Loan and 17% of the balance of
any such increase. As a result of the refinancing of this
loan, the fair market value of the retirement and assisted
care facility has been deemed to be $6,400,000 for the purpose
of calculating the participation. The participation would be
payable upon sale, refinancing of a senior mortgage loan or at
maturity of the Joint Venture Loan with the fair market values
to be determined at that time.
9
<PAGE> 12
Item 2. Description of Property.
The Partnership owned no real property as of December 31, 1995.
Item 3. Legal Proceedings.
The Partnership is pursuing certain legal proceedings in connection
with the default of the Horizon Borrower on the Horizon Loan. See "Item 1.
Business - Existing Mortgage Loans - Horizon Loan."
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
last quarter of 1995.
10
<PAGE> 13
PART II
Item 5. Market for Units of Limited Partnership Interest and Related Security
Holder Matters.
The Partnership originally caused depositary receipts representing
units of limited partnership interest to be issued in its public offering which
continued from February of 1987 to February of 1989, pursuant to the terms of
such depositary receipts. On June 25, 1990, the Managing General Partner
caused all holders of depositary units to be admitted to the Partnership as
Limited Partners and distributed to such Limited Partners the units of limited
partnership interests (the "Units") represented by their depositary receipts.
The Units are not readily transferable. There is no public market for the
Units and it is not currently expected that any will develop. There are
restrictions upon the transferability of Units, including the requirement that
the General Partners consent to any transferee becoming a substituted
Unitholder (which consent may be granted or withheld at the sole discretion of
the General Partners). In addition, restrictions on transfer may be imposed
under state securities laws.
The Revenue Act of 1987 contains provisions which may have an adverse
impact on investors in certain "publicly traded partnerships." If the
Partnership were to be classified as a "publicly traded partnership," income
attributable to the Units would be characterized as portfolio income and the
gross income attributable to Units acquired by tax-exempt entities after
December 17, 1987 would be unrelated business income, with the result that the
Units could be less marketable. The General Partners will, if necessary, take
appropriate steps to ensure that the Partnership will not be deemed a "publicly
traded partnership."
At December 31, 1995 and March 15, 1996, 1,911,411 Units were
outstanding and were held by approximately 1,555 holders of record.
The Partnership made distributions to Limited Partners of $1,270,569
or $.66 per Unit during 1995, $1,777,746 or $.93 per Unit during 1994,
$1,866,722 or $.98 per Unit during 1993, $1,824,848 or $.95 per Unit during
1992, $1,913,781 or $1.00 per Unit during 1991, $2,031,742 or $1.06 per Unit
during 1990, $1,812,715 or $.96 per Unit during 1989, and $843,048 or $.73 per
Unit during 1988. In addition, principal distributions of $1,000,000 ($.52 per
Unit), $3,000,000 ($1.57 per Unit) and $5,000,000 ($2.62 per Unit) were
disbursed in December 1993, July 1994, and May 1995 respectively. The
Partnership does not intend to make additional Mortgage Loans.
Item 6. Management's Discussion and Analysis or Plan of Operations.
Liquidity and Capital Resources. Common Goal Health Care
Participating Mortgage Fund L.P., a Delaware limited partnership (the
"Partnership"), was formed to make mortgage loans secured by real property
comprised of a mix of first and junior Mortgage Loans, secured by
health care related properties. The Public Offering commenced on February 20,
1987 and
11
<PAGE> 14
continued through February 20, 1989, when the Public Offering terminated.
Total gross offering proceeds raised were $19,129,110.
Partnership assets decreased from $10,750,381 at December 31, 1994 to
$4,747,607 at December 31, 1995. The decrease from 1994 to 1995 ($6,002,774 or
approximately 55.84%) resulted primarily from a decrease of cash and cash
equivalents by $5,991,994 ($5,000,000 of which was returned to the Limited
Partners as a principal pay back) and a decrease of accrued interest receivable
by $34,715. These decreases were partially offset by a $23,885 increase in
other receivables. As of December 31, 1995, the Partnership's loan portfolio
consisted of three mortgage loans, the aggregate outstanding principal balance
of which was $3,567,664.
The Partnership has structured its Mortgage Loans to provide for
payment of quarterly distributions from investment income. The interest
derived from the Mortgage Loans, repayments of Mortgage Loans and interest
earned on short-term investments contribute to the Partnership's liquidity.
These funds are used to make cash distributions to Limited Partners, to pay
normal operating expenses as they arise and, in the case of repayment proceeds,
may, subject to certain exceptions, be used to make additional Mortgage Loans.
Reference is made to "Item 1. Business" and the "Notes to the Financial
Statements" for further information regarding such Mortgage Loan investments.
The Partnership's balance of cash and cash equivalents at December 31,
1995 and 1994 was $1,010,659 and $7,002,603, respectively, which consisted of
operating cash and working capital reserves. The decrease in cash and cash
equivalents from December 31, 1994 resulted from net earnings of $388,420, and
a decrease in interest and other receivables of $10,830; all of which were
offset by a payment of $1,261,461 ($.66 per Unit) in dividend distributions
(which included $873,041 [$.46 per Unit] return of capital), $5,000,000 ($2.62
per Unit) return of principal, $111,830 distributed to a general partner,
Common Goal Capital Group, Inc., and a decrease in accrued expenses and
payables of $17,903. The net result was a decrease of cash and cash
equivalents of $5,991,944. The Partnership is required to maintain reserves
not less than 1% of gross offering proceeds (not less than $191,201), but
currently maintains a reserve significantly in excess of that amount. The
amount of cash and cash equivalents currently maintained by the Partnership is
primarily the result of proceeds from the repayment of mortgage loans.
On February 12, 1996 the Partnership received $1,115,232 as a payoff
on the Winthrop Loan. $1,000,000 was applied to principal, $3,833 to basic
interest, $55,000 to a Prepayment Penalty, and $47,671 to Estimated Gross
Revenue. The remaining $8,728 will be applied to Legal Fees incurred by the
transaction and to the Equity Participation owed in accordance with the loan
documents. At the time of payoff, the partners were not able to determine if
any additional Gross Revenue and Equity Participation were owed. Therefore,
the parties entered into two separate escrow arrangements whereby funds were
withheld pending further determination of whether said funds are owed.
12
<PAGE> 15
The Partnership's success and the resultant rate of return to
Unitholders is dependent upon, among other things the continued ability of the
remaining borrowers to pay the current interest, additional interest and
principal of the Mortgage Loans.
Since the Horizon Loan has been charged off, the Partnership's
Riverview, New Medico and SHALP Loans have been paid off, and the Joint Venture
and Westwood Loans have been paid down (see "Item 1. Business - Existing
Mortgage Loans"), and the subsequent February 1996 payoff of the Winthrop Loan,
the Partnership's rates of return have been and will continue to be impacted.
However, the Partnership will continue to pursue its pending litigation against
the original Horizon borrower and its general partners and affiliates of the
original lessee, certain Adventist groups. Also, the additional funds
representing repayment of the above mentioned loans is being invested per
Partnership guidelines (see "Item 1. Business - General").
Results of Operations. The Partnership was organized in August, 1986.
The Partnership funded seven Mortgage Loans between 1987 and 1990, including a
loan made by a venture between the Partnership and Common Goal II in August,
1990. As of December 31, 1995, the Partnership had three remaining Mortgage
Loans. Since commencement of operations in July of 1987, the Partnership
invested all available funds (funds not invested in Mortgage Loans) in
short-term, temporary investments. The interest earned on these investments has
been and is expected to continue to be less than the interest rates achievable
on Mortgage Loans made by the Partnership. Although the Partnership's earnings
were expected to increase slowly once its portfolio of Mortgage Loans was
substantially completed and borrowers commenced payments of Additional Interest,
the default on the Partnership's $1,400,000 Horizon Loan (made in July 1988)
which occurred in July of 1990 (as described above), has adversely impacted such
expectation.
During the years ended December 31, 1995, 1994, and 1993 the
Partnership had net earnings of $388,420, $827,967, and $2,384,976 based on
total revenues of $727,059, $1,215,181, and $2,765,824 and total expenses of
$338,639, $387,214, and $380,848, respectively. The Partnership's net earnings
decreased to $.20 per Unit in 1995, and $.43 per Unit in 1994, after increasing
to $1.25 per Unit in 1993. The Partnership's distributions to Limited Partners
increased in 1995 to $3.28 per Unit from $2.50 per Unit in 1994 and $1.50 per
Unit in 1993. The 1995 distribution included a $5,000,000 principal repayment
($2.62 per Unit). The 1994 distribution included a $3,000,000 principal
repayment ($1.57 per Unit). The 1993 distribution included a $1,000,000
principal repayment ($.52 per Unit). Eliminating the effect of the principal
repayments to the Limited Partners, the dividend distributions would have
decreased to $.66 per Unit in 1995 from $.93 per Unit in 1994, and $.98 per
Unit in 1993. The 1995 dividend distributions included a return of capital of
$.46 per Unit. The 1994 dividend distributions included a return of capital of
$.50 per Unit. The 1993 dividend distributions did not include a return of
capital.
Since the General Partners cannot presently predict the outcome of the
litigation in connection with the Horizon Loan default, they cannot predict
with any accuracy the impact therefor for future years (see "Item 1. Business -
Existing Mortgage Loans - Horizon Loan, and -
13
<PAGE> 16
New Medico Loan"). The General Partners anticipate that expenses in 1996 will
continue at a level approximating the 1995 level, with the exception of
expenses attributable to the Horizon Loan litigation.
Although the Partnership made dividend distributions of $1,270,569 in
1994, the distributions may not remain at the present level (9.256% financial
capital) as a result of the Horizon Loan charge-off, the payoffs of the New
Medico, Riverview and SHALP Loans, the pay down of the Joint Venture and
Westwood Loan and the subsequent payoff of the Winthrop Loan in February 1996.
The General Partners are currently reviewing the distribution policy and the
matters of the additional reserves now being held. The Partnership receives a
lesser rate of return from its short-term investments than it would receive
from the loans, (were they not paid down) thereby reducing funds available for
distribution. The Partnership distributed $5,000,000 as a principal repayment
on May 1, 1995.
Item 7. Financial Statements.
See Financial Statements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
14
<PAGE> 17
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The Partnership does not have directors or officers. The following is
a list of the officers and directors of the Managing General Partner as of
March 15, 1996:
Name Age Position
- ------------------------ --- ------------------------------------------
Albert E. Jenkins III 49 Chairman of the Board, Chief Executive
Officer, President, Treasurer and Director
Richard R. Wood 73 Director
Anthony L. Jones 38 Director
Albert E. Jenkins III is the President and Chief Executive Officer of
the Managing General Partner as well as the Executive Vice President and
Secretary/Treasurer of Common Goal Mortgage Company. He is also President and
Chief Executive Officer of Common Goal Capital Group, Inc. II ("CG Capital
Group II"), the managing general partner of Common Goal Health Care Pension and
Income Fund L.P. II, a Delaware limited partnership which commenced a public
offering of its securities in January 1990. Mr. Jenkins also serves on the
boards of directors of the above-referenced corporations. Mr. Jenkins is a
co-general partner of Common Goal Limited Partnership I and Common Goal
Management Company. Mr. Jenkins is also President, Chief Executive Officer and
a director of St. Catherine's of Seneca, Inc., St. Catherine's Care Center of
Tiffin, St. Catherine's Care Center of Bloomville and St. Catherine's Care
Centers of Fostoria. In addition, Mr. Jenkins is President and a director of
St. Catherine's Health Care Management, Inc. and St. Catherine's Care Centers
of Washington Court House Inc. Mr. Jenkins has been a licensed securities
salesman since 1971 and an investment advisor registered under the Investment
Advisers Act of 1940 since 1978.
Richard R. Wood is a director of the Managing General Partner and is
president, a director and owner of 80% of the outstanding stock of Renwood
Properties, Inc. Mr. Wood is also a co-general partner of Common Goal Limited
Partnership I and a director of Common Goal Capital Group Inc. II, the managing
general partner of Common Goal II. In addition, Mr. Wood is a member of the
board of directors of the St. Catherine's affiliated companies which currently
own five health care facilities in Ohio. Mr. Wood has, either individually or
together with or through Renwood, sponsored 31 prior private limited
partnerships which have acquired real estate. These partnerships have raised
approximately $30,762,525, with approximately 81% of the properties acquired
being government-subsidized low income housing projects for families and the
elderly and handicapped. In addition, Mr. Wood is a controlling shareholder of
Renwood, Inc. and several of the Renwood companies, which act as co-general
partners of certain of the above-referenced syndications. He is currently a
member of the National Leased Housing
15
<PAGE> 18
Association, Council for Rural Housing and the Real Estate Investment
Association. Mr. Wood received a B.A. from Harvard University in 1943 and
attended Massachusetts Institute of Technology from 1947-1948.
Anthony L Jones. On April 10, 1995, the Board of Directors of the
Common Goal Capital Group, Inc. appointed Mr. Anthony L Jones to the Board of
Directors. Mr. Jones is a Director, Vice-President, and Founder of Capital
Access Group, Inc., a Michigan based business financial consulting firm
("CAG"). CAG assists its clients in marketing, capital formation, and public
relations. CAG's current client list includes such publicly-traded companies
as Fila Gold (NASDAQ:FGLF) and Royal Energy (NASDAQ:ROYL). Prior to forming
CAG, Mr. Jones was Director of Marketing for Common Goal Capital Group, Inc.
where he assisted in the development and implementation of marketing strategies
and was responsible for raising $25 million for the Common Goal public
programs. From 1975-1979 Mr. Jones served in the United States Marine Corps.
Mr. Jones currently holds a NASD Series 7 securities license.
On March 31, 1995, the Partnership was notified of Mr. Dale
McClelland's resignation from the Managing General Partner's board of directors
through a resignation letter dated March 30, 1995. The Managing General
Partner accepted Mr. McClelland's resignation. Mr. McClelland's resignation
was reported in the Partnership's Current Report on Form 8-K dated March 31,
1995.
On March 31, 1995, Mr. Bernard Ross resigned from the Managing General
Partner's board of directors. The Managing General Partner accepted Mr. Ross'
resignation and expressed its appreciation for Mr. Ross' years of service to
the Partnership. Mr. Ross' resignation was reported in the Partnership's
Current Report on Form 8-K dated March 31, 1995.
Item 10. Executive Compensation.
The Partnership has no executive officers or directors. The
Partnership is not required to pay the officers and directors of the General
Partners any current nor any proposed compensation in such capacities.
However, the Partnership is required to pay certain fees, make distributions
and allocate a share of the profits or losses of the Partnership to the General
Partners as described under the caption "Management Compensation" on pages 9
through 13 of the Partnership's Prospectus, which description is incorporated
herein by reference. Set forth below are the fees, compensation and other
reimbursements paid or accrued to Common Goal and its Affiliates for the year
ended December 31, 1995.
16
<PAGE> 19
Capacities in
Which Compensation
Name of Affiliate was Received Remuneration
- -------------------- ------------------- ------------
Common Goal Management fee $91,593
Common Goal Mortgage Mortgage loan $19,690
Company servicing fees
No form of non-cash remuneration was paid by the Partnership.
For further information on compensation paid to Common Goal and its Affiliates,
see "Management Compensation" on pages 9-13 of the Prospectus.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The Partnership, as an entity, does not have any directors or
officers. The following is information concerning Unit ownership as of
December 31, 1995.
To the best knowledge of the Partnership, no person owns more than 5%
of the outstanding Units. Messrs. Jenkins and Wood each own less than 1% of
the total outstanding Units and all officers and directors of the Managing
General Partner, as a group, own less than 1% of the total outstanding Units.
No other officer or director of the Managing General Partner owns any Units.
Item 12. Certain Relationships and Related Transactions.
The Partnership has entered into a joint venture with Common Goal II,
an affiliated, publicly-offered limited partnership. On August 1, 1990, the
joint venture made a $3,430,114 loan to an unaffiliated third party, which loan
had a remaining principal balance of $1,618,254 at December 31, 1995. For
further information concerning this Mortgage Loan, see "Item 1. Business, Joint
Venture Loan."
The Partnership engages the services of Common Goal Mortgage Company
in connection with servicing Mortgage Loans for which Common Goal Mortgage
Company is paid a fee. See Item 11, Executive Compensation, for the
information concerning such fees.
Item 13. Exhibits and Reports on Form 8-K.
(a) (1) Financial Statements
The response to this portion of Item 13 is submitted as a
separate section of this report, commencing on page F-1.
17
<PAGE> 20
(2) Financial Statement Schedules
See response to Item (d), below.
(3) Exhibits
See response to Item (c), below.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K
during the quarter ended December 31, 1995.
(c) Exhibits
The following exhibits are included herein or
incorporated by reference:
Number
------
3.1 Second Amended and Restated Agreement of
Limited Partnership of Registrant dated as
of February 1, 1987 (incorporated by
reference from the Registrant's Registration
Statement (File No. 33-8531) on Form S-11
filed under the Securities Act of 1933, as
amended)
3.2 Pages 9-13 of the Registrant's final
prospectus dated February 20, 1987, as filed
with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities
Act of 1933, as amended.
(d) Financial Statement Schedules
No financial statement schedules of Common Goal Health Care
Participating Mortgage Fund L.P. are included as such
schedules, for which provision is made in the applicable
accounting regulations of the Securities and Exchange
Commission, are not required under the related instructions,
are inapplicable, or the information required to be presented
is included in the financial statements and related notes.
18
<PAGE> 21
[KPMG LOGO]
The Global Leader
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE
FUND L.P.
(A LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-1
<PAGE> 22
[KPMG LOGO]
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE
FUND L.P.
(A LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-2
<PAGE> 23
[KPMG PEAT MARWICK LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners
Common Goal Health Care
Participating Mortgage Fund L.P.:
We have audited the accompanying balance sheets of Common Goal Health Care
Participating Mortgage Fund L.P. (a limited partnership) as of December 31,
1995 and 1994, and the related statements of earnings, partners' capital and
cash flows for each of the years in the three-year period ended December 31,
1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Common Goal Health Care
Participating Mortgage Fund L.P. as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Baltimore, Maryland
February 12, 1996
F-3
<PAGE> 24
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
================================================================================
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,010,659 7,002,603
Receivables:
Interest 145,399 180,114
Other 23,885 -
- --------------------------------------------------------------------------------
Total current assets 1,179,943 7,182,717
Mortgage loans receivable, net (notes 2 and 4) 3,567,664 3,567,664
- --------------------------------------------------------------------------------
$ 4,747,607 10,750,381
================================================================================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 5,070 22,973
- --------------------------------------------------------------------------------
Total current liabilities 5,070 22,973
Partners' capital 4,742,537 10,727,408
- --------------------------------------------------------------------------------
$ 4,747,607 10,750,381
================================================================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 25
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Statements of Earnings
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
================================================================================
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 727,059 1,083,181 1,819,540
- --------------------------------------------------------------------------------
Other income (note 2):
Loan prepayment penalties - 132,000 409,034
Equity participation received in pay-off of
mortgage loan receivable - - 422,000
Loan refinancing fees - - 72,750
Recovery of loan receivable previously
written off - - 42,500
- --------------------------------------------------------------------------------
Total other income - 132,000 946,284
- --------------------------------------------------------------------------------
Total income 727,059 1,215,181 2,765,824
Expenses:
Professional fees 162,212 135,698 138,049
Fees to affiliates (note 1):
Management 91,593 126,593 143,472
Mortgage servicing 19,690 21,044 32,852
Other (note 1) 65,144 103,879 66,475
- --------------------------------------------------------------------------------
Total expenses 338,639 387,214 380,848
- --------------------------------------------------------------------------------
Net earnings $ 388,420 827,967 2,384,976
================================================================================
Net earnings per limited partner unit $ 0.20 0.43 1.25
================================================================================
Weighted average limited partner units
outstanding (note 1) 1,911,411 1,911,411 1,911,411
================================================================================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 26
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Statements of Partners' Capital
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
================================================================================
Total
General Limited partners'
partners partners capital
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1992 $ 97,988 15,075,945 15,173,933
Net earnings 47,700 2,337,276 2,384,976
Distributions to limited partners
($1.50 per unit) - (2,866,722) (2,866,722)
- --------------------------------------------------------------------------------
Balance at December 31, 1993 145,688 14,546,499 14,692,187
Net earnings 16,559 811,408 827,967
Distributions to limited partners - (1,777,746) (1,777,746)
($.93 per unit)
Distributions to general partners (15,000) - (15,000)
Return of capital to limited partners
($1.57 per unit) - (3,000,000) (3,000,000)
- --------------------------------------------------------------------------------
Balance at December 31, 1994 147,247 10,580,161 10,727,408
Net earnings 7,768 380,652 388,420
Distributions to limited partners - (1,261,461) (1,261,461)
($.66 per unit)
Distributions to general partners (111,830) - (111,830)
Return of capital to limited partners
($2.62 per unit) - (5,000,000) (5,000,000)
- --------------------------------------------------------------------------------
Balance at December 31, 1995 $ 43,185 4,699,352 4,742,537
================================================================================
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 27
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
====================================================================================================
1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 388,420 827,967 2,384,976
Adjustments to reconcile net earnings to
net cash provided by operating activities:
(Increase) decrease in due from affiliate - 5,668 (5,668)
Decrease in interest and other receivables 10,830 158,076 222,847
Increase (decrease) in accounts
payable and accrued expenses (17,903) (20,848) 31,116
Decrease in due to affiliates - (430) (1,359)
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 381,347 970,433 2,631,912
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from mortgage loan principal
repayments - 3,600,000 6,836,850
- ----------------------------------------------------------------------------------------------------
Net cash provided by investing activities - 3,600,000 6,836,850
- ----------------------------------------------------------------------------------------------------
Cash flows used in financing activities -
distributions to partners (6,373,291) (4,792,746) (2,866,722)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (5,991,944) (222,313) 6,602,040
Cash and cash equivalents, beginning of year 7,002,603 7,224,916 622,876
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,010,659 7,002,603 7,224,916
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 28
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
notes to Financial Statements
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Common Goal Health Care Participating Mortgage Fund L.P. (Partnership)
was formed on August 20, 1986 to invest in and make mortgage loans to
third-parties and affiliates involved in health care. On July 21, 1987,
the Partnership commenced operations, having previously sold more than
the specified minimum of 116,000 units ($1,160,000). The Partnership's
offering terminated on February 20, 1989 with the Partnership having
sold the specified maximum of 1,912,911 units ($19,129,110). There is
no active public trading market for the units. At December 31, 1995,
there are 1,555 unit holders.
The general partners include Common Goal Capital Group, Inc. as the
managing general partner and Common Goal Limited Partnership I as the
minority general partner. Under the terms of the Partnership agreement,
the general partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership.
Under the terms of the Partnership agreement, the Partnership reimbursed
the general partners for offering and organizational expenses (excluding
broker/dealer selling commissions, but including accountable due
diligence expense reimbursements) incurred in connection with the
issuance and distribution of the units in an amount fixed at 3.5% of
gross offering proceeds. In addition, broker/dealer selling
commissions of 9.5% of gross proceeds have been borne by the
Partnership. Common Goal Securities, Inc., an affiliate acting as
managing dealer, received up to .5% of the gross offering proceeds
for accountable expenses incurred in connection with the sale of the
units. Offering and organizational expenses are recorded as reduction
of partners' capital.
Under the terms of the Partnership agreement, the Partnership is required
to pay a quarterly management fee to the managing general partner equal
to .75% per annum of adjusted contributions, as defined. Additionally, a
mortgage servicing fee equal to .25% per annum of the Partnership's
outstanding mortgage loan principal amount is to be paid to Common Goal
Mortgage Company, an affiliate of the general partners.
Additionally, under the terms of the Partnership agreement, the
Partnership is required to reimburse the managing general partner for
certain operating expenses. In 1995, 1994 and 1993, the managing general
partner charged the Partnership for $47,785, $41,067, and $46,618 of
these expenses, respectively. The managing general partner believes that
such charges have not adversely affected the current yield to the limited
partners.
The Partnership classifies all short-term investments with maturities at
dates of purchase of three months or less as cash equivalents.
F-8
<PAGE> 29
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) CONTINUED
An allowance for loan losses will be provided, if necessary, at a level
which the Partnership's management considers adequate based upon an
evaluation of known and inherent risks in the loan portfolio.
No provision for income taxes has been recorded as the liability for
such taxes is that of the partners rather than the Partnership.
Earnings per limited partner unit are computed based on the weighted
average limited partner units outstanding for the period.
As discussed above, the Partnership invests in and makes mortgage loans
to businesses in the health care industry. Those businesses are subject
to certain inherent risks, including the following:
- Substantial dependence on revenues derived from reimbursement by the
Federal Medicare and state Medicaid programs;
- Government regulation, government budgetary constraints and proposed
legislative and regulatory changes; and
- Lawsuits alleging malpractice and related claims.
Such inherent risks require the use of certain management estimates in
the preparation of the Partnership's financial statements and it is
reasonably possible that a change in such estimates may occur.
(2) MORTGAGE LOANS RECEIVABLE
Information concerning mortgage loans receivable as of December 31 is
as follows:
<TABLE>
<CAPTION>
Face and carrying
amount of mergers
Basic ---------------------
interest Maturity Prior
Description rate date liens 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Westwood loan 11.50% March 10, 1998 $ 3,200,000 1,000,000 1,000,000
Winthrop loan 11.50% March 25, 1998 7,200,000 1,000,000 1,000,000
Honey Brook loan 13.70% January 1, 2000 8,810,000 1,567,664 1,567,664
- --------------------------------------------------------------------------------
$19,210,000 3,567,664 3,567,664
================================================================================
</TABLE>
(Continued)
F-9
<PAGE> 30
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Notes to Financial Statements
- -------------------------------------------------------------------------------
(2) CONTINUED
The loans are second mortgage loans secured by health
care-related real properties. Interest is payable monthly and the
principal balances are due at maturity. The loans generally provide
for the payment of additional interest based upon gross revenues of the
properties and the payment of participation interests ranging from 6%
to 30% of the increase in the fair value of the properties at maturity
or redemption, as defined.
At December 31, 1991, management of the Partnership entered
into an agreement with the borrowers' on the Horizon loan such that,
under certain conditions, the loan would not be settled for
less than $866,000. Accordingly, management evaluated the Partnership's
exposure with respect to this mortgage loan receivable and provided an
allowance for loss of $400,000 of which $200,000 represented a
provision for loss recorded in 1990. During 1992, the property
securing this mortgage loan receivable was seized by the holder of the
prior loan. As such, the borrowers defaulted on the loan and
management of the Partnership charged off the remaining receivable
balance of $993,495 during 1992. Management is still attempting to
recover the loan balance. During 1993, $42,500 was recovered on the
loan. No amounts were recovered on the loan during 1995 and 1994.
During 1993, $1,700,000 of the Honey Brook loan was paid down.
The Riverview loan was paid off during 1993. Prepayment penalties of
$146,000 and $263,000, respectively were received on the Honey Brook
and Riverview loans. In addition, $422,000 was recognized as income on
the equity participation interest of the increase in fair value of the
property securing the Riverview loan.
During 1994, $300,000 of the Westwood loan was paid down. The
SHALP loan was paid off during 1994. A prepayment penalty of $132,000
was received on the SHALP loan.
The carrying value of the mortgage loans for tax purposes is
the same as that for financial reporting purposes. All properties are
subject to a first mortgage lien.
(Continued)
F-10
<PAGE> 31
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) CONTINUED
A summary of activity in mortgage loans receivable for the years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<S> <C>
Balance at December 31, 1992 $ 14,004,514
Repayment of mortgage loans (6,836,850)
--------------------------------------------------------------
Balance at December 31, 1993 7,167,664
Repayments of mortgage loans (3,600,000)
--------------------------------------------------------------
Balance at December 31, 1994 3,567,664
Repayment of mortgage loans -
--------------------------------------------------------------
Balance at December 31, 1995 $ 3,567,664
==============================================================
</TABLE>
The geographic distribution of the property securing the Partnership's
mortgage loans at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Number Principal
State of loans amount
-----------------------------------------------------------
<S> <C> <C>
Massachusetts 1 $ 1,000,000
Missouri 1 1,000,000
Pennsylvania 1 1,567,664
-----------------------------------------------------------
3 $ 3,567,664
===========================================================
</TABLE>
(3) PARTNERS' CAPITAL
On June 15, 1992, 1,500 of the outstanding units of the Partnership
were liquidated. At December 31, 1993, 1994 and 1995, 1,911,411 units
remained outstanding.
(4) SUBSEQUENT EVENTS
In January 1996, the Partnership declared and paid a distribution of
$234,266 to limited partner unitholders of record at December 15, 1995.
On January 9, 1996, the Partnership was notified by Westwood of its
intent to prepay the mortgage on the facility which the Partnership
currently holds. It is anticipated that the payoff of the Westwood
mortgage will occur by mid-April 1996.
(Continued)
F-11
<PAGE> 32
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A LIMITED PARTNERSHIP)
Notes to Financial Statements
- -------------------------------------------------------------------------
(4) CONTINUED
On February 12, 1996, the Winthrop loan was paid off in full. A
prepayment penalty in the amount of $55,000 was received on the loan
which will be recognized by the Partnership in 1996.
- -------------------------------------------------------------------------
F-12
<PAGE> 33
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.
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
By: Common Goal Capital Group, Inc.,
General Partner
By: /s/ Albert E. Jenkins
------------------------------------
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Position Date
---- -------- ----
/s/ Albert E. Jenkins Chairman (Principal 3/27/96
- ---------------------------- Executive Officer),
Albert E. Jenkins III President, Principal
Financial and
Accounting Officer
and Director of
Managing General
Partner
/s/ Richard R. Wood Director of Managing 3/27/96
- --------------------------- General Partner
Richard R. Wood
/s/ Anthony L Jones Director of Managing 3/27/96
- --------------------------- General Partner
Anthony L Jones
(A Majority of the Board of Directors of the Managing General
Partner)
<PAGE> 34
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.
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
By: Common Goal Capital Group, Inc.,
General Partner
By: /s/ Albert E. Jenkins III
-------------------------------------
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,010,659
<SECURITIES> 0
<RECEIVABLES> 169,284
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,179,943
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,747,607
<CURRENT-LIABILITIES> 5,070
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,742,537
<TOTAL-LIABILITY-AND-EQUITY> 4,747,607
<SALES> 0
<TOTAL-REVENUES> 727,059
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 338,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 388,420
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388,420
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
