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 For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the Transition period from _____ to ____
Commission File Number: 0-17600
Common Goal Health Care Participating Mortgage Fund L.P.
Exact name of small business issuer as specified in its charter)
Delaware 52-1475268
(State or other Jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
215 Main Street
Penn Yan, New
York 14527
Address of principal executive offices) (Zip Code)
(315) 536-5985
(Issuer's telephone number)
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 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, 1999 were $ 260,216.
The aggregate original sales price of the units of Limited Partnership Interest
held by non-affiliates of the Registrant as of March 31, 2000 was $19,114,110
(1,580 investors). As of March 31, 2000, 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 Part III of this Annual Report on
Form 10-KSB.
<PAGE>
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 interest (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 did not own or acquire real property. The Partnership
has one Mortgage Loan that remained outstanding as of March 31, 2000. On April
11, 2000, the Partnership agreed to extend the Mortgage Loan so that it will now
mature on January 1, 2001. The Partnership does not intend to make additional
Mortgage Loans and will commence liquidation when the last Mortgage Loan is
repaid. See "Existing Mortgage Loan," 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 participation payable at maturity of the Mortgage Loan or upon the sale
or refinancing of the underlying property (the "Participation"). See "Existing
Mortgage Loan" below regarding payment of the Participation on the Partnership's
last outstanding Mortgage Loan.
Partnership funds held pending distribution may be invested, 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 having assets in excess of $100,000,000, interest-bearing time
deposits in banks and thrift institutions or any combination of these
investments.
The Partnership conducts its operations so that it is not subject to
regulation under the Investment Company Act of 1940. Generally, the term
"investment company" would not include the Partnership unless, after a one-year
period, the Partnership, among other things, were to be engaged primarily, or
were to hold itself out as being engaged primarily, or were to propose to engage
primarily, in the business of investing, reinvesting or trading in securities,
or if it were to have more than 40% of its total assets, excluding cash and
government securities, invested in "investment securities" as that term is
defined in the Investment Company Act of 1940. Based on this test, the
Partnership is not an investment Company.
The Partnership is not subject to federal income taxes as the liability
for such taxes is that of the Partners rather than the Partnership.
Existing Mortgage Loan.
The Partnership's last outstanding mortgage loan (the "Joint Venture
Loan") was made in August 1990 through a joint venture (the "Joint Venture")
with Common Goal 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.
The Joint Venture, CGI-CGII Honeybrook General Partnership, a Maryland
general partnership (the "Lender"), entered into an Amended and Restated Loan
Agreement (the "Loan Agreement") with Honey Brook Medical Investors, Ltd.
("Medical"), Honey Brook Retirement Investors, Ltd. ("Retirement"), Forest L.
Preston ("Preston"), Fred L. Lester ("Lester") and Charles E. Jabaley
("Jabaley") (collectively, the "Borrowers"). Medical holds title to property
referred to as Hickory House Nursing Home located in Honey Brook, Pennsylvania
("Hickory House"). Retirement holds title to the property referred to as
Heatherwood Retirement Center also located in Honey Brook, Pennsylvania
("Heatherwood"). Life Care Centers of America, Inc. ("Life Care") or its
affiliates operate Hickory House and Heatherwood.
The Loan Agreement provided for a Loan in the principal amount of
$3,430,113.95, which initially was funded by the Partnership. Common Goal II
subsequently funded $95,600 of the loan principal in 1991, which decreased the
Partnership's portion of the Joint Venture Loan to $3,334,514. The loan was
originally collateralized by an absolute assignment of all of the general and
limited partnership interests in Medical and Retirement, a Junior Mortgage on
Hickory House; and guaranties of Preston, Lester, Jabaley and Life Care. The
Loan Agreement provided for Basic Interest of 13.7% per annum payable monthly in
advance at 12% per annum with 1.7% deferred and paid annually and Additional
Interest consisting of two components (participation in gross revenues and
participation in appreciation).
On December 3, 1993, Lender and Borrowers executed a First Amendment to
the Amended and Restated Loan Agreement (the "First Amendment") pursuant to
which the description of the Collateral was amended to eliminate the Mortgage
and the calculation of Additional Interest was amended to provide that the fair
market value of the Hickory House portion of the Collateral was deemed to be
$6,400,000. Thus, while the Mortgage on Hickory House was released and a fair
market value was attributed to that property (for purpose of subsequent
calculation Additional Interest), Lender continued to be entitled to participate
in gross revenues and appreciation in Heatherwood and Hickory House. At December
31, 1999 and 1998, the Joint Venture Loan had an outstanding balance of
$1,618,254, with the Partnership's portion being approximately $1,567,664 and
Common Goal II's portion being approximately $50,590.
In January, 2000, Borrowers requested an extension of the maturity date to
March 31, 2000. Lender agreed provided that Borrowers paid down the principal
balance of the loan by $500,000, which amount was paid in February 2000. The
amount was applied first to pay of the $50,590 principal due Common Goal II and
the balance of $449,410 was applied to pay down the Partnership's principal to
$1,168,844 . On April 11, 2000, the Lender and the Borrowers agreed that
$235,000 of Additional Interest was due, of which $200,000 would be paid by May
5, 2000, and the $35,000 balance would be paid when the loan matures on January
1, 2001. The Partnership will receive all but $7,355 of the Additional Interest
which will be paid to Common Goal II on May 5, 2000. Commencing as of April 1,
2000, the Borrowers will make payments of interest only on the Mortgage Loan at
a rate of 10.5% per annum.
Partnership Allocation of Income and Loss and Distribution.
Net Income and Net Loss. Net income (except with respect to a Disposition,
which includes any Partnership transaction not in the ordinary course of its
business, including, without limitation, collections of principal payments,
equity participation payments, prepayments, prepayment penalties, sales,
exchanges, foreclosures or other dispositions of Mortgage Loans held by the
Partnership, recoveries of damage awards and insurance proceeds (other than the
receipt of subscriptions for Units, all forms of interest payments when due on
Mortgage Loans or business or rental interruption insurance proceeds)) and net
loss of the Partnership are allocated 98% to Limited Partners and 2% to the
General Partners. Net income arising from a Disposition is allocated 98% to
Limited Partners and 2% to the General Partners to the extent of any negative
balances in the capital accounts of the Limited Partners, and then 100% to
Limited Partners in an amount necessary to bring the Limited Partners' capital
accounts up to an amount equal to their Original Contributions, which means the
amount of $10.00 for each Unit less the return of any amount of uninvested funds
returned, as defined in the prospectus, plus the 11% per annum preferred
cumulative return thereon (less previous distributions to the Limited Partners
in repayment of such amounts). The remainder of such net income shall be
allocated 85% to the Limited Partners and 15% to the General Partners.
Distributions of Cash From Operations. Distributions of Adjusted Cash From
Operations, defined as all receipts of interest payments on Mortgage Loans less
cash receipts used to pay operating expenses and to repurchase any Units (Cash
Flow) less any amount set aside for the restoration or creation of working
capital reserves, are distributed 98% to the Limited Partners and 2% to the
General Partners, and are apportioned quarterly among Limited Partners of record
as of the record date declared within 30 days after the end of each quarter and
are paid quarterly. No distributions of Adjusted Cash From Operations with
respect to any calendar year are made to the General Partners until the
following occurs:
First, distributions to the Limited Partners equal to the 8% annual
cumulative return on their Adjusted Contributions, defined as Original
Contributions attributable to a Unit, reduced by the total of cash distributed
from Disposition Proceeds and from working capital reserves, for such year
(plus any amounts accrued from prior years) have been made to the Limited
Partners; and
Second, payment of all previously subordinated management fees, if any,
have been made.
Thereafter, all previously subordinated amounts payable to the General
Partners with respect to their 2% interest are paid in full to the extent funds
are available, and if not available, are deferred and paid out of Disposition
Proceeds, defined as receipts from Dispositions net of related expenses, amounts
necessary for the payment of debts and obligations of the Partnership and any
amount set aside for working capital reserves. The Partnership has been making
distributions to the Limited Partners in excess of the 8% annual cumulative
return on Adjusted Contributions.
Distributions of Disposition Proceeds. The Managing General Partner has
the right to reinvest or distribute all Disposition Proceeds, through the end of
the eleventh year after the date of the Prospectus. Non-liquidating
distributions of Disposition Proceeds are distributed in the following order of
priority, except as otherwise required by law:
First, 100% to the Limited Partners until the Limited Partners have
received an amount which, when added to prior distributions of Disposition
Proceeds and cash from reserves attributable thereto, equals the Original
Contributions of the Limited Partners;
Second, 100% to the Limited Partners until each Limited Partner has
received an amount which, when added to all prior distributions to Limited
Partners from all sources (including prior distributions in satisfaction of the
8% annual cumulative return but excluding distributions pursuant to above),
equals the 11% per annum preferred cumulative return on their Adjusted
Contributions, (calculated from the first day of the calendar quarter succeeding
the quarter in which Capital Contributions are received);
Third, 100% to the General Partners until they have been paid 100% of the
subordinated portion, if any, of (a) the Partnership Management Fee, if any, and
then (b) their 2% interest in Adjusted Cash From Operations; and
Fourth, the remainder, 85% to the Limited Partners and 15% to the General
Partners.
Dissolution and Returns of Principal. Since it was the intention of the
Managing General Partner to liquidate the Partnership's assets between 1999 and
2004, the Managing General Partner will not reinvest loan proceeds in new
Mortgage Loans. The Partnership's last remaining Mortgage Loan, the Joint
Venture Loan, matured in January 2000, but was extended to March 31, 2000 in
return for a paydown of principal by $500,000. See "Existing Mortgage Loan"
above regarding an issue that has arisen regarding the amount of Additional
Interest Due. The Partnership intends to commence an orderly liquidation
thereafter.
Proceeds from the liquidation shall be applied and distributed in the
following order:
First, to the payment of creditors of the Partnership but excluding secured
creditors whose obligations will be assumed or otherwise transferred on the
liquidation of Partnership assets; and
Second, after allowance for the expenses of liquidation and the setting up
of any reserves for contingencies which the Managing General Partner considers
necessary, to the General Partners and Limited Partners in proportion to and to
the extent of the positive balances in their capital accounts, after net income
or loss arising from a Disposition has been allocated, with any excess being
distributed in accordance with the order of priority for non-liquidating
distributions.
Notwithstanding anything to the contrary, the Managing General Partner has
the right to defer liquidation if, in the opinion of the Managing General
Partner, the sale of Partnership assets in liquidation would result in a
material underrealization on the Partnership's assets. The Managing Partner also
has the right to determine the rate at which returns of principal (returns of
Original Contribution) are distributed to the limited partners.
Item 2. Description of Property.
The Partnership owned no real property as of December 31, 1999.
Item 3. Legal Proceedings.
The Partnership is not a party to any litigation.
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 1999.
PART II
Item 5. Market for Units of Limited Partnership Interest and Related Security
Holder Matters.
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 March 31, 2000, 1,911,411 Units were outstanding and were held by
approximately 1580 holders of record.
The Partnership made no distributions to Limited Partners during 1999. The
Partnership made distributions to Limited Partners of $572,651 or $.30 per Unit
during 1998.
Item 6. Management's Discussion and Analysis or Plan of Operation.
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.
Partnership assets increased to $2,262,219 at December 31, 1999 from
$1,835,800 at December 31, 1998. The increase from 1998 to 1999 ($426,419 or
approximately 23%) resulted primarily from an increase of mortgage receivable by
$227,645 and an increase of cash and cash equivalents by $140,190, an increase
of accrued interest receivable by $58,584, and the fact that there were no
repayments of Mortgage Loan receivables. As of December 31, 1999, the
Partnership's loan portfolio consisted of one mortgage loan, the aggregate
outstanding principal balance of which was $1,795,309.
The Partnership structured its Mortgage Loans to provide for payment of
quarterly distributions from investment income. The final payment of principal
with respect to the Partnership's last remaining Mortgage Loan is now due on
January 1, 2001. The Partnership will thereafter commence liquidation. Funds
remaining after payment of final expenses will be distributed to Limited
Partners. Reference is made to "Item 1. Description of Business" and the "Notes
to the Financial Statements" in "Item 7. Financial Statements" for further
information regarding such Mortgage Loan investments.
The Partnership's balance of cash and cash equivalents at December 31,
1999 and 1998 was $381,677 and $241,487 respectively, which consisted of
operating cash and working capital reserves. The increase in cash and cash
equivalents from December 31, 1998 resulted from net income of $166,922 offset
by an increase in interest receivable and an increase in current liabilities.
Dividend distributions noted as a return of capital represent those
distributions which are in excess of current year earnings. The Partnership is
required to maintain reserves not less than 1% of gross offering proceeds (not
less than $191,291), but currently maintains a reserve in excess of that amount,
$381,677 at December 31, 1999. The amount of cash and cash equivalents currently
maintained by the Partnership is primarily the result of proceeds from the
repayment of mortgage loans.
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. At
December 31, 1999, the Partnership had one remaining Mortgage Loan. Since
commencement of operations in July of 1987, the Partnership invested available
funds (funds not invested in Mortgage Loans) in short-term 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.
During the years ended December 31, 1999 and 1998 the Partnership had net
income of $166,922 and $158,558, based on total revenues of $260,216 and
$239,436, and total expenses of $93,294 and $80,878 respectively. The
Partnership's net income per Limited Partner Unit was $.09 per Unit in 1999 and
$.08 per Unit in 1998. The Partnership made no distributions to Limited Partners
in 1999 and $.30 per Unit in 1998.
The distributions may not remain at the present level as a result of loan
payoffs. 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, thereby reducing funds available for distribution.
Expenses increased in 1999 by $12,416 primarily because of an increase of
$15,812 in professional fees and a decrease of $2,129 in miscellaneous expenses.
Additionally, under the terms of the Partnership agreement, the
Partnership is required to reimburse the Managing General Partner for certain
operating expenses paid on behalf of the Partnership. In 1999 and 1998, the
Managing General Partner was reimbursed by the Partnership for $66,567 and
$54,566, of these expenses, respectively. The Managing General Partner believes
that such charges have not adversely affected the current yield to the Limited
Partners.
Subsequent Event. On February 14, 2000, the Borrowers repaid $500,000 of
the outstanding balance of the Joint Venture Loan ($50,590 of which was used to
pay down the Common Goal II portion of the Joint Venture Loan). On April 11,
2000 the Lender and Borrowers agreed to pay Additional Interest of $235,000, of
which $200,000 would be paid on May 5, 2000 and $35,000 would be paid when the
loan matures on January 1, 2001. The Partnership will receive all but $7,355 of
the Additional Interest, which amount will be paid to Common Goal II on May 5,
2000.
Year 2000 Compliance.
Impact of Year 2000
In prior periods, the Partnership discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999 the Partnership completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Partnership experienced no significant disruptions
in mission critical information technology and non-information technology
systems and believes those systems successfully responded to the Year 2000 date
change. The Partnership is not aware of any material problems resulting from
Year 2000 issues, either with its internal systems, or the products and services
of third parties. The Partnership had no expense in 1999 and does not anticipate
any additional expense resulting from Year 2000 issues. The Partnership will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
Some statements in this Form 10-KSB are forward looking and actual results
may differ materially from those stated. As discussed herein, among the factors
that may affect actual results are changes in the financial condition of the
borrower and/or anticipated changes in expenses or capital expenditures.
Item 7. Financial Statements.
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Table of Contents
Page
Independent Auditors' Reports.....................................F - 1
Financial Statements
Balance Sheet................................................F - 2
Statements of Income.........................................F - 3
Statements of Partners' Capital..............................F - 4
Statements of Cash Flows.....................................F - 5
Notes to Financial Statements.....................................F - 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Common Goal Health Care
Participating Mortgage Fund L.P.
Penn Yan, New York
We have audited the accompanying balance sheet of Common Goal Health Care
Participating Mortgage Fund L.P. (a Delware limited partnership) as of December
31, 1999 and the related statements of income, partners' capital and cash flows
for each of the years in the two year period then ended. These financial
statements are the responsibility of the management of Common Goal Health Care
Participating Mortgage Fund L.P. 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, 1999 and the results of its
operations and cash flows for each of the years in the two year period then
ended in conformity with generally accepted accounting principles.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
March 16, 2000
Denver, Colorado
F - 1
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Balance Sheet
December 31, 1999
Assets
Cash and cash equivalents ............................... $ 381,677
Accrued interest receivable ............................. 85,233
Mortgage loan receivable (Note 2) ....................... 1,795,309
----------
$2,262,219
==========
Liabilities and Partners' Capital
Accounts payable and accrued expenses ................... $ --
Due to affiliates ....................................... 110,509
Deferred revenue (Note 2) ............................... 227,645
----------
Total liabilities .................................... 338,154
Partners' capital
General partners ..................................... 70,542
Limited partners ..................................... 1,853,523
----------
Total partners' capital ........................... 1,924,065
----------
$2,262,219
==========
See notes to financial statements.
F - 2
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Statements of Income
For the Years Ended
December 31,
-------------------------
1999 1998
---------- ----------
Revenue
Interest income ...................... $ 260,216 $ 239,436
---------- ----------
Total revenues ..................... 260,216 239,436
---------- ----------
Expenses
Professional fees .................... 64,515 48,703
Fees to affiliates
Management ......................... 21,603 22,870
Mortgage servicing ................. 3,919 3,919
Other ................................ 3,257 5,386
---------- ----------
93,294 80,878
---------- ----------
Net income ............................. $ 166,922 $ 158,558
========== ==========
Net income allocated to general partners $ 3,338 $ 3,171
Net income allocated to limited partners 163,584 155,387
---------- ----------
$ 166,922 $ 158,558
========== ==========
Basic earnings per limited partner unit $ .09 $ .08
========== ==========
Weighted average limited partner units
outstanding ........................... 1,911,411 1,911,411
========== ==========
See notes to financial statements.
F - 3
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Statements of Partners' Capital
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partners Partners Capital
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1997 .......... $ 64,033 $ 2,107,203 $ 2,171,236
Distributions to limited partners ($.30
per unit) ............................ -- (572,651) (572,651)
Net income ............................ 3,171 155,387 158,558
----------- ----------- -----------
Balance at December 31, 1998 .......... 67,204 1,689,939 1,757,143
Net income ............................ 3,338 163,584 166,922
----------- ----------- -----------
Balance at December 31, 1999 .......... $ 70,542 $ 1,853,523 $ 1,924,065
=========== =========== ===========
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Statements of Cash Flows
For the Years Ended
December 31,
------------------------
1999 1998
--------- ---------
Cash flows from operating activities
Net income .................................. $ 166,922 $ 158,558
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities -
Increase in mortgage receivable .......... (227,645) --
Decrease (increase) in interest and other
receivables ............................. (58,584) 16,184
Decrease in accounts payable and accrued
expenses ................................ (4,000) --
Increase in due to affiliates ............ 35,852 45,554
Increase in deferred revenue ............. 227,645 --
--------- ---------
(26,732) 61,738
--------- ---------
Net cash provided by operating
activities ......................... 140,190 220,296
--------- ---------
Cash flows from financing activities
Distributions and returns of principal to
partners ................................... -- (572,651)
--------- ---------
Net cash used in financing activities -- (572,651)
--------- ---------
Net increase (decrease) in cash and cash
equivalents ................................... 140,190 (352,355)
Cash and cash equivalents, beginning of year ... 241,487 593,842
--------- ---------
Cash and cash equivalents, end of year ......... $ 381,677 $ 241,487
========= =========
Supplemental disclosure of cash flow information:
Interest paid was $0 for 1999 and 1998.
Income taxes paid were $0 for 1999 and 1998.
See notes to financial statements.
F - 5
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Common Goal Health Care Participating Mortgage Fund L.P. (the Partnership), a
Delaware Limited Partnership, was formed on August 20, 1986 to invest in and
make mortgage loans to third parties and affiliates involved in health care.
Having sold more than the specified minimum of 116,000 units ($1,160,000), the
Partnership commenced operations on July 21, 1987. 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, 1999, there were 1,580 unit holders.
The General Partners include Common Goal Capital Group, Inc., the Managing
General Partner, and Common Goal Limited Partnership I, 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 term of the Partnership agreement, the Partnership reimbursed the
General Partners for certain offering and organizational expenses incurred in
connection with the issuance and distribution of the units in an amount fixed at
3.5% of gross offering proceeds. These offering and organizational expenses
excluded broker/dealer selling commissions and included accountable due
diligence expense reimbursements. Broker/dealer selling commissions of 9.5% of
gross proceeds were also paid by the Partnership. Common Goal Securities, Inc.
(CGSI), an affiliate acting as managing dealer, received selling commissions of
2% of the gross offering proceeds and an additional 7.5% of the purchase price
of all units sold directly by CGSI. Additionally, CGSI was reimbursed for all
expenses incurred in connection with the offering and also received an amount
equal to .5% of the gross offering proceeds for accountable expenses. Offering
and organizational expenses were recorded as a reduction of partners' capital.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F - 6
<PAGE>
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
Notes to Financial Statements
For entities investing in and making mortgage loans to businesses in the health
care industry, certain inherent risks may increase the possibility of actual
results differing from management's estimates. These inherent risks include,
among other things, the following:
o Substantial dependence on revenues derived from reimbursement by
the Federal Medicare and state Medicaid programs;
o Government regulation, government budgetary constraints and
proposed legislative and regulatory changes; and
o Lawsuits alleging malpractice and related claims.
Partnership Management Fees and Operating Expenses
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 paid on behalf of the Partnership. In 1999 and 1998, the Managing
General Partner was reimbursed by the Partnership for $66,567 and $54,566,
respectively, of these expenses. The remaining expenses were paid directly by
the Partnership.
Partnership Allocation of Income and Loss and Distributions
Net Income and Net Losses
Net income (except with respect to a Disposition, as defined, which includes any
Partnership transaction not in the ordinary course of its business, including
without limitation, collections of principal payments, equity participation
payments, prepayments, prepayment penalties, sales, exchanges, foreclosures
other dispositions of Mortgage Loans held by the Partnership, recoveries of
damage awards and insurance proceeds (other than the receipt of subscriptions
for Units, all forms of interest payments when due on Mortgage Loans or business
or rental interruption insurance proceeds) and net loss of the Partnership is
allocated 98% to Limited Partners and 2% to the General Partners.
Net income arising from a Disposition is allocated 98% to Limited Partners and
2% to the General Partners to the extent of any negative balances in the capital
accounts of the Limited Partners, and then 100% to Limited Partners in an amount
necessary to bring the Limited Partners' capital accounts up to an amount equal
to their original contributions, as defined, which means the amount of $10.00
for each unit less the return of any amount of uninvested funds returned, as
defined, plus the 11% per annum preferred cumulative return thereon (less
previous distributions to the Limited Partners in repayment of such amounts).
Remaining net income is allocated 85% to the Limited Partners and 5% to the
General Partners.
Distributions of adjusted cash from operations, defined as all receipts of
interest payments on mortgage loans less cash receipts used to pay operating
expenses and to repurchase any units (cash flow) less any amount set aside for
the restoration or creation of working capital reserves, are distributed 98% to
the limited partners and 2% to the general partners, and are apportioned
quarterly among limited partners of record as of the record date declared within
30 days after the end of each quarter and are paid quarterly. No distributions
of adjusted cash from operations with respect to any calendar year are made to
the general partners until the following occurs:
First, distributions to the limited partners equal to the 8% annual
cumulative return on their adjusted contributions, defined as original
contributions attributable to a unit, reduced by the total of cash
distributed from disposition proceeds and from working capital reserves,
for such year (plus any amounts accrued from prior years) have been made to
the limited partners; and Second, payments of all previously subordinated
management fees, if any, have been made.
Thereafter, all previously subordinated amounts payable to the general
partners with respect to their 2% interest are paid in full to the extent
funds are available, and if not available, are deferred and paid out of
disposition proceeds, defined as receipts from dispositions net of related
expenses, amounts necessary for the payment of debts and obligations of the
partnership and any amount set aside for working capital reserves. The
partnership has been making distributions to the limited partners in excess
of the 8% annual cumulative return on adjusted contributions.
Distributions of Disposition Proceeds
The managing general partner has the right to reinvest or distribute all
disposition proceeds, through the end of the eleventh year after the date of the
prospectus which is 1987. Non-liquidating distributions of disposition proceeds
are distributed in the following order of priority, except as otherwise required
by law:
First, 100% to the limited partners until the limited partners have
received an amount which, when added to prior distributions of disposition
proceeds and cash from reserves attributable thereto, equals the original
contributions of the limited partners;
Second, 100% to the limited partners until each limited partner has
received an amount which, when added to all prior distributions to limited
partners from all sources (including prior distributions in satisfaction of
the 8% annual cumulative return but excluding distributions pursuant to
above), equals the 11% per annum preferred cumulative return on their
adjusted contributions, (calculated from the first day of the calendar
quarter succeeding the quarter in which capital contributions were
received);
Third, 100% to the general partners until they have been paid 100% of the
subordinated portion, if any, of (a) the partnership management fee, if
any, and then (b) their 2% interest in adjusted cash from operations; and
Fourth, the remainder, 85% to the limited partners and 15% to the general
partners.
Dissolution and Returns of Principal
Since it was the intention of the managing general partner to liquidate the
Partnership's assets between 1999 and 2004, the managing general partner will
not reinvest loan proceeds in new mortgage loans. The partnership's last
remaining mortgage loan, the joint venture loan, will mature on January 1, 2000.
The partnership expects to commence an orderly liquidation in thereafter.
Proceeds from the liquidation will be applied and distributed in the following
order:
First, to the payment of creditors of the partnership but excluding secured
creditors whose obligations will be assumed or otherwise transferred on the
liquidation of partnership assets; and
Second, after allowance for the expenses of liquidation and the setting up
of any reserves for contingencies which the managing general partner
considers necessary, to the general partners and limited partners in
proportion to and to the extent of the positive balances in their capital
accounts, after net income or loss arising from a disposition has been
allocated, with any excess being distributed in accordance with the order
of priority for non-liquidating distributions.
Notwithstanding anything to the contrary, the managing general partner has the
right to defer liquidation if, in the opinion of the managing general partner,
the sale of partnership assets in liquidation would result in a material
underrealization on the Partnership's assets. The managing general partner also
has the right to determine the rate at which returns of principal (returns of
original contributions) are distributed to the limited partners.
Allowance for Losses
An allowance for loan losses is 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. There was no allowance for losses at
December 31, 1999 and 1998.
Federal Income Taxes
No income tax provision has been included in the financial statements since
income or loss of the Partnership is required to be reported by the partners on
their respective income tax returns. Net income for financial reporting purposes
did not differ from net income for federal income tax purposes for the year
ended December 31, 1999 and 1998.
Basic Earnings Per Limited Partner Unit
Basic earnings per limited partner unit is computed based on the weighted
average limited partner units outstanding for the year dividend into the net
income applicable to the Limited Partners.
There were no dilutive limited partnership units during 1999 or 1998.
Cash and Cash Equivalents
The partnership classifies all short-term investments with maturities of three
months or less at the date of purchase as cash equivalents.
Concentration of Credit Risk
The Partnership's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents, accrued interest
receivable and a mortgage loan receivable. The Partnership maintains cash
balances in bank deposit accounts which, at times, may exceed federally insured
limits. At December 31, 1999, the Partnership's cash and cash equivalent
balances were in excess of such limits by approximately $265,500.
The entire accrued interest receivable and mortgage loan receivable balance at
December 31, 1999 and 1998 are from a ten year, 13.7% mortgage loan provided by
the Partnership to Honey Brook Medical Investors, Ltd.
Reclassifications
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
<PAGE>
Note 2 - Mortgage Loan Receivable
Mortgage loan receivable as of December 31, 1999 and 1998 are as follows:
Basic Face and
Interest Maturity Prior Carrying
Description Rate Date Liens Amount
- ------------------- --------- --------------- ------------ ----------
Honey Brook loan 13.7% January 1, 2001 $8,810,000 $1,795,309
The Honey Brook loan is a second mortgage loan secured by a health care related
real property. Interest is payable monthly and the principal balance is due at
maturity. The loan provides for the payment of additional interest based upon
gross revenues of the property and the payment of a participation interest equal
to a percentage of the increase in the fair value of the underlying facility at
maturity or redemption, or pursuant to any sale of the facility, as defined.
Participation interests are recorded as revenue when they are determinable,
generally at maturity or redemption of the loan or pursuant to any sale of the
facility. The property is subject to a first mortgage lien.
On January 1, 2000, the Honey Brook loan matured. Subsequent to year end, the
Partnership and Common Goal Health Care Pension and Income Fund L.P. II received
$500,000 in February 2000 and renegotiated the loan terms which included an
increase in the loan balance of approximately $235,000 representing a
participation in the increase in value of the underlying properties. In
accordance with FASB Statement of Standards No. 66, "Accounting for Sales of
Real Estate", $227,645 of the participation was not recognized as income during
1999. The Partnership has recorded $227,645 of the participation amount
representing its share of the joint venture loan, as deferred revenue, and the
interest thereon will be recognized as it is earned. The renegotiated
outstanding mortgage balance will earn interest at a 10.5% interest rate and
will be paid monthly. Based on the new loan agreement, the Partnerships will
receive $200,000 on May 5, 2000, with the remaining balance payable upon
maturity at January 1, 2001.
In 1990, Common Goal Health Care Pension and Income Fund L.P. II ("Commission
Goal II"), an affiliated, publicly-offered limited partnership with investment
objectives that are substantially identical to those of the partnership and the
partnership participated in a ten-year second mortgage loan in the original
principal amount of $3,430,114 to an unaffiliated third party through a joint
venture between the Partnership and Common Goal II (the "Joint Venture Loan").
At December 31, 1999 and 1998, the Partnership's mortgage loan receivable
included $1,567,664, representing the partnership's participation of 96.87% in
the remaining $1,618,254 principal balance of the loan.
All property securing the Partnership's mortgage loan at December 31, 1999 and
1998 is located in Pennsylvania.
<PAGE>
Note 3 - Fair Value of Financial Instruments
The fair value of the Partnership's participation in the mortgage loan
receivable did not differ from its carrying value as the rate of interest on
the refinanced loan balance approximated the market rate for commensurate loans
as follows:
Carrying Fair
Value Value
---------- ----------
December 31, 1999 $1,795,309 $1,795,309
The Partnership estimates the fair value of its participation in mortgage loan
receivable by discounting future cash flows using an appropriate interest rate.
The carrying amounts at December 31, 1999 and 1998 for cash and cash
equivalents, accrued interest receivable, other receivables, due from and to
affiliates, and accounts payable and accrued expenses approximated their fair
values due to the short maturity of these instruments.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On March 20, 1999, the Partnership engaged Ehrhardt Keefe Steiner &
Hottman PC as its independent auditors for the 1998 fiscal year. Reports on From
8-K, 8-K/A and Form 8-K/A-2 reporting the event were filed on March 24, 1999,
April 2, 1999 and April 9, 1999 respectively. There were no reporting
disagreements on financial statement disclosures or accounting matters covering
the prior two fiscal years up through March 20, 1999 audited by the predecessor
auditors.
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 31, 2000:
- --------------------------------------------------------------------------------
Name Age Position
Albert E. Jenkins III 52 Chairman of the Board, Chief
Executive Officer, President,
Treasurer and Director
Richard R. Wood 76 Director
William Jasper 83 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 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.
William E. Jasper, Jr. is a director of Common Goal Capital Group, Inc. II
and has been a member of the Board of Directors of Madison Square Federal
Savings Bank since 1964. Prior to 1980, when Mr. Jasper retired, he had served
as president of a multi-line insurance agency and brokerage. Mr. Jasper is a
Deputy Regional Director for a fraternal organization that is dedicated to the
Maryland Special Olympics which provides health-care training and specialized
sports for the mentally handicapped. Mr. Jasper attended Baltimore City College
and has taken numerous extended courses at Loyola College and Johns Hopkins
University in real estate, appraisals, inspections, financial planning,
mortgages and management.
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, 1999.
Capacities in
which Compensation
Name of Affiliate was Received Remuneration
Common Goal Management fee $21,603
Common Goal Mortgage Mortgage loan $ 3,919
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, 1999.
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 entered into the Joint Venture Loan 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, 1999. For
further information concerning this Mortgage Loan, see "Item 1. Description of
Business" - "Existing Mortgage Loan" - "The Joint Venture Loan.
"The Partnership engages the services of Common Goal Mortgage Company, an
affiliate of the General Partners, in connection with servicing Mortgage Loans
for which Common Goal Mortgage Company is paid a fee. See Item 10, 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.
(2) Financial Statement Schedules
Not applicable.
(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, 1999.
(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 Registrants 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.
<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.
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: April 14, 2000
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 April 14, 2000
- ---------------------- 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 April 14, 2000
- ----------------------- General Partner
Richard R. Wood
/s/ William E. Jasper, Jr. Director of Managing April 14, 2000
- ----------------------- General Partner
William E. Jasper, Jr.
(A Majority of the Board of Directors of the Managing General Partner)
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<PERIOD-END> DEC-31-1999
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<RECEIVABLES> 1,880,542
<ALLOWANCES> 0
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<PP&E> 0
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<TOTAL-ASSETS> 2,262,219
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0
0
<COMMON> 0
<OTHER-SE> 1,924,065
<TOTAL-LIABILITY-AND-EQUITY> 2,262,219
<SALES> 0
<TOTAL-REVENUES> 260,216
<CGS> 0
<TOTAL-COSTS> 93,294
<OTHER-EXPENSES> 0
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