<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
Commission file number 1-9302
FORUM RETIREMENT PARTNERS, L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1686799
------------------------ ----------------
(State of incorporation) (I.R.S. Employer
Identification No.)
8900 Keystone Crossing, Suite 200
Post Office Box 40498
Indianapolis, Indiana 46240-0498
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: 317-846-0700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Preferred Depositary Units American Stock Exchange
Representing Preferred Limited
Partners' Interests
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not 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-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant (excluding units owned by
affiliates of the registrant's general partner): $24,307,714.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Prospectus (the "Subscription
Offering Prospectus") dated January 10, 1994, as supplemented on
February 3, 1994, relating to a subscription offering by the
registrant filed with the Commission as part of Registration
Statement Number 33-71498 on November 10, 1993, (the "1993 Form S-
2"), as amended -- Part I.
There are 33 pages in this Report. The financial statement
and exhibit indices are located at pp. 31-33.
<PAGE>
PART I
Item 1. Business.
Forum Retirement Partners, L.P. (the "Partnership") was
formed in 1986 to own retirement communities ("RCs") originally
developed or acquired by Forum Group, Inc., ("Forum Group"), a
corporation which is a substantial equity owner of the
Partnership and the parent corporation of Forum Retirement, Inc.,
the general partner of the Partnership (the "General Partner").
Partnership Recapitalization. On October 6, 1993, the
Partnership entered into an agreement (the "Recapitalization
Agreement") with Forum Group pursuant to which the Partnership
issued 6.5 million depositary units representing limited
partners' interests in the Partnership ("Preferred Depositary
Units" or "Units") to a subsidiary of Forum Group ("Forum A/H"),
and Forum A/H made a capital contribution to the Partnership of
$13.0 million in the aggregate, or $2.00 per unit. The proceeds
were used to prepay a portion of the Partnership's bank debt
scheduled to mature on December 31, 1993 (the "Bank Credit
Facility").
On December 28, 1993, the Partnership entered into a loan
agreement with Nomura Asset Capital Corporation ("Nomura")
pursuant to which Nomura provided approximately $50,700,000 in
new financing (the "Nomura Loan"). The proceeds of the Nomura
Loan were used to prepay the remaining balances due under the
Bank Credit Facility and under the Partnership's split coupon
first mortgage notes due July 1, 1996 (the "Split Coupon Notes"),
to pay fees and expenses related to the financing and to fund
reserves. The Nomura Loan is secured by first priority mortgages
on the Partnership's nine RCs and by security interests in
substantially all of the Partnership's other assets. For a
description of the principal terms of the Nomura Loan, see Note
(4) of Notes to Consolidated Financial Statements under Item 8.
Pursuant to the Recapitalization Agreement, and to afford
holders of Preferred Depositary Units the opportunity to avoid
the dilution resulting from the issuance of the Preferred
Depositary Units to Forum A/H, on January 10, 1994 the
Partnership commenced a subscription offering pursuant to which
holders of Preferred Depositary Units of record as of the close
of business on October 18, 1993 (other than Forum Group and its
affiliates) were permitted to purchase .07398342 of a Preferred
Depositary Unit for each Preferred Depositary Unit held by them
on October 18, 1993 at a purchase price of $2.00 per Unit.
1,994,189 Preferred Depositary Units were issued in the
subscription offering, which expired on February 25, 1994. In
accordance with the Recapitalization Agreement, the Partnership
used the $3,988,398 of proceeds of the subscription offering to
repurchase 1,994,189 Preferred Depositary Units from Forum A/H at
a purchase price of $2.00 per unit. Following the repurchase
transaction, Forum Group beneficially owned 43.2% of the
outstanding Units, including its 1.0% General Partner's interest.
For additional information relating to the 1993
recapitalization and subscription offering, see the disclosures
contained under the following captions in the Subscription
Offering Prospectus (which disclosures are incorporated herein by
this reference): "Prospectus Summary" (at pp. 4-10), "The
Recapitalization" (at pp. 16-18), "Cash Distribution Policy" (at
pp. 23-24) and "The Subscription Offering" (at pp. 24-27).
Forum Group Reorganization and Recapitalization. On
February 19, 1991, Forum Group and 12 of its affiliates (not
including the Partnership or the General Partner) voluntarily
commenced proceedings under chapter 11 of the United States
Bankruptcy Code (the "Reorganization Proceedings") in the United
States Bankruptcy Court for the Southern District of Indiana,
Indianapolis Division (the "Bankruptcy Court"). In the course of
the Reorganization Proceedings, Forum Group rejected the lease
agreement (the "Lincoln Heights Lease") between Forum Retirement
Operations, L.P., an affiliated operating partnership of the
2
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Partnership ("Operations"), as lessor, and Forum Group, as
lessee, covering The Forum at Lincoln Heights, an RC in San
Antonio, Texas ("Forum/Lincoln Heights"). On February 5, 1993,
the matter was settled pursuant to an agreement (the "Settlement
Agreement") whereby (i) Operations received from Forum Group
$125,000 and 63,612 shares of reorganized Forum Group's common
stock, and (ii) Forum Group agreed to provide the Partnership
certain general and administrative services for compensation in
the amount of $180,000 per year.
Forum Group was recapitalized in June 1993 in a series of
transactions pursuant to which an investor group (the "FGI
Investor Group") obtained beneficial ownership of a majority of
Forum Group's capital stock. Following the recapitalization of
Forum Group, the Board of Directors of the General Partner was
reconstituted. See "Item 3 -- Legal Proceedings" for a
discussion of certain litigation challenging the constitution of
the Board of Directors of the General Partner and the management
agreement entered into in 1986 in connection with the formation
of the Partnership.
Pursuant to agreements entered into in connection with Forum
Group's 1993 recapitalization, on July 27, 1993, the FGI Investor
Group offered to purchase all outstanding shares of Forum Group
common stock for $3.62 per share. Pursuant to that offer,
Operations tendered the shares of Forum Group common stock which
it had received pursuant to the Settlement Agreement and received
$230,275 therefor.
The Board of Directors of the General Partner intends to
consider, among other alternatives, the possible expansion of
certain of its existing RCs to add additional capacity on land
already owned by the Partnership in an effort further to increase
the Partnership's levels of operating income overall by adding
capacity to existing facilities without having to incur
substantial land acquisition and common area build-out costs.
Preliminary evaluations indicate that it may be feasible from an
engineering standpoint to add an aggregate of up to approximately
500 additional independent living, assisted living and nursing
care units to existing RCs, yielding favorable returns to the
Partnership. However, any major expansion or other capital
improvement program could require that the Partnership obtain
additional financing and would affect the Partnership's levels of
distributable cash, if any. Furthermore, such expansions may
require additional regulatory approvals and the modifications of
the Nomura Loan. The Board of Directors also presently intends
to consider other alternative applications of the Partnership's
cash on hand and from operations (if any), including
distributions to Unitholders, repurchases of Units, establishment
of reserves, and other capital expenditures. There can be no
assurance that the Partnership will adopt or be able successfully
to implement any major expansion or other capital improvement
program, as to the timing thereof or as to the effect thereof on
the Partnership's financial position.
See "Item 2 -- Properties" for a discussion of the
Partnership's RCs.
Item 2. Properties.
The Partnership (through an operating partnership) owns RCs
in Delaware (4), Florida, New Mexico, South Carolina and Texas
(2) (collectively, the "Properties"). All of the Properties are
managed by Forum Group pursuant to a management agreement entered
into in 1986 in connection with the formation of the Partnership
under which Forum Group acts as manager (the "Management
Agreement").
Except as described below, each Property contains an
independent living component and a nursing component, and each
Property except Millcroft, Myrtle Beach Manor and Shipley Manor
also includes an assisted living component. One Property (Foulk
Manor) consists of an assisted living component and a nursing
component, and does not contain an independent living component.
Independent living components contain a variety of
accommodations, together with amenities such as dining
facilities, lounges, and game and craft rooms. All residents of
the independent living components are provided security, meals,
3
<PAGE>
and housekeeping and linen service. Routine healthcare service
is available upon demand 24 hours a day from an on-site nursing
staff, and each independent living unit is equipped with an
emergency call system. The independent living components of the
Properties consist of apartments, villas and, in the case of
Foulk Manor North, condominiums. Independent living unit
residency fees presently range from $999 to $3,960 per month,
depending on the size of accommodations. Each apartment and
villa resident enters into a residency agreement that may be
terminated by the resident on short notice. Although there can
be no assurance that available independent living units will be
reoccupied as residency agreements expire or are terminated,
since 1988 at least 80% of the residents of the apartments and
villas have renewed their residency agreements from year to year.
All residents of the independent living components of the
Properties are assured space in the assisted living (if any) and
nursing components should the need therefor arise.
Nursing components provide residents a full range of nursing
care. Residents have private or semiprivate rooms, and share
communal dining and social facilities. In most instances, each
resident of the independent living component of a Property is
entitled to care in the assisted living (if any) or nursing
component at no extra charge for up to a specific number of days
annually or an aggregate of a specified number of days during the
resident's lifetime. After utilizing this accrued time, the
resident pays for both independent living occupancy, and assisted
living or nursing care, until cancelling one or the other. The
charge for a private nursing room presently ranges from $67 to
$160 per day.
Assisted living components provide residents a
semistructured environment that encourages independent living.
Residents have private or semiprivate suites, eat meals in a
private dining room, and are provided the added services of
scheduled activities, housekeeping and linen service, preventive
health surveillance, periodic health monitoring, assistance with
activities of daily living and emergency care. The charge for a
private assisted living suite presently ranges from $46 to $125
per day.
The Properties provide ancillary healthcare services,
including the operation of an adult day care center on the
premises of one RC, and the placement of private duty registered
nurses, licensed practical nurses and nursing technicians.
The following table indicates the name and location, current
capacity, average occupancy rate for each of the last five years
and average effective annual fees/charges per unit/suite/bed for
each of the last five years for each Property:
4
<PAGE>
<TABLE>
<CAPTION>
________Capacity__________
Inde-
pendent Assisted Total
Living Living Nursing Units/ Occupancy Rate
Name and Location Units Suites Beds Suites/Beds 1993 1992 1991 1990 1989
- ---------------------------- ------- -------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Forum at Lincoln Heights 152 30 60 242 94.0% 86.8% 68.5% 56.3% 17.1%
San Antonio, Texas
Foulk Manor -0- 51 52 103 83.5% 80.2% 70.9% 83.5% 87.0%
Wilmington, Delaware
Foulk Manor North 58 11 46 115 90.9% 89.9% 88.1% 82.7% 84.6%
Wilmington, Delaware
Millcroft 63 -0- 100 163 92.1% 90.6% 87.9% 90.0% 93.6%
Newark, Delaware
The Montebello on Academy 114 15 60 189 96.1% 90.1% 85.0% 87.4% 80.8%
Albuquerque, New Mexico
The Montevista at Coronado 123 15 120 258 85.5% 81.6% 81.1% 74.3% 58.9%
El Paso, Texas
Myrtle Beach Manor 61 -0- 80 141 93.6% 89.9% 79.4% 86.1% 88.6%
Myrtle Beach,
South Carolina
The Park Summit of Coral 199 22 35 256 89.7% 81.7% 76.3% 76.3% 77.4%
Springs
Coral Springs, Florida
Shipley Manor 61 -0- 82 143 93.3% 85.8% 85.9% 90.8% 90.7%
Wilmington, Delaware
<CAPTION>
Average Effective Annual
Fees/Charges Per Unit/Suite/Bed
Name and Location 1993 1992 1991 1990 1989
- ---------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
The Forum at Lincoln Heights $27,417 $26,366 $18,858 $22,779 $10,190
San Antonio, Texas
Foulk Manor $29,941 $30,149 $31,512 $29,583 $26,735
Wilmington, Delaware
Foulk Manor North $29,175 $28,322 $26,711 $25,678 $23,601
Wilmington, Delaware
Millcroft $28,804 $27,803 $27,087 $25,071 $23,308
Newark, Delaware
The Montebello on Academy $27,530 $27,426 $25,722 $24,804 $24,815
Albuquerque, New Mexico
The Montevista at Coronado $24,081 $22,588 $20,321 $19,823 $17,690
El Paso, Texas
Myrtle Beach Manor $23,061 $21,813 $20,752 $19,349 $17,872
Myrtle Beach,
South Carolina
The Park Summit of Coral $24,602 $24,687 $25,072 $24,177 $21,596
Springs
Coral Springs, Florida
Shipley Manor $29,704 $29,501 $29,396 $26,655 $24,826
Wilmington, Delaware
</TABLE>
5
<PAGE>
Mortgages
The Properties are subject to first mortgages securing
outstandings under the Nomura Loan. The current principal amount
outstanding under the Nomura Loan is approximately $50,700,000,
and borrowings under the Nomura Loan bear interest at 9.93% per
annum (assuming a servicing cost of 0.2% per annum). See Item 1,
"Business", and Note 4 of Notes to Consolidated Financial
Statements filed under Item 8 for additional information
regarding the Nomura Loan.
Depreciation
The following table indicates, with respect to each
component of each Property upon which depreciation is taken, the
federal tax basis, rate, method and life claimed with respect to
such component for purposes of depreciation:
<TABLE>
<CAPTION>
Net
Federal
Tax Basis Life
Name and Location Component (12/31/93) Rate Method* (Years)
- --------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C>
The Forum at Real property $17,134,913 2.5-5% SL 20-40
Lincoln Heights Personal property 661,763 10-20% SL/ADS 5-10
San Antonio, Texas
Foulk Manor Real property 2,244,649 2.5-5.3% SL 19-40
Wilmington, Delaware Personal property 207,623 10-20% SL/ADS 5-10
Foulk Manor North Real property 2,290,215 2.5-5.3% SL 19-40
Wilmington, Delaware Personal property 246,801 10-20% SL/ADS 5-10
Millcroft Real property 4,443,859 2.5-6.7% SL 15-40
Newark, Delaware Personal property 245,059 10-20% SL/ADS 5-10
The Montebello Real property 6,966,117 2.5-6.7% SL 15-40
on Academy Personal property 152,622 10-20% SL/ADS 5-10
Albuquerque, New Mexico
The Montevista Real property 12,101,733 2.5-5% SL 20-40
at Coronado Personal property 1,497,135 10-20% SL/ADS 5-10
El Paso, Texas
Myrtle Beach Manor Real property 2,407,524 2.5-5.3% SL 19-40
Myrtle Beach, Personal property 222,172 10-20% SL/ADS 5-10
South Carolina
The Park Summit of Real property 9,328,240 2.5-6.7% SL 15-40
Coral Springs Personal property 385,211 10-20% SL/ADS 5-10
Coral Springs, Florida
Shipley Manor Real property 4,850,825 2.5-6.7% SL 15-40
Wilmington, Delaware Personal property 190,007 10-20% SL/ADS 5-10
<FN>
________________________________________
* ADS = Alternative depreciation system
SL = Straight line
</TABLE>
6
<PAGE>
Real Estate Taxes
The following table indicates, with respect to each
Property, the assessed value, real estate tax rate and annual
real estate taxes for 1993:
<TABLE>
<CAPTION>
Assessed Real Estate Annual Real
Name and Location Value Tax Rate Estate Taxes
---------------------------------------------------------------------
<S> <C> <C> <C>
The Forum at Lincoln Heights
San Antonio, Texas $13,000,000 2.76% $ 358,962
Foulk Manor
Wilmington, Delaware 2,247,600 1.18% 26,586
Foulk Manor North
Wilmington, Delaware 4,093,200 1.18% 48,417
Millcroft
Newark, Delaware 6,352,000 1.40% 88,790
The Montebello on Academy
Albuquerque, New Mexico 6,215,237 1.27% 78,961
The Montevista at Coronado
El Paso, Texas 5,099,392 2.52% 128,500
Myrtle Beach Manor
Myrtle Beach, South
Carolina 4,448,800 1.07% 47,780
The Park Summit of Coral
Springs
Coral Springs, Florida 12,240,000 2.45% 300,235
Shipley Manor
Wilmington, Delaware 5,274,800 1.18% 62,395
---------- ---- -------
$58,971,029 1.93%* $1,140,626
=========== ==== =========
<FN>
-------------------------
*Weighted average real estate tax rate
</TABLE>
Sources of Payment
The independent and assisted living components (if any)
of the Properties receive direct payment for resident occupancy
solely on a private pay basis. The nursing components of the
Properties receive payment for resident care directly on a
private pay basis, including payment from private health
insurance, and from governmental reimbursement programs such as
the federal Medicare program for certain elderly and disabled
residents, and state Medicaid programs for certain medically
indigent residents. The following table indicates the
approximate percentages of operating revenues for each of the
last five years derived by the Partnership from private sources,
and Medicare and Medicaid:
7
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Independent and
Assisted Living
Components
---------------
Source 1993 1992 1991 1990 1989
------------ --------------------------------
Private 100% 100% 100% 100% 100%
Medicare and Medicaid -0- -0- -0- -0- -0-
--------------------------------
Total 100% 100% 100% 100% 100%
================================
Nursing Components
------------------
1993 1992 1991 1990 1989
--------------------------------
Private 69% 72% 77% 73% 78%
Medicare and Medicaid 31% 28% 23% 27% 22%
--------------------------------
Total 100% 100% 100% 100% 100%
================================
Total RCs
---------
1993 1992 1991 1990 1989
--------------------------------
Private 85% 86% 89% 87% 91%
Medicare and Medicaid 15% 14% 11% 13% 9%
--------------------------------
Total 100% 100% 100% 100% 100%
================================
Most private insurance carriers reimburse their
policyholders, or make direct payment to facilities, for covered
services at rates established by the facilities. Where
applicable, the resident is responsible for any difference
between the insurance proceeds and the total charges. In certain
states, Blue Cross plans pay for covered services at rates
negotiated with facilities. In other states, Blue Cross plans
are administered under contracts with facilities providing for
payment under formulae based on the cost of services. The
Medicare program also makes payment under a cost-based
reimbursement formula. Under the Medicaid program, each state is
responsible for developing and administering its own
reimbursement formula.
Within the statutory framework of the Medicare and
Medicaid programs, there are substantial areas subject to
administrative rulings, interpretations and discretion which
affect payment made under those programs. In addition, the
federal and state governments might reduce the funds available
under those programs in the future or require more stringent
utilization of healthcare facilities. Those measures could
adversely affect the Partnership's future revenues and,
therefore, the value of the Properties.
At any given time, there are numerous federal and state
legislative proposals relating to the funding and reimbursement
of healthcare costs. It is difficult to predict whether those
proposals will be adopted or the form in which they might be
adopted. In January, 1993, President Clinton established the Task
Force on National Health Care Reform (the "Task Force"). The
Task Force was charged with preparing health care reform
legislation to be presented to Congress. Among the stated
concerns considered by the Task Force were the means to control
or reduce public and private spending on health care, to reform
the payment methodology for healthcare goods and services by both
the public (Medicare and Medicaid) and private sectors and to
provide universal access to health care. The Task Force has
presented its report and recommendations to the Administration,
and the Administration has recently proposed legislation to
Congress. The Partnership cannot predict the effect the Task
8
<PAGE>
Force's report and recommendations or the proposed legislation
may have on its business, and no assurance can be given that any
such report and recommendations or the proposed legislation will
not have a material adverse effect on the Partnership. Various
other legislative and industry groups are studying numerous
healthcare issues, including access, delivery and financing of
long-term health care, and at any given time there are numerous
federal and state legislative proposals relating to the funding
and reimbursement of healthcare costs. It is difficult to
predict whether these proposals will be adopted or the form in
which they might be adopted, and no assurance can be given that
any such legislation, if adopted, would not have a material
effect on the Partnership.
Regulation and Other Factors
Healthcare facility operations are subject to federal, state
and local government regulations. Facilities are subject to
periodic inspection by state licensing agencies to determine
whether the standards necessary for continued licensure are
maintained. In granting and renewing licenses, the state
agencies consider, among other things, buildings, furniture and
equipment; qualifications of administrative personnel and staff;
quality of care; and compliance with laws and regulations
relating to operation of facilities. State licensure of a
nursing facility is a prerequisite to certification for
participation in the Medicare and Medicaid programs. Requirements
for licensure of assisted living components are generally less
comprehensive and stringent than requirements for licensure of
nursing facilities. Most states do not have licensure
requirements for the independent living components of RCs. The
Properties are presently in substantial compliance with all
applicable federal, state and local regulations with respect to
licensure requirements. However, because those requirements are
subject to change, there can be no assurance that the Properties
will be able to maintain their licenses upon a change in
standards, and future changes in those standards could
necessitate substantial expenditures by the Partnership to comply
therewith.
Competition
The Properties compete with long-term healthcare
facilities of varying similarity in the respective geographical
market areas in which the Properties are located. Competing
facilities are operated on a national, regional and local basis
by religious groups and other nonprofit organizations, as well as
by private operators, some of which have substantially greater
resources than the Partnership. The independent living
components of the Properties face competition from all the
various types of residential opportunities available to the
elderly. However, the number of RCs that offer on-premises
healthcare services is limited. The assisted living and nursing
components of the Properties compete with other assisted living
and nursing facilities, and, to a lesser extent, with general
hospitals. Because the target market segment of the Properties
(i.e., full-service RCs) is relatively narrow, the risk of
competition may be higher than with some other types of RCs.
Additionally, the Properties may be subject to competition from
new RCs, and assisted living and nursing facilities, developed in
close proximity to them.
Significant competitive factors for attracting
residents to the independent living components of the Properties
include price, physical appearance, and amenities and services
offered. Additional competitive factors for attracting residents
to the assisted living and nursing components of the Properties
include quality of care, reputation, physician and nursing
services available, and family preferences. The Partnership
believes that its RCs rate high in each of these categories,
except that its RCs are generally more expensive than competing
facilities. The assisted living and nursing components of the
Properties are designed to supplement, not to compete with,
healthcare services provided by general hospitals.
Insurance
The Partnership maintains professional liability,
comprehensive general liability and other typical insurance
coverage on all its RCs. The Partnership believes that its
insurance is adequate in amount and coverage.
9
<PAGE>
Item 3. Legal Proceedings.
On January 24, 1994, the Russell F. Knapp Revokable
Trust (the "Plaintiff"), filed a complaint (the "Complaint") in
the United States District Court for the Northern District of
Iowa against the General Partner alleging breach of the
Partnership Agreement, breach of fiduciary duty, fraud and civil
conspiracy. On March 17, 1994, the Plaintiff amended the
Complaint, adding Forum Group as a defendant. The Complaint
alleges, among other things, that the Plaintiff holds a
substantial number of Units, that the Board of Directors of the
General Partner is not comprised of a majority of independent
directors, as required by the Partnership Agreement and as
allegedly represented in the Partnership's 1986 Prospectus for
its initial public offering and that the General Partner's Board
of Directors has approved and/or acquiesced in 8% management fees
being charged by Forum Group under the Management Agreement. The
Complaint further alleges that the "industry standard" for such
fees is 4% thereby resulting in an "overcharge" to the
Partnership estimated by the Plaintiff at $1.8 million per annum,
beginning in 1994. The Plaintiff is seeking the restoration of
certain former directors to the Board of Directors of the General
Partner and the removal of certain other directors from that
Board, an injunction prohibiting the payment of 8% management
fees and unspecified compensatory and punitive damages.
The General Partner believes that the allegations in
the Complaint are without merit and intends vigorously to defend
against this litigation.
Pursuant to the Management Agreement, management fees
payable to Forum Group for periods from the formation of the
Partnership in 1986 to December 31, 1993 were deferred. Such
deferred fees will become payable only if certain conditions
occur. Under the terms of the Management Agreement entered into
in connection with the formation of the Partnership in 1986, and
as disclosed in the Partnership's 1986 Prospectus, Forum Group's
management fees for periods after December 31, 1993 will not be
deferred. See Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further
discussion of the Management Agreement.
Item 4. Submission of Matters to a Vote of Security
Holders.
No matter was submitted during 1993 to a vote of
security holders.
PART II
Item 5. Market for Partnership's Common Equity and Related
Stockholder Matters.
(a) Market Information. The principal United
States market in which Units are being traded is the American
Stock Exchange (symbol:FRL).
The high and low sales prices for Units for each
full quarterly period within the two most recent fiscal years, as
reported in the consolidated transaction reporting system, were
as follows:
1993 HIGH LOW
---- ---- ---
Quarter ended March 31, 1993 1 11/16
Quarter ended June 30, 1993 2-1/16 1
Quarter ended September 30, 1993 2 1-1/8
Quarter ended December 31, 1993 3-1/16 1-3/4
10
<PAGE>
1992
----
Quarter ended March 31, 1992 15/16 3/8
Quarter ended June 30, 1992 13/16 3/8
Quarter ended September 30, 1992 5/8 5/16
Quarter ended December 31, 1992 7/8 1/4
(b) Holders. The approximate number of record
holders of Units as of March 15, 1994, was 1,143.
(c) Dividends. The Partnership has not made any
distributions on Preferred Depositary Units for 1993, 1992 and
1991. However, with the continued improvements in the
Partnership's operating results and the completion of the
Recapitalization in the fourth quarter of 1993, the Partnership
presently expects to have positive cash flow commencing in 1994.
There necessarily can be no assurance that operating results will
continue to improve or as to whether or when, or at what levels,
any future cash distributions to holders of Units will be made.
See "Cash Distribution Policy": (at pp. 23-24) in the
Subscription Offering Prospectus (which disclosure is
incorporated herein by this reference) for a discussion of the
Partnership's cash distribution policy; and "Item 1 -- Expansion
of RCs" for a discussion of possible cash needs for expansions of
the Partnership's RCs.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Years ended December 31
1993 1992 1991 1990 1989
----------------------------------------
(in thousands except per Unit amounts)
<S> <C> <C> <C> <C> <C>
Total revenues $44,176 $41,950 $43,101 $29,243 $28,793
Loss before extraordinary
charge $1,762 $6,112 $23,431 $2,466 $1,067
Extraordinary charge - early
extinguishment of debt $2,917 $-0- $-0- $-0- $-0-
Net loss $4,679 $6,112 $23,431 $2,466 $1,067
General Partner's interest
in net loss $47 $61 $234 $25 $11
Limited partners' interest
in net loss $4,632 $6,051 $23,197 $2,441 $1,056
Average number of Units
outstanding 10,317 8,785 8,785 8,754 8,535
Loss per Unit:
Loss before extraordinary
charge $0.17 $0.69 $2.64 $0.28 $0.12
Extraordinary charge $0.28 $-0- $-0- $-0- $-0-
Net loss per Unit $0.45 $0.69 $2.64 $0.28 $0.12
Cash flow from operations
as adjusted* $4,285* $519* $294* $4,881* $1,397*
Total assets $110,480 $109,767 $127,945 $145,684 $147,200
Long-term obligations $51,339 $59,893 $75,594 $72,456 $68,174
Partners' equity $38,386 $30,187 $36,299 $59,730 $63,418
Cash distributions declared:
Per Preferred Unit $ --- $ --- $ --- $ --- $1.51
Per Common Unit ** $ --- $ --- $ --- $ --- $0.1
Per Unit $ --- $ --- $ --- $0.40 $ ---
<FN>
See notes to selected financial data on next page.
11
<PAGE>
* Cash flow from operations, as adjusted, reflects the
net cash flow generated by the operations of the
partnership for the indicated periods, adjusted as
described below. Management fees have been deferred
during these periods and therefore have not been paid
from the cash flow from operations. The amounts of
deferred management fees (in thousands) for the
periods covered above were: 1993: $3,516,000; 1992:
$3,337,000; 1991: $3,391,000; 1990: $1,615,000 and
1989: $1,595,000. Beginning in January, 1994,
management fees will become due and payable on a
current basis and will therefore reduce cash flows
from operations. The computation of the cash flow
from operations, as adjusted, is computed by
subtracting property and equipment additions and
principal amortization of Long Term Debt from the "Net
cash provided by operating activities" in the
Consolidated Statements of Cash Flows and adjusting
for changes in accrued revenues and expenses, net
included therein. Accordingly, cash flow from
operations, as adjusted, does not represent cash flow
provided by operating activities as defined by
generally accepted accounting principles, should not
be considered as an alternative to net income as an
indicator of the Partnership's operating performance
and is not indicative of cash available to fund all
cash flow needs. See "Item 8 -- Financial Statements
and Supplementary Data" for the Partnership's
Consolidated Statements of Cash Flows.
** On January 1, 1990 Common Units became equivalent
to Preferred Units and the capital account balance
attributable to each Common Unit was adjusted to be
equal to the capital account balance attributable to
each Preferred Unit.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations.
Introduction. At December 31, 1993, the Partnership owned
nine RCs, all of which were managed by Forum Group. Operating
revenues and operating income (operating revenues less operating
expenses) for the year then ended, on a comparable RC basis, were
$4,355,000 (11%) and $2,794,000 (32%), respectively, higher than
1992. Combined occupancy at December 31, 1993, was 94%, compared
to 90% at December 31, 1992.
The year ended December 31, 1993 produced a net loss of
$4,679,000 compared to a net loss of $6,112,000 for 1992. The
loss for the year ended December 31, 1993 includes an
extraordinary charge in the amount of $2,917,000 related to the
early extinguishment of debt.
On March 26, 1992, the Partnership sold the business and
substantially all of the assets of The Lafayette/Philadelphia, an
RC located in Philadelphia, Pennsylvania ("The Lafayette"), for
$17,000,000. Approximately $16,000,000 of the proceeds were used
to repay a portion of the indebtedness under the Partnership's
then-outstanding Split Coupon Notes.
The Partnership has incurred net losses consistently since
its formation in 1986. However, the Partnership's operating
results improved substantially in 1993 compared to 1992.
Excluding the effects of the sale of The Lafayette in the first
quarter of 1992 and the effects of the write-off of deferred
financing costs in connection with the Partnership's
recapitalization on refinancing described below and certain other
fees and expenses and reserves relating thereto, in 1993 the
Partnership's RCs' operating revenues increased 11% over
operating revenue for the comparable period in 1992 and the
Partnership's net operating income (operating revenues less
operating expenses) for 1993 was 32% higher than its net
operating income for 1992.
The improvement in operating revenue was attributable both
to improved occupancy rates for the Partnership's RCs during 1993
12
<PAGE>
and to increases in the amount of revenue generated per occupied
unit. Average occupancy of the Properties for 1993 was 91.1% as
compared to average occupancy of 85.9% for 1992, and average
revenue per occupied unit for the same periods has improved from
$26,052 to $27,156. Because many of the Partnership's operating
expenses are fixed, a substantial portion of incremental revenues
generated by improvements in occupancy are expected to flow-
through to increase the Partnership's net operating income. In
light of the large and growing segment of the U.S. population
which is 75 years of age and older and the low levels of
construction of new RCs and other competitive properties during
the 1990's compared to the high levels of RC and other real
estate construction and development in the 1980's, management of
the Partnership presently expects the recent increases in
occupancy levels and billing rates and, therefore, in net
operating income, to be sustainable, although there necessarily
can be no assurance with respect thereto.
Management of the Partnership is implementing various
systems designed to control and, in some instances, decrease
operating expenses. In addition, as discussed below, on December
28, 1993, the Partnership refinanced its long-term indebtedness
on terms that reduce the Partnership's overall level of
indebtedness and total required debt service payments during the
term of the new loan. However, pursuant to the terms of the
Management Agreement between the Partnership and Forum Group,
management fees (based on the Partnership's gross operating
revenues) payable to Forum Group for all periods from the
formation of the Partnership in 1986 to December 31, 1993 have
been deferred. Management fees payable for periods after
December 31, 1993 will not be deferred.
The Partnership has not made any distributions on Preferred
Depositary Units for 1993, 1992 and 1991. However, with the
continued improvements in the Partnership's operating results and
the completion of the Refinancing in the fourth quarter of 1993,
the Partnership presently expects to have positive cash flow
commencing in 1994. There necessarily can be no assurance that
operating results will continue to improve or as to whether or
when, or at what levels, any distributions will be made. As
discussed above, the Board of Directors of the General Partner
intends to consider the possible expansion of certain of its RCs
as well as other alterations intended to increase the
Partnership's levels of operating income. Implementation of this
strategy may affect the Partnership's levels of distributable
cash, if any. See "Item 1 - Business" for a discussion of
alternative strategies which the Board of Directors of the
General Partner intends to consider.
Operating Revenues. Operating revenues for the year ended
December 31, 1993 increased by $2,149,000 (5%) compared to
operating revenues for 1992. Operating revenues for the year
ended December 31, 1992 included $2,206,000 from the operation of
The Lafayette. The remaining change (increase of $4,355,000) is
primarily attributable to increases in occupancy, residency fees
and charges.
Operating revenues for the year ended December 31, 1992
decreased by $577,000 (1%) compared to operating revenues for
1991. Operating revenues for the year ended December 31, 1991,
did not include $1,423,000 from the operation of Forum/Lincoln
Heights through April 30, 1991. Operating revenues for the years
ended December 31, 1991, and December 31, 1992, included
$8,440,000 and $2,206,000, respectively, from the operation of
The Lafayette. After adjusting for these inter-period
inconsistencies in the Partnership's RC portfolio by adding
Forum/Lincoln Heights' 1991 operating revenue and deleting The
Lafayette's operating revenue for both 1991 and 1992, the
remaining change (increase of $4,234,000) is primarily
attributable to increases in occupancy, residency fees and
charges.
A change in the estimate of amounts reimbursable by third
party payors from prior years resulted in the recognition of
$379,000 of additional operating revenues in the year ended
December 31, 1993.
13
<PAGE>
Operating Expenses. Operating expenses, including management
fees and depreciation for the year ended December 31, 1993
decreased by $760,000 (2%) compared to 1992. Those expenses for
the year ended December 31, 1992 included $2,286,000 from the
operation of The Lafayette. The remaining change (increase of
$1,526,000) is primarily attributable to increases in occupancy
combined with normal inflationary increases in other operating
expenses.
Operating expenses, including management fees and
depreciation, for the year ended December 31, 1992 decreased by
$2,400,000 (6%) compared to operating expenses for 1991. For the
year ended December 31, 1991, those expenses did not include
$1,318,000 from the operation of Forum/Lincoln Heights through
April 30, 1991. Those expenses for the years ended December 31,
1991, and December 31, 1992, included $8,251,000 and $2,286,000,
respectively, from the operation of The Lafayette. After
adjusting for these inter-period inconsistencies in the
Partnership's RC portfolio by adding Forum/Lincoln Heights' 1991
operating expenses and deleting The Lafayette's operating
expenses for both 1991 and 1992, the remaining change (increase
of $2,049,000) is primarily attributable to increases in
occupancy combined with normal inflationary increases in other
operating expenses.
Pursuant to the terms of the Management Agreement as in
effect since the Partnership's formation in 1986, management fees
(based on the Partnership's gross operating revenues) payable to
Forum Group for all periods prior to 1994 have been deferred.
Such fees accruing after January 1, 1994 will not be deferred.
The deferred management fees were expensed in the Partnership's
statements of operations and reflected on a deferred basis in the
Partnership's balance sheets for the relevant periods.
Accordingly, except for variations in management fees payable
resulting from variations in revenue levels, the commencement of
the current payment of such fees for periods after January 1,
1994 will not affect the Partnership's operating or net income as
compared to prior periods, although it will affect the
Partnership's cash position.
Interest Expense. Total interest expense for the year ended
December 31, 1993 decreased by $1,404,000 compared to total
interest expense for 1992, due principally to a reduction in the
principal amount of long-term debt.
Total interest expense for the year ended December 31, 1992,
decreased by $1,385,000 compared to total interest expense for
1991, due principally to (i) a reduction in long-term debt as a
result of the sale of The Lafayette and (ii) lower interest rates
during 1992.
Income Taxes. The Omnibus Budget Reconciliation Act of 1987
provides that certain publicly traded partnerships will be
treated as corporations for federal income tax purposes. A
grandfather provision delays corporate tax status until 1998 for
publicly-traded partnerships in existence prior to December 18,
1987. On August 8, 1988, the General Partner was authorized by
the limited partners to do all things deemed necessary or
desirable to insure that the Partnership is not treated as a
corporation for federal income tax purposes. Alternatives
available to avoid corporate taxation after 1998 include: (i)
selling or otherwise disposing of all or substantially all of the
Partnership's assets pursuant to a plan of liquidation, (ii)
converting the Partnership into a real estate investment trust or
other type of legal entity, and (iii) restructuring the
Partnership to qualify as a partnership primarily with passive
rental income. While the Partnership presently intends to avoid
being taxed as a corporation for federal income tax purposes,
there can be no assurance that it will be successful.
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Implementation of that Statement has not had
a material effect on the Partnership.
14
<PAGE>
Financial Condition
Recapitalization. Pursuant to the Recapitalization
Agreement, $13 million of additional equity was provided to the
Partnership by a subsidiary of Forum Group which purchased 6.5
million Units at a price of $2.00 per Unit. That additional
equity, together with the Nomura Loan (described below), allowed
the Partnership to refinance its indebtedness.
As required by the Recapitalization Agreement, the
Partnership made a subscription offering whereby Unitholders of
record as of October 18, 1993 (other than Forum Group and its
affiliates) had the right to acquire additional Units at $2.00
per Unit, the same price paid by the Forum Group subsidiary in
order to avoid dilution to their ownership interests caused by
the recapitalization. As a result of the subscription offering,
subscriptions were received for 1,994,189 Units, the proceeds
which were used to repurchase 1,994,189 Units from the Forum
Group subsidiary at the same price paid by that subsidiary.
Forum Group's percentage ownership in the Partnership is now
approximately 43.2%, including the 1% General Partner's interest
which it beneficially owns.
Liquidity and Capital Resources. On December 28, 1993, the
Partnership entered into a loan agreement with Nomura for
$50,700,000 in new financing. The Nomura Loan bears interest at
the rate of 9.93% per annum (assuming a 0.20% servicing fee), is
amortized over a 20-year period and matures on January 1, 2001.
The proceeds of the Nomura Loan were used to repay in full (i)
the approximately $9.5 million remaining principal balance of the
debt under the Bank Credit Facility, which would have matured on
December 31, 1993 and (ii) approximately $34.1 million aggregate
principal amount of the Split Coupon Notes, which would have
matured June 30, 1996, and to pay related fees and expenses.
As discussed above, the discontinuation of the deferral of
management fees commencing on January 1, 1994 will affect the
Partnership's cash position. Deferred management fees are
payable to Forum Group out of proceeds of sales and refinancings
after making distributions of those proceeds in an amount
sufficient (i) to meet limited partners' tax liabilities, (ii) to
repay limited partners' capital contributions, and (iii) to pay a
12% cumulative, simple annual return on limited partners'
unrecovered capital contributions. Deferred management fees
become immediately due and payable in the event that the
Management Agreement is terminated, which may occur under certain
conditions, including if Forum Retirement, Inc. is removed as the
General Partner of the Partnership and 80% in interest of the
limited partners vote to terminate such agreement. The
Partnership is unable to determine when or if deferred management
fees will be paid.
For additional discussion of the Management Agreement, see.
"Management Agreement" of the Subscription Offering Prospectus
(at pp. 33-35).
Operating activities provided $1,841,000 less cash during
the year ended December 31, 1993 than during 1992. Normal
operating activities provided $48,000 less $1,889,000 used to pay
real estate taxes and accrued interest during December, 1993 in
connection with the refinancing discussed above.
Investing activities provided $17,092,000 less cash during
the year ended December 31, 1993 than during 1992, due
principally to the sale of The Lafayette.
Financing activities used $15,908,000 less cash during the
year ended December 31, 1993 than during 1992, due principally to
the application of the net proceeds of the sale of The Lafayette
to pay principal of the Split Coupon Notes.
15
<PAGE>
Inflation. Management does not believe that inflation has
had a material effect on net operating income. To the extent
possible, increased costs are recovered through increased
residency fees and charges. Marketing efforts are being
continued to improve move-ins and overall occupancy rates.
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements are filed
under this Item:
Page(s)
Independent Auditors' Report..................................17
Consolidated Balance Sheets - December 31, 1993 and 1992.....18
Consolidated Statements of Operations -
Years ended December 31, 1993, 1992 and 1991................19
Consolidated Statements of Partners'
Equity - Years ended December 31, 1993, 1992 and 1991....20
Consolidated Statements of Cash Flows -
Years ended December 31, 1993, 1992 and 1991................21
Notes to Consolidated Financial Statements...............22 - 26
16
<PAGE>
Independent Auditors' Report
- ----------------------------
The Partners
Forum Retirement Partners, L.P.:
We have audited the accompanying consolidated balance sheets of
Forum Retirement Partners, L.P. and subsidiary partnerships as of
December 31, 1993 and 1992 and the related consolidated
statements of operations, partners' equity and cash flows for
each of the years in the three-year period ended December 31,
1993. These consolidated financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Forum Retirement Partners, L.P. and subsidiary
partnerships as of December 31, 1993 and 1992 and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1993 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick
Indianapolis, Indiana
February 1, 1994
17
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Consolidated Balance Sheets
December 31, 1993 and 1992
(in thousands)
Assets 1993 1992
------ ---- ----
Property and equipment:
Land $ 14,572 14,501
Buildings 96,473 95,680
Furniture and equipment 7,739 7,393
------- -------
118,784 117,574
Less accumulated depreciation 20,519 17,163
------- -------
Net property and equipment 98,265 100,411
Cash and cash equivalents 4,700 4,888
Accounts receivable, less allowance for
doubtful accounts of $126 and $86 2,274 707
Amounts receivable from parent of
general partner - 225
Restricted cash 1,719 1,893
Deferred financing costs, net of accumulated
amortization of $2,186 in 1992 2,339 943
Other assets 1,183 700
------- -------
$ 110,480 109,767
======= =======
Liabilities and Partners' Equity
--------------------------------
Long-term debt, including $773 and $24,975
due within one year 50,707 59,045
Accounts payable and accrued expenses 3,402 5,539
Amounts due to parent of general partner 638 1,286
Deferred management fees due to parent of
general partner 15,780 12,264
Resident deposits 1,341 1,211
------- -------
Total liabilities 71,868 79,345
------- -------
General partner's equity in subsidiary
partnerships 226 235
------- -------
Partners' equity:
General partner 490 409
Limited partners (15,285 and 8,785 units
issued and outstanding) 37,896 29,778
------- -------
Total partners' equity 38,386 30,187
------- -------
$ 110,480 109,767
======= =======
See accompanying Notes to Consolidated Financial Statements.
18
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Consolidated Statements of Operations
Years ended December 31, 1993, 1992 and 1991
(in thousands except per unit amounts)
1993 1992 1991
---- ---- ----
Revenues:
Operating revenues $ 43,797 41,648 42,225
Rental income from parent of
general partner - - 588
Other income 379 302 288
------ ------ ------
Total revenues 44,176 41,950 43,101
------ ------ ------
Costs and expenses:
Operating expenses 32,969 33,873 35,595
Management fees to parent of
general partner 3,516 3,337 3,391
Depreciation 3,356 3,391 4,035
Interest, including amounts to parent
of general partner of $50, $68 and $77 6,106 7,510 8,895
Reduction in carrying value of
properties - - 14,850
------ ------ ------
Total costs and expenses 45,947 48,111 66,766
------ ------ ------
Loss before general partner's interest
in loss of subsidiary partnerships
and extraordinary charge 1,771 6,161 23,665
General partner's interest in loss of
subsidiary partnerships 9 49 234
------ ------ ------
Loss before extraordinary charge 1,762 6,112 23,431
Extraordinary charge - early
extinguishment of debt 2,917 - -
------ ------ ------
Net loss 4,679 6,112 23,431
General partner's interest in net loss 47 61 234
------ ------ ------
Limited partners' interest in net loss $ 4,632 6,051 23,197
====== ====== ======
Average number of units outstanding 10,317 8,785 8,785
====== ====== ======
Loss per unit:
Loss before extraordinary charge $ 0.17 0.69 2.64
Extraordinary charge 0.28 - -
---- ---- ----
Net loss $ 0.45 0.69 2.64
==== ==== ====
See accompanying Notes to Consolidated Financial Statements.
19
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Consolidated Statements of Partners' Equity
Years ended December 31, 1993, 1992 and 1991
(in thousands)
General Limited
partner partners
------- --------
Balances at January 1, 1991 $ 704 59,026
Net loss (234) (23,197)
----- -------
Balances at December 31, 1991 470 35,829
Net loss (61) (6,051)
----- -------
Balances at December 31, 1992 409 29,778
Capital contributions from issuance of
6,500 units, net of offering costs of $253 128 12,750
Net loss (47) (4,632)
----- -------
Balances at December 31, 1993 $ 490 37,896
===== =======
Accumulated balances:
Capital contributions 1,173 116,279
Offering expenses (3) (6,625)
Cash distributions (255) (29,679)
Accumulated losses (425) (42,079)
----- -------
Balances at December 31, 1993 $ 490 37,896
===== =======
See accompanying Notes to Consolidated Financial Statements.
20
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
(in thousands)
1993 1992 1991
---- ---- ----
Cash flows from operating activities:
Net loss $ (4,679) (6,112)(23,431)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property and equipment 3,356 3,391 4,035
Amortization of deferred financing costs 479 339 517
Amortization of discount on long-term debt - 1,433 2,629
Extraordinary charge 2,917 - -
Deferred management fees due to parent of
general partner 3,516 3,337 3,391
Reduction in carrying value of properties - - 14,850
Accrued revenues and expenses, net (4,210) 1,125 1,929
Other 121 (172) (124)
------ ------ ------
Net cash provided by operating activities 1,500 3,341 3,796
------ ------ ------
Cash flows from investing activities:
Additions to property and equipment (1,210) (813) (1,232)
Proceeds from sale of retirement community - 16,695 -
------ ------ ------
Net cash provided (used) by investing
activities (1,210) 15,882 (1,232)
------ ------ ------
Cash flows from financing activities:
Reduction of long-term debt (59,260)(17,134) (341)
Proceeds from long-term debt 50,707 - 850
Yield maintenance premium and other expenses
in connection with refinancing (2,602) - -
Deferred financing costs (2,436) (95) (14)
Capital contributions, net 12,939 - -
Payment of deferred purchase price to parent of
general partner - - (620)
Cash distributions to partners - - (799)
Net decrease (increase) in restricted cash 174 843 (550)
------ ------ ------
Net cash used by financing activities (478)(16,386) (1,474)
------ ------ ------
Net increase (decrease) in cash and cash equivalents (188) 2,837 1,090
Cash and cash equivalents at beginning of year 4,888 2,051 961
------ ------ ------
Cash and cash equivalents at end of year $ 4,700 4,888 2,051
====== ====== ======
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1993 and 1992
(1)Summary of Significant Accounting Policies
------------------------------------------
Organization
------------
Forum Retirement Partners, L.P. and a subsidiary partnership
(the "Partnership") own nine retirement communities ("RCs")
which were acquired from Forum Group, Inc. ("Forum Group").
Forum Group was engaged to manage, and continues to manage,
the RCs for the Partnership.
The general partner of the Partnership, a wholly owned
subsidiary of Forum Group, receives 1% of all distributions
of net cash flow until the limited partners receive
cumulative distributions equal to a 12% cumulative annual
return on the initial offering price. Thereafter, the
general partner is to receive 30% of all distributions of net
cash flow.
On February 19, 1991, Forum Group commenced reorganization
proceedings under Chapter 11 of the United States Bankruptcy
Code, and on April 2, 1992, Forum Group's plan of
reorganization was confirmed by the Bankruptcy Court. In
February 1993, the Partnership and Forum Group entered into a
settlement agreement disposing of certain claims which arose
during the reorganization proceedings. As part of that
settlement, the Partnership received a cash payment of
$125,000 and 63,612 shares of Forum Group common stock which
were sold in August 1993 for $230,000, resulting in a gain of
$130,000.
To facilitate the refinancing of its long-term debt, the
Partnership and Forum Group entered into a Recapitalization
Agreement (the "Recapitalization Agreement") in October 1993,
which provided for, among other things, an immediate infusion
of $13 million of equity into the Partnership by a wholly-
owned subsidiary of Forum Group. The Partnership applied the
$13 million of proceeds to the partial prepayment of the
outstanding principal balance of the secured bank credit
agreement that was to mature on December 31, 1993. In order
to repay the remaining amount due on the secured bank credit
agreement and other indebtedness of the Partnership, on
December 28, 1993, the Partnership obtained $50.7 million in
new mortgage financing (see note 4).
In order that the other limited partners' interests are not
diluted as a result of the Recapitalization Agreement, in
January 1994, the Partnership offered all of the other
limited partners the right to purchase 0.74 of a Partnership
unit for each unit owned on October 18, 1993, at $2.00 per
unit. Proceeds from the exercise of these rights are to be
used to repurchase units from the wholly owned subsidiary of
Forum Group at $2.00 per unit.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
the Partnership and its affiliated operating partnership in
which the Partnership has a 99% limited partner's interest.
The effects of all significant intercompany accounts and
transactions have been eliminated in consolidation.
22
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Notes to Consolidated Financial Statements
Property and Equipment
----------------------
Property and equipment are carried at cost. Depreciation is
computed on the straight-line method at rates calculated to
amortize the costs over the estimated useful lives of the
related assets.
Deferred Costs
--------------
Costs incurred in connection with the initial occupancy of
independent living components of RCs are amortized on the
straight-line method over the first 12 months after opening
the RC, the term of the initial independent living residents'
contracts. Financing costs are amortized to interest expense
on the straight-line method over the term of the related loan
agreement.
Operating Revenues
------------------
Routine service revenues are generated from monthly charges
for independent living units and daily charges for assisted
living suites and nursing beds, and are recognized monthly
based on the terms of the residents' agreements. Advance
payments received for services are deferred until the
services are provided. Ancillary service revenues are
generated on a "fee for service" basis for supplementary
items requested by residents, and are recognized as the
services are provided.
Operating revenues include amounts estimated by management to
be reimbursable by Medicare, Medicaid and other cost-based
programs. Cost-based reimbursements are subject to audit by
agencies administering the programs, and provisions are made
for potential adjustments that may result. To the extent
those provisions vary from settlements, revenues are charged
or credited when the adjustments become final. A change in
the estimate of amounts reimbursable by third party payors
from prior years resulted in the recognition of $379,000 of
additional operating revenues in the year ended December 31,
1993.
Rental income from leased RCs is recognized as income over
the terms of the leases on the straight-line method.
Income Taxes
------------
As partnerships, the allocated share of income or loss for
the year is includable in the income tax returns of the
partners; accordingly, income taxes are not reflected in the
accompanying consolidated financial statements.
The tax basis of the Partnership's property and equipment is
approximately $11,000,000 less than the basis reported for
financial statement purposes, primarily due to the carryover
tax basis of the affiliated operating partnerships and
differences in tax reporting methods.
23
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Notes to Consolidated Financial Statements
Per Unit Data
-------------
The net loss per unit is based on the limited partners'
interest in the net loss divided by the average number of
limited partner units outstanding.
(2)Cash
----
Restricted cash includes required property, working capital
and other reserves amounting to $612,000 and $855,000 at
December 31, 1993 and 1992, respectively, and residents'
deposits of $1,107,000 and $1,038,000 at December 31, 1993
and 1992, respectively.
Cash and cash equivalents include cash and highly liquid
investments with a maturity of three months or less.
(3)Reduction in Carrying Value of Properties
-----------------------------------------
On March 26, 1992, the Partnership sold a RC to an unrelated
third party for $17,000,000. Based on the expected sales
proceeds, a reduction of $4,850,000 in carrying value of the
property was recorded during 1991. Proceeds from the sale
were used to prepay a portion of the split coupon mortgage
notes (see note 4).
Due to difficulties in real estate markets and related
factors, the Partnership had not achieved the occupancy and
revenue levels that were expected at several of its RCs and,
accordingly, management believed that the carrying values of
those RC's as of December 31, 1991 would not be recovered.
Based on management's evaluation of market conditions at that
time, a reduction in the carrying value of its properties of
$10,000,000 was recorded as of December 31, 1991. The
methodology used to estimate the ultimate recovery value of
the properties was an income approach which estimated the
annual operating cash flow at the end of a six-year holding
period, after estimated annual capital expenditures of
$100,000 per facility and management fees of 2% of gross
revenues, based on the Partnership's 1992 and 1993 operating
budgets. Estimates of annual revenue and expense increases
thereafter ranged from 4.5% to 4.75% and 1% to 3.5%,
respectively. Capitalization rates ranging from 9% to 11%
were used to estimate the value of the properties at the end
of the six-year period.
The method used for estimating property values requires
sensitive assumptions regarding future operations and
economic conditions. The inability to achieve the estimated
operating cash flows used in estimating the property values
could have a material effect on the ultimate recoverability
of the property values. Based on its current expectations
and operating budgets, management does not believe that an
additional reduction in the carrying values of the RCs is
necessary at December 31, 1993 or 1992. However, additional
reductions in value may be necessary in the future if the
cash flow assumptions are not achieved or market conditions
decline.
24
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Notes to Consolidated Financial Statements
(4)Long-term Debt
--------------
Long-term debt at December 31 is summarized as follows:
1993 1992
---- ----
Mortgage loan $ 50,707,000 -
Split coupon mortgage notes - 34,070,000
Bank credit facility - 24,975,000
---------- ----------
$ 50,707,000 59,045,000
========== ==========
On December 28, 1993, the Partnership entered into a new
mortgage loan agreement and used the proceeds to retire the
split coupon mortgage notes and the outstanding balance at
that date of $9.5 million on the bank credit facility, and to
pay the related fees, yield maintenance premium and expenses.
The new loan requires monthly payments of principal (based on
a 20-year amortization) and interest at 9.93% (assuming
servicing costs of 0.20%) to maturity on January 1, 2001.
The loan agreement prohibits prepayment for three years and
requires payment of a yield maintenance premium, as defined,
if prepaid thereafter. Additional principal payments are
required if the debt service coverage ratio, as defined, is
below specified levels. The loan is secured by all of the
Partnership's RCs. Scheduled principal payments on the
mortgage loan as of December 31, 1993, are $773,000 in 1994,
$927,000 in 1995, $1,023,000 in 1996, $1,129,000 in 1997 and
$1,247,000 in 1998.
The split coupon mortgage notes were repaid on December 28,
1993 and upon prepayment, these notes required payment of a
yield maintenance premium of $2,142,000 which is included in
extraordinary charge in the accompanying consolidated
statements of operations. The split coupon mortgage notes,
as restructured in March 1992, included prohibition of cash
distributions and required the maintenance of cash escrow and
reserve funds. Base interest rates ranged from 7.75% to
9.25%, payable monthly, and additional interest rates ranged
from 2.25% to 3.00%, payable monthly from net operating cash
flow for the previous month, as defined, or upon maturity on
June 30, 1996, for an effective rate of 11.46%. Prior to
this restructuring, the split coupon mortgage notes, which
were issued with a principal amount of $51,000,000 at a
discount, had an effective interest rate of 11.75%. Interest
payments of $255,000 were due monthly at 6% per annum through
July 1992, with principal and interest payments of $527,000
due monthly at 11.75% thereafter to maturity on July 1, 1996.
The outstanding principal balance under the bank credit
facility was repaid and the agreement terminated on December
28, 1993. In March 1992, the maturity of the bank credit
facility was extended to March 31, 1993. In March 1993,
maturity was extended to December 31, 1993. Interest was
payable quarterly through March 1993, and monthly thereafter,
at the bank's reference rate plus 2%.
Amounts due to parent of general partner include long-term
debt of $632,000 and $848,000 at December 31, 1993 and 1992,
respectively, with a blended interest rate of 7.2% and
maturities in varying amounts through January 31, 2004.
25
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIPS
Notes to Consolidated Financial Statements
Interest paid during 1993, 1992 and 1991 totaled $5,872,000,
$6,732,000 and $5,795,000, respectively.
(5)Leases
------
The Partnership leased an RC to Forum Group under a net
operating lease originally scheduled to expire on September
30, 1991. In conjunction with Forum Group's reorganization
proceeding, on May 1, 1991, Forum Group rejected this lease,
and the RC became subject to the management agreement (see
note 6). Rental income under the lease totaled $588,000 in
1991. Through May 1, 1991, Forum Group was responsible for
all operating expenses of the leased RC.
(6)Commitments and Contingencies
-----------------------------
In connection with the formation of the Partnership, the
Partnership entered into a long-term management agreement
with Forum Group which requires fees of 8% of gross operating
revenues. Through December 31, 1993, the agreement provides
for the deferral of payment of the fees if net cash flow is
not adequate to make certain distributions to limited
partners. Since cash flow has not been adequate to make the
distributions, all management fees earned since formation of
the Partnership have been deferred. The Partnership also
reimbursed Forum Group for general and administrative costs
incurred on behalf of the Partnership, which amounted to
$180,000, $176,000 and $195,000 in 1993, 1992 and 1991,
respectively.
On January 24, 1994, the Russell F. Knapp Revokable Trust
(the "Plaintiff"), filed a complaint (the "Complaint") in the
United States District Court for the Northern District of
Iowa against the Partnership's general partner alleging
breach of the partnership agreement, breach of fiduciary
duty, fraud and civil conspiracy. The Complaint alleges,
among other things, that the Plaintiff holds a substantial
number of Units, that the Board of Directors of the general
partner is not comprised of a majority of independent
directors, as allegedly required by the partnership agreement
and as represented in the 1986 Prospectus for the
Partnership's initial public offering, and that the general
partner's Board of Directors has approved and/or acquiesced
in 8% management fees being charged by Forum Group under the
management agreement. The Complaint further alleges that the
"industry standard" for such fees is 4% thereby resulting in
an "overcharge" to the Partnership estimated by the Plaintiff
at $1.8 million per annum, beginning in 1994. The Plaintiff
is seeking the restoration of certain former directors to the
Board of Directors of the general partner and the removal of
certain other directors from that Board, an injunction
prohibiting the payment of 8% management fees and unspecified
compensatory and punitive damages. The general partner
believes that the allegations in the Complaint are without
merit and intends vigorously to defend against this
litigation.
26
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
No reportable change in or disagreement with accountants has
taken place during the Partnership's two most recent fiscal years
or any subsequent interim period.
PART III
Item 10. Directors and Executive Officers of the
Partnership.
The following table lists the names and ages of all current
directors and executive officers of the General Partner; all
positions and offices with the General Partner held by each such
person; each such person's term of office as a director or an
executive officer, and the period during which he has served as
such; and each such person's business experience for the past
five years. The directors of the General Partner serve as such
until their successors are elected. See "Item 3 -- Legal
Proceedings" for a discussion of certain litigation challenging
the constitution of the Board of Directors of the General Partner
and the Management Agreement entered into in 1986 in connection
with the formation of the Partnership. The executive officers of
the General Partner serve at the pleasure of the Board of
Directors of the General Partner.
Name, Principal Occupation Served
and Business Experience Since Age
----------------------- ----- ---
Directors:
Donald J. McNamara 1993 40
Chairman of the Board and President
of the General Partner; Chairman and
Co-Chief Executive Officer of The
Hampstead Group since 1988;
director of La Quinta Motor Inns, Inc.
since 1992.
John F. Sexton 1993 61
Chairman, Evans-McKinsey Company,
since 1993, theretofore Senior Vice
President of Finance, Lomas Financial
Corporation since prior to 1989;
director of Turtle Creek National
Bank since prior to 1989; director
of Forecast Homes since 1992;
director of American Hotels and
Realty Corp. since prior to 1989.
James C. Leslie 1993 37
Executive Vice President - Financial
Services and director of The Staubach
Company since 1992 and director since
prior to 1989; President and director of
Wolverine Holding Company since prior
to 1989.
27
<PAGE>
Non-Director Officers:
Paul A. Shively 1986 51
Vice President, Treasurer and Chief
Financial Officer of the General
Partner; Senior Vice President,
Treasurer and Chief Financial Officer
of Forum Group since prior to 1989;
director and Secretary of Capital
Industries, Inc., since prior to 1989;
director of Forum Group, 1988-1992.
John H. Sharpe 1993 44
Secretary and General Counsel of the
General Partner; Vice President,
Secretary and General Counsel of
Forum Group since 1992; formerly
Assistant General Counsel of Forum
Group since prior to 1989.
On March 9, 1993 David K. Easlick and John R. Wood resigned
as directors of the General Partner and Donald D. Gilligan,
Everett A. Sisson and Kenneth P. Williamson joined the board of
directors of the General Partner. Following the recapitalization
of Forum Group, Messrs. Gilligan, Shively, Sisson and Williamson
resigned as directors and Messrs. McNamara, Sexton and Harry J.
Kloosterman became directors. James C. Leslie and John W. Kneen
became directors on August 4, 1993. Messrs. Kloosterman and
Kneen resigned as directors on September 7, 1993. See Item 3 of
Part I for a discussion of certain litigation challenging the
constitution of the Board of Directors of the General Partner.
Item 11. Executive Compensation.
No cash compensation is paid to any officer of the General
Partner for services rendered in any capacity to the Partnership
and its affiliated operating partnerships.
Each independent director of the General Partner is
compensated for all services as a director at the rate of $18,000
per year, payable quarterly in advance, plus $1,500 for each
board or committee meeting attended in person and $1,000 per
meeting attended telephonically. Each other director of the
General Partner is compensated for all services as a director at
the rate of $15,000 per year, payable quarterly in advance.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
(a) Security Ownership of Certain Beneficial Owners. The
following table shows the numbers and percentages of Units owned
beneficially on March 15, 1994, by any person known to the
Partnership to be the beneficial owner of more than 5% of the
issued and outstanding Units. Each person has sole voting and
investment power as to the Units beneficially owned by that
person.
28
<PAGE>
Units
-----
Amount and
Name and Nature of Percent
Address of Beneficial of
Beneficial Owner Ownership Total
---------------- ---------- -------
Forum Group, Inc. 6,446,079 42.2%
8900 Keystone Crossing,
Suite 200
Post Office Box 40498
Indianapolis, Indiana
46240-0498
Hatton Hall Associates 824,670* 5.4%
9560 Wilshire Boulevard,
Suite 301
Beverly Hills, California
90212
* This information is based upon the most recent Statement
on Schedule 13D received by the Partnership from Hatton Hall
Associates. However, the Partnership has received reports of the
results of the subscription offering indicating that, following
the exercise of its subscription rights, Hatton Hall Associates
owned 1,150,068 Units or 7.52% of Units outstanding as of March
11, 1994.
In an affidavit dated March 17, 1994, Russell K. Knapp
stated that, as of March 1, 1994 the "Knapp Family" owned 846,000
Units. That amount equals 5.06% of the 15,285,248 Units
outstanding as of March 11, 1994. The most recent Statement on
Schedule 13D received by the Partnership from the Russell F.
Knapp Family Group (Post Office Box 1326, Cedar Rapids, Iowa
52046), which was filed on or about April 13, 1993, reported that
as of March 31, 1993 the Russell F. Knapp Family Group owned
444,568 Units. The Partnership does not presently know the
actual level of beneficial ownership of the Partnership of Mr.
Knapp or, if applicable, any group of which he is a member.
None of the directors or officers of the General Partner
beneficially owns any Units, except insofar as they may be deemed
beneficially to own Units owned by Forum or its affiliates.
Changes in Control. There are no arrangements, known to the
Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership. See "Item 1 --
Business" in respect to the acquisition of majority ownership in
Forum Group by the Investor Group and related transactions.
Item 13. Certain Relationships and Related Transactions.
Apart from (i) the transactions contemplated by the
Management Agreement, (ii) the reimbursement of Forum Group for
direct expenses incurred on behalf of the Partnership and office
expenses, salaries, compensation expenses, administrative
expenses and other expenses necessary or appropriate to the
conduct of the business of, and allocable to, the Partnership
pursuant to the Settlement Agreement (totalling $180,000 for the
Partnership's last fiscal year), (iii) the Recapitalization
Agreement and the transactions contemplated thereby, including
the reimbursement of Forum Group for certain fees and expenses
incurred with respect to the Recapitalization Agreement
(totalling $131,952), there is no transaction, or series of
similar transactions, since the beginning of the Partnership's
last fiscal year, or any currently proposed transaction, or
series of similar transactions, to which the Partnership or any
of its affiliated operating partnerships was or is to be party,
in which the amount involved exceeds $60,000 and in which (i) any
director or executive officer of the General Partner or Forum
29
<PAGE>
Group, (ii) any nominee for election as a director of the General
Partner or Forum Group, (iii) any security holder known to the
registrant to own of record or beneficially more than 5% of any
class of the registrant's voting securities, or (iv) any member
of the immediate family of any of the foregoing persons, had, or
will have, a direct or indirect material interest. At December
31, 1993, deferred management fees due Forum Group under the
Management Agreement totalled approximately $15,780,000. See
Item 1 - "Partnership Recapitalization: and Item 7 of Part I of
this Report for a discussion of the Management Agreement between
the Partnership and Forum Group.
30
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) Documents Filed as Part of Report. The
following documents are filed as a part of this report:
1. Financial statements:
The following consolidated financial statements of
the Partnership and its affiliated operating partnerships are
filed under Item 8 of this report:
Page(s)
-------
Independent Auditors' Report..............................17
Consolidated Balance Sheets - December 31, 1993 and
1992....................................................18
Consolidated Statements of Operations
Years ended December 31, 1993, 1992 and 1991............19
Consolidated Statements of Partners'
Equity - Years ended December 31, 1993, 1992 and 1991...20
Consolidated Statements of Cash Flows -
Years ended December 31, 1993, 1992 and 1991............21
Notes to Consolidated Financial Statements...........22 - 26
2. Financial statement schedules:
The following other financial statements and
financial statement schedules are filed pursuant to this item:
Page(s)
-------
Independent Auditors' Report.............................F-1
Schedule V - Property, Plant and Equipment...............F-2
Schedule VI - Accumulated Depreciation, Depletion
and Amortization of Property, Plant and Equipment......F-3
Schedule VIII - Valuation and Qualifying Accounts........F-4
Schedule X - Supplementary Income Statement Information..F-5
All other schedules for which provision is made in
Regulation S-X are not required under the related instructions or
are inapplicable, and have therefore been omitted.
31
<PAGE>
3. Exhibits:
Page
----
Exhibit 2(1): Option Agreement (MLP), dated
December 29, 1986, by and among Forum Group,
the Partnership and Operations (incorporated by
reference to Exhibit 2(1) to Registration Statement
Number 33-71498 dated November 10, 1993
(the "1993 Form S-2"))....................................N/A
Exhibit 2(2): Recapitalization Agreement, dated
October 6, 1993, between Forum Group and the
Partnership (incorporated by reference to Exhibit
10(1) to Partnership Current Report on Form 8-K,
dated October 12, 1993 (the "October 1993 Form 8-K")).....N/A
Exhibit 2(3): Letter Agreement, dated December 14,
1993, by and among Forum Group, Forum A/H and the
Partnership (incorporated by reference to Exhibit 2(3)
of Amendment No. 1 to the 1993 Form S-2, dated
December 21, 1993 ("1993 Amendment No. 1"))...............N/A
Exhibit 4(1): Amended and Restated Agreement
of Limited Partnership, dated as of December 29,
1986, of the Partnership, as amended
(incorporated by reference to Exhibit 4(1) to the
1993 Form S-2)............................................N/A
Exhibit 10(1): Management Agreement (MLP),
dated as of December 31, 1986, by and among the
Partnership, Forum Retirement Operations, L.P.,
Forum Health Partners I-A, L.P., Foulk Manor
Associates, L.P. and Forum Group (the "Management
Agreement") (incorporated by reference to Exhibit
10(1) to the 1993 Form S-2)...............................N/A
Exhibit 10(2): First Amendment to Management
Agreement, dated as of September 20, 1986 (incorporated
by reference to Exhibit 10(2) to the 1993 Form S-2).......N/A
Exhibit 10(3): Second Amendment to Management
Agreement, dated as of September 20, 1989 (incorporated
by reference to Exhibit 10(3) to the 1993 Form S-2).......N/A
Exhibit 10(4): Third Amendment to Management
Agreement, dated as of May 27, 1992 (incorporated by
reference to Exhibit 10(4) to the 1993 Form S-2)..........N/A
Exhibit 10(5) Fourth Amendment to Management
Agreement, dated as of November 9, 1993 (incorporated
by reference to Exhibit 10(5) to the 1993 Form S-2).......N/A
32
<PAGE>
Exhibit 10(6): Depositary Agreement, dated
as of December 29, 1986, by and among the Partnership,
the General Partner, limited partners and assignees
holding depository receipts and Manufacturers Hanover
Trust Company ("Manufacturers") (incorporated
by reference to Exhibit 10(6) to the 1993 Form S-2).......N/A
Exhibit 10(7): Assignment of Depositary Agreement
from Manufacturers to American Stock & Trust
Company, dated January 1, 1992 (incorporated by
reference to Exhibit 10(7) of Amendment No. 2
to the 1993 Form S-2, dated January 5, 1994
("1993 Amendment No. 2")..................................N/A
Exhibit 10(8): Loan Agreement, dated as of December 28,
1993, by and among FRP Financing Limited, L.P., Nomura
Asset Capital Corporation and Bankers Trust Company
(incorporated by reference to Exhibit 10(8) to 1993
Amendment No. 2)..........................................N/A
Exhibit 11: Computation of Net Loss Per Unit.........E-1 and E-2
Exhibit 22: Subsidiaries of the Partnership..............E-3
Exhibit 28(1): Prospectus dated January 10, 1994,
as supplemented on February 3, 1994, relating to a
subscription offering by the Partnership filed with
the Commission as part of Registration Statement
Number 33-71498 on November 10, 1993, as
amended in Part I.........................................N/A
Reports on Form 8-K. No reports on Form 8-K were filed by
the Partnership during the last quarter of the fiscal year
covered by this report.
33
<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.
FORUM RETIREMENT PARTNERS, L.P.,
a Delaware limited partnership
By: Forum Retirement, Inc.,
General Partner
By:/s/Paul A. Shively
------------------
Paul A. Shively,
Vice President
and Treasurer
Date: March 29, 1994
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes
Paul A. Shively and John H. Sharpe, and each of them, to file one
or more amendments to this report, which amendments may make
changes in this report as any of them deems appropriate, and each
person whose signature appears below hereby appoints Paul A.
Shively and John H. Sharpe, and each of them, as attorney-in-fact
to execute in his name and on his behalf individually, and in
each capacity stated below, any amendments to this report.
____________
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.
Signature Title Date
--------- ----- ----
(1) Principal Executive Financial
and Accounting Officer of
General Partner:
/s/Paul A. Shively Vice President, March 29, 1994
------------------ Treasurer and
Paul A. Shively Chief Financial
Officer
S-1
<PAGE>
(2) A Majority of the Board of
Directors of General Partner:
/s/Donald J. McNamara Director March 29, 1994
---------------------
Donald J. McNamara
/s/ James C. Leslie Director March 29, 1994
-------------------
James C. Leslie
/s/ John F. Sexton Director March 29, 1994
------------------
John F. Sexton
S-2
<PAGE>
Independent Auditors' Report
- ----------------------------
The Partners
Forum Retirement Partners, L.P.:
Under date of February 1, 1994, we reported on the consolidated
balance sheets of Forum Retirement Partners, L.P. and subsidiary
partnerships as of December 31, 1993 and 1992 and the related
consolidated statements of operations, partners' equity and cash
flows for each of the years in the three-year period ended
December 31, 1993, as contained in the annual report on Form 10-K
for the year 1993. In connection with our audits of the
aforementioned consolidated financial statements, we also have
audited the related financial statement schedules as listed in
the accompanying index. These financial statement schedules are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick
Indianapolis, Indiana
February 1, 1994
F-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
-----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
COL.A | COL. B | COL. C | COL. D | COL. E | COL. F
-----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
| Balance | | | Other Changes - | Balance
| at Beginning | Additions | | Add (Deduct) - | at End
Classification | of Period | at cost | Retirements | Describe | of Period
-----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Land $14,501 $71 $0 $0 $14,572
Buildings 95,680 793 0 0 96,473
Furniture and equipment 7,393 346 0 0 7,739
--------------- --------------- --------------- --------------- ---------------
TOTALS $117,574 $1,210 $0 $0 $118,784
=============== =============== =============== =============== ===============
Year ended December 31, 1992
Land $16,415 $28 $1,942 $0 $14,501
Buildings 112,055 404 16,779 0 95,680
Furniture and equipment 8,109 381 1,097 0 7,393
--------------- --------------- --------------- --------------- ---------------
TOTALS $136,579 $813 $19,818 (3) $0 $117,574
=============== =============== =============== =============== ===============
Year ended December 31, 1991:
Land $17,089 $55 $0 ($729) $16,415
Buildings 125,432 744 0 (14,121) 112,055
Furniture and equipment 7,676 433 0 0 8,109
--------------- --------------- --------------- --------------- ---------------
TOTALS $150,197 $1,232 $0 ($14,850) (1) $136,579
=============== =============== =============== =============== ===============
<FN>
Note 1 - "Other Changes" are comprised of reduction in carrying value of property subject to pending
sale ($4,850) and reduction in carrying values of other properties ($10,000).
Note 2 - Depreciation has been computed principally in accordance with the following range of rates:
Buildings 2-1/2% to 20%
Furniture and equipment 10% to 33-1/3%
Note 3 - Reflects the March 25, 1992, sale of The Lafayette.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
- -----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
COL.A | COL. B | COL. C | COL. D | COL. E | COL. F
- -----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
| Balance | Additions | | Other Changes - | Balance
| at Beginning | Charged to | | Add (Deduct) - | at End
Description | of Period |Costs & Expenses | Retirements | Describe | of Period
- -----------------------------------|-----------------|-----------------|------------------|----------------------|-----------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Land improvements $35 $15 $0 $0 $50
Buildings 13,806 2,591 0 0 16,397
Furniture and equipment 3,322 750 0 0 4,072
--------------- --------------- --------------- --------------- ---------------
TOTALS $17,163 $3,356 $0 $0 $20,519
=============== =============== =============== =============== ===============
Year ended December 31, 1992:
Land improvements $23 $13 $1 $0 $35
Buildings 13,820 2,632 2,646 0 13,806
Furniture and equipment 3,052 746 476 0 3,322
--------------- --------------- --------------- --------------- ---------------
TOTALS $16,895 $3,391 $3,123 (1) $0 $17,163
=============== =============== =============== =============== ===============
Year ended December 31, 1991:
Land improvements $13 $10 $0 $0 $23
Buildings 10,590 3,230 0 0 13,820
Furniture and equipment 2,257 795 0 0 3,052
--------------- --------------- --------------- --------------- ---------------
TOTALS $12,860 $4,035 $0 $0 $16,895
=============== =============== =============== =============== ===============
<FN>
Note 1 - Reflects the March 25, 1992, sale of The Lafayette.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FORUM RETIREMENT PARTNERS, L.P. AND, SUBSIDIARY PARTNERSHIPS
- -----------------------------------|-----------------|---------------------------------------|---------------------|---------------
COL. A | COL. B | COL. C | COL. D | COL. E
- -----------------------------------|-----------------|---------------------------------------|---------------------|---------------
| | Additions | |
| |-----------------|---------------------| |
| | (1) | (2) | |
| Balance | Charged to | Charged to | | Balance
| at Beginning | Costs and |Other Accounts - | Deductions - | at End
Description | of Period | Expenses | Describe | Describe | of Period
- -----------------------------------|-----------------|-----------------|---------------------|---------------------|---------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts
receivable $86 $226 $0 $186 (1) $126
================= ================= ================= ================= ==============
Year ended December 31, 1992:
Deducted from asset accounts:
Allowance for doubtful accounts
receivable $183 $138 $0 $235 (1) $86
================= ================= ================= ================= ==============
Year ended December 31, 1991:
Deducted from asset accounts:
Allowance for doubtful accounts
receivable $195 $192 $0 $204 (1)(2) $183
================= ================= ================= ================= ==============
<FN>
Note 1 - Uncollectible accounts receivable charged off, less recoveries and contractual adjustments of revenues.
Note 2 - Reduction by the sale of assets as part of the leasing of facilities to Forum Group, Inc.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FORUM RETIREMENT PARTNERS, L.P. AND, SUBSIDIARY PARTNERSHIPS
- -----------------------------------|---------------------------------------------------
COL. A | COL. B
- -----------------------------------|---------------------------------------------------
Item | Charged to costs and expenses
- -----------------------------------|---------------------------------------------------
Year Ended December 31,
1993 1992 1991
-----------------------------
(in Thousands)
<S> <C> <C> <C>
Depreciation - property & equipment $3,356 $3,391 $4,035
Taxes other than income:
Payroll 1,358 1,455 1,521
Other 1,510 1,752 2,168
Amortization of intangible assets 479 339 517
<FN>
Note 1 - Amounts for maintenance and repairs, preoperating costs, deferrals, and
advertising were not presented as such amounts are less than 1% of total
revenues. There were no royalties during the periods.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
EXHIBIT 11
COMPUTATION OF NET LOSS PER UNIT
Year ended December 31,
1989 1990 1991 1992 1993
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Average units outstanding:
Common 2,055,000 2,055,000 2,055,000 0 0
Preferred 6,480,000 6,699,000 6,730,000 8,785,000 10,317,000
------------ ------------- ------------- ------------- -------------
TOTALS 8,535,000 8,754,000 8,785,000 8,785,000 10,317,000
============ ============= ============= ============= =============
Net loss $1,067,000 $2,466,000 $23,431,000 $6,112,000 $4,679,000
General partner's interest in net loss 11,000 25,000 234,000 61,000 47,000
------------ ------------- ------------- ------------- -------------
Limited partners' interest in net loss 1,056,000 2,441,000 23,197,000 6,051,000 4,632,000
Less related distributions:
Distributions declared, net of General
Partner's distribution 8,661,000 N/A N/A N/A N/A
Reduced by:
Cash reserves used 0
Forum Group, Inc. support (3,904,000)
------------
Distibutions from operations 4,757,000
------------
Undistributed loss $5,813,000
============
LOSS PER UNIT
Preferred
Undistributed loss per unit:
Undistributed loss $5,813,000 N/A N/A N/A N/A
Total units outstanding 8,535,000
------------
Undistributed loss per unit
before special distribution ($0.69)
Special distribution (0.16)
------------
Undistributed loss per unit (0.85)
------------
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
EXHIBIT 11
COMPUTATION OF NET LOSS PER UNIT
Year ended December 31,
1989 1990 1991 1992 1993
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Distributed income per unit:
Distributions from operations 4,757,000 N/A N/A N/A N/A
Preferred units outstanding 6,480,000
------------
Distributed income per unit
before special distribution 0.73
Special distribution 0.16
------------
Undistributed loss per unit 0.89
------------
Net loss per preferred unit $0.04
============
Common ($0.69)
============
Proforma ($0.12) ($0.28) ($2.64) ($0.69) ($0.45)
============ ============= ============= ============= =============
</TABLE>
E-2
<PAGE>
Exhibit 22
----------
Subsidiaries of Forum Retirement Partners, L.P.
-----------------------------------------------
State of
Name Organization
---- ------------
1. Forum Health Partners I-A, L.P. (99%-owned) Delaware
2. Forum Retirement Operations, L.P. (99%-owned) Delaware
3. Foulk Manor Associates, L.P. (99%-owned) Delaware
E-3
