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, 1994
Commission File Number: 1-9302
FORUM RETIREMENT PARTNERS, L.P.
8900 Keystone Crossing, Suite 200
Post Office Box 40498
Indianapolis, Indiana 46240-0498
Telephone: (317) 846-0700
Incorporated in Delaware I.R.S. No. 35-1686799
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 be 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 the
registrant's general partner or its affiliates): $13,545,000.
There are 28 pages in this Report. The financial statement
and exhibit indices are located at pp. 26-28.
1
<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 $50,707,000 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 3
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. As a result of the
repurchase transaction, and several additional subsequent
purchase transactions, as of March 1, 1995, Forum Group
beneficially owned 62.1% of the outstanding units, including its
1.0% General Partner's interest.
As previously announced, the Board of Directors of the
General Partner is continuing to analyze the possible expansion
of certain of the Partnership's properties in an effort to
further improve the Partnership's results of operations. A
preliminary study has identified several potentially attractive
expansion opportunities, which could increase the number of
living units owned by the Partnership by approximately 30%, for
an estimated capital expenditure totaling $25 million. Any
expansion would likely modify the uses of or add capacity to
existing facilities without incurring substantial land
acquisition and common area build-out costs. 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
modification of the Nomura Loan. There can be no assurance that
the Partnership will adopt or be able to successfully 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.
2
<PAGE>
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").
Seven of the nine RCs are comprised of an independent living
component and a nursing component, and each Property except
Millcroft and Shipley Manor also includes an assisted living
component. Foulk Manor and Myrtle Beach Manor each consist of an
assisted living component and a nursing component, but do 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,
and housekeeping and linen service. Emergency healthcare service
is available upon demand 24 hours a day from on-site staff, and
each independent living unit is equipped with an emergency call
system. The independent living components of the Properties
consist of apartments and, in the case of Foulk Manor North,
villas. Independent living unit residency fees presently range
from $999 to $3,790 per month, depending on the size and location
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.
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 $50 to $130
per day.
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 priority admission in the assisted living (if any) or
nursing component. The charge for a private nursing room
presently ranges from $59 to $178 per day.
The Properties also provide ancillary healthcare services,
including the operation of an adult day care center on the
premises of one RC.
3
<PAGE>
The following table indicates the name and location and
current capacity for each Property:
<TABLE>
<CAPTION>
________Capacity__________
Total
Independent Assisted Units/
Living Living Nursing Suites
Name and Location Units Suites Beds Beds
- ----------------- ----------------------------------------
<S> <C> <C> <C> <C>
The Forum at Lincoln Heights 152 30 60 242
San Antonio, Texas
Foulk Manor -0- 51 52 103
Wilmington, Delaware
Foulk Manor North 58 11 46 115
Wilmington, Delaware
Millcroft 63 -0- 100 163
Newark, Delaware
The Montebello on Academy 114 15 60 189
Albuquerque, New Mexico
The Montevista at Coronado 122 15 120 257
El Paso, Texas
Myrtle Beach Manor -0- 60 85 145
Myrtle Beach, South Carolina
The Park Summit of Coral 206 17 35 258
Springs
Coral Springs, Florida
Shipley Manor 61 -0- 82 143
Wilmington, Delaware
</TABLE>
The overall average occupancy rates for the Properties for
calendar year 1994 was 93.8%. The degree of utilization of each
facility is dependent on many factors. Occupancy rates may be
adversely affected by the opening of newly developed facilities
and the expansion or renovation of competing facilities.
Mortgages
The Properties are subject to first mortgages securing
outstanding borrowings under the Nomura Loan. The current
principal amount outstanding under the Nomura Loan is $49.9
million, and borrowings under the Nomura Loan bear interest at
9.93% per annum (including a servicing cost of 0.2% per annum).
See "Item 1 - Business" and Note 3 of Notes to Consolidated
Financial Statements filed under Item 8 for additional
information regarding the Nomura Loan.
Depreciation
The aggregate net federal tax basis of the Properties as of
December 31, 1994, was $59.6 million for real property and $3.9
million for personal property.
4
<PAGE>
Real Estate Taxes
The average real estate tax rate for calendar year 1994 for
the Properties was approximately two percent and the aggregate
assessed real estate tax value for such facilities for the same
period was $58.7 million.
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 financially
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:
<TABLE>
<CAPTION>
Independent and
Assisted Living
Components
Source 1994 1993 1992 1991 1990
------ ---------------------------------
<S> <C> <C> <C> <C> <C>
Private 100% 100% 100% 100% 100%
Medicare and Medicaid -0- -0- -0- -0- -0-
Total 100% 100% 100% 100% 100%
Nursing Components
1994 1993 1992 1991 1990
--------------------------------
Private 65% 69% 72% 77% 73%
Medicare and Medicaid 35% 31% 28% 23% 27%
Total 100% 100% 100% 100% 100%
Total RCs
1994 1993 1992 1991 1990
--------------------------------
Private 82% 85% 86% 89% 87%
Medicare and Medicaid 18% 15% 14% 11% 13%
Total 100% 100% 100% 100% 100%
</TABLE>
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 payments
5
<PAGE>
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.
Various 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 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.
6
<PAGE>
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.
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 to an 8% management fee 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 an 8% management fee, and unspecified
compensatory and punitive damages.
The General Partner intends to vigorously defend against
this litigation. The Partnership, in accordance with the
Management Agreement, reimbursed the General Partner for $146,000
of litigation costs relating to this claim in 1994.
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 are not
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 1994 to a vote of security
holders.
7
<PAGE>
PART II
Item 5. Market for the Partnership's Common Equity and
Related Unitholder 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:
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
1993
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
1994
Quarter ended March 31, 1994 $2-7/8 $2
Quarter ended June 30, 1994 $2-3/4 $1-5/8
Quarter ended September 30, 1994 $2-3/4 $1-7/8
Quarter ended December 31, 1994 $2-7/8 $2-1/4
</TABLE>
(b) Holders. The approximate number of record holders
of Units as of February 10, 1995, was 968.
(c) Dividends. The Partnership has not made any
distributions on Preferred Depositary Units for 1994, 1993, 1992,
and 1991. With 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 in 1995. See "Item 1 -- Business" for a
discussion of possible cash needs for expansions of the
Partnership's RCs. 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.
8
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands except per Unit amounts)
<S> <C> <C> <C> <C> <C>
Total revenues $47,333 $44,176 $41,950 $43,101 $29,243
Income (loss) before
extraordinary charge $317 ($1,762) ($6,112) ($23,431) ($2,466)
Extraordinary charge - early
extinguishment of debt $-0- ($2,917) $-0- $-0- $-0-
Net income (loss) $317 ($4,679) ($6,112) ($23,431) ($2,466)
General Partner's interest
in net income (loss) $3 ($47) ($61) ($234) ($25)
Limited partners' interest
in net income (loss) $314 ($4,632) ($6,051) ($23,197) ($2,441)
Average number of Units
outstanding 15,285 10,317 8,785 8,785 8,754
Income (loss) per limited
partner Unit:
Income (loss) before
extraordinary charge $0.02 ($0.17) ($0.69) ($2.64) ($0.28)
Extraordinary charge $-0- ($0.28) $-0- $-0- $-0-
Net income (loss) $0.02 ($0.45) ($0.69) ($2.64) ($0.28)
Cash flow from operations
as adjusted* $2,446* $4,285* $519* $294* $4,881*
Total assets $111,163 $110,480 $109,767 $127,945 $145,684
Long-term obligations $49,934 $50,707 $59,893 $75,594 $72,456
Partners' equity $38,612 $38,386 $30,187 $36,299 $59,730
Cash distributions declared:
Per Unit $--- $--- $--- $--- $0.40
</TABLE>
* 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 periods prior to January 1, 1994, 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 and 1990:
$1,615,000. Beginning in January, 1994 management fees
became due and payable on a current basis and
therefore reduced cash flows from operations. 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.
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations.
Introduction. At December 31, 1994, the Partnership owned
nine RCs, all of which were managed by Forum Group. Operating
revenues and net operating income (operating revenues less
operating expenses and management fees) for the year then ended,
were $3,289,000 (8%) and $1,781,000 (24%), respectively, higher
than 1993. Combined occupancy at December 31, 1994 was 95%,
compared to 94% at December 31, 1993.
The year ended December 31, 1994 produced net income of
$317,000 compared to a net loss of $4,679,000 for 1993. The loss
for the year ended December 31, 1993 included 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 improvement in operating revenues was attributable to
improved occupancy rates for the Partnership's RCs during 1994,
increases in the amount of revenue generated per occupied unit,
and increased provision of ancillary healthcare services.
Average occupancy of the Properties for 1994 was 93.8% as
compared to average occupancy of 91.1% for 1993, and average
revenue per occupied unit for the same periods has improved from
$27,156 to $28,190. 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 has implemented 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.
The Partnership has not made any distributions on its Units
for 1994, 1993, 1992, and 1991. With the continued improvements
in the Partnership's operating results and the completion of the
Refinancing in the fourth quarter of 1993, the Partnership
expects to continue to have positive cash flow in 1995. 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. The Board of Directors of the
General Partner is continuing to analyze 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 opportunities for expansion which the Board
of Directors of the General Partner intends to consider.
Operating Revenues. Operating revenues for the year ended
December 31, 1994 increased by $3,289,000 (8%) compared to
operating revenues for 1993. This increase is primary
attributable to increases in occupancy, residency fees and
charges, and increases in the provision of ancillary healthcare
services.
10
<PAGE>
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.
A change in the estimate of amounts reimbursable by third
party payors from prior years resulted in the recognition of
$210,000 and $379,000 of additional operating revenues for 1994
and 1993, respectively.
Operating Expenses. Operating expenses, including management
fees and depreciation, for the year ended December 31, 1994
increased by $1,643,000 (4%) compared to those combined expenses
for the same period of 1993. This increase was principally
attributable to changes in occupancy, increased provision of
ancillary healthcare services, and normal inflationary increases
in other operating expenses, as partially offset by a reduction
of $300,000 for the year ended December 31, 1994, due to a
reduction in workers' compensation insurance costs.
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.
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 have not been 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 current payment
of such fees for periods after January 1, 1994 did not affect the
Partnership's operating or net income as compared to prior
periods, although it did affect the Partnership's cash position.
Interest Expense. Total interest expense for the year ended
December 31, 1994 decreased by $722,000 compared to total
interest expense for 1993, due primarily to a reduction in the
principal amount of long-term debt.
Total interest expense for the year ended December 31, 1993
decreased by $1,404,000 compared to total interest expense for
1992, also due primarily to a reduction in the principal amount
of long-term debt.
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.
11
<PAGE>
Financial Condition
Liquidity and Capital Resources. At December 31, 1994, the
Partnership had cash and cash equivalents of $5,588,000, accounts
receivable of $2,650,000, and current liabilities of $5,164,000.
The Partnership believes that it has adequate liquidity to meet
its foreseeable working capital requirements.
The General Partner is continuing to study the possible
expansion of certain of the Partnership's properties in an effort
to further increase operating income. A preliminary study has
identified several attractive expansion opportunities, which
could increase the number of living units owned by the
Partnership by approximately 30%, for an estimated capital
expenditure totaling $25 million. Any expansion would likely
modify the uses of, or add capacity to, existing facilities
without incurring substantial land acquisition and common area
build-out costs. Any significant expansion could require the
Partnership to obtain additional financing, modify existing
financing and obtain regulatory approvals.
On December 28, 1993, the Partnership entered into a loan
agreement with Nomura for $50,707,000 in new financing. The
Nomura Loan bears interest at the rate of 9.93% per annum
(including 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 prepay in full (i) the approximately
$9.5 million remaining principal balance of secured debt under a
prior bank credit facility which was due to mature on December
31, 1993, and (ii) approximately $34.1 million aggregate
principal amount of the Partnership's split coupon first mortgage
notes, which were due to mature on June 30, 1996, and to pay
related fees and expenses.
As discussed above, management fees payable to Forum Group
for all periods from the formation of the Partnership in 1986 to
December 31, 1993 ($15,780,000) were deferred. Management fees
for periods after December 31, 1993 are being paid quarterly, in
arrears. 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 to (i) meet limited
partners' tax liabilities, (ii) repay limited partners' capital
contributions, and (iii) 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, but not limited to, if
Forum Retirement, Inc. is removed as the General Partner and 80%
in interest of the limited partners vote to terminate such
agreement. The Partnership is unable to determine when or if
management fees deferred prior to January 1, 1994 will become
payable.
Operating activities provided $3,541,000 more cash during
the year ended December 31, 1994 than during 1993, due
principally to improved operating performance and reductions in
other accrued revenues and expenses during 1993, net of the above-
described difference in the treatment of management fees due the
parent of the General Partner.
Investing activities used $643,000 more cash during the year
ended December 31, 1994 than during 1993, due to normal
fluctuations in the timing of purchases of property and
equipment.
Financing activities used $1,822,000 more cash during the
year ended December 31, 1994 than during 1993, due principally to
the October, 1993 Recapitalization Agreement and the December,
1993 Nomura Loan closing.
Inflation. Management does not believe that inflation has
had a material effect on net income. To the extent possible,
increased costs are recovered through increased residency fees
and charges.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements are filed
under this Item:
Page(s)
-------
<TABLE>
<S> <C>
Independent Auditors' Report 14
Consolidated Balance Sheets - December 31, 1994 and 1993 15
Consolidated Statements of Operations -
Years ended December 31, 1994, 1993 and 1992 16
Consolidated Statements of Partners'
Equity - Years ended December 31, 1994, 1993 and 1992 17
Consolidated Statements of Cash Flows -
Years ended December 31, 1994, 1993 and 1992 18
Notes to Consolidated Financial Statements 19 - 22
</TABLE>
13
<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 partnership as of
December 31, 1994 and 1993 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,
1994. 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
partnership as of December 31, 1994 and 1993 and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles.
/s/KPMG Peat Marwick, L.L.P.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 6, 1995
14
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIP
Consolidated Balance Sheets
December 31, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Property and equipment:
Land $ 14,758 14,572
Buildings 97,918 96,473
Furniture and equipment 8,174 7,739
------ ------
120,850 118,784
Less accumulated depreciation 24,000 20,519
------- -------
Net property and equipment 96,850 98,265
Cash and cash equivalents 5,588 4,700
Accounts receivable, less allowance for doubtful
accounts of $208 and $126 2,650 2,274
Restricted cash 2,625 1,719
Deferred financing costs, net of accumulated
amortization of $352 in 1994 2,152 2,339
Other assets 1,298 1,183
------- ------
$ 111,163 110,480
======= =======
Liabilities and Partners' Equity
--------------------------------
Long-term debt, including $927 and $773 due
within one year 49,934 50,707
Accounts payable and accrued expenses 3,969 3,402
Management fees and amounts due to parent
of general partner 1,195 638
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,445 1,341
------ ------
Total liabilities 72,323 71,868
------ ------
General partner's equity in
subsidiary partnership 228 226
------ ------
Partners' equity:
General partner 492 490
Limited partners (15,285 units issued
and outstanding) 38,120 37,896
------ ------
Total partners' equity 38,612 38,386
------ ------
$ 111,163 110,480
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
15
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Operations
Years ended December 31, 1994, 1993 and 1992
(in thousands except per unit amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues:
Operating revenues $ 47,086 43,797 41,648
Other income 247 379 302
------ ------ ------
Total revenues 47,333 44,176 41,950
------ ------ ------
Costs and expenses:
Operating expenses 34,226 32,969 33,873
Management fees to parent of
general partner 3,767 3,516 3,337
Litigation 146 - -
Depreciation 3,491 3,356 3,391
Interest, including amounts to
parent of general partner of
$38, $50 and $68 5,384 6,106 7,510
------ ------ ------
Total costs and expenses 47,014 45,947 48,111
Income (loss) before general
partner's interest in income
(loss) of subsidiary partnership
and extraordinary charge 319 (1,771) (6,161)
General partner's interest in income
(loss) of subsidiary partnership 2 (9) (49)
------ ------- -------
Income (loss) before
extraordinary charge 317 (1,762) (6,112)
Extraordinary charge - early
extinguishment of debt - 2,917 -
------ ------ -------
Net income (loss) 317 (4,679) (6,112)
General partner's interest in
net income (loss) 3 (47) (61)
------ ------- -------
Limited partners' interest in
net income (loss) $ 314 (4,632) (6,051)
====== ======= =======
Average number of limited partner
units outstanding 15,285 10,317 8,785
====== ====== ======
Income (loss) per limited
partner unit:
Income (loss) before
extraordinary charge $ 0.02 (0.17) (0.69)
Extraordinary charge - (0.28) -
------ ------ ------
Net income (loss) $ 0.02 (0.45) (0.69)
====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
16
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Partners' Equity
Years ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
General Limited
partner partners
------- --------
<S> <C> <C>
Balances at January 1, 1992 $ 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
Offering costs (1) (90)
Net income 3 314
------- -------
Balances at December 31, 1994 $ 492 38,120
======= =======
Accumulated balances:
Capital contributions 1,173 116,279
Offering costs (4) (6,715)
Cash distributions (255) (29,679)
Accumulated losses (422) (41,765)
------- -------
Balances at December 31, 1994 $ 492 38,120
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
17
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 317 (4,679) (6,112)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation of property
and equipment 3,491 3,356 3,391
Amortization of deferred
financing costs 352 479 339
Amortization of discount on
long-term debt - - 1,433
Extraordinary charge - 2,917 -
Deferred management fees due
to parent of general partner - 3,516 3,337
Management fees due to parent
of general partner 981 - -
Accrued revenues and expenses, net (207) (4,210) 1,125
Other 107 121 (172)
------ ------ ------
Net cash provided by
operating activities 5,041 1,500 3,341
------ ------ ------
Cash flows from investing activities:
Additions to property and equipment (1,853) (1,210) (813)
Proceeds from sale of retirement community - - 16,695
------ ------ ------
Net cash provided (used) by
investing activities (1,853) (1,210) 15,882
------ ------ ------
Cash flows from financing activities:
Reduction of long-term debt (949) (59,260) (17,134)
Proceeds from long-term debt - 50,707 -
Yield maintenance premium and other
expenses in connection with refinancing - (2,602) -
Deferred financing costs (293) (2,436) (95)
Capital contributions - 13,131 -
Offering costs (152) (192) -
Net decrease (increase) in restricted cash (906) 174 843
------- ------- -------
Net cash used by financing activities (2,300) (478) (16,386)
======= ======= =======
Net increase (decrease) in cash
and cash equivalents 888 (188) 2,837
Cash and cash equivalents at
beginning of year 4,700 4,888 2,051
------ ------- -------
Cash and cash equivalents at end of year $ 5,588 4,700 4,888
====== ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
18
<PAGE>
FORUM RETIREMENT PARTNERS, L.P.
AND SUBSIDIARY PARTNERSHIP
Notes to Consolidated Financial Statements
(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. Forum Group owned 62.1% of the Partnership at
December 31, 1994.
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. 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 3).
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 were used
to repurchase 1,994,189 units from the wholly owned
subsidiary of Forum Group at $2.00 per unit. The Partnership
incurred costs of $91,000 and $253,000 in 1994 and 1993,
respectively, as a result of the offering.
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
and the general partner of the Partnership owns the remaining
1% interest. The effects of all significant intercompany
accounts and transactions have been eliminated in
consolidation.
19
<PAGE>
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. The Partnership records a provision for
value impairment whenever the estimated future cash flows
from the property's operations or projected sale are less
than the property's net carrying value.
Deferred Costs
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 $210,000 and
$379,000 of additional operating revenues for 1994 and 1993,
respectively.
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 assets are approximately
$12,000,000 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.
Per Unit Data
The net income (loss) per unit is based on the limited
partners' interest in the net income (loss) divided by the
average number of limited partner units outstanding.
Reclassifications
Certain amounts in the 1993 financial statements have been
reclassified to conform with the 1994 presentation.
20
<PAGE>
(2) Cash
Restricted cash includes required property, working capital
and other reserves amounting to $1,434,000 and $612,000 at
December 31, 1994 and 1993, respectively, and residents'
deposits of $1,191,000 and $1,107,000 at December 31, 1994
and 1993, respectively.
Cash and cash equivalents include cash and highly liquid
investments with a maturity of three months or less.
(3) Long-term Debt
On December 28, 1993, the Partnership entered into a new
mortgage loan agreement for $50,707,000, and the proceeds
were used to retire the split coupon mortgage notes and 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, 1994 are $927,000 in 1995,
$1,023,000 in 1996, $1,129,000 in 1997, $1,247,000 in 1998
and $1,376,000 in 1999.
The prepayment of the split coupon mortgage notes required 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
included a 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% through December 28, 1993. Prior to
a restructuring in 1992, the split coupon mortgage notes 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.
Interest under the bank credit facility 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 $457,000 and $632,000 at December 31, 1994 and 1993,
respectively, with a blended interest rate of 7.2% and
maturities in varying amounts through January 31, 2004.
Interest paid during 1994, 1993 and 1992 totaled $4,679,000,
$5,872,000 and $6,732,000, respectively.
21
<PAGE>
(4) 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 provided
for the deferral of the payment of the fees if net cash flow
was not adequate to make certain distributions to limited
partners. Since cash flow was not adequate to make the
distributions, the $15,780,000 of management fees earned
since formation of the Partnership through December 31, 1993
was deferred. The Partnership also reimbursed Forum Group
for general and administrative costs incurred on behalf of
the Partnership, which amounted to $180,000 in 1994 and 1993
and $176,000 in 1992.
On January 24, 1994, the Russell F. Knapp Revocable 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
to 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
intends to vigorously defend against this litigation. The
Partnership, in accordance with the management agreement,
reimbursed the general partner for $146,000 of litigation
costs relating to this claim in 1994.
(5) Employee Benefit Plan
Effective April 1, 1993, Forum Group established a defined
contribution profit sharing plan, including features under
Section 401(k) of the Internal Revenue Code, which will
provide retirement benefits to its eligible employees. The
Partnership contributes to the plan for participants employed
at the RCs.
The Partnership has expensed $43,000 and $34,000 in 1994 and
1993, respectively, relating to its portion of employee
contributions under this plan.
22
<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 41
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 62
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 Americana
Hotels and Realty Corp.
since prior to 1989.
James C. Leslie 1993 38
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; director of
Columbus Realty Trust
since 1993.
23
<PAGE>
Non-Director Officers:
Paul A. Shively 1986 52
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.
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.
Messrs. Sexton and Leslie are 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. Mr. McNamara is compensated for all services as
a director at the rate of $15,000 per year, payable quarterly in
advance.
In addition to amounts payable to Forum Group under the
Management Agreement, Forum Group and the General Partner are
entitled to the reimbursement of various amounts and to
indemnification for certain costs and losses under the Management
Agreement and the Partnership Agreement.
24
<PAGE>
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 January 6, 1995, 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. In addition to the Units beneficially owned by it, Forum
Group beneficially owns the General Partner's 1% general
partnership interest.
<TABLE>
<CAPTION>
Units
-----
Amount and
Name and Nature of Percent
Address of Beneficial of
Beneficial Owner Ownership Total
---------------- ---------- -------
<S> <C> <C>
Forum Group, Inc. 9,427,791 61.7%
8900 Keystone Crossing,
Suite 200
Post Office Box 40498
Indianapolis, Indiana
46240-0498
Russell F. Knapp Family Group 846,306 5.5%
1300 13th Street N.W.
Cedar Rapids, Iowa 52405
</TABLE>
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 Recapitalization Agreement and
related transactions.
Item 13. Certain Relationships and Related Transactions.
Apart from (i) the transactions contemplated by the
Management Agreement and the Recapitalization Agreement, and (ii)
the reimbursement to 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 (totaling $180,000 for the
Partnership's last fiscal year), 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 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 and 1994, deferred
management fees due Forum Group under the Management Agreement
totaled 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.
25
<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 partnership are filed
under Item 8 of this report:
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditors' Report 14
Consolidated Balance Sheets - December 31, 1994 and 1993 15
Consolidated Statements of Operations
Years ended December 31, 1994, 1993 and 1992 16
Consolidated Statements of Partners' Equity
Years ended December 31, 1994, 1993 and 1992 17
Consolidated Statements of Cash Flows -
Years ended December 31, 1994, 1993 and 1992 18
Notes to Consolidated Financial Statements 19 -- 22
</TABLE>
2. Financial statement schedules:
The following other financial statements and financial
statement schedules are filed pursuant to this item:
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditors' Report F-1
Schedule VIII - Valuation and Qualifying Accounts F-2
</TABLE>
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.
26
<PAGE>
<TABLE>
<CAPTION>
3. Exhibits:
Page
----
<S> <C>
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
27
<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 22: Subsidiaries of the Partnership E-1
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
</TABLE>
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.
28
<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 16, 1995
POWER OF ATTORNEY
-----------------
Each person whose signature appears below hereby authorizes
Paul A. Shively 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 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 16, 1995
- ---------------------------- Treasurer and Chief
Paul A. Shively Financial Officer
S-1
<PAGE>
(2) A Majority of the Board of
Directors of General Partner:
/s/Donald J. McNamara Director March 16, 1995
- ----------------------------
Donald J. McNamara
/s/James C. Leslie Director March 16, 1995
- ----------------------------
James C. Leslie
/s/John F. Sexton Director March 16, 1995
- ----------------------------
John F. Sexton
S-2
<PAGE>
Independent Auditors' Report
The Partners
Forum Retirement Partners, L.P.:
Under date of February 6, 1995, we reported on the consolidated
balance sheets of Forum Retirement Partners, L.P. and subsidiary
partnership as of December 31, 1994 and 1993 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, 1994, as contained in the annual report on Form 10-K
for the year 1994. In connection with our audits of the
aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/KPMG Peat Marwick, L.L.P.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 6, 1995
F-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FORUM RETIREMENT PARTNERS, L.P. AND, SUBSIDIARY PARTNERSHIP
-----------------------------------|-----------------|--------------------------------------|---------------------|--------------
COL. A | COL. B | COL. C | COL. D | COL. E
-----------------------------------|-----------------|--------------------------------------|---------------------|--------------
| | Additions | |
| |-----------------|--------------------| |
| | (1) | | |
| 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> <C>
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts
receivable $126 $147 $0 $65 (1) $208
================= ================= ================ ================= =============
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
================= ================= ================ ================= =============
<FN>
Note 1 - Uncollectible accounts receivable charged off, less recoveries and contractual adjustments of revenues.
</TABLE>
F-2
<PAGE>
Exhibit 22
Subsidiaries of Forum Retirement Partners, L.P.
State of
Name Organization
---- ------------
FRP Financing Limited, L.P. (99%-owned) Delaware
E-1
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,588
<SECURITIES> 0
<RECEIVABLES> 2,858
<ALLOWANCES> 208
<INVENTORY> 0
<CURRENT-ASSETS> 8,238
<PP&E> 120,850
<DEPRECIATION> 24,000
<TOTAL-ASSETS> 111,163
<CURRENT-LIABILITIES> 6,091
<BONDS> 49,934
<COMMON> 0
0
0
<OTHER-SE> 38,612
<TOTAL-LIABILITY-AND-EQUITY> 11,163
<SALES> 0
<TOTAL-REVENUES> 47,333
<CGS> 0
<TOTAL-COSTS> 47,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,384
<INCOME-PRETAX> 317
<INCOME-TAX> 0
<INCOME-CONTINUING> 317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
