SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter Ended September 30, 1997
Commission File Number: 1-9302
FORUM RETIREMENT PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Organized in Delaware I.R.S. No.35-1686799
10400 Fernwood Road
Bethesda, MD 20817
Telephone: (301) 380-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange On Which Registered
Preferred Depository 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
<PAGE>
INDEX
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- 3
September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Operations -- 4
Three and nine months ended September 30, 1997 and 1996
Condensed Consolidated Statement of Partners' Equity -- 5
September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Cash Flows -- 6
Nine months ended September 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II. OTHER INFORMATION AND SIGNATURE
- ----------------------------------------
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Property and equipment, net.............................................. $ 97,895 $ 97,540
Cash and cash equivalents................................................ 6,214 6,199
Deferred financing costs, net............................................ 1,250 1,528
Other assets............................................................. 2,559 1,243
------------- -----------
Total assets.................................................... $ 107,918 $ 106,510
============ ===========
LIABILITIES AND PARTNERS' EQUITY
Debt ................................................................ $ 47,147 $ 47,984
Due to manager........................................................... 2,860 2,611
Other liabilities........................................................ 317 291
Deferred management fees due to parent of general partner................ 15,780 15,780
------------ -----------
Total liabilities............................................... 66,104 66,666
------------ -----------
General partner's equity in subsidiary partnership 256 236
------------ -----------
Partners' equity:
General partner..................................................... 522 502
Limited partners (15,285 units issued and outstanding) 41,036 39,106
------------ -----------
Total partners' equity.......................................... 41,558 39,608
------------ -----------
Total liabilities and partners' equity.......................... $ 107,918 $ 106,510
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES ............................................................ $ 4,332 $ 4,404 $ 13,915 $ 13,039
-------- -------- --------- ---------
OPERATING COSTS AND EXPENSES
Depreciation and amortization.................................... 1,006 990 2,784 2,888
Base management fees to MSLS..................................... 1,142 1,078 3,489 3,170
Property taxes................................................... 352 548 1,278 1,232
Insurance and other.............................................. 424 265 458 488
-------- -------- --------- ---------
Total operating costs and expenses........................... 2,924 2,881 8,009 7,778
-------- -------- --------- ---------
OPERATING PROFIT BEFORE PARTNERSHIP EXPENSES
AND INTEREST..................................................... 1,408 1,523 5,906 5,261
General and administrative....................................... (45) (23) (350) (593)
Interest expense................................................. (1,269) (1,187) (3,839) (3,799)
Interest income.................................................. 112 199 253 279
-------- -------- --------- ---------
Income before general partner's interest in income of
subsidiary partnership........................................... 206 512 1,970 1,148
General partner's interest in income of subsidiary partnership........ 2 5 20 11
-------- -------- --------- --------
NET INCOME............................................................ $ 204 $ 507 $ 1,950 $ 1,137
======== ======== ========= ========
General partner's interest in net income.............................. $ 2 $ 5 $ 20 $ 11
======== ======== ========= ========
Limited partners' interest in net income.............................. $ 202 $ 502 $ 1,930 $ 1,126
======== ======== ========= ========
Average number of units outstanding................................... 15,285 15,285 15,285 15,285
======== ======== ========= ========
Net income per limited partner unit................................... $ 0.01 $ 0.03 $ 0.13 $ 0.07
======== ======== ========= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
(Unaudited, in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners
------- --------
<S> <C> <C>
Balances at January 1, 1997.......................................... $ 502 $ 39,106
Net income........................................................... 20 1,930
-------- ---------
Balances at September 30, 1997....................................... $ 522 $ 41,036
======== =========
Accumulated balances:
Capital contributions....................................... $ 1,173 $ 116,279
Offering costs.............................................. (4) (6,715)
Cash distributions.......................................... (255) (29,679)
Accumulated losses.......................................... (392) (38,849)
-------- ---------
Balances at September 30, 1997 ...................................... $ 522 $ 41,036
======== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 1,950 $ 1,137
Adjustments to reconcile to cash from operations
Depreciation expense........................................................... 2,784 2,888
Amortization of deferred financing cost........................................ 278 276
Changes in other operating accounts............................................ (953) 1,148
-------- --------
Cash provided by operations......................................................... 4,059 5,449
-------- --------
INVESTING ACTIVITIES
Capital expenditures........................................................... (3,139) (3,313)
-------- --------
Cash used in investing activities................................................... (3,139) (3,313)
-------- --------
FINANCING ACTIVITIES
Repayments of debt............................................................. (837) (758)
Payments on note due to general partner........................................ (68) (45)
-------- --------
Cash used in financing activities................................................... (905) (803)
-------- --------
Increase in cash and cash equivalents............................................... 15 1,333
-------- --------
Cash and cash equivalents, beginning of period...................................... 6,199 2,960
-------- --------
Cash and cash equivalents, end of period............................................ $ 6,214 $ 4,293
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Forum Retirement
Partners, L.P. (the "Partnership") and subsidiary partnership have been prepared
by the Partnership without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted. The Partnership
believes the disclosures made are adequate to make the information presented not
misleading. However, the condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
In the opinion of the Partnership, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (which include only
recurring adjustments) necessary to present fairly the financial position of the
Partnership as of September 30, 1997 and December 31, 1996, and the results of
operations and cash flows for the three and nine months ended September 30,
1997. Interim results are not necessarily indicative of fiscal year performance
because of the impact of seasonal and short-term variations.
The Partnership's balance sheet has been presented in a non-classified format.
Accordingly, information as reported in prior filings has been restated.
NOTE 2. OWNERSHIP INTEREST OF THE GENERAL PARTNER AND ITS AFFILIATES
Forum Retirement, Inc., a wholly-owned subsidiary of Forum Group, Inc. ("Forum
Group"), is the general partner of the Partnership (the "General Partner") and
owns a one percent interest in the Partnership and a one percent partnership
interest in a subsidiary operating partnership in which the Partnership owns a
ninety-nine percent limited partnership interest. The General Partner's interest
in the subsidiary operating partnership is reflected in the statements of
operations as a reduction of the income or loss of the Partnership. Forum Group
beneficially owns approximately 79% of the outstanding Preferred Depository
Units (the "Units") representing preferred limited partner interests in the
Partnership.
On June 21, 1997, HMC Senior Communities, Inc. ("HMCSC"), a wholly-owned
subsidiary of Host Marriott Corporation ("Host Marriott"), acquired all of the
outstanding stock of Forum Group from Marriott Senior Living Services, Inc.
("MSLS"), a subsidiary of Marriott International, Inc. ("MI"). In connection
with the acquisition, Forum Group assigned to MSLS its interest as manager under
a long-term management agreement (the "Management Agreement") for the nine
senior living communities owned by the Partnership.
NOTE 3. REVENUES
Revenues represent house profit from the Partnership's senior living
communities. House profit reflects the net revenues flowing to the Partnership
as property owner and represents gross community operating sales less
property-level expenses excluding depreciation and amortization, real and
personal property taxes, insurance, management fees and certain other costs
which are classified as operating costs and expenses.
7
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
House profit generated by the Partnership's senior living communities consists
of:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands)
Community Sales
Routine...................................................... $ 12,666 $ 12,088 $ 37,733 $ 35,112
Ancillary.................................................... 1,611 1,429 5,883 4,593
--------- --------- --------- ---------
Total Community Sales.................................... 14,277 13,517 43,616 39,705
--------- --------- --------- ---------
Department Costs
Routine...................................................... 8,518 7,796 25,054 22,821
Ancillary.................................................... 1,427 1,317 4,647 3,845
--------- --------- --------- ---------
Total Department Costs................................... 9,945 9,113 29,701 26,666
--------- --------- --------- ---------
Department Profit
Routine...................................................... 4,148 4,292 12,679 12,291
Ancillary.................................................... 184 112 1,236 748
--------- --------- --------- ---------
Revenues................................................. $ 4,332 $ 4,404 $ 13,915 $ 13,039
========= ========= ========= =========
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a
complaint (the "Indiana Complaint") in the United States District Court for the
Southern District of Indiana (the "Indiana Court") against the General Partner
and Forum Group alleging breach of the partnership agreement ("Partnership
Agreement"), breach of fiduciary duty, fraud, insider trading, and civil
conspiracy/aiding and abetting. The Indiana Complaint is a derivative action
seeking recovery of damages and other relief on behalf of, and not from, the
Partnership. The Indiana Complaint alleged, 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
Indiana Complaint further alleged 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 sought the
restoration of certain former directors to the Board of Directors of the General
Partner and the removal of certain other directors from the Board, an injunction
prohibiting the payment of an 8% management fee, and unspecified compensatory
and punitive damages. The defendants moved to dismiss the Indiana Complaint for
failure to state a claim for which relief could be granted and, in response, on
December 11, 1995, the Plaintiff amended the Indiana Complaint. The defendants
moved to dismiss the amended complaint on similar grounds, and on May 17, 1996,
the Indiana Court ruled on the defendant's motion by dismissing without
prejudice two of the four counts contained in the amended complaint, namely the
counts for alleged insider trading and civil conspiracy/aiding and abetting. On
February 28, 1997, the Plaintiff filed a motion for partial summary judgment on
the issue of the composition of the General Partner's Board of Directors. The
defendants filed a cross-motion for summary judgment on February 28, 1997. Both
motions were denied by the Indiana Court on October 2, 1997. The Indiana Court
has set a trial date of December 8, 1997. The General Partner intends to
vigorously defend against this litigation.
8
<PAGE>
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed in the Form 10-Q are forward-looking statements within
the meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. These risks are detailed from time to time in the Partnership's
filings with the Securities and Exchange Commission. The Partnership undertakes
no obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
RESULTS OF OPERATIONS
Revenues. Revenues represent gross property routine and ancillary sales less
property-level expenses. Routine service revenues are generated from monthly
charges for independent living units and daily charges for assisted living
suites and nursing beds which are recognized monthly based on the terms of the
residents' agreements. 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. Total revenues for the three months ended
September 30, 1997 decreased by $72,000, or 1.6%, to $4,332,000 compared to the
same period in 1996. Total revenues for the nine months ended September 30, 1997
increased by $876,000, or 6.7%, to $13,915,000 compared to the same period in
1996. Both the quarter and year-to-date gross property routine and ancillary
sales showed significant growth due to increases in residency fees and charges
in the independent living, assisted living and nursing components, the favorable
impact of 88 expansion units and increases in therapy and other ancillary
healthcare services. However, the increases in gross sales also resulted in
increased department costs due to a higher level of nursing and therapy staffing
as well as an increase in the amount of therapy and ancillary healthcare
services, resulting from the expansions described above. These increases in
departmental costs had a significant impact on the quarter revenues as the four
properties with expansions experienced increased operating costs as the new
units have not been fully occupied.
Combined average occupancy (calculated based on the number of units occupied
during the respective period) at the nine senior living communities decreased
over four percentage points to 90.1% for the three months ended and decreased
over one percentage point to 92.9% for the nine months ended September 30, 1997
due to the impact of certain expansion units which have not yet been occupied.
The combined average monthly rental rate per occupied unit (calculated using
revenue generated from the respective rental components and excluding non-rental
revenues) increased 8% for the three months ended September 30, 1997 and 7% for
the nine months ended September 30, 1997, compared to the same periods in 1996,
with most of the of the nine properties experiencing increases.
Operating Costs and Expenses. Operating costs and expenses consist of
depreciation and amortization, base management fees, real and personal property
taxes, insurance and certain other costs. The Partnership's operating costs and
expenses increased $43,000, or 1.5%, to $2,924,000 for the three months ended
and $231,000, or 3.0%, to $8,009,000 for the nine months ended September 30,
1997. The increased costs and expenses resulted from additional depreciation of
property and equipment, and an increase in management fees as a function of
increases in gross sales.
Operating Profit. As a result of the changes in revenues and operating costs and
expenses discussed above, the Partnership's operating profit decreased by
$115,000 to $1,408,000, or 33% of revenues, for the three months ended September
30, 1997 from $1,523,000, or 35% of revenues, for the same period in 1996.
Operating profit for the nine months ended September 30, 1997 increased by
$645,000 to $5,906,000, or 42% of revenues, from $5,261,000, or 40% of revenues,
for the same period in 1996.
9
<PAGE>
Net Income. The Partnership reported net income of $204,000 for the three months
ended September 30, 1997 compared to net income of $507,000 for the same period
in 1996. Net income for the nine months ended September 30, 1997 was $1,950,000
compared to net income of $1,137,000 for the same period in 1996.
Income Taxes. The Omnibus Budget Reconciliation Act of 1987 provided that
certain publicly traded partnerships should be treated as corporations for
federal income tax purposes. A grandfather rule delayed the application of this
provision until tax years beginning after December 31, 1997 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 the
Partnership to avoid corporate taxation for tax years beginning after December
31, 1997 include: (i) selling or otherwise disposing of all or substantially all
of the Partnership's assets pursuant to a plan of liquidation and (ii)
converting the Partnership into a real estate investment trust or other type of
legal entity. Such actions are prohibited or restricted under the Partnership's
current financing and may require the granting of a waiver by the lender
thereunder. There can be no assurance that any such waiver would be granted.
There can be no assurance that the Partnership will avoid being taxed as a
corporation for federal income tax purposes.
On August 5, 1997, President Clinton signed the Taxpayer Relief Act of 1997 (the
"Act"). A provision in the Act allows certain publicly traded partnerships which
would otherwise become subject to tax as a corporation beginning in 1998 to
elect to be subject to a special tax on gross income from its active conduct of
a trade or business, and continue to avoid being treated as a corporation for
federal income tax purposes. The tax generally applies to a partnership's gross
income at the rate of three and one half percent, effective for taxable years
beginning after December 31, 1997.
Had the Partnership historically been taxed as a corporation, income tax expense
recognized for the periods presented in the accompanying Statements of
Operations would have approximated $82,000, $205,000, $788,000 and $459,000 for
the three-month and nine-month periods ended September 30, 1997 and 1996,
respectively. Had the Partnership been taxed under the elective provisions of
the Act for the periods presented, tax incurred by the Partnership would have
been approximately $500,000, $473,000, $1,526,000 and $1,390,000 for the
three-month and nine-month periods ended September 30, 1997 and 1996,
respectively.
The Partnership has experienced taxable losses in prior years, although there is
no certainty that such losses will continue in 1997 and future periods. The
General Partner is continuing to study this area as well as the impact on
taxable income/loss of changes in depreciable lives related to a conversion to
corporate status. Should the Partnership convert to corporate status, the
Partnership expects that tax depreciation would decrease in 1998, resulting in
an increase in taxable income. Internal Revenue Service guidance on this issue
is expected to be issued in December and should allow the General Partner to
complete its evaluation and recommend a course of action in the best interest of
the Partnership and its partners. Should the Partnership elect to convert to
corporate status, the Partnership will be required to establish a deferred tax
liability or asset with an offsetting one-time charge or credit to income
representing the cumulative tax effect of temporary differences between the book
and tax treatment of certain income and expense items such as depreciation.
FINANCIAL CONDITION
Liquidity and Capital Resources. At September 30, 1997, the Partnership had cash
and cash equivalents of $6,214,000 and restricted cash of $2,550,000, which is
included in other assets on the balance sheet. Cash provided by operating
activities was $4,059,000 for the nine months ended September 30, 1997, which is
$1,390,000 less than the prior year due principally to changes in its working
capital balances. The Partnership believes that it has adequate liquidity to
meet its foreseeable working capital requirements.
10
<PAGE>
The Partnership has an on-going expansion program related to all of its
communities in an effort to further improve the Partnership's results of
operations. The expansion program consists of twelve separate projects expected
to increase the total number of units by 303, or 16% of total units, at an
estimated capital cost of $21.9 million. Currently, four expansion projects have
been completed, three expansion projects are under construction and another five
expansion projects are in active development or design. Three of the five
projects currently in development or design are expected to begin construction
by the end of 1997. The four completed projects increased the number of assisted
living and nursing units owned by the Partnership and increased the total number
of units by 88 units, or 5%, at a capital cost of $3.9 million. The expansions
are designed to add capacity to and/or modify the uses of existing facilities to
increase earnings without incurring substantial land acquisition and common area
build-out costs. Certain expansions will require additional regulatory
approvals. The Partnership expended $3,139,000 and $3,313,000 for the nine
months ended September 30, 1997 and 1996, respectively, related to these
expansion projects, and renewal and replacement projects for existing
properties.
The Partnership is financing and intends to continue to finance this expansion
program from the Partnership's cash flow from operations. If cash flow from
operations is insufficient to complete future expansions on a timely basis, the
expansion may be delayed, reduced in scope or discontinued. The terms of the
Partnership's current debt agreement restrict the Partnership from incurring
additional third-party financing (other than $1 million of equipment financing)
and prohibit the imposition of liens on the Partnership's assets. There can be
no assurance that a waiver can be obtained from the lender to permit any third
party financing, or whether, when and on what terms, any such financing may be
available. As a result of the capital required to fund the expansion program,
the Partnership does not expect to make distributions in respect of limited
partner units in the foreseeable future.
The implementation of the expansion program and its impact on the value of an
investment in the Partnership is subject to a number of variables, including
without limitation, the availability of cash flow from operations, the ability
to obtain required zoning variances and permits from local governmental
authorities and the timing thereof, whether development and construction costs
are higher or lower than anticipated, whether construction is completed faster
or slower than anticipated, whether newly added living units are occupied faster
or slower than anticipated and whether operating costs are higher or lower than
anticipated.
Cash used in financing activities was $905,000 for the nine months ended
September 30, 1997, an increase of $102,000 over the prior year principally due
to an increase in principal amortization on the Partnership's debt.
11
<PAGE>
PART II. OTHER INFORMATION
--------------------------
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
ITEM 1. LEGAL PROCEEDINGS
On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a
complaint (the "Indiana Complaint") in the United States District Court for the
Southern District of Indiana (the "Indiana Court") against the General Partner
and Forum Group alleging breach of the partnership agreement ("Partnership
Agreement"), breach of fiduciary duty, fraud, insider trading, and civil
conspiracy/aiding and abetting. The Indiana Complaint is a derivative action
seeking recovery of damages and other relief on behalf of, and not from, the
Partnership. The Indiana Complaint alleged, 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
Indiana Complaint further alleged 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 sought the
restoration of certain former directors to the Board of Directors of the General
Partner and the removal of certain other directors from the Board, an injunction
prohibiting the payment of an 8% management fee, and unspecified compensatory
and punitive damages. The defendants moved to dismiss the Indiana Complaint for
failure to state a claim for which relief could be granted and, in response, on
December 11, 1995, the Plaintiff amended the Indiana Complaint. The defendants
moved to dismiss the amended complaint on similar grounds, and on May 17, 1996,
the Indiana Court ruled on the defendant's motion by dismissing without
prejudice two of the four counts contained in the amended complaint, namely the
counts for alleged insider trading and civil conspiracy/aiding and abetting. On
February 28, 1997, the Plaintiff filed a motion for partial summary judgment on
the issue of the composition of the General Partner's Board of Directors. The
defendants filed a cross-motion for summary judgment on February 28, 1997. Both
motions were denied by the Indiana Court on October 2, 1997. The Indiana Court
has set a trial date of December 8, 1997. The General Partner intends to
vigorously defend against this litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FORUM RETIREMENT PARTNERS, L.P.,
a Delaware Limited Partnership
By: FORUM RETIREMENT, INC., GENERAL PARTNER
By: /s/ Donald D. Olinger
---------------------------
Donald D. Olinger
Vice President
November 14, 1997
-----------------
Date
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Forum
Retirement Partners, L.P. Condensed Consolidated Balance Sheet and Condensed
Consolidated Statement of Operations as of and for the nine months ended
September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000804752
<NAME> Forum Retirement Partners, L.P.
<MULTIPLIER> 1,000
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,214
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 132,403
<DEPRECIATION> 34,508
<TOTAL-ASSETS> 107,918
<CURRENT-LIABILITIES> 0
<BONDS> 47,147
0
0
<COMMON> 0
<OTHER-SE> 41,558
<TOTAL-LIABILITY-AND-EQUITY> 107,918
<SALES> 13,915
<TOTAL-REVENUES> 13,915
<CGS> 0
<TOTAL-COSTS> 8,009
<OTHER-EXPENSES> 350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,839
<INCOME-PRETAX> 1,950
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,950
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
