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 March 31, 1998
Commission File Number: 1-9302
FORUM RETIREMENT PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 35-1686799
(State of Incorporation) (I.R.S. Employer Identification
Number) 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>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION (unaudited):
Condensed Consolidated Balance Sheets - 3
March 31, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations - 4
Three months ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows - 5
Three months ended March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of 9
Operations and Financial Condition
PART II. OTHER INFORMATION AND SIGNATURE 11-12
</TABLE>
2
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Property and equipment, net.............................................. $ 98,774 $ 99,615
Deferred financing costs, net............................................ 1,058 1,144
Restricted cash.......................................................... 2,848 2,452
Cash and cash equivalents................................................ 3,220 6,459
------------ -----------
Total assets.................................................... $ 105,900 $ 109,670
============ ===========
LIABILITIES AND PARTNERS' EQUITY
Debt..................................................................... $ 46,554 $ 46,854
Deferred income taxes.................................................... 1,372 --
Due (from) to manager.................................................... (537) 3,909
Other liabilities........................................................ 961 678
General partner's equity in subsidiary partnership 273 262
Deferred management fees due to parent of general partner 15,780 15,780
------------ -----------
Total liabilities............................................... 64,403 67,483
------------ -----------
Partners' equity:
General partner..................................................... 521 528
Limited partners (15,285 units issued and outstanding).............. 40,976 41,659
------------ -----------
Total partners' equity.......................................... 41,497 42,187
------------ -----------
Total liabilities and partners' equity.......................... $ 105,900 $ 109,670
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
(unaudited, in thousands, except per unit data)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
REVENUES....................................................................................... $ 4,614 $ 4,426
--------- --------
OPERATING COST AND EXPENSES
Depreciation and amortization............................................................. 965 944
Base management fees to MSLS.............................................................. 1,172 1,138
Property taxes............................................................................ 170 463
Insurance and other....................................................................... 46 17
--------- --------
Total operating costs and expenses.................................................... 2,353 2,562
--------- --------
OPERATING PROFIT BEFORE PARTNERSHIP EXPENSES
AND INTEREST.............................................................................. 2,261 1,864
General and administrative................................................................ 78 101
Interest expense.......................................................................... 1,244 1,272
Interest income........................................................................... (106) (41)
--------- --------
Income before general partner's interest in income of
subsidiary partnership.................................................................... 1,045 532
General partners' interest in income of subsidiary partnership................................. 11 5
--------- --------
INCOME BEFORE INCOME TAXES..................................................................... 1,034 527
Provision for income taxes resulting from change in tax status (see Note 5)............... (1,271) --
Provision for income taxes for current operations ........................................ (453) --
--------- --------
Total provision for income taxes...................................................... (1,724) --
--------- --------
NET INCOME (LOSS).............................................................................. $ (690) $ 527
========= ========
General partner's interest in net income (loss)................................................ $ (7) $ 5
========= ========
Limited partners' interest in net income (loss)................................................ $ (683) $ 522
========= ========
Average number of limited partner units........................................................ 15,285 15,285
========= ========
Earnings (loss) per limited partner unit....................................................... $ (.04) $ .03
========= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1998 and 1997
(unaudited, in thousands)
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................................... $ (690) $ 527
Adjustments to reconcile to cash from operations
Depreciation................................................................... 965 944
Amortization of deferred financing costs....................................... 86 92
Increase in deferred income taxes.............................................. 1,372 --
Change in other operating accounts............................................. (4,272) (1,249)
-------- ---------
Cash (used in) provided by operations............................................... (2,539) 314
-------- ---------
INVESTING ACTIVITIES
Capital expenditures........................................................... (125) (825)
Increase in capital improvement reserve........................................ (152) (133)
-------- ---------
Cash used in investing activities................................................... (277) (958)
-------- ---------
FINANCING ACTIVITIES
Repayments of debt............................................................. (300) (272)
Principal payments on note due to general partner (27) (12)
Increase in financing reserve.................................................. (96) -
-------- ---------
Cash used in financing activities................................................... (423) (284)
Decrease in cash and cash equivalents............................................... (3,239) (928)
Cash and cash equivalents, beginning of period...................................... 6,459 6,199
-------- ---------
Cash and cash equivalents, end of period............................................ $ 3,220 $ 5,271
======== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. 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, 1997.
In the opinion of the Partnership, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position of the Partnership as of March 31, 1998 and December 31,
1997, and the results of its operations and cash flows for the three months
ended March 31, 1998 and 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.
2. 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 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 accompanying consolidated statements of operations as a
reduction of the income of the Partnership. Forum Group beneficially owns
approximately 86% of the outstanding Preferred Depository Units (the
"Units") representing a preferred limited partner interest 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 RCs owned by the Partnership.
On April 16, 1998, the Board of Directors of Host Marriott approved a plan
to reorganize Host Marriott's current business operations by spinning-off
Host Marriott's senior living business into a separate corporation, the
Senior Living Communities Company and contributing Host Marriott's hotels
and certain other assets and liabilities to a newly formed Delaware limited
partnership, Host Marriott, L.P., whose sole general partner will be Host
Marriott Trust, a newly formed Maryland Real Estate Investment Trust
("REIT"). After the proposed reorganization, HMCSC will lease hotels from
Host Marriott, L.P. The reorganization, if consummated, will not have a
significant impact on the operations of the Partnership.
Consummation of the reorganization is subject to significant contingencies,
including final Board approval, consent of shareholders, partners,
bondholders, lenders and ground lessors of Host Marriott, its affiliates
and other third parties. Accordingly, there can be no assurance that the
reorganization will be completed.
3. 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.
6
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
House profit generated by the Partnership's senior living communities
consists of (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Community Sales
Routine .............................................................. $ 12,502 $ 12,396
Ancillary............................................................. 2,153 1,874
--------- ---------
Total Community Sales............................................. 14,655 14,270
--------- ---------
Department Costs
Routine .............................................................. 8,210 8,306
Ancillary............................................................. 1,831 1,538
--------- ---------
Total Department Costs............................................ 10,041 9,844
--------- ---------
Department Profit
Routine .............................................................. 4,292 4,090
Ancillary............................................................. 322 336
--------- ---------
Revenues.......................................................... $ 4,614 $ 4,426
========= =========
</TABLE>
4. Other assets include restricted cash as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- -----------
<S> <C> <C>
Debt service reserve fund.................................................. $ 487 $ 391
Fixed asset reserve fund................................................... 421 268
Real estate tax reserve fund............................................... 453 627
Insurance reserve fund..................................................... 1,487 1,166
--------- ---------
$ 2,848 $ 2,452
========= =========
</TABLE>
The debt service, fixed asset, real estate tax and insurance reserve funds
consist of monies transferred into segregated escrow accounts out of
revenues generated by the Partnership, pursuant to the Partnership's
secured loan facility. These funds are periodically disbursed by the
collateral agent to pay for debt service, capital expenditures, insurance
premiums and real estate taxes relating to the secured property. In some
cases, to ensure prompt payment, the Partnership utilizes its unrestricted
cash to pay for capital expenditures, insurance premiums and real estate
taxes and is thereafter reimbursed for such payments out of funds held in
the appropriate escrow account.
5. The Omnibus Budget Reconciliation Act of 1987, as amended by the Taxpayer
Relief Act of 1997 (the "Act"), provided that certain publicly traded
partnerships should be treated as corporations for federal income tax
purposes. A provision of 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.
7
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Partnership has elected not to pay the special tax on gross income and
began being treated as a corporation for federal income tax purposes
effective January 1, 1998. Included within the Partnership's tax provision
for the first quarter of 1998 is a one time charge of approximately $1.3
million to record a net deferred tax liability related to the change in tax
status. The net deferred tax liability represents the tax effect of the
excess of the net assets reported in the accompanying financial statements
over the Partnership's tax basis in the net assets. This difference is due
primarily to the use, for income tax purposes, of accelerated depreciation
methods and shorter depreciable lives for fixed assets and deferred
management fees which have been expensed under generally accepted
accounting principals but are generally not deductable for tax purposes
until paid.
6. 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. Cash flow was not adequate to make the distributions, and the
entire $15,780,000 of management fees earned from the formation of the
Partnership through December 31, 1993 was deferred. The management fee
payable to Forum Group of $15,780,000 for all periods from the formation of
the Partnership in 1986 to December 31, 1993 was 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% of the limited
partners' interest vote to terminate such agreement. The Partnership is
unable to predict when or if management fees deferred prior to January 1,
1994 will become payable.
On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff")
filed a complaint in the United States District Court of the Southern
District of Indiana (the "Indiana Court") against the General Partner and
Forum Group alleging breach of the partnership agreement, breach of
fiduciary duty, fraud, insider trading and civil conspiracy/aiding and
abetting. On February 4, 1998, the Plaintiff, MSLS, the General Partner,
Forum Group and Host Marriott entered into a Settlement and Release
Agreement (the "Settlement Agreement"), pursuant to which Host Marriott
agreed to pay each limited partner electing to join in the Settlement
Agreement $4.50 per unit in exchange for (i) the transfer of all
Partnership units owned by a settling limited partner; (ii) an agreement by
each settling limited partner not to purchase additional Partnership units;
(iii) a release of all claims asserted in the litigation; and (iv) a
dismissal of the litigation. Initially, the period within which a limited
partner could elect to participate in the Settlement Agreement was
scheduled to expire on April 27, 1998. This period has now been extended to
May 22, 1998. Host Marriott expects that additional limited partners will
join in the Settlement Agreement but cannot predict with any certainty the
extent of such additional participation. Host Marriott also agreed to pay
as much as an additional $1.25 per unit to the settling Limited Partners,
under certain conditions, in the event that Host Marriott within three
years following the date of settlement initiates a tender offer for the
purchase of units not presently held by Host Marriott or the settling
Limited Partners. On February 5, 1998, the Indiana Court entered an order
approving the dismissal of the Plaintiff's case.
In connection with the Settlement Agreement on March 25, 1998, Host
Marriott acquired 1,000,894 limited partner shares for $4,504,023. As a
result of this purchase, Host Marriott's ownership interest in the
Partnership, directly or through affiliates, increased to approximately
86%.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Form 10-Q include forward-looking statements
within the meaning of the Private Litigation Reform Act of 1995, including
without limitation, statements related to Host Marriott Corporation ("Host
Marriott") proposed REIT conversion, the terms, structure and timing thereof,
and the expected effects of the proposed REIT conversion. All forward-looking
statements involve known and unknown risks, uncertainties, and other factors,
many of which are not within the control of the Partnership, that may cause
actual transactions, results, performance or achievements to be materially
different from any future transactions, results, performance or achievements
expressed or implied by such forward-looking statements. While the Partnership
believes that the expectations reflected in these forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its performance
or other expectations will be attained, that the transactions described herein
will be consummated or that the terms of the transactions or the timing or
effects thereof will not differ materially from those described herein. 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. Revenues for the three months ended March 31, 1998
increased by $188,000, or 4%, to $4,614,000 compared to the same period in 1997.
The revenue increase is primarily the result of increases in residency fees and
charges in the independent living, assisted living and nursing components, the
favorable impact of the expansion units and increases in therapy and other
ancillary healthcare services. However, these increases in gross sales also
resulted in increased department costs. Combined average occupancy (calculated
based on the number of units occupied during the respective period) at the nine
senior living communities was 94.6% for the three months ended March 31, 1998,
an increase of approximately 1.3% compared to the same period in 1997.
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 decreased $209,000, or 8%, to $2,353,000 for the three months ended
March 31, 1998 due primarily to a decrease in property taxes.
OPERATING PROFIT. As a result of the changes in revenues and operating costs and
expenses discussed above, the Partnership's operating profit increased by
$397,000, or 21%, to $2,261,000 for the three months ended March 31, 1998. As a
percentage of revenues, operating costs and expenses decreased from 58% for the
three months ended March 31, 1997 to 51% for the same period in 1998.
INTEREST EXPENSE. Interest expense decreased by $28,000, or 2%, to $1,244,000
for the three months ended March 31, 1998 from $1,272,000 during the same period
in 1997 resulting from loan principal amortization.
NET INCOME (LOSS) . The net loss was $690,000 for the three months ended March
31, 1998 compared to net income of $527,000 for the same period in 1997 due to
the impact of an approximate $1.3 million one-time tax charge discussed below,
partially offset by improved operations. The net loss per limited partner unit
for the three months ended March 31, 1998 was $.04 per unit, compared to net
income per unit of $.03 per share for the same period in 1997.
INCOME TAXES. The Partnership began being taxed as a corporation effective
January 1, 1998. This has resulted in a one-time charge of approximately $1.3
million included as the tax provision for the first quarter of 1998.
Additionally, the Partnership's income tax provision for the first quarter of
1998 was $453,000.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES.
At March 31, 1998, the Partnership had cash and cash equivalents of $3,220,000
and restricted cash of $2,848,000. The Partnership believes that it has
sufficient capital resources to conduct its operations in the ordinary course of
business.
The Partnership's long-term financing needs have historically been funded
through loan agreements with independent financial institutions. The General
Partner believes that the Partnership will have sufficient capital resources and
liquidity to continue to conduct its operations in the ordinary course of
business, although there can be no assurance of the Partnership's ability to do
so.
The Partnership's principal source of cash is from operations. Its principal
uses of cash are operating expenses, debt service, property replacement and
renewals as well as to fund the expansions discussed below.
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 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 expansion program consists of
eleven separate projects expected to increase the total number of units by 292,
or 18% of total units, at an estimated cost of $20 million. Currently, six
expansion projects have been completed, two expansion projects are under
construction and another three expansion projects are in active development or
design. The three remaining projects in development or design are expected to
begin construction by the end of 1998 or early 1999. The six completed projects
increased the total number of units by 113, at a cost of $7.9 million.
The Partnership is financing and intends to continue to finance this expansion
program with cash 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 to the limited partners 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 government
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 and whether operating costs are higher or lower than
anticipated.
Cash used in operating activities was $2,539,000 for the three months ended
March 31, 1998, compared to cash provided by operations of $314,000 for the same
period in 1997 due principally to changes in working capital and amounts due to
Marriott International for reimbursement of operating costs and management fees.
Cash used in investing activities was $277,000 for the three months ended March
31, 1998, compared to $958,000 for the same period in 1997 due to a decrease in
capital expenditures.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
Cash used in financing activities was $423,000 for the three months ended March
31, 1998, compared to $284,000 for the same period in 1997 due to increases in
repayments of debt, payments on note due to general partner and financing
reserve.
On April 16, 1998, the Board of Directors of Host Marriott approved a plan to
reorganize Host Marriott's current business operations by spinning-off Host
Marriott's senior living business into a separate corporation, the Senior Living
Communities Company and contributing Host Marriott's hotels and certain other
assets and liabilities to a newly formed Delaware limited partnership, Host
Marriott, L.P., whose sole general partner will be Host Marriott Trust, a newly
formed Maryland Real Estate Investment Trust ("REIT"). After the proposed
reorganization, HMCSC will lease hotels from Host Marriott, L.P. The
reorganization, if consummated, will not have a significant impact on the
operations of the Partnership.
Consummation of the reorganization is subject to significant contingencies,
including final Board approval, consent of shareholders, partners, bondholders,
lenders and ground lessors of Host Marriott, its affiliates and other third
parties. Accordingly, there can be no assurance that the reorganization will be
completed.
Cash used in financing activities was $423,000 for the three months ended March
31, 1998, compared to $284,000 for the same period in 1996 due to increases in
repayments of debt, payments on note due to general partner and financing
reserve.
On April 16, 1998, the Board of Directors of Host Marriott approved a plan to
reorganize Host Marriott's current business operations by spinning-off Host
Marriott's senior living business into a separate corporation, the Senior Living
Communities Company and contributing Host Marriott's hotels and certain other
assets and liabilities to a newly formed Delaware limited partnership, Host
Marriott, L.P., whose sole general partner will be Host Marriott Trust, a newly
formed Maryland Real Estate Investment Trust ("REIT"). After the proposed
reorganization, HMCSC will lease hotels from Host Marriott, L.P. The
reorganization, if consummated, will not have a significant impact on the
operations of the Partnership.
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 in the United States District Court of the Southern District
of Indiana (the "Indiana Court") against the General Partner and Forum Group
alleging breach of the partnership agreement, breach of fiduciary duty, fraud,
insider trading and civil conspiracy/aiding and abetting. On February 4, 1998,
the Plaintiff, MSLS, the General Partner, Forum Group and Host Marriott entered
into a Settlement and Release Agreement (the "Settlement Agreement"), pursuant
to which Host Marriott agreed to pay each limited partner electing to join in
the Settlement Agreement $4.50 per unit in exchange for (i) the transfer of all
Partnership units owned by a settling limited partner; (ii) an agreement by each
settling limited partner not to purchase additional Partnership units; (iii) a
release of all claims asserted in the litigation; and (iv) a dismissal of the
litigation. Initially, the period within which a limited partner could elect to
participate in the Settlement Agreement was scheduled to expire on April 27,
1998. This period has now been extended to May 22, 1998. Host Marriott expects
that additional limited partners will join in the Settlement Agreement but
cannot predict with any certainty the extent of such additional participation.
Host Marriott also agreed to pay as much as an additional $1.25 per unit to the
settling Limited Partners, under certain conditions, in the event that Host
Marriott within three years following the date of settlement initiates a tender
offer for the purchase of units not presently held by Host Marriott or the
settling Limited Partners. On February 5, 1998, the Indiana Court entered an
order approving the dismissal of the Plaintiff's case.
In connection with the Settlement Agreement on March 25, 1998, Host
Marriott acquired 1,000,894 limited partner shares for $4,504,023. As a result
of this purchase, Host Marriott's ownership interest in the Partnership,
directly or through affiliates, increased to approximately 86%.
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
None.
12
<PAGE>
SIGNATURE
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
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
May 15, 1998 By: /s/ Donald D. Olinger
- ------------ ---------------------------
Date Donald D. Olinger
Vice President
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Forum
Retirement Partners, L.P. condensed consolidated balance sheets and condensed
statement of operations as of the quarter ended March 31, 1998 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> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
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0
0
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