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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number: 1-9302
FORUM RETIREMENT PARTNERS, L.P.
Delaware 35-1686799
(State of Incorporation) (I.R.S. Employer
Identification Number)
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 Representing American Stock Exchange
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
There were 15,285,248 Preferred Depository Units outstanding as of March
18, 1998.
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) was $14,658,094 as of March 18, 1998.
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PART I
Forward-Looking Statements
Certain matters discussed herein 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 Forum Retirement Partners,
L.P. (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.
Item 1. Business.
Forum Retirement Partners, L.P. (the "Partnership") is a Delaware
limited partnership that was formed in 1986 to own retirement communities
("RCs") originally developed or acquired by Forum Group, Inc. ("Forum Group").
As of March 19, 1998, the Partnership owned nine upscale senior living
properties with 1,731 units. Forum Retirement, Inc., a wholly-owned subsidiary
of Forum Group, Inc., 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.
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 capital 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 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 to
limited partners for the foreseeable future.
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Item 2. Properties.
The Partnership (through an operating limited partnership in which the
Partnership is the 99% limited partner and the General Partner is the 1% general
partner) owns nine senior living communities with 1,731 units in Delaware,
Florida, New Mexico, South Carolina and Texas (collectively, the "Properties").
In connection with the acquisition of Forum Group by HMCSC, Forum Group assigned
to MSLS its interest as manager under a long-term management agreement for the
nine senior living communities owned by the Partnership.
Seven of the nine communities consist of independent living, assisted
living and nursing components. The remaining two communities provide assisted
living and nursing components only.
Independent living components, which represent 44% of the Partnership's
senior living units, 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.
Each resident enters into a residency agreement that may be terminated by the
resident, generally requiring 30 days 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, which represent 18% of the Partnership's
senior living units, provide a supportive environment that encourages
independent living. Residents have private or semiprivate units, 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, security and transportation services, assistance
with activities of daily living, and emergency care. Additionally, skilled
nursing and therapy services are generally available.
Nursing components, which represent 38% of the Partnership's senior
living units, 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.
Some communities also provide ancillary healthcare services, including
the operation of an adult day care center on the premises of one community.
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The following table indicates the name, location and current capacity for each
property:
Capacity
-----------------------------------------
Independent Assisted
Living Living Nursing Total
Name And Location Units Units Units Units
- ----------------- ----- ----- ----- -----
The Forum at Lincoln Heights 151 30 60 241
San Antonio, Texas
Foulk Manor North 58 11 46 115
Wilmington, Delaware
Foulk Manor South -- 56 57 113
Wilmington, Delaware
Millcroft 62 36 100 198
Newark, Delaware
The Montebello on Academy 114 35 60 209
Albuquerque, New Mexico
The Montevista at Coronado 123 15 109 247
El Paso, Texas
Myrtle Beach Manor -- 68 104 172
Myrtle Beach, South Carolina
The Park Summit of Coral Springs 192 50 35 277
Coral Springs, Florida
Shipley Manor 62 15 82 159
Wilmington, Delaware
------- ------- ------- -------
Total units 762 316 653 1,731
======= ======= ======= =======
The overall average occupancy rate for the Properties for 1997 was 92.8%.
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. Expansion
of the Properties may adversely impact occupancy during the development and
lease-up process, as was the case during 1997 at certain of these properties.
Mortgages
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 of certain of the
Partnership bank debt scheduled to mature on December 31, 1993 and to prepay the
Partnership's split coupon first mortgage notes due July 1, 1996, 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 Properties and by
security interests in substantially all of the Partnership's other assets.
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The principal amount outstanding under the Nomura Loan at December 31, 1997
was $46.9 million, which bears interest at 9.93% per annum. See "Item 1 -
Business" and Note 7 of the accompanying Consolidated Financial Statements for
additional information regarding the Nomura Loan.
Sources of Payment
The independent and assisted living components 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 qualified 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 from Medicare and Medicaid:
INDEPENDENT AND ASSISTED LIVING COMPONENTS
------------------------------------------
SOURCE 1997 1996 1995 1994 1993
- ------ ---- ---- ---- ---- ----
Private 100% 100% 100% 100% 100%
Medicare/Medicaid -- -- -- -- --
---- ---- ---- ---- ----
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
NURSING COMPONENTS
-------------------------------------------
SOURCE 1997 1996 1995 1994 1993
- ------ ---- ---- ---- ---- ----
Private 55% 61% 65% 65% 69%
Medicare/Medicaid 45% 39% 35% 35% 31%
---- ---- ---- ---- ----
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
TOTAL PROPERTIES
-------------------------------------------
SOURCE 1997 1996 1995 1994 1993
- ------ ---- ---- ---- ---- ----
Private 75% 79% 82% 82% 85%
Medicare/Medicaid 25% 21% 18% 18% 15%
---- ---- ---- ---- ----
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
Most private insurance carriers reimburse their policyholders, or make
direct payment to facilities, for covered services at rates established by the
facilities. Where applicable, the resident is responsible for any difference
between the insurance proceeds and the total charges. In certain states, Blue
Cross plans pay for covered services at rates negotiated with facilities. In
other states, Blue Cross plans are administered under contracts with facilities
providing for payment under formulae based on the cost of services. The Medicare
program also make payments 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 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.
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Various legislative and industry groups are studying numerous healthcare
issues, including access, delivery, and financing of long-term healthcare, 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 or the value of the
Properties.
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 being 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, except to
the extent that such independent living components are associated with the
provision of healthcare services. 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 various senior living facilities in each
property's respective geographical market areas. 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. Some of the national and
regional competitors in the senior living industry are: Manor Care, Sunrise
Assisted Living, Care Matrix and Kapson Senior Quarters. 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. 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, 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 of the manager, physician and nursing
services available, and family preferences. The Partnership believes that its
RC's rate high in each of these categories, except that its RC's are generally
more expensive than competing facilities.
Option Agreement
Pursuant to an option agreement (the "Option Agreement") entered into at
the time of the Partnership's formation, Forum Group has the option to purchase,
for a price equal to the appraised fair market value thereof, any RC which the
Partnership determines to sell. Accordingly, consummation of any transaction to
sell any of the Properties would be subject to, among other limitations, the
election of Forum Group not to exercise such option. Under the Option Agreement,
the Partnership has an option, subject to certain limitations and restrictions,
to purchase up to 15 additional RCs developed by Forum Group or any wholly
owned (or in certain circumstances partly owned) affiliate of Forum Group at the
lower of the appraised value of the RC or the sum of 115% of the costs incurred
in connection with development of the RC and an amount equal to net operating
losses incurred between completion and the purchase.
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Employees
Neither the General Partner nor the Partnership has any employees. Host
Marriott provides the services of certain employees (including the General
Partner's executive officers) to the Partnership and the General Partner. The
Partnership and the General Partner anticipate that each of the executive
officers of the General Partner will generally devote a sufficient portion of
his or her time to the business of the Partnership. However, each of such
executive officers also will devote a significant portion of his or her time to
the business of Host Marriott and its other affiliates. No officer or director
of the General Partner or employee of Host Marriott devotes a significant
percentage of time to Partnership matters. To the extent that any officer,
director or employee does devote time to the partnership, the General Partner or
Host Marriott, as applicable, is entitled to reimbursement for the cost of
providing such services. As of March 9, 1998, MSLS had approximately 1,200
employees working on the premises of the Partnership's nine communities pursuant
to the Management Agreement.
Item 3. Legal Proceedings.
On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a
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 ( the "Partnership Agreement"),
breach of fiduciary duty, fraud, insider trading and civil conspiracy/aiding and
abetting. On February 4, 1998, the Plaintiff, Marriott Senior Living Services,
Inc., the General Partner, Forum Group and Host Marriott Corporation entered
into a Settlement and Release Agreement (the "Settlement Agreement"), pursuant
to which Host Marriott Corporation agreed to purchase, at a price of $4.50 per
unit, the Partnership units of each Limited Partner electing to join in the
Settlement Agreement. A subsidiary of Host Marriott Corporation currently holds
79% of the outstanding units in the Partnership. Host Marriott Corporation 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 Corporation 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 is approximately
86%.
Item 4. Submission Of Matters To A Vote Of Security Holders.
None.
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PART II
Item 5. Market For The Partnership's Common Equity And Related Unitholder
Matters.
The preferred depository units are listed on the American Stock Exchange
and are traded under the symbol "FRL". The following tables set forth, for the
fiscal periods indicated, the high and low sales prices per unit, as reported in
the consolidated transaction reporting system. The approximate number of record
holders of Preferred Depository Units as of March 19, 1998 was 374. The
Partnership has not declared or made any distributions on Preferred Depository
Units for the last seven years. The Partnership intends to invest its excess
cash flow in its expansion program and does not expect to make distributions on
Preferred Depository Units in the foreseeable future. There necessarily can be
no assurance as to whether or when, or at what level, any future cash
distributions to holders of Units will be made. See "Item 1 - Business" for a
discussion of possible cash needs for expansions of the Partnership's RCs.
1996 High Low
- ---- ---- ----
First Quarter $5 $2-11/16
Second Quarter 4 3-1/4
Third Quarter 3-5/8 3-1/8
Fourth Quarter 3-3/4 3
1997 High Low
- ---- ---- ---
First Quarter $3-3/4 $3
Second Quarter 3-10/16 2-15/16
Third Quarter 4-3/4 3
Fourth Quarter 5-7/8 4-1/4
1998 High Low
- ---- ---- ---
First Quarter (through March 18, 1998) $4-5/8 $4-9/16
Item 6. Selected Financial Data.
Years Ended December 31
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Income Statement Data (in thousands except per Unit amounts)
Revenues $ 17,614 $ 16,283 $ 15,135 $ 15,093 $ 13,046
Income (loss) before
extraordinary charge 2,579 699 297 317 (1,762)
Extraordinary charge -
early extinguishment
of debt -- -- -- -- (2,917)
Net income (loss) 2,579 699 297 317 (4,679)
General Partner's interest
in net income (loss) 26 7 3 3 (47)
Limited Partners' interest
in net income (loss) 2,553 692 294 314 (4,632)
Average number of Units
outstanding 15,285 15,285 15,285 15,285 10,317
Basic and diluted earnings
(loss) per limited partner
Unit:
Income (loss) before
extraordinary charge .17 .05 .02 .02 (.17)
Extraordinary charge -- -- -- -- (.28)
Net income (loss) .17 .05 .02 .02 (.45)
Balance Sheet Data
Total assets $109,670 $106,510 $110,610 $111,163 $110,480
Long-term obligations 46,854 47,984 49,007 49,934 50,707
Partners' Equity 42,187 39,608 38,909 38,612 38,386
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
1997 Compared to 1996
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 increased $1,331,000, or 8.2%, to
$17,614,000 for 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, 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.
Combined average occupancy (calculated based on the number of units occupied
during the respective period) at the nine senior communities was 92.8% for the
year ended December 31, 1997, a decrease of approximately 1.6% compared to 1996.
The Partnership has not made any distributions on its Units in the past
seven years. Recently, this has been primarily due to the level of expansion
activity at several of its communities. The Partnership believes that operating
results can be expected to improve as a result of the expansion program.
Furthermore, the Partnership believes that it can continue to sustain high
levels of occupancy at the senior communities while enhancing operating margins
and performance. There necessarily can be no assurance that operating results
will improve or as to whether or when, or at what levels, any distributions will
be made. Implementation of the Partnership's expansion plan will negatively
affect the Partnership's level of distributable cash, if any, until the
expansion plan is completed. See "Item 1 - Business" for a discussion of the
Partnership's expansion efforts.
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 $230,000, or 2.3%, to $9,946,000 for 1997 generally due to
lower depreciation and property taxes, partially offset by increased management
fees as a result of the gross sales increase discussed above. As a percentage
of revenues, operating costs and expenses decreased from 62.5% in 1996 to 56.5%
in 1997.
Operating Profit. As a result of the changes in revenues and operating
costs and expenses discussed above, the operating profit increased $1,561,000,
or 25.6% to $7,668,000 in 1997. As a percentage of revenues, operating profit
increased to 43.5% in 1997 from 37.5% in 1996.
Interest Expense. Interest expense increased nominally to $5,115,000 in
1997 from $5,097,000 in 1996.
Net Income. Net income in 1997 was $2,579,000 compared to a net income of
$699,000 in 1996. The net income per limited partner unit for 1997 was $.17 per
share, compared to $.05 per share for 1996.
Income Taxes. 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
or, in certain cases, 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.
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
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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 would require the
granting of a waiver by the lender thereunder. The General Partner does not
believe that these are viable alternatives.
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 $1,042,000, $282,000, and $119,000 for the
years ended December 31, 1997, 1996 and 1995, 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 $2,049,000,
$1,880,000, and $1,743,000 for 1997, 1996 and 1995, respectively.
The Partnership has not elected to pay the special tax on gross income and
will continue to be treated as a partnership. As a result, for federal tax
purposes beginning in 1998, corporate income tax will be assessed upon and paid
for by the Partnership. Effective January 1,1998, the Partnership will recognize
a deferred tax liability of approximately $8 million representing the excess of
the Partnership's book basis in its assets over its tax basis as of that date,
with a corresponding one-time charge against income in 1998. The excess results
from the cumulative tax effect of temporary differences between the book and tax
treatment of certain items principally depreciation.
1996 Compared to 1995
Revenues. Revenues increased $1,148,000, or 7.6%, to $16,283,000 in 1996 as
compared to 1995. The revenue increase is primarily the result of increases in
residency fees and charges in the independent living, assisted living and
nursing components, occupancy increases at a majority of the senior communities
and the favorable impact of expansion units at four communities. Each of the
nine senior communities experienced revenue increases in 1996.
Operating Costs and Expenses. Operating costs and expenses increased
$863,000, or 9.3%, to $10,176,000 over the comparable period last year. The
increase in operating costs and expenses is primarily related to increases in
depreciation and amortization expense as a result of additions to property and
equipment, including additions related to the expansions discussed above.
Management fees increased as a function of the increase in sales. As a
percentage of revenues, operating costs and expenses increased to 62.5% in 1996
as compared to 61.5% in 1995.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, the Partnership's operating profit increased
$285,000, or 4.9%, to $6,107,000 in 1996. As a percentage of revenues,
operating profit decreased to 37.5% in 1996 from 38.5% in 1995.
Interest Expense. Interest expense decreased by 3% to $5,097,000, due
primarily to a reduction in the principal amount of debt.
Net Income. Net income for 1996 was $699,000 compared to a net income of
$297,000 in 1995. The net income per limited partner unit for 1996 was $.05 per
share, compared to $.02 per share for 1995.
Liquidity and Capital Resources
Capital Transactions. At December 31, 1997, the Partnership had cash and
cash equivalents of $6,459,000 and restricted cash of $2,452,000 which is
included in other assets on the balance sheet. The Partnership believes that it
has adequate liquidity to meet its foreseeable working capital requirements.
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.
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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, whether newly added units are occupied faster or
slower than anticipated and whether operating costs are higher or lower than
anticipated.
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.
Debt Payments. At December 31, 1997, the Partnership had approximately $47
million in mortgage debt secured by the Partnership's communities. Required
principal maturities on the mortgage debt are $1,247,000 in 1998, $1,376,000 in
1999, $1,520,000 in 2000 and the remaining balance of $42,712,000 in 2001.
Cash Flows. The Partnership's operating activities provided $7,372,000,
$7,914,000 and $2,988,000 of cash flow in 1997, 1996 and 1995. Cash provided by
operations, excluding changes in other operating accounts, was $6,891,000,
$5,203,000 and $4,289,000 in 1997, 1996 and 1995, respectively, due to improved
results for the RCs.
The Partnership's cash used in investing activities in 1997, 1996 and 1995
totaled $6,025,000, $3,607,000 and $4,519,000, respectively. Cash used in
investing activities primarily consists of the cost of new expansion units and
the funding of other capital additions, improvements and renewals and
replacements to existing community facilities.
The Partnership's cash used in financing activities was $1,087,000,
$1,068,000 and $1,097,000 in 1997, 1996 and 1995, respectively. The
Partnership's cash used in financing activities primarily consists of principal
payments on the secured mortgage debt of the RCs.
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.
11
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements are filed under this Item:
Page
-----
Reports of Independent Public Accountants 13-14
Consolidated Balance Sheets - December 31, 1997 and 1996 15
Consolidated Statements of Operations - Years ended December 31, 1997,
1996 and 1995 16
Consolidated Statements of Partners' Equity - Years ended December 31,
1997, 1996 and 1995 17
Consolidated Statements of Cash Flows - Years ended December 31, 1997,
1996 and 1995 18
Notes to Consolidated Financial Statements 19
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Partners of
FORUM RETIREMENT PARTNERS, L.P.:
We have audited the accompanying consolidated balance sheets of Forum Retirement
Partners, L.P. and subsidiary partnership (the "Partnership") as of December 31,
1997 and 1996, and the related consolidated statements of operations, partners'
equity and cash flows for each of the years in the two year period ended
December 31, 1997. These consolidated financial statements and the schedule
referred to below are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 the Partnership as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for each of the years in the
two year period ended December 31, 1997 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The schedule listed in the index at Item
14(a)(2) is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the consolidated financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the consolidated financial statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
March 18, 1998
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners of
FORUM RETIREMENT PARTNERS, L.P.:
We have audited the accompanying consolidated statements of operations,
partners' equity and cash flows of Forum Retirement Partners, L.P. and
subsidiary partnership for the year ended December 31, 1995. These
consolidated financial statements and financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audit.
We conducted our audit 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 audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of their operations and their
cash flows of Forum Retirement Partners, L.P. and subsidiary partnership for
the year ended December 31, 1995 in conformity with generally accepted
accounting principles. Also, 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.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 9, 1996, except as to note 7,
which is as of March 25, 1996
14
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
Consolidated Balance Sheets
December 31, 1997 and 1996
(in thousands)
ASSETS 1997 1996
------ ---- ----
Property and equipment, net................................ $ 99,615 $ 97,540
Deferred financing costs, net.............................. 1,144 1,528
Other assets............................................... 2,452 1,243
Cash and cash equivalents.................................. 6,459 6,199
-------- --------
Total assets............................................. $109,670 $106,510
======== ========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Debt....................................................... $ 46,854 $ 47,984
Due to manager............................................. 3,909 2,611
Other liabilities.......................................... 678 291
General partner's equity in subsidiary partnership......... 262 236
Deferred management fees due to parent of general partner.. 15,780 15,780
-------- --------
Total liabilities........................................ 67,483 66,902
-------- --------
Partners' equity:
General partner.......................................... 528 502
Limited partners (15,285 units issued and outstanding)... 41,659 39,106
-------- --------
Total partners' equity................................ 42,187 39,608
-------- --------
Total liabilities and partners' equity................ $109,670 $106,510
======== ========
See Notes to Consolidated Financial Statements.
15
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(in thousands, except per unit amounts)
1997 1996 1995
---- ---- ----
REVENUES......................................... $17,614 $16,283 $15,135
------- ------- -------
OPERATING COSTS AND EXPENSES
Depreciation and amortization.................... 3,928 4,093 3,630
Base management fees to MSLS..................... 4,684 4,301 3,961
Property taxes................................... 1,256 1,619 1,299
Insurance and other.............................. 78 163 423
------- ------- -------
Total operating costs and expenses............ 9,946 10,176 9,313
------- ------- -------
OPERATING PROFIT BEFORE PARTNERSHIP
EXPENSES AND INTEREST......................... 7,668 6,107 5,822
General and administrative....................... (357) (699) (601)
Interest expense................................. (5,115) (5,097) (5,261)
Interest income.................................. 409 395 338
------- ------- -------
Income before general partner's interest in
income of subsidiary partnership.............. 2,605 706 298
General partner's interest in income of
subsidiary partnership........................ (26) (7) (1)
------- ------- -------
NET INCOME....................................... $ 2,579 $ 699 $ 297
======= ======= =======
General partner's interest in net income......... $ 26 $ 7 $ 3
======= ======= =======
Limited partners' interest in net income......... $ 2,553 $ 692 $ 294
======= ======= =======
Average number of limited partner
units outstanding............................. 15,285 15,285 15,285
======= ======= =======
Earnings per limited partner unit................ $ .17 $ .05 $ .02
======= ======= =======
See Notes to Consolidated Financial Statements.
16
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Partners' Equity
For the Years ended December 31, 1997, 1996 and 1995
(in thousands)
General Limited
partner partners
------- --------
Balances at December 31, 1994.......................... $ 492 $ 38,120
Net income........................................... 3 294
------ --------
Balances at December 31, 1995.......................... 495 38,414
Net income........................................... 7 692
------ --------
Balances at December 31, 1996.......................... 502 39,106
Net income........................................... 26 2,553
------ --------
Balances at December 31, 1997.......................... $ 528 $ 41,659
====== ========
Accumulated balances:
Capital contributions................................ $1,173 $116,279
Offering costs....................................... (4) (6,715)
Cash distributions................................... (255) (29,679)
Accumulated losses................................... (386) (38,226)
------ --------
Balances at December 31, 1997.......................... $ 528 $ 41,659
====== ========
See Notes to Consolidated Financial Statements.
17
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 2,579 $ 699 $ 297
Adjustments to reconcile to cash from operations
Depreciation and amortization ...................... 3,928 4,093 3,630
Amortization of deferred financing costs............ 384 411 362
Changes in other operating accounts................. 481 2,711 (1,301)
------- ------- -------
Cash provided by operations........................... 7,372 7,914 2,988
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures................................ (6,003) (4,427) (3,986)
(Increase) decrease in capital improvement reserve.. (22) 820 (533)
------- ------- -------
Cash used in investing activities..................... (6,025) (3,607) (4,519)
------- ------- -------
FINANCING ACTIVITIES
Repayments of debt.................................. (1,130) (1,023) (927)
Payments on note due to general partner............. (53) (45) (121)
Decrease in financing reserves...................... 96 -- --
Payment of deferred financing costs................. -- -- (49)
------- ------- -------
Cash used in financing activities..................... (1,087) (1,068) (1,097)
------- ------- -------
Increase (decrease) in cash and cash equivalents...... 260 3,239 (2,628)
------- ------- -------
Cash and cash equivalents, beginning of year.......... 6,199 2,960 5,588
------- ------- -------
Cash and cash equivalents, end of year................ $ 6,459 $ 6,199 $ 2,960
======= ======= =======
</TABLE>
See 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
Description of Business
Forum Retirement Partners, L.P. and a subsidiary partnership (collectively,
the "Partnership") own nine retirement communities ("RCs") with 1,731 units
which were acquired from Forum Group, Inc. ("Forum Group").
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.
In September 1995, Forum Group commenced a tender offer for any and all
outstanding units not already owned by it at $2.83 per unit. The tender offer
was completed in December 1995, with 2,644,724 units being purchased. Forum
Group owned 79% of the Partnership at December 31, 1997 and 1996.
On February 15, 1996, Forum Group, Marriott International, Inc., and a
subsidiary thereof (collectively "Marriott International") entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger
Agreement, Marriott completed a tender offer for the shares of Forum Group on
March 23, 1996 and purchased 100% of the outstanding common stock of Forum
Group.
Forum Retirement, Inc., a wholly-owned subsidiary of 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 accompanying consolidated
statements of operations as a reduction of the income of the Partnership. Forum
Group beneficially owns 79% 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
RC's owned by the Partnership.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary 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.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of
three months or less at date of purchase to be cash equivalents.
19
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Property and Equipment
Property and equipment is recorded at cost. For newly developed properties,
cost includes interest, rent and real estate taxes incurred during development
and construction. Replacements and improvements are capitalized.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 40 years for buildings and three to 10
years for furniture and equipment. Leasehold improvements are amortized over
the shorter of the lease term or the useful lives of the related assets.
Effective January 1, 1996, the Companies adopted SFAS No. 121, which
requires that an impairment loss be recognized when the carrying amount of an
asset exceeds the sum of the undiscounted estimated future cash flows associated
with the asset. Management has determined that no such provision is necessary at
December 31, 1997.
Deferred Costs
Financing costs are amortized as interest expense on the straight-line
method over the remaining life of the debt.
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.
On November 20, 1997, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached a consensus on EITF 97-2,
"Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician
Practice Management Entities and Certain Other Entities with Contractual
Management Arrangements." EITF 97-2 addresses the circumstances in which a
management entity may include the revenues and expenses of a managed entity in
its financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of
excluding the property-level revenues and operating expenses of its communities
from its consolidated statements of operations. If the Partnership concludes
that EITF 97-2 should be applied to its communities, it would include operating
results of those managed operations in its consolidated financial statements.
Application of EITF 97-2 to financial statements as of and for the year ended
December 31, 1997 would have increased both revenues and operating expenses by
approximately $41 million and would have had no impact on operating profit, net
income or earnings per limited partner unit.
Working Capital
Pursuant to the terms of the Partnership's Management Agreements, the
Partnership is required to provide the respective manager with working capital
and supplies to meet the operating needs of the RCs. The respective manager
converts cash advanced by the Partnership into other forms of working capital
consisting primarily of operating cash, inventories, resident deposits and trade
receivables and payables which are maintained and controlled by the manager.
Upon the termination of the Management Agreements, the manager is required to
convert working capital and supplies into cash and return it to the Partnership.
As a result of these conditions, the individual components of working capital
and supplies controlled by the manager are not reflected in the accompanying
balance sheets.
20
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Income Taxes
Provision for federal and state income taxes has not been made in the
accompanying consolidated financial statements as the Partnership does not pay
income taxes, but rather, allocates its profits and losses to individual
unitholders.
The tax basis of the Partnership's assets are approximately $8 million 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.
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
in certain cases, 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.
The Partnership has not elected to pay the special tax on gross income and
continues to be treated as a partnership. As a result, for federal tax purposes
beginning in 1998, corporate income tax will be assessed upon and paid for by
the Partnership. Effective January 1,1998, the Partnership will recognize a
deferred tax liability of approximately $8 million representing the excess of
the Partnership's book basis in its assets over its tax basis as of that date,
with a corresponding one-time charge against income in 1998. The excess results
from the cumulative tax effect of temporary differences between the book and tax
treatment of certain items, principally depreciation.
Per Unit Data
The earnings per unit is based on the limited partners' interest in the
Partnership's net income divided by the average number of limited partner
units outstanding.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the financial statements have been reclassified to
conform with the 1997 presentation.
21
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. REVENUES
House profit generated by the Partnership's senior living communities
consists of (in thousands):
1997 1996 1995
---- ---- ----
Community Sales
Routine....................... $ 50,544 $ 47,917 $ 43,921
Ancillary..................... 8,011 5,794 5,877
-------- -------- --------
Total Community Sales....... 58,555 53,711 49,798
-------- -------- --------
Department Costs
Routine....................... 34,239 31,992 29,895
Ancillary..................... 6,702 5,436 4,768
-------- -------- --------
Total Department Costs...... 40,941 37,428 34,663
-------- -------- --------
Department Profit
Routine....................... 16,305 15,925 14,026
Ancillary..................... 1,309 358 1,109
-------- -------- --------
Revenues.................... $ 17,614 $ 16,283 $ 15,135
======== ======== ========
Community sales consist of routine and ancillary sales. Routine sales 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 sales are generated on
a "fee for service" basis for supplementary items requested by residents, and
are recognized as the services are provided.
Total sales include amounts estimated by management to be reimbursable by
Medicare, Medicaid and other third party payor agreements. Medicare and
Medicaid represented 17% and 8% in 1997, 14% and 7% in 1996 and a combined 18%
in 1995 of total sales. Reimbursement arrangements are subject to audit and
retroactive adjustment. Provisions are made for potential adjustments that may
result. To the extent those provisions vary from settlements, sales are charged
or credited when the adjustments become final. Changes in the estimate of
amounts reimbursable by third party payors from prior years resulted in the
recognition of $238,000, $107,000 and $261,000 of additional sales for 1997,
1996 and 1995, respectively. In the General Partner's opinion, any adjustments
related to current and prior years' operations will be immaterial to current and
future financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
1997 1996
---- ----
Land and land improvements $ 14,348 $ 14,871
Buildings and leasehold improvements 105,425 103,496
Furniture and equipment 11,310 9,955
Construction in progress 4,177 941
-------- --------
135,260 129,263
Less accumulated depreciation (35,645) (31,723)
-------- --------
$ 99,615 $ 97,540
======== ========
22
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Interest costs capitalized in connection with the Partnership's development
and construction activities totaled $34,000 in 1997, $247,000 in 1996 and
$99,000 in 1995.
4. OTHER ASSETS
Other assets include restricted cash as follows (in thousands):
1997 1996
---- ----
Debt service reserve fund $ 391 $ 487
Fixed asset reserve fund 268 246
Real estate tax reserve fund 627 510
Insurance reserve fund 1,166 --
------- -------
$ 2,452 $ 1,243
======= =======
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. MANAGEMENT FEES
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. Pursuant to the terms of the Management
Agreement in effect since the Partnership's formation in 1986, management fees
payable to Forum Group for all periods prior to 1994 have been deferred as cash
flow was not adequate to make the distributions. Fees accruing after January 1,
1994 have been paid on a current basis. The deferred management fees were
expensed in the Partnership's statements of operations as incurred and are
reflected as deferred management fees due to parent of General Partner in the
Partnership's accompanying balance sheet as of December 31, 1997. As
discussed in Note 9, the payment of deferred fees is uncertain in the
foreseeable future.
On June 21, 1997, in connection with the acquisition of Forum Group by
HMCSC, Forum Group assigned its interest as manager to MSLS. The Partnership
paid MSLS management fees of $4,684,000, $4,301,000 and $3,961,000 for 1997,
1996 and 1995, respectively.
6. RELATED PARTIES
At December 31, 1997, the Partnership had related party payables totaling
$1,496,000 due to HMCSC resulting from corporate and operating expenses paid by
HMCSC on behalf of the Partnership. At December 31, 1997 and 1996, the
Partnership had related party payables totaling $2,413,000 and $2,611,000 due to
MI and its affiliates resulting from the net reimbursement for current operating
expenses, management fees and working capital. The Partnership also reimburses
the General Partner for general and administrative costs incurred on behalf of
the Partnership, which amounted to $250,000 in 1997, $180,000 in 1996 and
$180,000 in 1995. These amounts are included in general and administrative cost
in the Partnership's accompanying Income Statement.
23
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. DEBT
On December 28, 1993, the Partnership entered into a mortgage loan
agreement for $50,707,000, and the proceeds were used to retire the split coupon
mortgage notes, including the yield maintenance premium, and the bank credit
facility and to pay related fees and expenses of $775,000. The mortgage loan
requires monthly payments of principal (based on a 20-year amortization) and
interest at 9.93% per annum to maturity on January 1, 2001. The loan agreement
prohibited prepayment for the first three years of the loan term 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 communities.
Debt maturities at December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 1,247
1999 1,376
2000 1,520
2001 42,711
2002 --
Thereafter --
-------
$46,854
=======
</TABLE>
Amounts due to parent of General Partner include long-term debt of $222,500
and $291,000 at December 31, 1997 and 1996, respectively, with a blended
interest rate of 7.2% and maturities in varying amounts through January 31,
2004.
Interest expense incurred during 1997, 1996 and 1995 totaled $5,115,000,
$5,097,000 and $5,261,000, respectively. Amortization of deferred financing
costs, included within interest expense totaled $384,000, $411,000 and $362,000
in 1997, 1996 and 1995, respectively.
8. 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. Cash flow was not
adequate to make the distributions, and the entire $15,780,000 of management
fees earned from 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 for 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 purchase, at a price of $4.50 per
unit, the Partnership units of each limited partner electing to join in the
Settlement Agreement. A subsidiary of Host Marriott currently holds 79% of
the outstanding limited partner units in the Partnership. Host Marriott also
agreed to pay as much as an additional $1.25 per unit to the settling limited
24
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 is
approximately 86%.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership believes the carrying amount of its financial instruments
(excluding property indebtedness and deferred management fees) approximates
their fair value due to the relatively short maturity of these instruments.
There is no quoted market value available for any of the Partnership's
instruments. Property indebtedness, with a carrying amount of $46,854,000, at
December 31, 1997, has been calculated to have a fair value of $49,820,000 by
discounting the scheduled loan payments to maturity using rates that are
believed to be currently available for debt of similar terms and maturities. The
deferred management fees due to the parent of the General Partner, with a
carrying amount of $15,780,000 at December 31, 1997, have been assessed to have
a fair value of zero due to the uncertainty of payment for the foreseeable
future.
10. QUARTERLY FINANCIAL DATA (Unaudited)
(in thousands, except per unit amounts)
<TABLE>
<CAPTION>
1997
--------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $3,983 $4,640 $4,332 $4,659 $17,614
Operating profit 1,864 2,476 1,408 1,920 7,668
Net income 527 1,219 204 629 2,579
Earnings per limited partner unit .03 .08 .01 .05 .17
</TABLE>
<TABLE>
<CAPTION>
1996
--------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $3,961 $3,767 $4,404 $4,151 $16,283
Operating profit 1,858 1,764 1,523 962 6,107
Net income 374 256 507 (438) 699
Earnings (loss) per
limited partner unit .03 .02 .03 (.03) .05
</TABLE>
25
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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 and qualified. The executive officers of the General Partner serve at
the pleasure of the Board of Directors of the General Partner.
<TABLE>
<CAPTION>
Name, Principal Occupation
and Business Experience Served Since Age
- ------------------------------ ------------ ---
<S> <C> <C>
Robert E. Parsons, Jr. 1997 42
Robert E. Parsons, Jr. joined Host Marriott's Corporate
Financial Planning staff in 1981 and was made Assistant
Treasurer in 1988. In 1993, Mr. Parsons was elected Senior
Vice President and Treasurer of Host Marriott, and in 1995,
he was elected Executive Vice President and Chief
Financial Officer of Host Marriott. In June of 1997 Mr.
Parsons was elected President and Director of the
Partnership.
John F. Sexton 1993 65
John F. Sexton is Chairman of Evans - McKinsey Company, a
financial consulting firm, a position he has held from
1993. From 1989 to 1993, Mr. Sexton served as Chief
Financial Officer of Lomas Financial Corporation.
Previously, Mr. Sexton served as a director of Americana
Hotels and Realty Corp. and Chairman and Director of Mutual
Equity Mortgage. Mr. Sexton was elected a Director of the
General Partner in 1993.
James C. Leslie 1993 42
James C. Leslie is President, Chief Operating Officer and a
director of The Staubach Company, positions he has held
since March 1996 and September, 1984, respectively. Mr. Leslie
was Chief Financial Officer of the Staubach Company from
1982 to January 1992, at which time he became President of
Staubach Financial Services, a position he held until
February 1996. Mr. Leslie is also President and a board
member of Wolverine Holding Company, and serves on the
boards of FM Properties, Inc., Wyndham International, Inc. and
the North Texas Chapter of the Arthritis Foundation. Mr.
Leslie is a certified public accountant.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Name, Principal Occupation
and Business Experience Served Since Age
- ---------------------------- ------------ ---
<S> <C> <C>
Christopher G. Townsend 1997 50
Christopher G. Townsend joined Host Marriott in 1982 as a
Senior Attorney. In 1984, Mr. Townsend was made Assistant
Secretary of Host Marriott, and in 1986, he was made
Assistant General Counsel. In 1993, Mr. Townsend was
elected Senior Vice President, Corporate Secretary and
Deputy General Counsel of Host Marriott. In January 1997,
he was elected General Counsel of Host Marriott. In June
of 1997 Mr. Townsend was elected Vice President of the
Partnership.
Christopher J. Nassetta 1997 35
Christopher J. Nassetta joined Host Marriott in October 1995
as Executive Vice President. Prior to joining Host
Marriott, Mr. Nassetta served as President of Bailey Realty
Corporation from 1991 until 1995. He had previously served
as Chief Development Officer and in various other positions
with The Oliver Carr Company from 1984 through 1991. In
June of 1997 Mr. Nassetta was elected Vice President of the
Partnership.
Bruce D. Wardinski 1997 37
Bruce D. Wardinski joined Host Marriott in 1987 as Senior
Financial Analyst of Financial Planning & Analysis and was
named Manager in June 1988. He was appointed Host
Marriott's Director of Financial Planning & Analysis in
1989, Director of Project Finance in June 1993, Vice
President of Project Finance in June 1994, and Senior Vice
President of International Development in October 1995. In
1996, Mr. Wardinski was named Senior Vice President and
Treasurer of Host Marriott. Prior to joining Host Marriott,
Mr. Wardinski was with the public accounting firm of Price
Waterhouse. In June of 1997 Mr. Wardinski was elected Vice
President and Treasurer of the Partnership.
Donald D. Olinger 1997 39
Donald D. Olinger joined Host Marriott in 1993 as Director
of Corporate Accounting. Later in 1993, Mr. Olinger was
promoted to Senior Director and Assistant Controller of
Host Marriott. He was promoted to Vice President of
Corporate Accounting in 1995. In 1996, he was elected
Senior Vice President and Corporate Controller of Host
Marriott. Prior to joining Host Marriott, Mr. Olinger was
with the public accounting firm of Deloitte & Touche. In
June of 1997 Mr. Olinger was elected Vice President of the
Partnership.
</TABLE>
See "Item 1--Business" for a discussion of a change in control of Forum Group
that occurred on June 21, 1997.
27
<PAGE>
The Partnership Agreement provides that the Board of Directors of the
General Partner shall at all times contain a majority of individuals each of
whom is an Independent Director. The Partnership Agreement defines an
"Independent Director" as a person who is not (i) a director, officer or
employee of, (ii) a holder of 1% or more of the capital stock of, or (iii) an
Affiliate of, the General Partner or any of its affiliates. Vacancies of
Independent Directors are filled by the remaining Independent Director(s).
The certificate of incorporation of the General Partner requires that a
majority of the Board of Directors of the General Partner consist at all times
of individuals who are each an Independent Director. The certificate of
incorporation defines an "Independent Director" to be a person meeting the same
test set forth in the Partnership Agreement, except that, for so long as the
Nomura Loan remains outstanding, the Board of Directors of the General Partner
shall contain a majority of individuals each of whom (i) is not, and during the
immediately preceding five years has not been, a director (other than a director
of the General Partner), officer or employee of Forum Group or any of its
subsidiaries or Affiliates, and (ii) does not have, and has not had during the
immediately preceding five years, any ownership interest in the General Partner,
Forum Group or any other subsidiary or Affiliate thereof. The certificate of
incorporation provides that any vacancy on the Board created by the removal or
withdrawal of an Independent Director shall be filled by an Independent Director
selected by the remaining Independent Directors, and if there are none, by the
shareholders of the General Partner.
Messrs. Leslie and Sexton are Independent Directors under each of the
foregoing definitions. 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.
Item 11. Executive Compensation.
No cash or other compensation is paid to any officer of the General Partner
for services rendered in any capacity to the Partnership and its affiliated
operating partnership.
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. In addition, if Mr. Sexton or Mr. Leslie serve as a committee
chairman, he will receive $250 per substantive discussion of such committee.
Mr. Parsons will receive no compensation for his service as a director.
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.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
(a) Security Ownership of Certain Beneficial Owners. The following table
shows the numbers and percentages of Units owned beneficially on March 20, 1998
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.
Units
----------------------------
Name and Address of Beneficial Owner Number Percent of Total
- ------------------------------------ ------ ----------------
Forum Group, Inc. (1) 12,072,515 79.0%
- ---------------
(1) Consists of Units owned by the General Partner and by another wholly-owned
subsidiary of Forum Group. Forum Group is a wholly-owned subsidiary of Host
Marriott Corporation.
28
<PAGE>
(b) Security Ownership of Management. 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 Group or its affiliates.
Changes in Control. See "Item 1- Business" for a discussion of a change of
control of Forum Group that occurred on June 21, 1997.
Item 13. Certain Relationships and Related Transactions.
Under the Management Agreement, for fiscal 1997, MSLS received (i)
management fees of $4,684,000 and (ii) reimbursement of $41,434,892 for direct
expenses incurred on behalf of the Partnership, and for 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.
29
<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> <C>
Reports of Independent Public Accountants.........................................................................13-14
Consolidated Balance Sheets - December 31, 1997 and 1996..........................................................15
Consolidated Statements of Operations - Years ended December 31, 1997, 1996 and 1995..............................16
Consolidated Statements of Partners' Equity - Years ended December 31, 1997, 1996 and 1995........................17
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996 and 1995..............................18
Notes to Consolidated Financial Statements........................................................................19
</TABLE>
2. Financial Statement Schedules:
The following other financial statement schedule is filed pursuant to this
item:
<TABLE>
Page
----
<S> <C>
Schedule III - Real Estate and Accumulated Depreciation.........................................................S-1
</TABLE>
All other schedules for which provision is made in Regulation S-X are not
required under the related instruction or are inapplicable, and have therefore
been omitted.
3. Exhibits:
<TABLE>
<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
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
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
Exhibit 10(6): Depository 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 Depository 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 10(9): Amendment to Loan Agreement, dated as of January 31, 1994, by
and among FRP Financing Limited, L.P., Nomura Asset Capital Corporation
and Bankers Trust Company (incorporated by reference to Exhibit 10(9) to 1995 Form 10-K) .... N/A
Exhibit 10(10): Second Amendment to Loan Agreement, dated as of March 31, 1995,
by and among FRP Financing Limited, L.P., Nomura Asset Capital Corporation
and Bankers Trust Company (incorporated by reference to Exhibit 10(10) to 1995 Form 10-K) .... N/A
Exhibit 21: Subsidiaries of the Partnership............................................................ E-21
</TABLE>
Reports on Form 8-K.
July 7, 1997- Report of the announcement that HMC Senior
Communities, Inc., a wholly-owned subsidiary of Host
Marriott Corporation, acquired all of the outstanding
stock of Forum Group, Inc. ("Forum Group") from
Marriott Senior Living Services, Inc., a wholly-owned
subsidiary of Marriott International, Inc. Forum
Group owns all of the outstanding stock of Forum
Retirement, Inc., the general partner of the
Partnership, and also indirectly owns approximately
79% of the outstanding preferred depository units of
the Partnership.
31
<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
---------------------------------------
Date: March 25, 1998 By: /s/ Robert E. Parsons, Jr.
---------------------------------------
Robert E. Parsons, Jr.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer
of General Partner
/s/ ROBERT E. PARSONS, JR. President March 25, 1998
- ----------------------------------------
Robert E. Parsons, Jr.
(2) Principal Financial and
Accounting Officer of
General Partner:
/s/ DONALD D. OLINGER Vice President March 25, 1998
- ----------------------------------------
Donald D. Olinger
(3) A majority of the Board of
Directors of General Partner:
/s/ ROBERT E. PARSONS, JR. Director March 25, 1998
- ----------------------------------------
Robert E. Parsons, Jr.
/s/ JAMES C. LESLIE Director March 25, 1998
- ----------------------------------------
James C. Leslie
/s/ JOHN F. SEXTON Director March 25, 1998
- ----------------------------------------
John F. Sexton
</TABLE>
32
<PAGE>
SCHEDULE III
Page 1 of 2
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Gross Amount
at
Initial Costs December 31, 1997
------------------------ -----------------
Subsequent
Building and Costs
Description Debt Land Improvements Capitalized Land
- ----------- ---- ---- ------------ ----------- ----
<S> <C> <C> <C> <C> <C>
Senior Living Communities:
Lincoln Heights
San Antonio, TX .................. $ 9,846 $ 3,345 $ 19,617 $ 487 $ 3,345
Coral Springs/Park Summit
Coral Springs, FL ................ 4,962 3,227 12,339 1,256 3,227
Montebello
Albuquerque, NM .................. 9,154 1,726 13,031 1,774 1,726
Montevista
El Paso, TX ...................... 6,013 1,652 13,616 586 1,652
Millcroft
Wilmingon, DE .................... 3,881 507 9,592 2,818 507
Shipley Manor
Wilmington, DE ................... 4,905 1,379 8,810 1,636 1,379
Myrtle Beach
Myrtle Beach, SC ................. 3,286 1,046 6,060 1,695 1,046
Foulk Manor North
Wilmington, DE ................... 2,925 912 6,487 981 912
Other senior living properties
each less than 5% of total ....... 1,882 554 3,859 781 554
--------- --------- ---------- ---------- ----------
TOTAL ............................ $ 46,854 $ 14,348 $ 93,411 $ 12,014 $ 14,348
========= ========= ========== ========== ==========
<CAPTION>
Gross Amount at
December 31, 1997
-----------------------
Building and Accumulated Date Depreciation
Description Improvements Total Depreciation Acquired Life
- ----------- ------------ ----- ------------ -------- ----
<S> <C> <C> <C> <C> <C>
Senior Living Communities:
Lincoln Heights
San Antonio, TX .................. $ 20,104 $ 23,449 $ (4,188) 1989 40
Coral Springs/Park Summit
Coral Springs, FL ................ 13,595 16,822 (4,626) 1986 40
Montebello
Albuquerque, NM .................. 14,805 16,531 (3,890) 1986 40
Montevista
El Paso, TX ...................... 14,202 15,854 (4,050) 1986 40
Millcroft
Wilmingon, DE .................... 12,410 12,917 (3,161) 1986 40
Shipley Manor
Wilmington, DE ................... 10,446 11,825 (2,727) 1986 40
Myrtle Beach
Myrtle Beach, SC ................. 7,755 8,801 (1,970) 1986 40
Foulk Manor North
Wilmington, DE ................... 7,468 8,380 (2,109) 1986 40
Other senior living properties
each less than 5% of total ....... 4,640 5,194 (1,402)
--------- --------- ----------
TOTAL ............................ $ 105,425 $ 119,773 $ (28,123)
========= ========= ==========
</TABLE>
S-1
<PAGE>
Schedule III
Page 2 of 2
FORUM RETIREMENT PARTNERS, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in millions)
Notes:
(A) The change in total cost of properties for the years ended December 31,
1995, 1996 and 1997 is as follows:
Balance as of December 31, 1994 ..................... $112,643
Additions:
Capital expenditures ............................ 1,484
Transfers from construction in progress ......... 33
--------
Balance as of December 31, 1995 ..................... $114,160
========
Additions:
Capital expenditures ............................ 2,729
Transfers from construction in progress ......... 1,478
--------
Balance as of December 31, 1996 ..................... $118,367
========
Additions:
Capital expenditures ............................ 465
Transfers from construction in progress ......... 941
--------
Balance as of December 31, 1997 ..................... $119,773
========
(B) The change in accumulated depreciation and amortization for the years ended
December 31, 1995, 1996 and 1997 is as follows:
Balance as of December 31, 1994 ..................... $(18,933)
Depreciation and amortization ..................... (2,864)
--------
Balance as of December 31, 1995 ..................... (21,797)
Depreciation and amortization ..................... (3,229)
--------
Balance as of December 31, 1996 ..................... (25,026)
Depreciation and amortization ..................... (3,097)
--------
Balance as of December 31, 1997 ..................... $(28,123)
========
(C) The aggregate cost of properties for Federal income tax purposes is
approximately $107,612,000 at December 31, 1997.
(D) The total cost of properties excludes construction-in-progress
properties.
S-2
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF FORUM RETIREMENT PARTNERS, L.P.
NAME STATE OF
- ---- ORGANIZATION
------------
FRP Financing Limited, L.P. (99% limited partnership interest) Delaware
E-21
<TABLE> <S> <C>
<PAGE>
<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 AND FOR THE YEAR ENDED DECEMBER 31, 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
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,459
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 135,260
<DEPRECIATION> (35,645)
<TOTAL-ASSETS> 109,670
<CURRENT-LIABILITIES> 0
<BONDS> 46,854
0
0
<COMMON> 0
<OTHER-SE> 42,187
<TOTAL-LIABILITY-AND-EQUITY> 109,670
<SALES> 17,614
<TOTAL-REVENUES> 17,614
<CGS> 0
<TOTAL-COSTS> 9,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,115
<INCOME-PRETAX> 2,579
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,579
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
