UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-9921
SENIOR INCOME FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3392077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip Code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
<TABLE>
<CAPTION>
Consolidated Balance Sheets
September 30, December 31,
Assets 1994 1993
<S> <C> <C>
Real estate:
Land $ 4,824,699 $ 4,824,699
Buildings and improvements 37,846,509 38,308,877
----------- -----------
42,671,208 43,133,576
Less- accumulated depreciation (13,230,723) (11,875,602)
----------- -----------
29,440,485 31,257,974
Cash and cash equivalents 2,995,206 2,058,534
Prepaid expenses 247,599 148,958
----------- -----------
Total Assets $32,683,290 $33,465,466
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 276,117 $ 148,603
Deferred rent payable 1,089,029 1,054,983
Due to affiliates 211,986 206,699
Security deposits payable 150,525 144,775
Distributions payable 365,720 365,720
---------- ----------
Total Liabilities 2,093,377 1,920,780
Partners' Capital (Deficit):
General Partner (24,225) (14,678)
Limited Partners 30,614,138 31,559,364
---------- ----------
Total Partners' Capital 30,589,913 31,544,686
Total Liabilities and Partners' ---------- ----------
Capital $32,683,290 $33,465,466
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Rental $2,648,928 $2,425,962 $7,734,673 $7,056,459
Interest 21,835 9,647 51,153 25,310
Other 251,440 119,197 251,440 119,197
--------- --------- --------- ---------
Total 2,922,203 2,554,806 8,037,266 7,200,966
========= ========= ========= =========
Expenses
Payroll 720,540 665,494 2,178,579 1,996,990
Depreciation 452,240 450,828 1,355,121 1,351,747
Rent and utilities 403,435 391,896 1,219,013 1,170,495
General and administrative 370,993 307,371 1,032,421 854,986
Supplies 263,041 251,692 762,513 737,971
Repairs and maintenance 99,729 118,216 324,672 427,923
Real estate taxes 103,077 111,957 301,077 335,871
Travel and entertainment 14,642 7,873 27,277 23,413
Earthquake repairs - - 694,207 -
--------- --------- --------- ---------
Total Expenses 2,427,697 2,305,327 7,894,880 6,899,396
--------- --------- --------- ---------
Net Income $ 494,506 $ 249,479 $ 142,386 $ 301,570
========= ========= ========= =========
Net Income Allocated:
To the General Partner $ 1,424 $ 3,657 $ 1,424 $ 10,972
To the Limited Partners 493,082 245,822 140,962 290,598
--------- --------- --------- ---------
$ 494,506 $ 249,479 $ 142,386 $ 301,570
========= ========= ========= =========
Per limited partnership unit
(4,827,500 outstanding) $ .10 $ .05 $ .03 $ .06
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Partners' Capital
For the nine months ended September 30, 1994
General Limited Total
Partner's Partners' Partners'
Deficit Capital Capital
<S> <C> <C> <C>
Balance at January 1, 1994 $(14,678) $31,559,364 $31,544,686
Net income 1,424 140,962 142,386
Distributions (10,971) (1,086,188) (1,097,159)
------- ---------- ----------
Balance at September 30, 1994 $(24,225) $30,614,138 $30,589,913
======= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
<S> <C> <C>
Net income $ 142,386 $ 301,570
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,355,121 1,351,747
Provision for earthquake repairs 694,207 -
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Prepaid expenses (98,641) (63,075)
Accounts payable and accrued expenses 127,514 73,856
Deferred rent payable 34,046 34,047
Due to affiliates 5,287 (17,617)
Security deposits payable 5,750 10,350
--------- ---------
Net cash provided by operating activities 2,265,670 1,690,878
========= =========
Cash Flows from Investing Activities:
Additions to real estate (231,839) (17,290)
--------- ---------
Net cash used for investing activities (231,839) (17,290)
========= =========
Cash Flows from Financing Activities:
Distributions paid to partners (1,097,159) (731,440)
--------- ---------
Net cash used for financing activities (1,097,159) (731,440)
========= =========
Net increase in cash and cash equivalents 936,672 942,148
Cash and cash equivalents at beginning of period 2,058,534 929,375
--------- ---------
Cash and cash equivalents at end of period $2,995,206 $1,871,523
========= =========
</TABLE>
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements included in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1994, the
results of operations for the three and nine months then ended and the changes
in partners' capital and cash flows for the nine months then ended. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
The following significant events have occurred or material contingencies exist
which would require disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5):
As reported on the 1993 Form 10-K, an earthquake struck the greater Los Angeles
area on January 17, 1994, causing damages at two of the Properties, Ocean House
and Prell Gardens. The Partnership has earthquake insurance with a deductible
equal to 5% of the replacement cost of the property, as determined by
independent appraisal. The General Partner has engaged an independent
appraiser to determine the replacement cost and is currently awaiting
completion of the appraisal, at which time, the exact amount of the deductibles
will be computed by the insurance company. Payment of the deductibles which
are estimated at $500,000 and $250,000 for Ocean House and Prell Gardens,
respectively, will be funded from Partnership cash reserves. The General
Partner has engaged a structural and seismic engineer to determine the cost to
repair the damages at both of the Properties and to provide reinforcement
against future earthquakes. Currently, the cost to repair Ocean House is
estimated to be $813,000 and the cost to repair Prell Gardens is estimated to
be $194,000, before application of available insurance deductibles, when
determined. The bidding process for contractors has begun, and it is
anticipated that the major construction project for both properties will begin
in early 1995.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$357,100 and $153,097, respectively, which represent repair costs not yet
expended, net of the estimated deductibles. As these costs are incurred, the
buildings will be brought back to their original basis.
Based on the recently completed engineering reports, costs to retrofit the
buildings for protection against future earthquakes is estimated to be
approximately $270,000 and $48,000 for Ocean House and Prell Gardens,
respectively. The General Partner is currently studying the reports and their
related costs, which, appropriately, are not included as a component of the
earthquake repair expenses, and will determine if such an upgrade of the
buildings is feasible.
Part I, item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At September 30, 1994, the Partnership had cash and cash equivalents of
$2,995,206 compared with $2,058,534 at December 31, 1993. The increase is
primarily attributable to net cash from operations exceeding capital
improvement costs and cash distributions.
As reported on the 1993 Form 10-K, an earthquake struck the greater Los Angeles
area on January 17, 1994, causing damages at two of the Properties, Ocean House
and Prell Gardens. The Partnership has earthquake insurance with a deductible
equal to 5% of the replacement cost of the property, as determined by
independent appraisal. The General Partner has engaged an independent
appraiser to determine the replacement cost and is currently awaiting
completion of the appraisal, at which time the exact amount of the deductibles
will be computed by the insurance company. Payment of the deductibles, which
are estimated at $500,000 and $250,000 for Ocean House and Prell Gardens,
respectively, will be funded from Partnership cash reserves. The General
Partner has engaged a structural and seismic engineer to determine the cost to
repair both of the Properties and to provide reinforcement against future
earthquakes. Currently, the cost to repair Ocean House is estimated to be
$813,000 and the cost to repair Prell Gardens is estimated to be $194,000,
before application of available insurance deductibles, when determined. The
bidding process for contractors has begun, and it is anticipated that the major
construction project for both properties will begin in early 1995.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$357,100 and $153,097, respectively, which represent repair costs not yet
expended, net of the estimated deductibles. As these costs are incurred, the
buildings will be brought back to their original basis.
Based on the recently completed engineering reports, costs to retrofit the
buildings for protection against future earthquakes are estimated to be
approximately $270,000 and $48,000 for Ocean House and Prell Gardens,
respectively. The General Partner is currently studying the reports and their
related costs, which, appropriately, are not included as a component of the
earthquake repair expenses, and will determine if such an upgrade of the
buildings is feasible.
The Partnership's earthquake insurance policy covering all four properties
expired August 5, 1994. The current insurance carrier renewed coverage on only
two properties: Nohl Ranch and Pacific Inn. After an extensive search, the
Partnership secured coverage for Ocean House and Prell Gardens from an
alternate insurance carrier. However, given the location of these properties
and the extent of the earthquake damage they recently sustained, the premium
for insuring both Ocean House and Prell Gardens increased from approximately
$17,000 per annum to approximately $180,000 per annum. Once these properties
have been repaired and reinforced against future earthquakes, there is a
possibility that the insurance premium will be adjusted accordingly.
The General Partner declared a cash distribution of $.075 per Unit for the
quarter ended September 30, 1994 which is expected to be paid to investors on
or about November 14, 1994. The General Partner anticipates that the
Partnership's net cash flow will be sufficient to maintain this distribution
level throughout 1994, however, the amount and timing of distributions will be
reviewed on a quarterly basis.
Results of Operations
Partnership operations for the three and nine months ended September 30, 1994
resulted in net income of $494,506 and $142,386, compared with net income of
$249,479 and $301,570 for the corresponding periods in 1993. In comparing the
nine-month periods, the decrease can be attributed primarily to the costs
associated with the earthquake, discussed above, offset partially by an
increase in rental income.
Rental income for the three and nine months ended September 30, 1994 was
$2,648,928 and $7,734,673, compared with $2,425,962 and $7,056,459 for the
corresponding periods in 1993. The increase can be attributed to higher
average occupancy at Ocean House, rental rate increases instituted over the
past year at Pacific Inn, Prell Gardens and Nohl Ranch, and increased income
from the assisted living programs at Ocean House and Nohl Ranch. Interest
income for the three and nine-month periods ended September 30, 1994 was
$21,835 and $51,153, compared with $9,647 and $25,310 for the corresponding
periods in 1993. The increase is due to higher average cash balances
maintained in 1994. Other income for the three and nine months ended
September 30, 1994 was $251,440 compared with $119,197 for the three and nine
months ended September 30, 1993. Other income for 1994 represents a property
tax refund at Ocean House for tax years 1993 and 1992. Other income in 1993 is
comprised of a property tax refund at Nohl Ranch for tax years 1992 and 1991.
Total expenses for the three and nine months ended September 30, 1994 were
$2,427,697 and $7,894,880, compared with $2,305,327 and $6,899,396 for the
corresponding periods in 1993. The increase for the nine-month period is
primarily due to earthquake repairs expense of $694,207 recorded in the first
quarter of 1994, and higher payroll and general and administrative expenses.
The actual earthquake expenditures through September 30, 1994 were $142,900 at
Ocean House and $41,110 at Prell Gardens. Payroll expenses for the three and
nine months ended September 30, 1994 were $720,540 and $2,178,579, compared
with $665,494 and $1,996,990 for the corresponding periods in 1993. The
increase is primarily due to higher payroll costs associated with the
institution of the assisted living program at Nohl Ranch in 1994. General and
administrative expenses for the three and nine months ended September 30, 1994
were $370,993 and $1,032,421, compared with $307,371 and $854,986 for the
corresponding periods in 1993. The increase is primarily a result of the
payment of property manager performance incentive fees at all four properties
and higher earthquake insurance at Ocean House and Prell Gardens, discussed
above. Under the new management agreement, property manager performance
incentive fees are payable on a monthly basis, compared to the prior management
agreement where fees were payable in arrears on an annual basis. Repairs and
maintenance expense for the three and nine months ended September 30, 1994 was
$99,729 and $324,672, compared with $118,216 and $427,923 for the corresponding
periods in 1993. The decrease is primarily attributable to a decrease in
expenditures for routine property upgrades at Ocean House and Prell Gardens,
and a lower equipment rental expense at Ocean House.
Average occupancy levels at the Partnership's properties for the three and nine
months ended September 30, 1994, and 1993 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Property 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Ocean House 96% 92% 95% 90%
Pacific Inn 95% 93% 93% 93%
Prell Gardens 98% 99% 97% 99%
Nohl Ranch Inn 87% 77% 82% 83%
Average Occupancy 94% 90% 92% 91%
</TABLE>
PART II OTHER INFORMATION
Items 1-5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the three month period covered by this
report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SENIOR INCOME FUND L.P.
BY: SENIOR INCOME FUND INC.
General Partner
Date: November 10, 1994 BY: /s/ Moshe Braver
------------------------
President, Director and
Chief Operating Officer
Date: November 10, 1994 BY: /s/ Sean Donahue
------------------------
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,995,206
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 247,599
<PP&E> 42,671,208
<DEPRECIATION> 13,230,723
<TOTAL-ASSETS> 32,683,290
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 30,589,913
<TOTAL-LIABILITY-AND-EQUITY> 32,683,290
<SALES> 000
<TOTAL-REVENUES> 8,037,266
<CGS> 000
<TOTAL-COSTS> 4,813,131
<OTHER-EXPENSES> 3,081,749
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 142,386
<INCOME-TAX> 000
<INCOME-CONTINUING> 142,386
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 142,386
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
