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, 1995
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
ATTN: Andre Anderson 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
Consolidated Balance Sheets
September 30, December 31,
Assets 1995 1994
Real estate:
Land $4,824,699 $4,824,699
Buildings and improvements 38,033,926 37,839,781
42,858,625 42,664,480
Less accumulated depreciation (15,004,469) (13,665,635)
27,854,156 28,998,845
Cash and cash equivalents 3,864,784 3,305,871
Prepaid expenses 141,230 154,366
Total Assets $31,860,170 $32,459,082
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $294,493 $413,367
Deferred rent payable 1,134,425 1,100,379
Due to affiliates 227,824 215,000
Security deposits payable 152,500 145,775
Distributions payable 365,720 365,720
Total Liabilities 2,174,962 2,240,241
Partners' Capital (Deficit):
General Partner (33,275) (27,938)
Limited Partners 29,718,483 30,246,779
Total Partners' Capital 29,685,208 30,218,841
Total Liabilities and Partners' Capital $31,860,170 $32,459,082
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
General Limited
Partner Partners Total
Balance at December 31, 1994 $(27,938) $30,246,779 $30,218,841
Net income 5,635 557,891 563,526
Distributions (10,972) (1,086,187) (1,097,159)
Balance at September 30, 1995 $(33,275) $29,718,483 $29,685,208
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rental $2,784,429 $2,648,928 $8,082,273 $7,734,673
Interest 60,306 21,835 143,649 51,153
Other - 50,588 - 50,588
Total Income 2,844,735 2,721,351 8,225,922 7,836,414
Expenses
Payroll 726,267 720,540 2,241,869 2,178,579
Depreciation 450,410 452,240 1,347,656 1,355,121
Rent and utilities 414,317 403,435 1,238,914 1,219,013
General and administrative 421,877 370,993 1,207,518 1,032,421
Supplies 295,016 263,041 824,963 762,513
Repairs and maintenance 191,351 99,729 472,234 324,672
Real estate taxes 102,208 103,077 303,782 301,077
Travel and entertainment 8,385 14,642 25,460 27,277
Earthquake loss - - - 694,207
Total Expenses 2,609,831 2,427,697 7,662,396 7,894,880
Net Income (Loss) $234,904 $293,654 $563,526 $(58,466)
Net Income (Loss) Allocated:
To the General Partner $2,349 $- $5,635 $-
To the Limited Partners 232,555 293,654 557,891 (58,466)
$234,904 $293,654 $563,526 $(58,466)
Per limited partnership unit
(4,827,500 outstanding) $.05 $.06 $.12 $(.01)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $563,526 $(58,466)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,347,656 1,355,121
Provision for earthquake loss - 694,207
Loss on disposal of asset 6,998 -
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Prepaid expenses 13,136 (98,641)
Accounts payable and accrued expenses (118,874) 328,366
Deferred rent payable 34,046 34,046
Due to affiliates 12,824 5,287
Security deposits payable 6,725 5,750
Net cash provided by operating activities 1,866,037 2,265,670
Cash Flows from Investing Activities:
Additions to real estate (219,965) (231,839)
Proceeds from disposal of asset 10,000 -
Net cash used for investing activities (209,965) (231,839)
Cash Flows from Financing Activities:
Distributions paid to partners (1,097,159) (1,097,159)
Net cash used for financing activities (1,097,159) (1,097,159)
Net increase in cash and cash equivalents 558,913 936,672
Cash and cash equivalents at beginning of period 3,305,871 2,058,534
Cash and cash equivalents at end of period $3,864,784 $2,995,206
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1995 and the results of operations for the three
and nine months ended September 30, 1995 and 1994, cash flows for the nine
months ended September 30, 1995 and 1994 and the statement of changes in
partners' capital (deficit) for the nine months ended September 30, 1995.
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 subsequent to fiscal year 1994,
or the following material contingencies exist, which requires disclosure in
this interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5):
Earthquake Loss
As a result of the Northridge earthquake that struck the greater Los Angeles
area on January 17, 1994, damages were sustained at two of the Partnership's
properties, Ocean House and Prell Gardens. The Partnership has earthquake
insurance with a deductible equal to 5% of the replacement costs of the
properties, as determined by an independent appraisal. The General Partner
engaged an independent appraiser to determine the replacement costs, the
Partnership's deductible portion of which are estimated not to exceed $500,000
and $250,000 for Ocean House and Prell Gardens, respectively, and will be
funded from Partnership cash reserves.
The Partnership has engaged an independent structural and seismic engineer who
has advised the General Partner, and the City of Santa Monica as it relates to
the Ocean House property, that the repairs to date, at both Ocean House and
Prell Gardens, have rendered the building safe for continued occupancy. The
engineer has further concluded that additional structural improvements will be
required to bring the properties up to current building codes and to increase
their ability to withstand future earthquakes. Preliminary estimates suggest
that the cost of these additional repairs approximate $.5 million for Prell
Gardens and $1.6 million for Ocean House. The General Partner has been
aggressively pursuing reimbursement from the insurance carrier for these
additional costs, less the deductible, under the Partnership's insurance
policy, however the insurance carrier has preliminarily indicated that it will
not reimburse the Partnership for the cost of these additional improvements.
The General Partner believes that per the terms of the insurance policy, the
insurance carrier should cover these costs, and on September 15, 1995,
litigation was initiated in Los Angeles Superior Court against the insurance
carrier and the Partnership's insurance broker. This litigation is being
pursued vigorously. If insurance is not available for any reason, the General
Partner believes there are adequate Partnership reserves to cover these
structural improvements. However, any such funding could adversely impact the
Partnership's cash flow and could result in a temporary suspension of cash
distributions.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$247,368 and $181,430, respectively, which represent the Partnership's
estimated share of insurance deductibles, net of improvements to date, for
earthquake damage. As these costs continue to be incurred, the buildings will
be brought back to their original basis. As of September 30, 1995, Ocean House
and Prell Gardens incurred earthquake repairs of $252,632 and $68,570,
respectively. Consequently, the net building basis reduction is $428,798 at
September 30, 1995.
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Partnership had cash and cash equivalents of
$3,864,784 compared with $3,305,871 at December 31, 1994. The increase is
attributable to net cash from operations exceeding capital improvement costs
and cash distributions.
Accounts payable and accrued expenses were $294,493 at September 30, 1995, as
compared with $413,367 at December 31, 1994. The decrease is primarily due to
the timing of payments and accruals for real estate taxes and the timing of
rental payments.
As a result of the Northridge earthquake that struck the greater Los Angeles
area on January 17, 1994, damages were sustained at two of the Partnership's
properties, Ocean House and Prell Gardens. The Partnership has earthquake
insurance with a deductible equal to 5% of the replacement costs of the
properties, as determined by an independent appraisal. The General Partner
engaged an independent appraiser to determine the replacement costs, the
Partnership's deductible portion of which are estimated not to exceed $500,000
and $250,000 for Ocean House and Prell Gardens, respectively, and will be
funded from the Partnership's cash reserves.
The Partnership has engaged an independent structural and seismic engineer who
has advised the General Partner that additional structural improvements will be
required to bring the properties up to current building codes and to increase
their ability to withstand future earthquakes. Preliminary estimates suggest
that the cost of these additional repairs approximate $.5 million for Prell
Gardens and $1.6 million for Ocean House. The General Partner has been
aggressively pursuing reimbursement from the insurance carrier for these
additional costs, less the deductible, under the Partnership's insurance
policy. The insurance carrier has preliminarily indicated that it will not
reimburse the Partnership for the cost of these additional improvements. The
General Partner believes that per the terms of the insurance policy, the
insurance carrier should cover these costs, and on September 15, 1995,
litigation was initiated in Los Angeles Superior Court against the insurance
carrier and the Partnership's insurance broker. This litigation is being
pursued vigorously. If insurance is not available for any reason, the General
Partner believes there are adequate Partnership reserves to cover these
structural improvements. However, any such funding could adversely impact the
Partnership's cash flow, and could result in a temporary suspension of cash
distributions.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$247,368 and $181,430, respectively, which represent the Partnership's
estimated share of insurance deductibles, net of improvements to date, for
earthquake damage. As these costs continue to be incurred, the buildings will
be brought back to their original basis. As of September 30, 1995, Ocean House
and Prell Gardens incurred earthquake repairs of $252,632 and $68,570,
respectively. Consequently, the net building basis reduction is $428,798 at
September 30, 1995.
The General Partner declared a cash distribution of $.075 per Unit for the
quarter ended September 30, 1995 which will be paid to investors in November
1995. As stated above, the outcome of the Partnership's efforts to obtain
reimbursement from the insurance carrier for all structural improvements
required to bring Ocean House and Prell Gardens up to current building codes
and to increase their ability to withstand future earthquakes could result in a
temporary suspension of cash distributions should the General Partner conclude
that cash reserves are at risk of being depleted below levels deemed acceptable
for maintaining Partnership operations.
On April 6, 1988, the Partnership entered into a Property Management Agreement
with Leisure Care, Inc. (the "Operator"), which is not affiliated with the
General Partner. The Operator supervises the day-to-day management of the
Partnership's properties and acts as nonexclusive leasing agent for the
properties. On June 30, 1995, the Property Management Agreement expired and an
extension was executed between the General Partner and the Operator which is
effective through June 30, 1996.
Results of Operations
Partnership operations resulted in net income of $234,904 and $563,526 for the
three and nine months ended September 30, 1995, compared with net income of
$293,654 and a net loss of $58,466 for the three and nine months ended
September 30, 1994. The decrease in net income for the three-month period can
be attributed primarily to higher general and administrative costs and to
higher repair and maintenance costs. For the nine-month period, the change
from net loss to net income is attributable to the provision for earthquake
loss recorded in the corresponding 1994 period and an increase in rental and
interest income in 1995. These changes were offset by higher general and
administrative costs and by higher repair and maintenance costs.
Rental income for the three and nine months ended September 30, 1995 was
$2,784,429 and $8,082,273, respectively, compared with $2,648,928 and
$7,734,673 for the corresponding periods in 1994. The increase is primarily
attributable to higher average occupancy rates during 1995 at both Nohl Ranch
and Pacific Inn.
Interest income for the three and nine months ended September 30, 1995 was
$60,306 and $143,649 compared with $21,835 and $51,153 for the corresponding
1994 periods. The increase reflects higher average cash balances maintained
and higher interest rates in 1995.
Total expenses were $2,609,831 and $7,662,396 for the three and nine months
ended September 30, 1995, compared with $2,427,697 and $7,894,880 for the three
and nine months ended September 30, 1994. The 8% increase for the three-month
period is mainly attributable to increases in general and administrative
expenses and repair and maintenance expenses. For the nine-month period, the
decrease primarily is due to the provision for earthquake loss of $694,207
recorded in 1994. Excluding this expense, total expenses increased 6% for the
nine-month period, largely due to increased repairs and maintenance and general
and administrative expenses.
General and administrative expenses totalled $421,877 and $1,207,518 for the
three and nine months ended September 30, 1995, compared with $370,993 and
$1,032,421 for the three and nine months ended September 30, 1994. The
increases are largely the result of higher insurance costs at all of the
Partnership's properties. Repairs and maintenance expenses totalled $191,351
and $472,234 for the three and nine months ended September 30, 1995, compared
with $99,729 and $324,672 for the three and nine months ended September 30,
1994. The increases are primarily attributable to property improvements
completed in 1995.
For the nine months ended September 30, 1995, and 1994, the average occupancy
levels for the properties were as follows:
Property 1995 1994
Nohl Ranch 94% 82%
Ocean House 92% 95%
Pacific Inn 97% 93%
Prell Gardens 95% 97%
Average Occupancy 95% 92%
PART II OTHER INFORMATION
Item 1 Legal Proceedings
On September 15, 1995, litigation was initiated in Los Angeles Superior
Court against the Partnership's insurance carrier and insurance broker
as a result of the insurance company's preliminary indication that it
would not reimburse the Partnership for property improvements related
to earthquake damages sustained at two of the Partnership's properties,
Prell Garden and Ocean House, in January of 1994. This litigation is
being vigorously pursued.
Items 2-5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(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 and 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 13, 1995 BY: /s/ Moshe Braver
President, Director and
Chief Operating Officer
Date: November 13, 1995 BY: /s/ Sean Donahue
Vice President and
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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<RECEIVABLES> 000
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<PP&E> 42,858,625
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