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 June 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
June 30, December 31,
Assets 1995 1994
Real estate:
Land $ 4,824,699 $ 4,824,699
Buildings and improvements 37,988,431 37,839,781
42,813,130 42,664,480
Less accumulated depreciation (14,562,881) (13,665,635)
28,250,249 28,998,845
Cash and cash equivalents 3,424,385 3,305,871
Prepaid expenses 204,341 154,366
Total Assets $ 31,878,975 $ 32,459,082
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 209,458 $ 413,367
Deferred rent payable 1,123,076 1,100,379
Due to affiliates 214,198 215,000
Security deposits payable 150,500 145,775
Distributions payable 365,720 365,720
Total Liabilities 2,062,952 2,240,241
Partners' Capital (Deficit):
General Partner (31,966) (27,938)
Limited Partners 29,847,989 30,246,779
Total Partners' Capital 29,816,023 30,218,841
Total Liabilities
and Partners' Capital $ 31,878,975 $ 32,459,082
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
General Limited Total
Partner Partners Partners
Balance at December 31, 1994 $ (27,938) $30,246,779 $30,218,841
Net income 3,286 325,336 328,622
Distributions (7,314) (724,126) (731,440)
Balance at June 30, 1995 $ (31,966) $29,847,989 $29,816,023
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Rental $2,666,670 $2,584,875 $5,297,844 $5,085,745
Interest 41,868 13,621 83,343 29,318
Total 2,708,538 2,598,496 5,381,187 5,115,063
Expenses
Payroll 797,464 757,331 1,515,602 1,458,039
Depreciation 448,728 451,837 897,246 902,881
Rent and utilities 430,808 405,380 824,597 815,578
General and administrative 355,759 317,225 785,641 661,428
Supplies 273,021 255,777 529,947 499,472
Repairs and maintenance 148,543 106,176 280,883 224,943
Real estate taxes 103,532 98,250 201,574 198,000
Travel and entertainment 6,688 7,341 17,075 12,635
Earthquake loss - - - 694,207
Total Expenses 2,564,543 2,399,317 5,052,565 5,467,183
Net Income (Loss) $ 143,995 $ 199,179 $ 328,622 $ (352,120)
Net Income (Loss) Allocated:
To the General Partner $ 1,440 $ - $ 3,286 $ -
To the Limited Partners 142,555 199,179 325,336 (352,120)
$ 143,995 $ 199,179 $ 328,622 $ (352,120)
Per limited partnership unit
(4,827,500 outstanding) $.03 $.04 $.07 $(.07)
Consolidated Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 328,622 $ (352,120)
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Depreciation 897,246 902,881
Provision for earthquake loss - 694,207
Increase (decrease) in
cash arising from changes
in operating assets and liabilities:
Prepaid expenses (49,975) 64,356
Accounts payable and
accrued expenses (203,909) 35,191
Deferred rent payable 22,697 22,698
Due to affiliates (802) 836
Security deposits payable 4,725 3,000
Net cash provided by operating activities 998,604 1,371,049
Cash Flows from Investing Activities:
Additions to real estate (148,650) (222,889)
Net cash used for investing activities (148,650) (222,889)
Cash Flows from Financing Activities:
Distributions paid to partners (731,440) (731,440)
Net cash used for financing activities (731,440) (731,440)
Net increase in cash and cash equivalents 118,514 416,720
Cash and cash equivalents
at beginning of period 3,305,871 2,058,534
Cash and cash equivalents at end of period $ 3,424,385 $ 2,475,254
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 June 30, 1995 and the results of operations for the three and
six months ended June 30, 1995 and 1994, cash flows for the six months ended
June 30, 1995 and 1994 and the statement of changes in partners' capital
(deficit) for the six months ended June 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 an 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 buildings 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 insurance carrier has
preliminarily indicated that it will not reimburse the Partnership for all of
these additional costs. The General Partner is aggressively pursuing
reimbursement from the insurance carrier for these additional costs, less the
deductible, under the Partnership's insurance policy, and, if necessary, may
seek a satisfactory resolution through the commencement of a legal action
against the insurance carrier and/or the insurance broker. 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, therefore,
could result in a temporary suspension of cash distributions.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$268,837 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 June 30, 1995, Ocean House and
Prell Gardens incurred earthquake repairs of $231,163 and $68,570,
respectively. Consequently, the net building basis reduction is $450,267 at
June 30, 1995.
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1995, the Partnership had cash and cash equivalents of $3,424,385
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.
As a result of an 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 buildings 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 insurance carrier has
preliminarily indicated that it will not reimburse the Partnership for all of
these additional costs. The General Partner is aggressively pursuing
reimbursement from the insurance carrier for these additional costs, less the
deductible, under the Partnership's insurance policy, and, if necessary, may
seek a satisfactory resolution through the commencement of a legal action
against the insurance carrier and/or the insurance broker. 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, therefore,
could result in a temporary suspension of cash distributions.
The building basis costs of Ocean House and Prell Gardens have been reduced by
$268,837 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 June 30, 1995, Ocean House and
Prell Gardens incurred earthquake repairs of $231,163 and $68,570,
respectively. Consequently, the net building basis reduction is $450,267 at
June 30, 1995.
The General Partner declared a cash distribution of $.075 per Unit for the
quarter ended June 30, 1995 which will be paid to investors on or about August
15, 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.
Results of Operations
Partnership operations resulted in net income of $143,995 and $328,622 for the
three and six months ended June 30, 1995, compared with net income of $199,179
and a net loss of $352,120 for the three and six months ended June 30, 1994.
The decrease in net income for the three-month period can be attributed
primarily to higher expenses in all categories except depreciation and travel,
which was partially offset by higher rental and interest income. For the
six-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. These changes were offset by higher
expenses in all categories except depreciation.
Rental income for the three and six months ended June 30, 1995 was $2,666,670
and $5,297,844, respectively, compared with $2,584,875 and $5,085,745 for the
corresponding periods in 1994. The increase is primarily attributable to
higher rental income at Nohl Ranch Inn and Pacific Inn due to improved average
occupancy during 1995. Interest income for the three and six months ended June
30, 1995 was $41,868 and $83,343 compared with $13,621 and $29,318 for the
corresponding 1994 periods. The increase reflects higher average cash balances
maintained and higher interest rates in 1995.
Total expenses were $2,564,543 and $5,052,565 for the three and six months
ended June 30, 1995, compared with $2,399,317 and $5,467,183 for the three and
six months ended June 30, 1994. The 7% increase for the three-month period is
attributable to increases in most expense categories except depreciation and
travel. Repair and maintenance expenses and general and administrative
expenses increased $42,367 and $38,534, respectively, for the three-month
period, as a result of property improvements and increased insurance expenses
at each of the properties. For the six-month period, the 8% decrease in
expenses is due to the provision for earthquake loss of $694,207 recorded for
the six months ended June 30, 1994. Excluding this expense, expenses increased
6% for the six-month period, largely due to increased repairs and maintenance
and general and administrative expenses, for the reasons cited above.
For the six months ended June 30, 1995, and 1994, the average occupancy levels
for the properties were as follows:
Property 1995 1994
Nohl Ranch 94% 79%
Ocean House 91% 95%
Pacific Inn 96% 93%
Prell Gardens 95% 96%
Average Occupancy 94% 91%
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 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: August 11, 1995 BY: /s/ Moshe Braver
President, Director and
Chief Operating Officer
Date: August 11, 1995 BY: /s/ Sean Donahue
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,424,385
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 204,341
<PP&E> 42,813,130
<DEPRECIATION> (14,562,881)
<TOTAL-ASSETS> 31,878,975
<CURRENT-LIABILITIES> 209,458
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 29,816,023
<TOTAL-LIABILITY-AND-EQUITY> 31,878,975
<SALES> 5,297,844
<TOTAL-REVENUES> 5,381,187
<CGS> 000
<TOTAL-COSTS> 3,369,678
<OTHER-EXPENSES> 1,682,887
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 328,622
<INCOME-TAX> 000
<INCOME-CONTINUING> 328,622
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 328,622
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
