UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the year ended: December 31, 1995 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 33-9921
SENIOR INCOME FUND L. P.
Exact name of registrant as specified in its charter
New York 13-3392077
State or other jurisdiction of
incorporation or organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor
New York, NY ATTN: Andre Anderson 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
4,827,500 DEPOSITORY UNITS OF LIMITED PARTNERSHIP INTEREST
Title of Class
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of Parts I, II, III and IV are
incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995.
PART I
Item 1. Business
(a) General Development of Business
Senior Income Fund L.P. (the "Partnership", formerly Shearson Lehman Senior
Income Fund Limited Partnership), a Delaware limited partnership, was formed
on October 14, 1986 pursuant to a Limited Partnership Agreement, as amended
and restated on March 17, 1987 pursuant to an Amended and Restated Limited
Partnership Agreement (the "Partnership Agreement"). The Partnership was
formed for the purpose of acquiring a general partnership interest in Shearson
August Property Partnership, a California general partnership (the "Property
Partnership"), with August Financial Partners II ("AFP-II") an affiliate of
August Financial Corporation ("August"). The Property Partnership was formed
to acquire, operate and ultimately sell four specified residential properties
for senior citizens (the "Properties"). The general partner of the
Partnership is Senior Income Fund Inc. (the "General Partner", formerly
Shearson Lehman Senior Income Fund, Inc.), a Delaware corporation, and wholly
owned subsidiary of Lehman Brothers Inc. (formerly Shearson Lehman Brothers
Inc.). The Partnership will continue until December 31, 2036 unless
terminated earlier pursuant to the provisions of the Partnership Agreement.
On March 25, 1987, the Property Partnership acquired three rental retirement
projects in the Los Angeles area and one in the Orange County region of
Southern California: Pacific Inn, a 134-unit project in Torrance; Nohl Ranch
Inn, a 133-unit project in Anaheim; Ocean House, a 121-unit project in Santa
Monica; and Prell Gardens, a 102-unit project in Van Nuys. For a description
of the Properties, see the Partnership's Annual Report to Unitholders for the
year ended December 31, 1995 included in Item 14 of this report. The Property
Partnership acquired the fee interest in the land, building and improvements of
Pacific Inn, Nohl Ranch Inn and Prell Gardens and the leasehold interest in the
land, building and improvements in Ocean House from Senior Inns of America
Venture, a California general partnership (the "Seller") and an affiliate of
August, for an aggregate purchase price of $40,400,000. For a breakdown of the
purchase price of each of the Properties, see Note 7, "Real Estate," to the
Consolidated Financial Statements of the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995 included in Item 14 of this
report.
As reported on the Annual Reports on Form 10-K for the years ended December 31,
1994 and December 31, 1993, an earthquake struck the greater Los Angeles area
on January 17, 1994, causing damage at two of the Properties, Ocean House and
Prell Gardens. Information regarding the impact on the Properties is included
below under Item 2. "Properties."
(b) Financial Information about Industry Segments
Substantially all of the Partnership's revenues, operating profit or loss and
assets relate solely to its interest as general partner of the Property
Partnership whose operating profit or loss and assets relate to its ownership
and operation of the Properties.
(c) Narrative Description of Business
The Partnership's principal objectives are:
(1) to provide quarterly cash distributions a portion of which will be
"tax sheltered;"
(2) to preserve and protect capital;
(3) to achieve long-term appreciation in the value of the Properties for
distributions upon sale of the Properties.
There is no assurance that these objectives will be achieved.
Employees
The Partnership has no employees.
Competition
The Properties compete with a variety of retirement living complexes within
their primary geographic markets, including continuing care and lifecare
facilities, which offer higher levels of personal care, and often skilled
nursing, in addition to independent living units. However, continuing care and
lifecare facilities usually require up-front accommodation fees, and place
greater emphasis on health and well-being rather than on independent lifestyle
and community activities. In order to raise visibility of the Properties and
attract potential tenants, the operator, Leisure Care, Inc., (the "Operator")
emphasizes strong community-oriented programs to build a strong community
presence with hospital administrators, church groups and civic groups.
For a discussion of the competitive conditions in each of the markets in which
the Partnership's Properties are located, see the Partnership's Annual Report
to Unitholders for the year ended December 31, 1995 included in Item 14 of this
report.
Property Management
The Operator is among the leading retirement center management companies in
size, experience and profit history. The Operator supervises the day-to-day
management of the Properties, including employing the operating personnel on
behalf of the Partnership, according to a property management agreement (the
"Property Management Agreement") and acts as the non-exclusive leasing agent
for all four Properties. An extension to the Property Management Agreement,
which expired on December 31, 1993, was executed and can be terminated by
either party upon sixty days notice. Certain terms of the Property Management
Agreement have been modified as set forth in the extension. On June 30, 1995,
the extension of the original Property Management Agreement expired and a new
extension was executed between the General Partner and the Operator which is
effective through July 1, 1996. All of the terms and conditions of the
original extension of the Management Agreement shall remain in full force and
effect through the new expiration date. See Note 5, "Property Management," to
the Consolidated Financial Statements for further discussion of the Property
Management Agreement.
Item 2. Properties
For a general description of each of the Partnership's Properties, see the
Partnership's Annual Report to Unitholders for the year ended December 31, 1995
included in Item 14 of this report.
1994 Earthquake
As a result of an earthquake that struck the greater Los Angeles area on
January 17, 1994, damages were sustained at two of the Properties, Ocean House
and Prell Gardens. Additional information is incorporated by reference to Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Note 11, "Earthquake Loss," to the Consolidated Financial
Statements.
Government Regulations
Two of the Properties, Ocean House and Nohl Ranch, maintain assisted living
programs which require licensing. Accordingly, these properties are subject to
the periodic licensing requirements and inspection procedures of the California
State Department of Social Services. California law prescribes a list of
services which must be provided in rental retirement facilities such as: (i)
assistance with daily living activities in the combinations which meet the
needs of residents, (ii) helping residents gain access to appropriate
supportive services in the community, (iii) being aware of the residents'
general whereabouts, (iv) monitoring the activities of the residents while they
are under the supervision of the facility to ensure their general health,
safety, well being, and (v) encouraging the residents to maintain and develop
their maximum functional ability through participation in planned activities.
Both criminal and civil penalties may be imposed in the event of violation of
any of these duties. Currently there are no restrictions on the level of
rents, nor on rent increases. Prell Gardens is currently not subject to the
foregoing requirements.
Item 3. Legal Proceedings
On September 15, 1995, litigation was initiated by the Partnership 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 damage sustained at two of the Partnership's properties, Ocean
House and Prell Gardens, in January of 1994. Attorneys for all parties are
currently taking depositions. Additional information is incorporated by
reference to Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and Note 11, "Earthquake Loss," to the
Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the holders of Units ("Limited
Partners") during the fourth quarter of the year for which this report is
filed.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and Related
Security Holder Matters
(a) Market Price Information
There is no established trading market for the units nor is there anticipated
to be.
(b) Holders
As of December 31, 1995, there were 3,830 Limited Partners of record.
(c) Cash Distributions per Unit (1)
1995 1994
1st Quarter .075 .075
2nd Quarter .075 .075
3rd Quarter .075 .075
4th Quarter .075 .075
Total .30 .30
(1) The amount and timing of distribution payments is reviewed on a quarterly
basis. Distributions are paid approximately forty-five days following the
period for which they are declared.
Item 6. Selected Financial Data
(Dollars in thousands, except per Unit data)
1995 1994 1993 1992 1991
Rental Income $10,838 $10,387 $9,526 $9,120 $9,230
Interest Income $199 $98 $36 $15 $51
Total Income $11,037 $10,485 $9,561 $9,135 $9,281
Net Income (Loss) $(7,977) $137 $518 $(44) $425
Net Income (Loss)
Per Unit (1) $(1.63) $.03 $.11 $(.01) $.08
Cash Distributions
Per Unit $.30 $.30 $.30 $.13 $.5252
Total Assets $22,976 $32,459 $33,465 $34,033 $35,397
(1) Total Units outstanding 4,827,500
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
As a result of the Northridge earthquake that struck the greater Los Angeles
area on January 17, 1994, damage was 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. The provision
for earthquake loss of $750,000, which was recorded in 1994, represents the
estimated insurance deductibles for the two properties.
Shortly after the earthquake, the Partnership hired an independent structural
and seismic engineer to assess the damage at both properties. The engineer
informed the Partnership that repairs completed immediately after the
earthquake have rendered both buildings safe for continued occupancy. However,
the engineer concluded that additional structural improvements would be needed
to make both buildings less vulnerable to future earthquakes, and to bring them
into compliance with building codes enacted subsequent to the construction of
the properties (the "Retrofit Work") and building codes that were enacted after
the January 1994 earthquake (the "Structural Enhancements"). The total cost to
complete the work at both buildings is estimated to be approximately $4.8
million. This total is inclusive of the cost of the initial work already
completed, the estimated cost of the Retrofit Work and Structural Enhancements
and the cost to complete other less immediate earthquake-related repair work.
The total approximate cost is based on the most recent contractor bids as it
relates to Prell Gardens and engineer estimates as it relates to Ocean House.
While the General Partner feels it is important to complete this work, the
repairs are structural in nature, and are therefore, not expected to enhance
the overall value of the buildings.
The General Partner intends to proceed with the repair work regardless of the
resolution of the legal action (see Item 3.) If insurance coverage is not
available for any reason, the General Partner believes there are adequate
Partnership reserves to fund the required repairs, however any funding could
adversely impact the Partnership's cash position and its ability to pay future
cash distributions.
The Retrofit Work and Structural Enhancements have not yet begun at either
property. With respect to Prell Gardens, in October of 1995, the City of Los
Angeles finalized the criteria it uses in determining the extent of structural
enhancements required at buildings of the same type, construction and age as
Prell Gardens. In accordance with city ordinances, the General Partner
prepared plans outlining the work proposed for Prell Gardens and submitted them
to the City of Los Angeles for final approval in December 1995. The City has
recently approved the Partnership's plans and will grant the Partnership the
necessary permits to begin work, which will commence in April 1996. The
Partnership's contractor has estimated that the cost of the work will be
approximately $1.4 million and require 15 to 20 months to complete.
Plans pertaining to the repairs at Ocean House have been prepared, however they
have not been submitted to the City of Santa Monica, where the property is
located. In June 1994, the City of Santa Monica enacted a new building
ordinance specific to damage caused by the earthquake. However, due to
pressure from numerous other Santa Monica property owners, the City is
currently considering a possible revision of this new ordinance. The
Partnership's construction plans, estimated to cost approximately $3.4 million,
have been prepared in accordance with the new ordinance. The possible revision
being considered by the City of Santa Monica could reduce the scope and final
cost of the work. Therefore, the Partnership is waiting for the City of Santa
Monica to issue its final ruling on the new ordinance. At this time, it is
uncertain when the City of Santa Monica will make its final decision.
The General Partner anticipates a temporary decline in occupancy in 1996 and
possibly 1997 at the affected properties, as some residents may need to be
relocated while work is completed. The General Partner plans to reduce
occupancy through natural attrition and then relocate residents to unoccupied
units within the building, rather than to an off-site facility. Although the
General Partner's plan is expected to reduce the expense of moving residents,
the process will interrupt the normal course of the operations at the
properties by reducing occupancy and rental income. The General Partner intends
to present the insurance carrier with a claim for loss of rents to recover
these additional earthquake related costs.
During November 1995, the insurance carrier determined that the damaged
sustained at the Prell Gardens property was in excess of the applicable
$250,000 deductible, leaving a net claim of $28,531 which was paid to the
Partnership and applied against the building basis. The net claim of $28,531
represents the undisputed amount under this claim, notwithstanding the separate
claims relating to the Structural Enhancements and Retrofit Work required at
the property. The insurance carrier determined for the Ocean House Property
that the damage sustained was less than the applicable deductible of $500,000.
The building basis costs of Ocean House and Prell Gardens have been reduced by
the $750,000 provision for earthquake loss. As repairs are incurred, the
buildings will be restored to their original basis. At December 31, 1995,
Ocean House and Prell Gardens have, cumulatively, incurred earthquake repairs
of $267,302 and $58,109, respectively. Consequently, the building basis costs
for Ocean House and Prell Gardens have been reduced by $232,698 and $191,891,
respectively, at December 31, 1995.
The General Partner declared a cash distribution of $.075 per Unit for the
quarter ended December 31, 1995, which was paid to the Limited Partners on
February 21, 1996. Since inception, limited partners have received cash
distributions totalling $4,510 per $10,000 investment. The level of future
distributions will be determined on a quarterly basis and will be based on cash
flow from operations, tempered by the Partnership's capital needs, including
additional earthquake related repairs at Prell Gardens and Ocean House.
At December 31, 1995 the Partnership had cash and cash equivalents of
$4,143,727 compared with $3,305,871 at December 31, 1994. The increase is
primarily attributable to net cash from operations exceeding additions to real
estate and cash distributions.
At December 31, 1995 accounts payable and accrued expenses were $212,144
compared to $413,367 at December 31, 1994. The 1994 balance includes a
$200,852 tax refund received at the Ocean House property that was required to
be paid back to the taxing authority in April 1995.
Total assets at December 31, 1995 were $22,975,880 in 1995 compared to
$32,459,082 at December 31, 1994. The decrease is due primarily to the
Partnership's write-down of the Prell Gardens, Ocean House and Nohl Ranch
properties to their estimated fair market values, pursuant to the requirements
of FAS 121. The determination of the estimated fair market value of the
properties was based upon a recent appraisal of the properties. Additional
information is incorporated by reference to Note 7, "Real Estate," to the
Consolidated Financial Statements.
In November 1995, the operator discovered termites at Pacific Inn. An
independent contractor has examined the property and informed the General
Partner that it will be necessary to temporarily close the building for
approximately four days while it is tented and fumigated. The cost to complete
the procedure will cost approximately $153,000. The cost to relocate tenants
is included in the total extermination cost. Preliminary discussions with the
exterminator indicate that there will be no permanent damage to the building
caused by the termites. The operator also discovered termites at Prell Gardens
in March 1996, however, the extent of the damage and the cost to exterminate
the property have not yet been determined.
On February 20, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a Form 8-K disclosing this resolution on February 23, 1996.
Results of Operations
1995 versus 1994
Partnership operations generated a net loss of $7,877,298 for the year ended
December 31, 1995, compared to net income of $137,035. The change from net
income to net loss is primarily attributable to a $8,712,292 loss recognized on
the write down of Prell Gardens, Ocean House and Nohl Ranch, implemented in
compliance with Financial Accounting Standard No. 121, a new accounting
standard which was issued in March 1995. This was partially offset by a
provision for earthquake loss in 1994 of $750,000 related to the earthquake
repairs at Ocean House and Prell Gardens in the amounts of $500,000 and
$250,000, respectively, and higher total income in 1995.
Rental revenue for the year ended December 31, 1995 was $10,838,267, compared
with $10,386,764 in 1994. The 4.3% increase is mainly the result of higher
occupancy at Nohl Ranch and Pacific Inn. For the year ended December 31, 1995
interest income was $199,078, compared with $97,928 in 1994. The increase
reflects higher average cash balances maintained in 1995.
For the year ended December 31, 1995, total expenses were $18,914,643, compared
with $10,347,657 in 1994. Total expenses increased in 1995 as a result of the
above mentioned write-down of real estate in 1995. Total expenses in 1994
included a provision for earthquake loss in the amount of $750,000, the
Partnership's deductible under its insurance policy. General and
administrative expenses for the year ended December 31, 1995 were $1,633,797,
compared with $1,427,356 in 1994. The increase is primarily a result of higher
insurance costs and higher management incentive fees at all four of the
Partnership's properties. For the year ended December 31, 1995, repairs and
maintenance expense was $616,998, compared with $490,095 in 1994. The increase
is mainly the result of property improvements completed in 1995. Supplies
expenses were $1,122,448, and $1,020,782, respectively, for the years ended
December 31, 1995 and 1994. The increase in 1995 is primarily attributable to
higher costs associated with the food services department as a result of
increased average occupancy in 1995.
1994 versus 1993
Partnership operations for the year ended December 31, 1994 resulted in net
income of $137,035, compared with net income of $518,280 in 1993. The decrease
in net income can be attributed primarily to the provision for the earthquake
loss, discussed above, increases in payroll and general and administrative
expenses, partially offset by higher rental income in 1994.
Rental income for the year ended December 31, 1994 was $10,386,764, compared
with $9,525,552 in 1993. The increase can be attributed to higher average
occupancy at all of the properties, 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 year ended December 31, 1994 was $97,928, compared with $35,836
in 1993. The increase is due to higher average cash balances maintained and
higher interest rates in 1994.
Total expenses for the year ended December 31, 1994 were $10,347,657, compared
with $9,043,108 in 1993. The increase is primarily due to the recognition of
earthquake loss of $750,000, higher payroll and general and administrative
expenses. Payroll expenses for the year ended December 31, 1994 were
$2,884,586, compared with $2,667,725 in 1993. The increase is primarily due to
higher payroll costs associated with the institution of the assisted living
program at Nohl Ranch in September 1993. General and administrative expenses
for the year ended December 31, 1994 were $1,427,356, compared with $1,129,202
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. In 1993, the
property manager did not earn any incentive fees, therefore, no expense was
recorded. Under the new management agreement, property manager performance
incentive fees are payable on a monthly basis, compared with the prior
management agreement where fees were payable in arrears on an annual basis.
Repairs and maintenance expense for year ended December 31, 1994 was $490,095,
compared with $538,058 in 1993. The decrease is primarily attributable to a
reduction in expenditures for routine property upgrades at Ocean House and
Prell Gardens, partially offset by an increase in routine property upgrades
including carpet replacement and purchased services at Pacific Inn.
For the years ended December 31, 1995, 1994 and 1993, the average occupancy
levels for the properties were as follows:
Property 1995 1994 1993
Ocean House 92% 95% 91%
Pacific Inn 97% 94% 91%
Prell Gardens 93% 97% 95%
Nohl Ranch 95% 83% 77%
Average Occupancy 94% 92% 89%
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995, which is filed as an exhibit under Item 14.
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 Partnership has no directors or officers. The General Partner has general
responsibility for all aspects of the Partnership's operation. Certain of the
officers and directors of the General Partner are also officers and employees
of Lehman Brothers Inc.
Certain officers and directors of the General Partner are now serving (or in
the past have served) as officers or directors of entities which act as general
partners of a number of limited partnerships which have sought protection under
the provisions of the Federal Bankruptcy Code. The partnerships which have
filed bankruptcy petitions own assets which have been adversely affected by the
economic conditions in the markets in which that asset is located and,
consequently, the partnerships sought protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
The directors and principal officers of the General Partner are listed below.
Name Office
Moshe Braver Director, President and Chief Operating Officer
Sean F. Donahue Chief Financial Officer and Vice President
Joseph Donaldson Vice President
Moshe Braver, 42, is currently a Managing Director of Lehman Brothers and has
held such position since October 1985. During this time, he has held positions
with the Business Analysis Group, International and Capital Markets
Administration and currently, with the Diversified Asset Group. Mr. Braver
joined Shearson Lehman Brothers in August 1983 as Senior Vice President. Prior
to joining Shearson, Mr. Braver was employed by the accounting firm of Coopers
& Lybrand from January 1975 through August 1983 as an Audit Manager. He
received a Bachelor of Business Administration degree from Bernard Baruch
College in January 1975 and is a Certified Public Accountant.
Sean F. Donahue, 34, is currently a Vice President of Lehman Brothers in the
Diversified Asset Group. Mr. Donahue joined Lehman in April 1986 as an
Assistant Vice President with the Realty Finance Group. Mr. Donahue has been
actively involved in real estate investment, management, marketing and
workouts. From December 1985 to April 1986, Mr. Donahue was Assistant
Treasurer of The Patrician Group and was actively involved with the company's
banking relationships and real estate acquisitions. Prior to that, Mr. Donahue
was employed by Peat Marwick Mitchell & Co. as a consultant in the firm's Real
Estate Practice Group. Mr. Donahue received a B.B.A. degree from Pace
University in 1983.
Joseph Donaldson, 32, serves as a Vice President of Lehman Brothers in its
Diversified Asset Group and has held such position since November 1990. From
October 1988 to October 1990, Mr. Donaldson held the position of Assistant
Manager with the Internal Audit Department of Citibank's Investment Bank.
Prior to that, Mr. Donaldson was employed with Price Waterhouse and Company.
Mr. Donaldson received a B.B.A. in accounting from the University of Georgia
and is a Certified Public Accountant.
Item 11. Executive Compensation
The Directors and Officers of the General Partner do not receive any salaries
or other compensation from the Partnership. See Item 13, "Certain
Relationships and Related Transactions," for a description of certain
transactions of the General Partner and its affiliates with the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners.
At December 31, 1995, no investor held more than 5% of the outstanding Units.
(b) Security ownership of management.
Officers and Directors of the General Partner owned no units of the Partnership
as of December 31, 1995.
(c) Changes in control.
None.
Item 13. Certain Relationships and Related Transactions
First Data Investor Services Group (formerly The Shareholder Services Group),
an unaffiliated company, provides partnership accounting and investor relations
services for the Partnership. Prior to May 1993, these services were provided
by an affiliate of the General Partner. The Partnership's transfer agent and
certain tax reporting services are provided by Service Data Corporation, an
unaffiliated company.
For fees paid and reimbursed to the General Partner or its affiliates during
1995, 1994 and 1993, see Note 6, "Related Party Transactions," to the Financial
Statements in Item 8, "Financial Statements and Supplementary Data," which is
incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995, which is filed as an exhibit under Item 14.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
Consolidated Balance Sheets - At December 31, 1995 and 1994 (1)
Consolidated Statements of Partners' Capital (Deficit)
- For the years ended December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Operations
- For the years ended December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Cash Flows
- For the years ended December 31, 1995, 1994 and 1993 (1)
Notes to the Consolidated Financial Statements (1)
Report of Independent Accountants (1)
(a)(2) Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation (1)
Report of Independent Accountants (1)
(1) Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1995, filed as an exhibit under Item 14.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the fourth quarter of the year for which
this report is filed.
(c) Exhibits
3.1 The Partnership's Amended and Restated Agreement of Limited
Partnership, Dated March 17, 1987, is hereby incorporated by reference to
Exhibit A to the Prospectus contained in Registration Statement No. 33-9921,
which registration Statement (the "Registration Statement") was declared
effective by the Securities and Exchange Commission on January 30, 1987.
3.2 The Capital Contribution Agreement by and among the General Partner and
Shearson Group is hereby incorporated by reference to Exhibit 3.2 to the
Registration Statement.
10.1 Form of the Management Agreement dated as of April 5, 1988 between the
Partnership and the Operator is incorporated by reference to Exhibit 10.2 to
the Registration Statement.
10.2 The form of Property Partnership Agreement between the Partnership and
the Property Partner is hereby incorporated by reference to Exhibit 10.6 to the
Registration Statement.
10.3 The form of Purchase Agreement concerning the acquisition of the
Properties is hereby incorporated by reference to Exhibit No. 10.4 to the
Registration Statement.
10.4 Form of the Amended Management Agreement dated as of January 1, 1990
between the Partnership and the Operator hereby incorporated by reference to
Exhibit 10.5 to the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1989, as filed with the Securities and Exchange Commission on
March 30, 1990.
10.5 Form of the Settlement Agreement Dated December 18, 1989 between the
Partnership and class members hereby incorporated by reference to Exhibit 10.6
to the Partnership's Annual Report on Form 10-K for the year ended December 31,
1989, as filed with the Securities and Exchange Commission on March 30, 1990.
13.1 Annual Report to Unitholders for the year ended December 31, 1995.
27 Financial Data Schedule<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 29, 1996 BY: /s/ Moshe Braver
Name: President, Director and
Title Chief Operating Officer
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: March 29, 1996 BY: /s/ Moshe Braver
President, Director and
Chief Operating Officer
Date: March 29, 1996 BY: /s/ Sean Donahue
Vice President and
Chief Financial Officer
Date: March 29, 1996 BY: /s/ Joseph Donaldson
Vice President
Exhibit 13.1
Senior Income Fund L.P.
1995 Annual Report
Senior Income Fund L.P., formerly Shearson Lehman Senior Income Fund Limited
Partnership, (the "Partnership") raised $48,275,000 during its offering period
in 1987 and acquired four congregate care facilities in Southern California.
The Partnership has retained Leisure Care, Inc., one of the leading retirement
center management companies in the country, to assist with the day-to-day
management of the facilities.
Average
Occupancy Rental Income*
Property 1995 1994 1995 1994 % change
Ocean House 92% 95% $3,417 $3,402 0.4%
Prell Gardens 93% 97% 1,675 1,690 -0.9%
Pacific Inn 97% 94% 3,573 3,440 3.9%
Nohl Ranch Inn 95% 83% 2,174 1,854 17.3%
* in thousands of Dollars
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 (select option 1) 800-223-3464 (select option 2)
----MESSAGE TO INVESTORS----
Presented for your review is the 1995 Annual Report for Senior Income Fund L.P.
All four of the Partnership's facilities reported stable operating results in
1995, despite growing competition and the continued weak economic conditions in
Southern California. This report includes an update on the earthquake repairs
at Ocean House and Prell Gardens, a review of operations at each of the
Partnership's properties and audited financial statements for the year ended
December 31, 1995.
Cash Distributions
Cash distributions paid from operations for 1995 totalled $300 per $10,000
investment, including the 1995 fourth quarter distribution in the amount of $75
per $10,000 investment paid on February 21, 1996. Since inception, limited
partners have received cash distributions totalling $4,510 per $10,000
investment. The level of future distributions will be determined on a
quarterly basis and will be based on cash flow from operations, tempered by the
Partnership's capital needs, including additional earthquake related repairs at
Prell Gardens and Ocean House, as discussed below. Accordingly, cash
distributions could be reduced or suspended in 1996.
Market Update
Competition for tenants remains strong at the Partnership's properties as a
weak economy and growing competition in Southern California has resulted in
increased selectivity by prospective tenants. The ongoing weakness in the
high-technology and defense industries, although improved compared to previous
years, continues to adversely impact the region, contributing to a substantial
decline in existing single-family home prices. The decline negatively impacts
the Partnership's four facilities as elderly home owners are less willing to
sell their homes and move into a retirement facility at a time when prices are
depressed. Furthermore, the relatively weak economic conditions in California
create greater competition among the area's congregate care providers to reduce
rents and resident fees in order to attract prospective residents. We will
continue to pursue our aggressive marketing campaign and foster strong
community relations in order to increase the facilities' visibility among the
area's eligible senior population.
Earthquake Repairs
As previously reported, Ocean House and Prell Gardens sustained damage as a
result of a severe earthquake which struck the Los Angeles area in January
1994. Shortly after the earthquake, the Partnership hired an independent
structural and seismic engineer to assess the damage at both properties. The
engineer informed the Partnership that repairs completed immediately after the
earthquake have rendered both buildings safe for continued occupancy. However,
the engineer concluded that additional structural improvements would be needed
to make both buildings less vulnerable to future earthquakes, and to bring them
into compliance with building codes enacted subsequent to the construction of
the properties (the "Retrofit Work") and building codes that were enacted after
the January 1994 earthquake (the "Structural Enhancements"). The total cost to
complete the work at both buildings is estimated to be approximately $4.8
million. This total is inclusive of the cost of the initial work a lready
completed, the estimated cost of the Retrofit Work and Structural Enhancements
and the cost to complete other less immediate earthquake-related repair work.
The total approximate cost is based on the most recent contractor bids as it
relates to Prell Gardens and engineer estimates as it relates to Ocean House.
While the General Partner feels it is important to complete this work, the
repairs are structural in nature, and are therefore, not expected to enhance
the overall value of the buildings.
The Retrofit Work and Structural Enhancements have not yet begun at either of
the properties. With respect to Prell Gardens, in October of 1995, the City of
Los Angeles finalized the criteria it uses in determining the extent of
structural enhancements required at buildings of the same type, construction
and age as Prell Gardens. In accordance with city ordinances, the General
Partner prepared plans outlining the work proposed for Prell Gardens and
submitted them to the City of Los Angeles for approval in December 1995. The
City has recently approved the Partnership's plans and granted the Partnership
the necessary permits to begin work. Work will commence at Prell Gardens in
April 1996. The Partnership's contractor has estimated that the cost of the
work will be approximately $1.4 million and require 15 to 20 months to
complete.
Plans pertaining to the repairs at Ocean House have been prepared, however they
have not been submitted to the City of Santa Monica, where the property is
located. In June 1994, the City of Santa Monica enacted a new building
ordinance specific to damage caused by the earthquake. However, due to
pressure from numerous other Santa Monica property owners, the City is
currently considering a possible revision of this new ordinance. The
Partnership's construction plans, estimated to cost approximately $3.4 million,
have been prepared in accordance with the new ordinance. The possible revision
being considered by the City of Santa Monica could reduce the scope and final
cost of the work. Therefore, the Partnership is waiting for the City of Santa
Monica to issue its final ruling on the new ordinance. At this time, it is
uncertain when the City of Santa Monica will make its final decision.
The General Partner anticipates a temporary decline in occupancy in 1996 and
possibly 1997 at the affected properties, as some residents may need to be
relocated while work is completed. The General Partner plans to reduce
occupancy through natural attrition and then relocate residents to unoccupied
units within the building, rather than to an off-site facility. Although the
General Partner's plan is expected to reduce the expense of moving residents,
the process will interrupt the normal course of the operations at the
properties by reducing occupancy and rental income. The General Partner intends
to present the insurance carrier with a claim for loss of rents to recover
these additional earthquake related costs.
The General Partner is aggressively pursuing reimbursement from the insurance
carrier for any additional repair costs, less the deductible, under the
Partnership's insurance policy. However, the insurance carrier has
preliminarily refused to pay for the cost of the additional earthquake repairs,
and as a result, the Partnership has initiated litigation against the insurance
carrier and insurance broker. Attorneys for all parties are currently taking
depositions.
The General Partner intends to proceed with the repair work regardless of the
resolution of the legal action. If insurance coverage is not available for any
reason, the General Partner believes there are adequate Partnership reserves to
fund the required repairs, however any funding could adversely impact the
Partnership's cash position and its ability to pay future cash distributions.
Operations Update
Rental revenue increased at three of the properties during 1995. The improved
revenues are attributed primarily to increased rental income resulting from
higher average occupancy levels at Nohl Ranch and Pacific Inn. At Nohl Ranch,
increased occupancy was the result of the availability of the assisted living
program, which has reduced the number of move-outs resulting from residents who
require more assistance with their daily routines as they age. Assisted living
units command higher rental rates contributing to increased rental income. An
assisted living program will be implemented at Pacific Inn during 1996 which
will provide additional competitive advantages for that property.
In November 1995, the operator discovered termites at Pacific Inn. An
independent contractor has examined the property and informed the General
Partner that it will be necessary to temporarily close the building for
approximately four days while it is tented and fumigated. The cost to complete
the procedure will cost approximately $153,000. The cost to relocate tenants
is included in the total extermination cost. Preliminary discussions with the
exterminator indicate that there will be no permanent damage to the building.
The operator also discovered termites at Prell Gardens in March 1996, however,
the extent of the damage and the cost to exterminate the property have not yet
been determined.
Summary
The additional structural improvements at Prell Gardens will begin in April and
the work at Ocean House will begin as soon as we receive approval from the City
of Santa Monica. We intend to pursue collection of the Partnership's insurance
claim through litigation while continuing to focus on maintaining the
properties' stable operating results. We will keep you updated on our efforts
in future correspondence.
Very truly yours,
Senior Income Fund, Inc.
The General Partner
/s/ Moshe Braver
Moshe Braver
President
March 29, 1996
----PROPERTY PROFILES----
Ocean House Santa Monica, California
Ocean House is a ten-story property adjacent to Santa Monica Beach. Many of
the property's 121 units feature balconies and ocean views. Ocean House
provides residents with various amenities including an assisted living program.
The property is located in an upscale area with an established senior
population and faces competition from three other retirement facilities within
its market. The property competes at the higher end of the price scale based
on its location and level of service. The property enjoys a competitive
advantage due to its assisted living program, many activity programs and
community involvement.
Operations at Ocean House generated total rental income of $3,416,963 and net
cash flow of $283,437, compared with total rental income of $3,402,425 and net
cash of flow of $311,508 in 1994. Net cash flow is gross revenues less
operating expenses and ground rent. The decrease in net cash flow is primarily
attributable to higher insurance and repair and maintenance expenses.
Prell Gardens Van Nuys, California
Prell Gardens is a two-story, 102-unit retirement facility surrounding a
courtyard and garden. Daily meals, maid service, a beauty salon and
transportation services are some of the many amenities available at the
property. Prell Gardens enjoys a strong reputation within the San Fernando
Valley, and competes with two facilities offering similar services. The
property competes in the higher end of the market and has maintained its high
occupancy level through aggressive marketing efforts and strong ties to the
local community. Resident satisfaction continues to be high as evidenced by
the numerous resident referrals and low resident turn over.
Property operations for the year generated total rental income of $1,675,013
and net cash flow of $259,837, compared with total rental income of $1,689,732
and net cash flow of $356,548 in 1994. The decrease in net cash flow reflects
higher insurance costs and greater overall property operating expenses.
Pacific Inn Torrance, California
Pacific Inn is a three-story retirement facility located in an affluent section
of Torrance. The property has 134 units with private balconies or patios, and
features services and amenities including a visiting doctor, beauty salon,
dining services and daily maid service. Pacific Inn competes with three older
retirement facilities in its primary location. The facility's reputation has
enabled the property to charge premium rents and maintain a strong profit
margin. Building upon the success of the Partnership's existing assisted
living programs, the General Partner will be implementing an assisted-living
program at Pacific Inn in 1996.
During 1995, Pacific Inn recorded total rental income of $3,572,630 and net
cash flow of $1,749,879, compared with total rental income of $3,440,400 and
cash flow of $1,779,208 in 1994. The increase in rental income is a result of
higher average occupancy in 1995. Net cash flow slightly decreased as a result
of operating expenses.
Nohl Ranch Inn Anaheim, California
Nohl Ranch Inn, located in Anaheim Hills, an upscale community with mostly
young residents, is a three-story, 133-unit facility featuring an interior
courtyard and landscaped grounds. Nohl Ranch is affordably priced for its
market and engages in an extensive community outreach program to enhance the
property's visibility and referral network. The property includes such
features as a visiting doctor's office, beauty salon, daily meal and maid
service. The assisted living program, which provides assistance for residents
who require help with their daily routines, has been very successful in growing
the property's tenant base. Of the property's two competitors, which are both
located across the street from Nohl Ranch, only one currently offers an
assisted living program. Occupancy improved significantly in 1995, which marks
the seventh year in a row that occupancy has increased.
Property operations generated total rental income of $2,173,661 and net cash
flow of $518,708, compared with total rental income of $1,854,207 and net cash
flow of $276,278 in 1993. The increase in net cash flow is primarily the
result of an increase in rental income due to higher average occupancy in
1995.
(One bar graph showing the following information in graphic form: )
Average Occupancy 1991 -1995
1991 1992 1993 1994 1995
Ocean House 90% 85% 91% 95% 92%
Prell Gardens 93% 94% 95% 97% 93%
Pacific Inn 92% 91% 91% 94% 97%
Nohl Ranch Inn 72% 74% 77% 83% 95%
Financial Highlights
(in thousands except per unit data) 1995 1994
Total Revenue $11,037 $10,485
Total Expenses 18,915 10,348
Net Income (Loss) (7,877) 137
Cash Distributions per Unit* .30 .30
* There are 4,827,500 units outstanding.
- - Total revenue increased in 1995 mainly due to an increase in rental income as
a result of higher average occupancy at certain of the properties, and an
increase in interest income as a result of higher interest rates earned on
higher average cash balances.
- - Total expenses increased in 1995 as a result of a $8,712,292 loss recognized
on the write down of Prell Gardens, Ocean House and Nohl Ranch, implemented in
compliance with Financial Accounting Standard No. 121, a new accounting
standard which was issued in March 1995. Please see Notes 2 and 7 to the
Consolidated Financial Statements for more details.
- - The change from net income to net loss is primarily attributable to higher
expenses as a result of the write-down of real estate in 1995.
Consolidated
Balance Sheets December 31, 1995 and 1994
Assets 1995 1994
Real estate:
Land $4,824,699 $4,824,699
Buildings and improvements 18,767,614 37,839,781
23,592,313 42,664,480
Less accumulated depreciation (4,896,442) (13,665,635)
18,695,871 28,998,845
Cash and cash equivalents 4,143,727 3,305,871
Prepaid expenses 136,282 154,366
Total Assets $22,975,880 $32,459,082
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $212,144 $413,367
Deferred rent payable 1,145,774 1,100,379
Due to affiliates 228,104 215,000
Security deposits payable 145,475 145,775
Distributions payable 365,720 365,720
Total Liabilities 2,097,217 2,240,241
Partners' Capital (Deficit):
General Partner (42,568) (27,938)
Limited Partners 20,921,231 30,246,779
Total Partners' Capital 20,878,663 30,218,841
Total Liabilities and Partners' Capital $22,975,880 $32,459,082
Consolidated Statements of Partners' Capital (Deficit)
For the years ended December 31, 1995, 1994 and 1993
General Limited
Partner Partners Total
Balance at December 31, 1992 $(5,231) $32,494,517 $32,489,286
Net income 5,183 513,097 518,280
Distributions (14,630) (1,448,250) (1,462,880)
Balance at December 31, 1993 (14,678) 31,559,364 31,544,686
Net income 1,370 135,665 137,035
Distributions (14,630) (1,448,250) (1,462,880)
Balance at December 31, 1994 (27,938) 30,246,779 30,218,841
Net loss - (7,877,298) (7,877,298)
Distributions (14,630) (1,448,250) (1,462,880)
Balance at December 31, 1995 $(42,568) $20,921,231 $20,878,663
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Income 1995 1994 1993
Rental $10,838,267 $10,386,764 $9,525,552
Interest 199,078 97,928 35,836
Total Income 11,037,345 10,484,692 9,561,388
Expenses
Payroll 2,967,168 2,884,586 2,667,725
Depreciation 1,797,858 1,790,033 1,802,859
Rent and utilities 1,652,520 1,621,004 1,570,083
General and administrative 1,633,797 1,427,356 1,129,202
Supplies 1,122,448 1,020,782 992,895
Repairs and maintenance 616,998 490,095 538,058
Real estate taxes 375,926 323,412 309,855
Travel and entertainment 35,636 40,389 32,431
Earthquake loss - 750,000 -
Loss on write-down of real estate 8,712,292 - -
Total Expenses 18,914,643 10,347,657 9,043,108
Net Income (Loss) $(7,877,298) $137,035 $518,280
Net Income (Loss) allocated:
To the General Partner $ - $1,370 $5,183
To the Limited Partners (7,877,298) 135,665 513,097
$(7,877,298) $137,035 $518,280
Per limited partnership unit
(4,827,500 outstanding) $(1.63) $.03 $.11
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
Cash Flows from Operating Activities: 1995 1994 1993
Net income (loss) $(7,877,298) $137,035 $518,280
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 1,797,858 1,790,033 1,802,859
Provision for earthquake loss - 750,000 -
Loss on write-down of real estate 8,712,292 - -
Loss on disposal of asset 6,998 - -
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Prepaid expenses 18,084 (5,408) (73,204)
Accounts payable and accrued expenses (234,723) 216,935 (13,734)
Deferred rent payable 45,395 45,396 45,396
Due to affiliates 13,104 8,301 (28,349)
Security deposits payable (300) 1,000 7,950
Net cash provided by operating activities 2,481,410 2,943,292 2,259,198
Cash Flows from Investing Activities:
Additions to real estate (190,674) (233,075) (32,879)
Proceeds from disposal of asset 10,000 - -
Net cash used for investing activities (180,674) (233,075) (32,879)
Cash Flows from Financing Activities:
Distributions paid to partners (1,462,880)(1,462,880)(1,097,160)
Net cash used for financing activities (1,462,880)(1,462,880)(1,097,160)
Net increase in cash and cash equivalents 837,856 1,247,337 1,129,159
Cash and cash equivalents at beginning of year 3,305,871 2,058,534 929,375
Cash and cash equivalents at end of year $4,143,727 $3,305,871 $2,058,534
Supplemental Disclosure of Noncash Investing Activities:
Capital expenditures funded
through accounts payable $33,500 $47,829 $ -
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
Senior Income Fund L.P. (the "Partnership"), a Delaware limited partnership
(see below), was formed on October 14, 1986 for the purpose of acquiring a
general partnership interest in Shearson August Property Partnership (the
"Property Partnership"), a California general partnership. The Property
Partnership was formed to acquire and operate four specified senior residential
properties (the "Properties", see Note 7). The General Partner of the
Partnership is Senior Income Fund Inc., (the "General Partner"), a Delaware
corporation, and an affiliate of Lehman Brothers Inc. (see below). The other
general partner of the Property Partnership is August Financial Partners II
("AFP-II"), an affiliate of August Financial Corporation ("August"). The
Partnership will continue until December 31, 2036, unless terminated sooner in
accordance with the terms of the Partnership Agreement.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson changed
its name to Lehman Brothers Inc. ("Lehman Brothers"). The transaction did not
affect the ownership of the General Partner. However, the assets acquired by
Smith Barney included the name "Shearson." Consequently, effective October 29,
1993, the Shearson Lehman Senior Income Fund, Inc. General Partner changed its
name to Senior Income Fund Inc., and effective December 23, 1993, Shearson
Lehman Senior Income Fund Limited Partnership changed its name to Senior Income
Fund L.P.
The initial capital contributions to the Partnership totaled $110, representing
capital contributions of $100 by the General Partner and $10 by Shearson Lehman
Senior Depositary, Inc. (the Assignor Limited Partner).
The agreement of limited partnership authorized the issuance of 4,827,500
depositary units at $10 per unit, which represent assignments of economic and
certain other rights attributable to the partnership interests. The offering
period ended on March 17, 1987, at which time 4,827,500 depositary units had
been issued.
On March 25, 1987, the Property Partnership acquired the Properties from Senior
Inns of America Venture, an affiliate of August, for an aggregate purchase
price of $40,400,000, which was reduced by $1,491,664, the amount of purchase
price holdback used to cover the minimum yield guaranty (see Note 4). In
addition, an affiliate of the General Partner received $2,400,000 (see Note 7)
in connection with the acquisition of the Properties. In December 1986, August
had purchased a 100% interest in Senior Inns of America Venture for
$38,000,000.
On February 20, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a Form 8-K disclosing this resolution on February 23, 1996.
2. Significant Accounting Policies
Financial Statements
The consolidated financial statements include the accounts of the Partnership
and the Property Partnership. The effect of transactions between the
Partnership and the Property Partnership have been eliminated in consolidation.
Cash Equivalents
Cash equivalents consist of short-term highly liquid investments, primarily
commercial paper, which have maturities of three months or less from the date
of purchase. The carrying value approximates fair value because of the short
maturity of these instruments. Certain cash reflected on the Partnership's
balance sheet at December 31, 1995 and 1994 was on deposit with an affiliate of
the General Partner.
Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to a
concentration of credit risk principally consist of cash and cash equivalents
in excess of the financial institutions' insurance limits. The Partnership
invests available cash with high credit quality financial institutions.
Real Estate Investments
Real estate investments are stated at the lower of cost, less accumulated
depreciation or fair value and includes the initial purchase price of the
property, legal fees, acquisition and closing costs.
Leases are accounted for under the operating method. Under this method,
revenue is recognized as rentals are earned and expenses (including
depreciation) are charged to operations when incurred. Leases are generally
for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the properties. Maintenance and repairs are charged
to operations as incurred. Significant betterments and improvements are
capitalized and depreciated over their useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in income for the period. In 1994, (see Note 11), the Partnership
suffered earthquake damages and consequently, a net building basis adjustment
and corresponding reduction in depreciation expense resulted.
Accounting for Impairment
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121"),
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Partnership has adopted FAS 121 in
the fourth quarter of 1995.
Income Taxes
No provision for income taxes has been made in the financial statements since
income, losses and tax credits are passed through to the individual partners.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount 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.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("FAS 107"), requires that the Partnership
disclose the estimated fair values of its financial instruments. Fair values
generally represent estimates of amounts at which a financial instrument could
be exchanged between willing parties in a current transaction other than in
forced liquidation.
Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgement regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
3. Property Partnership and Partnership Agreements
Property Partnership Agreement
With respect to the Property Partnership, the Partnership had a 100% interest,
during the guaranty period (through December 31, 1989), in the income, losses
and cash distributions of the Property Partnership, other than expenses and
deductions allocable to AFP-II to the extent of its funding of the Minimum
Yield Guaranty (see Note 4). After the guaranty period, all income, losses and
cash distributions will be allocated 100% to the Partnership until it receives
its Cumulative Preferred Return, as defined, and thereafter 99.5% to the
Partnership and .5% to AFP-II.
Distributions of Net Cash Flow from Operations, Net Proceeds from Interim
Capital Transactions and Net Proceeds upon Dissolution will generally be
distributed 95% to the Partnership and 5% to AFP-II.
Partnership Agreement
The Partnership Agreement provides for the allocation of Income, Losses, Net
Cash Flow from Operations, Net Proceeds from Interim Capital Transactions and
Net Proceeds upon Dissolution, as follows:
Income is allocated 99% to the Limited Partners and 1% to the General Partner
until the Limited Partners have received their Preferred Return, as defined.
The balance is allocated 95% to the Limited Partners and 5% to the General
Partner.
Losses are allocated to the General Partner and Limited Partners in proportion
to, and to the extent of their positive capital account balances, as defined.
At such time as the partners' capital account balances are zero, losses will be
allocated in the same proportion as distributions.
Net Cash Flow from Operations with respect to each fiscal year will generally
be distributed 99% to the Limited Partners and 1% to the General Partner, until
such time as each Limited Partner has received an amount equal to his Preferred
Return, as defined. The Partnership's share of any remaining Net Cash Flow
from Operations will be distributed 95% to the Limited Partners and 5% to the
General Partner.
Net Proceeds from Interim Capital Transactions, as defined, generally will be
distributed 99% to the Limited Partners and 1% to the General Partner until
each Limited Partner has received an amount equal to his unpaid Cumulative
Preferred Return and Unrecovered Capital, as defined. The Partnership's share
of any excess Net Proceeds will be distributed 95% to the Limited Partners and
5% to the General Partner.
Net Proceeds upon Dissolution will be made in proportion to partners' capital
accounts. It is anticipated that Net Proceeds from any final liquidation of
the Partnership's assets generally will be distributed 99% to the Limited
Partners and 1% to the General Partner until each Limited Partner has received
an amount equal to any unpaid Preferred Return and his Unrecovered Capital as
defined. The Partnership's share of any excess Net Proceeds generally will be
distributed 95% to the Limited Partners and 5% to the General Partner.
4. Minimum Yield Guaranty and Litigation Settlement
In connection with the acquisition of the Properties, AFP-II, through December
31, 1989, provided the Partnership a minimum yield guaranty that the Properties
would generate sufficient revenues to fund all operating expenses and pay the
Partnership a minimum 9.09% yield on its Invested Capital, as defined. To the
extent net operating cash flows were not sufficient to provide the minimum
yield, additional amounts were to be funded by AFP-II. On February 15, 1989,
the Partnership was informed by AFP-II and August that they were financially
unable to meet any continuing minimum yield obligations. Subsequently, several
class action lawsuits were commenced against the Partnership. In October 1989,
the Partnership entered into a Stipulation and Agreement of Compromise and
Settlement (the "Settlement"). Under the terms of the Settlement, AFP-II was
required to pay $2,500,000 which amount was deemed to be additional invested
capital and was fully offset by an expense allocation. AFP-II h as no further
obligation to fund any amounts under the minimum yield guaranty. Additional
amounts owed to the partners under the minimum yield guaranty for the default
period amounted to $1,750,000 and were paid directly by the Lehman Brothers
Group, Inc. ("Group"), an affiliate of the General Partner in February 1990.
The Group's share of the minimum yield guaranty has not been reflected in the
accompanying financial statements, since Group, while an affiliate of the
General Partner, is not a partner.
Additional terms of the Settlement stipulate the following: (1) Group will
provide a minimum yield guaranty to the partners of 4.5% and 5.25% for the
years ended December 31, 1990 and 1991, respectively; (2) the Property
Partnership Agreement has been amended, reducing to 5% AFP-II's share of
potential distributions on dissolution and liquidation of the Property
Partnership (see Note 3); and (3) any amounts of unpaid Preferred Return (see
Note 3) which accrue after January 1, 1990 through the dissolution and
liquidation of the Partnership shall earn a 9% return, up to a maximum of
$10,000,000. Previously, the unpaid preferred return was non-interest bearing.
5. Property Management
As of 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 or AFP-II. The Operator supervises the day-to-day
management of the Properties and acts as nonexclusive leasing agent for the
Properties.
On December 31, 1993, the original Property Management Agreement expired and an
extension was executed between the General Partner and the Operator effective
through June 30, 1995. Certain terms of the original Property Management
Agreement have been modified as set forth in the extension. Changes with
respect to compensation and/or fees are summarized herein: (i) for services
rendered by the Operator, a base monthly management fee will be paid for each
property equal to 3% of the monthly collected gross income from each property;
(ii) for any remodel or addition to any of the properties costing in excess of
$10,000, the Owner shall pay Operator additional fees equal to 10% of the total
cost of the work managed by Operator. The fees shall be paid monthly to
Operator as costs are incurred; (iii) the performance incentive fee has been
replaced with the following terms: The Operator shall be entitled to payment
of three different types of performance incentive fees which shall be pai d on
an estimated basis each month based on the year-to-date figures available for
that month. The Net Profit Incentive Fee, as defined in the Property
Management Agreement, equals 100% of the amount, if any, by which net profit
for all properties exceeds a yearly threshold amount. The Post-Replacement
Reserve Incentive Fee, as defined in the Property Management Agreement, equals
100% of the total excess net profit, if any, for all of the properties after
deducting an amount equal to 2% of the gross income. The Profit Sharing
Incentive Fee, as defined in the Property Management Agreement, equals 25% of
the final profit amount, if any, for all of the properties. However, each of
the three incentive fees will not exceed 1% of the total gross income for all
of the properties in any one year. Each of the parties may terminate the
agreement for any reason or no reason at all, upon 60 days prior written notice
to the other party. In addition, the Operator will also be reimbursed for ce
rtain expenses incurred in connection with the Properties.
On June 30, 1995, the extension to the original Property Management Agreement
expired and a new extension was executed between the General Partner and the
Operator which is effective through July 1, 1996. All of the terms and
conditions of the original extension of the Management Agreement shall remain
in full force and effect through the new expiration date.
Management fees for the years ended December 31, 1995, 1994 and 1993 amounted
to approximately $325,000, $312,000 and $381,000, respectively. The Operator
was owed approximately $59,000, $55,000 and $32,000 at December 31, 1995, 1994
and 1993, respectively.
For the years ended December 31, 1995 and 1994, the Operator earned $298,415
and $264,953, respectively, in performance incentive fees. Due to economic
conditions for the year ended 1993, the Operator did not earn a performance
incentive fee nor a performance bonus.
6. Related Party Transactions
The General Partner or its affiliates earned administrative expenses of
approximately $86,000, $61,000 and $54,000 for the years ended December 31,
1995, 1994 and 1993, respectively. The General Partner or its affiliates were
owed approximately $228,000, $215,000 and $207,000 at December 31, 1995, 1994
and 1993, respectively.
7. Real Estate
The following table sets forth the purchase price for each of the Properties,
which amounts do not include the amount of the purchase price holdback and
related acquisition expenses:
Initial
# of Acquisition
Property Name Units Location Cost
Pacific Inn 134 Torrance, California $13,927,368
Nohl Ranch Inn 133 Anaheim, California 12,864,211
Ocean House 119 Santa Monica, California 7,761,053
Prell Gardens 100 Van Nuys, California 5,847,368
$40,400,000
The acquisition fee of $2,400,000 paid to Lehman Brothers, and certain other
costs of $631,868 related to the acquisition of the Properties have been
allocated on a pro rata basis to the assets acquired.
Pursuant to the requirements of FAS 121 and to obtain further support in
connection with the Partnership's insurance claim (see Note 11) and engineering
studies, during the fourth quarter of 1995 the Partnership obtained preliminary
estimates of fair market value from an independent appraiser. Such estimates
of fair value make use of a combination of certain generally accepted valuation
techniques, including direct capitalization and comparative sales analyses,
and, in the instances of Ocean House and Prell Gardens, have considered the
structural damage caused by the Northridge earthquake (see Note 11). As a
consequence of this valuation process, and pursuant to the requirements of FAS
121, the Partnership recognized an impairment loss of $8,712,292 as of December
31, 1995. The losses of $4,809,497, $2,081,900 and $1,820,895, aggregating the
$8,712,292, are attributable to Ocean House, Prell Gardens and Nohl Ranch Inn,
respectively.
8. Distributions Paid
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognize specific record dates for
payments within each calendar year. The consolidated statements of cash flows
recognize actual cash distributions paid during the calendar year. The
following table discloses the annual amounts as presented on the consolidated
financial statements:
Distributions Distributions
Payable Distributions Distributions Payable
Beginning Declared Paid December 31
of Year
1995 365,720 1,462,880 1,462,880 365,720
1994 365,720 1,462,880 1,462,880 365,720
1993 1,462,880 1,097,160 365,720
9. Commitments
The land on which Ocean House is located is leased to the Partnership under a
ground lease which expires in 2016. The lease carries renewal options for two
33-year periods. Under the ground lease, a sale of Ocean House by the
Partnership will require the consent of the lessor, which consent shall not be
unreasonably withheld. The Partnership is recording ground rent expense on a
straight-line basis, at an annual amount of $921,396, resulting in deferred
ground rent payable.
Future minimum rental payments to be paid under the ground lease at December
31, 1995 are as follows:
1996 $ 876,000
1997 876,000
1998 876,000
1999 876,000
2000 876,000
Thereafter 15,731,000
$ 20,111,000
10. Reconciliation of Net Income (Loss) to Taxable Income
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
December 31, 1995, 1994 and 1993:
1995 1994 1993
Net income (loss) per financial statements $(7,877,298) $137,035 $518,280
Depreciation deducted for tax
purposes in excess of
depreciation expense per
financial statements (48,925) (69,673) (132,026)
Tax basis Property Partnership
net income (loss) in excess of GAAP
basis Property Partnership net income 1,228,748 1,003,399 (141,972)
Financial statement loss on
write-down of real estate over tax
basis loss on write-down of real estate 8,712,292 - -
Other 861 514 536
Taxable net income $2,015,678 $1,071,275 $244,818
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of December
31, 1995, 1994 and 1993.
1995 1994 1993
Partners' capital per
financial statements $20,878,663 $30,218,841 $31,544,686
Adjustment for cumulative
difference between tax basis
net income (loss) and net income (loss)
per financial statements 7,436,041 (2,456,074) (3,389,800)
Partners' capital per tax return $28,314,704 $27,762,767 $28,154,886
11. 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 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 independent appraisal. The General Partner engaged an
independent appraiser to determine the replacement costs, the Partnership's
deductible portion, 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 provision for earthquake loss of $750,000,
which was recorded in 1994, represents the estimated insurance deductibles for
the two properties.
The Partnership has engaged an independent structural and seismic engineer who
has advised the General Partner, and the City of Santa Monica, that the repairs
to date, at both Ocean House and Prell Gardens, have rendered both buildings
safe for continued occupancy. The engineer informed the Partnership that
repairs completed immediately after the earthquake have rendered both buildings
safe for continued occupancy. However, the engineer concluded that additional
structural improvements would be needed to make both buildings less vulnerable
to future earthquakes, and to bring them into compliance with building codes
enacted subsequent to the construction of the properties (the "Retrofit Work")
and building codes that were enacted after the January 1994 earthquake (the
"Structural Enhancements"). The total cost to complete the work at both
buildings is estimated to be approximately $4.8 million. This total is
inclusive of the cost of the initial work already completed, the estimated cost
of the Retrofit Work and Structural Enhancements and the cost to complete other
less immediate earthquake-related repair work. The total approximate cost is
based on the most recent contractor bids as it relates to Prell Gardens and
engineer estimates as it relates to Ocean House. While the General Partner
feels it is important to complete this work, the repairs are structural in
nature, and are therefore, not expected to enhance the overall value of the
buildings.
The Retrofit Work and Structural Enhancements have not yet begun at either of
the properties. With respect to Prell Gardens, in October of 1995, the City of
Los Angeles finalized the criteria it uses in determining the extent of
structural enhancements required at buildings of the same type, construction
and age as Prell Gardens. In accordance with city ordinances, the General
Partner prepared plans outlining the work proposed for Prell Gardens and
submitted them to the City of Los Angeles for approval in December 1995. The
City has recently approved the Partnership's plans and granted the Partnership
the necessary permits to begin work. Work will commence at Prell Gardens in
mid-April 1996. The Partnership's contractor has estimated that the cost of
the work will be approximately $1.4 million and require 15 to 20 months to
complete.
Plans pertaining to the repairs at Ocean House have been prepared, however they
have not been submitted to the City of Santa Monica, where the property is
located. In June 1994, the City of Santa Monica enacted a new building
ordinance specific to damage caused by the earthquake. However, due to
pressure from numerous other Santa Monica property owners, the City is
currently considering a possible revision of this new ordinance. The
Partnership's construction plans, estimated to cost approximately $3.4 million,
have been prepared in accordance with the new ordinance. The possible revision
being considered by the City of Santa Monica could reduce the scope and final
cost of the work. Therefore, the Partnership is waiting for the City of Santa
Monica to issue its final ruling on the new ordinance. At this time, it is
uncertain when the City of Santa Monica will make its final decision.
The General Partner has been aggressively pursuing reimbursement from the
insurance carrier for any additional repair 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.
Attorneys for all parties are currently taking depositions. If insurance
coverage is not available for any reason, the General Partner believes there
are adequate Partnership reserves to fund the required repairs, however any
funding could adversely impact the Partnership's cash position and its ability
to pay future cash distributions.
During November 1995, the insurance carrier determined that the damage
sustained at the Prell Gardens Property was in excess of the applicable
$250,000 deductible, leaving a net claim of $28,531 which was paid to the
Partnership and applied against building basis. The net claim of $28,531
represents the undisputed amount under this claim, notwithstanding the separate
claims relating to the structural improvements required at the property. The
insurance carrier determined for the Ocean House Property that the damage
sustained was less than the applicable deductible of $500,000.
The building basis costs of Ocean House and Prell Gardens have been reduced by
the $750,000 provision for earthquake loss. As repairs are incurred, the basis
of the buildings will be restored to their original levels. At December 31,
1995, Ocean House and Prell Gardens have, cumulatively, incurred earthquake
repairs of $267,302 and $58,109, respectively. Consequently, the building
basis costs for Ocean House and Prell Gardens have been reduced by $232,698 and
$191,891, respectively, at December 31, 1995.
Report of Independent Accountants
To the Partners of
Senior Income Fund Limited Partnership:
We have audited the consolidated balance sheets of Senior Income Fund Limited
Partnership, a Delaware limited partnership, and Consolidated Venture as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits 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 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 Senior Income Fund
Limited Partnership, a Delaware limited partnership, and Consolidated Venture
as of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Partnership adopted the
provisions of Statment of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," in 1995.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 28, 1996
SENIOR INCOME FUND L.P.
and Consolidated Partnership
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Cost Capitalized
Subsequent
Initial Cost to Partnership To Acquisition
--------------------------- --------------
(1) (2) Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
Ocean House
Santa Monica, CA $0 $0 $7,496,394 $0 $1,110,619
Prell Gardens
Van Nuys, CA $0 $1,441,614 $4,613,166 $103,834 $974,115
Pacific Inn
Torrance, CA $0 $2,402,690 $11,436,807 $173,057 $941,186
Nohl Ranch Inn
Anaheim, CA $0 $816,915 $12,157,614 $58,840 $1,078,056
$0 $4,661,219 $35,703,981 $335,731 $4,103,976
Gross Amount at Which
Other Charges Add/(Deduct) (3) Carried at Close of Period
------------------------------ --------------------------
Buildings Buildings
and and
Description Land Improvements Land Improvements
Ocean House
Santa Monica, CA $0 $(8,607,013) $0 $0
Prell Gardens
Van Nuys, CA $(53,274) $(4,579,455) $1,492,174 $1,007,826
Pacific Inn
Torrance, CA $(88,789) $(422,638) $2,486,958 $11,955,355
Nohl Ranch Inn
Anaheim, CA $(30,188) $(7,431,237) $845,567 $5,804,433
$(172,251) $(21,040,343) $4,824,699 $18,767,614
Gross Amount at
Which Carried at
Close of Period
---------------
Life on Which
Depreciation
in Latest
Accumulated Date Income Statements
Description Total (4) Depreciation Acquired is Computed
Ocean House
Santa Monica, CA $0 0 03/25/87 (5)
Prell Gardens
Van Nuys, CA $2,500,000 0 03/25/87 (5)
Pacific Inn
Torrance, CA $14,442,313 4,896,442 03/25/87 (5)
Nohl Ranch Inn
Anaheim, CA $6,650,000 0 03/25/87 (5)
$23,592,313 4,896,442
(1) These properties are senior residential properties.
(2) The property partnership purchased the properties on an all cash basis.
(3) a) In 1990, the purchased price was reduced by the amount of the
purchase price holdback used to cover the minimum yield guaranty in the
amount of $1,491,664;
b) In 1994, the building basis costs of Ocean House and Prell Gardens
were reduced by the provision for earthquake loss in the amount of
$750,000 and increased by earthquake repairs of $325,411, resulting in
a net building basis reduction of $424,589. The balance at Nohl Ranch
includes the disposition of transportation equipment.
c) During 1995, the Partnership recognized a write-down of the carrying
value of Ocean House, Prell Gardens and Nohl Ranch Inn of $4,809,497,
$2,081,900 and $1,820,895, respectively, aggregating $8,712,292. The
net book value adjusted for the write-down, becomes the new carrying
value for the properties.
(4) The amount of accumulated depreciation for Federal income tax purposes
is $17,289,034.
(5) Buildings and improvements - 40 years; personal property - 10 years.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1995, 1994 and 1993:
Real Estate Investments: 1995 1994 1993
Beginning of year $42,664,480 $43,133,576 $43,100,697
Acquisitions 99,636 80,031 32,879
Less disposition (25,820) 0 0
Write-down (19,270,521) 0 0
Write down for earthquake 124,538 (549,127) 0
End of year $23,592,313 $42,664,480 $43,133,576
Accumulated Depreciation:
Beginning of year $13,665,635 $11,875,602 $10,072,743
Depreciation expense 1,797,858 1,790,033 1,802,859
Less disposition (8,822) 0 0
Write-down (10,558,229) 0 0
End of year $4,896,442 $13,665,635 $11,875,602
Report of Independent Accountants
Our report on the consolidated financial statements of Senior Income Fund
Limited Partnership, a Delaware limited partnership, and Consolidated Venture
has been incorporated by reference in this Form 10-K from the Annual Report to
Unitholders of Senior Income Fund Limited PArtnership for the year ended
December 31, 1995. In connection with our audit of such financial statements,
we have also audited the related financial statement schedule listed in the
index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements as a whole, presents
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 28, 1996
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,143,727
<SECURITIES> 000
<RECEIVABLES> 000
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<OTHER-SE> 20,878,663
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<SALES> 10,838,267
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