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, 1996
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
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
(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 At June 30, At December 31,
1996 1995
Assets
Real estate:
Land $ 4,824,699 $ 4,824,699
Buildings and improvements 19,011,350 18,767,614
23,836,049 23,592,313
Less accumulated depreciation (5,643,556) (4,896,442)
18,192,493 18,695,871
Cash and cash equivalents 4,118,861 4,143,727
Prepaid expenses 247,691 136,282
Total Assets $22,559,045 $22,975,880
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 173,418 $ 212,144
Deferred rent payable 1,168,471 1,145,774
Due to affiliates 227,090 228,104
Security deposits payable 145,387 145,475
Distribution payable 365,720 365,720
Total Liabilities 2,080,086 2,097,217
Partners' Capital (Deficit):
General Partner (46,565) (42,568)
Limited Partners (4,827,500 units outstanding) 20,525,524 20,921,231
Total Partners' Capital 20,478,959 20,878,663
Total Liabilities and Partners' Capital $22,559,045 $22,975,880
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
General Limited
Partner Partners Total
Balance at December 31, 1995 $(42,568) $20,921,231 $20,878,663
Net income 3,317 328,419 331,736
Cash distributions (7,314) (724,126) (731,440)
Balance at June 30, 1996 $(46,565) $20,525,524 $20,478,959
Consolidated Statements of Operations
Three months Six months
ended June 30, ended June 30,
1996 1995 1996 1995
Income
Rental $2,619,556 $2,666,670 $5,295,747 $5,297,844
Interest 56,559 41,868 102,523 83,343
Total income 2,676,115 2,708,538 5,398,270 5,381,187
Expenses
Payroll 784,719 797,464 1,543,089 1,515,602
Rent and utilities 394,374 430,808 802,950 824,597
General and administrative 394,315 355,759 774,989 785,641
Depreciation 373,966 448,728 747,114 897,246
Supplies 284,490 273,021 573,036 529,947
Repairs and maintenance 202,455 148,543 419,928 280,883
Real estate taxes 92,190 103,532 184,380 201,574
Travel and entertainment 8,875 6,688 21,048 17,075
Total expenses 2,535,384 2,564,543 5,066,534 5,052,565
Net Income $ 140,731 $ 143,995 $ 331,736 $ 328,622
Net Income Allocated:
To the General Partner $ 1,407 $ 1,440 $ 3,317 $ 3,286
To the Limited Partners 139,324 142,555 328,419 325,336
$ 140,731 $ 143,995 $ 331,736 $ 328,622
Per limited partnership unit
(4,827,500 outstanding) $.03 $.03 $.07 $.07
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 331,736 $ 328,622
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 747,114 897,246
Increase (decrease) in cash arising from changes in
operating assets and liabilities
Prepaid expenses (111,409) (49,975)
Accounts payable and accrued expenses (58,726) (203,909)
Deferred rent payable 22,697 22,697
Due to affiliates (1,014) (802)
Security deposits payable (88) 4,725
Net cash provided by operating activities 930,310 998,604
Cash Flows From Investing Activities
Additions to real estate (223,736) (148,650)
Net cash used for investing activities (223,736) (148,650)
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 (decrease) in cash and cash equivalents (24,866) 118,514
Cash and cash equivalents, beginning of period 4,143,727 3,305,871
Cash and cash equivalents, end of period $4,118,861 $3,424,385
Supplemental Disclosure of Non-Cash Investing Activities
Capital expenditures funded through accounts payable $ 20,000 $ 0
Notes to the Consolidated Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1995 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, 1996 and the
results of operations for the three and six months ended June 30,
1996 and 1995, cash flows for the six months ended
June 30, 1996 and 1995, and the statement of changes in partners'
capital (deficit) for the six months ended June 30, 1996.
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 1995, or the following material contingencies exist,
which requires disclosure in this interim report per Regulation S-
X, Rule 10-01, Paragraph (a)(5):
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, and the
Partnership's deductibles, 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 engaged an independent structural and seismic
engineer who advised the General Partner, and the City of Santa
Monica as it relates to Ocean House, that the repairs to date, at
both Ocean House and Prell Gardens, 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 contract
as it relates to Prell Gardens and engineering 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.
With respect to Prell Gardens, the City of Los Angeles recently
approved the Partnership's plans and granted the Partnership the
necessary permits to begin work. Work at Prell Gardens is
underway. The Partnership's contractor estimates that the work
will cost approximately $1.4 million and will require 10 to 15
months to complete.
The Retrofit Work and Structural Enhancements have not yet begun
at the Ocean House property. 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 as a result of the Northridge Earthquake.
However, due to pressure from numerous Santa Monica property
owners, the City is currently considering a revision of this new
ordinance and to date no revision has been made. 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.
At this time, it is uncertain when the City of Santa Monica will
make its final decision.
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 cover the cost
to bring the buildings into compliance with building codes
enacted after the Northridge Earthquake. The insurance carrier
also disputes the amount of damage the buildings sustained. 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 should be 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 were
reduced by the $750,000 provision for earthquake loss in 1994.
As repairs are incurred, the basis of the buildings will be
restored to their original levels. At June 30, 1996, Ocean House
and Prell Gardens have, cumulatively, incurred earthquake repairs
of $319,701 and $84,308, respectively.
Part 1, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, the Partnership had cash and cash equivalents of
$4,118,861 compared with $4,143,727 at December 31, 1995. The
slight decrease is primarily attributable to additions to real
estate and cash distributions to limited partners exceeding net
cash from operations.
Prepaid expenses at June 30, 1996 were $247,691 compared to $136,282
at December 31, 1995. The increase is due to the payment of the
1996/1997 insurance premium in June 1996.
Accounts payable and accrued expenses were $173,418 at June 30, 1996,
compared to $212,144 at December 31, 1995. The decrease is the
result of the timing of payments and required accruals.
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.
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 engineering 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 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 cover the cost to
bring the buildings into compliance with building codes enacted
after the Northridge Earthquake. The insurance carrier also
disputes the amount of damage the buildings sustained. 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.
With respect to Prell Gardens, the City of Los Angeles has approved
the Partnership's plans and has granted the Partnership the
necessary permits to begin work, which has commenced. The
Partnership's contractor estimates that the cost of the work will
be approximately $1.4 million and will require 10 to 15 months to
complete.
The Retrofit Work and Structural Enhancements have not yet begun at
the Ocean House property. 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 as
a result of the Northridge Earthquake. However, due to pressure
from numerous Santa Monica property owners, the City is currently
considering a revision of this new ordinance and to date no
revision has been made. 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. At this time, it is uncertain when the
City of Santa Monica will make its final decision.
The General Partner plans to reduce occupancy at the affected
properties while the work is completed during 1996 and possibly
1997, 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 building basis costs of Ocean House and Prell Gardens were reduced
by the $750,000 provision for earthquake loss in 1994. As repairs
are incurred, the basis of the buildings will be restored to their
original levels. At June 30, 1996, Ocean House and Prell Gardens
have, cumulatively, incurred earthquake repairs of $319,701 and
$84,308, respectively.
The General Partner declared a cash distribution of $.075 per Unit for
the quarter ended June 30, 1996 which will be paid to investors in
August 1996. 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. Accordingly, cash distributions could be reduced or
suspended at any time.
Results of Operations
Partnership operations resulted in net income of $140,731 and $331,736
for the three and six months ended June 30, 1996, largely unchanged
from $143,995 and $328,622 for the three and six months ended June
30, 1995, as a decrease in rental income at Prell Gardens was
offset by increases in rental income at the other three properties,
particularly Nohl Ranch.
Rental income for the three and six months ended June 30, 1996 was
$2,619,556 and $5,295,747, compared with $2,666,670 and $5,297,844
for the corresponding periods in 1995. The decrease can be
primarily attributed to a decline in rental income at Prell Gardens
as a result of lower overall occupancy associated with the
earthquake related repair work, and was partially offset by an
increase in rental income at the other three properties,
particularly Nohl Ranch, as a result of higher average occupancy in
1996. Interest income for the three- and six-month periods ended
June 30, 1996 were $56,559 and 102,523, compared with $41,868 and
$83,343 for the same periods in 1995. The increase is due to
higher average cash balances maintained in 1996.
Total expenses were $2,535,384 and $5,066,534 for the three and six
months ended June 30, 1996, compared with $2,564,543 and $5,052,565
for the corresponding periods in 1995. The increase for the six-
month period is primarily due to higher repairs and maintenance and
supplies expenses, and was partially offset by a decrease in
depreciation and rent and utilities. Repairs and maintenance
expense was $202,455 and $419,928 for the three and six months ended
June 30, 1996, compared to $148,543 and $280,883 for the comparable
periods in 1995. The increases for both periods are primarily
attributable to costs associated with termite extermination at
Pacific Inn, and improvements that were deemed to be non-capital
expenditures at both Pacific Inn and Prell Gardens. Depreciation
was lower for both the three- and six-month periods ended
June 30, 1996, due to the write down of three of the Partnership's
properties to their fair market values at year-end 1995.
For the six months ended June 30, 1996, and 1995, the average
occupancy levels for the properties were as follows:
Property Rental Units 1996 1995
Nohl Ranch 133 97% 94%
Ocean House 121 90% 91%
Pacific Inn 134 97% 96%
Prell Gardens 102 75% 95%
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SENIOR INCOME FUND L.P.
BY: SENIOR INCOME FUND INC.
General Partner
Date: August 14, 1996 BY:/s/ Moshe Braver
President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> June-30-1996
<CASH> 4,118,861
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 247,691
<PP&E> 23,836,049
<DEPRECIATION> (5,643,556)
<TOTAL-ASSETS> 22,559,045
<CURRENT-LIABILITIES> 173,418
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 20,478,959
<TOTAL-LIABILITY-AND-EQUITY> 22,559,045
<SALES> 5,295,747
<TOTAL-REVENUES> 5,398,270
<CGS> 000
<TOTAL-COSTS> 3,544,431
<OTHER-EXPENSES> 1,522,103
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 331,736
<INCOME-TAX> 000
<INCOME-CONTINUING> 331,736
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 331,736
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
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