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, 1997
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,
1997 1996
Assets
Real estate assets held for disposition $18,330,085 $18,301,085
Cash and cash equivalents 3,691,911 4,104,695
Prepaid expenses 384,360 168,259
Total Assets $22,406,356 $22,574,039
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 148,808 $1,033,316
Deferred rent payable 1,213,867 1,191,169
Due to affiliates 246,517 190,609
Security deposits payable 140,650 148,700
Distribution payable -- 365,720
Total Liabilities 1,749,842 2,929,514
Partners' Capital (Deficit):
General Partner (44,790) (54,910)
Limited Partners (4,827,500 units outstanding) 20,701,304 19,699,435
Total Partners' Capital 20,656,514 19,644,525
Total Liabilities and Partners' Capital $22,406,356 $22,574,039
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(54,910) $19,699,435 $19,644,525
Net Income 13,777 1,363,932 1,377,709
Distributions (3,657) (362,063) (365,720)
Balance at June 30, 1997 $(44,790) $20,701,304 $20,656,514
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
Income
Rental $2,818,102 $2,619,556 $5,642,965 $5,295,747
Interest and other income 58,910 56,559 115,892 102,523
Total Income 2,877,012 2,676,115 5,758,857 5,398,270
Expenses
Payroll 771,511 784,719 1,557,912 1,543,089
Rent and utilities 391,409 394,374 804,641 802,950
General and administrative 416,271 394,315 944,012 774,989
Supplies 265,423 284,490 537,690 573,036
Repairs and maintenance 156,296 202,455 282,297 419,928
Real estate taxes 98,392 92,190 196,783 184,380
Loss on real estate assets
held for disposition -- -- 48,000 --
Travel and entertainment 5,235 8,875 9,813 21,048
Depreciation -- 373,966 -- 747,114
Total Expenses 2,104,537 2,535,384 4,381,148 5,066,534
Net Income $ 772,475 $ 140,731 $1,377,709 $ 331,736
Net Income Allocated:
To the General Partner $ 7,725 $ 1,407 $ 13,777 $ 3,317
To the Limited Partners 764,750 139,324 1,363,932 328,419
$ 772,475 $ 140,731 $1,377,709 $ 331,736
Per limited partnership unit
(4,827,500 outstanding) $.16 $.03 $.28 $.07
Consolidated Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities
Net Income $1,377,709 $ 331,736
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation -- 747,114
Loss on real estate assets held for disposition 48,000 --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Prepaid expenses (216,101) (111,409)
Accounts payable and accrued expenses (884,508) (58,726)
Deferred rent payable 22,698 22,697
Due to affiliates 55,908 (1,014)
Security deposits payable (8,050) (88)
Net cash provided by operating activities 395,656 930,310
Cash Flows From Investing Activities
Additions to real estate (77,000) (223,736)
Net cash used for investing activities (77,000) (223,736)
Cash Flows From Financing Activities
Distributions paid to partners (731,440) (731,440)
Net cash used for financing activities (731,440) (731,440)
Net decrease in cash and cash equivalents (412,784) (24,866)
Cash and cash equivalents, beginning of period 4,104,695 4,143,727
Cash and cash equivalents, end of period $3,691,911 $4,118,861
Supplemental Disclosure of Non-Cash Investing Activities
Capital expenditures funded through accounts payable $ -- $ 20,000
Notes to the Consolidated Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited financial statements
within Form 10-K.
The unaudited financial statements include all normal and
reoccurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
June 30, 1997 and the results of operations for the three and six
months ended June 30, 1997 and 1996, cash flows for the six
months ended June 30, 1997 and 1996 and the statement of changes
in partners' capital (deficit) for the six months ended June 30,
1997. Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.
Reclassification. Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
The following significant events have occurred subsequent to
fiscal year 1996, or the following material contingencies exist,
which require disclosure in this interim report per Regulation S-
X, Rule 10-01, Paragraph (a)(5):
Effective as of January 1, 1997, the Partnership began
reimbursing certain expenses incurred by the General Partner and
its affiliates in servicing the Partnership to the extent
permitted by the partnership agreement. In prior years,
affiliates of the General Partner had voluntarily absorbed these
expenses.
Subsequent Event
On August 1, 1997, the Partnership closed the Sale of three of
its four Properties_Prell Gardens, Nohl Ranch and Pacific Inn,
for net proceeds of $30,166,133 and an estimated gain on the sale
of approximately $11.8 million.
Part 1, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On June 9, 1997, the Partnership executed an agreement with an
unaffiliated third party, MBK Senior Properties, Ltd. (the
"Buyer"), to sell the Partnership's four Properties (the "Sale")
for $36,300,000, subject to adjustments and prorations for closing
costs, a credit for the cost of certain improvements to be made at
the Prell Gardens property and a credit for the cost to repair
earthquake damage at the Ocean House property. On August 1, 1997,
the Partnership closed the Sale for three of the four
Properties_Prell Gardens, Nohl Ranch and Pacific Inn, for net
proceeds of $30,166,133. The closing of the Partnership's fourth
property, Ocean House, is subject to the satisfaction of certain
conditions which include obtaining a final estimate of the costs
associated with the earthquake related repair work and approval of
such work from the City of Santa Monica. It is currently
anticipated that the sale of Ocean House will occur sometime during
the third quarter of 1997. Until the sale of the Ocean House
Property is complete, the Partnership will continue to operate the
property and generate rental income from operations.
As a result of the Sale, the Partnership will no longer pay quarterly
cash distributions beginning with the second quarter distribution
which would have been paid on or about August 15, 1997. On or
about August 25, 1997, the Partnership will pay a cash distribution
in the amount of $5.75 per Unit representing proceeds from the sale
of the Prell Gardens, Nohl Ranch, and Pacific Inn and cash flow
from operations for the second quarter of 1997. Since inception,
limited partners have received cash distributions totaling $11.235
per $10.00 Unit.
Once the sale of Ocean House is completed, the General Partner will
distribute the net proceeds from the sale together with the
Partnership's remaining cash reserves (after payment of or
provision for the Partnership's liabilities and expenses, and
establishment of a reserves for contingencies, if any) and dissolve
the Partnership in accordance with the Partnership Agreement.
However, the timing and amount of the final distribution is subject
to Ocean House's operations until closing, the timing of the
closing, closing adjustments and other factors, all of which remain
uncertain at this time. While the General Partner believes that
Ocean House is likely to be sold in 1997, there can be no assurance
that the sale will be consummated, or that a sale, if completed,
will result in any particular level of net sales proceeds.
Due to the pending sale, the Properties were reclassified on the
consolidated balance sheet as of December 31, 1996, as "Real estate
assets held for disposition."
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 Properties, Ocean House and Prell Gardens. The General Partner
pursued reimbursement from the insurance carrier for the repair
costs, less the deductible, under the Partnership's insurance
policy. However, the insurance carrier refused to cover the cost
to bring the buildings into compliance with building codes enacted
after the Northridge Earthquake. The insurance carrier also
disputed the amount of damage the buildings sustained. As a
result, on September 15, 1995, the General Partner initiated
litigation against the insurance carrier and insurance broker. On
November 19, 1996, the Partnership and General Partner, executed a
Mutual Release and Settlement Agreement (the "Settlement
Agreement") with the insurance carrier, whereby the Partnership
agreed to release the insurance carrier from all claims pending
under the lawsuit and to assign its remaining claim against the
insurance broker to the insurance carrier. The Partnership
received $3,200,000 from the insurance carrier pursuant to the
Settlement Agreement. Costs associated with the litigation which
include legal, expert witness and engineering fees were offset
against the $3,200,000, resulting in net insurance settlement
income of approximately $2,318,387.
At June 30, 1997, the Partnership had cash and cash equivalents of
$3,691,911 compared with $4,104,695 at December 31, 1996. The
decrease is primarily attributable to distributions paid to
partners and additions to real estate exceeding net cash from
operations.
Prepaid expenses at June 30, 1997 were $384,360 compared to $168,259
at December 31, 1996. The increase is due to the payment of the
1997-98 insurance premium in June 1997.
Accounts payable and accrued expenses were $148,808 at June 30, 1997,
compared to $1,033,316 at December 31, 1996. The decrease is
mainly due to the payment of outstanding invoices for services
rendered in connection with repair work at Ocean House and Prell
Gardens and the payment of legal fees associated with various
tender offers, insurance litigation and the AFP-II buyout.
Results of Operations
Partnership operations resulted in net income of $772,475 and
$1,377,709 for the three and six months ended June 30, 1997,
compared to $140,731 and $331,736 for the same periods in 1996.
The increases are primarily due to the elimination of depreciation
expense in 1997 as a result of reclassifying the real estate assets
as held for disposition at December 31, 1996, and higher rental
income in 1997.
Rental income for the three and six months ended June 30, 1997 was
$2,818,102 and $5,642,965, compared with $2,619,556 and $5,295,747
for the corresponding periods in 1996. The increase is primarily
the result of higher average occupancy in 1997 compared to 1996.
Interest and other income for the three- and six-month periods
ended June 30, 1997 was $58,910 and $115,892, compared with $56,559
and $102,523 for the same periods in 1996. The increases represent
additional insurance proceeds received in 1997 related to the 1996
termite extermination at Pacific Inn.
Total expenses were $2,104,537 and $4,381,148 for the three and six
months ended June 30, 1997, compared with $2,535,384 and $5,066,534
for the corresponding periods in 1996. The decreases are primarily
due to the elimination of depreciation expense, lower repairs and
maintenance and supplies expenses. The decrease was partially
offset by an increase in general and administrative expense and a
loss on real estate assets held for disposition. The Partnership
recorded no depreciation expense in 1997 as a result of the
properties being classified as real estate assets held for
disposition. Repairs and maintenance expense decreased from
$202,455 and $419,928 for the three and six months ended June
30, 1996, to $156,296 and $282,297 for the comparable periods in
1997, as a result of lower expenses for repairs that were deemed to
be non-capital expenditures. General and administrative expenses
for the three and six months ended June 30, 1997 were $416,271 and
$944,012, compared to $394,315 and $774,989 for the 1996 periods.
During the 1997 periods, certain expenses incurred by the General
Partner, its affiliates, and an unaffiliated third party service
provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of the General Partner in prior periods,
were reimbursable to the General Partner and its affiliates.
For the six months ended June 30, 1997, and 1996, the average
occupancy levels for the properties were as follows:
Property Rental Units 1997 1996
Nohl Ranch 133 96% 97%
Ocean House 121 95% 90%
Pacific Inn 134 97% 97%
Prell Gardens 102 74% 75%
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 -
A current report on Form 8-K was filed
June 9, 1997, disclosing that the Partnership
and an unaffiliated third party, MBK Senior
Properties, Ltd., had entered into a Purchase
and Sale Agreement and Joint Escrow
Instructions for a sale of all four of the
Partnership's Properties.
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, 1997 BY: /s/ Moshe Braver
Name: Moshe Braver
Title:President, Director and Chief Operating Officer
Date: August 14, 1997 BY: /s/ Sean Donahue
Name: Sean Donahue
Title:Vice President and Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 3,691,911
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 384,360
<PP&E> 18,330,085
<DEPRECIATION> 000
<TOTAL-ASSETS> 22,406,356
<CURRENT-LIABILITIES> 148,808
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 20,656,514
<TOTAL-LIABILITY-AND-EQUITY> 22,406,356
<SALES> 5,642,965
<TOTAL-REVENUES> 5,758,857
<CGS> 000
<TOTAL-COSTS> 3,389,136
<OTHER-EXPENSES> 944,012
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 1,377,709
<INCOME-TAX> 000
<INCOME-CONTINUING> 1,377,709
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 1,377,709
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
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