United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the Quarterly Period Ended September 30, 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.
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Exact Name of Registrant as Specified in its Charter
Delaware 13-3392077
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State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
- -------------------------------------- --------
Address of Principal Executive Offices Zip Code
(212) 526-3237
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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 September 30, At December 31,
1997 1996
Assets
Real estate assets held for disposition $ 21,542 $18,301,085
Cash and cash equivalents 5,509,390 4,104,695
Prepaid expenses 265,999 168,259
Total Assets $5,796,931 $22,574,039
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 279,781 $ 1,033,316
Deferred rent payable 1,225,216 1,191,169
Due to affiliates 40,000 190,609
Security deposits payable 60,220 148,700
Distribution payable -- 365,720
Total Liabilities 1,605,217 2,929,514
Partners' Capital (Deficit):
General Partner (209,435) (54,910)
Limited Partners (4,827,500 units outstanding) 4,401,149 19,699,435
Total Partners' Capital 4,191,714 19,644,525
Total Liabilities and Partners' Capital $5,796,931 $22,574,039
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $ (54,910) $19,699,435 $19,644,525
Net Income 129,514 12,821,902 12,951,416
Distributions (284,039) (28,120,188) (28,404,227)
Balance at September 30, 1997 $(209,435) $ 4,401,149 $ 4,191,714
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rental $1,585,477 $2,734,962 $7,228,442 $8,030,709
Interest and other income 156,629 46,548 272,521 149,071
Total Income 1,742,106 2,781,510 7,500,963 8,179,780
Expenses
Payroll 716,531 777,818 2,274,443 2,320,907
Rent and utilities 361,085 401,329 1,165,726 1,204,279
General and administrative 358,527 432,264 1,302,539 1,207,253
Supplies 248,613 279,661 786,303 852,697
Repairs and maintenance 372,328 170,783 654,625 590,711
Real estate taxes 42,368 95,860 239,151 280,240
Loss on real estate assets
held for disposition -- -- 48,000 --
Travel and entertainment 18,050 8,650 27,863 29,698
Depreciation -- 379,870 -- 1,126,984
Total Expenses 2,117,502 2,546,235 6,498,650 7,612,769
Net Income (Loss) from Operations (375,396) 235,275 1,002,313 567,011
Other Income:
Gain on sale of properties 11,949,103 -- 11,949,103 --
Net Income $11,573,707 $ 235,275 $12,951,416 $ 567,011
Net Income Allocated:
To the General Partner $ 115,737 $ 2,353 $ 129,514 $ 5,670
To the Limited Partners 11,457,970 232,922 12,821,902 561,341
$11,573,707 $ 235,275 $12,951,416 $ 567,011
Per limited partnership unit
(4,827,500 outstanding) $2.37 $.05 $2.66 $.12
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities
Net Income $12,951,416 $567,011
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation -- 1,126,984
Loss on real estate assets held for disposition 48,000 --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Gain on Sale of Properties (11,949,103) --
Prepaid expenses (97,740) (65,211)
Accounts payable and accrued expenses (753,535) 78,671
Deferred rent payable 34,047 34,046
Due to affiliates (150,609) (20,750)
Security deposits payable (88,480) 4,275
Net cash provided by (used for) operating activities (6,004) 1,725,026
Cash Flows From Investing Activities
Additions to real estate (77,000) (390,985)
Proceeds from disposal of asset 30,257,646 --
Net cash provided by (used for) investing activities 30,180,646 (390,985)
Cash Flows From Financing Activities
Distributions paid to partners (28,769,947) (1,097,159)
Net cash used for financing activities (28,769,947) (1,097,159)
Net increase in cash and cash equivalents 1,404,695 236,882
Cash and cash equivalents, beginning of period 4,104,695 4,143,727
Cash and cash equivalents, end of period $ 5,509,390 $ 4,380,609
Supplemental Disclosure of Non-Cash Investing Activities
Capital expenditures funded through accounts payable $-- $33,000
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited interim 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 September 30, 1997 and the results
of operations for the three and nine months ended September 30, 1997 and 1996,
cash flows for the nine months ended September 30, 1997 and 1996 and the
statement of changes in partners' capital (deficit) for the nine months ended
September 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.
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
$30,257,646 and a gain on the sale of the properties of $11,949,103. The sale
of the Partnership's fourth property, Ocean House, is subject to the
satisfaction of certain conditions of the buyer and approval of certain
building repairs by the City of Santa Monica. Due to unexpected delays, we
anticipate that the sale of Ocean House will occur in the first half of 1998.
In the meantime, the Partnership will continue to operate the property and
generate rental income from operations.
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 $30,257,646. The sale
of the Partnership's fourth property, Ocean House, is subject to the
satisfaction of certain conditions of the buyer and approval of certain
building repairs by the City of Santa Monica. Due to unexpected delays, we
anticipate that the sale of Ocean House will occur in the first half of 1998.
In the meantime, the Partnership will continue to operate the property and
generate rental income from operations.
As a result of the Sale, the Partnership suspended the payment of quarterly
cash distributions beginning with the second quarter distribution which would
have been paid on or about August 15, 1997. On August 25, 1997, the
Partnership paid a cash distribution in the amount of $5.75 per Unit
representing proceeds from the sale of 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, closing adjustments and other factors, all of which
remain uncertain at this time. While the General Partner is hopeful that Ocean
House will be sold in the first half of 1998, 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.
In anticipation of the Sale, the Properties were reclassified on the
consolidated balance sheet as of December 31, 1996, as "Real estate assets held
for disposition."
At September 30, 1997, the Partnership had cash and cash equivalents of
$5,509,390 compared with $4,104,695 at December 31, 1996. The increase is
primarily attributable to net proceeds from the Sale and net cash from
operations exceeding distributions paid to partners and additions to real
estate.
Prepaid expenses at September 30, 1997 were $265,999 compared to $168,259 at
December 31, 1996. The increase is due to the payment of the 1997-98 insurance
premiums in June 1997.
Accounts payable and accrued expenses were $279,781 at September 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.
Due to affiliates decreased to $40,000 at September 30, 1997 from $190,609 at
December 31, 1996, reflecting the payment of past due fees. Security deposits
payable decreased to $60,220 at September 30, 1997 from $148,700 at December
31, 1996, primarily due to the Sale.
Results of Operations
- ---------------------
Partnership operations resulted in net income of $11,573,707 and $12,951,416
for the three and nine months ended September 30, 1997, compared to $235,275
and $567,011 for the same periods in 1996. The increases are primarily due to
the gain on sale of properties in the amount of $11,949,103. Excluding this
gain, the Partnership incurred a net loss from operations of $375,396 and net
income from operations of $1,002,313 for the three and nine months ended
September 30, 1997, respectively. For the three-month period, the change from
net income to net loss in 1997 was primarily the result of lower rental income.
For the nine-month period, the higher net income from operations is mainly 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.
Rental income for the three and nine months ended September 30, 1997 was
$1,585,477 and $7,228,442, compared with $2,734,962 and $8,030,709 for the
corresponding periods in 1996. The decreases are primarily the result of the
Sale. Interest and other income for the three- and nine-month periods ended
September 30, 1997 was $156,629 and $272,521, compared with $46,548 and
$149,071 for the same periods in 1996. The increases represent interest earned
on the Partnership's higher cash balances, and additional insurance proceeds
received in 1997 related to the 1996 termite extermination at Pacific Inn.
Total expenses were $2,117,502 and $6,498,650 for the three and nine months
ended September 30, 1997, compared with $2,546,235 and $7,612,769 for the
corresponding periods in 1996. The decreases are primarily due to the
elimination of depreciation expense. 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 increased from
$170,783 and $590,711 for the three and nine months ended September 30, 1996,
to $372,328 and $654,625 for the comparable periods in 1997, as a result of
higher expenses for repairs that were deemed to be non-capital expenditures.
General and administrative expenses for the three and nine months ended
September 30, 1997 were $358,527 and $1,302,539, compared to $432,264 and
$1,207,253 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 nine months ended September 30, 1997 and 1996, the average occupancy
levels for Ocean House was 95% and 91% respectively.
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 three month period covered by this
report.
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: November 14, 1997 BY: /s/Jeffrey C. Carter
Name: Jeffrey C. Carter
Title: President, Chief Financial
Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 5,509,390
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 265,999
<PP&E> 21,542
<DEPRECIATION> 000
<TOTAL-ASSETS> 5,796,931
<CURRENT-LIABILITIES> 1,605,217
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 4,191,714
<TOTAL-LIABILITY-AND-EQUITY> 5,796,931
<SALES> 7,228,442
<TOTAL-REVENUES> 19,450,066
<CGS> 000
<TOTAL-COSTS> 5,148,111
<OTHER-EXPENSES> 1,302,539
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 12,951,416
<INCOME-TAX> 000
<INCOME-CONTINUING> 12,951,416
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 12,951,416
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.66
</TABLE>
