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, 1998
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition period from _____ to _____
Commission File Number: 33-9921
SENIOR INCOME FUND L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3392077
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
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 ___
<PAGE>
2
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
At September 30, At December 31,
1998 1997
--------------- --------------
<S> <C> <C>
Assets
Real estate assets held for disposition $ 21,542 $ 21,542
Cash and cash equivalents 5,723,587 5,320,317
Prepaid expenses 202,499 204,867
---------- ----------
Total Assets $5,947,628 $5,546,726
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 163,601 $ 180,192
Deferred rent payable 1,270,611 1,236,564
Due to affiliates 22,000 61,973
Security deposits payable 56,850 56,831
---------- ----------
Total Liabilities 1,513,062 1,535,560
---------- ----------
Partners' Capital:
General Partner -- --
Limited Partners (4,827,500 units
outstanding) 4,434,566 4,011,166
---------- ----------
Total Partners' Capital 4,434,566 4,011,166
---------- ----------
Total Liabilities and Partners' Capital $5,947,628 $5,546,726
========== ==========
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
For the nine months ended September 30, 1998
<CAPTION>
General Limited
Partner Partners Total
------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1997 $ -- $4,011,166 $4,011,166
Net Income -- 423,400 423,400
------- ---------- ----------
Balance at September 30, 1998 $ -- $4,434,566 $4,434,566
======= ========== ==========
</TABLE>
<PAGE>
3
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Income
Rental $1,002,943 $ 1,585,477 $3,003,164 $ 7,228,442
Interest and other
income 74,643 156,629 211,631 272,521
---------- ----------- ---------- -----------
Total Income 1,077,586 1,742,106 3,214,795 7,500,963
---------- ----------- ---------- -----------
Expenses
Payroll 293,660 716,531 855,712 2,274,443
Rent and utilities 279,633 361,085 831,929 1,165,726
General and
administrative 154,951 358,527 487,032 1,302,539
Supplies 97,990 248,613 278,454 786,303
Repairs and maintenance 74,719 372,328 208,691 654,625
Real estate taxes 40,191 42,368 116,565 239,151
Loss on real estate
assets held for
disposition -- -- -- 48,000
Travel and entertainment 4,294 18,050 13,012 27,863
---------- ----------- ---------- -----------
Total Expenses 945,438 2,117,502 2,791,395 6,498,650
---------- ----------- ---------- -----------
Net Income (Loss)
from Operations 132,148 (375,396) 423,400 1,002,313
Other Income
Gain on sale of
properties -- 11,949,103 -- 11,949,103
---------- ----------- ---------- -----------
Net Income $ 132,148 $11,573,707 $ 423,400 $12,951,416
========== =========== ========== ===========
Net Income Allocated:
To the General Partner $ -- $ 115,737 $ -- $ 129,514
To the Limited Partners 132,148 11,457,970 423,400 12,821,902
---------- ----------- ---------- -----------
$ 132,148 $11,573,707 $ 423,400 $12,951,416
========== =========== ========== ===========
Per limited partnership
unit (4,827,500
outstanding) $ .03 $ 2.37 $ .09 $ 2.66
----- ------ ----- ------
</TABLE>
<PAGE>
4
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
<CAPTION>
1998 1997
---------- ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 423,400 $ 12,951,416
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
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 2,368 (97,740)
Accounts payable and accrued expenses (16,591) (753,535)
Deferred rent payable 34,047 34,047
Due to affiliates (39,973) (150,609)
Security deposits payable 19 (88,480)
---------- ------------
Net cash provided by (used for) operating
activities 403,270 (6,004)
---------- ------------
Cash Flows From Investing Activities
Additions to real estate -- (77,000)
Proceeds from disposal of asset -- 30,257,646
---------- ------------
Net cash provided by investing activities -- 30,180,646
---------- ------------
Cash Flows From Financing Activities
Distributions paid to partners -- (28,769,947)
---------- ------------
Net cash used for financing activities -- (28,769,947)
---------- ------------
Net increase in cash and cash equivalents 403,270 1,404,695
Cash and cash equivalents, beginning of period 5,320,317 4,104,695
---------- ------------
Cash and cash equivalents, end of period $5,723,587 $ 5,509,390
========== ============
</TABLE>
<PAGE>
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1997 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 September 30, 1998 and the results of
operations for the three and nine months ended September 30, 1998 and 1997, cash
flows for the nine months ended September 30, 1998 and 1997 and the statement of
changes in partners' capital for the nine months ended September 30, 1998.
Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant event occurred subsequent to fiscal year 1997, which
requires disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
On October 13, 1998, the Partnership closed on the sale of the Partnership's
remaining property, Ocean House, a congregate care facility (the "Property").
The gross selling price of the Property was $5,172,750, less a credit for cost
of repairs due to earthquake damage of $4,174,171, resulting in a net selling
price of $998,579. The Property was sold to MBK Senior Living Communities, Ltd.,
formerly known as MBK Senior Properties, Ltd., a California limited partnership
(the "Buyer") unaffiliated with the Partnership. The selling price was
determined by arm's length negotiations between the Partnership and the Buyer.
As a result of the sale, the Partnership will be making a special distribution
of $1.10 per unit, on or about November 17, 1998, representing the net sales
proceeds and a portion of the Partnership's cash reserves. The remaining
reserves will be used to pay the Partnership's liabilities and expenses through
the liquidation of the Partnership. If any proceeds remain, the Partnership will
make another distribution upon liquidation.
<PAGE>
6
Item 7. 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, 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 $30,148,357. The Partnership's
fourth property, Ocean House, was sold on October 13, 1998 to MBK Senior Living
Communities, Ltd., formerly known as MBK Senior Properties, Ltd. The gross
selling price of the Property was $5,172,750, less a credit for cost of repairs
due to earthquake damages of $4,174,171, resulting in a net selling price of
$998,579.
As a result of the Sale, the Partnership suspended the payment of quarterly cash
distributions beginning with the second quarter 1997 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.
With the completion of the sale of Ocean House, the Partnership will be making a
special distribution of $1.10 per unit, on or about November 17, 1998,
representing the net sales proceeds and a portion of the Partnership's cash
reserves. The remaining reserves will be used to pay the Partnership's
liabilities and expenses through the liquidation of the Partnership. If any
proceeds remain, the Partnership will make another distribution upon
liquidation.
At September 30, 1998, the Partnership had cash and cash equivalents of
$5,723,587 compared to $5,320,317 at December 31, 1997. The increase represents
cash generated by operating activities, and is up primarily due to the
discontinuation of cash distributions.
Accounts payable and accrued expenses were $163,601 at September 30, 1998
compared to $180,192 at December 31, 1997. The change is primarily due to the
timing of property operating expense payments, management fee payments and the
timing of receipt of pre-paid rents, partially offset by a decrease in certain
accruals.
Results of Operations
Partnership operations resulted in net income of $132,148 and $423,400 for the
three and nine months ended September 30, 1998, respectively, compared to
$11,573,707 and $12,951,416 for the three and nine months ended September 30,
1997. The decrease is primarily a result of the sale of three of the
Partnership's four properties in 1997, which resulted in a gain on sale of
properties of $11,949,103 in the 1997 periods. Excluding this gain, net income
(loss) from operations totaled $(375,396) and $1,002,313, respectively, for the
three-month and nine-month periods ended September 30, 1997.
<PAGE>
7
Rental income for the three and nine months ended September 30, 1998 was
$1,002,943 and $3,003,164, respectively, compared to $1,585,477 and $7,228,422
for the corresponding periods in 1997. The decrease is due to the sale of three
of the Properties on August 1, 1997. Rental income at Ocean House for the nine
months ended September 30, 1998 increased by 7% over the same period last year,
primarily as a result of increased rental rates on new leases.
Primarily as a result of the sale of three of the Partnership's Properties on
August 1, 1997, all expense categories decreased from the 1997 periods to the
1998 periods.
Loss on real estate held for disposition was $-0- for the nine months ended
September 30, 1998 compared to $48,000 for the same period in 1997. The 1997
amount represents costs associated with balcony restoration at Ocean House which
were expensed through the loss provision in compliance with Statement of
Financial Accounting Standards No. 121.
For the nine months ended September 30, 1998 and 1997, Ocean House reported
average occupancy of 91% and 95%, respectively.
<PAGE>
8
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
On October 27, 1998 the Partnership filed a report on Form
8-K reporting the close of the sale of the Partnership's
remaining property.
<PAGE>
9
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 16, 1998 BY: /s/Michael T. Marron
Michael T. Marron
Director, President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 5,723,587
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 5,926,086
<PP&E> 21,542
<DEPRECIATION> 000
<TOTAL-ASSETS> 5,947,628
<CURRENT-LIABILITIES> 185,601
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 4,434,566
<TOTAL-LIABILITY-AND-EQUITY> 5,947,628
<SALES> 3,003,164
<TOTAL-REVENUES> 3,214,795
<CGS> 000
<TOTAL-COSTS> 2,304,363
<OTHER-EXPENSES> 487,032
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 423,400
<INCOME-TAX> 000
<INCOME-CONTINUING> 423,400
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 423,400
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
