SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
-----------
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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: 33-11863
--------
HARBOR AMERICAN HEALTH CARE TRUST, INC.
---------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 86-0576027
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2990 N. SWAN ROAD, SUITE 228, TUCSON, ARIZONA 85712
----------------------------------------------------
(Address of principal executive offices)
ISSUER'S TELEPHONE NUMBER: (520) 326-2000
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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
--------- ---------
The number of shares outstanding of the issuer's common stock as
of November 1, 1996 is 397,600.
---------------------------
1
<PAGE>
FORM 10-Q
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEETS
<TABLE>
<CAPTION> SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS:
- ------
<S> <C> <C>
Real Estate Properties:
Land $466,301 $466,301
Building and improvements, net
of accumulated depreciation
of $3,959,790 and $3,847,408
at September 30, 1996 and
December 31, 1995, respectively 4,397,313 4,509,692
Loan costs, net 586 5,860
Prepaid expenses 1,641 16,432
Rent and other receivables 50,084 77,796
Cash and cash equivalents 196,459 198,061
--------- ---------
TOTAL ASSETS $5,112,383 $5,274,142
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Mortgage notes payable $4,978,686 $5,068,685
Accounts payable and accrued expenses 166,606 191,238
---------- ----------
TOTAL LIABILITIES 5,145,292 5,259,923
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value;
10,000,000 shares authorized;
issued and outstanding,
397,600 shares 3,976 3,976
Paid in capital 3,652,823 3,652,823
Distributions in excess of
net earnings (3,689,708) (3,642,580)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (32,909) 14,219
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,112,383 $5,274,142
========== ==========
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-Q
PART I: FINANCIAL INFORMATION
STATEMENTS OF EARNINGS AND DISTRIBUTIONS
IN EXCESS OF NET EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
REVENUES:
- ---------
Rental income $178,486 $224,019
Interest income 2,024 2,672
Miscellaneous income 38,730 0
---------- ----------
219,240 226,691
---------- ----------
EXPENSES:
- ---------
Depreciation and amortization 39,182 36,368
Interest expense 120,678 118,390
Advisory and other fees 9,870 7,770
Directors fees and expenses 5,400 12,895
Other operating expenses 36,720 6,896
---------- ----------
211,850 182,319
---------- ----------
INCOME/(LOSS) BEFORE INCOME
TAXES (BENEFIT) 7,390 44,372
Income taxes (benefit) 0 0
---------- ----------
NET INCOME (LOSS) $7,390 $44,372
========== ==========
NET INCOME (LOSS) PER SHARE $0.02 $0.11
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 397,600 397,600
========== ==========
Distributions in excess of
earnings - beginning of period ($3,697,098) ($3,821,618)
Net income/(loss) 7,390 44,372
Distributions during the period 0 0
---------- ----------
Distributions in excess of
earnings - end of period ($3,689,708) ($3,777,246)
========== ==========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-Q
PART I: FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
- ---------------------------
Net income/(loss) $7,390 $44,372
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 39,182 36,368
(Increase)/decrease in:
Rent and other receivables 18,055 17,945
Prepaid expenses 4,929
Accounts payable and
accrued expenses 3,451 (7,011)
---------- ----------
Net cash provided by (used in)
operating activities 73,007 91,674
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures
Deposits on real estate
---------- ----------
Net cash provided by (used in)
investing activities 0 0
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Payments on long-term borrowings (30,768) (55,002)
Increase in loan costs
---------- ----------
Net cash provided by (used in)
financing activities (30,768) (55,002)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 42,239 36,672
CASH AND CASH EQUIVALENTS -
Beginning of period 154,220 78,532
---------- ----------
CASH AND CASH EQUIVALENTS -
End of period $196,459 $115,204
========== ==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-Q
PART I: FINANCIAL INFORMATION
STATEMENTS OF EARNINGS AND DISTRIBUTIONS
IN EXCESS OF NET EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
REVENUES:
- ---------
Rental income $534,863 $663,201
Miscellaneous income 39,730 0
Interest income 7,014 9,287
---------- ----------
581,607 672,492
---------- ----------
EXPENSES:
- ---------
Depreciation and amortization 117,656 133,572
Interest expense 359,003 374,071
Advisory and other fees 29,610 23,312
Directors fees and expenses 23,600 37,511
Other operating expenses 98,867 55,672
---------- ----------
628,736 624,138
---------- ----------
INCOME/(LOSS) BEFORE INCOME
TAXES (BENEFIT) (47,129) 48,354
Income taxes (benefit) 0 0
---------- ----------
NET INCOME (LOSS) ($47,129) $48,354
========== ==========
NET INCOME (LOSS) PER SHARE ($0.12) $0.12
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 397,600 397,600
========== ==========
Distributions in excess of
earnings - beginning of period ($3,642,579) ($3,825,600)
Net income (47,129) 48,354
Distributions during the period 0 0
---------- ----------
Distributions in excess of
earnings - end of period ($3,689,708) ($3,777,246)
========== ==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-Q
PART I: FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
- ---------------------------
Net income ($47,129) $48,354
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 117,656 133,572
Changes in assets and liabilities:
Rent and other receivables 27,712 58,654
Prepaid expenses 14,789
Accounts payable and
accrued expenses (24,632) (57,104)
---------- ----------
Net cash provided by (used in)
operating activities 88,397 183,476
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Increase in loan costs 0 (18,167)
---------- ----------
Net cash provided by (used in)
investing activities 0 (18,167)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Payments on long-term borrowings (89,999) (157,084)
Distributions to stockholders 0 0
---------- ----------
Net cash provided by (used in)
financing activities (89,999) (157,084)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,602) 8,225
CASH AND CASH EQUIVALENTS -
Beginning of period 198,061 106,979
---------- ----------
CASH AND CASH EQUIVALENTS -
End of period $196,459 $115,204
========== ==========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
NOTE 1: ORGANIZATION
- ----------------------
Harbor American Health Care Trust, Inc. (the "Trust") is a Real
Estate Investment Trust ("REIT"). The affairs of the Trust are
managed by its Advisor, Harbor American Capital Group, a
California Limited Partnership (the "Advisor"). The Trust
engages in acquiring and leasing health care facilities (nursing
homes and intermediate care mental retardation developmental
disabled nursing facilities) under long-term leases.
The Trust's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course
of business. The Trust has three properties, one in Florida and
two in Colorado. The Florida Property and one Colorado Property
are leased. Therefore, the cash flow available to pay operating
expenses is limited.
Management's plans include continuing to seek sources to
refinance the loan on the Florida Property and/or to sell the
Florida Property, developing alternative uses to retain the
economic viability of the Colorado Properties, and minimizing
operating costs.
The financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amount of
liabilities that might be necessary should the Trust be unable to
continue as a going concern.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
a. BUILDINGS AND IMPROVEMENTS - Depreciation of these assets is
--------------------------
computed by the straight-line method over the useful lives
of the assets which have been estimated to be 20 to 40
years. The Trust periodically evaluates the net realizable
value of its properties and provides a valuation allowance
when it becomes probable there has been a permanent
impairment of value.
b. LOAN COSTS - Loan costs have been deferred and are being
----------
amortized using the straight-line method over the term of
the related borrowing.
c. REVENUE RECOGNITION - Rental income from operating leases is
-------------------
recognized as earned over the life of the lease agreements.
d. INCOME TAXES - The Trust qualifies as a REIT under the
------------
provisions of the Internal Revenue Code. As such, the Trust
is not subject to federal income taxes on amounts
distributed to stockholders provided distributions to
stockholders are at least 95% of the Trust's real estate
investment trust taxable income and the Trust meets certain
other conditions.
e. USE OF ESTIMATES - Management has made certain estimates and
----------------
assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from
those estimates.
NOTE 3: REAL ESTATE PROPERTIES AND LEASES
- -------------------------------------------
At September 30, 1996 and December 31, 1995, the Trust owned
three nursing homes (the "Properties"), two of which are located
in Colorado (the "Colorado Properties"), and one in Florida (the
"Florida Property").
THE MICHIGAN PROPERTY
On March 9, 1994, the Trust sold the Marshall Manor property.
The sale resulted in a loss of $150,280.
Included in the caption "Rent and other receivables" is the
discounted contract balance of $52,882 at September 30, 1996 and
$81,290 at December 31, 1995, resulting from the sale of the
Marshall Manor facility. The contract, requiring quarterly
payments of $12,500 through March 31, 1996 and $18,750
thereafter, has been discounted using an implicit interest rate
of 7.5% and results in principal maturities of $45,153 and
$36,157 in 1996 and 1997, respectively. The contract is
subordinated to other debt secured by the Marshall Manor
property.
THE COLORADO PROPERTIES
Effective October 1, 1992, the Trust entered into three year
operating leases on the two Colorado Properties (the Country View
and New Life facilities) with Res-Care, Inc. ("Res-Care"). The
lessee had the option to renew the leases for three, one-year
terms. Res-Care did not elect to renew the lease for the Country
View facility. Therefore, that lease expired on September 30,
1995. Rather than exercising the first of three one-year options
to extend the lease term for the New Life facility, Res-Care
negotiated with the Trust for an additional thirty-month term
expiring March 31, 1998.
The lease provides for a basic rent equal to 115% of the annual
fair rental allowance as determined by the State of Colorado, to
be adjusted by the percentage decrease or increase in the "client
base" at the facility, resulting in an "adjusted monthly rent."
Beginning October 1, 1995, the base monthly rent for the New Life
facility approximates $12,439 per month. The base monthly rent
will be adjusted annually upon the issuance of a new annual fair
rental allowance by the State of Colorado.
The State of Colorado is interpreting certain federal guidelines
pertaining to active treatment of mentally retarded,
developmentally disabled ("MRDD") patients, such as those
receiving care at the Colorado Properties. The State's
interpretation of said guidelines is requiring these patients to
be moved into private housing which has resulted in all patients
being moved out of the Country View facility. It is Res-Care's
intent to likewise move the New Life patients into private
housing by March 31, 1998. The client base for the purposes of
determining rental payments includes patients who have been moved
into private housing.
Previously, it was management's belief that the Colorado
Properties would have to be used for purposes other than the
present MRDD use after the expiration of the initial three year
lease terms. Accordingly, the carrying value of the Colorado
Properties was reduced to the undiscounted cash flows expected to
be realized from the properties by a charge to operations in 1992
of $1,721,000 ($4.33 per share) and an additional $770,000 in
1993 ($1.94 per share).
8
<PAGE>
THE FLORIDA PROPERTY
Effective May 1, 1993, the Trust entered into a five year lease
with a Successor Lessee. The Successor Lessee has the option to
renew for five year terms. The lease provides for monthly
rentals consisting of an equity component of $7,000 and a debt
component equal to the amount of the Trust's mortgage payment.
Commencing January 1, 1995, additional rents may be earned,
equal to 5% of the incremental net patient revenue increase over
the 1994 base year. No additional rent has been earned or paid
to date.
Minimum annual lease payments expected to be received by the
Trust on all leased properties during the lease terms are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FLORIDA COLORADO
PROPERTY PROPERTIES TOTAL
-------- ---------- -----
<C> <C> <C> <C>
1996 $ 547,915 $149,275 $ 697,190
1997 547,915 149,275 697,190
1998 182,600 37,319 219,929
---------- -------- ----------
Total $1,278,430 $335,869 $1,614,299
========== ======== ==========
</TABLE>
The Colorado Properties' rentals are based on the adjusted
monthly rent at the inception of the Lease. The Florida Property
rental includes a debt component equal to the debt service on the
Trust's existing mortgage loan.
The Trust is contingently liable for unpaid property taxes which
are the contracted obligation of the lessees. Unpaid property
taxes approximated $74,000 at September 30, 1996.
NOTE 4: MORTGAGE NOTES PAYABLE
- --------------------------------
<TABLE>
9/30/96 12/31/95
------- --------
<S> <C> <C>
Bank mortgage note - Florida
Property, payable in monthly
installments of $38,660, including
interest at 10.25%, through
October 1996, at which date the
unpaid balance is due $3,304,709 $3,394,708
Bank mortgage note - Colorado
Properties, interest at 8.25%;
payable in monthly installments
of $11,950 of interest only,
through October 31, 1996, at
which date the unpaid balance is
due in full. 1,673,977 1,673,977
---------- ----------
Total mortgage notes payable $4,978,686 $5,068,685
========== ==========
</TABLE>
9
<PAGE>
The bank mortgage notes on the Colorado and Florida Properties
are secured by first mortgages and assignments of the leases and
rents thereunder. The bank mortgage note on the Colorado
Properties is also secured, to the extent of $800,000, by a
second mortgage on the Florida Property. The bank mortgage note
on the Florida Property is due and payable on October 31, 1996
and the bank mortgage note on the Colorado Properties is due and
payable on October 31, 1996.
In the event the bank elects not to extend the terms of the loans
beyond their due dates and exercises its right to call the loan,
the Trust would seek alternative sources of financing or
liquidate the properties to satisfy the debt. There is no
assurance that the Trust, if required to liquidate the property,
would be able to realize the carrying value of the property. No
provision for loss, if any, that may result upon the resolution
of the status of the mortgage loans has been made in the
accompanying financial statements.
NOTE 5: RELATED PARTY TRANSACTIONS
- ------------------------------------
The Trust has entered into agreements with the Advisor, and
affiliates of the Advisor, to provide various services to the
Trust in exchange for fees, as follows:
a. Advisory fees at an annual rate of .3% of average invested
assets, as defined; additional fees may be paid based on
earnings.
b. Property management, acquisition and disposition fees to be
paid based upon contractual agreements between the parties.
c. Incentive advisory service fees, payable annually in an
amount equal to 5% of the cash available for distribution to
stockholders for the fiscal year. The Advisor has agreed to
subordinate its incentive advisory fee to a cumulative
noncompounding return to the stockholders of 12% on average
adjusted invested capital beginning November 3, 1990, one
year after the termination of the initial public offering.
The Trust has paid no incentive advisory fees to date.
d. Mortgage servicing fees, at varying rates dependent upon the
types of loans serviced. The Trust has paid no mortgage
servicing fees to date. In June 1995, the Trust paid an
affiliate of the Advisor $8,817 as a fee for services
rendered in connection with the extension of the Bayshore
loan to October 31, 1996.
Leasing transactions with related parties are described in Notes
3 and 4.
In 1993, the Successor Lessee of the Florida Property made a
$47,921 payment of interest which had been accrued on the related
mortgage loan. This amount is being amortized over the term of
the lease. The unamortized portion ($10,372 at September 30,
1996 and $22,357 at December 31, 1995) has been included in the
balance sheet in the caption "Accounts payable and accrued
expenses."
NOTE 6: CASH RESERVES AND DISTRIBUTIONS TO STOCKHOLDERS
- ---------------------------------------------------------
Under the terms of the public offering, at least 5% of paid-in
capital is required to be set aside to pay for normal repairs,
replacements, working capital and contingencies. At June 30,
1996, the Trust has not met this requirement.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
-----------------------------------------------
OPERATION
---------
(a) Not Applicable
--------------
(b) Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
- -----------------------------------
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1996
--------------------------------------------------------
Operations for the fiscal quarter ended September 30, 1996
reflect rental income and interest income. The rental income is
a result of the lease of the three long term care facilities
owned by the Trust. One of these facilities is leased on a
thirty-month lease ending March 31, 1998 and one of the
facilities is leased to an affiliate of the Advisor, Harbor
American Capital Group, a California Limited Partnership. Such
affiliation results from common ownership by James R. Sellers of
Heritage Advisory Corporation, (the Managing General Partner of
the Advisor) and the lessee of the Florida Property. This lessee
is Bayshore Healthcare Services, Inc. ("BHS"). Two of the
nursing homes are located in Colorado (the "Colorado
Properties"), and one is located in Florida (the "Florida
Property").
The Colorado Properties are New Life Care Center in Greeley,
Colorado ("New Life") and Country View Care Center in Longmont,
Colorado ("Country View"). New Life is leased to Res-Care, Inc.
of Louisville, Kentucky ("Res-Care") for a thirty month period
ending March 31, 1998. Res-Care has kept its
lease payments current since inception of the leases (the
"Colorado Leases") on October 1, 1992. The mortgage payments on
the Colorado Properties are current.
The Trust has been seeking alternate uses for the Country
View Property but has not yet finalized any arrangement. If it
is unable to do so, the value of the property could be impaired.
The Trust is currently negotiating an extension agreement
with PNC Bank, Kentucky, Inc. ("PNC"), its lender on the
Colorado Properties. This loan will be due October 31, 1996.
Under the anticipated agreement, the loan will be extended to
an as yet undetermined date and monthly payments of interest only
at the rate of 9.25% per annum will be payable on the 20th of
each month. The monthly lease payment from New Life to the Trust
is approximately equivalent to the anticipated modified extended
monthly mortgage payment due from the Trust to PNC covering both
New Life and Country View. Efforts are being made to sell or
refinance the Colorado Properties. However, no assurance can be
given that such efforts will be successful. If the Trust is
unable to sell, refinance or arrange the currently negotiated
extension, the Trust could lose the properties under a
foreclosure proceeding.
The Florida Property is leased to BHS and all lease payments
are current. The Trust is obligated to PNC under a first
mortgage loan on the Florida Property which is current in its
mortgage payments but matures on October 31, 1996. The Trust is
also negotiating an extension
11
<PAGE>
agreement on this loan. Under the anticipated agreement, the
loan will be extended to an as yet undetermined date and provide
for monthly payments of $38,659.55 including interest at the rate
of 9.25% per annum payable on the 20th of each month. Efforts
are continuing to sell or refinance the Florida Property.
However, no assurance can be given that such efforts will be
successful.
If such a sale or refinancing is not able to be successfully
completed, the Trust could lose its equity in the Bayshore
Property, which could result in a net worth reduction that would
increase the negative net worth of the Trust.
Further, the loan on the Colorado Properties is cross-
collateralized with the loan on the Florida Property as evidenced
by a second lien in the amount of $800,000 on the Florida
Property securing the Colorado Properties debt. Current efforts
are being made to sell the Florida Property so that the mortgage
on the Florida Property can be paid in full and the loan on the
Colorado Properties can be paid down by $800,000. The remaining
debt on the Colorado Properties would then be approximately
$900,000.
A previously owned Michigan property, Marshall Manor Nursing
Home, was sold effective March 4, 1994. Terms of the sale
provided for the purchaser, Marshall Healthcare Investors, L.P., a
Georgia limited partnership, to pay $50,000 to the Trust during
the first year payable at the rate of $12,500 per quarter
beginning September 30, 1994. Quarterly payments totalling
$50,000 per year were also due in the second year beginning
September 30, 1995 and quarterly payments totalling $75,000 are
due in the third year beginning September 30, 1996. All payments
due to date have been made in a timely manner.
For the three months ending September 30, 1996, rental
income in the amount of $178,486 was received as compared with
the period ending September 30, 1995, for which $224,019 was
received, a decrease of 21%.
For the nine months ended September 30, 1996, rental income
in the amount of $534,863 was received. For the nine months
ending September 30, 1995, $663,205 of rental income was received
representing a 19% decrease from 1995 to 1996. This decrease for
both the three month and the nine month period ending September
30, 1996 was caused by the cessation of rental income from the
Country View Property.
The rental amounts received for the current quarter result
from the leases which became effective on June 30, 1995 for the
New Life Property and on May 1, 1993 for the Florida Property.
Interest income results from the Trust's funds being
temporarily invested in such short term investments as savings
accounts and certificates of deposits issued by the Trust's
banks, PNC and BankOne Arizona of Tucson, Arizona. Also,
the Trust currently has $40,000 invested in three month
Treasury Bills yielding approximately 5%.
12
<PAGE>
Gross revenues of $219,240 for the quarter ended and
$581,607 for the nine months ended September 30, 1996, were
primarily derived from the net lease rentals received from the
two Properties. Gross revenues were $226,691 for the quarter
ended and $672,492 for the nine months ended September 30, 1995,
which represented decreases of 3% and 14%, respectively.
Net income of $7,390 for the quarter ended and net losses of
$47,129 for the nine months ended September 30, 1996 resulted
after reduction of operating expenses, which included $39,182 and
$117,656 of depreciation and amortization for the quarter and
nine months ended September 30, 1996, respectively. Net income
was $44,372 for the quarter ended and $48,354 for the nine months
ended September 30, 1995, representing decreases from 1995 to
1996. These decreases in net income from quarter to quarter and
nine month period to nine month period in 1996 were due primarily
to the cessation of rental income from the Country View Property.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash flows from operations were $73,007 in the third quarter
of 1996 compared with $91,674 in the third quarter of 1995. This
quarterly decrease results primarily from the cessation of rental
income from the Country View Property and from the ongoing
Country View maintenance and insurance costs that must now be
borne by the Trust.
Since the future of Country View is in question and since
the potential sale of the Florida Property is also in question,
this impacts liquidity. Trust management intends to continue to
do everything in its power to protect shareholder equity. Trust
management feels that chances for selling the Florida Property at
a market price are good. However, it currently has no strong
indications of successfully leasing or selling the Country View
Property.
PART II: OTHER INFORMATION
ITEMS 1, 2, 3, AND 4. NOT APPLICABLE
--------------
Item 5. OTHER INFORMATION
a. NOMINATION OF NEW DIRECTORS
---------------------------
On October 25, 1996, the Board of Directors (the "Board")
held a special meeting in which three new Directors were
nominated to fill the three existing vacancies. The By-Laws of
the Trust provide for the election of five (5) members of the
Board. Grady P. Hunter and F. Dale Markham approved the election
of three new Directors to fill the vacancies on the Board. The
three new Directors are: Thomas M. Clarke, Charles E. Trefzger
and Thomas A. White. These nominations will be effective until
the next annual meeting of stockholders of the Trust.
b. OLD DIRECTORS' FEES
-------------------
The Board approved the payment of accrued, but unpaid,
directors' fees of $27,567 each to Messrs. Hunter and Markham
through October 31, 1996. In addition, the Board approved
compensation equal to $24,000 payable to Mr. Markham for his
services as President during 1996. Such fees have not been
paid to date and it is anticipated that prior to such payment,
the newly constituted Board will consider ratifying this approval
at some later Board meeting.
c. ELECTION OF OFFICERS
--------------------
On October 25, 1996, the newly constituted Board held a
special meeting in which the Officers of the Company were
elected. The following individuals were elected as Officers:
F. Dale Markham, Chairman
Thomas M. Clarke, President and Chief Financial Officer
Linda M. Clarke, Secretary and Treasurer
d. NEW ADVISOR
-----------
The Board accepted the termination of the advisory agreement
between the Trust and Harbor American Capital Group, effective as
of October 31, 1996. The newly constituted Board authorized and
approved the new Advisory Agreement with Lenox Healthcare Capital
Services, LLC ("Lenox"), a newly formed Massachusetts limited
liability company. Lenox will provide advisory services to the
Trust for a period of one year. The ownership of Lenox is held
as follows: 50% jointly Linda M. and Thomas M. Clarke; 35%
Heritage Advisory Corporation (of which James Sellers, principal
of the former advisor, owns 100%); and 15% Harbor American
Capital Group, a California limited partnership (and the general
partner of which is Heritage Advisory Corporation). Under the
new advisory agreement, the Trust is obligated for minimum fees
of $2,500 per month up to .3% of average invested assets (payable
monthly).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The following exhibits are filed as part of this
report:
27 -- Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
13
<PAGE>
SIGNATURE
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.
Date: November 14, 1996
HARBOR AMERICAN HEALTH CARE TRUST, INC.
BY: /s/ Thomas M. Clarke
--------------------------------
Thomas M. Clarke
President and Chief Financial Officer
(Principal Executive, Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810836
<NAME> HARBOR AMERICAN HEALTH CARE TRUST
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 196,459
<SECURITIES> 0
<RECEIVABLES> 50,084
<ALLOWANCES> 0
<INVENTORY> 586
<CURRENT-ASSETS> 0
<PP&E> 4,863,614
<DEPRECIATION> 3,959,790
<TOTAL-ASSETS> 5,112,383
<CURRENT-LIABILITIES> 166,606
<BONDS> 4,978,686
0
0
<COMMON> 3,976
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,112,383
<SALES> 0
<TOTAL-REVENUES> 219,240
<CGS> 0
<TOTAL-COSTS> 211,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,678
<INCOME-PRETAX> 7,390
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,390
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
