FORM 10-KSB
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED 12/31/95 OR
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 33-11863
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HARBOR AMERICAN HEALTH CARE TRUST, INC.
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(Name of small business issuer in its charter)
Maryland 86-0576027
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2990 N. Swan Road, Suite 228, Tucson, Arizona 85712
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(Address of principal executive offices)
Issuer's telephone number: (520) 326-2000
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: None
Name of each exchange on which registered: None
Securities registered under Section 12(g) of the Exchange Act:
None (Title of Class)
Check whether the issuer (1) has 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 issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of issuer's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
The issuer's revenues for the fiscal year ended December 31, 1995
were $933,639.
The aggregate market value of the voting common stock, $.01 par
value ("Common Stock"), held by non-affiliates of the issuer as
of March 29, 1996 was $377,600. 397,600 shares of Common Stock
of the registrant were outstanding as of March 29, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
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Total of sequentially numbered pages:
Exhibit Index on sequential page number:
<PAGE>
PART I
Item 1: Description of Business.
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(a) General Development of Business.
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Harbor American Health Care Trust, Inc. (the "Trust") is a
Maryland corporation formed on February 6, 1987. The principal
office of the Trust is located at 2990 N. Swan Road, Suite 228,
Tucson, Arizona 85712. The Trust is advised by Harbor American
Capital Group, a California Limited Partnership (the "Advisor").
The Trust completed its public offering on November 3, 1989.
During 1995 the Trust continued to own the real property,
fixtures and improvements used in connection with the operation
of three long term care facilities located in Florida and
Colorado. These are Bayshore Convalescent Center, a 150 bed
skilled and intermediate care nursing home facility located in
North Miami Beach, Florida acquired as of March 1988; Country
View Care Center, an 87 bed intermediate care nursing facility
located in Longmont, Colorado acquired as of December 1989; and
New Life Care Center, a 56 bed intermediate care nursing home
facility located in Greeley, Colorado acquired as of December
1989.
As of January 1, 1995, all the properties were leased on
long term leases. The Bayshore Convalescent Center was leased to
Bayshore Healthcare Services, Inc. ("BHS"). See Item 2:
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Description of Property, The Florida Lease. BHS is an affiliate
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of the Trust as it is owned by James R. Sellers, an affiliate of
the Advisor. Country View Care Center and New Life Care Center
(the "Colorado Properties") were leased to Res-Care, Inc., a
Kentucky corporation ("Res-Care"), an unaffiliated entity. On
September 30, 1995, the Country View Care Center in Longmont,
Colorado was vacated by Res-Care and remains unoccupied.
The Advisor has entered into an advisory service agreement
with Heritage Advisory Corporation, an Arizona corporation
("Heritage"), who is the managing general partner of the Advisor.
Under the terms of this agreement, Heritage is to perform the
day-to-day operations of the Trust and provide advice pertaining
to investments in real estate. Heritage is the successor to
Markham, Sellers & Mony, Inc., the original managing general
partner of the Advisor. The stock of Heritage is wholly owned by
James R. Sellers, the owner of BHS.
The Trust's continuing plan of operation for the 1996 fiscal
year (ending December 31, 1996) is as follows: The Trust intends
to own, lease or sell its properties. To the extent it has funds
available for investment (it currently has no such funds
available and no plans for raising such funds), it will invest
primarily in health care related properties, including long term
care facilities, medical office buildings, retirement housing
facilities, psychiatric hospitals and substance abuse recovery
centers through acquisitions, joint ventures and mortgage loans.
The Trust may also invest in commercial, industrial and
residential income producing real properties through similar
means. Since the Trust has no available funds for such
investments, its ability to undertake such investments will be
dependent upon the availability of capital to the Trust. See
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Item 6: Management's Discussion and Analysis or Plan of
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Operation.
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The State of Colorado is interpreting certain federal Health
Care Finance Agency 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 is requiring those patients to be moved
into private housing and out of institutional housing such as
that offered at the Colorado Properties.
The terms of the leases with Res-Care provide for lease
payments based on the number of patients residing at the Colorado
Properties as well as those placed outside of the facilities
under the "Community Advantage" program.
It is therefore management's belief that the Colorado
Properties may ultimately have to be used for purposes other than
the present MRDD use. By cooperating with the State of Colorado
in the implementation of this program the Trust believes it will
have until March 1998 to develop an alternative use for New Life
Care Center in Greeley, Colorado. Trust management worked during
1995 to develop an alternative use for Country View Care Center
in Longmont, Colorado. Plans were nearing completion to lease or
sell the property to a juvenile corrections operator when the
voters of the county in which the property is located voted to
disallow future juvenile corrections facilities in the county.
Other alternative uses for Country View are being considered. No
assurance can be given that such alternative uses, if any, will
not significantly reduce the long term value of the Colorado
Properties.
(b) Financial Information About Industry Segments.
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When financial resources are available the Trust's primary
business and industry segment is to invest in health care related
real properties, including long-term care facilities, medical
office buildings, retirement housing facilities, psychiatric
hospitals, and substance abuse recovery centers through
acquisitions, joint ventures and mortgage loans. The Trust also
may invest in commercial, industrial, and residential income-
producing properties through similar means.
Through December 31, 1995, all of the Trust's properties
were leased to lessees either affiliated or unaffiliated with the
Trust. See Item 1: Description of Business, General Development
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of Business.
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(c) Narrative Description of Business.
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The Directors of the Trust manage and control the affairs of
the Trust and have general responsibility and ultimate authority
affecting the investments of the Trust. The Directors have
engaged the Advisor as an investment advisor to select
investments and supervise the day-to-day operations of the Trust.
Heritage, as the managing partner of the Advisor, is engaged
primarily in real estate consulting.
The Trust qualifies as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code of
1985 ("Code"). As such, the Trust is not subject to federal
income taxes in amounts distributed to stockholders, provided
that distributions to stockholders are at least 95% of the
Trust's real estate investment trust taxable income and the Trust
meets certain other conditions.
For any year in which the Trust does not both (i) meet the
requirements of being taxed as a REIT and (ii) elect to be taxed
as a REIT, it will be taxed as a corporation. There can be no
assurance that the Trust will qualify as a REIT for any specific
year.
The investment objectives of the Trust are (1) to provide
quarterly or more frequent cash distributions to stockholders
from operations, (2) to provide long-term capital appreciation to
stockholders, and (3) to preserve and protect the stockholders'
original invested capital. When and if financial resources are
available, the Trust intends to invest primarily in health care
related property, including long-term care facilities, medical
office buildings, retirement housing facilities, psychiatric
hospitals and substance abuse recovery centers through
acquisitions, joint ventures, and mortgage loans. The Trust also
may invest in commercial, industrial and residential income
producing real properties through similar means. To the extent
funds are not fully invested in real properties or mortgage
loans, the Trust invests temporarily in investments such as: (i)
short-term government securities, (ii) securities of government
agencies, (iii) bankers' acceptances and repurchase agreements,
(iv) certificates of deposit, (v) deposits in commercial banks,
(vi) participations in pools of mortgages or bonds and notes,
and/or (vii) obligations of municipal, state, and federal
governments and government agencies. In addition, the Trust
intends to maintain working capital reserves of at least 5% of
the capital contributions of the Trust. However, since the
properties owned by the Trust have been reduced to three, only
two of which are presently producing revenue, the reserves of the
Trust at December 31, 1995 were approximately $100,000.
The current and anticipated business of the Trust is not
seasonal. The results of operations of the Trust will depend
upon the availability of (i) capital to the Trust, which is
currently limited, (ii) suitable opportunities for investment and
reinvestment of its funds, and (iii) the yields available from
time to time on real estate and other investments. If capital
were to become available to the Trust, the Trust will be
competing for acceptable investments with other financial
institutions, syndicators, other REITs, investment bankers,
including banks, insurance companies, savings and loan
associations, mortgage bankers, pension funds and other real
estate investment programs (including other real estate
investment programs which may be sponsored by the sponsor or the
Advisor of the Trust in the future) that may have similar
objectives to those of the Trust. The competitors may have
greater resources than the Trust and greater experience than the
directors or officers of the Advisor and its Affiliates.
Further, certain of the directors of the Trust and officers and
directors of the general partners of the Advisor and its
Affiliates are engaged for their own account or on behalf of
other entities in the type of activities in which the Trust
intends to be engaged. Thus the Trust could be in competition
for investments with one or more corporations, partnerships or
trusts with which such directors or officers may be affiliated.
The Trust, as of December 31, 1995, did not directly employ
any persons. The business of the Trust is managed by the Advisor
with which the Trust has entered into an Advisory Agreement. See
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Item 9: Directors, Executive Officers, Promoters and Control
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Persons; Compliance with Section 16(a) of the Exchange Act and
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Item 12. Certain Relationships and Related Transactions.
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Item 2: Description of Property.
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Bayshore Convalescent Center ("Bayshore") or the "Florida
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Property"). This property consists of a one-story structure
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built in 1963 and a two story addition built in 1968. The
structure totals 35,294 square feet and contains 150 beds. The
Property is located on an approximately 49,704 square foot parcel
of real estate at 16650 West Dixie Highway in North Miami Beach,
Florida.
Country View Care Center ("Country View" or one of the
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"Colorado Properties"). This property is a one story structure
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containing approximately 21,688 square feet, constructed during
the early 1970's. The building is situated on two parcels of
land containing approximately 9.8 acres near Longmont, Colorado.
This property was operated as an intermediate care facility to
serve the mentally retarded and contains 87 beds. It is
currently unoccupied.
New Life Care Center ("New Life" or one of the "Colorado
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Properties"). This property is a one-story structure containing
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approximately 18,000 square feet, built in 1957. The building is
located on a parcel of land containing approximately 1.09 acres,
approximately 3 miles from Greeley, Colorado. This property is
operated as an intermediate care nursing home facility to serve
the mentally retarded and contains 56 beds.
The Leases. The Trust has entered into Leases under net
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lease terms on all of the properties which it has acquired. The
Leases permit the lessee thereunder to operate the properties as
health care facilities licensed for skilled and intermediate long
term nursing services and for such additional uses as may be
approved by the Trust and consented to by the appropriate
mortgage lender.
The Colorado Leases. Effective October 1, 1992, upon
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rejection of the original leases, the Trust entered into the
Leases (the "Colorado Leases") of the Colorado Properties with
Res-Care.
The Colorado Leases had original terms of three (3) years
and originally provided for three (3) one year options to extend,
thus ending on September 30, 1998 if all options were exercised.
The primary term of these leases expired September 30, 1995.
Res-Care did not exercise the option to extend the Country View
lease but did negotiate a new option to extend the New Life lease
for thirty (30) months expiring March 31, 1998.
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 will be reduced.
See Item 2: The Colorado Property Loan.
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The remaining Colorado Lease is a net lease requiring
Res-Care to pay all operating expenses of the property except for
"major" repairs which are the obligation of the Trust. "Major"
repairs include, but are not limited to, structural repairs,
repairs to the roof, walls and foundations of the buildings on
the leased premises, maintenance of the electrical wiring and
fixtures, plumbing, heating and air-conditioning equipment,
sewage treatment plant, and repair of driveways and parking
areas.
The remaining Colorado Lease provides for a basic annual
rent payable monthly (the "Annual Base Rent") equal to 115% of
the "Annual Fair Rental Allowance" as determined by the State of
Colorado, Health Facilities Division, or any other agency having
jurisdiction over such rates ("HFD"). The Annual Base Rent is
$120,022 for New Life. Upon issuance from HFD, and receipt by
Res-Care of notice ("Notice") of a new Annual Fair Rental
Allowance, such Annual Fair Rental Allowance shall be substituted
in the calculation of Annual Base Rent effective as of the date
specified in the Notice. The monthly rent is adjusted by the
percentage decrease or increase in the Client Base (as defined
and adjusted in this paragraph) to arrive at an adjusted monthly
rent. The initial "Client Base" is deemed to be 52 at New Life
which was the client population of the facilities as of August
24, 1992. Any adjustments in the monthly rent as a result of an
increase or decrease in the client population of either facility
(including Country View) commence the month following such
increase or decrease and are based on the average daily
population for such month. Furthermore, any decrease in the
client population of either facility which is the result of the
transfer of a client to the supported living program in the
counties of Weld and Boulder, Colorado, known as Community
Advantage, is not considered a population decrease for purposes
of arriving at the adjusted monthly rent.
The remaining Colorado Lease provides for fixtures and
equipment to secure the landlord's interest in said lease. At
termination of the lease, title to said fixtures and equipment
reverts to the Trust. Res-Care is required to furnish regular
monthly and annual financing reports to the Trust.
The Florida Lease. This lease was entered into effective
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May 1, 1993 by the Trust with Bayshore Healthcare Services, Inc.,
an Arizona corporation ("BHS"). BHS is owned by James R. Sellers
who is an affiliate of the Advisor. This lease (the "Florida
Lease") has an original term of five (5) years and provides for
five (5) five-year options to extend, thus ending on March 31,
2023, if all options are exercised. The Florida Lease, as it may
be extended, is a net lease requiring BHS to pay all operating
expenses of the properties. Minimum rents are composed of two
parts, an equity component and a debt component. The beginning
equity component is $84,000 annually, payable $7,000 monthly. A
provision has been made to increase the equity component amount
after reviewing operations for the period from May 1, 1993,
through December 31, 1993. To date, no change has been made.
The monthly debt component is an amount not less than the
principal and interest payment charged by the facility first
mortgage lender, presently PNC Bank, Kentucky, Inc. ("PNC Bank")
of Louisville, Kentucky.
Additional rents are also provided. Commencing on January
1, 1995, and continuing so long as the Florida Lease remains in
force, additional rent shall be due in amounts equal to five
percent (5%) of the difference in Net Patient Revenues, compared
with Net Patient Revenues for the year ended December 31, 1994,
as reported in the financial statements of the facility prepared
in accordance with generally accepted accounting principles. Net
Patient Revenues are defined as total revenues of the facility,
including, without limitation, all ancillary fees, room and board
charges, rentals and other revenue derived in any way from the
operation of the facility, on an accrual basis, after deduction
of allowances for contractual adjustments as they relate to third
party payors and before deduction of any and all expenses. The
lessee is required to present the amount defined as Net Patient
Revenues in its regular financial reporting.
The Florida Lease provides for fixtures and equipment to
secure the landlord's interest in the Florida Lease. At
termination of such lease, title to said fixtures and equipment
reverts to the Trust. BHS is required to furnish regular monthly
and annual financial reports to the Trust.
As of December 31, 1995, real estate taxes for 1995
($36,048.48) were due and owing on the Bayshore Convalescent
Center. These are the responsibility of the lessee who has
agreed to bring them current. If it does not, responsibility
could shift to the Trust. Trust management is reasonably
confident the lessee will bring such tax payments current.
The Loans. Each of the three (3) properties owned by the
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Trust was funded by a combination of cash and mortgage loans.
PNC Bank, formerly Citizens Fidelity Bank & Trust Company, holds
the loans on Bayshore and on the Colorado Properties.
The Colorado Properties Loan. The first mortgage loan to
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PNC Bank has a current balance of $1,682,278 and is paid through
February 20, 1996. All payments have been kept current during
1995. The loan matured February 28, 1996. PNC Bank has verbally
agreed to extend this loan to October 20, 1996 and documentation
is currently being prepared to implement such extension. If the
Trust were unable to finalize this extension and pay off this
loan, it could lose its equity in these properties and PNC Bank
could exercise its rights as a second lien holder on the Bayshore
loan. No assurance can be given that the Trust will be able to
complete this extension or pay off this loan. However, several
previous extension agreements with PNC Bank have been completed.
The Bayshore Loan. The Trust is obligated to PNC Bank under
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a first mortgage loan which has a current balance due of
$3,386,028 and is paid through February 20, 1996. The current
maturity date is October 31, 1996. Loan terms provide for a 15
year amortizing loan with a current fixed interest rate of 10.25%
and monthly payments of $38,659. All loan payments and lease
payments have been kept current since the new lease with BHS was
entered into effective May 1, 1993.
In connection with the modifications of the Colorado
Properties loan in 1992, also with PNC Bank, the Bayshore
Property was given as additional collateral to the extent of an
$800,000 second mortgage.
Management believes Bayshore and the Colorado Properties are
adequately insured.
Current occupancy at Bayshore is 82% and 98% at New Life.
Item 3: Legal Proceedings.
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The companion cases of MMNH, Inc. v. Harbor American Health
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Care Trust, Inc., et al, Case No. 93-454808-CZ (County of
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Oakland, Michigan Circuit Court, filed April 28, 1993), and
EMNH, Inc. v. Harbor American Health Care Trust, Inc., et al,
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Case No. 93-454081-CZ (County of Oakland, Michigan Circuit Court,
filed April 28, 1993) (collectively, the "Michigan Cases") were
settled by a Consent Judgment entered on March 2, 1994. The
Michigan Cases involved claims by the plaintiffs that they had a
prior perfected security interest to that of the Trust in
personal property located at Marshall Manor and Eaton Manor,
respectively. The plaintiffs sought possession of such property
and monetary damages. The Circuit Court entered a Consent
Judgment for Possession in favor of the plaintiffs permitting the
plaintiffs to take possession of the personal property but
without the award of any monetary damages.
In re Health Concepts Corporation, Bankruptcy Case No.
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3-91-01798 (3) 11 (U.S. Bankruptcy Court, W.D. Ky) an adversary
hearing styled Dan L. McClaren, Trustee v. Sunquest Healthcare
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Corporation, Bayshore Healthcare Services, Inc. and Jerry M.
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Walker, Adversary Proceeding No. 93-3083 (U.S. Bankruptcy Court,
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W.D. Ky, filed September 3, 1993), was commenced alleging
property operating funds were misused at the Bayshore
Convalescent Center. The bankruptcy judge directed the
defendants to pay to the plaintiff, the bankruptcy trustee (the
"Trustee") approximately $300,000 to be used for operating
expenses at the facility. Subsequently, the Trustee, upon
receipt of such funds, did not use such funds to pay said
expenses. The defendants sought direction from the bankruptcy
judge to require the Trustee to use such funds for the payment of
operating expenses of the facility, including payment of property
taxes in the approximate amount of $90,000 for 1991, 1992 and the
first four months of 1993. If the defendants had been successful
in their request of the bankruptcy judge, the Trust, through the
lessee of the Bayshore Convalescent Center, would have
potentially available additional funds to assist in paying these
property taxes on the Bayshore Convalescent Center. The Court
ruled against the Trust and BHS, and an appeal was filed. In May
1995, the parties agreed to a settlement wherein the Trust
received $57,542.41 which it used to help bring these tax
payments current.
On March 22, 1994, the Colorado Department of Health,
Division of Administration (the "Division") issued a Notice of
Violation and Cease and Desist Order (the "Notice/Order") in
In the Matter of: Harbor American Health Care Trust, Inc.
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Wastewater Treatment Facility CDPS Permit No. CO-0042021 Weld
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County, Colorado. The permit (the "Permit") referred to above
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relates to the wastewater treatment system (the "System") at
Country View Care Center in Longmont, Colorado. The Notice/Order
alleged that in connection with monthly discharge monitoring
reports based on influent and effluent samples from the System,
the Trust was in violation of maximum effluents and
concentrations of tested substances, and required minimum
removals of tested substances. The Notice/Order, among other
items, required (i) the undertaking of immediate measures
necessary to cease and desist the violations, (ii) within 60
days, the submission of an engineering report to the Division
identifying structural corrections to the System and the costs
and timing related thereto, and (iii) notification to the
Division of the Trust's intent to comply with the Notice/Order
within ten days. Violations of the Permit or the Notice/Order
could have resulted in civil penalties of up to $10,000 per day.
Criminal penalties could have been imposed for reckless, knowing,
intentional or criminally negligent discharge of pollutants into
Colorado waters. The Trust complied with all immediate
requirements and requested a hearing to challenge the
Notice/Order. Subsequently on March 2, 1995, the Trust agreed to
a Settlement and Stipulated Order (the "Settlement") which
provides as follows:
a. That the Trust neither admits nor denies the violations
cited in the Notice/Order.
b. That the Division agrees to petition the Executive
Director, or her designee, to impose a civil penalty of $5,000.00
for the violations cited in the Notice/Order of March 22, 1994.
c. That the Trust agrees not to contest the amount of the
civil penalty and to pay $5,000.00 to the State of Colorado
within 30 days after the date of issuance of an Order for Civil
Penalty.
d. That the Division agrees that by signing the Order, it
will be deemed to have petitioned the Executive Director, or her
designee, to impose a civil penalty of $5,000.00.
e. That the Division agrees that once the penalty is
formally imposed and is paid in full, the Notice/Order of March
22, 1994, will be assigned a closed status and no further action
will be taken relative to the violations cited therein.
f. That the Order has the same effect and force as a final
Cease and Desist Order or Clean-up Order issued pursuant to
section 25-8-605 and 606, Colorado Revised Statutes ("C.R.S.").
Violation of any term contained therein is subject to action
under section 25-8-605 to 25-8-608, C.R.S.
g. That the Order becomes effective and the penalty will
be imposed once it is signed by all parties including the
Executive Director, or her designee.
On March 2, 1995, the Settlement was executed by the
appropriate authorities for the Colorado Department of Public
Health and Environment. On March 21, 1995, the $5,000 penalty
was paid and the case was closed.
Item 4: Submission of Matters to a Vote of Security Holders.
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There have not been any matters submitted to a vote of
security holders during the fourth quarter of the fiscal year
covered by this report through the solicitation of proxies or
otherwise.
PART II
Item 5: Market for Common Equity and Related Stockholder
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Matters.
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(a) Market Information.
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There is no established market for the Trust's shares of
Common Stock and it is unlikely that a market for such shares
will develop. If a market does develop, it is anticipated that
it will be in the over-the-counter market. To date, the Trust
has not selected any market makers for its shares. Since the
final number of shareholders is significantly smaller than the
amount anticipated by the original offering, it is unlikely the
stock will be quoted on the NASDAQ system.
Based on representations made to the Advisor by the transfer
agent of the shares of the Trust no sales occurred during 1993,
1994 or 1995. The transfer agent advised that in 1992 very
limited sales occurred, the high and low bid quotations for which
were $9.75 per share.
(b) Holders. As of March 15, 1996, there were 397,600
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shares of Common Stock outstanding, which were owned of record by
410 holders.
(c) Dividends. The Trust last declared dividends on the
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Common Stock in the amount of $0.06 per share in May 1992.
Unless property sales or leases are made in 1996 which result in
receipt by the Trust of sale or lease proceeds, there will not
likely be cash available for distributions for purposes of
declaring and paying any dividends in 1996. Under the Code a
REIT must meet certain qualifications, including a requirement
that it distribute annually to its stockholders at least 95% of
its taxable income as that term is defined in Part II, Subchapter
M, of Chapter 1 of the Code and regulations and rules promulgated
thereunder. The Trust intends to distribute quarterly or more
frequently to its stockholders on a pro-rata basis substantially
all cash available for distribution. The Trust anticipates that
such cash distributions will aggregate annually at least 95% of
its REIT taxable income.
Item 6: Management's Discussion and Analysis or Plan of
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Operation.
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(a) Plan of Operation.
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Not applicable.
(b) Management's Discussion and Analysis of Financial
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Condition and Results of Operations.
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For the year ended December 31, 1995, the Trust had net
income of $183,020, or $0.46 per share, as compared to net income
of $84,967, or $0.21 per share for 1994. The increase in net
income was due primarily to credits for directors' fees that were
waived and over-accrued in past years.
Rental revenues increased slightly from $908,100 in 1994 as
compared to $911,512 in 1995.
Interest and other income in 1995 was $22,127 as compared
with $28,664 in 1994. This decrease was primarily due to lower
interest rates on slightly lower principal balances.
Interest expense was down slightly to $469,411 for 1995 as
compared to $482,530 in 1994.
Other operating expenses increased to $84,056 in 1995 from
$69,662 in 1994, due primarily to utility and maintenance costs
at Country View Care Center previously borne by Res-Care.
Liquidity. The Trust has relied solely on rental income to
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pay its expenses in 1995 and 1994. Cash flows provided by
operations were $337,660 in 1995 and $91,901 in 1994. One reason
for the increase in cash flows from 1994 to 1995 was the
renegotiation of the loans with PNC Bank with respect to the
Colorado Properties to reflect interest-only payments. Because
of the expiration of the Country View lease on September 30,
1995, cash flows during calendar year 1996 can be expected to be
reduced by approximately $200,000.
Colorado Properties' lease payments by Res-Care, since
inception of the new leases on October 15, 1992, have been made
in a timely manner, and thus mortgage payments have also been
made in a timely manner. The Country View lease with Res-Care
expired on September 30, 1995; however, the New Life lease was
extended to March 31, 1998. Unless an alternative use can be
obtained for Country View, the equity in the Colorado Properties
could be diminished. This could negatively impact the net
carrying value of $805,938. Although the Trust management and
Advisor are making every effort to secure alternative uses for
Country View and eventually for New Life, no assurance can be
given that these efforts will be successful.
Lease payments by BHS, since inception of the new lease on
May 1, 1993, have also been made in a timely manner and, again,
mortgage payments have thus been made on a timely basis. This
lease provides approximately $80,000 per year in cash flow (the
difference between lease payments received and mortgage payments
made). These combined cash flows are the only source the Trust
has to maintain minimal liquidity for payment of past due real
estate taxes and such administrative costs as legal and
accounting, liability insurance, and the Advisor and Directors'
fees. Currently, Directors' fees in the amount of $29,400 each
are accrued and being paid as cash becomes available. $10,000
was paid to each of the current Directors in 1995 and $11,000 of
the $29,400 has been paid so far in 1996. A former director,
Mark C. Jones, was paid $7,500 in 1995 and waived a balance due
of $13,800.
Under the terms of the public offering, at least 5% of paid
in capital is required to be set aside to pay for working capital
and contingencies. At December 31, 1995, the Trust has not met
this requirement. The reserve fund presently has approximately
$100,000 for such working capital and contingencies. See Item 3:
-----------
Legal Proceedings.
- -----------------
Much national attention is currently focused on health care
reform. Although there is concern as to the status of
reimbursement programs on which the Trust indirectly relies for
its rental income, management believes the long term care
industry will benefit from any significant health care reform.
Item 7: Financial Statements.
--------------------
The financial statements are listed under Item 13: Exhibits
--------
and Reports on Form 8-K. Such financial statements are included
- -----------------------
herein beginning on Page F-1.
Item 8: Changes in and Disagreements With Accountants on
------------------------------------------------
Accounting and Financial Disclosure.
- -----------------------------------
On January 17, 1995, the Trust dismissed Deloitte & Touche
L.L.P. ("D&T") as its independent accountants. The decision to
change accountants was approved by the Board of Directors. There
were no disagreements between D&T and the Trust, whether or not
resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures,
which, if not resolved to the former accountant's satisfaction,
would have caused it to make reference to the subject matter of
the disagreement in connection with its reports. The Trust has
engaged La Voie, Clark, Charvoz & May, P.C. of Tucson, Arizona as
the auditor for the years ending December 31, 1994 and 1995.
PART III
Item 9: Directors, Executive Officers, Promoters and Control
----------------------------------------------------
Persons; Compliance with Section 16(a) of the Exchange Act.
- ----------------------------------------------------------
General. The Directors of the Trust are responsible for the
-------
management and control of the affairs of the Trust but have
retained the Advisor to, among other things, locate, investigate,
evaluate, and recommend real property and mortgage loan
investment opportunities for the Trust. The Advisor also serves
as a consultant in connection with the investment policy
decisions made by the Directors and supervises, subject to
direction of the Directors, the day-to-day operations of the
Trust. The Bylaws of the Trust provide that a majority of the
Trust's Directors must be unaffiliated with the Advisor and its
affiliates ("Unaffiliated Directors"). The remaining Directors
may be affiliates of the Trust ("Affiliated Directors").
Further, the Bylaws provide that the Trust should have five
Directors; however, at this time, no qualified or willing persons
to become Directors have been located. The Trust had four
Directors as of December 31, 1993: Melvin Himelstein, Grady P.
Hunter, and Mark C. Jones were Unaffiliated Directors. F. Dale
Markham, as President of the Trust, is an Affiliated Director.
Mark C. Jones submitted his resignation effective as of June 30,
1994. Melvin Himelstein submitted his resignation effective as
of January 18, 1995. As a result, the Trust presently has two
Directors, only one of whom may be considered an Unaffiliated
Director.
Officers and Directors of the Trust.
-----------------------------------
The Directors and principal officers of the Trust and their
principal occupations and other affiliations during the past five
years or more, unless otherwise stated, are as follows: Grady P.
Hunter, age 63, has served as a Director of the Trust since its
formation in 1987. Mr. Hunter has been Senior Vice President and
Chief Operating Officer of Lutheran Affiliated Services, Inc. in
Mars, Pennsylvania ("LAS") since April 1991. LAS is one of the
oldest and largest owners and operators of skilled nursing
facilities, specialized care programs and residential care
communities for the elderly in Western Pennsylvania.
From January 1988 until April 1991, Mr. Hunter served as
Executive Vice President and Chief Operating Officer of
Retirement Systems, Inc., a firm engaged in developing facilities
and programs and consulting with developers and operators of
long-term care and assisted living facilities for the frail
elderly.
Mr. Hunter served as Executive Vice President and division
Chief Executive Officer for Stanley Smith Security, Inc. from
1973 to 1987. "Smith" is one of the top ten international
contract and consulting services companies providing electronic,
transportation, security, manpower and facility operations
support services.
F. Dale Markham, age 67, has served as the President of the
Trust since May 16, 1991. He formerly served as Vice President
and Secretary, and has been a Director of the Trust since its
inception in 1987. From 1991 until his retirement effective
December 31, 1994, he was a Mortgage Banking Consultant and
Founder of the Real Estate Financing Division of Wardon Financial
Corporation, a mortgage banking firm located in Phoenix, Arizona.
From 1982 through 1992, he was President, a Director, and a
Principal Stockholder of Markham, Sellers & Mony, Inc., a
mortgage banking firm which was the original managing general
partner of the Advisor and a Sponsor of the Trust. Mr. Markham
served as President of Western American Financial Corporation, a
mortgage banking firm, from 1974 to 1982. He has been involved
in mortgage banking and real estate activities since 1957.
Mr. Markham was discharged from a Chapter 7 bankruptcy in
July of 1991. His bankruptcy had no material impact on his
ability to properly discharge his duties as an officer and
director.
Marvin Mony was elected Secretary of the Trust on April 3,
1992.
Officers and Directors of the Advisor.
-------------------------------------
James R. Sellers, age 62, is the President and sole
stockholder of Heritage Advisory Corporation, the Managing
General Partner of the Advisor.
Heritage has been the Managing General Partner of the
Advisor since July 1990, when it succeeded Markham, Sellers &
Mony, Inc. ("MSM"). Mr. Sellers has been Senior Vice President
of Keystone Capital Group, Inc., an Arizona based mortgage
banking firm since May 1993. Mr. Sellers was Senior Vice
President of Catalina Mortgage Company, also an Arizona based
mortgage banking firm, from July 1990 until May 1993. From 1982
to 1990, he served as Executive Vice President, a Director, and a
principal stockholder of MSM, the original Managing General
Partner of the Advisor. From 1974 until 1978, he served as a
Vice President and thereafter until 1982 as Senior Vice President
of Western American Financial Corporation, a mortgage banking
firm, where he supervised income property lending staffs
throughout the western United States.
Mr. Sellers filed a voluntary petition for protection
against creditors under Chapter 7 of the Bankruptcy Code in the
United States Bankruptcy Court, District of Arizona, on March 26,
1991. He was discharged from this bankruptcy in July of 1991.
His bankruptcy had no material impact on his ability to properly
discharge his duties as an officer and director of the Advisor
nor to manage the day-to-day affairs of the Trust.
Thomas G. Chase, age 43, has served as President and
director of Health Concepts Advisory Company ("HCAC") since its
formation in 1986. HCAC is the other General Partner of the
Advisor, although it has been inactive in the affairs of the
Trust since the Health Concepts Corporation ("HCC") and
affiliated bankruptcy filings in May of 1991, the affiliates
having been the former lessees of the Trust properties until the
discharge of such bankruptcies. He was also a stockholder and a
director of HCC and served as its Executive Vice President and
Secretary from 1988 until 1993. He served as Executive Vice
President of a division of HCC from 1984 to 1985. From 1979
until his affiliation with HCC in 1984, Mr. Chase was employed by
the predecessor of Deloitte & Touche, Louisville, Kentucky, an
international firm of certified public accountants, where he was
a Senior Management Consultant providing services to clients in
health care, elderly housing, financial institutions and other
industries.
Edward L. Turney, age 58, is the Secretary/Treasurer and a
director of HCAC. He served as President, Treasurer and a
Director of the Trust from its inception until his resignation on
May 16, 1991. Mr. Turney has been the President, a director, and
a principal stockholder of HCC, a sponsor of the Trust, since it
was founded by him in 1983.
Item 10: Executive Compensation.
----------------------
Set forth below is information concerning the annual
compensation for services in all capacities to the Registrant of
the President and Treasurer of the Trust for the last three
fiscal years ending December 31, 1995. F. Dale Markham,
President and Treasurer of the Trust, was the only executive
officer of the Trust compensated by the Trust for services
rendered to the Trust during the fiscal years of the Trust ended
December 31, 1995, 1994 and 1993, respectively.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
Name and Principal
Position Year Total Compensation(1)
- ------------------ ---- ---------------------
<S> <C> <C>
F. Dale Markham,
President and Treasurer 1995 $17,800 accrued, $10,000 paid
1994 $19,300 accrued, $4,000 paid
1993 $23,800 accrued, $6,500 paid
</TABLE>
_______________
(1) Includes director's fees payable annually in the amount of
$11,000 per year and additional compensation for additional time
contributed with respect to the management of the Trust ("Special
Fees").
The Trust paid or accrued annual directors' fees of $11,000
each to the Directors in 1995, plus a fee of $800 each for one
Directors' meeting attended in person. In 1996, $11,000 in
accrued Directors' fees and $10,500 in accrued Special Fees have
been paid to Mr. Markham.
The Advisor is required to distribute to each Unaffiliated
Director, as additional compensation, 1,000 shares of Trust
Common Stock for each of the first three fiscal years of the
Trust. The Advisor has neither purchased any such shares from
the Public Offering nor has it purchased any such shares from
broker dealers since the termination of the Public Offering.
Discussions between the Advisor and the remaining Unaffiliated
Director have been held as to the elimination of this
distribution to the Unaffiliated Director; however, no final
agreement has been reached with respect to this form of
compensation.
Mr. Himelstein, in his resignation and of his own volition,
waived all accrued and past due fees. On June 26, 1995, Mr.
Jones offered to accept $7,500 cash in lieu of past due
directors' fees of $16,300. The Directors approved this offer
and payment was made on July 5, 1995. Both Messrs. Jones and
Himelstein further waived any rights to the distribution of Trust
Common Stock referred to above.
The Trust may pay officers whose only affiliation is a
result of being an officer of the Trust. The Trust is not
required to pay any compensation to officers and directors of the
Trust who are also affiliated with the Advisor or its affiliates.
Although directors and officers affiliated with the Advisor are
remunerated indirectly by their relationship to the Advisor and
its affiliated companies, the Trust agreed to pay Mr. Sellers'
company, Heritage Advisory Corporation, the sum of $3,000 per
month beginning May 1, 1992, for an indefinite period. Mr.
Sellers voluntarily reduced the monthly payment to $2,000 per
month beginning August 1, 1993; to $1,600 per month beginning
November 1993; and to $1,000 per month beginning April 1, 1994,
which continues and is expected to continue until the Colorado
Properties are sold, leased or otherwise disposed. See Item 12:
------------
Certain Relationships and Related Transactions.
- ----------------------------------------------
In connection with the extension of the Bayshore loan with
PNC Bank, Heritage Advisory Corporation was paid on April 18,
1995, the sum of $8,817 (one-fourth of 1% of the loan amount of
$3,527,104) for negotiation of such extension. No other direct
compensation was paid or payable by the Trust during the fiscal
year ended December 31, 1995.
Item 11: Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management.
- ----------
The following table sets forth as of March 17, 1996, the
number and percentage of outstanding shares of Common Stock
beneficially owned by each person known by the Trust to own
beneficially more than five percent (5%) of the Trust's
outstanding shares of Common Stock, by each director of the
Trust, and by all directors and officers of the Trust as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT & NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------------- --------------- --------
<S> <C> <C> <C>
Common Stock, Harbor American 20,000 Shares (1) 5.03%
$.01 par value Capital Group, a
California Limited
Partnership
2990 N. Swan, Suite 228
Tucson, AZ 85712
Common Stock, Herbert W. Owens 40,000 Shares 10.06%
$.01 par value 1820 South 35th Avenue
Phoenix, AZ 85009
Common Stock, Grady P. Hunter (2) xxx
$.01 par value 1323 Freedom Road
Mars, PA 16046
Common Stock, F. Dale Markham (1) xxx
$.01 par value Rte. 4, Box 9712 E
Showlow, AZ 85901
Common Stock, James R. Sellers (1) xxx
$.01 par value 6601 N. Montezuma Dr.
Tucson, AZ 85718
Common Stock, Edward L. Turney (1) xxx
$.01 par value 1403 Old Harrods Creek Rd.
Louisville, KY 40223
Common Stock, All Directors and (1) and (2) xxx
$.01 par value Officers of the Trust
</TABLE>
(1) The Advisor owns of record and beneficially 20,000
shares of Common Stock. The former managing general partner of
the Advisor, MSM and HCAC, one of the current general partners,
HCC (the sole shareholder of HCAC) and each of the former
officers, directors and principal shareholders of MSM (F. Dale
Markham, Marvin Mony and James R. Sellers) and HCC (Edward L.
Turney) may also be deemed to be beneficial owners of the shares
of Common Stock owned of record by the Advisor.
(2) The Advisor had previously agreed to distribute to each
Unaffiliated Director, as additional compensation, 1,000 shares
of Trust Common Stock for each of the first three fiscal years of
the Trust. As of the date hereof, the Advisor has neither
purchased any such shares from the Public Offering nor has it
purchased such shares from broker dealers since the termination
of the Public Offering. Discussions between the Advisor and the
Unaffiliated Director have been held as to the elimination of
this distribution to the Unaffiliated Director; however, no final
agreement has been reached with respect to this form of
compensation.
Item 12: Certain Relationships and Related Transactions.
----------------------------------------------
The information set forth below summarizes certain
transactions between the Trust and its directors and/or five
percent (5%) shareholders during fiscal year 1995. The Advisor;
the present managing general partner, Heritage; the former
managing general partner of the Advisor (MSM); a present general
partner of the Advisor (HCAC); HCC (the sole shareholder of
HCAC); and each of the former officers, directors and principal
shareholders of MSM (F. Dale Markham, Marvin Mony and James R.
Sellers); and present officers, directors and shareholders of HCC
(Thomas G. Chase and Edward L. Turney); and of Heritage (James R.
Sellers) may be deemed to be the beneficial owners of more than
5% of the shares of Common Stock of the Trust.
Acquisition Fees. The Advisor receives acquisition fees
----------------
with respect to each real property purchased by or on behalf of
the Trust, equal to up to 5% of the contract price for the
property. No such properties were purchased during 1995, and
therefore no acquisition fees were paid.
Advisory Fee. During the fiscal year ended December 31,
------------
1995, the Trust paid Advisory Fees to the Advisor in the amount
of $18,100. An audit requested by the Advisor of the
calculations of the Advisory Fees paid in 1991, 1992, 1993 and
1994 indicated a combined overpayment of $8,984 as of
December 31, 1994. Accordingly, the Advisor reduced the monthly
payment in 1995 to $500 per month until such time as the overpaid
amount was reduced to zero. This was completed by May 1995. For
the period from January 1, 1996, through March 15, 1996, the
Trust paid Advisory Fees to the Advisor in the amount of $6,900.
James R. Sellers is the owner of Heritage which is the managing
general partner of the Advisor. Further, he is the owner of BHS,
which serves as lessee of the Florida Property. During 1995, BHS
paid lease rentals of $547,914.60 to the Trust.
Item 13: Exhibits and Reports on Form 8-K.
--------------------------------
(a) Documents filed as part of this Report.
--------------------------------------
1. The following financial statements are filed as a part
of this Report on the pages indicated:
Form 10-KSB
Page
----
Independent Auditors Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
(b) Reports on Form 8-K.
-------------------
None.
(c) Exhibits.
--------
See attached list of Exhibits.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Harbor American Health Care Trust, Inc.
Tucson, Arizona
We have audited the accompanying balance sheets of Harbor
American Health Care Trust, Inc. as of December 31, 1995 and
1994, and the related statements of income (with reconciliation
of distributions in excess of net earnings), and cash flows for
the years then ended. These financial statements are the
responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Harbor American Health Care Trust, Inc. as of December 31,
1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Trust will continue as a going concern. As discussed in
Note 1 to the financial statements, the accumulation of losses
and carrying costs of an unleased facility raise a substantial
doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in
Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Tucson, Arizona
March 15, 1996
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-KSB, PART I: FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
------------------------------
1995 1994
------------ ------------
ASSETS:
- ------
<S> <C> <C>
Real Estate Properties:
Land $ 466,301 $ 466,301
Building and improvements, net of
accumulated depreciation of
$3,847,408 and $3,697,274 at
December 31, 1995 and 1994,
respectively 4,509,692 4,659,826
Loan costs, net 5,860 11,184
Prepaid expenses 16,432
Rent and other receivables 77,796 202,465
Cash and cash equivalents 198,061 106,979
----------- -----------
TOTAL ASSETS $ 5,274,142 $ 5,446,755
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- ------------------------------------
Mortgage notes payable $ 5,068,685 $ 5,297,096
Accounts payable and accrued
expenses 191,238 318,460
----------- -----------
TOTAL LIABILITIES 5,259,923 5,615,556
----------- -----------
Stockholders' Equity:
Common stock, $.01 par value,
10,000,000 shares authorized,
397,600 shares issued and
outstanding 3,976 3,976
Paid in capital 3,652,823 3,652,823
Distributions in excess of
net earnings (3,642,580) (3,825,600)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 14,219 (168,801)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,274,142 $ 5,446,755
=========== ===========
</TABLE>
See Notes to Financial Statements
-2-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-KSB, PART I: FINANCIAL INFORMATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994
------------ ------------
REVENUES:
- --------
<S> <C> <C>
Rental income $ 911,512 $ 908,100
Interest and other income 22,127 28,664
----------- -----------
933,639 936,764
----------- -----------
EXPENSES:
- --------
Depreciation and amortization 173,625 201,510
Interest expense 469,411 482,530
Advisory, directors fees
and expenses 23,527 98,095
Other operating expenses 84,056 69,662
----------- -----------
750,619 851,797
----------- -----------
NET INCOME $ 183,020 $ 84,967
=========== ===========
Net income per share $0.46 $0.21
=========== ===========
Weighted average shares outstanding 397,600 397,600
=========== ===========
Reconciliation of distributions
in excess of net earnings:
Beginning of year $(3,825,600) $(3,910,567)
Net income 183,020 84,967
----------- -----------
End of year $(3,642,580) $(3,825,600)
=========== ===========
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FORM 10-KSB, PART I: FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1995 1994
----------- -----------
CASH FLOWS FROM OPERATIONS:
- --------------------------
<S> <C> <C>
Net Income $ 183,020 $ 84,967
Adjustments to reconcile net income
to net cash provided by (used for)
operation activities:
Depreciation and amortization 173,625 201,510
(Increase)/Decrease in:
Rent and other receivable 124,669 (73,659)
Prepaid expenses (16,432)
Accounts payable and
accrued expenses (127,222) (118,917)
---------- ----------
Net cash provided by
operating activities 337,660 91,901
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Sale of real estate properties 1,646,144
---------- ----------
Net cash provided by investing
activities 1,646,144
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Payments on mortgage notes payable (228,412) (1,645,725)
Increase in loan costs (18,166)
---------- ----------
Net cash used in financing
activities (246,578) (1,645,725)
---------- ----------
CASH AND CASH EQUIVALENTS:
- -------------------------
Increase during year 91,082 92,320
Beginning of year 106,979 14,659
---------- ----------
End of year $ 198,061 $ 106,979
========== ==========
Cash paid during the year
for interest $ 485,712 $ 472,818
========== ==========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- ----------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
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 leasing health care facilities (nursing
homes and intermediate care nursing facilities for the
mentally retarded developmentally disabled) 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 remaining, two under lease, thus limiting cash
flows available to pay operating expenses. As discussed in
Note 4 of the financial statements, a mortgage note on the
Colorado Properties was due on February 20, 1996. These
factors, among others, indicate that the Trust may be unable
to continue as a going concern for a reasonable period of
time.
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. On sale of this property, the
State of Florida will require refunding of amounts paid
under Medicare and Medicaid to the extent of depreciation
recapture totalling approximately $565,000. This
accordingly reduces the potential proceeds which might
result from the sale.
The financial statements do not include any adjustments
relating to the recoverability of recorded asset amounts or
the amount of the liabilities that might be necessary should
the Trust be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - For purposes of the statement of
cash flows, the Trust considers all short-term debt
securities purchased with a maturity of three months or less
to be cash equivalents. Cash at December 31, 1995 includes
$120,000 invested in 90 day U.S. Treasury bills.
Buildings and Improvements - Depreciation of these assets is
computed on the straight-line method over the useful lives
of the assets, 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.
Loan Costs - Deferred costs are being amortized on the
straight-line method over a 60 month period.
Revenue Recognition - Rental income from operating leases is
recognized as earned over the life of the lease agreements.
Income Taxes - Management is of the opinion the Trust
qualifies as a REIT under the Internal Revenue Code. As
such, the Trust is not subject to federal income taxes in
amounts distributed to stockholders, provided that
distributions to stockholders are at least 95% of the
Trust's real estate investment trust taxable income and the
Trust meets other certain conditions.
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.
-5-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------
3. REAL ESTATE PROPERTIES AND LEASES
At December 31, 1993, the Trust owned four nursing homes
("the Properties"), one of which was located in Michigan
("the Michigan Property"), two in Colorado ("the Colorado
Properties"), and one in Florida ("the Florida Property").
The Michigan property was sold on March 9, 1994.
At December 31, 1995, the carrying values of the Properties
are as follows:
<TABLE>
<CAPTION>
Colorado Florida
Properties Property Total
----------- ----------- -----------
<S> <C> <C> <C>
Cost:
Land $ 73,106 $ 393,195 $ 466,301
Buildings and improvements 3,673,784 4,683,317 8,357,101
Accumulated depreciation (849,952) (906,459) (1,356,409)
Writedown to net realizable
value (2,491,000) (2,491,000)
----------- ----------- -----------
Net Carrying Value $ 805,938 $ 4,170,055 $ 4,975,993
=========== =========== ===========
</TABLE>
The Trust entered into a new lease on the Florida property
effective May 1, 1993. The new lease of the Florida
property (the "Successor Lease") is owned by a former
director and officer of the Trust, who is also the president
and sole stockholder of Heritage Advisory Corporation, the
managing general partner of the Advisor.
THE MICHIGAN PROPERTIES
The Trust sold the Marshall Manor facility on March 9, 1994.
The carrying value of the Marshall Manor facility was
reduced by $112,000 during 1993 to the amount realized on
the sale. Accordingly, no gain or loss on sale was
recognized during 1994.
Included in the caption "Rent and other receivables" is the
discounted contract balance of $81,290 at December 31, 1995
resulting from the sale of the Marshall Manor facility. The
contract, requiring quarterly payments of $12,500 has been
discounted using an implicit interest rate of 7.5% and
results in principal maturities of $45,153 and $36,137 in
1996 and 1997, respectively. The note 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 with Res-Care, Inc. ("Res-Care"). The
lessee had the option to renew the leases for three, one
year terms. The leases provided 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 each facility,
resulting in an "adjusted monthly rent". The annual base
rents at the inception of the leases were $300,396 ($25,033
per month). The base monthly rent is adjusted annually upon
the issuance of a new annual fair rental allowance by the
State of Colorado.
-6-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------
The Country View lease with Res-Care expired on September
30, 1995. The New Life lease was extended to March 31,
1998.
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 is requiring these patients to be
moved into private housing, which is expected to be
completed during a three year period. The client base for
the purposes of determining rental payments includes
patients who have been moved into private housing.
It is management's belief that the Colorado Properties will
have to be used for purposes other than the present MRDD
use, after the expiration of the initial three year lease
term. Accordingly, the carrying value of the Colorado
Properties were reduced to the amounts expected to be
realized upon disposition of the properties by a previous
charge to operations.
On March 22, 1994, the Colorado Department of Health,
Division of Administration (the "Division") issued a Notice
of Violation and Cease and Desist Order (the "Order") to the
Trust. The Order alleged that in connection with monthly
discharge monitoring reports, based on influent and effluent
samples from the wastewater treatment system at one of the
Colorado Properties, the Trust was in violation of maximum
effluents and concentrations of tested substances, and
required minimum removals of tested substances. The Order,
among other items, required the Trust to submit an
engineering report within 60 days to the Division
identifying structural corrections to the system and the
costs and timing related thereto. The Trust satisfied all
requirements of the Order, paid a $5,000 penalty in March
1995, and does not expect to incur any further costs to
repair the system.
THE FLORIDA PROPERTY
Effective May 1, 1993, management entered into a new five
year lease with a Successor Lessee. The Successor Lessee
has the option to renew for five, 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
Minimum annual lease payments expected to be received by the
Trust during the lease terms are as follows:
<TABLE>
<CAPTION>
Year Ended Florida Colorado
December 31 Property Properties Total
----------- ----------- ----------- -----------
<S> <C> <C> <C>
1996 $ 547,915 $ 149,275 $ 697,190
1997 547,915 149,275 697,190
1998 182,600 37,319 219,929
----------- ----------- -----------
$ 1,278,430 $ 335,869 $ 1,614,299
=========== =========== ===========
</TABLE>
-7-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------
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, for an
amount totaling approximately $70,000 at December 31, 1995.
Fair value of financial instruments - The carrying values of
the financial instruments disclosed elsewhere in these
notes, are deemed to be representative of their fair values,
as the interest rates approximate market rates giving
consideration to their respective risks.
4. MORTGAGE NOTES PAYABLE
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Bank mortgage note - Colorado
Properties, interest at 8.5%;
payable in monthly installments
of $18,111, including interest,
through February 28, 1996, at
which date the unpaid
balance is due $ 1,673,977 $ 1,756,592
Bank mortgage note - Florida
Property, payable in monthly
installments of $38,660,
including interest at 10.25%
through October 31, 1996, at
which date the unpaid balance
is due 3,394,708 3,499,840
Note payable to bank, interest at
prime, due December 20, 1995 40,665
----------- -----------
Total, all current $ 5,068,685 $ 5,297,097
=========== ===========
</TABLE>
The bank mortgage notes on the Colorado and Florida
Properties are secured by first mortgages, 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 notes - Colorado and Florida Properties.
The loan on the Colorado properties is due February 28,
1996. The Bank has extended the loan on the Florida
property to 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.
-8-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Accounts payable $ 31,750 $ 27,500
Accrued interest 5,546 28,398
Accrued directors fees 58,800 111,150
Accrued property taxes 72,785 119,470
Deferred lessee concessions 22,357 31,942
--------- ---------
Total $ 191,238 $ 318,460
========= =========
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Trust has entered into an agreement with the Advisor to
provide various services to the Trust in exchange for fees,
as follows:
o Advisory fees at an annual rate of .3% of average
invested assets, as defined; additional fees may be paid
based on earnings. The Trust incurred advisory fees of
$27,266 and $24,609 during 1995 and 1994, respectively.
o Property management, acquisition and disposition fees to
be paid based upon contractual agreements between the
parties. The Trust has incurred no such fees during 1995
and 1994.
o Incentive advisory service fees, payable annually in an
amount equal to 5% of 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,
1991, one year after the termination of the initial
public offering. The Trust has incurred no incentive
advisory fees to date.
o Mortgage servicing fees, at varying rates dependent upon
the types of loans serviced. The Trust has incurred no
mortgage servicing fees to date.
During 1995 and 1994, the Trust paid $14,000 and $25,000,
respectively, as compensation for managing the affairs of
the Trust to the President and sole stockholder of Heritage
Advisory Corporation, the managing general partner of the
Advisor who is also the sole stockholder of the Successor
Lessees.
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 and has been classified in the balance
sheet as deferred lessee concessions (Note 5).
On January 24, 1996 the Board of Directors waived previously
accrued directors' and special fees totaling approximately
$46,000 as of December 31, 1994. Additional fees totaling
approximately $31,000, which were previously accrued during
the year ended December 31, 1995, were also waived. These
amounts increased current year income by $77,000 or $.19 per
share.
-9-
<PAGE>
HARBOR AMERICAN HEALTH CARE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------
7. CASH RESERVES
Under the terms of the public offering, at least 5% of paid-
in capital is required to be set aside to pay for working
capital and contingencies. At December 31, 1995, the Trust
has not met this requirement.
-10-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996 HARBOR AMERICAN HEALTH CARE TRUST, INC.
By: /s/ F. Dale Markham
-----------------------------------
F. Dale Markham, President and
Treasurer (Principal Executive,
Financial and Accounting Officer)
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
Dated: March 29, 1996 By: /s/ F. Dale Markham
-----------------------------------
F. Dale Markham, Director,
President, Treasurer (Principal
Executive, Financial and
Accounting Officer)
Dated: March 29, 1996 By: /s/ Grady P. Hunter
-----------------------------------
Grady P. Hunter, Director
<PAGE>
Supplemental Information to be Furnished with Reports Filed
- -----------------------------------------------------------
Pursuant to Section 15(d) of the Exchange Act by Non-reporting
- --------------------------------------------------------------
Issuers.
- -------
No annual report or proxy material has been sent to the
Trust's stockholders. An annual report and proxy material will
be sent to the Trust's stockholders subsequent to the filing of
this Form 10-KSB. The Trust shall furnish to the Securities and
Exchange Commission four copies of any annual report or proxy
material that is sent to the Trust's stockholders.
<PAGE>
EXHIBITS
TO
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
HARBOR AMERICAN HEALTH CARE TRUST, INC.
FOR FISCAL YEAR ENDED
DECEMBER 31, 1995
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
- ------- ----
3.1* Articles of Amendment and Restatement of Trust
filed as Exhibit 3.1 to Pre-Effective Amendment
No. 1 to the Trust's Registration Statement on
Form S-11 (Registration No. 33-11863) filed
June 2, 1987
3.2* Third Amended and Restated Bylaws of Trust
filed as Exhibit 3.2 to Form 10-K filed
March 30, 1988
10.1* Advisory Agreement dated as of May 18, 1988
between the Trust and Harbor American Capital
Group, a California Limited Partnership ("HACG")
filed as Exhibit 10.1 to Pre-Effective Amendment
No. 1 to the Trust's Registration Statement
on Form S-11 (Registration No. 33-11863) filed
June 2, 1987
10.2* Advisory Service Agreement dated as of June 25,
1987 between HACG and Health Concepts Advisory
Company filed as Exhibit 10.2 to Form 10-K filed
March 30, 1988
10.3* Advisory Service Agreement dated as of June 25,
1987 between HACG and Markham, Sellers & Mony,
Inc. filed as Exhibit 10.3 to Form 10-K filed
March 30, 1988
10.9(a)* Dividend Reinvestment Agreement and Plan
dated as of June 24, 1987 between the Trust,
Federated Transfer Agents, and LCS, Inc.
Company ("Federated") and HACG filed as
Appendix A to Pre-Effective Amendment No. 2
to the Trust's Registration Statement on
Form S-11 (Registration No. 33-11863) filed
July 2, 1987
10.9(b)* Amendment to Dividend Reinvestment Agreement
dated as of December 11, 1987, between the
Trust, Federated and HACG filed as Exhibit
10.9(b) to Form 10-K filed on March 30, 1988
10.9(c)* Second Amendment to Dividend Reinvestment
Agreement dated as of April 1, 1987, between
the Trust, Federated and HACG (filed as
amendment to Appendix "A" to the Prospectus
and incorporated by reference)
Exhibit Index Page 1
<PAGE>
Exhibit
Number Page
- ------- ----
10.10* Warrant Agreement dated as of July 8, 1987
between the Trust and Federated filed as
Exhibit 10.10 to Form 10-K filed on
March 30, 1988
10.11* Agreement between HACG and the Trust filed
as Exhibit 10.12 to Pre-Effective Amendment
No. 2 to the Trust's Registration Statement
on Form S-11 (Registration No. 33-11863)
filed July 2, 1987
10.12* Master Facility Lease Agreement dated as of
March 1, 1988 between the Trust and HCC-Bayshore
Convalescent Center, Inc. ("HCC-Bayshore")
filed as Exhibit 10.12 to Form 10-K filed
on March 30, 1988
10.13* Security Agreement dated as of March 1, 1988
between the Trust and HCC-Bayshore filed as
Exhibit 10.13 to Form 10-K filed March 30,
1988
10.14* Loan Agreement dated as of March 1, 1988
between the Trust and Citizens Fidelity Bank
& Trust Company ("Citizens") filed as
Exhibit 10.14 to Form 10-K filed on March 30,
1988
10.15* Addendum to Loan Agreement dated as of March 1,
1988 between the Trust and Citizens filed as
Exhibit 10.15 to Form 10-K filed March 30, 1988
10.16* Promissory Note dated as of March 1, 1988
between the Trust and Citizens filed as
Exhibit 10.16 to Form 10-K filed on March 30,
1988
10.17* Assignment of HCC-Bayshore Security Agreement
dated as of March 1, 1988 between the Trust
and Citizens filed as Exhibit 10.17 to Form 10-K
filed on March 30, 1988
10.18* Mortgage dated as of March 1, 1988 between
the Trust and Citizens filed as Exhibit 10.18
to Form 10-K filed on March 30, 1988
Exhibit Index Page 2
<PAGE>
Exhibit
Number Page
- ------- ----
10.19* Assignment of Leases and Rents dated as of
March 1, 1988 between the Trust and Citizens
filed as Exhibit 10.19 to Form 10-K filed
on March 30, 1988
10.20* Supplement to Assignment of Leases and Rents
dated as of March 1, 1988 between the Trust
and Citizens filed as Exhibit 10.20 to
Form 10-K filed on March 30, 1988
10.21* Real Property Purchase Agreement dated as of
March 1, 1988 between the Trust and
Medical Resources Development Corporation,
a Florida corporation, filed as Exhibit 10.24
to Post-Effective Amendment No. 1 to the
Trust's Registration Statement on Form S-11
(Registration No. 33-11863) filed April 13, 1988
10.22* Indemnification Agreement dated March 9, 1988,
between the Trust and HCC-Bayshore filed as
Exhibit 10.25 to Post-Effective Amendment
No. 1 to the Trust's Registration Statement
on Form S-11 (Registration No. 33-11863)
filed April 13, 1988
10.23* Real Property Purchase Agreement dated as of
December 27, 1989, by and among (i) HCC-Country
View Care Center, Inc. ("HCC-Country View"),
a Kentucky corporation; (ii) HCC-New Life
Care Center, Inc. ("HCC-New Life"), a
Kentucky corporation (collectively
HCC-Country View and HCC-New Life are referred
to as the "Sellers"); (iii) the Trust; and (iv)
HACG, and exhibits thereto
10.24* Master Facility Lease dated as of December 27,
1989 between the Trust and HCC-Country View
10.25* Master Facility Lease dated as of December 27,
1989 between the Trust and HCC-New Life
10.26* Loan Agreement dated as of December 27, 1989
between the Trust and Citizens
10.27* Amended and Restated Promissory Note dated
as of December 27, 1989 from the Trust to
Citizens
Exhibit Index Page 3
<PAGE>
Exhibit
Number Page
- ------- ----
10.28* Assumption Agreement and Amendment of Deeds
of Trust and Security Agreement dated as of
December 27, 1989 by and among (i) the Trust;
(ii) Citizens; (iii) HCC-Country View; and
(iv) HCC-New Life
10.29* Supplement to Assignments of Leases and Rents
(Country View) dated as of December 27, 1989
from the Trust to Citizens
10.30* Supplement to Assignment of Leases and Rents
(New Life) dated as of December 27, 1989
from the Trust to Citizens
10.31* Second CV Note dated as of December 27, 1989
from the Trust to HCC-Country View
10.32* Second NL Note dated as of December 27, 1989
from the Trust to HCC-New Life
10.33* Second Deed of Trust dated as of December 27,
1989 from the Trust for the benefit of
Sellers
10.34* Third CV Note dated as of December 27, 1989
from the Trust to HCC-Country View
10.35* Third NL Note dated as of December 27, 1989
from the Trust to HCC-New Life
10.36* Third Deed of Trust dated as of December 27,
1989 from the Trust for the benefit of
HCC-Country View
10.37* Third Deed of Trust dated as of December 27,
1989 from the Trust for the benefit of
HCC-New Life
10.38* Country View Security Agreement dated as of
December 27, 1989 from HCC-Country View to
the Trust
10.39* New Life Security Agreement dated as of
December 27, 1989 from HCC-New Life to
the Trust
Exhibit Index Page 4
<PAGE>
Exhibit
Number Page
- ------- ----
10.40* Collateral Assignment of Notes and Loan
Documents dated as of December 27, 1989
from the Sellers to Citizens
10.41* Collateral Assignment of Second Deed of
Trust dated as of December 27, 1989 from
the Sellers to Citizens
10.42* Assignment of Country View Security Agreement
dated as of December 27, 1989 from the Trust
to Citizens
10.43* Assignment of New Life Security Agreement
dated as of December 27, 1989 from the Trust
to Citizens
10.44* Personal Property Purchase Agreement dated
as of April 17, 1989 between MMNH, Inc.,
HCC-Marshall Manor Nursing Home, Inc. and
HCC, filed as Exhibit 10.44 to Form 10-K filed
on April 1, 1991
10.45* Personal Property Purchase Agreement dated
as of April 17, 1989 between EMNH, Inc.,
HCC-Eaton Manor Nursing Home, Inc. and
HCC, filed as Exhibit 10.45 to Form 10-K
filed on April 1, 1991
10.46* Amendment to HCC-Eaton Purchase Agreement
dated as of October 6, 1989 between EMNH,
Inc., HCC-Eaton Manor Nursing Home, Inc.
and HCC, filed as Exhibit 10.46 to Form
10-K filed on April 1, 1991
10.47* Amendment to HCC-Marshall Purchase Agreement
dated as of October 6, 1989 between MMNH,
Inc., HCC-Marshall Manor Nursing Home, Inc.
and HCC, filed as Exhibit 10.47 to Form 10-K
filed on April 1, 1991
10.48* Second Amendment to HCC-Eaton Purchase
Agreement dated as of December 28, 1989
between EMNH, Inc., HCC-Eaton Manor
Nursing Home, Inc. and HCC, filed as
Exhibit 10.48 to Form 10-K filed
on April 1, 1991
Exhibit Index Page 5
<PAGE>
Exhibit
Number Page
- ------- ----
10.49* Amendment to HCC-Marshall Purchase Agreement
dated as of December 28, 1989 between
MMNH, Inc., HCC-Marshall Manor Nursing Home,
Inc. and HCC, filed as Exhibit 10.49 to
Form 10-K filed on April 1, 1991
10.50* Master Facility Lease Agreement dated as
of April 1, 1990 between the Trust and
HCC-Marshall Manor Nursing Home, Inc.,
filed as Exhibit 10.50 to Form 10-K filed
on April 1, 1991
10.51* Master Facility Lease Agreement dated as
of April 1, 1990 between the Trust and
HCC-Eaton Manor Nursing Home, Inc., filed
as Exhibit 10.51 to Form 10-K filed
on April 1, 1991
10.52* Real Property Purchase Agreement dated as
of April 17, 1989 between Eaton Investment
Company and the Trust, filed as Exhibit
10.52 to Form 10-K filed on April 1, 1991
10.53* Real Property Purchase Agreement dated as
of April 17, 1989 between Calhoun Investment
Company and the Trust, filed as Exhibit 10.53
to Form 10-K filed on April 1, 1991
10.54* Amendment to Real Property Purchase Agreement
dated as of October 6, 1989 between Eaton
Investment Company and the Trust, filed as
Exhibit 10.54 to Form 10-K filed on April 1, 1991
10.55* Amendment to Real Property Purchase Agreement
dated as of October 6, 1989 between Calhoun
Investment Company and the Trust, filed as
Exhibit 10.55 to Form 10-K filed on
April 1, 1991
10.56* Second Amendment to Real Property Purchase
Agreement dated as of December 28, 1989
between Eaton Investment Company and the
Trust, filed as Exhibit 10.56 to Form 10-K
filed on April 1, 1991
10.57* Second Amendment to Real Property Purchase
Agreement dated as of December 28, 1989
between Calhoun Investment Company and
the Trust, filed as Exhibit 10.57 to
Form 10-K filed on April 1, 1991
Exhibit Index Page 6
<PAGE>
Exhibit
Number Page
- ------- ----
10.58* Promissory Note dated as of April 1, 1990
between the Trust and D & N for Eaton Manor,
filed as Exhibit 10.58 to Form 10-K filed
on April 1, 1991
10.59* Promissory Note dated as of April 1, 1990
between the Trust and D & N for Marshall
Manor, filed as Exhibit 10.59 to Form 10-K
filed on April 1, 1991
10.60* Mortgage, Security Agreement, Assignment of
Rents, Leases, Guaranty and Security Agreement
and Financing Statement dated as of April 1,
1990 between the Trust and D & N for Eaton
Manor, filed as Exhibit 10.60 to Form 10-K
filed on April 1, 1991
10.61* Mortgage, Security Agreement, Assignment of
Rents, Leases, Guaranty and Security Agreement
and Financing Statement dated as of April 1,
1990 between the Trust and D & N for Marshall
Manor, filed as Exhibit 10.61 to Form 10-K filed
on April 1, 1991
10.62* Lease Guaranty and Subordination dated as
of April 1, 1990 from HCC and Guarantors in
favor of the Trust for Eaton Manor, filed
as Exhibit 10.62 to Form 10-K filed on
April 1, 1991
10.63* Lease Guaranty and Subordination dated as
of April 1, 1990 from HCC and Guarantors in
favor of the Trust for Marshall Manor, filed
as Exhibit 10.63 to Form 10-K filed on
April 1, 1991
10.64* Security Agreement dated as of April 1, 1990
between HCC-Eaton Manor and the Trust, filed
as Exhibit 10.64 to Form 10-K filed on
April 1, 1991
10.65* Security Agreement dated as of April 1, 1990
between HCC-Marshall Manor and the Trust, filed
as Exhibit 10.65 to Form 10-K filed on
April 1, 1991
10.66* First Omnibus Amendment Agreement dated as
of September 1, 1991 between the Trust and
Citizens, filed as Exhibit 10.66 to Form
10-K filed on May 29, 1992
Exhibit Index Page 7
<PAGE>
Exhibit
Number Page
- ------- ----
10.67* Promissory Note (Renewal) dated as of
September 1, 1991 from the Trust to Citizens,
filed as Exhibit 10.67 to Form 10-K filed
on May 29, 1992
10.68* Mortgage dated as of September 1, 1991 from
the Trust to Citizens, filed as Exhibit 10.68
to Form 10-K filed on May 29, 1992
10.69* Assignment of Leases and Rents dated as of
September 1, 1991 from the Trust to Citizens,
filed as Exhibit 10.69 to Form 10-K filed
on May 29, 1992
10.70* Extension Agreement dated as of September 1,
1991 between the Trust and Citizens, filed
as Exhibit 10.70 to Form 10-K filed on
May 29, 1992
10.71* Lease effective as of September 1, 1992
between the Trust and Eaton Manor Healthcare
Services, Inc., filed as Exhibit 10.71 to
Form 10-KSB filed on April 15, 1993
10.72* Lease effective as of September 1, 1992
between the Trust and Marshall Manor
Healthcare Services, Inc., filed as
Exhibit 10.72 to Form 10-KSB filed on
April 15, 1993
10.73* Lease dated as of September 25, 1992 between
the Trust and Res-Care, Inc. ("Res-Care")
(Country View), filed as Exhibit 10.73 to
Form 10-KSB filed on April 15, 1993
10.74* Lease dated as of September 25, 1992 between
the Trust and Res-Care (New Life), filed as
Exhibit 10.74 to Form 10-KSB filed on
April 15, 1993
10.75* Second Omnibus Amendment Agreement (Bayshore)
effective as of December 4, 1992 between the
Trust and Citizens, filed as Exhibit 10.75 to
Form 10-KSB filed on April 15, 1993
10.76* Second Amendment to Mortgage and Assignment
of Leases and Rents (re: Bayshore First
Mortgage) effective as of December 4, 1992
from the Trust to Citizens, filed as Exhibit
10.76 to Form 10-KSB filed on April 15, 1993
Exhibit Index Page 8
<PAGE>
Exhibit
Number Page
- ------- ----
10.77* Second Amendment to Loan Agreement (Colorado
Nursing Homes) dated as of December 4, 1992
between the Trust and Citizens, filed as
Exhibit 10.77 to Form 10-KSB filed on
April 15, 1993
10.78* Promissory Note (Renewal and Increase) dated
as of September 20, 1992 from the Trust to
Citizens, filed as Exhibit 10.71 to
Form 10-KSB filed on April 15, 1993
10.79* Second Extension Agreement (Weld County,
Colorado) effective as of December 4, 1992
between the Trust and Citizens, filed as
Exhibit 10.79 to Form 10-KSB filed on
April 15, 1993
10.80* First Amendment to Mortgage and Assignment
of Leases and Rents (re: Bayshore Second
Mortgage) effective as of December 4, 1992
from the Trust to Citizens, filed as Exhibit
10.80 to Form 10-KSB filed on April 15, 1993
10.81* Bill of Sale effective as of December 4,
1992 from HCC-Country View to the Trust,
filed as Exhibit 10.81 to Form 10-KSB filed
on April 15, 1993
10.82* Bill of Sale effective as of December 4,
1992 from HCC-New Life to the Trust, filed
as Exhibit 10.82 to Form 10-KSB filed
on April 15, 1993
10.83* Bill of Sale effective as of December 4,
1992 from the Trust to Res-Care, filed
as Exhibit 10.83 to Form 10-KSB filed
on April 15, 1993
10.84* Promissory Note dated as of December 4,
1992 from Res-Care to the Trust, filed
as Exhibit 10.84 to Form 10-KSB filed
on April 15, 1993
10.85* Security Agreement dated as of December 4,
1992 from Res-Care to the Trust, filed as
Exhibit 10.85 to Form 10-KSB filed on
April 15, 1993
Exhibit Index Page 9
<PAGE>
Exhibit
Number Page
- ------- ----
10.86* Promissory Note dated as of December 4,
1992 from the Trust to Citizens, filed as
Exhibit 10.86 to Form 10-KSB filed on
April 15, 1993
10.87* Lease, as amended, dated as of April 1,
1993 between the Trust and Bayshore
Healthcare Services, Inc., filed as
Exhibit 10.87 to Form 10-KSB filed on
April 18, 1994
10.88* Second Supplement to Assignment of Leases
and Rents dated as of May 18, 1993 from
the Trust to PNC Bank, Kentucky, Inc.
(f/k/a Citizens) ("PNC"), filed as
Exhibit 10.88 to Form 10-KSB filed on
April 18, 1994
10.89* Subordination of Security Interest dated
as of May 18, 1993 from the Trust to PNC,
filed as Exhibit 10.89 to Form 10-KSB filed
on April 18, 1994
10.90* Agreement Concerning Interest Arrearage
dated as of May 20, 1993 between the
Trust and PNC, filed as Exhibit 10.90
to Form 10-KSB filed on April 18, 1994
10.91* Purchase and Sale Agreement, dated as of
March 4, 1994 by and between the Trust and
Marshall Healthcare Investors, L.P., a
Georgia limited partnership, filed as
Exhibit 10.91 to Form 10-KSB filed on
April 18, 1994
10.92 Amendment to Promissory Note, dated as
of October 31, 1994, by and between the
Trust and PNC
10.93 Third Extension of Maturity Date of Note
Secured by Mortgage and Assignment of
Leases and Rents (re: Bayshore First
Mortgage), dated as of October 31, 1994,
between the Trust and PNC
27 Financial Data Schedule
*Incorporated by reference
Exhibit Index Page 10
<PAGE>
Exhibit 10.92
AMENDMENT TO PROMISSORY NOTE
----------------------------
THIS AMENDMENT TO PROMISSORY NOTE is (the "Amendment") made
and entered into actually on the dates indicated in the notarial
certificates affixed hereto but is effective as of October 31,
1994, by and between [i] HARBOR AMERICAN HEALTH CARE TRUST, INC.,
a Maryland corporation having its principal office and mailing
address at 6601 North Montezuma Drive, Tucson, Arizona 85718-2427
(the "Maker"), and [ii] PNC BANK, KENTUCKY, INC., a Kentucky
banking corporation having a mailing address of 500 West
Jefferson Street, Louisville, Kentucky 40296 (the "Lender").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Maker is indebted to the Lender in a principal
amount as of the date of this Amendment of $3,527,104.60 as
evidenced by the promissory note dated May 4, 1990 made by Maker
to the order of Lender in the face principal amount of
$3,900,000, the maturity date of said instrument having been
extended and/or other provisions thereof having been amended by,
as applicable, the letter from Maker to Lender dated May 2, 1991,
the letter agreement between Maker and Lender dated as of April
20, 1992, the Second Omnibus Amendment Agreement between Maker
and Lender dated as of December 4, 1992, the letter agreement
between Maker and Lender dated as of May 13, 1993, the Agreement
Concerning Interest Arrearage between Maker and Lender dated as
of May 20, 1993, the Extension of Maturity Date of Note secured
by Mortgage and Assignment of Leases and Rents between Maker and
Lender dated as of March 31, 1994, and the Second Extension of
Maturity Date of Note secured by Mortgage and Assignment of
Leases and Rents dated as of June 30, 1994 (collectively, the
"Note"); and
WHEREAS, Maker and Lender desire to further extend the
maturity date of the Note, and to modify certain other provisions
of the Note as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, for other
valuable consideration, the receipt and sufficiency which are
hereby acknowledged, and intending to be legally bound, Maker and
Lender hereby agree as follows:
1. Effective October 31, 1994, the maturity date of the
Note is extended from October 31, 1994 until October 31, 1996,
when the entire then remaining unpaid principal amount of the
Note shall be due and payable.
2. Effective November 1, 1994, the fixed rate of interest
per annum applicable to the principal of the Note prior to any
default thereunder will be 10.25% rather than 8.00%.
3. Effective November 20, 1994, and continuing on the
20th day of each calendar month thereafter until and including
October 20, 1996, the constant monthly payment amount applied
first to interest accruing on and after such date and then to
principal will be $38,659.55 (being the approximate amount
necessary to fully amortize the principal amount owing as of
October 31, 1994 of $3,527,104.60 pursuant to one hundred eighty
(180) level monthly payments applied first to such accrued and
unpaid interest and then to the principal of such sum). MAKER
ACKNOWLEDGES THAT BECAUSE MONTHLY INSTALLMENTS OF PRINCIPAL AND
INTEREST REQUIRED UNDER THIS PARAGRAPH ARE BASED ON A FIFTEEN
(15) YEAR AMORTIZATION PERIOD AND THE TERM OF THIS NOTE IS
SHORTER THAN THE AMORTIZATION PERIOD, A SUBSTANTIAL PORTION OF
THE PRINCIPAL BALANCE OF THIS NOTE WILL DUE ON THE MATURITY DATE.
4. Except as set forth in this Amendment, all the
provisions of the Note shall remain in full force and effect and
in the same form as existed immediately prior to the
effectiveness of this Amendment. From and after the
effectiveness of this Amendment, each reference to the Note shall
mean and be deemed to be a reference to the Note as modified by
this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed and
delivered by the parties to it effective as of the date set forth
above.
WITNESSES: "Mortgagor"
[i] By: /s/ Marvin Mony HARBOR AMERICAN HEALTH CARE
----------------------
(Signature) TRUST, INC., a Maryland
corporation
Name Marvin Mony
---------------------
(Type or Print) By: /s/ F. Dale Markham
------------------------
- -
F. Dale Markham,
President
[ii] By: /s/ Wendy J. Stetkewicz
----------------------
(Signature)
Name Wendy J. Stetkewicz
---------------------
(Type or Print)
STATE OF ARIZONA )
) SS
COUNTY OF MARICOPA )
I hereby certify that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to
take acknowledgments, personally appeared F. Dale Markham, known
to me to be the President of Harbor American Health Care Trust,
Inc., a Maryland corporation, and who executed the foregoing
instrument and acknowledged before me that he executed the same
on behalf of said corporation.
WITNESS my hand and official seal in county and state last
aforesaid this 27th day of March, 1995.
My commission expires: March 25, 1997.
---------------------------------
/s/ Michelle M. Kienitz
---------------------------------
Notary Public
[SEAL]
"Lender"
WITNESSES: PNC BANK, KENTUCKY, INC., a
Kentucky banking corporation
[i] By /s/Linda M. Osborn
-------------------
(Signature)
Name Linda M. Osborn
-----------------
(Type or Print) By /s/ Lawrence E. Reynolds
-------------------------------
- -
Lawrence E. Reynolds
Vice President
[ii] By /s/ Beverly A. Mees
---------------------
(Signature)
Name Beverly A. Mees
-------------------
(Type or Print)
STATE OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
I hereby certify that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to
take acknowledgments, personally appeared Lawrence E. Reynolds
known to me to be the Vice President of PNC Bank, Kentucky, Inc.,
a Kentucky banking corporation, and who executed the foregoing
instrument and acknowledged before me that he executed the same
on behalf of said corporation.
WITNESS my hand and official seal in county and state last
aforesaid this 10th day of April , 1995.
---- -----------------
My commission expires: 3-12-99
----------------------------------
/s/ Frances M. Kelly
----------------------------------
Notary Public
[SEAL]
THIS INSTRUMENT PREPARED BY
AND TO BE RETURNED TO:
/s/ Arthur A. Rouse
- --------------------------
Arthur A. Rouse
Wyatt, Tarrant & Combs
Citizens Plaza
Louisville, Kentucky 40202
(502) 589-5235
<PAGE>
Exhibit 10.93
NOTE TO RECORDER. Documentary Stamps in amount of
- ----------------
$7,500.00 and $390.00, respectively, and Class "C"
intangible tax of $10,000.00 and $520.00, respectively,
were collected on $5,000,000.00 of indebtedness on
March 11, 1988, and on a $260,000 increase in
indebtedness on May 9, 1990, respectively. Loan since
has been reduced to $3,527,104.60 and no additional
indebtedness is being advanced.
THIRD EXTENSION OF MATURITY DATE
OF NOTE SECURED BY MORTGAGE
AND ASSIGNMENT OF LEASES AND RENTS
----------------------------------
(re: Bayshore First Mortgage)
THIS THIRD EXTENSION OF MATURITY DATE OF NOTE SECURED BY
MORTGAGE AND ASSIGNMENT OF LEASES AND RENTS (the "Amendment") is
executed by the parties to it actually on the dates indicated in
the notarial certificates affixed to it, but is made and
delivered effective as of October 31, 1994, by and between (i)
HARBOR AMERICAN HEALTH CARE TRUST, INC., a Maryland corporation
having its principal office and mailing address at 6601 North
Montezuma Drive, Tucson, Arizona 85718-2427 (hereinafter called
"Mortgagor"), and [ii] PNC BANK, KENTUCKY, INC., a Kentucky
banking corporation having its residence, principal office and
post office address at 500 West Jefferson Street, Louisville,
Jefferson County, Kentucky 40296 (hereinafter called "Lender").
RECITALS
--------
A. Mortgagor and Lender are parties to a certain
Mortgage dated as of March 1, 1988 and recorded March 11, 1988 in
Official Records Book 13605, Page 725 in the Office of the
Circuit Court Clerk of Dade County, Florida (the "Clerk's
Office"), as modified by the First Amendment to Mortgage dated as
of May 4, 1990 and recorded May 9, 1990 in Official Records Book
14539, Page 2826 in the Clerk's Office, a Second Amendment to
Mortgage and Assignment of Leases and Rents ("Second Amendment")
dated December 4, 1992 recorded December 30, 1992 in Official
Records Book 15761, Page 833, in the Clerk's Office, an Extension
of Maturity Date of Note Secured by Mortgage and Assignment of
Leases and Rents dated as of March 31, 1994 recorded April 25,
1994 in Official Records Book 16334, Page 187 in the Clerk's
Office (the "First Extension"), and a Second Extension of
Maturity Date of Note Secured by Mortgage and Assignment of
Leases and Rents dated as of June 30, 1994 recorded August 15,
1994 in Official Records Book 16476, Page 512, in the Clerk's
Office (the "Second Extension") (collectively, the "Mortgage"),
pursuant to which Mortgagor has granted to Lender a mortgage
security interest in the Premises described in the Mortgage as
security for indebtedness presently evidenced by the promissory
note ("Note") made by Mortgagor payable to the order of Lender in
face principal amount of Three Million Nine Hundred Thousand
Dollars ($3,900,000), maturing on October 31, 1994, and having a
current principal balance of $3,527,104.60.
B. In conjunction with the Mortgage, Mortgagor
additionally granted to Lender the Assignment of Leases and Rents
dated as of March 1, 1988, recorded March 11, 1988 in Official
Records Book 13605, Page 743 in the Clerk's Office, as
supplemented by the Supplement to Assignment of Leases and Rents
dated as of March 1, 1988, recorded March 22, 1988 in Official
Records Book 13615, Page 1727 in the Clerk's Office, and as
further amended by the First Amendment to Assignment of Leases
and Rents dated as of May 4, 1990, recorded May 9, 1990 in
Official Records Book 14539, Page 2830 in the Clerk's Office, the
Second Amendment, the First Extension and the Second Extension
(collectively, the "Assignment of Leases").
C. Lender and Mortgagor have agreed to extend the
maturity date of the indebtedness evidenced by the Note from
October 31, 1994 until October 31, 1996.
NOW, THEREFORE, in consideration of the premises, for
other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound,
Mortgagor and Lender hereby agree as follows:
1. Amendment to Mortgage. Mortgagor and Lender hereby
---------------------
modify and amend the Mortgage as follows:
A. The first full paragraph following the word
"WITNESSETH:" on the initial page of the Mortgage is amended and
restated in its entirety as follows:
Mortgagor is justly indebted to Lender for money loaned
to Mortgagor as evidenced by Mortgagor's promissory
note (the "Note") dated May 4, 1990, in the face
principal amount of $3,900,000, with interest thereon
at the rate provided for therein, payable to the order
of Lender on or before October 31, 1996, which is the
final maturity date thereof.
2. Amendment to Assignment of Leases and other Loan
------------------------------------------------
Documents. Each reference to the maturity date of the Note
- ---------
contained in the Assignment of Leases and in each of the other
Loan Documents as defined in the Loan Agreement referenced to in
the Mortgage is amended to read October 31, 1996, and each
reference to a date related to the maturity date of the
indebtedness evidenced by the Note shall be extended by a period
equal to the extension of the maturity of the Note established
pursuant to this Amendment.
3. Confirmation and Ratification. Mortgagor hereby
-----------------------------
restates and confirms for the benefit of Lender each of the
representations, warranties and covenants contained in the
Mortgage and the Assignment of Leases, respectively, each as
modified by this Amendment, and represents and warrants that
Mortgagor has no present defense to payment of the Note.
4. Effect of Amendment. From and after the date hereof,
-------------------
each reference to the Mortgage and the Assignment of Leases,
respectively, shall mean and be deemed to be a reference to the
Mortgage and the Assignment of Leases, respectively, as modified
by this Amendment. Except as expressly modified by this
Amendment, the Mortgage and the Assignment of Leases each shall
remain in full force and effect in the same form thereof as
subsisted immediately prior to the execution and delivery of this
Amendment. This Amendment is binding on each of the parties
hereto, and their respective successors and assigns.
5. No Agreement for Further Extensions. The agreement of
-----------------------------------
Lender to extend the maturity date of the indebtedness evidenced
by the Note until October 31, 1996 as effected pursuant to this
Amendment is limited to this instance solely, and shall not
create any obligation whatsoever on the part of Lender to agree
to or even in good faith to consider any request by Mortgagor to
further extend the maturity date of such indebtedness. Any
decision by Lender to further extend the maturity of the
indebtedness shall be made by Lender in its sole discretion,
which may be exercised arbitrarily.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and
delivered by the parties to it effective as of the date set forth
above.
WITNESSES: "Mortgagor"
[i] By: /s/ Marvin Mony HARBOR AMERICAN HEALTH CARE
---------------------
(Signature) TRUST, INC., a Maryland
corporation
Name Marvin Mony
---------------------
(Type or Print) By /s/ F. Dale Markham
--------------------------
- -
F. Dale Markham,
President
[ii] By: /s/ Wendy J. Stetkewicz
-----------------------
(Signature)
Name Wendy J. Stetkewicz
-----------------------
(Type or Print)
STATE OF ARIZONA )
) SS
COUNTY OF MARICOPA )
I hereby certify that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to
take acknowledgments, personally appeared F. Dale Markham, known
to me to be the President of Harbor American Health Care Trust,
Inc., a Maryland corporation, and who executed the foregoing
instrument and acknowledged before me that he executed the same
on behalf of said corporation.
WITNESS my hand and official seal in county and state last
aforesaid this 27th day of March, 1995.
My commission expires: March 25, 1997
----------------------------------
/s/ Michelle M. Kienitz
----------------------------------
Notary Public
[SEAL]
<PAGE>
"Lender"
WITNESSES: PNC BANK, KENTUCKY, INC., a
Kentucky banking corporation
[i] By /s/ Beverly A. Mees
-------------------- By /s/ Lawrence E. Reynolds
(Signature) -------------------------------
- -
Lawrence E. Reynolds
Name Beverly A. Mees Vice President
------------------
(Type or Print)
[ii] By /s/ Linda M. Osborn
--------------------
(Signature)
Name Linda M. Osborn
------------------
(Type or Print)
COMMONWEALTH OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
I hereby certify that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to
take acknowledgments, personally appeared Lawrence E. Reynolds
known to me to be the Vice President of PNC Bank, Kentucky, Inc.,
a Kentucky banking corporation, and who executed the foregoing
instrument and acknowledged before me that he executed the same
on behalf of said corporation.
WITNESS my hand and official seal in county and state last
aforesaid this 10th day of April, 1995.
My commission expires: 3-12-99
----------------------------------
/s/ Frances M. Kelly
----------------------------------
Notary Public
[SEAL]
THIS INSTRUMENT PREPARED BY
AND TO BE RETURNED TO:
/s/ Arthur A. Rouse
- --------------------------
Arthur A. Rouse
WYATT, TARRANT & COMBS
Citizens Plaza
Louisville, Kentucky 40202
(502) 589-5235
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810836
<NAME> HARBOR AMERICAN HEALTH CARE TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 198,061
<SECURITIES> 0
<RECEIVABLES> 77,796
<ALLOWANCES> 0
<INVENTORY> 5,860
<CURRENT-ASSETS> 0
<PP&E> 4,975,993
<DEPRECIATION> 3,847,408
<TOTAL-ASSETS> 5,274,142
<CURRENT-LIABILITIES> 191,238
<BONDS> 0
<COMMON> 3,976
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,274,142
<SALES> 0
<TOTAL-REVENUES> 933,639
<CGS> 0
<TOTAL-COSTS> 750,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469,411
<INCOME-PRETAX> 183,020
<INCOME-TAX> 0
<INCOME-CONTINUING> 183,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,020
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
