UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-1668
BEVERLY HILLS MEDICAL OFFICE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 95-4098476
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Balance Sheets
September 30, December 31,
Assets 1994 1993
Property and equipment:
Land $ 8,379,434 $ 8,379,434
Building and improvements 40,930,661 40,978,362
49,310,095 49,357,796
Less accumulated depreciation (10,259,133) (9,264,246)
39,050,962 40,093,550
Restricted cash 415,416 292,849
Cash and cash equivalents 1,351,051 1,078,390
Accounts receivable, net of allowance for
doubtful accounts of $13,316 in 1993 78,073 21,480
Prepaid expenses, net of accumulated
amortization of $122,524 in 1994 and
$214,934 in 1993 210,727 311,390
Other assets, net of accumulated amortization
of $185,465 in 1994 and $162,909 in 1993 115,290 137,846
Deferred Rent Receivable 451,463 383,290
Total Assets $ 41,672,982 $42,318,795
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 375,076 $ 150,097
Due to affiliates 328,187 267,253
Security deposits payable 178,698 170,301
Secured note payable 14,414,285 14,566,107
Total Liabilities 15,296,246 15,153,758
Partners' Capital (Deficit):
General Partner (206,331) (206,331)
Limited Partners 26,583,067 27,371,368
Total Partners' Capital 26,376,736 27,165,037
Total Liabilities and Partners' Capital $41,672,982 $42,318,795
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
Rental $ 969,617 $1,083,862 $2,909,973 $3,261,053
Interest 13,071 10,575 34,606 34,880
Other 18,834 10,680 22,949 14,798
Total Income 1,001,522 1,105,117 2,967,528 3,310,731
Expenses
Property operating 487,141 484,057 1,397,278 1,427,136
Depreciation and amortization 435,301 433,400 1,334,305 1,279,580
Interest 279,944 326,425 842,775 1,024,419
General and administrative 60,353 74,668 172,041 261,687
Bad debt - - 9,430 150
Total Expenses 1,262,739 1,318,550 3,755,829 3,992,972
Net Loss $ (261,217) $ (213,433) $ (788,301) $ (682,241)
Net Loss Allocated:
To the General Partner $ - $ - $ - $ -
To the Limited Partners (261,217) (213,433) (788,301) (682,241)
$ (261,217) $ (213,433) $ (788,301) $ (682,241)
Per limited partnership unit
(5,540,000 outstanding) $(.05) $(.04) $(.14) $(.12)
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1994
General Limited Total
Partner's Partners' Partners'
Deficit Capital Capital
Balance at December 31, 1993 $ (206,331) $27,371,368 $27,165,037
Net loss - (788,301) (788,301)
Balance at September 30, 1994 $ (206,331) $26,583,067 $26,376,736
Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
Net loss $ (788,301) $ (682,241)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,334,305 1,279,580
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash - operating (122,567) (72,504)
Accounts receivable (56,593) (7,862)
Prepaid expenses 30,617 (100,224)
Deferred rent receivable (68,173) (178,305)
Accounts payable and accrued expenses 163,266 (5,810)
Due to affiliates 60,934 85,518
Security deposits payable 8,397 2,225
Net cash provided by operating activities 561,885 320,377
Cash Flows from Investing Activities:
Additions - to real estate assets (199,115) (710,874)
Accounts payable - real estate assets 61,713 (241,868)
Restricted cash - reserves - 761,001
Net cash used for investing activities (137,402) (191,741)
Cash Flows from Financing Activities:
Payments of principal on note payable (151,822) (108,092)
Net cash used for financing activities (151,822) (108,092)
Net increase in cash and cash equivalents 272,661 20,544
Cash and cash equivalents at beginning of period 1,078,390 209,304
Cash and cash equivalents at end of period $1,351,051 $ 229,848
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 842,775 $1,024,419
Supplemental Schedule of Non-Cash Investing Activity:
Write-off of fully depreciated tenant improvements $ 246,816 $ -
========= =========
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the nine months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1993, and no
material contingencies exist which require disclosure in this interim report
per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At September 30, 1994, the Partnership had cash and cash equivalents of
$1,351,051, compared with $1,078,390 at December 31, 1993. The increase is
primarily attributable to cash flow provided by property operations, which
exceeded capital expenditures and loan payments at the Property. The
Partnership also had restricted cash of $415,416 at September 30, 1994. Such
funds include real estate tax escrows and security deposits.
As of September 30, 1994, prepaid expenses decreased to $210,727 from $311,390
at December 31, 1993. The $100,663 decrease is primarily the result of the
continued amortization of the Partnership's insurance policies and leasing
commissions, partially offset by leasing commission additions.
In order to lease vacant space at the Property, the Partnership must pay
leasing commissions and tenant improvement costs associated with new leases.
The amount of such costs remains uncertain at this time and will depend upon
the amount of space leased and the extent of required tenant improvements. The
General Partner intends to fund such costs from net cash flow provided by
property operations and Partnership cash reserves, to the extent possible. If
necessary, the General Partner will seek additional borrowings.
Two new five-year leases totalling 5,040 square feet were executed during the
third quarter. As previously reported, the largest of these leases, totalling
4,106 square feet, represents the second largest lease at the Property. As a
result, the Property was 68% occupied at September 30, 1994. Two tenants
representing 5,058 square feet executed lease extensions during the quarter.
Additionally, we completed one new lease, representing 459 square feet, and two
lease renewals, totalling 2,481 square feet, subsequent to the end of the third
quarter. The Partnership's leasing agent continues to aggressively market the
Property to area brokers and physicians, however, there can be no assurances as
to the success of these efforts given the current highly competitive market for
medical office space in the area.
Results of Operations
For the three and nine months ended September 30, 1994, Partnership operations
resulted in net losses of $261,217 and $788,301, respectively, compared to net
losses of $213,433 and $682,241, for the respective periods in 1993. The
increase in net loss for the 1994 periods is primarily attributable to lower
rental income, partially offset by lower interest and general and
administrative expenses.
Rental income for the three and nine months ended September 30, 1994 totalled
$969,617 and $2,909,973, respectively, compared to $1,083,862 and $3,261,053
for the corresponding periods in 1993. The decrease in rental income is
primarily attributable to a decrease in base rent due to a decline in average
occupancy from 72.3% at September 30, 1993 to 67.8% at September 30, 1994,
lower rental rates on lease renewals, and lower percentage rents.
Property operating expenses for the three and nine months ended September 30,
1994 totalled $487,141 and $1,397,278, respectively, compared to $484,057 and
$1,427,136 for the corresponding periods in 1993. The decrease for the nine
month period is primarily the due to reduced payroll, administrative and other
professional expenses, partially offset by increased repair and maintenance
costs resulting from a number of preventive maintenance projects.
For the three and nine months ended September 30, 1994, interest expense
totalled $279,944 and $842,775, respectively, compared to $326,425 and
$1,024,419 for the corresponding periods in 1993. The decrease is attributable
to a decline in the interest rate on the Partnership's note payable from 9.5%
to 7.75% effective October 1, 1993.
General and administrative expenses for the three and nine months ended
September 30, 1994 totalled $60,353 and $172,041, respectively, compared to
$74,668 and $261,687, respectively, for the corresponding periods in 1993. The
decrease represents the accrual of asset management fees in 1994 in the amount
of $50,000 per annum, down from $115,000 per annum in 1993. The General
Partner ultimately waived the fee increase of $65,000 during the fourth quarter
of 1993. The Partnership also experienced a decrease in legal fees, other
professional and salary reimbursement expenses as compared to the corresponding
period in 1993.
Bad debt expense for the nine month period ending September 30, 1994 totalled
$9,430, compared to $150 for the nine months ended September 30, 1993 due to
the write-off of uncollectible rents.
PART II OTHER INFORMATION
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEVERLY HILLS MEDICAL OFFICE PARTNERS, L.P.
BY: MEDICAL OFFICE PROPERTIES INC.
General Partner
Date: November 14, 1994 BY: /s/ Ron Hiram
Director, President and Chief Financial Officer
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