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 June 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: 0-16689
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
June 30, December 31,
1994 1993
Assets
Property and equipment:
Land $ 8,379,434 $ 8,379,434
Building and improvements 40,831,786 40,978,362
---------- ----------
49,211,220 49,357,796
Less accumulated depreciation (9,843,211) (9,264,246)
--------- ---------
39,368,009 40,093,550
Restricted cash 288,543 292,849
Cash and cash equivalents 1,324,792 1,078,390
Accounts receivable, net of allowance
for doubtful accounts of $13,316 in 1993 29,528 21,480
Prepaid expenses, net of accumulated
amortization of $110,663 in 1994 and
$214,934 in 1993 198,402 311,390
Other assets, net of accumulated
amortization of $177,946 in 1994
and $162,909 in 1993 122,809 137,846
Deferred Rent Receivable 415,401 383,290
---------- ----------
Total Assets $ 41,747,484 $ 42,318,795
========== ==========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 167,962 $ 150,097
Due to affiliates 306,016 267,253
Security deposits payable 169,680 170,301
Secured note payable 14,465,873 14,566,107
---------- ----------
Total Liabilities 15,109,531 15,153,758
Partners' Capital (Deficit):
General Partner (206,331) (206,331)
Limited Partners 26,844,284 27,371,368
---------- ----------
Total Partners' Capital 26,637,953 27,165,037
---------- ----------
Total Liabilities
and Partners' Capital $ 41,747,484 $ 42,318,795
========== ==========
STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Income
Rental $ 947,806 $ 1,071,344 $ 1,940,356 $ 2,177,191
Interest 11,359 11,444 21,535 24,305
Other 1,313 2,391 4,115 4,118
------- --------- --------- ---------
Total Income 960,478 1,085,179 1,966,006 2,205,614
Expenses
Property operating 478,429 489,723 910,137 943,079
Depreciation and amortization 430,752 426,016 899,004 846,180
Interest 280,931 348,592 562,831 697,994
General and administrative 56,326 104,708 111,688 187,019
Bad debt 5,406 150 9,430 150
--------- --------- --------- ---------
Total Expenses 1,251,844 1,369,189 2,493,090 2,674,422
--------- --------- --------- ---------
Net Loss $ (291,366) $ (284,010) $ (527,084) $ (468,808)
======= ======= ======= =======
Net Loss Allocated:
To the General Partner $ 0 $ 0 $ 0 $ 0
To the Limited Partners (291,366) (284,010) (527,084) (468,808)
------- ------- ------- -------
$ (291,366) $ (284,010) $ (527,084) $ (468,808)
======= ======= ======= =======
Per limited partnership unit
(5,540,000 outstanding) $ (.05) $ (.05) $ (.10) $ (.08)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the six months ended June 30, 1994
Limited General Total
Partners' Partner's Partners'
Capital Deficit Capital
Balance at December 31, 1993 $ 27,371,368 $ (206,331) $ 27,165,037
Net loss (527,084) 0 (527,084)
---------- ------- ----------
Balance at June 30, 1994 $ 26,844,284 $ (206,331) $ 26,637,953
========== ======= ==========
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
1994 1993
Cash Flows from Operating Activities:
Net loss $ (527,084) $ (468,808)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 899,004 846,180
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash - operating 4,306 (18,412)
Accounts receivable (8,048) 2,007
Prepaid expenses 54,803 42,807
Deferred rent receivable (32,111) (113,422)
Accounts payable and accrued expenses 17,865 (56,196)
Due to affiliates 38,763 73,363
Security deposits payable (621) 4,817
------- -------
Net cash provided by operating activities 446,877 312,336
Cash Flows from Investing Activities:
Additions - to real estate assets (100,241) (347,872)
Accounts payable - real estate assets 0 (305,192)
Restricted cash - reserves 0 553,988
------- ------
Net cash used for investing activities (100,241) (99,076)
Cash Flows from Financing Activities:
Payments of principal on note payable (100,234) (68,507)
------- ------
Net cash used for financing activities (100,234) (68,507)
Net increase in cash and cash equivalents 246,402 144,753
Cash and cash equivalents at beginning of period 1,078,390 209,304
--------- --------
Cash and cash equivalents at end of period $ 1,324,792 $ 354,057
========= ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 562,831 $ 697,994
NOTES TO THE FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements included in 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 June 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the six 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 June 30, 1994, the Partnership had cash and cash equivalents of $1,324,792,
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 $288,543 at June 30, 1994. Such funds include real
estate tax escrows and security deposits.
As of June 30, 1994, prepaid expenses decreased to $198,402 from $311,390 at
year-end 1993. The $112,988 decrease is primarily the result of the continued
amortization of the Partnership's insurance policies and leasing commissions,
partially offset by additional leasing commissions.
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.
During the second quarter, two leases totalling 3,415 square feet expired and
three tenants occupying 6,066 square feet renewed their leases. In June 1994,
the General Partner retained Ramsey-Shilling Co. in connection with the leasing
of the property. Although Ramsey-Shilling will continue efforts to
aggressively market the Property to area brokers and physicians, there can be
no assurances made 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 six months ended June 30, 1994, Partnership operations
resulted in net losses of $291,366 and $527,084, respectively. This compares
with net losses of $284,010 and $468,808, 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 six months ended June 30, 1994 totalled
$947,806 and $1,940,356, respectively, compared to $1,071,344 and $2,177,191
for the corresponding periods in 1993. The decrease in rental income is
primarily attributable to: i) a $187,621 decrease in base rent due to a decline
in average occupancy from 72% at June 30, 1993 to 65% at June 30, 1994, and
lower rental rates on lease renewals, ii) a decline in operating expense
recovery income due to improved operating efficiency of the Property which has
resulted in reduced amounts recoverable from certain tenants, and iii) lower
percentage rent. Interest income for the three and six months ended June 30,
1994 totalled $11,359 and $21,535 respectively, as compared to $11,444 and
$24,305 respectively, for the corresponding periods in 1993. The decrease in
interest income is primarily attributable to the Partnership's maintenance of
lower average cash balances earning less interest in 1994.
Property operating expenses for the three and six months ended June 30, 1994
totalled $478,429 and $910,137, respectively, compared to $489,723 and $943,079
for the corresponding periods in 1993. The decrease is primarily the result of
reduced payroll, administrative and utility expenses. This decrease was
slightly offset by increased repair and maintenance costs resulting from damage
caused by the Northridge earthquake in January of 1994.
For the three and six months ended June 30, 1994, interest expense totalled
$280,931 and $562,831, respectively, compared to $348,592 and $697,994 for the
corresponding periods in 1993. The decrease is attributable to the lower
interest rate on the Partnership's note payable which went into effect on
October 1, 1993.
General and administrative expenses for the three and six months ended June 30,
1994 totalled $56,326 and $111,688, respectively, compared to $104,708 and
$187,019, 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 in the fourth quarter of 1993.
The Partnership also experienced a decrease in 1994 legal fees and other
professional expenses as compared to the corresponding period in 1993.
Bad debt expense for the three and six month period ending June 30, 1994
totalled $5,406 and $9,430 respectively. This compares to bad debt expense of
$150 for the three and six months ended June 30, 1993. This increase reflects
a write-off of certain tenants' outstanding balances determined to be
uncollectible.
PART II OTHER INFORMATION
Items 1-4 Not applicable.
Item 5 Other Information
Effective May 20, 1994, American Express Company ("American
Express") distributed to holders of record of American Express,
shares of Lehman Brothers Holdings Inc. ("Lehman Brothers") common
stock. As a result of this transaction, the Partnership's General
Partner is no longer an affiliate of American Express. This change
is not expected to have any impact on the Partnership.
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 June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities and 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: August 12, 1994 BY: /s/ Ron Hiram
---------------------
Director, President and Chief Financial Officer
