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, 1997
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 33-12791
BEVERLY HILLS MEDICAL OFFICE PARTNERS, L.P.
----------------------------------------------------
Exact Name of Registrant as Specified in its Charter
Delaware 95-4098476
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State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
- ------------------------------------- --------
Address of Principal Executive Offices Zip Code
(212) 526-3237
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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 At September 30, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $ -- $ 8,379,434
Building, building improvements and equipment -- 41,921,813
-- 50,301,247
Less accumulated depreciation -- (14,031,118)
-- 36,270,129
Real estate assets held for disposition 28,500,000 --
Cash and cash equivalents 1,648,703 1,648,513
Restricted cash 533,384 498,257
Accounts and other receivables 67,847 105,552
Leasing commissions and prepaid expense,
net of accumulated amortization of
$212,762 in 1996 110,404 292,542
Other assets, net of accumulated amortization
of $275,692 in 1997 and $253,135 in 1996 25,063 47,620
Deferred rent receivable -- 388,464
Total Assets $30,885,401 $39,251,077
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 228,686 $ 213,517
Due to affiliates -- 337,765
Security deposits payable 180,344 179,725
Secured note payable 13,710,876 13,902,293
Total Liabilities 14,119,906 14,633,300
Partners' Capital (Deficit):
General Partner (206,331) (206,331)
Limited Partners (5,540,000 units outstanding) 16,971,826 24,824,108
Total Partners' Capital 16,765,495 24,617,777
Total Liabilities and Partners' Capital $30,885,401 $39,251,077
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(206,331) $24,824,108 $24,617,777
Net loss -- (7,852,282) (7,852,282)
Balance at September 30, 1997 $(206,331) $16,971,826 $16,765,495
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rental $ 985,998 $1,000,954 $ 3,012,398 $2,978,665
Interest 30,159 25,026 89,328 72,208
Other -- 6,674 24,475 16,758
Total Income 1,016,157 1,032,654 3,126,201 3,067,631
Expenses
Depreciation and amortization 442,928 475,824 1,377,232 1,420,828
Property operating 519,481 436,494 1,372,892 1,319,389
Provision for loss on real
estate held for disposition 7,232,323 -- 7,232,323 --
Interest 266,489 271,326 803,178 817,409
General and administrative 69,187 48,182 155,358 143,962
Asset management fee 12,500 12,500 37,500 37,500
Total Expenses 8,542,908 1,244,326 10,978,483 3,739,088
Net Loss $(7,526,751) $ (211,672) $(7,852,282) $ (671,457)
Net Loss Allocated:
To the General Partner $ -- $ -- $ -- $ --
To the Limited Partners (7,526,751) (211,672) (7,852,282) (671,457)
$(7,526,751) $ (211,672) $(7,852,282) $ (671,457)
Per limited partnership unit
(5,540,000 outstanding) $(1.36) $(.04) $(1.42) $(.12)
Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities
Net loss $(7,852,282) $(671,457)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,377,232 1,420,828
Provision for loss on real estate assets
held for disposition 7,232,323 --
Increase in cash arising from changes
in operating assets and liabilities:
Restricted cash (35,127) (44,184)
Accounts and other receivables 37,705 274,282
Leasing commissions and prepaid expenses (73,118) (127,733)
Deferred rent receivable 22,541 62,620
Accounts payable and accrued expenses 15,169 40,797
Due to affiliates (337,765) 37,500
Security deposits payable 619 12,480
Net cash provided by operating activities 387,297 1,005,133
Cash Flows From Investing Activities
Additions to real estate (195,258) (259,343)
Accounts payable - real estate (432) (20,708)
Net cash used for investing activities (195,690) (280,051)
Cash Flows From Financing Activities
Payments of principal on secured note payable (191,417) (177,187)
Net cash used for financing activities (191,417) (177,187)
Net increase in cash and cash equivalents 190 547,895
Cash and cash equivalents, beginning of period 1,648,513 1,026,560
Cash and cash equivalents, end of period $1,648,703 $1,574,455
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 803,178 $ 817,409
Supplemental Disclosure of Cash Flow Information:
In connection with the General Partner's intent to sell the property in 1997,
deferred rent receivable and prepaid leasing commissions-net of amortization in
the amounts $365,923 and $205,233, respectively, were reclassified as "Real
estate assets held for disposition."
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited interim financial statements include all normal and recurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of September 30, 1997 and the results
of operations for the three- and nine-month periods ended September 30, 1997
and 1996 and cash flows for the nine-month periods ended September 30, 1997 and
1996 and the statement of partners' capital (deficit) for the nine-month
periods ended September 30, 1997. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
The following significant event has occurred subsequent to fiscal year 1996,
and no material contingencies exist which would require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Real estate assets held for disposition
The General Partner has decided to market Beverly Sunset Medical building for
sale and has engaged a real estate brokerage company to assist with the
marketing efforts. The General Partner currently anticipates that the sale of
the Partnership's sole asset will be completed prior to year-end 1997. The
Partnership's real estate assets, deferred rent receivable and prepaid leasing
commissions were reclassified on the balance sheet at September 30, 1997 as
"Real estate assets held for disposition." Accordingly, after September 30,
1997, the Partnership suspended depreciation and amortization in accordance
with the Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed
Of." In addition, the Partnership recognized an expense of $7,232,323 as
provision for loss on real estate assets held for disposition.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The General Partner has commenced marketing the Beverly Sunset Medical Building
(the "Property") for sale and has engaged Ramsey- Shilling Commercial Real
Estate Services, Inc. to assist with the Partnership's marketing efforts. The
Partnership has entered into exclusive negotiations with a major real estate
investment trust to purchase the Partnership's property, and the General
Partner believes it is likely that the Property will be sold in 1997. However,
there can be no assurance that a sale of the Property will occur within this
time frame or that any sale, if completed, will result in a particular price.
In light of the Partnership's marketing efforts, the Partnership's real estate
assets, deferred rent receivable and prepaid leasing commissions were
reclassified on the balance sheet at September 30, 1997 to "Real estate assets
held for disposition." Accordingly, after September 30, 1997, the Partnership
suspended depreciation and amortization in accordance with the Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long- Lived Assets to be Disposed Of." In addition,
the Partnership recognized an expense of $7,232,323 as provision for loss on
real estate assets held for disposition.
At September 30, 1997, the Partnership had cash and cash equivalents of
$1,648,703, largely unchanged from $1,648,513 at December 31, 1996. In order
to remain competitive, the Partnership must pay leasing commissions and tenant
improvement costs associated with new and renewal leases. The amount of such
costs is uncertain at this time and depends 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 from operations and the Partnership cash
reserves, to the extent possible.
At September 30, 1997, the Partnership had restricted cash, which is comprised
of security deposits and real estate tax and insurance escrows, of $533,384,
compared with $498,257 at December 31, 1996. The increase is primarily due to
an increase in the escrow for real estate taxes.
Accounts and other receivables were $67,847 at September 30, 1997, compared to
$105,552 at December 31, 1996. The decrease is primarily due to the collection
of real estate tax abatements in 1997 for the 1994-95 tax year and the timing
of rental receipts.
Leasing commissions and prepaid expenses, net of accumulated amortization,
decreased from $292,542 at December 31, 1996, to $110,404 at September 30,
1997. The decrease is primarily due to the reclassification of prepaid leasing
commissions to "Real estate assets held for disposition" as discussed above. As
a result, the remaining balance consists entirely of prepaid insurance.
At September 30, 1997, other assets were $25,063, compared to $47,620 at
year-end 1996. The decrease is due to the amortization of prepaid interest and
intangible assets for the period ended September 30, 1997.
Due to affiliates was $0 at September 30, 1997, compared to $337,765 at
year-end 1996. The reduction is the result of the payment of accrued asset
management fees.
During the third quarter of 1997, a tenant occupying 1,653 square feet executed
a ten-year lease renewal. Another tenant expanded its space by 460 square feet
during the quarter. However, a tenant occupying 1,899 square feet on a
month-to-month basis vacated the Property in August 1997. As a result, the
Property's occupancy level declined to 71% at September 30, 1997, compared to
72% at September 30, 1996. Despite the decline in occupancy at September 30,
1997, the average occupancy for the first nine months of 1997 was 72%, compared
to 71% for the first nine months of 1996. Two leases representing 2,155 square
feet are scheduled to expire on December 31, 1997.
Results of Operations
- ---------------------
The Partnership incurred net losses of $7,526,751 and $7,852,282, respectively,
for the three and nine months ended September 30, 1997, as compared with net
losses of $211,672 and $671,457, respectively, for the corresponding periods in
1996. The higher net losses are primarily the result of a provision for loss on
real estate assets held for disposition in the amount of $7,232,323 recognized
in the third quarter of 1997 in compliance with Statement of Financial
Accounting Standard No. 121. The higher net losses are also due to higher
property operating expenses, which were partially offset by lower depreciation
and amortization expenses.
Rental income totaled $985,998 and $3,012,398 for the three- and nine-month
periods ended September 30, 1997, respectively, compared with $1,000,954 and
$2,978,665 for the corresponding periods in 1996. The slight increase for the
nine-month period is the result of the increase in average occupancy for the
nine months ended September 30, 1997 compared to the same period in 1996.
Interest income was $30,159 and $89,328 for the three- and nine-month periods
ended September 30, 1997, compared to $25,026 and $72,208, respectively, for
the 1996 periods, the increase of which was due to the Partnership maintaining
a higher cash balance in 1997. Other income totaled $0 and $24,475 for the
three and nine months ended September 30, 1997, compared with $6,674 and
$16,758, respectively, for the 1996 periods. The increase for the nine-month
period is primarily attributable to the receipt of real estate tax abatements
for the 1994-1995 tax year.
For the three- and nine-month periods ended September 30, 1997, property
operating expenses were $519,481 and $1,372,892, respectively, compared to
$436,494 and $1,319,389 for the corresponding periods in 1996. The increases
are mainly due to higher repairs and maintenance expenses in 1997.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEVERLY HILLS MEDICAL OFFICE PARTNERS, L.P.
BY: Medical Office Properties Inc.
General Partner
Date: November 14, 1997 BY: /s/Jeffrey C. Carter
--------------------
Name: Jeffrey C. Carter
Title: Director and President
Date: November 14, 1997 BY: /s/Timothy E. Needham
---------------------
Name: Timothy E. Needham
Title: Vice President and Chief Financial
Officer
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 1,648,703
<SECURITIES> 0
<RECEIVABLES> 67,847
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,500,000
<DEPRECIATION> 000
<TOTAL-ASSETS> 30,885,401
<CURRENT-LIABILITIES> 14,119,906
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 16,765,495
<TOTAL-LIABILITY-AND-EQUITY> 30,885,401
<SALES> 0
<TOTAL-REVENUES> 3,126,201
<CGS> 0
<TOTAL-COSTS> 1,372,892
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,232,323
<INTEREST-EXPENSE> 803,178
<INCOME-PRETAX> (7,852,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,852,282)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,852,281)
<EPS-PRIMARY> (1.42)
<EPS-DILUTED> (1.42)
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