SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from______ to ______.
Commission file number 0-17695.
HealthCare Properties, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1317327
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14160 DALLAS PARKWAY, SUITE 300, DALLAS, TEXAS 75240
- --------------------------------------------------------------------------------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
------------------
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Limited Partnership Interest
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The Registrant's outstanding securities consist of units of limited partnership
interests which have no readily ascertainable market value since there is no
public trading market for these securities on which to base a calculation of
aggregate market value.
Documents incorporated by reference. NONE
------
Exhibit Index Page : 32
Page 1 of 34
<PAGE>
TABLE OF CONTENTS
PART I Page
Item 1 Business 2
Item 2 Properties 3
Item 3 Legal Proceedings 4
Item 4 Submission of Matters to a Vote of Security Holders 5
PART II
Item 5 Market for Registrant's Common Equity
and Related Security Holder Matters 6
Item 6 Selected Financial Data 7
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 8 Financial Statements and Supplementary Data 11
Item 9 Changes in and Disagreements with Accountants on Accounting 11
and Financial Disclosure
PART III
Item 10 Directors and Executive Officers of the Registrant 12
Item 11 Executive Compensation 14
Item 12 Security Ownership of Certain Beneficial Owners and Management 14
Item 13 Certain Relationships and Related Transactions 15
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 32
SIGNATURES 34
<PAGE>
PART I
Item 1. Business
HealthCare Properties, L.P. ("Registrant"), is a Delaware limited
partnership formed in March 1987, for the purpose of acquiring, leasing and
operating, of existing or newly constructed health care properties. The General
Partner of Registrant is Capital Realty Group Senior Housing, Inc. ("Capital")
The offering of Registrant's limited partnership interests (the
"Units") terminated on August 31, 1989, although some Units were sold to
existing investors pursuant to Registrant's distribution reinvestment plan (the
"Plan") until July of 1991 when the Plan was suspended. Registrant received
gross proceeds from the offering of $43,373,269 and net proceeds of $38,748,791.
All of the net proceeds of the offering were originally invested in 12
properties (the "Properties") or used for working capital reserves. Registrant
partially financed the acquisition of eight of its original properties with
non-recourse debt. Four properties were initially unleveraged. As of December
31, 1996, four of the original twelve properties had either been sold or deeded
back to the lender, leaving the Registrant with four properties secured by debt
and four properties unleveraged. See Item 2. "Properties" and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a description of Registrant's properties and their history.
As of December 31, 1996, Registrant had seven properties leased to
unaffiliated operators under triple net leases, whereby the lessee is
responsible for all operating expenses, insurance and real estate taxes. On
August 1, 1996, the United States Bankruptcy Court approved the transfer of the
operations of Cambridge Nursing Home to Cambridge Nursing Home Limited Liability
Company ("Cambridge LLC"), a subsidiary of the Registrant, thereby releasing the
operations of this facility from the jurisdiction of the Bankruptcy Court
All of Registrant's triple net leases with unaffiliated operators
require operators to make necessary repairs and Registrant inspects or receives
reports from each facility at least annually to insure that necessary repairs
are made. Registrant is responsible for capital improvements and debt service
payments under mortgage obligations secured by certain properties.
Both the income and expenses of operating the Properties owned by
Registrant are subject to factors outside the control of both Registrant and the
operators of the facilities, such as oversupply of similar properties resulting
from overbuilding, increases in unemployment or population shifts, reduced
availability of permanent mortgage funds, changes in taxes and regulations,
including healthcare regulations and zoning laws, or changes in patterns or
needs of users.
For the year ended December 31, 1996, Registrant's Properties accounted
for, in the aggregate, in excess of 97% of Registrant's gross revenues.
Registrant's strategy is to maintain and hold its properties for
long-term appreciation. Registrant may reinvest net sale or refinancing proceeds
in additional health care properties.
The terms of the transactions between Registrant and affiliates of the
General Partner of Registrant are set forth below. Also, See Item 13 below.
2
<PAGE>
Transaction with Capital
In June 1993, the holders of Units ("Unit Holders") approved the
replacement of the existing general partners of the Partnership, Jacques-Miller,
Inc. and Jacques and Associates, L.P., (collectively, the "Prior General
Partners"), with Capital as well as various amendments to the Partnership
Agreement of the Partnership (the "Partnership Agreement").
Competition
The real estate business is highly competitive. Registrant's properties
are subject to competition from similar properties in the vicinity of each
property. In addition, the health care industry segments in which Registrant's
lessees participate are also subject to intense competitive pressures, which may
impact such lessees' ability to generate sufficient revenues to fulfill their
obligations to Registrant under their leases.
Employees
The registrant is managed by an affiliate of Capital. There were no
employees of Registrant at December 31, 1996.
Regulatory Matters
Federal, state and local government regulations govern fitness and
adequacy, equipment, personnel and standards of medical care at a health care
facility, as well as health and fire codes. Changes in the applicable
regulations could adversely affect the operations of a property, which could
also affect the financial results of Registrant. Risks of inadequate cost
reimbursements from various government programs such as Medicaid and Medicare
may also impact lessees' ability to fulfill their lease obligations to
Registrant. Any impact from proposed health care legislation is not known at
this time; however, such impact could adversely affect cost reimbursements from
various government programs.
Item 2. Properties
Registrant owns eight properties at December 31, 1996 consisting of
four nursing homes and four rehabilitation centers purchased between October
1987 and October 1990. Four facilities were newly constructed when purchased.
Four facilities are security for mortgage loans. Two of these loans are
non-recourse to Registrant while two loans are guaranteed by Registrant. See
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
3
<PAGE>
The following table summarizes key information about each of Registrant's
properties:
<TABLE>
<CAPTION>
HEALTHCARE PROPERTIES, L.P.
PROPERTY SUMMARY
CEDARBROOK CANE CREEK CRENSHAW CREEK SANDY BROOK
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Location Nashville, TN Martin, TN Lancaster, SC Mt. Dora, FL
Type Rehab Rehab Rehab Rehab
Date Purchased 10/87 11/87 6/88 9/88
Purchase Price $3,955,000 $4,000,000 $3,900,000 $4,200,000
Original Mortgage Amount $2,000,000 $2,200,000 $0 $0
12/31/96 Mortgage Balance $899,029 $789,199 $0 $0
Mortgage Maturity June 30, 1997 December 1, 2001 N/A N/A
End of Lease Term 2001 2001 2001 2001
CAMBRIDGE TRINITY HILLS HEARTHSTONE MCCURDY
----------------------------------------------------------------------------------
Location Cambridge, MA Ft. Worth, TX Round Rock, TX Evansville, IN
Type Nursing Nursing Nursing Nursing
Date Purchased 9/90 2/88 11/88 9/89
Purchase Price $5,100,000 $2,700,000 $3,625,000 $7,100,000
Original Mortgage Amount $0 $0 $1,500,000 $4,700,000
12/31/96 Mortgage Balance $0 $0 $1,341,859 $4,177,328
Mortgage Maturity N/A N/A July 1, 1997 April 1, 2012
End of Lease Term N/A 2000 2000 2001
</TABLE>
Item 3. Legal Proceedings
A. On April 4, 1991, Registrant initiated the filing of an involuntary Chapter
7 bankruptcy proceeding against SentinelCare of California, Inc.
("SentinelCare"), the lessee of Registrant's Diablo/Tamarack facility. This
action resulted in Registrant gaining operating control of the Diablo facility
on April 29, 1991.
On January 21, 1992 Registrant won a judgment against Mr. Barry Lieberman (a
guarantor of SentinelCare's lease) in connection with his guaranties and is
currently pursuing efforts to collect on that judgment in the Connecticut state
courts.
B. In December 1991, Registrant initiated litigation in Massachusetts against
NCA Cambridge Nursing Home (NCAC) and Richard Wolfe (NCAC's operator/lessee and
a guarantor of NCAC's lease obligations to Registrant) in an attempt to enforce
certain obligations of NCAC and Mr. Wolfe under the terms of NCAC's lease of
Registrant's Cambridge Nursing Home facility. In February 1992, NCAC filed a
voluntary Chapter 11 proceeding in the Southern District of Florida. Registrant
subsequently learned that in addition to NCAC's default under certain terms of
its lease, the State of Massachusetts asserted claims against NCAC regarding
prior Massachusetts Medicaid payments made to NCAC for fiscal years 1988 through
1991. The Massachusetts claims were against NCAC; however, Massachusetts has
regulations requiring successor operators of a facility to indemnify the state
for its losses suffered in connection with a prior operator of the same
facility. It was therefore possible that Registrant could have been subject to
such liability based on certain interpretations of state regulations. As a
result, the Registrant could have become liable for approximately $1,400,000 in
4
<PAGE>
connection with the recovery of Medicaid overpayments. Additionally, property
taxes were owed to the City of Cambridge in an amount in excess of $600,000. On
May 24, 1993, Registrant reached an agreement with Mr. Wolfe to repossess that
facility pending emergence from Bankruptcy Court. In December 1995, Registrant
reached a settlement with the State of Massachusetts and the City of Cambridge
with regard to the outstanding issues facing the Cambridge facility. This
settlement was approved by the United States Bankruptcy Court. The settlement
eliminated the Registrant's exposure in connection with the $1,400,000 Medicaid
overpayments and allowed the Registrant to pay a settlement amount with regard
to unpaid property taxes. On August 1, 1996, the United States Bankruptcy Court
approved the transfer of the operations of Cambridge Nursing Home to Cambridge
LLC, a subsidiary of the Registrant, thereby releasing the operations of this
facility from the jurisdiction of the Bankruptcy Court. The Registrant has filed
an administrative claim for advances and past due rent in the Bankruptcy Court.
See Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
C. The prior General Partner of Registrant informed the mortgage lender of
Countryside in April 1992 that all debt service payments were being suspended
and that the respective mortgage obligations of the Registrant needed to be
restructured. This was due to the poor overall financial performance of the
facility. Capital conducted negotiations concerning such debt restructuring and
subsequently sold the Countryside facility on May 1, 1996 to a third party buyer
for approximately $2,200,000. With the sale proceeds, Registrant paid off the
lender on Countryside an amount agreed to by the lender in full settlement of
all obligations to the lender. Registrant netted approximately $26,000 in cash
as a result of this sale, after payment to lender and closing costs. Registrant
also obtained full release of all potential liability from the lender.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
<PAGE>
PART II
Item 5.Market for Registrant's Common Equity and Related Security Holder Matters
At March 19, 1997, there were 2360 Unit Holders of record in Registrant
owning an aggregate of 4,172,457 Units. There is no public market for these
Units and Capital does not plan to list the Units on a national exchange or
automated quotation system. Registrant formerly had a liquidity reserve feature
which, under certain circumstances, permitted Unit Holders to liquidate their
Units. Due to inadequate liquidity of Registrant and the adverse impact on Unit
values caused by defaults of certain of Registrant's lessees, the prior General
Partners suspended all redemptions pursuant to the liquidity reserve in March of
1991. Due to the valuation formula required to be used by Registrant in any such
redemptions, it is unlikely that the General Partner will be able to reinstate
the liquidity feature in the foreseeable future.
Pursuant to the terms of the Partnership Agreement, there are
restrictions on the ability of the Unit Holders to transfer their Units. In all
cases, the General Partner must consent in writing to any substitution of an
Unit Holder. The Internal Revenue Code contains provisions which have an adverse
impact on investors in "publicly traded partnerships." Accordingly, the General
Partner has established a policy of imposing limited restrictions on the
transferability of the Units in private transactions. This policy is intended to
prevent a public trading market from developing and may impact the ability of a
Unit Holder to liquidate his investment quickly. This policy will remain in
effect until such time, if ever, as further changes in the Internal Revenue Code
permit Registrant to alter the scope of the restrictions.
The ability of Registrant to make distributions of Operating Cash Flow
is dependent upon operational performance of properties operated by Registrant
and collection of adequate rental revenues from properties leased to third party
operators.
6
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
HEALTHCARE PROPERTIES, L.P.
(A Delaware Limited Partnership)
December 31, 1996, 1995, 1994, 1993 and 1992
(not covered by Independent Auditors'
Report)
Year Ended December 31
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
1996 1995 1994 1993 1992
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
<S> <C> <C> <C> <C> <C>
Total Assets $32,487,547 $33,812,286 $40,914,991 $43,375,924 $45,979,774
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Mortgage Debt $7,207,414 $9,775,601 $16,268,668 $16,713,020 $17,367,461
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Total Revenue from
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Operations $7,560,104 $8,419,024 $12,574,481 $14,024,311 $9,773,866
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Weighted Average
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Number of Units 4,172,457 4,172,457 4,172,457 4,172,457 4,172,457
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Net Income (Loss)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Income (Loss) Before $684,651 $(2,354,181) $(3,035,459) $(2,395,486) $(598,318)
Extraordinary Item
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Extraordinary Gain $952,692 $3,604,514 $0 $0 $0
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Net Income (Loss) $1,637,343 $1,250,333 $(3,035,459) $(2,395,486) $(598,318)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Net Income (Loss)
Per Unit
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Income (Loss) before $0.16 $(0.56) $(0.71) $(0.56) $(0.14)
Extraordinary Item
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Extraordinary Gain $0.23 $0.79 $0 $0 $0
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Net Income (Loss) $0.39 $0.23 $(0.71) $(0.56) $(0.14)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Net Income (Loss)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Tax $794,101 $(1,692,342) $(393,245) $1,710,132 $(648,013)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Per Unit $.19 $(.41) $(.09) $.41 $(0.15)
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
============== ---- ------------- ----- ------------ ---- ------------- ---- ------------ ----- ------------ ====
Cash Distributions $0 $0 $0 $250,000 $0
============== ==== ============= ===== ============ ==== ============= ==== ============ ===== ============ ====
Per Unit $0 $0 $0 $.06 $0
============== ==== ============= ===== ============ ==== ============= ==== ============ ===== ============ ====
<FN>
The above selected financial data should be read in conjunction with the
consolidated financial statements and the related notes appearing elsewhere in
this annual report. See Footnote 3. "Property and Improvements" to the
Consolidated Financial Statements for discussion of property dispositions.
</FN>
</TABLE>
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
Registrant raised gross proceeds from the offering of over $43,300,000
and purchased twelve properties. Registrant does not anticipate additional
capital investments by Unit Holders. Sources for Registrant's liquidity include
rental revenues from lessees of certain of Registrant's properties, operational
income from properties operated by a subsidiary of Registrant, potential
proceeds from mortgage financing on one or more of Registrant's four unleveraged
properties, or potential sale proceeds from any of Registrant's eight
properties. The Registrant anticipates sufficient cash flow to meet debt service
requirements and cover all other operational expenses. The Registrant may
reinvest net sale proceeds and available cash in additional healthcare
properties. For further information, see the discussion below on each individual
property.
Registrant ended 1996 with cash and cash equivalents of $8,995,455 as
compared with $7,606,857 at December 31, 1995. Cash and cash equivalents
primarily increased in 1996 due to improved cash flow provided by operating
activities.
Accounts receivable at December 31, 1996 were approximately $794,000 as
compared to $210,000 at December 31, 1995. This increase during 1996 is
primarily from the inclusion of operations of Cambridge LLC on August 1, 1996.
Accounts payable and accrued expenses were approximately $1,004,000 at
December 31, 1996, as compared to $1,526,000 at December 31, 1995. This decrease
resulted largely from the reduction of accrued interest and property taxes in
connection with the Countryside facility which was sold on May 1, 1996.
Operating facility accounts payable of approximately $211,000 at
December 31, 1996, and $83,000 at December 31, 1995, related to the Cambridge
LLC and Countryside facilities, respectively.
Decreases from December 31, 1995 to 1996 in property and improvements,
deferred charges and mortgage loans payable in default primarily relate to the
sale of the Countryside property in 1996.
Two loans of the Registrant became due in January 1996;
however, one loan was extended to March 31, 1996 and subsequently extended to
June 30, 1997. The Registrant is currently negotiating extension of the loan
until December 1, 2001. The lender of the other loan agreed to extend the loan
to December 1, 2001, pending completion of final loan documents.
The mortgage loan for the Hearthstone facility becomes due on July 1,
1997. The Registrant will make a decision by the second quarter of 1997 as to
whether to refinance this mortgage loan.
Results of Operations
Rental revenues were approximately $4,590,000 in 1996 compared to
approximately $5,100,000 in 1995, and approximately $5,297,000 in 1994. The
decrease of rental revenues from 1994 to 1995 and from 1995 to 1996 is primarily
due to the loss of lease revenue generated from the Heritage Manor property upon
its sale on July 5, 1995.
8
<PAGE>
Patient revenues of approximately $2,970,000 for the year ended
December 31, 1996, approximately $3,269,000 for the year ended December 31,
1995, and approximately $6,699,000 for the year ended December 31, 1994, related
to the operations at the Cambridge LLC, Countryside, Diablo/Tamarack, and
Foothills facilities. The decrease in patient revenues for 1996 as compared to
1995 resulted from the sale of the Countryside facility on May 1, 1996 and was
partially offset by the commencement of operations of Cambridge LLC on August
1,1996. The decrease in patient revenues for 1995 as compared to 1994 resulted
from the transfers of the Diablo/Tamarack and Foothills facilities back to the
respective lenders in 1995.
During 1996, the gain on disposition of operating properties of
approximately $388,000 and extraordinary gain of approximately $953,000 resulted
from the sale of the Countryside facility. During 1995, the loss on disposition
of operating properties of approximately $1,237,000 and extraordinary gain of
approximately $3,605,000 resulted from the sale of Heritage Manor and transfers
of the Diablo/Tamarack and Foothills facilities.
During 1994, other income of $579,075 primarily resulted from the
collection of $560,000 in legal claims from the former operator of the Foothills
and Countryside facilities.
Facility operating expenses were approximately $2,728,000 in 1996
compared to approximately $3,238,000 in 1995, and approximately $6,597,000 in
1994. The decrease in facility operating expenses in 1996, compared to 1995,
resulted from the sale of the Countryside facility on May 1, 1996 and was
partially offset by the commencement of operations of Cambridge LLC on August
1,1996. The decrease in facility operating expenses in 1995, compared to 1994,
resulted from the transfers of the Foothills and Diablo/Tamarack facilities in
1995.
Depreciation was approximately $1,418,000 for 1996, $1,722,000 for
1995, and $1,912,000 for 1994. Depreciation decreased in 1996 and 1995 due to
the above mentioned dispositions of properties.
Fees to affiliates were approximately $1,276,000, $1,279,000, and
$1,582,000 for the years ended 1996, 1995, and 1994, respectively. Fees to
affiliates were relatively unchanged from 1996 compared to 1995. The decrease of
fees to affiliates in 1995 from 1994 resulted from decreased management fees
upon transfers of the Diablo/Tamarack and Foothills facilities.
Lease default expenses of approximately $115,000, $286,000, and
$453,000 for the years ended 1996, 1995, and 1994, respectively, decreased in
1996 and 1995 due to the resolution of the Countryside, Cambridge,
Diablo/Tamarack and Foothills lease defaults.
Administrative and other expenses were approximately $192,000,
$115,000, and $222,000 for the years ended 1996, 1995, and 1994, respectively.
Administrative and other expenses increased from 1995 to 1996 due to the
increased accounting and professional fees. Administrative and other expenses
decreased from 1994 to 1995 due to decreased professional fees, rent and travel
expenses.
Bad debt expense was approximately $875,000, $1,586,000, and $920,000
for the years ended 1996, 1995, and 1994, respectively. Bad debt expense
decreased in 1996, compared to 1995, because the Registrant stopped making lease
rent accruals on the Cambridge facility, which accruals had been fully reserved
by the Registrant, upon release of facility operations by the Bankruptcy Court
on August 1, 1996. See Item 3. "Legal Proceedings". Bad debt expense increased
9
<PAGE>
in 1995, compared to 1994, primarily due to bad debt allowance provided on
advances made to NCAC to pay property taxes on the Cambridge facility.
Interest income was approximately $239,000, $186,000, and $103,000 for
the years ended 1996, 1995, and 1994, respectively. Interest income increased in
1996 and 1995 from 1994 due to additional interest earned on net proceeds
received upon the sale of Heritage Manor and increased operational cash flow.
Amortization was approximately $114,000, $171,000, and $196,000 for the
years ended 1996, 1995, and 1994, respectively. Amortization decreased in 1996
and 1995, compared to the prior year, primarily due to fully amortized deferred
costs for the Diablo/Tamarack, Countryside, and Foothills facilities.
Interest expense was approximately $784,000, $1,325,000, and $1,646,000
for the years ended 1996, 1995, and 1994, respectively. Interest expense
decreased in 1996 from 1995 due to the repayment of the mortgage upon the sale
of the Countryside facility. Interest expense decreased in 1995 from 1994 due to
the repayment of the mortgage upon the sale of Heritage Manor and the transfer
of the Diablo/Tamarack and Foothills mortgages back to the lenders.
In the fourth quarter of 1994, the Cambridge property which had been
carried at $4,185,381 was written down to the appraised value of $2,000,000.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Operations of the Registrant's Properties
Cedarbrook, Cane Creek, Crenshaw Creek and Sandy Brook facilities. Rebound,
Inc. (a subsidiary of HealthSouth Corporation) leases the Cedarbrook, Cane
Creek, Crenshaw Creek and Sandy Brook properties pursuant to a master lease with
the Registrant.
Due to low occupancy of the Sandybrook facility, it was closed in 1994
and at this time the lessee has not provided any information on when it might
reopen. Rental payments in March and April 1995 were discontinued by HealthSouth
causing an interruption in the master lease. Registrant met with HealthSouth and
those payments were subsequently made in the second quarter of 1995. Subsequent
to that time period, all payments have been made on a timely basis. In February
1997, the Registrant was notified by HealthSouth of the closing of the
Cedarbrook facility due to the low occupancy. At this time, the Registrant
cannot determine when this facility might reopen. HealthSouth has continued to
make lease payments on a timely basis.
Two recourse loans, Cedarbrook and Cane Creek, were due in January 1996
in the aggregate amount of approximately $2,400,000. The Cedarbrook note was
extended through March 31, 1996 and subsequently extended to June 30, 1997. The
Registrant is currently negotiating extension of the loan until December 1,
2001. The lender of the Cane Creek note agreed to extend the loan to December 1,
2001, pending completion of final loan documents.
Countryside facility. On May 1, 1996, the Countryside facility was sold
to a third party buyer for approximately $2,200,000. With the sale proceeds,
Registrant paid off the lender on Countryside an amount agreed to by the lender
in full settlement of all obligations to the lender. Registrant netted
10
<PAGE>
approximately $26,000 in cash as a result of this sale, after payment to lender
and closing costs. Registrant also obtained a full release of all potential
liability from the lender.
Cambridge facility The lessee of the Cambridge facility, NCAC, filed a
voluntary petition under Chapter 11 of the Federal Bankruptcy Code in February
of 1992. Registrant commenced litigation against NCAC seeking full payment of
future rentals under the lease of NCAC. See Item 3, B.
On August 1, 1996, the United States Bankruptcy Court approved the
transfer of the operations of NCA Cambridge Nursing Home to Cambridge LLC, a
subsidiary of the Registrant, thereby releasing the operations of the facility
from the jurisdiction of the United States Bankruptcy Court.
Trinity Hills, McCurdy. and Hearthstone facilities The Registrant's
other facility lessees are all current in their lease obligations to the
Registrant. In addition, the Registrant believes it likely that two of these
lessees will pay additional rental amounts to the Registrant during future years
based upon increased revenues at those facilities. However, there can be no
assurance of such increased revenue. Two of these facilities appear to be
generating cash flow sufficient to fund their lease obligations, but Trinity
Hills is, at this time, not generating sufficient cash flow to fund its lease
obligations from property operations. However, the lessee continues to fund the
lease deficit.
Impact of Inflation
To offset potential adverse effect of inflation, Registrant has
required each of its unaffiliated tenants to execute "triple-net" leases with
the tenant being responsible for all operating expenses, insurance and real
estate taxes. Such leases generally require additional participating rent
payments based on certain increases in the lessee's collected revenues. To the
extent that Registrant undertakes to operate certain facilities through
wholly-owned subsidiaries, those subsidiaries, and ultimately Registrant, will
be directly exposed to the inflationary pressures on health care industry
operating costs.
Item 8. Financial Statements and Supplementary Data
See the Consolidated Financial Statements with Independent Auditors'
Report thereon.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
11
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The Registrant is a Limited Partnership managed by an
affiliate of Capital and has no directors, officers, or
significant employees.
(b) The General Partner of Registrant is:
Capital Realty Group Senior Housing, Inc., ("Capital") a
Texas corporation, that was formed under the laws of the State
of Texas in 1988.
(c) As of December 31, 1996 the officers and directors of Capital,
the General Partner, were:
Name Age Position
Jeffrey L. Beck 52 Chief Executive Officer and Director
James A. Stroud 46 Chief Operating Officer, Secretary
and Director
Keith N. Johannessen 40 President
David Beathard 49 Vice President
Rob L. Goodpaster 44 National Director of Marketing
David Brickman 38 Vice President
Robert F. Hollister 41 Controller
JEFFREY L. BECK, age 52. Mr. Beck has served as an officer and a director
of Capital since December 1988, most recently serving as Chief Executive Officer
since November 1990. He owns 50% of Capital Realty Group Corporation, the parent
of Capital and has served as its Chief Executive Officer since February 1988.
From 1975 to 1985, he was President of Beck Properties, Inc., which was the
predecessor of Capital. From 1973 to 1974, he was Regional Controller with
Trammell Crow & Company, a real estate company based in Dallas, Texas. Mr. Beck
is Chairman of the Board of Directors of United Texas Bank of Dallas. Mr. Beck
served as Chairman of the American Senior Housing Association.
JAMES A. STROUD, age 46. Mr. Stroud has served as an officer and a
director of Capital since December 1988, most recently serving as Chief
Operating Officer and Secretary since May 1991. He owns 50% (through a trust) of
Capital Realty Group Corporation, the parent of Capital and has served as its
President, Secretary and a Director since February 1988. From 1984 until 1985,
he was Executive Vice-President of Equity Management Corporation, Dallas, Texas,
a full service real estate company. From 1980 to 1983, he was director in charge
of the Tax Department of the law firm of Baker, Glast & Middleton, Dallas,
Texas. From 1978 until 1980, he was an associate with Brice & Mankoff (formerly
Durant and Mankoff), a law firm in Dallas, Texas. Mr. Stroud is a Certified
Public Accountant and a licensed attorney. He received his B.B.A. from Texas
Tech University with highest honors, his J.D. from the University of Texas with
honors, and his L.L.M. in taxation from New York University with honors. While
at New York University, he was a graduate editor of the New York University Tax
Law Review and a Wallace Scholar. Mr. Stroud is a founder and director of the
Assisted Living Facilities Association of America, a member of the Health
Industry Council, President-elect of the National Association for Senior Living
Industries ("NASLI"), and has delivered speeches on health care topics to the
NASLI, National Investment Conference, and the Urban Land Institute.
12
<PAGE>
KEITH N. JOHANNESSEN, age 40. Mr. Johannessen became Executive Vice
President of Capital in May 1993 with responsibility for supervising the
day-to-day operations of Capital's retirement communities. In March 1994, Mr.
Johannessen became President of Capital. From September 1992 through May 1993,
Mr. Johannessen was a Senior Manager in the North Central Region for the health
care practice of Ernst & Young LLP, responsible for assisting in the development
and direction of the firm's long term care center consulting projects in the
region as well as on a national basis. From August 1987 through September 1992,
Mr. Johannessen was Executive Vice President with Oxford Retirement Services,
Inc. responsible for the sales, marketing and operations of retirement
communities and nursing homes. From August 1978 to August 1987, Mr. Johannessen
was employed by Life Care Services Corporation in a variety of operations
management positions, from single retirement projects to multi-facility
responsibilities. He is a licensed nursing home administrator and holds a
Bachelor of Arts Degree from Nyack College, New York. Mr. Johannessen is active
in the American Senior Housing Association, National Association for Senior
Living Industries and the American Association of Homes and Services for the
Aging.
DAVID BEATHARD, age 49. Mr. Beathard is Vice President of Capital with
responsibility for supervising the daily operations of Capital Nursing Homes and
Senior Communities. Prior to joining Capital, Mr. Beathard was a management
consultant for the retirement housing industry in Ohio. From 1978 to 1991, Mr.
Beathard served as Executive Director , Regional Administrator, Regional Vice
President, and Vice President and Director of Operations Management for Life
Care Services Corp. Mr. Beathard has been in the senior housing and services
business for 20 years.
ROB L. GOODPASTER, age 44. Mr. Goodpaster became National Director of
Marketing of Capital in December 1992, with overall responsibility for marketing
and lease-up functions of Capital's managed properties. With 19 years of
experience in the industry, Mr. Goodpaster has an extensive background in
retirement housing marketing. His experience includes analyzing demographics,
developing and implementing marketing plans, creating outreach and advertising
programs, hiring and training sales personnel and implementing lead management
and tracking systems. Prior to joining Capital, Mr. Goodpaster was National
Director of Marketing for Autumn America from January 1990 to November 1992.
From 1985 until December 1989, he was President of Retirement Living Concepts,
Inc. where he marketed retirement properties throughout the United States. Mr.
Goodpaster was formerly Vice President, Marketing for U.S. Retirement Corp. from
1984 to 1985 and Vice President, Development for American Retirement Corp. from
1980 to 1984. Mr. Goodpaster is a graduate of Ball State University with a B.S.
in Business Management and Marketing. Mr. Goodpaster is a member of the National
Association of Senior Living Industry and the Texas Association of Retirement
Communities.
DAVID BRICKMAN, age 38. Mr. Brickman has served as Vice President and
Counsel of Capital since 1992. Mr. Brickman received his bachelor of Arts degree
from Brandeis University. He holds a J.D. from the University of South Carolina
Law School, an M.B.A. from the University of South Carolina School of Business
Administration and a Masters of Health Administration from Duke University.
Prior to joining Capital in 1992, he served as in-house counsel from 1986
through 1987 with Cigna Health Plan, Inc., from 1987 through 1989 with American
General Group Insurance Company and from 1989 until joining Capital, with LifeCo
Travel Management Company located in Houston, Texas. In addition to his legal
responsibilities, Mr. Brickman is also responsible for asset management
activities, operational activities and investor relations for Capital's
portfolio.
13
<PAGE>
ROBERT F. HOLLISTER, age 41. Mr. Hollister has served as Controller of
Capital since 1992. Mr. Hollister received his Bachelor of Science in Accounting
from the University of Maryland. His experience includes public accounting as
well as private experience in fields such as securities, construction, and
nursing homes. Prior to joining Capital in 1992, Mr. Hollister was the chief
financial officer and controller for Kavanaugh Securities, Inc. from December
1985 until 1992. Mr. Hollister is the property controller and supervises the
day-to-day accounting and financial aspects of Capital. Mr. Hollister is a
Certified Financial Planner and a member of both local and national professional
accounting organizations.
(d) Section 16 (a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and any amendments
thereto furnished to the Registrant pursuant to Rule 16a-3(e) of the
SEC rules, the Registrant is not aware of any failure of any officer or
director of Capital or beneficial owner of more than ten percent of the
Units to timely file with the SEC any Form 3, 4 or 5 relating to the
Registrant for 1996 except that the following persons or entities
failed to file in a timely basis the following reports: Capital filed
five late reports on Form 4 reporting fourteen transactions; Capital
Retirement Group, Inc. filed five late reports on Form 4 reporting four
transactions; Capital Senior Living Communities, L.P. filed five late
reports on Form 4, reporting fourteen transactions; and each of Messrs.
Beck and Stroud filed five late reports on Form 4, reporting fourteen
transactions.
Item 11. Executive Compensation
The Registrant has no officers or directors. The officers and directors
of the General Partner receive no direct current remuneration from Registrant
nor is it proposed that they receive remuneration in such capacities. Registrant
is required to pay certain fees to the General Partner or its affiliates, make
distributions, and allocate a share of the profits and losses of Registrant to
the General Partner. The relationship of the General Partner (and its directors
and officer) to its affiliates is set forth above in Item 10. Reference is also
made to Note 7 of the Notes to the Consolidated Financial Statements included
herein, for a description of such distributions, allocations and the
compensation and reimbursements paid to the General Partner and certain
affiliates. Also see Item 13. "Certain Relationships and Related Transactions"
for additional information.
There are no compensatory plans or arrangements resulting from
resignation or retirement of the partners, directors or executive officers of
the General Partner which require payments to be received from Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Aside from Capital Senior Living Communities, L.P., an affiliate of
Capital, which owns 37.5% of outstanding units of Registrant as of March 27,
1997, no other person or group owns more than 5% of Registrant as of March 27,
1997.
(b) No partners, officers or directors of the General Partner directly
own any Units at March 19, 1997. However, Messrs. Beck and Stroud (through a
trust) each own indirectly 50% of Capital and they may be deemed beneficial
owners of the Units owned by Capital and Capital Senior Living Communities, L.P.
Capital also owns a 2% interest in the Registrant as the general partner.
14
<PAGE>
Item 13. Certain Relationships and Related Transactions
Under the terms of the Partnership Agreement, Registrant is entitled to
engage in various transactions involving affiliates of the General Partner.
Pursuant to the Partnership Agreement, the General Partner receives a share of
Registrant's profits and losses.
The General Partner and its affiliates are entitled to receive an
Acquisition Fee, as defined in Registrant's Partnership Agreement, for their
services rendered to Registrant in connection with the selection and purchase of
any property by Registrant whether designated as real estate commissions or
other fees, however designated and however treated for tax or accounting
purposes. Aggregate Acquisition Fees payable to all persons in connection with
the purchase of Registrant's properties may not exceed the lesser of: (a) 2% of
the gross proceeds of Registrant's offering; or (b) such compensation as is
customarily charged in similar arm's-length transactions. If there are
insufficient proceeds to pay such fee to the General Partner and their
affiliates, such amount will not be deferred. No amounts were earned in 1996 and
1995 in connection with such services. In connection with any reinvestment of
sale or refinancing proceeds as provided in the Partnership Agreement, the
Registrant will pay a reinvestment acquisition fee of 2% of the price of
additional properties payable from Net Sale or Refinancing Proceeds utilized
solely for the acquisition. No such fees were paid in 1996 or in 1995.
Registrant may pay the General Partner or its affiliates a Regulatory
Approval Fee, as defined in the Partnership Agreement, of up to 6% of the costs
of any newly constructed property which is acquired by Registrant. The services
rendered in connection with such fee will include: obtaining the appropriate
certificates of need, licenses, Medicare and Medicaid clearances, regulatory
approvals of transfer as is necessary, and such other federal, state, local and
other regulatory agency approvals as are necessary, and completion of various
other items which pertain to the commencement of the operation of a newly
constructed health care facility. Said services are expected to continue over
the term for which such Registrant properties are subject to compliance with
regulatory agencies, so as to ensure that the newly constructed property can be
placed into service on a timely basis and remain operational. This fee will not
exceed $1,150,000. The General Partner or its affiliates did not earn any
compensation in 1996 or in 1995 in connection with such services. The Prior
General Partners earned $455,000 since inception.
Registrant may pay to the General Partner or its affiliates, for
services rendered in connection with the refinancing of a Registrant property, a
mortgage placement fee equal to the lesser of: (a) 2% of the refinancing
proceeds of the Registrant property; or (b) fees which are competitive for
similar services in the geographical area where the Registrant property is
located. No such fees were paid in 1996 or 1995.
Registrant may pay to the General Partner or its affiliates, for
services rendered in connection with the sale of a Registrant property, and
shall be entitled to receive the lessor of: (a) 3% of the sale price of the
Registrant's property, or (b) an amount not to exceed 50% of the standard real
estate commission. Amounts earned by the General Partner in 1996 for the sale of
Countryside were $66,000 and in 1995 for the sale of the Heritage Manor was
$92,250.
For property management services, the General Partner or its affiliates
are entitled to receive leasing and property management fees. Since most of
Registrant's properties have long-term, triple-net leases and others have
independent fee management engagements for most services, the General Partner or
its affiliates received 1% of the monthly gross rental or operating revenues,
totaling approximately $72,000, $80,000, and $113,000 in 1996, 1995, and 1994,
respectively. Property management fees paid to the General Partner were
15
<PAGE>
approximately $208,000, $252,000, and $474,000 in 1996, 1995, and 1994,
respectively. Asset management fees paid to the General Partner were
approximately $740,000, $712,000, and $731,000 in 1996, 1995, and 1994,
respectively.
The General Partner may be reimbursed for its direct expenses relating
to offering and administration of Registrant. The General Partner or its
affiliates received $256,000, $235,000, and $266,000 reimbursements for such
out-of-pocket expenses in 1996, 1995, and 1994, respectively.
In addition, a 50% owner of the General Partner is chairman of the
board and an owner of a bank, United Texas Bank of Dallas, where the Registrant
holds the majority of its operating cash accounts.
16
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
HealthCare Properties, L.P.:
We have audited the accompanying consolidated balance sheets of HealthCare
Properties, L.P. and subsidiaries (a Delaware limited partnership) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, partnership equity, and cash flows for each of the years in the
three-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HealthCare
Properties, L.P. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 7, 1997, except as to the fifth paragraph
of note 4, which is as of March 21, 1997
18
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 8,995,455 7,606,857
Accounts receivable, less allowance for doubtful accounts of
of $4,225,811 in 1996 and $3,489,937 in 1995 (notes 6 and 9) 794,234 210,409
Prepaid expenses 85,295 129,714
Property and improvements, net (notes 3, 4 and 5) 22,112,619 25,251,255
Deferred charges, less accumulated amortization of $765,409 in
1996 and $734,146 in 1995 499,944 614,051
------------ ------------
$ 32,487,547 33,812,286
========== ==========
Liabilities and Partnership Equity
Accounts payable and accrued expenses (note 4) $ 1,004,204 1,526,209
Operating facility accounts payable 211,304 83,194
Mortgage loans payable - in default (note 4) - 2,068,539
Mortgage loans payable (note 4) 7,207,414 7,707,062
----------- -----------
8,422,922 11,385,004
----------- ----------
Partnership equity (deficit):
Limited partners (4,172,457 units) 24,058,684 22,449,617
General partner 5,941 (22,335)
-------------- -------------
24,064,625 22,427,282
Commitments and contingencies (note 4)
$ 32,487,547 33,812,286
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Revenues (notes 5, 6 and 9):
<S> <C> <C> <C>
Net patient service $ 2,969,991 3,268,800 6,698,751
Rental 4,590,113 5,100,085 5,296,655
Other income - 50,139 579,075
----------- ----------- ------------
7,560,104 8,419,024 12,574,481
--------- --------- ----------
Expenses:
Facility operating expenses 2,727,909 3,238,004 6,597,068
Depreciation 1,418,293 1,721,605 1,911,876
Fees to affiliates (note 7) 1,275,833 1,279,428 1,581,765
Bad debts 875,143 1,585,555 919,737
Lease default expenses 114,523 286,108 453,140
Administrative and other 192,385 114,625 222,055
---------- ---------- ------------
6,604,086 8,225,325 11,685,641
--------- --------- ----------
Income from operations 956,018 193,699 888,840
---------- ---------- ------------
Other income (expense):
Interest income 239,215 185,650 102,511
Interest expense (784,092) (1,324,845) (1,645,647)
Amortization (114,107) (171,265) (195,782)
Gain (loss) on disposition of operating
properties, net (note 3) 387,617 (1,237,420) -
Loss due to reduction of carrying value of
operating properties (note 3) - - (2,185,381)
--------------- --------------- -----------
(271,367) (2,547,880) (3,924,299)
---------- --------- -----------
Income (loss) before extraordinary item 684,651 (2,354,181) (3,035,459)
---------- --------- -----------
Extraordinary gain on disposition of
operating properties (note 3) 952,692 3,604,514 -
---------- --------- -----------
Net income (loss) $ 1,637,343 1,250,333 (3,035,459)
========= ========= ===========
Allocation of net income (loss):
Limited partners $ 1,609,067 960,336 (2,974,750)
General partners 28,276 289,997 (60,709)
----------- ---------- -------------
$ 1,637,343 1,250,333 (3,035,459)
========= ========= ===========
Per unit:
Income (loss) before extraordinary item $ .16 (.56) (.71)
Extraordinary gain .23 .79 -
--- --- ---
Net income (loss) $ .39 .23 (.71)
=== === ===
Distributions $ - - -
Weighted average number of units 4,172,457 4,172,457 4,172,457
========= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Consolidated Statements of Partnership Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Equity at December 31, 1993 $ 24,464,031 (251,623) 24,212,408
Net loss (2,974,750) (60,709) (3,035,459)
----------- -------- -----------
Equity at December 31, 1994 21,489,281 (312,332) 21,176,949
Net income 960,336 289,997 1,250,333
------------ ------- -----------
Equity at December 31, 1995 22,449,617 (22,335) 22,427,282
Net income 1,609,067 28,276 1,637,343
----------- -------- -----------
Equity at December 31, 1996 $ 24,058,684 5,941 24,064,625
========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 1,637,343 1,250,333 (3,035,459)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,532,400 1,892,870 2,107,658
Bad debts 875,143 1,585,555 919,737
(Gain) loss on disposition of operating
properties, net (387,617) 1,237,420 -
Extraordinary gain on disposition of operating
properties (952,692) (3,604,514) -
Loss due to reduction of carrying value of
operating properties - - 2,185,381
Changes in assets and liabilities, net of
effects of property dispositions:
Accounts receivable (1,458,968) (1,228,720) (850,301)
Prepaid expenses 43,647 39,406 (11,473)
Accounts payable and accrued expenses 443,384 (89,940) 1,018,878
---------- ----------- ---------
Net cash provided by operating activities 1,732,640 1,082,410 2,334,421
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and improvements (21,969) (760) (514,406)
Proceeds from sale of property 2,246,114 2,958,287 -
Cash forfeiture on disposition of property held in
receivership - (67,969) -
--------------- ---------- ----------
Net cash provided by (used in)
investing activities 2,224,145 2,889,558 (514,406)
--------- --------- ----------
Cash flows from financing activities - payments on
mortgage loans payable (2,568,187) (1,971,385) (444,352)
--------- --------- ----------
Net increase in cash and cash equivalents 1,388,598 2,000,583 1,375,663
Cash and cash equivalents at beginning of year 7,606,857 5,606,274 4,230,611
--------- --------- ---------
Cash and cash equivalents at end of year $ 8,995,455 7,606,857 5,606,274
========= ========= =========
Cash paid for interest $ 716,910 850,747 981,346
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) General
HealthCare Properties, L.P., is a Delaware limited partnership
established for the purpose of acquiring, leasing and operating existing
or newly constructed long-term health care properties. These properties
are operated by the Partnership or are leased to qualified operators who
provide specialized health care services. Effective July 1, 1993, Capital
Realty Group Senior Housing, Inc. (CRG) became the sole general partner
of the Partnership. Effective February 1, 1995, Capital Senior Living,
Inc., (CSL), an affiliate of CRG became the managing agent for the
Partnership replacing CRG, which had been managing agent since July 1,
1992.
At December 31, 1995, CRG owned approximately 9% of the Partnership's
limited partner units. During 1996, Capital Senior Living Communities,
L.P. (CSLC), an affiliate of CRG, acquired CRG's 9% interest in the
Partnership. In addition, CSLC purchased approximately 16% of the limited
partner units from unaffiliated limited partners. At December 31, 1996
and 1995, CSLC owned approximately 31% and 6% of the Partnership's
limited partner units, respectively.
The consolidated financial statements as of and for the years ended
December 31, 1995 and 1994 include the accounts of the Partnership and
its wholly owned subsidiaries, Danville Care, Inc., Foothills Care, Inc.,
Countryside Care, Inc. and Countryside Care, LP. In addition, the
consolidated financial statements as of and for the year ended December
31, 1996 include the accounts of the Partnership's wholly owned
subsidiary, Cambridge Nursing Home Limited Liability Company (Cambridge
LLC), which began operating Cambridge Nursing Home effective August 1,
1996 (see note 6). All significant intercompany accounts and transactions
have been eliminated in consolidation.
At December 31, 1996, 1995 and 1994, the status of the Partnership's
properties was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operated under bankruptcy and managed by CSL - 1 1
Leased to unaffiliated operators on a triple net basis 7 7 8
Operated by subsidiaries of the Partnership and
managed by CSL 1 1 2
Operated and managed under receivership by
an unaffiliated operator - - 1
-- -- --
8 9 12
== == ==
</TABLE>
During 1996, one of the properties (Countryside) operated by a subsidiary
of the Partnership was sold to an unrelated third party. Additionally,
during 1996, the operations of the property (Cambridge) previously
23
<PAGE>
operated under bankruptcy and managed by CSL were transferred to
Cambridge LLC. CSL continues to manage this property (see note 6). During
1995, one of the Partnership's leased properties was sold to an unrelated
third party and the deeds for two of the Partnership's operated
properties were transferred to the noteholders in lieu of foreclosure
(see note 3).
(2) Summary of Significant Accounting Policies
Property and improvements are stated at cost. The Partnership adopted the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996.
This Statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceed the fair value of the assets. The fair value is based on
either the expected future cash flows discounted at a rate which varies
based on associated risk or an independent third-party appraisal. Assets
to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. Adoption of this Statement did not have a
material impact on the Partnership's 1996 financial position or results
of operations.
Depreciation is provided in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
using declining-balance and straight-line methods, as follows: buildings
and improvements, 25 to 31 years; furniture, fixtures and equipment, 5 to
10 years.
The financial statements and federal income tax returns are prepared on
the accrual method of accounting and include only those assets and
liabilities and results of operations which relate to the business of the
Partnership and its wholly owned subsidiaries. No provision has been made
for federal and state income taxes since such taxes are the
responsibility of the individual partners. Although the Partnership's
subsidiaries file federal corporate income tax returns, none of the
subsidiaries had significant net income for financial reporting or income
tax purposes in 1996, 1995 or 1994. Accordingly, no provision has been
made for federal and state income taxes for these subsidiaries in 1996,
1995 or 1994.
Net income (loss) of the Partnership and taxable income (loss) are
generally allocated 98% to the limited partners and 2% to the general
partner. The net income of the Partnership from the disposition of a
property is allocated (i) to partners with deficit capital accounts on a
pro rata basis (ii) to limited partners until they have been paid an
amount equal to the amount of their Adjusted Investment (iii) to the
limited partners until they have been allocated income equal to their 12%
Liquidation Preference, and (iv) thereafter, 80% to the limited partners
and 20% to the general partner. The net loss of the Partnership from the
disposition of a property is allocated (i) to partners with positive
capital accounts on a pro rata basis and (ii) thereafter, 98% to the
limited partners and 2% to the general partner. Distributions of
available cash flow are generally distributed 98% to the limited partners
24
<PAGE>
and 2% to the general partner, until the limited partners have received
an annual preferential distribution, as defined. Thereafter, available
cash flow is distributed 90% to the limited partners and 10% to the
general partner.
No distributions were made in 1996, 1995 or 1994.
Deferred charges primarily represent initial fees and other costs
incurred in negotiating leases and mortgage loans payable. These costs
are being amortized using the straight-line method over the lives of the
related leases or mortgage loans.
Net patient service revenue is reported at the estimated net realizable
amounts due from residents, third-party payors, and others for service
rendered. Revenue under third-party payor agreements is subject to audit
and retroactive adjustment. Provisions for estimated third-party payor
settlements are provided in the period the related services are rendered.
Differences between the estimated amounts accrued and interim and final
settlements are reported in operations in the year of settlement.
The Partnership records accounts receivable for contingent rentals and
past due rents only when circumstances indicate a substantial probability
of collection. Existing receivables are reserved to the extent collection
is deemed doubtful by the Partnership's management. Deductions to the
allowance for doubtful accounts were $45,682, $29,953 and $32,426 for
1996, 1995 and 1994, respectively.
The Partnership classifies all highly liquid investments with original
maturities of three months or less as cash equivalents.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities to
prepare these consolidated financial statements. Actual results could
differ from those estimates.
(3) Property and Improvements
Property and improvements consist of:
<TABLE>
<CAPTION>
December 31
-----------
1996 1995
---- ----
<S> <C> <C>
Land $ 3,145,803 3,570,802
Buildings and improvements 31,397,383 34,467,946
Furniture, fixtures and equipment 1,603,965 1,851,124
----------- -----------
36,147,151 39,889,872
Allowance for reduction in carrying value of
operating properties (2,185,381) (3,026,898)
----------- -----------
33,961,770 36,862,974
Less accumulated depreciation 11,849,151 11,611,719
---------- ----------
$ 22,112,619 25,251,255
========== ==========
</TABLE>
25
<PAGE>
The following property dispositions occurred during 1996 and 1995:
<TABLE>
<CAPTION>
Net property Mortgage loans
and payable Net Net gain on
improvements Other proceeds disposition
1996: ------------- -------------- --------- ----------- ---------
Sale of Countryside
<S> <C> <C> <C> <C> <C> <C>
on May 1, 1996 $ 1,742,401 (2,068,539) (987,804) (26,367) 1,340,309
========= ========= ========== =========== =========
1995:
Sale of Heritage
Manor on July 5,
1995 $ 2,530,645 (1,500,000) 63,857 (1,458,287) 363,785
Deed transferred to
noteholder in lieu
of foreclosure:
Foothills 2,122,178 (2,360,895) (872,587) - 1,111,304
Diablo/Tamarack 2,071,334 (2,160,787) (802,552) - 892,005
--------- --------- ---------- -------------- ----------
$ 6,724,157 (6,021,682) (1,611,282) (1,458,287) 2,367,094
========= ========= ========= ========= =========
</TABLE>
"Other" consists primarily of disposition costs, accrued interest payable
and deferred charges (prepaid loan fees).
The Countryside property was sold to an unrelated third-party investor on
May 1, 1996 for $2,246,114. The resulting net gain is comprised of (1) an
ordinary gain of $387,617 representing the difference between the
carrying value of the property and the sales proceeds and (2) an
extraordinary gain of $952,692 representing the difference between the
agreed-upon cash settlement with the lender and the mortgage loan payable
including accrued interest payable.
The Heritage Manor property was sold on July 5, 1995 to an unrelated
third-party investor for $3,075,000. With the proceeds, the Partnership
paid the $1,500,000 mortgage loan balance. The resulting net gain of
$363,785 represents the difference between the carrying value of the
property and the sales proceeds.
The deed to the Diablo/Tamarack property was transferred to the
noteholder in lieu of foreclosure on July 31, 1995. The resulting net
gain is comprised of (1) an ordinary loss of $686,770 representing the
difference between the carrying value and the fair value of the property
and, (2) an extraordinary gain of $1,578,775 representing the difference
between the fair value of the property, and the mortgage loan payable
including accrued interest payable.
Effective December 1, 1994, the Foothills property was placed in
receivership. The deed to the property was subsequently transferred to
the noteholder in lieu of foreclosure on July 19, 1995. The resulting net
gain is comprised of (1) an ordinary loss of $914,435, representing the
difference between the carrying value and the fair value of the property
and, (2) an extraordinary gain of $2,025,739 representing the difference
26
<PAGE>
between the fair value of the property, and the mortgage loan payable
including accrued interest payable.
In 1994, management concluded that the carrying value of its Cambridge
property exceeded its estimated fair value. As a result, in the fourth
quarter of 1994, this property, which had been carried at $4,185,381, was
written down to $2,000,000.
Combined operating results for Cambridge, Foothills, Countryside and
Diablo/Tamarack follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net patient service revenue $ 2,969,991 3,268,800 6,698,751
--------- --------- ---------
Facility operating expenses 2,727,909 3,238,004 6,597,068
Depreciation 248,134 275,815 369,401
Fees to affiliates 261,517 319,454 650,740
Bad debts 79,682 325,921 52,263
Lease default expenses 35,923 120,258 81,014
----------- ---------- -----------
3,353,165 4,279,452 7,750,486
--------- --------- ---------
Loss from operations $ (383,174) (1,010,652) (1,051,735)
========== ========= =========
Interest expense $ 67,181 457,691 664,306
=========== ========== ==========
</TABLE>
1996 operating results consist of amounts at the Cambridge facility from
August 1, 1996 through December 31, 1996 and at the Countryside facility
from January 1, 1996 through April 30, 1996. Operating results consist of
amounts at the Countryside facility for the year ended December 31, 1995
and at the Diablo/Tamarack facility from January 1, 1995 through July 31,
1995. 1994 operating results consist of amounts at the Countryside and
Diablo/Tamarack facilities for the year ended December 31, 1994 and at
the Foothills facility from January 1, 1994 through November 30, 1994.
(4) Mortgage Loans Payable
Mortgage loans payable consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage loans payable - in default (note 3) $ - 2,068,539
Mortgage loans payable 7,207,414 7,707,062
--------- ---------
Total mortgage loans payable $ 7,207,414 9,775,601
========= =========
</TABLE>
Mortgage loans payable (including $5,865,555 and $6,333,183 due to banks
at December 31, 1996 and 1995), bear interest ranging from 6.6% to 10.75%
at December 31, 1996 and 6.8% to 10.75% at December 31, 1995. These notes
are payable in monthly installments of $101,092 at December 31, 1996 and
$94,618 at December 31, 1995, including interest. The notes are secured
27
<PAGE>
by properties with net book values aggregating $13,246,635 and
$14,004,632 at December 31, 1996 and 1995, respectively. The notes range
in maturity from 1997 to 2012.
Mortgage loans payable - in default, consisted of one loan at December
31, 1995, secured by the Countryside property. In 1996, the note secured
by the Countryside property was extinguished in connection with the
disposition of the property securing the note (see note 3). The note was
secured by property with net book value aggregating $1,779,852 at
December 31, 1995. The note was in default at December 31, 1995 because
of the Partnership's failure to make required debt service payments when
due and because of the failure of the former lessee to pay required
property taxes to the taxing authorities.
The Partnership had one mortgage loan aggregating $1,062,237 at December
31, 1995 that was in default as a result of not meeting a debt coverage
ratio, as defined. Despite this default, the lender waived this ratio
requirement through January 1, 1997. At December 31, 1996, the
Partnership met the debt coverage ratio. Accordingly, this loan balance
is classified as "mortgage loans payable" in the accompanying
consolidated balance sheets.
Accrued interest payable related to mortgage loans payable - in default
aggregated $766,972 at December 31, 1995.
The Partnership leases four of its properties under a master lease (see
note 6). The rentals under the master lease provide additional security
for two notes payable used to finance two of the master lease properties.
Both of these notes were callable by the lenders at any time between
January 1, 1993 and November 30, 1995; however, the lenders agreed not to
exercise their call rights prior to maturity on January 31, 1996 as long
as the Partnership remained in compliance with the loan agreements. One
of the lenders agreed to extend the maturity date of its note to December
1, 2001, pending completion of final loan documents. On March 21, 1997,
the other lender agreed not to exercise its call rights until June 30,
1997. The Partnership is currently negotiating the extension of the note
until December 1, 2001.
Presented below is a summary of required principal payments on mortgage
loans payable. The note callable on June 30, 1997 is included in amounts
due currently.
1997 $ 2,568,389
1998 355,176
1999 385,309
2000 273,807
2001 178,193
2002 and thereafter 3,446,540
---------
$ 7,207,414
28
<PAGE>
(5) Leases
The Partnership leases its property and equipment to tenants under
noncancelable operating leases. The lease terms range from 9 to 12 years
with options to renew for additional five-year terms and options to
purchase the leased property at the current fair market value at the end
of the initial lease term. The leases generally provide for contingent
rentals based on the performance of the property. Contingent rentals
aggregated $192,325, $165,042 and $173,541 in 1996, 1995 and 1994,
respectively.
Minimum rentals for the next three years for leases not in default are
$3,971,328 per year, subject to change based on changes in interest
rates. Minimum rentals are $3,761,262 and $2,858,619 for the years 2000
and 2001. There are no minimum rentals thereafter. Property and
improvements less accumulated depreciation attributable to such rentals,
amounted to $20,502,517 and $21,671,891 at December 31, 1996 and 1995,
respectively.
(6) Lease Defaults
NCA Cambridge, Inc., the lessee of the Partnership's Cambridge Nursing
Home (Cambridge) property, petitioned for Chapter 11 bankruptcy
protection in 1992. In May 1993, CRG began operating Cambridge under the
control of the bankruptcy court pursuant to a settlement agreement with
the lessee; however, the results of operations of this property have not
been included in the Partnership's consolidated statements of operations
for the two years ended December 31, 1995 and from the period January 1,
1996 through July 31, 1996. On August 1, 1996, in accordance with the
approval of the bankruptcy court, the operations of Cambridge were
transferred to Cambridge LLC, a subsidiary of the Partnership,
effectively removing the operations of the property from the jurisdiction
of the bankruptcy court. Accordingly, the results of operations of
Cambridge are included in the 1996 consolidated statements of operations
for the period August 1, 1996 through December 31, 1996.
In connection with this property, the lessee was overpaid for services to
Medicaid patients during the period the lessee operated the property.
Based on certain interpretations of state regulations, the Partnership
could have been liable for approximately $1,400,000 in connection with
the recovery of these Medicaid overpayments. During 1995, the Partnership
entered into a settlement agreement with the state of Massachusetts,
approved by the bankruptcy court, whereby the $1,400,000 became a
general, unsecured claim of the bankruptcy estate of NCA Cambridge, Inc.,
which will be settled through bankruptcy court proceedings. Additionally,
as part of the settlement agreement with the state, the Partnership
agreed to loan NCA Cambridge, Inc. $590,000 to pay outstanding real
property taxes due on the Cambridge property.
The Partnership fully reserved for this receivable in 1995.
Four of the Partnership's properties are subject to a master lease with a
single operator, HealthSouth Rehabilitation Corp. (HealthSouth). This
master lease, as amended, contains a nine-year renewal option and
provides for contingent rentals equal to 4% of the revenue differential,
as defined, effective January 30, 1997.
29
<PAGE>
During 1994, HealthSouth closed the Partnership's Sandybrook facility. In
February 1997, HealthSouth closed the Cedarbrook facility. Despite these
closures, HealthSouth has continued making its full lease payments under
the terms of the master lease.
Delinquent rentals fully reserved by the Partnership as a result of lease
defaults approximated $393,000 in 1996 and $674,000 in 1995 and 1994.
Other income in 1994 primarily consists of $560,000 in recovered
administrative expenses owed the Partnership from the former operator of
two of the Partnership's properties.
(7) Related Party Transactions
Approximate fees paid to the general partner and affiliates of the
general partner are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Asset management fees $ 740,000 712,000 731,000
Property management fees 208,000 252,000 472,000
Administrative and other expenses 256,000 235,000 266,000
General partner management fees 72,000 80,000 113,000
----------- ----------- ----------
$ 1,276,000 1,279,000 1,582,000
========= ========= =========
</TABLE>
A 50% partner in CRG is chairman of the board of a bank where the
Partnership holds the majority of its operating cash accounts.
In connection with the sale of Countryside in 1996, the general partner
was paid fees aggregating $66,000. In connection with the sale of
Heritage Manor in 1995, the general partner was paid fees aggregating
$92,250.
(8) Income Taxes
Reconciliation of financial statement basis partners' equity to federal
income tax basis partners' equity is as follows:
<TABLE>
<CAPTION>
Years ended December 31
-----------------------
1996 1995 1994
---- ---- ----
Total partners' equity - financial statement
<S> <C> <C> <C>
basis $ 24,064,625 22,427,282 21,176,949
Current year tax basis net earnings
over (under) financial statement basis (684,329) (2,942,675) 2,552,427
Cumulative tax basis net earnings over
financial statement basis 5,136,578 8,079,253 5,526,826
----------- ----------- -----------
Total partners' equity - federal income
tax basis $ 28,516,874 27,563,860 29,256,202
========== ========== ==========
</TABLE>
30
<PAGE>
HEALTHCARE PROPERTIES, L.P. AND SUBSIDIARIES
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
Because many types of transactions are susceptible to varying
interpretations under federal and state income tax laws and regulations,
the amounts reported above may be subject to change at a later date upon
final determination by the taxing authorities.
(9) Business and Credit Concentrations
The Partnership's eight facilities are located in the southeastern United
States, Texas, Indiana and Massachusetts. The four facilities operated by
HealthSouth (note 6) are located in the southeastern United States and
accounted for approximately $2,367,000 (31%), $2,367,000 (28%) and
$2,292,000 (18%) of Partnership revenues in 1996, 1995 and 1994,
respectively. One property leased to an unaffiliated operator accounted
for approximately $1,023,716 (14%) and $977,000 (12%) of Partnership
revenues in 1996 and 1995, respectively.
The Partnership also derives revenue from Medicaid programs funded by the
states of Colorado, California, Michigan and Massachusetts. The
Partnership derived 14% of its revenues from the Colorado state program
during 1994 and 15% and 11% of its revenues from the Michigan state
program in 1995 and 1994, respectively. The Partnership derived 15% of
its revenues from the state program in Massachusetts in 1996.
Receivables due from state Medicaid programs aggregated $438,350 and
$116,933 at December 31, 1996 and 1995, respectively.
The Partnership does not require collateral or other security to support
financial instruments subject to credit risk.
(10) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments presented below.
(a) Cash and Cash Equivalents, Receivables and Payables
The carrying amount approximates fair value because of the short
maturity of these instruments.
(b) Mortgage Loans Payable
The fair value of the Partnership's mortgage loans payable is
calculated by discounting scheduled cash flows through maturity
using discount rates that are currently available to the
Partnership on other borrowings with similar risk and maturities.
Issuance costs and other expenses that would be incurred in an
actual borrowing are not reflected in this amount.
<TABLE>
<CAPTION>
Carrying value Fair value
<S> <C> <C>
Mortgage loans payable $ 7,207,414 7,436,177
========= =========
</TABLE>
31
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
The following Consolidated Financial Statements of
HealthCare Properties, L.P. and Subsidiaries are incorporated
by reference as set forth in PART II, Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Operations - Years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Partnership Equity - Years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows- Years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because they are inapplicable,
not required, or the information is included in the financial
statements or notes thereto.
(3) Exhibits
Page Nos. in
Exhibit Number This Filing
3 Restated Limited Partnership Agreement is incorporated N/A
by reference to Exhibit A to the Prospectus of Registrant
dated August 31, 1987, as filed with the Commission
pursuant to Rule 424(b).
32
<PAGE>
10 Restructuring Agreement dated November 30, 1992, N/A
between Registrant and Rebound, Inc. with exhibits.
27 Financial Data Schedule (included only in Edgar filing) N/A
28 Partnership Management Agreement, dated July 29, 1992, N/A
with Capital Realty Group Properties, Inc. as filed with
the Commission in the Third Quarter 10-Q,
dated September 30, 1992.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of fiscal 1996.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934; the Registrant has duly caused this Report to be signed on
its behalf of the undersigned, thereunto duly authorized.
HEALTHCARE PROPERTIES, L.P.
By: Capital Realty Group Senior Housing, Inc.,
General Partner
By:/s/James A. Stroud
-----------------------
James A. Stroud
Chief Operating Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in capacities and on the dates indicated.
By:/s/James A. Stroud March 27, 1997
---------------------
James A. Stroud
Chief Operating Officer and Director
(Chief financial, and accounting officer)
By:/s/Jeffrey L. Beck March 27, 1997
---------------------
Jeffrey L. Beck
Chief Executive Officer and Director
34
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814458
<NAME> HEALTHCARE PROPERTIES, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,995,455
<SECURITIES> 0
<RECEIVABLES> 5,020,045
<ALLOWANCES> (4,225,811)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 36,147,151
<DEPRECIATION> (14,034,532)
<TOTAL-ASSETS> 32,487,547
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,064,625
<TOTAL-LIABILITY-AND-EQUITY> 32,487,547
<SALES> 0
<TOTAL-REVENUES> 8,186,936
<CGS> 0
<TOTAL-COSTS> 6,604,086
<OTHER-EXPENSES> 114,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784,092
<INCOME-PRETAX> 684,651
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 952,692
<CHANGES> 0
<NET-INCOME> 1,637,343
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
