SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 oganization) Identification Number)
14160 DALLAS PARKWAY, SUITE 300, DALLAS, TEXAS 75240
(Address of principal executive office)
(972) 770-5600
(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 at least the past 90 days. YES x NO
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHCARE PROPERTIES, L.P.
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,. 1997 December 31, 1996
(Unaudited) (Audited)
ASSETS --------------- -----------------
------
<S> <C> <C>
Cash and cash equivalents $ 9,231,206 $ 8,995,455
Accounts receivable, less allowance for doubtful
accounts of $4,240,811 in 1997 and $4,225,811 in 1996 932,657 794,234
Prepaid Expenses and other 40,618 85,295
Property and improvements, net 21,800,909 22,112,619
Deferred charges, less accumulated amortization
of $792,261 in 1997 and $765,409 in 1996 473,093 499,944
------- -------
$ 32,478,483 32,487,547
=========== ==========
LIABILITIES AND PARTNERSHIP EQUITY
Accounts payable and accrued expenses $ 960,883 1,004,204
Operating facility accounts payable 26,262 211,304
Mortgage loans payable 7,077,893 7,207,414
--------- ---------
8,065,038 8,422,922
--------- ---------
Partnership equity:
Limited partners (4,172,457 units) 24,400,528 24,058,684
General partner 12,917
24,413,445 24,064,625
---------- ----------
$ 32,478,483 32,487,547
========== ==========
</TABLE>
<PAGE>
HEALTHCARE PROPERTIES, L.P.
(A Limited Partnership)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended, Three months ended,
March 31, 1997 March 31, 1996
-------------- --------------
Revenues:
<S> <C> <C>
Rental $ 1,098,224 $ 1,219,335
Net patient services 1,206,148 578,512
------------------ ----------------
2,304,372 1,797,847
------------------ ----------------
Expenses:
Facility operating expenses 1,134,952 548,166
Depreciation 340,960 378,980
Lease default expenses 4,650 40,071
Administrative and other 340,070 415,480
Bad debts 13,217 170,415
------------------ ----------------
1,833,849 1,553,112
------------------ ----------------
Income from operations 470,523 244,735
------------------ ----------------
Other income (expenses):
Interest income 77,749 56,187
Interest expenses (172,601) (233,331)
Amortization (26,851) (28,527)
------------------ ----------------
(121,703) (205,671)
------------------ ----------------
Net income $ 348,820 $ 39,064
================== ================
NET EARNINGS PER UNIT $ .08 $ .01
================== ================
WEIGHTED AVERAGE
NUMBER OF UNITS 4,172,457 4,172,457
================== ================
</TABLE>
<PAGE>
HEALTHCARE PROPERTIES, L.P.
(A Limited Partnership)
STATEMENTS OF PARTNERSHIP EQUITY
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
Allocation of Net Earnings
<S> <C> <C> <C>
(Loss) 98% 2% 100%
=== == ====
EQUITY at
December 31, 1996 $ 24,058,684 $ 5,941 $ 24,064,625
Net Income 341,844 6,976 348,820
----------- ---------- -----------
EQUITY at
March 31, 1997 $ 24,400,528 $ 12,917 $ 24,413,445
=========== ========== ===========
</TABLE>
<PAGE>
HEALTHCARE PROPERTIES, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 348,820 $ 39,064
Adjustments to reconcile net loss to
net cash provided by operating activities:
Bad debts 13,217 170,415
Depreciation and amortization 367,811 407,507
Changes in assets and liabilities:
Accounts receivable (151,640) (129,800)
Prepaid expenses 44,677 11,744
Accounts payable &
accrued expenses (228,363) 52,218
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 394,522 551,148
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and improvement (29,250) (7,188)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (29,250) (7,188)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage loans payable (129,521) (122,188)
--------- ---------
NET CASH USED IN
FINANCING ACTIVITIES (129,521) (122,188)
--------- ---------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 235,751 421,772
CASH AND CASH EQUIVALENTS
Beginning of Period 8,995,455 7,606,857
--------- ---------
CASH AND CASH EQUIVALENTS
End of Period $ 9,231,206 $ 8,028,629
========= =========
</TABLE>
<PAGE>
HEALTHCARE PROPERTIES, L.P.
(A Limited Partnership)
NOTE TO FINANCIAL STATEMENTS
Three months ended March 31, 1997
(Unaudited)
A. ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary have been included. Operating
results are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997. The financial statements should be read in
conjunction with the consolidated financial statements and the footnotes thereto
included in Registrant's annual report on Form 10-K for the year ended December
31, 1996.
B. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL PARTNER
Effective July 1, 1993, Capital Realty Group Senior Housing, Inc. ("CRGSH")
replaced Jacques-Miller, Inc. and Jacques and Associates, L.P. as the sole
General Partner of the Registrant.
Personnel working at the Property sites and certain home office personnel
who perform services for the Registrant are employees of Capital Senior Living,
Inc. (CSL), an affiliate of CRGSH. The Registrant reimburses CSL for the
salaries, related benefits, and overhead reimbursements of such personnel as
reflected in the accompanying financial statements. Reimbursements and fees paid
to the general partner and affiliates of the general partner are as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Salary and benefit reimbursements $ 787,281 $ 399,433
Administrative reimbursements 50,285 90,223
Asset management fees 103,433 180,000
Property management fees 84,285 40,525
General partner management fees 23,023 11,097
--------------- ---------------
$ 1,048,307 $ 721,278
=============== ===============
</TABLE>
Currently, Capital Senior Living Communities, L.P., an affiliate of CRGSH, holds
approximately 50% of the outstanding units of the Registrant.
C. VALUATION OF RENTAL PROPERTY
Generally accepted accounting principles require that the Registrant evaluate
whether it is probable that the estimated undiscounted future cash flows of its
properties, taken individually, will be less than the respective net book value
of the properties. If such a shortfall exists and is material, then a write-down
is warranted. The Registrant performs such evaluations on an on-going basis.
During the three months ended March 31, 1997, based on the Registrant's
evaluation of the properties, the Registrant did not believe that any additional
write-down was warranted.
The balance sheet of the Registrant as of March 31, 1997, shows total
assets of $32,478,483, total liabilities of $8,065,038, and Registrant equity of
$24,413,445.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
Registrant commenced an offering to the public on August 31, 1987, of
depository units representing beneficial assignments of limited partnership
interests ("Units"). On October 14, 1987, Registrant commenced operations,
having previously accepted subscriptions for more than the specified minimum of
120,000 Units. As of August 30, 1989, the offering was closed except for Units
for sale to existing investors under the terms of a distribution reinvestment
plan. As of September 30, 1995, Registrant had sold Units aggregating
approximately $43.4 million. Due to the suspension of the distribution
reinvestment plan, Registrant does not anticipate any additional inflow of
investment.
All of the net proceeds of the offering were originally invested in 12
properties or used for working capital reserves. The Registrant partially
financed the acquisition of eight of its original properties with non-recourse
debt. Four properties were initially unleveraged. As of March 31, 1997, 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.
Potential sources of liquidity for Registrant include collection of
outstanding receivables and/or revenue participation related to various leased
facilities, collection on defaulted rent and/or damage settlements related to
leases in default, new mortgage financing on one or more of Registrant's
unencumbered assets, and a potential sale of one or more of the Registrant's
assets.
As of March 31, 1997, Registrant had cash and cash equivalents
aggregating $9,231,206. The cash and cash equivalents will be used for working
capital, balloon notes due by 1997, emergency reserves, and other restructuring
requirements.
Registrant's general policy is to maintain sufficient cash and cash
equivalents to address disruptions of its lease revenues and to have adequate
additional funds for investment in existing assets for improvements. To the
extent that Registrant deems it necessary to take over the operations of any of
its facilities currently under long term net lease, such action would require
additional investment in working capital for operating reserves, capital
expenditures and related debt payments. As a consequence of prior defaults,
Registrant suspended cash distributions on July 1, 1991, pending successful
resolution of the various problems within its portfolio. Due to the uncertainty
of the timing and conditions under which the Liquidity Reserve (which was
suspended in March of 1991) might be reactivated, on August 15, 1991, Registrant
ceased accepting additional liquidation requests. As required by the Partnership
Agreement for Limited Partners to be paid their portion for federal income
taxes, a $250,000 cash distribution was made in June 1993. Future cash
distributions will be dependent upon improved operational income and successful
refinancing on certain Registrant mortgages. The Units are not publicly traded
and as a result the liquidity of each Limited Partner's individual investment is
limited.
<PAGE>
Results of Operations
Discussion of Three Months Ending March 31, 1997
Rental revenues for the three months ended March 31, 1997, decreased
$121,111 from the comparable three months ended March 31, 1996, due to the
termination of lease accruals with the prior lessee of the Cambridge facility.
Net patient services for the three months ended March 31, 1997, increased
$627,636 from the three months ended March 31, 1996. Net patient services for
the three months ended March 31, 1997 is for the Cambridge facility, which
Registrant assumed management of in August 1996, and net patient services for
the three months ended March 31, 1996 is for the Countryside facility, which was
sold in May 1996. Interest income for the three months ended March 31, 1997
increased $21,562 from the three months ended March 31, 1996 primarily due to
rising interest rates and increasing cash available for investment.
Facility operating expenses for the three months ended March 31, 1997,
increased by $586,786 from the comparable 1996 period. Facility operating
expenses for the three months ended March 31, 1997 and 1996 include the
operating expenses of the Cambridge Nursing Home and Countryside, respectively.
Depreciation for the three months ended March 31, 1997, decreased $38,020 from
the comparable 1996 period and is primarily due to the loss of the Countryside
facility. Lease default expense decreased $35,421 for the three months ended
March 31, 1997 from the comparable 1996 period due to decreasing legal fees
incurred on the resolution of defaulted leases. Administrative expenses,
including fees to the General Partner, decreased $75,410 for the three months
ended March 31, 1997 in comparison to 1996 and is primarily due to decreased
administrative reimbursements and asset management fees. Bad debt expense for
the three months ended March 31, 1997 decreased $157,198 from the comparable
1996 period primarily due to the decreasing bad debt provision on Partnership
advances and rent provisions to the Cambridge facility. Interest expense and
amortization for the three months ended March 31, 1997 decreased by $60,730 and
$1,676, respectively, from the comparable 1996 period, and is primarily due to
the loss of the Countryside facility.
Cash and cash equivalents as of March 31, 1997 increased $235,751 over
the balance at December 31, 1996. Increased cash for the three months ending
March 31, 1997 in comparison to 1996 is primarily due to improved operating cash
flow. Net accounts receivable of $932,657 at March 31, 1997 reflected an
increase of $138,423 over 1996 year-end balances and is due to delayed
collection of Medicaid and Medicare claims from the Cambridge facility. Accounts
payable, accrued expenses, and facility accounts payable balances decreased
$228,363 at March 31, 1997, from December 31, 1996 and is primarily due to the
payment of accrued Medicaid liabilities on the Countryside facility.
The following is a brief discussion of the status of 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.
<PAGE>
Two recourse loans, Cedarbrook and Cane Creek, were due in January 1996
in the aggregate amount of approximately $2,400,000. 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.
Countryside facility. The mortgage loan on Countryside was in default
from April 1992 onward. On May 1, 1996, Registrant sold the Countryside facility
to a third party buyer for $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 $26,000 as a
result of this agreed upon sale. Registrant also obtained a full release of all
potential liability from the lender.
Cambridge facility. The lessee of the Cambridge facility, Nursing
Centers of America-Cambridge ("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.
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
deficit lease cash flow.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Registrant has been engaged in litigation in an attempt to recover
damages from defaulting lessees and their guarantors. Such actions involve
claims against a prior operator of the Diablo/Tamarack facility. In certain
cases counterclaims against Registrant have been either threatened or filed.
Registrant does not believe any materially adverse judgements are likely from
these counter claims.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
<PAGE>
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.
HEALTHCARE PROPERTIES, L.P.
By: CAPITAL REALTY GROUP SENIOR HOUSING, INC.
General Partner
By: /s/Keith Johannessen
--------------------
Keith Johannessen
President
Date: May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814458
<NAME> HEALTHCARE PROPERTIES, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,231,206
<SECURITIES> 0
<RECEIVABLES> 5,173,468
<ALLOWANCES> (4,240,811)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 36,176,401
<DEPRECIATION> (14,375,492)
<TOTAL-ASSETS> 32,478,483
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,413,445
<TOTAL-LIABILITY-AND-EQUITY> 32,478,483
<SALES> 0
<TOTAL-REVENUES> 2,382,121
<CGS> 0
<TOTAL-COSTS> 1,833,849
<OTHER-EXPENSES> 26,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 172,601
<INCOME-PRETAX> 348,820
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 348,820
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
